Donation Box / Hundi Cash Handling Controls - Complete Framework

Donation box cash is highest-risk cash stream for any Religious / Charitable Trust. It is anonymous, high volume, small denomination, no payer trail. Courts treat it as property held in trust for community of worshippers with public character, not private income of trustees/pujaris.

1. Objective of Controls

• Prevent misappropriation, pilferage, substitution
• Ensure complete accounting - from hundi to bank
• Establish audit trail for Income Tax Sec 11, 115BBC, 269ST and FCRA
• Demonstrate fiduciary duty under Indian Trusts Act, Bombay Public Trust Act, HR&CE Acts

2. Detailed Control Framework - 10 Pillars

A. Physical Controls over Box

1. Dual Lock System: 2 keys - one with Trust Secretary, one with Treasury/Bank Officer. Single person cannot open.
2. Sealing & Numbering: Each hundi uniquely numbered, seal register maintained. Seal checked before opening. Used in Jagannath Puri - each hundi sealed before and after opening, entries in statutory forms.
3. Fixed Location + CCTV: 24x7 CCTV with 90-day retention, directly over hundi. No blind spot. Access to CCTV only to independent vigilance wing.
4. No cash handling at shrine: Boxes not counted at public hall. Shifted to secured Counting Hall / Parakamani Hall.

B. Opening Controls

Standard followed by TTD Tirupati, Kashi Vishwanath and Vaishno Devi:

• Scheduled Opening: e.g. Every Thursday or daily at fixed time, announced.
• Opening Committee (Maker-Checker): Minimum 4 persons:
  • Executive Officer / SDM - Govt witness
  • Trustee / Managing Committee Member - independent witness
  • Bank Representative - SBI/nationalized bank
  • Internal Auditor / Retd Gazetted Officer
• Dress Code: Tirupati Parakamani model - pocketless clothes, frisking on entry/exit, no mobiles, armoured transport

C. Counting & Segregation

1. Cash, coins, foreign currency, gold, silver, cheques separated on table under CCTV.
2. Denomination-wise counting by 2 teams independently, then reconcile.
3. Weighing of coins, XRF testing for jewellery.
4. Jewellery valued by Govt-approved valuer - as done in Kashi Vishwanath.
5. Foreign currency - separate FCRA account compliance.

D. Documentation

• Hundi Opening Register: Date, Box No, Seal No, Opened By, Time
• Cash Count Sheet: Signed by all committee members
• Deposit Slip: Bank acknowledgement same day - creates audit trail
• Inventory Register for Gold/Silver: Weight, purity, photos
• CCTV footage logbook with hash preserved.

E. Deposit & Bank Controls

• Same day deposit into designated Trust Savings Account. No cash kept overnight beyond insured limit.
• Cash in transit insurance + security guard.
• No adjustment of expenses directly from hundi cash - violation of SA 400.

F. Segregation of Duties

Person collecting cannot be person counting cannot be person accounting. Mandatory as per Technical Guide on NPOs - Individuals handling cash should not make entries to general ledger and should be bonded.

G. Reconciliation & Audit

1. Daily collection vs Bank deposit reconciliation
2. Monthly surprise verification by statutory auditor
3. Annual stock-take of jewellery inventory
4. Internal Audit reporting to Board, not to temple manager

H. Legal Compliance Controls

• Sec 115BBC: Anonymous donations taxable @30% for purely charitable trusts. Exempt if trust is wholly religious or both charitable+religious - see case laws below. Maintain inscription on box - "For Temple" vs "For Hospital" distinction held taxable/not taxable.
• Sec 269ST: Cash receipt > Rs 2 lakh from single person in a day prohibited. Even hundi cash if traced to single donor via CCTV/confession attracts penalty equal to amount.
• FCRA Sec 7, 12(1A), 17: If foreign currency found in hundi, must go to SBI Main Branch, New Delhi designated FCRA account. Supreme Court in Noel Harper v UOI (2022) upheld - no fundamental right to receive foreign donations.

3. Case Laws - Must Know

1. Madras High Court - P Seethalakshmi v Commissioner, WA(MD) 25/2025 - 2026 LiveLaw (Mad) 147 - Landmark on Ownership

"Religion is not a cloak for enrichment... Hundi collection is not the fiefdoms of a poosari and is resource held in trust for community of worshippers and also impressed with public character."

Court cited Supreme Court in Shri Jagannath Temple Puri Management Committee v Chintamani Khuntia, (1997) 8 SCC 422 - poojaris not entitled to share in hundi as matter of right.
Ratio: Misappropriation by hereditary poojaris = ground for Govt takeover under HR&CE Act. Massive collection + fights for hundi shocked judicial conscience.

2. Bombay High Court - CIT(E) v Shree Sai Baba Sansthan Trust, Shirdi, ITA 598/2024 dated 08.10.2024

Facts: Trust received huge anonymous hundi collection. AO taxed u/s 115BBC(1) saying 80G registered = charitable only.

Held: Trust deed shows both religious (rituals, festivals) and charitable (annadan, hospital). Sec 80G(5B) allows religious expenditure up to 5% - trust satisfied. Hence exempt under 115BBC(2)(b) - both charitable+religious trusts kept out of ambit of anonymous donation tax. Upholds ITAT Shirdi order.

3. ITAT Mumbai - Gurudev Siddha Peeth, Shrish Thakkar

Held: Offerings received in hundis/donation boxes is NOT "Anonymous donation" u/s 115BBC at all. Section 115BBC was meant to check inflow of black money with modus operandi of bogus donations, not petty box collections.

4. ITAT Jodhpur - ABCAUS 4526 (2025) - Gupt Daan / Small Boxes

Gupt donation / donation in small boxes cannot be held as anonymous donation. Even if not corpus, trust gets deduction for charitable spending.

5. Ram Janmabhoomi Teerth Kshetra - Ayodhya Hundi Theft FIR 2024-25

Trust's internal audit (Nov 2020) called management "highly unprofessional", no SOPs, no hierarchy, no maker-checker. Later SIT found 105 instances of cash removal from counting area on CCTV. FIR under IPC 406/408 Criminal Breach of Trust by persons entrusted with donations and.
Learning: Private trust deed model without statutory oversight fails vs TTD/Jagannath/Vaishno Devi models governed by dedicated Acts with government nominee + statutory audit.

4. Model SOP for Auditors

Auditor Checklist (DIAC - Auditing Charitable Institutions): Examine controls over cash receipts, verify authenticity of donation receipts, check authorization.