2021 (6) TMI 903 - AT - Income Tax

Tribunal upholds CIT(A)'s decision, dismisses Revenue appeals due to invalid statements and unreliable seized documents.

DCIT, Cen. Cir. – 2 (2), Pune Versus Shikshana Prasaraka Mandali Sharada Sabhagruha

DCIT, Cen. Cir. – 2 (2), Pune Versus Shikshana Prasaraka Mandali Sharada Sabhagruha - TMI Issues Involved:1. Validity of the addition made by the Assessing Officer (AO) regarding the alleged capitation fee received by the assessee.2. Reliability of the statements recorded under Section 132(4) of the Income Tax Act.3. Validity of the retraction of statements by the individuals involved.4. Examination of the seized documents and their evidentiary value.5. Jurisdiction of the AO to make additions for earlier assessment years without incriminating material.6. Application under Rule 27 of the ITAT Rules challenging the validity of the assessment order.Issue-wise Detailed Analysis:1. Validity of the Addition Made by the AO:The primary issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition made by the AO regarding the alleged capitation fee received in cash by the assessee for student admissions. The AO had added an amount of Rs. 20 lakhs per seat for the assessment years 2005-06 to 2011-12 based on evidence collected during a search operation and statements recorded under Section 132(4) of the Income Tax Act. The CIT(A) deleted these additions, leading to the Revenue's appeal.2. Reliability of the Statements Recorded Under Section 132(4):The Revenue argued that the statements recorded under Section 132(4) of the Act had significant evidentiary value and could be relied upon for making additions. The statements were made by key officials of the institution, including the Director and other employees, admitting the receipt of capitation fees. However, the CIT(A) found these statements unreliable as they were retracted by the individuals involved, who claimed that their statements were recorded under coercion and without being allowed to read them.3. Validity of the Retraction of Statements:The individuals involved retracted their statements the day after they were recorded, claiming coercion and misrepresentation by the officers. They filed retraction affidavits within 25 days. The AO cross-examined these individuals to verify the correctness of their retractions. The Tribunal found that the retraction affidavits were consistent and credible, noting that the individuals were not given a chance to read their statements before signing them. The Tribunal held that the statements recorded under Section 132(4) of the Act were invalid and could not be used as evidence.4. Examination of the Seized Documents and Their Evidentiary Value:The Tribunal examined the seized documents, which were torn pieces of paper pasted together in a disjointed manner. The documents did not correlate with each other and did not provide any discernible information related to capitation fees. The Tribunal found that the documents were 'dumb documents' and could not be relied upon to conclude that capitation fees were received. The Tribunal also noted that there was no corroborative material evidence to support the AO's claim.5. Jurisdiction of the AO to Make Additions for Earlier Assessment Years:The Tribunal held that the AO did not have jurisdiction to make additions for earlier assessment years without any incriminating material found as a result of the search. The only evidence was the torn document, which was not considered incriminating. The Tribunal emphasized that additions for unabated assessment years must be based on incriminating evidence found during the search.6. Application Under Rule 27 of the ITAT Rules:The assessee filed an application under Rule 27 of the ITAT Rules, challenging the validity of the assessment order for the years 2005-06 to 2011-12. The Tribunal noted that no ground questioning the validity of the proceedings under Section 153C of the Act was raised before the CIT(A). The Tribunal held that Rule 27 does not permit the respondent to expand the scope of an appeal and assail the decision on issues not subject to the appeal. Therefore, the application under Rule 27 was dismissed.Conclusion:The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decision to delete the additions made by the AO. The Tribunal found that the statements recorded under Section 132(4) were invalid due to coercion and lack of corroborative evidence. The seized documents were deemed unreliable, and the AO's jurisdiction to make additions for earlier years without incriminating material was questioned. The application under Rule 27 was also dismissed.