2025 (2) TMI 1438 - AT - Income Tax

Unexplained cash payments for student fees challenged; regular fees substantiated and capitation fee addition struck down on lack of supporting material

Unexplained cash payments for a student's fees were challenged as regular course fee and alleged capitation fee. The regular fee was substantiated by ... Unexplained cash payment - Addition towards regular course fee and capitation fee paid in cash by the assessee for study of his son - AO on the basis of statement of Dr. P Mahalingam Chairman of Trust which runs Santosh Group of Institutions made additions in the hands of assessee on account of alleged payment of capitation fee - HELD THAT:- We find merit in the contention of assessee. Once the assessee has been able to substantiate source of payment of regular course fee. No addition was called for specially when Smt. Usha Rani by way of affidavit has confirmed that she had paid regular course fee for the study of her grandson. Hence, addition is deleted. Addition on account of capitation fee - The addition has been made merely on the basis of statement of Dr. P. Mahalingam Chairman of Santosh Group of Institutions. Assessee has submitted that neither statement of Dr. P. Mahalingam was provided to the assessee, nor search material was ever confronted to the assessee. In the absence of any material being available to the assessee on the basis on which the AO has made addition, such addition is unsustainable. Hence, addition allegedly paid by the assessee towards capitation fee in cash is deleted. Assessee appeal allowed. Issues: (i) Whether addition of Rs. 20,25,000/- towards regular course fee paid for assessee's son can be sustained when the assessee produced a sale deed and an affidavit from the declared source payer; (ii) Whether addition of Rs. 13,25,000/- as alleged capitation fee paid in cash can be sustained where the addition is based on statements/seized material not confronted or produced to the assessee.Issue (i): Whether addition of Rs. 20,25,000/- as regular course fee is justified.Analysis: The source of payment for the regular course fee was supported by a sale deed showing sale proceeds and by an affidavit from the person who admitted payment from those proceeds. The assessee consistently denied making the payment. The authorities below disbelieved the affidavits because bank statements of the payer were not produced. The tribunal examined the documentary sale deed and the affidavit establishing the source and application of funds for the fee.Conclusion: Addition of Rs. 20,25,000/- is deleted and the addition is not sustained in favour of the revenue.Issue (ii): Whether addition of Rs. 13,25,000/- as alleged capitation fee paid in cash is justified.Analysis: The addition was founded on statements/seized material attributed to the educational institution's representative. That material was not produced or confronted with the assessee during proceedings. In the absence of evidence made available to the assessee or independent material linking the assessee to the alleged cash payment, the addition lacks requisite evidentiary basis.Conclusion: Addition of Rs. 13,25,000/- is deleted and the addition is not sustained in favour of the revenue.Final Conclusion: Both additions (Rs. 20,25,000/- and Rs. 13,25,000/-) are set aside and the appeal is allowed.Ratio Decidendi: Where the assessee substantiates source of payment by reliable documentary evidence and affidavit, and where alleged incriminating material or statements relied upon by the revenue are not produced or confronted with the assessee, additions based on such uncorroborated material cannot be sustained.