Section 153C limitation and third-party evidence rule led to deletion of capitation fee additions and related exemption denial.

Section 153C was applied from the date the seized material reached the Assessing Officer of the other person, so the six-year span ran from AY 2013-14 to AY 2018-19; AYs 2011-12 and 2012-13 were outside scope, and AY 2017-18 could not be completed under section 143(3). Additions for alleged capitation fee were deleted because the material came from employees and third parties, with no independent corroboration against the assessee and retracted statements lacking reliability. Exemption under section 11 was therefore not denied. Major relief was also upheld on corpus donations and development fees, while one donation was remanded for verification, foreign currency was sent back for factual examination, and rejection of books and related depreciation issues were only partly sustained.

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Issues: (i) Whether the assessment years 2011-12 and 2012-13 were outside the scope of section 153C and whether assessment of AY 2017-18 under section 143(3) was without jurisdiction; (ii) whether additions towards alleged unaccounted capitation fee could be sustained on the basis of documents seized from employees and retracted statements; (iii) whether exemption under section 11 could be denied on the footing that capitation fee was collected; (iv) whether corpus donations and development fees were liable to be added as unexplained credits or taxable receipts; (v) whether the addition for foreign currency required factual reconsideration; and (vi) whether rejection of books and the related depreciation issue were sustainable.

Issue (i): Whether the assessment years 2011-12 and 2012-13 were outside the scope of section 153C and whether assessment of AY 2017-18 under section 143(3) was without jurisdiction.

Analysis: The six-year period under section 153C was held to run from the date on which the seized material was received by the Assessing Officer having jurisdiction over the other person. On the admitted facts, the relevant material was received only on 02.08.2018, with the result that the block period ran from AY 2013-14 to AY 2018-19. AYs 2011-12 and 2012-13 therefore fell outside the permissible span. AY 2017-18, being within that span, could not be completed merely under section 143(3) and the assessment was held to be without jurisdiction.

Conclusion: The assessments for AYs 2011-12 and 2012-13 under section 153C were unsustainable, and the assessment for AY 2017-18 under section 143(3) was quashed.

Issue (ii): Whether additions towards alleged unaccounted capitation fee could be sustained on the basis of documents seized from employees and retracted statements.

Analysis: The impugned additions rested substantially on laptops, loose papers, pen drives, diary entries, cash found with employees, and statements recorded under section 132(4). The Tribunal found that the material was seized from employees and other third parties, not from the assessee, and no independent corroborative material was found in the assessee's possession. The retracted statements were not treated as sufficiently reliable, and the evidentiary value of the seized material was found insufficient to fasten liability on the assessee without further corroboration.

Conclusion: The additions towards capitation fee were deleted.

Issue (iii): Whether exemption under section 11 could be denied on the footing that capitation fee was collected.

Analysis: The denial of exemption was based on the assumption that the assessee was engaged in collection of capitation fee. Once the addition itself was found unsustainable, the foundation for denial of exemption failed. The registration under section 12A remained intact, and the alleged violation of charitable character was not established on reliable material.

Conclusion: The assessee was held entitled to exemption under section 11 in respect of the receipts in question.

Issue (iv): Whether corpus donations and development fees were liable to be added as unexplained credits or taxable receipts.

Analysis: For corpus donations, the Tribunal found that the Assessing Officer relied largely on an investigation report relating to another group and did not bring independent material to establish accommodation entries. The relief granted by the CIT(A) in respect of most corpus donations was sustained. However, the specific donation from Abdul Fakir Malim was restored to the Assessing Officer for limited factual verification. As regards development fees, the Tribunal followed the view that where the receipts were treated as corpus contributions and applied for the trust's objects, they could not be treated as taxable revenue receipts on the facts found.

Conclusion: Major relief on corpus donations and development fees was upheld; the issue concerning Abdul Fakir Malim was remanded for fresh examination.

Issue (v): Whether the addition for foreign currency required factual reconsideration.

Analysis: The assessee's explanation regarding purchase, contribution, and accounting of foreign currency required verification of supporting particulars. As the factual foundation was incomplete, the matter was considered fit for reconsideration by the Assessing Officer.

Conclusion: The issue was remanded to the Assessing Officer.

Issue (vi): Whether rejection of books and the related depreciation issue were sustainable.

Analysis: The basis for rejecting the books was the alleged non-accounting of capitation fee. Since the capitation fee additions were deleted, the foundation for rejecting the books fell away. On depreciation, the Tribunal held that denial on opening assets was not tenable for earlier years and directed allowance for those years, while the remaining years required verification of whether the asset cost had already been allowed as application of income.

Conclusion: The rejection of books was not sustained, and the depreciation issue was partly allowed with a direction for verification in remaining years.

Final Conclusion: The assessee succeeded on the jurisdictional challenge and on the core additions relating to capitation fee, while receiving substantial relief on corpus donations and development fees; the foreign currency and certain depreciation aspects were remanded or partly restored for limited verification.

Ratio Decidendi: For section 153C proceedings, the six-year period is to be reckoned from the date the seized material is received by the Assessing Officer of the other person, and additions based only on third-party seized material and retracted statements cannot stand without independent corroboration.

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