TaxTMI 
TaxTMI 
2011 (7) TMI 1018
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....der section 12A of the Income-tax Act, with the Commissioner of Income-tax, Coimbatore. The assessee-trust runs an engineering college affiliated to Anna University, Chennai and also runs a college of occupational therapy. A search under section 132 of the Act was conducted in this case including its group cases on August 13, 2007. During the course of search, certain incriminating evidence including cash of Rs. 20 lakhs was found and seized from M/s. Saveetha Engineering College. As a sequel to this search, notice under section 153A was issued to the assessee. The assessee-trust filed a return in response thereof on September 17, 2009 admitting nil income. On the basis of document seized and statements recorded, the Assistant Commissioner of Income-tax, Central Circle (Assessing Officer) has made the following additions: (Rs.) Income returned Nil Add : 1. Capitation fees collected from the student 5,37,00,000 2. Unaccounted cash 21,26,923 3. Excess income as per income and expenditure account as per proviso to section 164(1) 4,12,67,096 Total 9,70,94,019 4. Aggrieved, the assessee filed appeal before the learned Commissioner of Inco....
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....ution since Dr. N. M. Veeraiyan merely denied the statement of Dr. B. Muthukumaran without any evidence or he could not produce Dr. B. Muthukumaran for cross examination. 1.(e) The learned Commissioner of Income-tax (Appeals) has failed to note that the letter dated August 26, 2003 from the Director of Medical Education/Chairman, Grievance Committee reveals the fact that the assessee used to charge excess fee against the prescribed fee structure and hence this proves the receipt of capitation fees by the institution. 1.(f) The learned Commissioner of Income-tax (Appeals) has failed to note that the evidentiary value of a deposition statement which is otherwise admissible is not wiped out in the absence of corroboration as observed in several case law mentioned in the assessment order. 1.(g) The learned Commissioner of Income-tax (Appeals) ought to have applied well settled principle of law that in the income-tax proceedings, facts of life, human probabilities and economic realities cannot be ignored as held in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC), Juggilal Kamlapat v. CIT [1969] 73 ITR 702 (SC) and Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) and uphe....
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..... The facts apropos this issue are that this addition is solely based on the sworn statement recorded under section 132(4) on August 13, 2007 from Dr. B. Muthukumaran, a special officer in Saveetha Engineering College. While answering question No. 18, Dr. B. Muthukumaran had stated that the college collected capitation fees as donation from students admitted against management quota. In reply to question No. 19, he had further stated that the donations were collected in cash, and for donations cheques/demand drafts were not accepted. He stated that Rs. 3 lakhs was taken as donation from each student for admission to the course under the control of Anna University. However, this amount was Rs. 1 lakh for admission in Saveetha University. He also stated in his statement that regarding this amount, no books of account were maintained. A loose sheet No. 56 was seized as annexure Ann/B&D/MR/S dated August 13, 2007 which contained the details of the number of seats allotted under the management quota and under the Government quota. The averments on sheet No. 56 are reproduced below : Anna University Management quota Government quota Total For B. E. course 1....
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....ced by the Assessing Officer is nothing but a piece of paper containing details of number of seats allotted to management quota and Government quota. This document cannot be said to be even an incriminating document because this is a declared truth which is also recorded in the books of the trust. The statement recorded after the verification cannot be accepted without doubt. So, we can safely conclude that document No. 56 cannot be treated as incriminating document by any stretch of imagination. Nothing incriminating is scribe on it. Nothing has been mentioned on this piece of paper regarding collection of any capitation fees or even the amount of fees which is legally chargeable. Hence, we cannot give meaning in one way or the other, more specifically, suitable to the Revenue's interest on the basis of alleged statement, which heavily suffers from contradictions and also stand refuted by the management when these statements were put to them during the course of assessment proceedings. It was categorically denied to have collected any capitation fees. After verification when something is recorded which is contrary to the main body of statement, it cannot be accepted as a volun....
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....st on the basis of such evidence. Recording of some questions after verification could be viewed as an involuntary statement, extracted from the deponent. In any case, a possibility of such inference is always there. With regard to such statement, the Central Board of Direct Taxes has issued instructions vide Circular No. 286/2/2003-IT, wherein it has been directed that search party shall not obtain confessions. So, the admission made under section 132(4) by the concerned officer cannot be treated even as a valid piece of evidence. There being no incriminating document having been found or seized during search and the statement also being abstruse, the addition in question has no legs to stand on. Had there been a valid statement, even then, solely on the basis thereof, addition could not have been made. This is a well settled principle of law by now and there are umpteen decisions in support of this view. 10. We are not convinced with the learned Departmental representative that the letter dated August 26, 2003 written by the Director of Medical Education/Chairman, Grievance Committee alleging that the assessee was charging excess fee against the prescribed fee structure would ....
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....f the society, considering the above, the assessee-society has violated section 13(1)/ 13(1)(c) which reads as under : "13(1). Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof 13(1)(c)(ii). if any part of such income or any property of the trust or the institution is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in subsection (3)." ' In the instant case, donations receipts of the trust have been diverted to the personal investment of the president Dr. N. M. Veeraiyan. This fact cannot be ignored because of the human probabilities and surrounding circumstances as laid down by the hon'ble Supreme Court of India in the cases of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal v. CIT [1995] 214 ITR 801 (SC). The assessee has invested in movable and immovable assets like gold jewellery and construction/furnishing of residential building. Dr.N. M. Veeraiyan, the president has also admitted to having received donations from students which is nothing but capitation fee....
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....al and factual position, it is held that the society is not eligible to claim exemption under sections 11 and 12 of the Income-tax Act, 1961. Accordingly the incomes of the society are taxable under the proviso to section 164(1) which reads as under: 'Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate.' 24. On behalf of the appellant with regard to the above addition it is submitted that the appellant had not violated the provisions of section 13(1)(c). Since at the first instance as explained earlier the appellant had not received any capitation fee, it is worthwhile and pertinent to look into the purpose for which the search was conducted, which was discussed by the Assessing Officer in pages 1 and 2 of the assessment orders which is as follows : 'Search under section 132 of the Income-tax Act was conducted on August 13, 2007 in the cases of M/s. Saveetha Institute of Medic....
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....receipt of alleged capitation fee which was utilised by him and offered as income especially when the disclosures were made in the hands of the trustees/members in their personal capacity for which the trustee/ members filed the returns admitting the income in respect of the disclosure made by them. 26. I have gone through the assessment order. I have also carefully gone through the submissions of the authorised representative. As pointed out by the authorised representative and as per my findings discussed earlier the appellant-trust/society had not received any capitation fee. The so called admission made by Dr. N. M. Veeraiyan during the course of search and survey operations in respect of income of family members, was also in their personal hands. The admission of the above income was also not in respect any receipt of capitation fee. Since the appellant-trust/ society had not received any capitation fee, the diversion of the same for the personal benefits of the trustee/members does not arise. Further there was also no incriminating material found or seized during the course of search revealing diversion of any sort of money from the trust to the trustees/ members of ....
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....rch does not stand properly explained, hence, the action of the learned Commissioner of Income-tax (Appeals) is correct. The learned authorised representative stated that this amount represent tuition fees, petty cash, caution deposit, application amount and transport fee from students. The learned Commissioner of Income-tax (Appeals) has simply mentioned that after considering the written submission made on behalf of the assessee and not in agreement with the explanation offered for unaccounted cash and hold the cash to be unaccounted cash of the assessee-trust. In this regard, the version of the learned authorised representative is that in his statement recorded on August 13, 2007 vide reply to Question No. 16 has clearly stated that the cash was from tuition fees (Rs. 17,09,000), petty cash (Rs. 10,153), caution deposit for disbursement to students (Rs. 1,33,000), application amount received from students (Rs. 2,36,770) and transport fees of college of engineering (Rs.15,000). It was stated in this very statement that regarding fees collected, no record or register is maintained because after collecting the fees, they were entered in a file in the computer and later the amounts ....
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....essing Officer towards capitation fees collected from the students at Rs. 1,27,00,000. 1.(b) The learned Commissioner of Income-tax (Appeals) has failed to give adequate weight to the sworn statement under section 132(4) deposed by Dr. B. Muthukumaran, Special Officer of the institution which proved the fact that the institution collected capitation fees for admission to the management quota, that the amounts were collected by cash and that no books were maintained for that purpose. 1.(c) The learned Commissioner of Income-tax (Appeals) has failed to note that the finance officer Sri T. A. Varadarajan had not denied the receipt of capitation fees but only stated that he did not know the details. 1.(d) The learned Commissioner of Income-tax (Appeals) has failed to note that the burden of proof that the institution did not receive capitation fees was not discharged by the institution since Dr. N. M. Veeraiyan merely denied the statement of Dr. B. Muthukumaran without any evidence or he could not produce Dr. B. Muthukumaran for cross examination. 1.(e) The learned Commissioner of Income-tax (Appeals) has failed to note that the letter dated....
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....ot be ignored and upheld the additions since one cannot expect direct evidence especially when the funds of the trust are diverted for personal benefits of the trustee. 2.(e) The learned Commissioner of Income-tax (Appeals) has failed consider the ratio of the following case laws mentioned in the assessment order : (i) Maddi Venkataraman and Co. P. Ltd. v. CIT [1998] 229 ITR 534 (SC). (ii) Vodithala Education Society v. Asst. DIT (Exemptions) [2008] 20 SOT 353 (Hyd). 3. The appellant craves leave to add, to amend or alter the above grounds of appeal as may be deemed necessary. Relief claimed in appeal The order of the learned Commissioner of Income-tax (Appeals) may be set aside and the order of the Assessing Officer be restored." 19. In the assessee's appeal, the following grounds have been raised : "1. The order of the Commissioner of Income-tax (Appeals), Salem is opposed to law, facts and in the circumstances of the case. 2. The Commissioner of Income-tax (Appeals) erred in sustaining the addition in respect of seized cash of Rs. 3,69,950. 3. The Commissioner of Income-tax (Appeals) erred in not a....