TaxTMI 
TaxTMI 
2016 (4) TMI 84
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....een granted registration u/s 12A of the Act by the Commissioner of Income-tax-I, Hyderabad on 2-4-1998. Subsequently, it was also granted approval u/s 10(23C)(vi) of the I.T. Act, by the CCIT-1, Hyderabad on 21-9-2007, with effect from Assessment Year 2003-04 to 2005-06 retrospectively, which was renewed on 14-2-2008 from the Assessment Year 2006- 07 onwards. The assessee society is running an Engineering College by the name Sreenidhi Institute of Science and Technology (SNIST) and its main objects are to provide education, vocational guidance, training and research programmes, to promote technical, professional and vocational education etc. to the students. 2.2 In the course of search at the residence of Shri K.T. Mahi and Smt. Sarita Mahi, cash of Rs. 2,84,110/- and jewellery of Rs. 22,36,380/- were found, out of which Rs. 2,00,000/- and Rs. 8,59,680/- respectively, were seized. In addition to the same, documents relating to unaccounted Income generation and Investments thereof were also found and seized, which pointed to the fact that the assessee society was collecting amounts over and above the regular fees and the trustees were utilizing the amounts for their personal bene....
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....u/s.132(4) on 6-11-2009 admitted additional income of Rs. 16.50 crores in his Individual hands with a view to set right the lapses, omissions and commissions in his individual business affairs and all issues involved in the seized material. 2.6 However, the Assessing Officer, after going through the relevant material noticed that, the total unaccounted monies, received over and above the prescribed fee, came to Rs. 16,62,26,600/- (after reducing the amount of Rs. 6,42,97,600/- on account of fee collections and certain refunds), as against the admission of Rs. 16.50 crores by Shri Mahi. He also noted that even though Shri Mahi had admitted such additional income in his individual hands, source for the same stemmed from the college only. 2.7 The Assessing Officer has quantified the unaccounted receipts for various years, after reducing the fees and funds out of the total amounts collected from students as per the seized Annexure as under: Assessment Year Unaccounted receipts (Rs.) 2005-06 18,62,000/- 2006-07 1,35,17,000/- 2009-10 9,00,44,700/- 2010-11 6,04,02,900/- 2.8 The Assessing Officer has also listed out year-wise investments as appearing ....
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.... implying that the remaining part appearing in the seized papers but not recorded in the books was also true. It was also found that the students whose names were appearing in the seized material were actually studying in the college and their names could be traced out in the books with the details of fees paid by them. He further noted that the above mentioned seized material was found and seized from the table of Shri Ramesh Babu only, who categorically stated that the said books reflected the amounts of cash received from various persons as consideration for courses offered to them. He also explained how the said cash was being used by Shri KT Mahi for Investments in real estate, personal expenditure, etc. Shri Ramesh Babu also explained the mode of receipt of fees and donation/capitation fee, stating that for the Management Quota seats, only fee is collected through Bankers Cheque/DD, while capitation fee is collected in cash. He also explained that the fee in the form of cheques was being deposited into the bank a/c of SNISTCollection a/c in Andhra Bank, Sultan Bazar, while the cash donations were being deposited into KT Mahi's personal a/c with, Andhra Bank or Indian Bank....
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....for selling education and that the element of charity no longer remained the activity of the assessee. He concluded that since the society sells seats of professional courses and collects Capitation Fee and therefore, the activity of the assessee no more remains charitable activity within the meaning of sec. 2(15) of the Act. The Assessing Officer held that the material seized in the course of search clearly establishes the collection of money over and above the prescribed fees and this fact was admitted by the employees of the society, who even admitted that the amount so collected was being handed over to the Chairman and interested persons in the society. The Assessing Officer opined that when the society admits students under the Management Quota in consideration of an amount, which is over and above the prescribed fees, it clearly establishes the intention of the assessee to earn profits and that the assessee's case, the seized documents showed that collection of such amounts was a regular phenomenon. He also took note of the fact that even in the state of Andhra Pradesh, a committee has fixed the fees that may be collected by the professional educational Institutions per ....
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....ot available to it. He also provided copies of various statements recorded during the course of search, as requested by the assessee, Vide letter dated 26-12-2012, the assessee stated that the statement given by Shri Ramesh Babu is false, baseless, incorrect and without knowing the facts. It was also stated that the books seized were not at all related to any of the transactions of the assessee society and were maintained purely by Shri Ramesh Babu in his personal capacity. Therefore, the assessee claimed that those could not be accepted as the books of account of the society. It also relied upon the Affidavit filed by Shri KT Mahi before the ADIT, emphasizing the fact that cross-examination of these persons would begin a long and protracted litigation, and therefore, to avoid litigation and have peace of mind, the income was admitted. On a consideration of the assessee's submissions, the Assessing Officer noted that in his reply to question, No.5, Shri KT Mahi had stated that notings with respect to cash transactions reflected in the seized material are prone with difficulties for explanation, and evidence to the level desired cannot be adduced by him. Accordingly, Shri Mahi a....
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.... available in the assessee's case regarding charging of capitation fee, the Assessing Officer concluded that the assessee society was into the practice of collection of capitation fee for the earlier years also. Relying on the seized material, the average excess fee received was worked out by him. In view of the above conclusion, the Assessing Officer estimated the excess amount collected for AYs 2004-05 to 2007-08 as under: S. No. Academic Year AY No. Management seats Estimated excess amount collected Total amount 1 2003-04 2004-05 78 1,00,000 78,00,000 2 2004-05 2005-06 77 1,50,000 1,15,50,000 3 2005-06 2006-07 4 2006-07 2007-08 115 2,50,000 2,87,50,000 5 2007-08 2008-09 130 3,00,000 3,90,00,000 2.20 Since the approval u/s 10(23C) had already been rescinded by the Hon'ble DGIT (Inv) by way of his order dated 16-12-2011, the claim of exemption under the said section was rejected. In view of the foregoing discussion, the AO concluded that the assessee is not eligible for exemption u/s 11 of the Act also and accordingly proceeded to assess the a....
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....so debited Rs. 86,472/- on account of loss on sale of vehicles which in his opinion was to be disallowed as the vehicle being the capital asset was to have an effect on the Block of assets. Considering these and the unaccounted income, the total loss was worked out at Rs.(-) 1,98,64,736/-. 2.26 Asst. Year 2009-10: The Income and expenditure statement for this asst. year showed a surplus of Rs. 8,13,821/-. Considering the same and the unaccounted income, the total Income was worked out at Rs. 9,12,58,521/-. 2.27 Asst. Year 2010-11: The income and expenditure statement for this asst. year showed a surplus of Rs. 98,07,374/-. Besides, the Assessing Officer disallowed the claim of donation of Rs. 2,23,409/- in the absence of any evidence. Considering the same and the unaccounted income, the total Income was worked out at Rs. 7,04,33,683/-. 3. Aggrieved by the order of Assessing Officer, the assessee preferred appeals before the CIT(A). 4. After considering the submissions of the assessee, the CIT(A) decided the appeals as under: 4.1 The CIT(A) observed that during the appeal proceedings, the assessee reiterated what was stated before the Assessing Officer and submitted t....
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....he collected amounts have not reached the society, therefore, the exemption u/s. 11 cannot be denied. It cannot also be said that the seized documents on which, the Assessing Officer had placed reliance conclusively proved that it was only the society, which is received the excess money. The Circumstances only show that it was Sri K.T. Mahi, who has collected excess money without the knowledge or the authority of the society. In other words, none of the monies were collected by Sri K.T. Mahi on the authority of the society. In the case of CIT vs. Geethanjali University, 214 Taxman (Raj), it was held that what is required for purpose of seeking approval u/s 10(23)(c) is that university or education trust shall exist solely for educational purposes and not for purpose of profit. Furthermore though the admissions were not in accordance with prescribed rules still the said violation could not be to its losing character as an entity existing solely for educational purposes. Following the ratios of the decisions as mentioned above, In the present case though excess fees has been collected by Sri K.T. Mahi, the society does not lose its character as the Institution which is existing fo....
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....s observed by the Hon'ble ITAT. It may be noted that the Assessing Officer has categorically brought out the discrepancy/irregularity with regard to the allowability of exemption u/s 11 in the assessment order. 4.3 The CIT(A) after analysing the issue with relevant sections and following the decision of the Jurisdictional High Court in the case of M/s Ahura Holdings Ltd. Vs. DCIT reported in - 2012-TIOL-357-HC-AP-IT & Gopal Lal Badruka Vs. DCIT 346 ITR 106, held as follows: "09.14. In the present case, the Assessing Officer estimated the suppression of capitation fee in the earlier years on the basis of the incriminating seized material found for Asst. years 2009-10 and 2010-11 which has been admitted by the Managing Trustee, Sri K.T. Mahi as capitation fee received by him and offered it to tax in his hands. It may be noted that in the preceding paras, I have held that the entire capitation fee received, needs to be considered in the hands of the society in view of the violation of provisions of section 13(1)(c) of the Act by the society and that the society loses the cover of exemption u/s.11 of the I.T. Act. There has been incriminating material for AYs 2009-10 and 2010....
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....a nullity. 3. The Commissioner (Appeals) has erred in upholding the assessment under the status of an AOP. 4. The Commissioner (Appeals) has erred in upholding an addition of Rs. 78,00,000, on account of estimated suppression (extrapolation) of capitation fees, as Society's undisclosed income. a. The Commissioner (Appeals) has erred in upholding the assumption of extrapolation irrespective of any evidence from the seized material. b. The Commissioner {Appeals} has erred in upholding the inference of the assessing officer that the assessee earned undisclosed income. c. The Commissioner (Appeals) has erred in upholding the inference of the assessing officer that KT Mahi, the Trustee, collected the capitation fee on behalf of the Society. d. The Commissioner (Appeals) has erred in upholding the inference of the assessing officer that the assessee was into the practice of collecting capitation fee. e. The Commissioner (Appeals) has erred in upholding the inference of the assessing officer that the assessee Society exists not solely for educational purpose but only for profits. f. The Commissioner (Appeals) has erred in upholding the inference of the assessin....
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....ociety. 6.1 Referring to the above observations, the ld. AR submitted that in the present case no material has been brought on record to show that the assessee solely exists for profit motive and that the department has not been able to discharge its onus of showing as to how the conditions for grant of registration have been breached by the assessee. The registration has been granted to the society for many years in the past under the same facts and there is no change in the facts or in the activities of the society in the present year. He submitted that it has also not been demonstrated by the Department as to how the object of the assessee has turned into a commercial one. The predominant object of the assessee is and remains to carry out charitable purpose of advancement of education and not to earn profit. In fact no profit has been established to have been earned by the assessee. According to him, the DIT has failed to specify as to how profit earning is the predominant activity of the assessee as the society has been pursuing its object of imparting education to students. Therefore, according to him, the assessee society cannot be deprived of the benefit of registration g....
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....ong application of law-Fact that the Department had filed further appeal against the earlier order was not a valid ground for not following the same.-CIT VS. L G. Ramamurthi 1977 CTR (Mad) 416 (1977) 110 ITR 453 (Mad), Union of India VS. Kaumudini Narayan Dalal (2001)168 CTR (SC) 3: (2001) 249 ITR 219 (SC), CIT VS. AL. Ramanathan (2000) 159 CTR (Mad) 255: (2000) 245 ITR 494 (Mad) and Union of India & Ors. VS. Kamalakshay Finance Corpn. Ltd. AIR 1992 SC 711 followed 2. CIT vs Travancore Titanium Products Ltd 265 ITR 526 (Kerala) 3. S Shanmugavel Nadar vs State of Tamil Nadu 263 ITR 658 (SC) 4. CIT vs Sterling Foods 237 ITR 579 (SC) 5. CIT vs B R Constructions 202 ITR 222 (FB) 6. AP Bidya Devi vs CIT 263 ITR 52 (Calcutta) 7. CIT vs Nestle India 83 CCH 76 (Delhi) ITA 644/2012 8. CIT vs Shyamalal M Soni 276 ITR 156 (MP) 9. ACIT vs Affection Investments Ltd 2 Sort 165 (Ahmedabad) 10. AP State Warehousing Corp Ltd vs DCIT 41 CCH 43 (Hyderabad) ITA 456,673,673/H/2014 11. DC of WT vs Ashwin C Shah 82 lTD 573 (Mumbai) 12. DCIT vs Mangal Dayak Chit Fund P Ltd 92 lTD 258 (Hyd) 13. DCIT vs Managalam Cement Ltd 92 ITD 44 (TM) (Jaipur) 14. Marubeni Corporat....
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.... Bank of Baroda vs. H.C. Srivastava (2002) 175 CTR (Bam) 663: (2002) 256 ITR 385 (BOM) and Aggarwal Warehousing & Leasing Ltd. vs. CIT (2002) 177 CTR (MP) 15: (2002) 257 ITR 235 (MP) applied. 3. NPAR Drugs P Ltd vs oar 98 ITO 285 (TM) (Delhi) - IT (55) 206/Del/2002 Appeal (Tribunal)-Precedent-Binding nature- Tribunal is not a formal source of law in the sense High Courts are- It is not a Court of record- Tribunal is the final factfinding authority While the issue before the High Court comes to an end once a judgment is delivered and the question is not raised again, the same question may be raised again before the Tribunal in a fresh assessment- Thus, decision of a Bench of the Tribunal, even in the case of the same assessee in a particular assessment year does not constitute a binding precedent on subsequent co- ordinate Bench of the Tribunal in relation to another assessee or another assessment year of the same assessee - However, a subsequent Bench can draw different conclusion if there is adequate justification to depart from the earlier view, e.g., where subsequently new or more facts or material or evidence come to light-However/if it is only a case of different opinion....
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....after considering All Cargo, and AP High Court judgmnts in Gopal Lal Badruka and Ahura Holdings etc.) He submitted that in view of this, for assessment year up to 2008-09, no assessment can be made based on estimation without any incriminating evidence being found. 6.8 Ld. AR further submitted that abated cases which are open for assessment are required to be assessed like any other normal assessment. As per settled law, these assessments should be based on relevant material which is justifiable. Whereas in the present case, the AO has made additions based on material related to other years. He submitted that each year is different and the AO cannot rely on other years' assessment to make an addition. For this proposition he relied on the following cases: * ACIT vs Gurumukh M Jagwani - Laxmi Industries, No.ITA 1771 to 1773 of 2007, ITAT Pune * ACIT vs Thakkar Popatlal Velji Sales Ltd, ITAT Mumbai, No. ITA 4812,4813 and 4845 all of 2010 * JB Education Society v ACIT, 55 Taxman.com 322, ITA 29 to 41 of 2013 Hyderabad where it was observed that "Held that in the absence of evidence or material indicating any suppression about collection of fees towards management qu....
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.... Aditanar Educational Institution Vs. Addl. CIT, 90 Taxman 0528 3. ITA No. 1120/Hyd/09 in case of M/s Vasavi Academy of Education, Hyderabad, order dated 29th January, 2010. 4. ITA No. 1369/Hyd/2012 in the case of M/s Saivani Educational Society, order dated 9th January, 2013. 8. We have heard the arguments of both the parties and perused the material on record as well as orders of revenue authorities. We have also carefully gone through the decisions cited. Subsequent to survey and based on the records found by the revenue, no doubt that the evidence found, establishes that additional fees was collected by the people involved in the management of the education in the college. Now, the question that arises is, who actually collected the additional/capitation fees. On perusal of the decision of the coordinate bench of this Tribunal on the very same set of facts, it clearly spelt out that the additional fees was collected by Mr. K.T. Mahi without clear authority of the society. With the above factual findings, it is held that Mr. K.T. Mahi has collected additional/collection fees and the same should be assessed only in the hands of Mr. Mahi. Moreover, the same was also accep....
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....sp; AY Estimate No. of students Amount 1. 2004-05 1,00,000 78 78,00,000 2. 2005-06 1,50,000 77 115,50,000 3. 2006-07 2,00,000 - - 4. 2007-08 250,000 45 287,50,000 5. 2008-09 3,00,000 130 390,00,000 From the above calculation, it is clearly established that Assessing Officer had presumed that the society or Mr. Mahi had collected the above said amount but could not provide any cogent material to substantiate the above presumption. He relied on the two judgments viz., Rajwik & Co Vs. ACIT and M.s Bawarchi Restaurant (supra) to justify the extrapolation. In the case of Rajwik, it was established that the assessee had suppressed income based as part period evidences and sworn deposition of partner of the firm, which was upheld. Whereas in the given case, no doubt, it was established that Mr. Mahi collected excess fees but the excess collection was not for part period nor he had accepted in the sworn deposition anything more than Rs. 16.50 crores. On the other hand, the decision of M/s Bawarchi can be applied when the situation arises for estimation. Not in the present case. Moreover, as per the re....
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....iate the assessments for all the six years prior to the assessment year in which the search had taken place, but he will get the free hand only in respect of those assessments which had not attained finality on the date of search. It was held that the pending assessments in such cases will abate and the A.O. while framing the assessment under section 153A/153C of the Act will get free hand through abatement and will frame the assessment afresh. It was held that where proceedings have reached finality, the assessment under section 153A read with 143(3) however has to be made as was originally made/assessed and further addition should be restricted only to the extent they are supported/justified by any material found during the course of search." 11. In view of the above judicial precedents, we are of the view that the Assessing Officer cannot estimate the unaccounted receipts for all the assessment years based on the material found in the search proceedings relating to a particular AY without any cogent material available for the other AYs and without any statement/deposition of any of the office bearers of the society that it has collected additional fees in the earlier years al....