TaxTMI 
TaxTMI 
2013 (11) TMI 1705
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....h Bhavan which is the premises owned by the assessee trust as well as his residence at "Ashirvad", Bharati Nagar, Paud Road, Kothrud, Pune. As noted by the Assessing Officer, Shri Ramchandra Dada Shinde is the trusted employee of the trustees and he was also working as Accounts Officer looking after the Accounts of various trusts of Bharti Vidyapeeth Group including the present assessee. In this case the registration of the assessee trust was cancelled by the CIT(Central), Pune by exercising his powers u/s. 12AA (3) of the Act vide order dated 08-11-2007. The assessee had challenged the cancellation of the registration before the ITAT, Pune and order of CIT(Central), Pune was cancelled and registration granted to the assessee u/s. 12A was restored. 3. Another aspect to be considered in this case that is the reference was made by the Assessing Officer u/s. 142(2A) for the special audit and the entire assessment is based as per the audit report given by the Special Auditors. The assessee has not pressed the grounds taken in respect of reference made to the special audit u/s. 142(2A) and hence, we are also skipping the discussion on the said issue. In the present case, there is no ....
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.... hence, the exemption u/s. 11 was not allowable. 6. The learned CIT(A) erred in holding that the appellant trust has violated the provisions of section 13(1)(c) of the Act. 7. The learned CIT(A) erred in holding that the appellant trust was charging some capitation fee for admissions to the students without appreciating the correct facts of the case. 8. The learned CIT(A) erred in holding that the cash and the loose papers found with Shri Shinde belonged to the appellant and not to Shri Shinde and that the appellant had received the capitation fee as per these papers. 9. The learned CIT(A) erred in confirming an addition of Rs. 2,00,50,000/- made to the total income of the appellant on the basis of the various loose papers found with Shri Shinde. 10. The learned CIT(A) erred in confirming the addition of Rs. 3, 14,83,8707- made by the learned A.O. being the cash found with Shri Shinde on the ground that the same pertained to the appellant and not to Shri Shinde. 11. The learned CIT(A) erred in confirming the following additions to the total income in the hands of the appellant - i. Disallowance of Rs. 77,69,011/- u/s 40....
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....on u/s.12A from Commissioner of Income-tax, Pune was obtained on 13/9/1973 vide registration No.CH/P/PNA/86/73-74, issued vide No.P165/Registration of Trust (86)773-74/13/9/1973. Numerous educational and allied institutions in diverse fields, including medical colleges, engineering colleges, management institutes and schools etc. have been opened and run under the aegis of this trust since the granting of registration in 1973 entitling BVP exemption from the payment of taxes under the Income-tax Act. As per the list given approximately 208 institutes are presently run in and around Pune, Mumbai, Thane, Navi Mumbai, Solapur, Satara, Kolhapur and Sangli etc. in Maharashtra and others in Delhi. Bharati Vidyapeeth, deemed university is also part of the above trust. BVP has been enjoying the exemption from payment of taxes since 1973 till A.Y. 1998-99. Exemption for subsequent assessment years has been either withdrawn or denied subsequent to the search and discovery of certain facts held adverse by the Income-tax Department in respect of the conduct of the appellant trust. 5.2 After noticing reports from various corners about the illegal practices being carried out in the educationa....
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....llant, in the context of their different grounds of appeal, that the appellant, because of s.132(4A), has been arguing that the incriminating documents found and seized along with the cash should be held to be belonging to Sri Shinde and not the trust. Such a proposition does not appear correct. First of all, the presumption is not mandatory because the word used in s.132(4A) is "may" and not "shall". Therefore, the option is with the department to exercise it or not and if exercise it, in what manner? Furthermore, the presumptions are required to be applied where the evidences found are not indicative of its real ownership. In other words, where it is not possible to infer or attach an evidence to a particular person, the above provision comes to the rescue of the department. Had that not been the case, section 153C would not have been on the statute wherein, the AO on coming to the satisfaction that seized material belongs to other than the searched person, can initiate proceeding similar to S.153A in the case of that other person. Because in that case, the department is permitted legally to presume that the same belong to the other person from whom it is not seized. It can furth....
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....es each and the same has been deposited in cash in various fund accounts of institutes run by BVP. This admission of fact was found to be matching with the findings that huge cash was actually seen deposited in the building fund accounts and other trust accounts of various institutes and BVP. This part of the statement of Mr.Shinde appears to have been given in spontaneity, as the same do not match with the stand that he has been taking generally in his statement that the money belong to him for his consultation. If he was giving consultancy and money seized represented the same, where is the question of such earnings made in earlier years getting deposited in the accounts of appellant instead of that of Mr. Shinde. Such a statement given in spontaneity is known to be true as per the principles of psychology. Even though the appellant and Mr.Shinde have attempted to dilute this statement during the course of crossexamination of Mr.Shinde by the appellant, it got corroborated due to the finding of huge cash deposits in different fund accounts. The cash deposits in fund accounts were, however, claimed by the appellant to be arising from coupon donations collected through dedicated vo....
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....nting approval u/s.142(2A). For getting elaborate details of the documents found and statement etc. given by Shri Shinde and other associated materials and developments, assessment order of the AO passed in this case as well as the order of the CIT(Central) passed u/s.12AA(3) can be referred to. Such findings in the facts and circumstances of the case look logical and acceptable. 5.5 The statements of Shri R.D. Shinde, recorded on 20/7/2005 and thereafter including his cross examination made by appellant and re-examination made by the Addl.CIT on behalf of CIT(Central) during the course of 12AA(3) proceedings, are vital, important and relevant. Both the department and the appellant have tried to rely on them selectively and conversely. However, if his statement is seen considering the fact that he was the trusted employee of appellant entrusted with the job of collecting money while granting admission in certain cases (especially under management quota) then inference becomes easy and it more or less shows that the departmental understanding and reliance is correct and credible. From the perusal of statements recorded during survey and search and thereafter during cross examinat....
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....h amount cannot possibly be given by students, by any stretch of imagination, to Shri Shinde, the Accounts Manager, as is claimed by him and the appellant, the same was held to be belonging to the BVP. Some such noting given below gives its nature quite clearly to establish, as per the AO, that the money collected was by the BVP and for the admissions :- Page No. 5 7+fee Page No. 6 13+fees Page No. 9 12+fee & 5+fee Page No. 16 7+fees & 15+fee Page No.29 35+fee Page No. 30 1+fee Page No. 52 7+fee Page No. 56 9+fee Page No. 60 12+fee Page No. 61 11+fee Page No. 65 10+fees Page No. 76 3 to 4+fee It is worthwhile to note that at no place reference to "consultancy" is appearing in these documents. Shri Shinde however, in response to question No.17 and 18 of his statement dt.20/7/2005 admitted that the prefix amounts are in lakhs and the same are to be collected from students in addition to regular fee. The total of such collections for A.Y.2006-07 was determined by the AO to be at Rs. 9,47,21,850/-. The " + " appearing in the above referred documents have been argued by the AO to indicate that the cumu....
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...., MD, BDS, MBA etc. can be seen from documents seized in bundle 1 (page 85), bundle 2 (page 24 & 39), bundle A1 (page 19), bundle A4 (page 1), bundle A6 (page 13 - 20, 31) and bundle A-8(page 140). Following students were found to have been given admission in the academic year 2005-06, as noted in the assessment order at page 38. S.No Bundle No Page No Name of Student Capitation Amount Institute 1 1 85 Gesti Sabharwal 125000 BV Engineering College, Pune BE (Civil) 2 2 24 Prashant Patil 200000 BV Management Institute, Pune 3 2 39 KCKurian 100000 BV Nursing College, Pune 4 A-l 19 Narayan Kumar 1 75000 BVEngg College, Pune BE(Chem) 5 A-4 1 Mcdvika Singh 150000 BVEngg College, Pune BE(Comp) 6 A-6 13-20 Sidharth Shukla 125000 BVEngg College, Pune BE (Prodn Engg) 7 A-6 31 Bhav inkumar Maheshbhai Tilva 700000 BV Medical College, Sangli 8 A-8 140 Pooja Ravindra Shah 650000 BV Dental College, Mumbai 5.9 Shri Shinde in response to Q.No.7 & 8 of his statement recorded on 21/7/2005, on the issue of collection of....
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....oupon donations, were held not credible in the facts of the case. The appellant has raised objection as AO didn't cross examine them. The AO has stated that much purpose would not have been served as they were tutored. On the contrary, strength was drawn from the statement given by Mr. Shinde that the money / capitation fee collected has been partly deposited in such fund accounts, to say that they are linked to the capitation fee / collection of money for granting admissions. It was stated that the onus is on the assessee to prove that the particular donation whether coupon or otherwise, has in fact been given by the donor voluntarily. The claim of the appellant that the rural folk after knowing the good work of the trust, have voluntarily given these donations could not be accepted in the facts of the case. It was observed by the AO that such large rural population cannot be expected to know about the activities of the trust, when they hardly affect them. Such collections were seen in large quantity not only in the case of the appellant trust but also in the case of other group trusts who are hardly known to have any activities which could influence / impact the large rural p....
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.... 3,30,000/- Admission 6. Kirit B Patel 5,00,000/- Admission of son 7. AshokVPatel 10,00,000/- Admission of daughter for MBBS 8. Suman Gitesh Shah 14,00,000/- Admission to MBBS 9. Dr. Ajay Patel 3,00,000/- Admission 10. Dr. J.V.Shukla 1,00,000/- Admission for daughter for BDS 11. Ashok Kumar Roy 2,00,000/- Paid BVMF for admission 12. Dr. P. K. Gupta 9,50,000/- for admission of Ravi Pratap 13. Shri K. R. Naik, Link India Ltd., Mumbai 10,00,000/- Admission for Medical Education. 14. Shri Vijay Singh Thorat, Mumbai 4,00,000/- -do- 15. Y .E. Shroff, Mumbai 9,00,000/- Donation admitted for the purpose of Medical Education. The above exercise clearly establishes that the appellant has in certain cases accepted the donations/capitation fees in cheque from the students or their guardians in the name of group trusts. In other words AO held even donations from identifiable cases also as of for securing admissions. 5.12 The details of students admitted under management quota in various college/institutions during academic year 1999-2000 to 2005....
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....Cash - Party denied. 5. S. R. Swami 1,00,000 25-7-2000 Payment made towards admission in the College. 6. M/s. Fleet Guard Filter Put Ltd. 10,00,000 30-4-2005 Party accepted, but the donations were given at the request of the Trust 7. D.S. Choudhary 5,000 30-10-02 Cash - Party denied. 8. Mrs. Meera Dudhane 10,000 30-10-02 Cash - Party denied. 9. Mr. J.R. More 5,000 30-10-02. Cash - Incorrect address of the party. Through the above, the AO has tried to establish that the contention of the appellant made before the AO was not found correct even in respect of cases which were offered for examination. 5.15 Documents seized vide bundle No.A-2, A-3, A-8, A-9 and bundle No.4, from the room of Shri R.D. Shinde, have been referred to show utilization of money collected by the trust for the personal benefits of trustees while meeting the expenditure relating to their agricultural farms and others (credit cards etc.) Subsequent to the findings of the nature described above and on receipt of a report from the AO, as described in the order passed u/s.12AA(3), the CIT (Central), Pune initiated action....
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....f payment Rs. 3,000/- made to Shri Rajendra Mohite by Bharati Vidyapeeth, Pune. - bundle no A-2 Page No. 94 to 98-:- Bills of diesel expenses of Bharati Vidyapeeth, Pune. - bundle no A-2 Page No. 101 to 106-:- Expenditure details of Bharati Vidyapeeth, Pune. - Bundle No. A-3 :- Page No. 35 to 48 - Car expenses bills of Bharati Vidyapeeth, Pune. - Bundle No. A-4 :- Pages 11 to 12 & 14 to 18 - Counterfoils of cash deposits in Bharati Sah. Bank Ltd. total of Rs. 21.20 lakhs. - Bundle No. A-4 :- Page No. 20 to 25- Details of labour payment made to M/s Valmiki Enterprises of Rs. 1,06,400/- by Bharati Vidyapeeth. - Bundle No. A-4 :- Page No. 26 - Details of payment of Rs. 10,000/- to Shri. Amrale Rohidas Dyanoba as a advance for office work by Bharati Vidyapeeth. - Bundle No. A-8 :- Page No. 6 to 27 - Details of payments made to Shri D. G. Kanase of Rs. 22, 000/-. - Bundle No. A-8 :- Page No. 28 to 30 - Details of payments made to Shri Rajiv Sathe of Rs. 1,25,000/-. - Bundle No. A-8 :- Page No. 31 to 32 - Details of expenditure incurred by B.V. Medical College (B.V.M.C.), Sangali. Total Rs. 6,34,479/- ....
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....sions of Sec.10(23C) and hence, the claim of the assessee for getting the exemption of its income u/s. 11 cannot be entertained and this issue arises from Ground No. 4. 10. We first address to the issue arising from the Ground No. 4. The relevant discussion on this issue is in the order of the Ld. CIT(A) on Page Nos. 36 to 38 more particularly in Para No. 6.2 but there is no discussion on this issue in the assessment order. The operative part of the discussion in Para No. 6.2 of the Ld. CIT(A) is as under: 6.2 Education is a professed responsibility of the state having important bearing on the welfare of the society at large. Therefore, the legislature has included education as a charitable purpose to encourage more and more people to contribute to the attainment of this object. Tax exemption given to organizations engaged in such activities are indirect financial aids to such organizations. In view of the above, checks have been built in the scheme of provisions relating to these exemptions. To further augment this cause, benefits are also granted to the public also in their taxes u/s. 80G or so, who contribute money to organizations, engaged in such activities. Such l....
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....general provision contained in s. 11 may not override the provisions of specific section. In other words, the income of such educational institutions / hospitals, as are covered in these provisions, has to be examined under ss. 10(23C)(iiiab), 10(23C)(iiiad) and 10(23C)(vi) and not under s. 11 of the I.T. Act. 11. We have heard the Learned Counsel. The argument of the Learned Counsel is that Sec. 11 of the Income-tax Act applies to all the charitable trust including the educational trust and if the assessee satisfies the conditions of Sec.11 of the Act then exemption cannot be denied. He submits that there is no statutory bar in Sec. 11 for excluding the trusts or institutions having objects of educational activities. The Learned Counsel also referred to Sec.2(15) and submits that the said section defines charitable purpose which also includes "Education". Per contra the Ld. CIT (DR) relied on the order of the Ld. CIT(A). There is a merit in the argument of the Learned Counsel. As per the definition of Sec. 2(15) of the charitable purpose the education is one of the purpose specified in the said provision and more over even though the registration was cancelled by the Ld. CIT ex....
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.... allowed. 12. Now we proceed to address Ground No. 5 taken by the assessee. The relevant discussion on this issue is on Page Nos. 81 to 92 of the assessment order i.e. Para Nos. 10 to 10.17 and Page Nos. 76 to 95 (Para No. 12.1 to 12.5) of the Ld. CIT(A)'s Order. We prefer to reproduce relevant facts as well as discussions from the order of the Ld. CIT(A) for the A.Y. 2006-07 and in the said year the assessee has acquired the shares of the following institutions or Co-operative Bank: A.Y. 2006-07 Shares in Abhyuday Sahakari Bk 25,000/- Shares Bharati Sahakari Bank Boys Hostel Kolhapur 3,31,000/- Shares Bharati Sahakari Bank (Boys Hostel Sangli) 4,25,000/- Shares Bharati Sahakari Bank (Central Bank) 34,57,160/- Shares Bharati Sahakari Bank E.M. School Balewadi 3,30,950/- Shares Bharati Sahakari Bank Girls Hostel Kolhapur 3,57,500/- Shares Bharati Sahakari Bank Girls Hostel Panchani 2,56,000/- Shares Bharati Sahakari Bank (Girls Hostel Sangli) 4,25,000/- Shares Bharati Sahakari Bank (Hospital Sangli) 4,25,000/- Shares Bharati Sahakari Bank (Medical College, Sangli) 4,25,000/- Shares Bharati Sahakari Bank (Pharm.College Pune) 5,600/- ....
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....ana Churth [170 ITR 62 (Ker)], (ii) CIT Vs. Sarladevi Sarabhai Trust [172 ITR 698 (Guj)], (iii) CIT Vs. Hindustan Charity Trust [139 ITR 913 (Cal)]. The AO, however, in the remand report reiterated his view point to state that the claim of the assessee is not acceptable as the Act does not provide for any exceptions and the shareholding therefore constitutes violation of s.11(5). The appellant has stuck to his ground in his rejoinder submitted on the remand report. Therefore, the fact remains that the appellant has made the investment for the purpose of availing loan which have been utilized for the purpose of the trust. The dispute that remains is whether in the facts and circumstances of the case and in law, the investment made in the share of the above bank could be held as violation of s. 11(5) as there is no exception in the said clauses or not. 14. So far as in respect of the investment in shares of the Bharati Sahakari Bank Ltd. the contention of the assessee is that the shares of Bharati Sahakari Bank Ltd. were purchased for the purposes of obtaining the loans from the Bank from time to time for developing infrastructure of different institutions and also enjoying Over D....
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....see that the shares were purchased under compulsion for obtaining the loan from the bank as per the bye-laws of the bank. The investment in shares amounting to Rs. 25,250/- is very meagre considering the total assets of the trust amounting to Rs. 23,24 crores. There was no objection by the revenue in the past for holding such shares in the Bharati Sahakari Bank and exemption u/s.11 was granted, therefore, exemption u/s.11 should not be denied to the assessee. It is the case of the revenue that by investing in shares of the cooperative bank the assessee has violated the provisions of section 13(1)(d) r.w.s.11(5). The loan so obtained from the bank has already been repaid and assessee is having only overdraft from the bank amounting to Rs. 12,87,665/-. Therefore, the assessee is not entitled to benefit of exemption u/s.11. 18.2 The submission of the learned counsel for the assessee that in the instant case the assessee had availed loan from Bharati Sahakari Bank for which it had to buy certain number of shares of the Bank as a pre-condition for such loan and the bank while granting such loan had deducted the subscription to such shares could not be controverted by the learne....
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....ssessee. The relevant discussion in the order of the Ld. CIT(A) is as under: 13.2 The AO has dealt this issue in detail in the assessment order from para 11 to para 12.6. Annexure-IV of the Assessment order has also been enclosed in this regard wherein the AO has enclosed detail of expenses and diversions made by the appellant for the benefit of the trustees or their relatives as prohibited in the s.13(1)(c). Specific and detailed discussion in respect of expenses on agricultural farm of the trustees has been separately made in the order. It can be further seen that the AO has also referred to the facts of seizure of cash of Rs. 3,13,83,870/- and incriminating documents found during the search conducted in the main office of the appellant in connection with the search/survey of its trusted employee Shri R.D. Shinde, establishing collection of cash /capitation fee in lieu of the admissions granted to various aspirants under management quota or otherwise. The AO has also referred to other facts found during search which have been dealt in detail while giving the factual matrix of this case in para 5 of this order. Reliance has also been placed on the discussions made in the ....
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....hem busy or away from the place used to leave it with either the P.A. or Shri Shinde. It has also been contended that Shri Shinde in his statement has also not stated at any point of time that those farm expenses have been met from trust's money. On careful consideration, I find that the evidences seized establishes that the expenditure has been made. The appellant says that there is no evidence that those expenses were met by Mr.Shinde from Trust money. It may be true but at the same time no credible evidence is available or were produced viz. cheque etc. to show that those expenses were met by trustees either. Therefore, whether it has been met from the funds of the trust or not can only be inferred from the surrounding circumstances. Much strength cannot be drawn from the statement of Shri Shinde as he has been seen from the statements given at different points of time to be making conscious attempt to protect the interest of the trust and trustees. It has also been argued that the expense on agriculture actually shown in the books is approximately Rs. 17,12,000/- which is more than Rs. 16,19,309/- found during search. The appellant has argued that such expenses have been as....
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....therefore, the contention is not correct. The appellant has also raised the issue that the burden is on the department to show that the meaning drawn from the documents is correct. It can be stated in this respect that this issue has already been dealt above. Regarding the issue of presumption available u/s.132(4A), it can be seen that the presumption is available to the department against the appellant as the documents have been found and seized from the premise of the appellant, even if the warrant of search was in the name of the employee, who was suspected to be carrying out the targeted affairs on behalf of the assessee. Even otherwise, the contents are clear and there is no dispute on the ownership of documents. Support of presumptions is required in cases of ambiguity only. All the three judgments relied upon by the appellant on the above issues therefore become inapplicable. Now coming back to the issue of the appellant that the evidences relating to cash seizure, collection of money for admissions and agricultural expenses etc. are only for A.Y.2004-05 to A.Y.2006-07 and therefore s.13(1)(c) could be invoked in these years only, I find that though the direct evidences are ....
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.... 18. He also referred to the bills and vouchers which were found with Shri Shinde which are placed at page no. 457 to 554 of paper book II. He submits that on none of those vouchers, nowhere it is indicated that Shri Shinde has paid the amount either himself or from the funds of the assessee trust. He argues that admittedly Shri Shinde is the employee of the assessee trust and as per the case of the Revenue he is looking after the accounts and it is logical that the said bills/vouchers could be with Shri Shinde. He also argues that the cash flow statements of the family members on page no. 919 to 924 of paper book No. IV which is in respect of the agricultural farms establish beyond the doubt that the expenditure incurred by them is not from any trust fund or by Shri Shinde which is to the extent of Rs. 17,12,000/- but from their own funds. He vehemently argues that the conclusion is drawn by the Assessing Officer and the CIT(A) only on presumptions and surmises and not base on any iota of evidence to support said conclusion. He submits that in para no. 13.6, Ld. CIT(A) admits that explanation may be true but he puts burden on assessee to prove otherwise which is contrary to pro....
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....port the said finding of the Assessing Officer and hold further that the assessee has not violated the provisions of Sec.13(1)(c) of the Income-tax Act as there is no evidence to suggest that any direct or indirect benefits are enjoyed by the trustees by meeting expenses of Agriculture Farms from funds of the assessee trust. 20. The next important and crucial issue arises from the Ground Nos. 7, 8 and 10. The cash to the extent of Rs. 3,14,83,870/- was seized from the Almari (cupboard) of Shri R.D. Shinde which was in his cabin. On the basis of said seizure it is held by the authorities below that the assessee trust was involved in collecting the capitation fee/donations for admission of the students and the cash seized from the Shri Shinde from his Almari kept in his cabin in fact belong to the assessee trust. It is necessary to narrate the relevant facts as given in the order of the Ld. CIT(A). The relevant facts pertaining to the seizure of the cash of Rs. 3,14,83,870/- has been already analyzed in this order and for avoiding the repetition those facts are to be treated as facts pertaining to issue arising from these grounds. The Assessing Officer dealt with the issue in the ....
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....cluding fee has been quoted to all students at the time of admission. The notings found on some of the seized papers are as under:- " READY TO PAY ....... + FEE', " READY TO PAY FEE ONLY" " AMOUNT READY TO PAY IS LESSER THAN DEMANDED" 5.4. Even though Shri Shinde agreed that the entire money found and seized during the course of Search belongs to him and that he is earning consultancy income from aspiring students by guiding them, the same is contrary to the facts. The contention that this amount stands for his consultation fees defies all logic as no one will pay consultancy charges of Rs. 7 lakhs, 12 lakhs, 35 lakhs, etc. for the securing admission to the course where fee itself is between 1 to 5 lakhs. 5.5. Even trustees and their family members were found to be directing students orally to Shri Shinde for admission in certain cases and Shri Shinde has been noting it down in his own handwriting clearly giving reference of the person who has sent the slip or who has referred the matter to him. Specific reference in this regard may be made to some pages, of Loose Paper Bundle no. 1, seized from the premises of Shri R.D.Shinde, on 21....
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.... investments and immovable properties are nominal compared tohuge claim made in his statement. It is impossible to believe that Shri Shinde sitting in the office of Bharati Vidyapeeth itself was collecting huge cash amounts from students seeking admission and the trustees were unaware of this fact. The only logical conclusion which can be drawn from above facts is that this cash belong to the Trust which has been earned by charging illegal donation from students seeking admission in various courses run by Educational Institutions of the trust. 5.8 Nobody can believe such a stand that entire money was kept in Bharati Vidya Bhavan building only. This is furthermore against his very answer given during the course of search that Rs. 3.14 crores is the intake of last 15 days only. Besides, as already discussed, who would pay consultancy charges from Rs. 5 lac to Rs. 30 lacs, for kind of consultancy statedly given by him, as discussed in later part of this order. 5.9 In the course of proceedings u/s.l2AA{3) of the I.T. Act, before the CIT(C), Pune, on 15.10.2007, the assessee requested for copies of the statements which were relied upon and also the papers and documents....
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....5 of re-examination, Shri Shinde has stated that he was removed from the services of Bharati Vidyapeeth in April, 2007. The search took place in the month of July, 2005 and Shri R.D. Shinde was removed from services in April, 2007. This means that he remained under the employment of Bharati Vidyapeeth for a period of 21 months even after the Management came to know that Shri R.D. Shinde has in his possession sum of Rs. 3.14 crores and is doing consultancy business without the knowledge of the Trust. This brings the Management to great disrepute. Penal action under various Acts including Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 can be initiated against the Management, still the Management decided to keep him in service for a period of 21 months on its rolls and paid salary. No Management, worth its salt would keep a person who brings the Management in disrepute, on its rolls for a single day. Normally, he would have been\ show the door on that very day itself. The fact that Shfi R.D. Shinde remained in the employment for 21 months even after the scandal came to light goes to show that Shri Shinde was not acting on his own behalf, hut was acting ....
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....dmission Committee consists of eminent persons and Shri Shinde has no hand in admission. He was not in the Committee at all. It was further been stressed that out of Annexure I where 146 names have been given, 26 students have been given admission on merit and therefore issue of charging any donation from them does not arise. It has been admitted that 8 students out of 146 students as per Annexure I which depicts the number of students whose slips have been found, have been given admission in Management quota. 5.18. Regarding Management quota also, it has been emphasized that it is strictly based on merit. If two students have applied for a seat in Management quota, admission has to be given to the student who has scored higher marks. No evidence has been led in this regard. Here also it has been stressed that the Managing Committee has no discretion. The assessee was only confronted with the slips found from the cabin of search. In its reply, the assessee has confined itself only to these and not other seats in the Management Quota. The assessee Trust is running a number of educational institutions. The number of seats in the Management Quota is more than 600. 5.....
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.... Shinde, was in fact belonged to the assessee trust and hence, the Assessing Officer has rightly made the addition of the said amount on substantive basis in the hands of the assessee. The assessee is in appeal before us. 22. The Learned Counsel vehemently argued that the search is conducted u/s. 132(1) of the Act against Shri R.D. Shinde and hence, the intention of the Department was to unearth the undisclosed income of Shri R.D. Shinde not the assessee trust. The Department did not conduct any search or seizure operation against the assessee trust or it's trustees. In the search operation, the residence of Shri Shinde was covered and his statement u/s. 132(4) was recorded. The search warrant was only on the name of Shri R.D. Shinde and the Revenue cannot be take the different stand stating that the search was intended for the assessee trust. If the Department was of the opinion that the assessee trust is collecting the funds then the warrant should have been against the assessee trust or it's trustees but surprisingly not a single warrant is issued against any of the trustees. He submits that in the statement recorded u/s. 132(4), the Shri Shinde has categorically denied that ....
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....nst the assessee trust for fastening tax liability which is not in accordance with the law. He submits that the Revenue has not come forward to explain why the search warrant was not issued against the assessee trust or any of the his trustees if it is a case of the Revenue that the assesse trust is engaged into collection of money through Shri Shinde. The Department should have first issued the search warrant against the assessee trust as well as his trustees and then against Shri Shinde and not only against Shri Shinde, if the Revenue has any information as to form belief against the assessee u/s. 132(1). As per the provisions of Sec. 132(4A) of the Incometax Act the presumption in law is that the money or documents found at the time of search belongs to the persons searched. 24. Ld. Counsel argues that in the present case also the money was found with Shri Shinde and hence, in terms of Sec. 132(4A) as Shri Shinde has accepted the ownership of that money and has also explained how he has earned that money misusing his position in the assessee trust the said money cannot be taxed in hand of the assessee trust. He argues that the stand of the Department about the theory of the p....
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.... order and he also earns the commission by managing the admissions. If Shri Yadav could earn the commission from admissions then why the Department should not believe with Shri Shinde, who has made the clear admissions also could earn the income in same way. It is not uncommon that the employees can misuse his positions for their personal benefits. He submits that the loose papers which have been seized from Shri Shinde are only in his handwriting and the said evidence suggest that Shri Shinde was actively involved in collecting the money from the students in the name of commission. He argues that even the Department has seized innumerable documents but not single documents suggest that Shri Shinde has handed over money to the assessee trust. He submits that as per the documents found during the course of the search with Shri Shinde the papers were about 146 candidates. He submits that out of 146 candidates, the admissions were given only to 34 students out of which 8 students were given admission in Management Quota and 26 students were given admission in regular quota. He submits that the balance 112 candidates whose names were noted on the loose papers were not given any admissi....
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....87[or Additional Director or Additional Commissioner] 88[or Joint Director or Joint Commissioner] in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under subsection (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuab....
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....ck-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;] (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing : [Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any [Chief Commissioner or Commissioner], but such 9[Chief Commissioner or Commissioner] has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 10[120], it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the 11[Chief Commissioner or Commissioner] having jurisdiction over such person may be prejudicial to the interests of the revenue :] [Provided further that where it is not possible or pract....
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....er than those mentioned in the second proviso to sub-section (1),] serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this subsection. [Explanation.-For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1).] (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. [Explanation.-For the removal of doubts, it is hereby declared th....
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.... which basis the Department is claiming that Shri R.D. Shinde is a trusted employee and hence, the search was carried against him. But the fact remained that if the assessee trust was targeted for taking the action against Shri Shinde then why out of 100 employees only Shri Shinde was searched. We also find that in the statement recorded u/s. 132(4) Shri Shinde has admitted in clear terms that he was collecting the money by charging the "Consultancy Fee". We are not concerned here what nomenclature is given by Shri Shinde for collecting the money from the students or their parents who approached him. We also find that lot of loose papers which are in the handwriting of Shri Shinde were found and seized. There were singular/plural numbers may be in the form of code numbers, found noted on the loose papers suggesting that there was some bargain and some amount was fixed for helping the students for setting admission. 29. So far as the assessee trust is concerned it is running innumerable institutes and faculties. We have also find that the loose papers were seized from Shri Shinde are pertained to 146 students and out of which 8 students are given admission in Management Quota and....
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....w have erred in holding that the amount of Rs. 3,14,83,870/- which was found in the possession of Shri Shinde belong to the assessee trust. We, accordingly, hold that the said cash found in the possession of Shri Shinde did not belong to the assessee trust. In the light of our above discussion, we, accordingly, reverse the finding of the Ld. CIT(A) on this issue and allow the Ground Nos. 7, 8 and 10 of the assessee. 31. Ground No. 11 is in respect of the different disallowances are made by the Ld. CIT(A). In the present case, the registration of the assessee trust u/s. 12A has been restored by the Tribunal. Moreover, we have also held that the assessee has not violated the provisions of Sec. 11(5) r.w.s. 13(1)(d) and 13(1)(c) hence the disallowance made by the Assessing Officer treating the assessee's income as a business income become redundant. So far as Ground No. 12 is concerned the said ground is not pressed by the assessee hence the said ground is dismissed as not pressed. 32. Ground No. 13 is concerned it is in respect of the donations collected through the coupons. The Assessing Officer has discussed this issue in para nos. 8.15 to 8.26 and relevant discussion is as u....
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....ount. 8.19. In response to the show cause notices, the assessee stated that various donations are received towards the corpus i.e. building fund, development fund and that is the reason why the same have been treated towards the corpus and credited to the balance sheet, directly. It is the stand of the assessee that donations are collected from the public at large. The assessee stated that there are various volunteers who collect donations from the public by issuing coupons ranging between Rs. 25/- to Rs. 1000/-. 8.20. Now coming to the question whether the above donations are indeed for the purpose of the corpus of the trust the same can only be confirmed by the donor and not by the donee. Here in this case the assessee has not even filed the confirmation for the donation, leave alone the direction letter from the donor to treat these donations as Corpus Donation. 8.21. The crux of the reply of the assessee is that it has received coupon donations ranging from Rs. 25/- to Rs. 1000/- through various volunteers. It is to be noted that no separate receipt was issued to the donors and hence the name and addresses of the Donors are not available. The assessee....
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.... 25.30 00.65 1.31 0.00 0.00 00.05 0.00 3 Patangrao Kadam Pratishtan 32.40 47,25 24.36 36.20 23.00 8.60 18.90 25.80 4 Yeshwantrao Mohite Pratishtan 22.70 25.20 00.10 00.15 0.00 0.00 0.00 0.00 5 Bharati Vidyapith Medical Foundation 9.10 31.25 48.45 43.50 53.55 13.05 50.93 38.65 6 Abhijit Kadam Memorial Foundation 0.00 0.00 43. 75 45.22 29.10 29.26 9.85 26.75 7 Matoshri Bayabai Kadam Memorial Foundation 22.28 46.35 46.30 36.83 47.40 19.15 8.40 25.48 8. Sonhira for Rural Development 0.00 47.70 28.97 38.15 23.05 3.75 8.05 26.05 9 Bharati Krida Pratishtan 22.70 47.31 27.00 37.35 24.00 8.00 8.95 26.75 TOTAL 154.44 343.16 243.03 276.21 224.3 90.09 114.13 196.1 8.26. About the voluntary nature of such receipts without conceding the assessee's claim on existence of such donor, it can also be said that in a situation where more than fifty percent of population is illiterate the writing o....
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.... forming part of the corpus donations. On this issue there is no separate discussion in the assessment order as this issue is merged with the issue of the donations collected through coupons. During the course of the appellate proceedings the remand report was called on this issue which reference is given on page no. 194 of the order of the Ld. CIT(A). In addition to the donations through the issue of the coupons as per the books of account of the assessee, the assessee has received the following donations grant: (a). Donations from the specified donors Rs. 3,72,62,223/- (b). Grant Funds received from various educational bodies like UGC, AITE etc. Rs. 1,21,17,965/- 35. So far as grants of the statutory bodies are concerned, the Ld. CIT(A) held that the same cannot be treated as Revenue receipts as the grants received are for purchase of the capital items. There is no dispute about the fact that all the donations are received through the cheques which are duly recorded in the books of account of the assessee. The assessee filed the list of the donations received by cheque which is at page nos. 597 to 600 (Paper Book, Vol.-III). The assessee has also filed the co....
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....already been rejected. Amounts, contained in the seized material, are nothing but donations/capitation fee, over and above regular fee, collected by Shri Shinde for and on behalf of Bharati Vidyapeeth. Shri Shinde was specifically asked to explain the contents of each loose paper and the details of the notings on the loose papers seized in bundle no. 1 to 3 seized under Panchanama dated 21/07/2005 and bundle no. 1 to 6 , 8 & 9 seized on 22-07- 2005. As per the notings, extracted from these loose papers, the transactions are found to be as under:- (1) Loose paper Bundle No. 1 of the Panchanama dt. 21/07/2005 Page No. Amount (Rs.) 1 & 2 200000 3 & 4 1000000 5 700000 7 700000 9 to 12 4000000 15 1500000 19 2500000 20 & 21 2500000 29 & 30 1000000 31 500000 36 to 40 500000 42 to 54 800000 55 to 57 1400000 58 to 61 1000000 62 to 64 600000 65 1500000 66 700000 68 1900000 69 500000 70 & 71 500000 72 to 74 1000000 75 700000 76 to 82 1700000 Total Rs. 2,74,00,000/- &....
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....- (9) Loose Paper B. No. 7 of Panchanama 22/07/2005 (Page No. 41 & 42) Para 4.12 (7)(A) of the Report Rs. 10,00,000/- 7.2. The total of the above, works out to Rs. 9,47,21,850/- and the same was proposed to be taxed as undisclosed income in the case of Bharati Vidyapeeth. The assessee, vide letter dated 21-07-2008, submitted that Shri Sinde has Shri Shinde has owned up the papers found with him. The assessee stated that the papers found a does not constitute incriminating evidence against the assessee. In effect, the assessee is reiterating the stand taken earlier. It is clear from the discussion, made in this order, that the evidences emanating from the seized material are relevant to the case of the assessee and the correctness of the same is established. The evidences show that the assessee is charging donations/ capitation fee, over and above the regular fee, and therefore the assessee is conveniently ignoring the seized cash and material. 7.3 In view of the above, the sum of Rs. 9,47,21,850/-, is treated as undisclosed income, on account of donations/capitation fee arising out of seized material, in the case of Bharati Vi....
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....aims that there is no reason in making addition when none of these candidates were given admission in any institutes of the assessee. 7.3. The assessee, further, submitted that out of the amount of Rs. 9.47 Crs., Rs. 87,50,350/- is pertaining to the various loose papers which are dumb documents in nature and are not relevant to the capitation fees nor does it indicate any other matter for making addition. The list of such papers has been given on Page 2046 of Volume II Part 7. The assessee has discussed each of these papers in detail in para 5.8 of its submission and has also submitted documentary evidences in support of its claim vide page no. 2046-2057 of Volume II Part 7. The assessee, therefore, claim to delete the addition made. 7.4. The submission made by the assessee is considered and the documentary evidences produced are verified. These documents were submitted by the assessee at the fag end of the assessment proceedings and therefore could not be verified at that stage. Now, on verification of the same, the report on each of the above contention of the assessee is submitted as under - a. In respect of the claim of the assessee that it has not co....
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....ions quoted above, which were not discussed to keep the discussion in para 5 compact, are now being discussed hereafter. It is important to declare that these issues were also considered while coming to the final decision, but found not so relevent to alter the decision or worthy of discussions there in the objective in which that para was created. On the issue of statements of 15 persons considered by the AO in para 8.3 of the order to show collection of donation for granting admissions, the appellant has, in para 5.9 of his submissions has contended that the opportunity to cross-examine those persons has not been given and therefore, the AO cannot be permitted to place reliance on them in view of the judgment of the Hon'ble Supreme Court given in the case of Kishanchand Chellaram, 125 ITR 713, I find that the objection in a strict sense, is correct, as the AO has apparently not given the said opportunity. However, AO has not entirely based its arguments and conclusions on the above statements. He has only drawn a strength in the light of other facts and evidences to support them. Therefore, I find that, even if the evidences collected in the form of statements of 15 persons a....
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....d before him during the remand were considered and verified. According to him, the same were not considered during assessment as they were produced at the fag end of the assessment proceedings. However, on verification during remand, of the facts / evidences relating to quantification, the AO has not been able to find or state that the conention of the appellant that admissions to 112 candidates in respect of which collection Rs. 6.59 crores has been calculated and that the documents based on which Rs. 87,50,350/- was added are dumb, are not correct or not acceptable. The AO, is seen to have accepted the facts stated by the appellant for the above two figures and has requested to consider these issues on merit. On careful consideration of the facts relating to the quantification of Rs. 9,47,21,850/-, I find that the evidences, based on which the appellant has sought relief were available before the AO at the time of the assessment and therefore, no objection for their admission exists. Further the documents referred to by the appellant in para 5.8 to show that the addition of Rs. 87,50, 350/- were either based on dumb documents or were of nature which could not form basis for addit....
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....gument of the appellant is not considered as allowable. Similarly, the other consequential arguments of the appellant could be seen as made in Ground No.19 of the appeal, wherein the appellant has requested to delete the addition of Rs. 3.14 crores as the same should be considered to be covered by the figure of Rs. 9.47 crores. As the appellant has been granted relief out of the addition of Rs. 9.47 crores and the total remaining addition is now less than Rs. 3.14 crores, this ground of the appellant is of no relevance. Therefore, the same is considered as dismissed. 39. Now the assessee is in appeal before us. The Ld. Counsel submits that the Assessing Officer has made the addition of Rs. 9.47 Crores on the basis of the papers/documents found and seized from Shri Shinde. He submits that the Assessing Officer has not given how the amount of Rs. 9.47 Crores was calculated when the said addition was made in the original assessment but in the remand proceedings the Assessing Officer accepted that out of the 146 students no admission is given to 112 students. He argues that there is no iota of evidence to suggest that the assessee has taken capitation fee from the students for....
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.... are appearing in respect of 146 students all have got the admissions. He further proceeded by estimating the alleged capitation fee and worked out on the basis of the statement of Shri Shinde that whatever the cash was found with him that was in respect of 15 days admissions and he was indulged into the said affair in much more earlier period also. Nothing has been controverted before us that in fact out of the 146 students to the extent of 112 candidates no admissions were given at all in any of the institutions of the assessee trust. This suggests that whatever the evidence in the form of loose papers is collected during the course of the search has no relevance with the assessee and cannot be relied on to sustain the addition. Moreover, another important aspect is to be considered that Shri Shinde has admitted that he is working as a consultant or agent. We have also perused the statements given by him to the Revenue during investigation stating that he used to make promises to many students and if the admission is by luck confirm then he used to collect whole money otherwise used to refund the token amount taken. In our opinion when this facts are clear and Shri Shinde has adm....
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....e income and expenditure account. 5. On facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting a part of the additions u/s. 40A(3) amounting to Rs. 53,756/- when the corresponding payments were not covered by any of the exceptions in Rule 6DD. 6. On facts and circumstances of the case and in law, the Ld. CIT (A) erred in allowing deduction for Rs. 31,99,423/- towards debit balances written off in the absence of full details of such debit balances. 7. Without Prejudice to ground no. 6, the CIT (A) failed to appreciate that a part of the debit balances written off towards fees and grants receivable may be relating to the fees and grants mentioned in Ground No. 1 which the Ld. CIT (A) has directed not to treat as income thereby resulting in double relief to the assessee. 43. So far as Grounds No. 1 & 2 are concerned it is in respect of the treatment of the fees collected by the assessee trust from the students and as well as grants received from UGC, AICTE etc. On this issue there is no specific discussion in the assessment order and income is re-casted by adopting the Special Audit Report. The Ld. CIT(A) has discussed this issu....
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.... no. 18.3 of the impugned order and we preferred to reproduce the same for the sake of clarity. "18.3. The AO has dealt this issue in paras 8 to 8.32 of his order. The details can be seen from the order. It is however noted that the AO in his order has referred to the seizure of cash of Rs. 3.14 crores from the premise of the appellant in the search of Shri R.D. Shinde, and also the statement recorded on 21/7/2005, wherein Shri Shinde is stated to have said that the amount seized represents money collected from students in last 15 days and on being further confronted about such collections made in earlier year, he has stated that he has earned Rs. 2 crores each in earlier two years, which were probably deposited in building fund accounts or trust accounts. The AO has further stated in the order, that in view of the above statement of Shri Shinde all such building fund accounts for the period of June.r 2004 to July 2005 were scrutinized and huge deposits mainly in cash was noted, which were ultimately transferred to the account of BVP. The summary of such details has been given in para 8.1 of the order which is shown below: Name of the Accountholder Account Details ....
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.... para 8.4 and 8.5 have further tried to link the collection of the money to the trust based on the statement of Shri Shinde. In para 8.6 the AO has further referred to Annexure-ll of the order wherein the details of the number of students admitted under management quota in various colleges / institutions for the academic years 1999- 2000 to 2005-06 are given. The AO has further given a table of rates at which collection for different courses were made, based on the seized documents. The said table is also given below: Name of the course Rates for admission (Rs.) Medical (MBBS) 15 lakhs to 20 lakhs B.D.S. 6 lakhs to 7 lakhs M.S. (Ortho) 30 lakhs Electrical Engineering 2 lakhs Computer Engineering 1.5 lakhs Information Technology 1 lakh Civil/I. T./Chem. Engg. 2 lakhs M.Sc. Nursing 0.7 5 lakhs M.S. (Surgery) 25 lakhs Hotel Management 1 lakh B.Sc. (Nursing) 1 lakh M.B.A. 1.5 lakh M.D. (Gynac.) M.C.A. 35 lakhs to 40 lakhs M.C.A. 1.5 la khs D.G.O. 20 lakhs. In addition to the above discussions, the AO has also referred to findings made in searches simultaneously conducted in the ....
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.... Mr. J.R. More 5,000 30-10-02. Cash - Incorrect address of the party. The Assessing Officer in para 8.14 has further referred to the documents seized and the statement given by Shri Shinde to establish that the cash collected was partly deposited in building accounts. In this respect, the Assessing Officer has further referred to documents seized at Page Nos. 11 to 18 of Bundle No. 14 of Panchnama dated 22-7-2005. These pages are stated to be counterparts of the pay-in-slips for deposits in cash in Bharati Sahakari Bank Ltd. in the accounts of the institutions affiliated to the Bharati Vidyapeeth. It is noted in the assessment order that Shri Shinde explained these documents to represent cash collected through coupons by Organizers of the Trust, well wishers etc. As per the AO, the assessee was given an opportunity to prove the coupon donations or other donations. They were asked to furnish the details of names and addresses of the donors in respect of the Corpus fund and other specified funds like Imarat A/c, Fine Arts A/c and other Imarat A/cs etc. The assessee was also asked to furnish confirmation letters of such donors. It may be noted that, as per the....
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....stee. In the absence of this signature even the verification of so called coupon collector is also not possible. 8.25 It is difficult to believe that such a large number of rural population shall be making payment to a trust, the existence of which is hardly known to them apart from the fact that the activities of the trust hardly affects their welfare. It is also interesting to note that not only the assessee trust but similar donations running into lakhs of rupees have also been collected by the other trusts of the same group from very same villages in a similar manner by way of unnamed unsigned coupon collections of small donations and also in all the years as indicated below: - S. No. Name of the trust AY 99-00 AY 00-01 AY 01-02 AY 02-03 AY 03-04 AY 04-05 AY 05-06 AY 06-07 1 Bharati Kala Academy 22.63 48.05 23.45 37.50 24.20 8.28 9.00 26.70 2 Yeshwantrao Smriti Nvas 22.63 25.30 00.65 1.31 0.00 0.00 00.05 0.00 3 Patangrao Kadam Pratishtan 32.40 47,25 24.36 36.20 23.00 8.60 18.90 25.80 4 Yeshwantrao Mohite Pratishtan 22.70 25.20 00.10 ....
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.... found to be preprinted on the coupons. In other words the nature of donations is decided by the assessee trusts itself without the knowledge of the donor. In this context, it will also be worthwhile to reproduce the following observations of the Honourable Members of the ITAT C Bench Mumbai in case of "Prabodhan Prakashan" Vs. ADIT (Exmp) as below. "It is true that there is no stipulation in the above section that the specific directions should be in writing and, therefore, we agree that it should be possible to come to a conclusion from the facts and circumstances of a case whether a specific direction was there or not, even where there were no written directions accompanying the donations. However, at the same time, it has to be kept in view that the specific direction should be that of the donor and not of the donee. In other words, it will not be sufficient for the donee alone to declare that the voluntary contributions were being allocated to the corpus. There should be evidence to show that the direction came from the donor."" 8.30 Merely because the assessee produced stray evidences incapable of verification, it cannot be held that it has discharged its on....
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....assessee has given voluminous details to the learned A.O. in this context and had submitted the details in the form of circulars issued by the State Govt. and other documentary evidence to justify that the grants received are capital receipts not chargeable to tax. 12.3 The assessee submits that the special auditor and the learned A.O. has erred in taxing the various donations / grants received. The assessee had received donations of Rs. 3,71,00,000/-from various donors list of which is enclosed herewith. The assessee had also submitted the letters from the said parties that the said amount should be treated towards the corpus of the trust. The learned A.O. has totally ignored these letters. Once, the donation was towards the corpus of the trust, the said amount is exempt from tax u/s 11(1)(d). Accordingly, the assessee submits that this amount of Rs. 3,71,00,000/- is exempt from tax u/s 11(1)(d) and hence, there is no reason to treat the said amount as revenue receipt. 12.4 The assessee has received the following donations through issue of coupons - i. Building fund Donations Rs. 20,000/- ii. Building fund head office Rs. 3,37,20,460/- ....
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....s it was clearly mentioned that these are towards the corpus. The learned A. O. has not accepted the contention of the assessee and has taxed the same as revenue receipts. The assessee also submits that these coupons were issued , to the donors for the donations received clearly state that these donations are towards the corpus. If that be so, it is submitted that the donations should be considered as the corpus donations. Accordingly, we submit that the appellant was justified informing the opinion that they were corpus donations. We also draw your kind attention to the provision of section 115BBC which is introduced w.e.f. 1.4.2007 wherein it is stated that in the case of a charitable trust, the anonymous donations would be taxed as an income @ 30%. This amendment also shows that the legislature itself has accepted that in the case of a charitable trust, the anonymous donations are received. Further, we submit that the affidavits given from the donors and the volunteers are not contravened by the dept. by cross examining them and therefore, the question of holding a view that this money is out of unexplained cash credits is not possible. 12.6 There is no doubt that as pe....
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....sessee submits that as clarified in para 12.7, these receipts are towards corpus fund and if exemption u/s 11 is denied, then, these receipts are to be treated as capital receipts not chargeable to tax. 12.10 The auditor has taxed Rs. 8,24,00,405/- being amount credited to college development fund account and Rs. 1,96,40,478/- being amount credited to development fund in this year. He has also taxed an amount of Rs. 1,75,11,044/- being received from on account of University Development fund. The assessee submits that out of Rs. 1.96Crs., actual amount collected from the students is Rs.l,45,77,978/- and Rs. 50,62,500/- is on account of transfer from the income expenditure account to the development fund account. This amount of Rs. 50,62,500/- is nothing but appropriation entry passed by the assessee and it is not a case of any donations / grants received by the assessee. This aspect is clear from the fact that the said amount of Rs. 50,62, 500/- is debited to the income and expenditure account and the said amount is also not allowed as an expenditure by the special auditor. In para 6.2(b), he has given the details of the expenses not allowed while computing the income and a....
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....held it to be revenue receipt. The various documentary evidences were submitted to the learned A.O. along with our submissions dated 10' July and 25th July, 2008 in number of box files. In case, Your Honour desires, we can submit the said voluminous information on hearing from Your Honour. 12.12 It is further submitted that these types of grants are received by the institutions of the trust from various government authorities for meeting capital expenditure. These grants are receipt of capital nature and are treated by the trust as capital fund. The same are accounted as per the principles of accounting for grants as specified by the ICAI in this respect. The accounting standard specifies that the capital grant received should be treated as capital receipt. The project grants are of repetitive nature also. As already clarified earlier, the assessee trust receives grants from the Govt. for various purposes. The trust is running various educational institutions on grantable and non-grantable basis. There are number of schools and colleges giving profession, vocational and regular curriculum, sports education and training. The Central government, HRD Department and the st....
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....he assessee should be allowed as an expenditure while computing the income. It is also submitted that in respect of certain grants, the assessee had utilize those grants for acquiring assets. The assessee submits that without prejudice to the earlier submissions, the grant received should be reduced from the cost of the assets which are purchased from the grant received. This is in view of explanation 10 to section 43(1). As regards, student aid, student welfare, school development fund, these amounts are collected from the students as per the norms and regulations of the university. These funds have to be spent on the welfare, aid of the students and the emergency situation of the students. So the said amount is a liability of the trust and income. 46. The Ld. CIT(A) has called remand report of the Assessing Officer on the above submissions of the assessee. The relevant part of the remand report is reproduced by the Ld. CIT(A) in para no. 18.5 of the impugned order. The assessee's submissions in rejoinder to the remand report of the Assessing Officer are reproduced in para no. 18.6 by the Ld. CIT(A). The assessee contended that the donations were received mainly by cheques and ....
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....e Special Auditor in his report in para 6.2(a). The said computation said computation made by the Auditor u/s.142(2A) is based on the directions issued by the AO for the reasons discussed in paras 8 to 8.32 and the same has been given in this order at para 18.2 above. The AO in the discussions referred to above has concluded that the appellant on the basis of the evidences collected during search and survey and also in the post search inquiry, was found to be collecting donations / capitation fee for granting admissions under the management quota and even otherwise, and the same money was either utilized for depositing in various fund accounts of the trusts or for the personal benefits of persons described in s.13(3) of the IT.Act. These findings were supported by the AO with the seizure of cash and documents from the head office of the BVP, in the search of Mr. Shinde, one of the trusted employees of the group looking after the accounts as well as the admissions in BVP's institutions. Therefore, it can be seen that the AO has established from the cash and documents seized, that the appellant has been charging capitation fee / donation for granting admissions. Even though the s....
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....s quoted below:- "Point No. 12: re - Coupon Donations received: Upon examination of the records and enquiry with BVP it was noticed that the Coupon Donations were received in cash from various unnamed persons. Such cash collections, which have been designated as coupon donations, have been deposited in various bank accounts of the assessee (i.e. BVP). The coupons do not bear the name of the donor nor any directions from the donor as to the purpose for which the same was to be used. It is seen that the cash deposits on account of coupon donations have been credited to 'building fund' and various other 'earmarked fund' accounts. In the absence of identity of the donors and directions from , the donors, the coupon donations cannot be regarded as donations towards corpus/earmarked funds. The total amount stated to be collected by coupon donations during the year under consideration is quantified at Rs.................. , which is in agreement with the amount recorded in the books of account. The assesses could not make available for our verification the counterfoils of all coupons issued against coupon donations, the coupon donation Registers and other relevant....
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....show that they are in respect of voluntary contributions received by a trust created wholly or partly for charitable or religious purposes and therefore, in the present case, where it is not in dispute that the appellant who has been assessed in the status of AOP has come into the existence due to the formation of the trust deed. Therefore, the existence of the AOP under assessment is definitely in the deed of trust created by settlers and managed by trustees. Therefore, in my opinion, even if the exemption is withdrawn, the applicability of this provision to take certain receipts as income will continue. On the argument of the appellant that gifts, being a capital receipt cannot be taxed u/s.28, it is observed that such an argument is based on the presumption that the gift / donations are genuine. In a case where the receipts are either in lieu of exchange or trade off for granting admissions, or are fully unexplained, they are definitely of the nature of business assessable u/s.28. On careful consideration of the items appearing in para 6.2(a) of the Auditor's Report, already quoted at para 18.2 of this order in the light of the submissions of the appellant made to show th....
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....found in post search investigation to be in lieu of securing admissions and this aspect has been dealt in detail in the assessment order and therefore, they are to be treated at par with coupon donations. The AO has further argued that such donations would become taxable in view of section 2(24)(iia) once the exemptions are withdrawn. This issue has already been discussed in 'detail while considering the coupon donations and therefore, following the same it is stated that the contention of the AO is correct. Such receipts have to be considered as income whether we consider it u/s.2(24)(iia) or s.28. Considering the same, the item appearing at 'b' in the table above is to be treated as income of the appellant. Items appearing at 'c' and 'd' of the table have been more or less accepted by the AO in the remand report to be non-taxable in view of the submissions made and evidences submitted during remand proceedings. On careful consideration during the appeal and on submissions made in this regard by the appellant before and after the remand, I find that the AO has rightly accepted these items appearing in para 6(2)(a) of the Audit Report as not taxable. Col....
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....in the profit and loss account, not allowable as revenue expenditure. There is Rs. 1,21,17,965/- amount in respect of item appearing at 'd' of the table in this assessment year. As already discussed above, the items appearing at'd' of the table is to be treated as non-taxable as they are held to be grants for capital purposes from various statutory bodies. In view of the above discussions, the appeal on the above issue is statistically treated as partly allowed. 48. In sum and substance, so far as the donations collected in cash through the coupons are concerned the Ld. CIT rejected the argument of the assessee and held that the donations collected through corpus is to be treated as income of the assessee trust. The identical issue has been dealt with by us in assessee's appeal also and the same has been decided against the assessee save the observation of the Ld. CIT(A) that the donations were collected from donors through coupons for giving the admissions as there is no evidence to suggest that the said coupons were utilized for collection the donations from the candidates or their parent coming for the admissions in the different institutes run by the assessee trust. ....
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.... this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this court by its order dated 16th August, 1979, that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the Punjab National Bank Ltd. to the ITO, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceeding....
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....Fund Expenses 5,062,500 Computer Expenses 1,125,664 Internet Expenses 26,000 Laboratory Expenses 1,140,930 Building Repairs and Maintenance 4,024,521 Repairs - Furniture / Equipment 316,052 Electricity Charges Exp. 120,365 Bank Commission 1,873,400 Municipal Taxes 608,000 Stamp Paper Expenses 1,870,033 Service, Survey & Inspection Charges 85,500 Insurance Charges 1,934,798 Interest on Loan 5,601,265 Interest on Property Loan 9,46,026 Total 37,346,892 52. The Ld. CIT(A) has dealt with this issue as under: "In the assessment order certain expenses appearing in the books were treated as capital expenditure on the basis of audit report submitted by the Special Auditor. The Assessee has objected to such addition on the ground that these expenses are of revenue nature and may not be considered as capital expenses. The assessee has however not submitted the documents in support of its claim". 19.6. The appellant in the rejoinder dt. 17.02.2010 to the remand report on the above issue submitted as under:- "9] In para 8, the A.O. has stated that the assessee had ....
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....ed this under the head "fees collected from students" but after discussion even though it was considered to be not collected from students but the same was held to be not o?" revenue nature also. The said amount has already been not assessed as income being a notional entry, and therefore, the question of allowing any expense relating to that cannot be permitted. Otherwise also, this is definitely of capital nature. On the remaining items appearing in para 6.2 of the audit report, the appellant drew my attention to the submissions made by them in Paperbook Vol.II (Part 2). On examination it was found to be relating to a) Development Fund Expenses, b) Gramin Vikas Pratisthan Expenses, c) Interest on loan, bank charges and Stamp Paper Expenses not relating to purchase of land, d) Ground Development Expenses, relating to maintenance of play-grounds etc. of various educational institutes, e) Insurance Expenses, relating to various buildings owned by the appellant and alredy under use, and f) Remaining which are apparently of capital nature. A table was accordingly prepared after discussing the above matter with the appellant and the same is placed below for A.Y.2000-01 to A.Y.2006- ....
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.... 200,602 6,016,665 2005-06 11,337,841 1,341,777 744,717 72,341 2,750,266 2006-07 37,346,892 3,366,120 19,290,724 - 24,591,642 141,257,06 11,578,694 22,602,661 3,037,461 47,951,804 The above ground is therefore considered partly allowed. 53. We have heard the parties. We find that the Ld. CIT(A) has personally examined the evidences produced by the assessee. We further find that the evidences filed by the assessee in the form of Paper Books were sent to the Assessing Officer when the remand report was called, but it appears that in remand report the Assessing Officer has just reiterated his original stand without any further investigation or enquiry. After examining the evidences the Ld. CIT(A) held that to the extent of Rs. 50,62,500/- out of Rs. 3,73,46,892/- the amount relates to development fund expenses. The Assessing Officer has considered this amount under the head "fees collected from students" and Assessing Officer has held the said amount is not in revenue nature. The main thrust of the Assessing Officer is on the Special Audit Report and during the assessment pr....
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....T(A) discussing his issue is as under: 25.2. The Assessing Officer has not made any detailed discussion on the above addition. These additions have been made based on the Special Audit Report received on the directions of the Assessing Officer, after giving a show cause to the appellant vide letter dt. 23/6/2008 and after considering the submissions made by the appellant. 25.3. The appellant has made following submissions on the above ground vide their letter dt. 7/7/2009 and the same is quoted below for ready reference and proper appreciation:- "17] Ground No. 20 - The learned A.O. erred in not allowing the claim of the assessee of unrecovered debit balances written off which ought to have been allowed as a deduction while computing the income. The Ld. A. O. has added in the total income of the assessee the amount of Rs. 41,53,082/- being liabilities written back in all the years under consideration. In this context it is submitted that it is not an income of the assessee but only an amount written back in the books by mere book entry and therefore is not an income in the hands of the assessee. Hence it is requested to kindly delete the same. Secondly, it i....
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....t of liabilities written back is not justifiable in view of the explanation to proviso to section 41(1). However the debit balances like advances & fees receivable etc. written off as bad debts may be considered on merits." 25.5 In the rejoinder to the remand report, the appellant has reiterated his submissions made earlier. However, it was contended that the claim should be allowed as the AO has accepted the contention of the appellant. On careful consideration of all the facts available on the issue, it is observed that the assertion of the appellant that the AO has accepted the contention of the appellant is not correct. The AO has not made any comments in respect of the claim of the appellant but has merely stated that it be considered on merits. It is seen that the AO made adjustment in making the computation of income while passing the assessment order based on the figures determined by the Special Auditor in respect of liabilities written back and debit balances like advances and fees receivable written off. It is the claim of the AO that the liabilities written back of Rs. 41,53,082/- in this year is taxable in view of specific provision contained in explanation to provi....
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....lowed the claim of the assessee only after considering the remand report of the Assessing Officer. In our opinion, no interference is called for, accordingly, same is confirmed. 58. In the result, the Revenue's appeal is dismissed. 59. Now we take up the assessee's appeal for the A.Y. 2007-08 which is arising out of the assessment order framed u/s. 143(3) of the Income-tax Act. The assessee has filed the abridged/concise grounds in place of original multiple grounds. The assessee has taken the following abridged/concise grounds: 1. The learned CIT(A) erred in holding that the appellant trust was not entitled to the exemption u/s 11 as the registration granted was cancelled u/s. 12AA(3). 2. The learned CIT(A) erred in holding that the appellant trust has violated the provisions of section 13(l)(d) by investing the funds in the modes other than those prescribed in section 11(5). 3. The learned CIT(A) erred in holding that the set off of the excess deficit till A.Y. 2006 - 07 in the hands of the appellant trust was not available against the income of the appellant for this year. 4. The learned CIT(A) erred in holding that the capital expenditu....
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....nefit of exemption as a trust or institution u/s. 11 of the Act. 61. In the A.Y. 2006-07 there were mainly three reasons given by the Assessing Officer for denying the benefit of exemption to the assessee u/s. 11 of the Act. One of the reason was the cancellation of the registration by the Ld. CIT by exercising his powers u/s. 12AA(3) of the Act, second reason that the alleged violation of the provisions of Sec. 11(5) r.w.s. 13(1)(d) and third reason that the trustees of the assessee have violated the provisions of Sec.13(1)(c), by allegedly deriving benefit directly or indirectly from the income of the assessee trust as there is a charge that the trustees have used the money of the assessee trust for meeting their agricultural expenditure. 62. Ground No. 2 is in respect of the charge of the Assessing Officer that the assessee has violated the provisions of Sec. 13(1)(d) by investigating the funds in the modes other than those prescribed in Sec. 11(5). The Assessing Officer has discussed this issue in para No. 5 of the assessment order which is reproduced below: "5. A major important issue in the case of the assessee relates to violation of Section 11(2) r.w.s. Secti....
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....re shown in Annexure B of the audit report vide page No. 2 to 8/ 95 of the audit report. In this respect it is submitted that all these investment and deposits including the shares of the bank is for the object of the trust and in compliance with the rules and regulation for the purpose. In respect of holding of shares of Bharati Sahakari Bank as appearing in Annexure B it is submitted that purchase of these shares is mandatory for the client who take the loan from the bank. It is submitted that the assessee trust had taken the loans from the said bank in the past and also availing the loan facility in the current year. For the purposes of obtaining the loans as per the bye laws of the bank, we had to buy the shares thereof and become member of the society. The relevant portion of the bye laws of the said bank are already submitted in the asst. proceedings for earlier years. It is also to be noted that the number of shares to purchased depends upon the amount of loans to be obtained by us and this is the reason why we had invested in the shares of these co-op banks. It may be noted that no loan is granted unless its shares are purchased and the confirmation from the Bharati Sahakar....
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....assessee are made in the earlier year and continued in the current year. In this respect it is worth to note that taking into consideration such investment as violation of provisions of sec. 11 (5), the trust has been treated as A.O.P. and the income is taxed denying the status as Trust, for A.Y. 2006-07 and earlier years. The defects in violation of provisions of Sec. 11(5) of the I.T. Act continue in the year under consideration and hence the income shown by the assessee as income of the trust is not found to be correct. 63. The Ld. CIT(A) relying on the order of his predecessor for the A.Y. 2006-07 has held that the investment in the shares of the Bharati Sahakari Bank Ltd. has resulted in the violation of provisions of Sec. 11(5) r.w.s. 13(1)(d) of the I.T. Act for the A.Y. 2007-08. 64. We have heard the parties. We find that the identical issue has been adjudicated by us in the appeal filed by the assesse for A.Y. 2006-07 (ITA No. 923/PN/2010) and this issue is decided in favour of the assessee. As the facts are identical in this year we, accordingly, following our reasons in the A.Y. 2006-07 hold that acquiring the shares of the Bharati Sahakari Bank Ltd. as a condition....