AI Drafter 
TaxTMI 
TaxTMI 
2019 (9) TMI 765
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....sposed of by this common order, for the sake of convenience 2. At the time of hearing, the Ld A.R did not press the Cross objections and accordingly all the Cross objections filed by the assessee are dismissed as Not Pressed. In all the appeals filed by the assessee, the grounds numbered as 7 to 9(b) relate to certain legal issues. At the time of hearing, the Ld A.R did not press those grounds. Accordingly, those grounds are also dismissed as Not pressed. The Grounds numbered as 10 & 11 in all the appeals of the assessee relate to charging of interest, which are consequential in nature. The Ground Nos.1, 12 and 13 are General in nature. The remaining grounds urged by the assessee relate to the following additions sustained by Ld CIT(A):- (a) Rejection of claim to exclude income offered by the assessee in the statement taken u/s 132(4) for Asst. year 2010-11 - Rs. 4,00,00,000/- Asst. year 2011-12 - Rs. 6,00,00,000/- Asst. year 2012-13 - Rs. 7,50,00,000/- Asst. year 2013-14 - Rs. 7,50,00,000/- (b) Direction of the Ld CIT(A) to disallow depreciation @ 10% of the above said amounts. 3. In the appeals filed by the revenue, the ....
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....other grounds that may be urged at the time of hearing with the plea that the orders of Ld CIT(A) may be set aside and that of the assessing officer may be restored." 4. The revenue has also raised specific issues in certain years as detailed below:- Assessment Year: 2012-13:- (a) Whether the Ld CIT(A) was justified in deleting the addition of Rs. 703.00 lakhs and Rs. 554.50 lakhs made for violation of provisions of sec.13(1)(c) of the Act.*** (b) Addition of Rs. 993.00 lakhs relating to payment made for non-specified purposes in cash to contractor, other related concerns, promoters etc. Assessment Year : 2013-14:- (a) Whether the Ld CIT(A) was justified in deleting the addition of Rs. 703.00 lakhs and Rs. 554.50 lakhs made for violation of provisions of sec.13(1)(c) of the Act. (b) Addition of Rs. 4333.00 lakhs relating to payment made for non-specified purposes in cash to contractor, other related concerns, promoters etc. Assessment year : 2014-15:- (a) Whether the Ld CIT(A) was justified in deleting the addition of Rs. 703.00 lakhs and Rs. 554.50 lakhs made for violation of provisions of sec.13(1)(c) of t....
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....airman of the assessee institution stated that he may not be able to prove satisfactorily the utilisation of funds which have been made in cash and accordingly admitted that an amount of Rs. 25.00 crores may be disallowed from the amount of "application of income" in assessment years 2010-11 to 2013-14 as detailed below:- Assessment years Amount 2010-11 4,00,00,000 2011-12 6,00,00,000 2012-13 7,50,00,000 2013-14 7,50,00,000 ---------------- 25,00,00,000 ============ Consequently, the assessee agreed for disallowance of above said amount from the claim of "Application of income" for the purposes of sec.11(1)(a) of the Act, vide its letter dated 13.09.2013. The assessee also furnished to the AO a revised computation of total income on 14.12.2015excluding the above amounts from the claim of "application of income" alongwith following explanations:- "The Trust has incurred certain expenditures towards construction of building and has made cash payments to contractors and other suppliers. In the search proceedings, on these findings of the department, we have agreed for the disallowance of sum of Rs. 25.00 ....
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.... for the objects of the trust, which was in clear violation of the provisions of sec.11 of the Act. Accordingly the AO decided to add the amount of Rs. 58.02 crores as income of the assessee in the following years:- Assessment Year Amount 2012-13 9,93,00,000 2013-14 43,33,00,000 2014-15 4,76,00,000 ------------------ 58,02,00,000 ============ Since the AO added the above said amount of Rs. 58.02 crores to the total income in the three years cited above respectively, there was no necessity to make addition of Rs. 25.00 crores voluntarily offered by the assessee in AY 2010-11 to 2013-14, since it formed part of the above said amount of Rs. 58.02 crores. It is also pertinent to note that the AO made the above said additions u/s 69C of the Act as unexplained expenditure. 9. The AO noticed that the assessee has paid following amount as unsecured loans to the following related persons in the year relevant to AY 2013-14:- Srinivasa Enterprises - 133 lakhs Sri G Dayanand - 570 lakhs --------- 703 lakhs ===== The AO took the view that the above payments have....
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....d "capitation fee" under the name of "development fees" over and above notified fees and further, since the assessee has engaged agents for soliciting the students for admission in its institutions, the AO took the view that these activities are not charitable in nature. He took support of following decisions to hold that the collection of capitation fee is not a charitable activity:- a. Miss Mohini Jain vs. State of Karnataka (1992)(2 SCC 666) b. Islamic Academy of Education vs. State of Karnataka (2003)(6 SCC 697) Accordingly, he took the view that the collection of capitation fee is against constitutional scheme and prohibited by State enactment. Further, as discussed in the earlier paragraphs, the AO had held that the assessee has violated the provisions of sec.13(1)(c) r.w.s 13(3) of the Act. Accordingly, the AO held that the assessee could not be considered as a charitable institution as per the provisions of Income tax Act. Accordingly, he held that the assessee is not eligible for exemption u/s 11 of the Act. In this regard, he also took support of the decision rendered by Hyderabad bench of ITAT in the case of Vodithala Education Society vs. ADIT (2008....
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....bove said additions. 15. The Ld CIT(A), on the contrary, expressed the view that the voluntary offer of Rs. 25.00 crores made by the assessee should be sustained. He expressed the view that the Statement was made voluntarily by the assessee and hence there is no reason as to why such a statement should not be relied upon by the AO. The Ld CIT(A) took support of following decision in this regard:- (a) CIT vs. O. Abdul Razak (2013)(350 ITR 071)(Ker) (b) Bhagirath Aggarwal vs. CIT (2013)(351 ITR 0143)(Del) Before Ld CIT(A), the assessee contended that the additions were inadvertently agreed by its trustee on a mistaken notion on both facts and law. However, the Ld CIT(A) rejected the same by observing that the assessee has not retracted from its Statement and by making such a voluntary offer, the assessee has estopped the AO from probing the matter further. Accordingly, the Ld CIT(A) sustained addition to the extent of Rs. 25.00 crores as per the voluntary offer made by the assessee in aggregate, which was spread between assessment years 2010-11 to 2013-14. 16. The Ld CIT(A) further expressed the view that the above said addition of Rs. 25.00 crores represen....
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....ct. He submitted that the search action has shown that the assessee has not applied its income for the objects of the trust. When this fact was confronted by the search team, the assessee has agreed for addition of Rs. 25.00 crores. Further, the AO has also noticed that the assessee has diverted funds in violation of sec.13(1)(c) r.w.s. 13(3) of the Act. The AO has also noticed that the assessee has collected capitation fee under the name of Development Fee, which was in violation of constitutional scheme. Collection of capitation fee has been held to be non-charitable activity. In view of the above cumulative facts, the AO has rejected the exemption claimed by the assessee u/s 11 of the Act. Accordingly, the Ld D.R submitted that the Ld CIT(A) was not justified in allowing exemption u/s 11 of the Act to the assessee. 21. The Ld D.R further submitted that the assessing officer has made addition of Rs. 58.02 crores in aggregate in AY 2012-13 to 2014-15, since the assessee could not prove the application of income of the above said amount before the search officials and also before the assessing officer. The payments have been made by way of cash, which is not susceptible for veri....
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....hers and the books of accounts of the assessee have been audited. He submitted that the auditors have not found any deficiency either in the maintenance of vouchers or in books of accounts. Accordingly, he submitted that there is no reason to hold that the expenses incurred by way of cash are for non-specified purposes and, in fact, there is no basis available with the AO in order to hold so. He submitted that the tax authorities cannot accept part of construction expenses recorded in the books of accounts as genuine and reject part thereof on the reasoning that some portion of construction expenses have been incurred in cash. He submitted that the aggregate amount of construction expenses incurred by the assessee during the financial year relevant to AY 2013-14 was only Rs. 1921 lakhs only, whereas the assessing officer has added a sum of Rs. 4333 lakhs in that year. He submitted that the Ld CIT(A) has rightly appreciated the above said fact and has also noticed that the assessing officer has not furnished the basis for arriving at the figures of above said additions. The Ld CIT(A) has expressed the following view in this regard:- "....The AO should have listed the expens....
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....O to drop the proposal. 27. The Ld A.R submitted that the assessing officer did not make addition of Rs. 25.00 crores in aggregate surrendered by the assessee in the statement taken u/s 132(4) of the Act in AY 2010- 11 to 2013-14. Instead he has added a sum of Rs. 58.02 crores in aggregate in AY 2012-13 to 2014-15. Hence it should be construed that the AO has accepted the explanations given by the assessee in its letter dated 14-12-2015, at least in respect of AY 2010-11 and 2011-12. The ld CIT(A) has recorded a finding that the addition of Rs. 58.02 crores made by the AO in AY 2012-13 to 2014-15 does not have any basis. Hence the very basis on which the AO sought to deny exemption u/s 11 of the Act to the assessee has failed. 28. The Ld A.R submitted that the AO has also taken the view that the assessee has violated the provisions of sec.13(1)(c) of the Act in making payment of Rs. 703.99 lakhs and Rs. 554.50 lakhs. Accordingly, he has added both the above said amounts in AY 2013-14. Accordingly, he has held that these additions will make the assessee to lose exemption u/s 11 of the Act.The Ld A.R submitted that the Ld CIT(A) has accepted the fact that the transactions perta....
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....see has collected capitation fees. He submitted that the development fee represents voluntary donations, which is proved by the fact that the fee so collected from people varies in amount from person to person. Further, there is no allegation from any of the donors that it represents capitation fee. He submitted that the Ld CIT(A) has also noted the fact that the development fee was not collected from all the students. The Ld CIT(A) has also given finding that the assessee has issued receipts for collection of voluntary donations and has also accounted for the same. Hence the Ld CIT(A) has taken support of the decision rendered by Hon'ble Madras High Court in the case of CIT vs. Balaji Educational and Charitable Public Trust (2015)(374 ITR 0274) in order to hold that the voluntary donations do not partake the character of Capitation fee. He submitted that the facts available in the case of Balaji Educational and Charitable Public Trust is in parity with the facts of the assessee. Accordingly, he submitted that the finding of the assessing officer on alleged collection of Capitation fee is based on surmises and conjectures, without conducting any enquiry. Accordingly, the Ld A.R....
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....mportant piece of evidence, but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect." He submitted that the assessee has demonstrated that the surrender of Rs. 25.00 crores made by the assessee is based on wrong appreciation of facts and law. Further, the assessee has also demonstrated that all the expenses relating to construction of buildings have been duly accounted for in the books of accounts and further they are also supported by the vouchers. (e) The Ld A.R submitted that the assessee has clarified before the AO, in its letter dated 14.12.2015, that there is no reason for agreeing for surrender of Rs. 25.00 crores. The AO also did not make addition, out of the above said amount, in AY 2010-11 to 2013-14. He submitted that it is the Ld CIT(A), who has made the above said addition of Rs. 25.00 crores on the reasoning that the assessee has agreed for the same. (f) Even if it is taken that the addition of Rs. 58.02 crores made by the AO (in AY 2012-13 to 2014-15) would include the amount of Rs. 25.00 crores surrendered by the assessee (in AY 2010-11 to 2013-14), yet the fact would remain....
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....perty held under trust wholly for charitable or religious purposes shall be exempt to the extent to which such income is applied to such purposes in India and where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen percent of the income from such property. Accordingly, the amount exempt u/s 11 of the Act is the aggregate amount of the amount applied for objects of the trust and the amount accumulated u /s 11(1)(a) not exceeding 15% of income. Under the Explanation given below section 11(1) of the Act, the assessee could postpone the application of income, if it is not able to apply its income for the reasons stated in the above said Explanation. It is also pertinent to note that the provisions of sec.11(2) enables the assessee to accumulate the income, if assessee is not able to apply 85% of its income or is not deemed to have been applied. It can be seen that even if the assessee is not able to apply 85% of its income for charitable purposes, the Act permits the assessee to apply the shortfall in the subsequent years, in which case, the amount so postponed....
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....on of Rs. 58.02 crores would include the amount of Rs. 25.00 crores offered by the assessee. The AO also made additions in AY 2013-14 to the tune of Rs. 703.99 lakhs and Rs. 554.50 lakhs for alleged violation of provisions of sec.13(1)(c) r.w.s 13(3) of the Act. He has further held that the assessee has collected Capitation fee under the name "Development Fee" over and above the fee prescribed by the Government and such collection was in violation of Constitutional Scheme and hence non-charitable in nature. All the above said observations and additions made by the AO has led him to come to the conclusion that the assessee is not entitled to exemption u/s 11 of the Act. Accordingly he held that the assessee is not entitled to exemption u/s 11 of the Act. 37. As observed earlier, the Ld CIT(A) held that the addition of Rs. 58.02 crores was not justified, but made the addition of Rs. 25.00 crores surrendered by the assessee. The Ld CIT(A) also held that the assessee would not be eligible for depreciation on the above said amount of Rs. 25.00 crores. The Ld CIT(A) deleted the additions made u/s 13(1)(c) of the Act. With regard to allegation of collection of Capitation fee, the Ld CI....
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....fits into the provisions of sec.69C of the Act, since the source for these expenses remains unexplained. Accordingly, the AO has assessed the above said amount of Rs. 58.02 crores in AY 2012-13 to 2014-15 as stated above. 39. The Ld CIT(A) noticed that the assessing officer has made the above said addition without making any enquiry. The observations made by Ld CIT(A) are extracted below:- "47. During the course of assessment proceedings, the appellant should have been called upon to produce all vouchers and bills which were incurred in cash. The major part of the expenditure stated to have been incurred in cash appears to be for the "Buildings". There is no indication in the assessment order that the Assessing officer attempted to obtain the evidence by issue of notice u/s 142(1). The assessing officer has relied upon the outcome of search proceedings only. The basis for arriving at the figures for disallowance is not discernible from the assessment order. When compared to the expenditure on addition to the building in the Balance Sheet of the appellant and the disallowance made by the Assessing Officer, some peculiar results emerge. Though the caption for addition in ....
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....e method of computation of total income of a Charitable Trust is different from the method of computation total income of a business concern. It is pertinent to note that, for the purpose of determining the quantum of income applied for objects of the trust, no distinction shall be made between Capital expenditure and Revenue expenditure, i.e., even capital expenditure is also treated as application of income. In the case of a business concern, the assessee would not be entitled for deduction of capital expenditure. Of course, depreciation is allowed thereon at prescribed rates. The focus in respect of a charitable trust is that it should apply its income for charitable purposes only. Only in case of violation of provisions of sec.13, then the charitable trust shall be liable to lose exemption u/s 11 of the Act and would be liable to pay tax on its total income as computed u/s 11 to 13 of the Act. 41. In the instant case, there is no dispute that the assessee was constructing buildings for its medical college during the years relevant to AY 2010-11 onwards. We have noticed that the amount spent on construction is treated as application of income for the objects of the trust and ....
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....spectively for AY 2012-13 to 2014-15 was quantified. 43. The AO has also stated that the assessee could not produce the bills, vouchers etc., in support of the expenditure incurred. However, the assessing officer has not rejected the books of accounts of the assessee. On the contrary, it is the submission of the assessee that all the expenses incurred on construction have been duly accounted for in the books of accounts. It was further stated that the books of accounts have been duly audited and the auditors have not found any deficiency in the maintenance of accounts and vouchers. We notice that the assessee has made above said submissions before the AO, but the AO could not controvert the same by bringing any material on record. 44. During the course of hearing, the Ld A.R submitted that it is not discernible as to how the AO has quantified the amount of Rs. 9.93 crores, Rs. 43.33 crores and Rs. 4.76 crores. The Ld CIT(A) has also observed so. Hence the revenue was asked to furnish the details as to how the above said amounts were arrived. As noticed earlier, the revenue could not furnish the details. 45. Hence, we are of the view that the Ld CIT(A) was justified in hold....
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....ring the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:-......" Even if the view of the AO, that the money spent in cash is to be considered as amount spent for non-specified purposes, is accepted as correct for a moment, then the case of the assessing officer has to be considered as income not deemed to have been applied for charitable purposes. In that case, it is required to apply the provisions of Explanation given under sec. 11(1) and sec.11(2) of the Act while determining the total income of the assessee, i.e., the assessee should have been given an opportunity to avail the benefits given in the Explanation under sec.11(1) and sec.11(2), since it is the AO who has held that the payments made in cash should be considered as payment for "non-specified purposes."It is also pertinent to note that the provisions of sec. 13 of the Act are not applicable to the alleged application for non-specified purposes". ....
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....efore the AO was wrong. The assessee submitted that the transactions represent transactions between M/s Hotel Solitaire, a group concern, and the above said persons. It was submitted that the assessee was not aware of the contents in the seized material while giving explanations before the AO and it could ascertain actual nature of transactions only after examination of seized material. The Ld CIT(A) was convinced with the explanations of the assesseeand accordingly deleted the addition of Rs. 703 lakhs. 50. We heard the parties on this issue and perused the record. The Ld D.R contended that the Ld CIT(A) has violated the provisions of Rule 46A by admitting additional evidences. However, the Ld A.R submitted the assessee has ascertained the correct nature of contents of seized materials only subsequently and accordingly, it could offer proper explanations before the Ld CIT(A), i.e, the transactions recorded in the seized material represent transactions entered between M/s Hotel Solitaire and above said persons. We also notice that the assessee has produced bank statement of Hotel Solitaire to show that the transactions recorded in the seized material matches with the transaction....
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....hout the above said details, it cannot be proved that there was violation of provisions of sec.13(1)(c) of the Act. 54. The Ld CIT(A) deleted this addition with the following observations:- "70. I have carefully perused the assessment order and the written submission. The discussion in the assessment order leaves much to be desired. Except the names and amounts and the allegation that cash withdrawals have been made, no other particulars are available. There is no reference to any seized material. The bank from which cash withdrawal was made, the date of withdrawal and when the amount was paid to the parties are all missing. Whether the cash withdrawal was made on a single day or is it the aggregate of the amounts withdrawn in a week, a month or a year has also not been specified. To cap it all, the Assessing Officer has made the addition with the caption "Payments made to related persons". But in the discussion part, there is no mention about the purpose of alleged payments. Without such basic details, the Assessing Officer could not have put across to the appellant, whether the same have been entered in the books of account, much less question the violation of the pro....
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....e books of accounts is not reliable. On the contrary, the AO has placed his reliance on the very same books of accounts for determining the total income of the assessee by considering the receipts and expenses. Further, the AO has not furnished the break-up details of the payments alleged to have been made to the three persons mentioned above. The AO should have furnished the break-up details and he himself could have compared the said details of cash withdrawals with the books of accounts in order to ascertain as to whether the impugned withdrawals were actually given to the above said persons or not. The AO could have also asked explanations from the assessee by furnishing the breakup details. The AO has not carried out any of the above said steps. On the contrary, it is the submission of the assessee that all cash withdrawals made from the bank have been duly accounted for in the books of accounts and no payment, as alleged by the AO, has been made to the above said three persons during the year relevant to AY 2013-14. According to the assessee, it has furnished the above said explanations on the basis of books of accounts. Hence we are of the view that there is merit in the con....
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....velopment fees has been accounted for as revenue receipts and applied for only educational purposes. 26. The Assessing officer did make an attempt to call for information from students by addressing in about 17 cases, some of which have been served. The replies received, if not satisfactory or are adverse to the appellant, should be put across to the appellant to rebut the same, as otherwise the conclusion would be one-sided. The Assessing officer has himself after being satisfied about the accounting of Development fees and bringing into the books of account deleted the addition made in the assessment in his rectification order passed later, which will be adverted to in the subsequent part of this order. With regard to siphoning off of funds in violation of Section 13, the same has been dealt with in the latter part of this order. There is no doubt there is a prohibition contained in Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984 to collect capitation fees by educational institutions and the authorities have been empowered to inspect, enquire and investigate as to whether an institution is collecting capitation fee in contravention of the pr....
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....principles of natural justice. 29. As regards, the case laws quoted by the Assessing Officer, viz., Miss Mohini Jain vs. State of Karnataka (1992)(2 SCC 666), it dealt with capitation fee and its maladies. The appellant has justified his collections as voluntary donations. As regards the case of Islamic Academy of Education vs. State of Karnataka (2003) 6 SCC 697, the State of Karnataka has fixed certain percentage of seats to be filled on merits, and a small percentage has been left to be filled up by Management Quota. The Management has to have some discretion in order to provide infrastructure, laboratory, hospital, faculty etc., to run the institutions to the requisite standard. The Assessing Officer has further referred to the decision of ITAT Hyderabad in the case of Vodithala Education Society vs. ADIT (2008)(20 SOT 353), wherein the ITAT has referred to the decision of the Madras High Court in the case of T.Devasahaya Nadar vs. CIT (51 ITR 20). The appellant has brought out in its written submissions a plethora of case laws to meet the points raised by the Assessing Officer. The very same Madras High Court in the case of COMMISSIONER OF INCOME TAX vs. BALAJI EDUCAT....
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....t of donors alone. A reply was submitted by the assessee and in paragraph 6(iii), the Assessing Officer states that all the statements tallied. However, the assessing officer comes to a different conclusion that contribution is not voluntary, and it is relatable to admission of students. We find this finding of the Assessing Officer, as has been rightly held by the Commissioner of Income Tax (Appeals) and the Tribunal, is not supported by documents, but on the basis of Assessing Officer's inference. It cannot be now stated that something was not furnished, nevertheless, he tallied all the materials and came to the conclusion as stated above. If the Assessing Officer has tallied the figures then the assessees case of actual contribution to Trust has to be accepted. It has been shown in the return of income. A bald statement in paragraph (7) of the assessment order that the assessee is not carrying on charitable activities for the purpose of Section 13 read with Section 11 of the Act appears to be the mainstay of the department's case. 7.10 In effect, it is clear that the authority has confused himself with the admission of students in management quota with the carry....
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....s the same proposition. 31. Therefore, the denial of exemption under section 11 of the entire income is not sustainable. 58. We heard the parties on this issue and perused the record. We notice that the assessing officer has taken the view that the development fees collected by the assessee is in the nature of Capitation fee, since it is over and above the fees prescribed by the Government. However, the submission of the assessee is that the development fee so collected represents voluntary donation given by the donors. The Ld CIT(A) has given a finding that the assessee has not received development fee from all the students and further the quantum of donation varies from one person to another. In the instant case, the AO has not brought on record any credible material to prove that the donations were not voluntary. The AO had placed his reliance on the statement given by two persons named Shri K J Pramod and Sri Shivarame Gowda. However, the AO has not allowed the opportunity of cross examining them. Further the statements so given by them is contrary to the books of accounts, i.e., no evidence was found to show that the assessee has collected money outside the books o....
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....disallowance of depreciation thereon. 61. The facts relating to this issue are that during the course of search proceedings, a statement u/s 132(4) of the Act was recorded from the Chairman of assessee institution named Shri G Dayanand on 13-09-2013. In response to question no.6, Shri G Dayanand has stated as under:- "In my submission earlier, I had admitted Rs. 4.99 crore on account of cash deposits in bank account of my proprietorship concern, investment in jewellery and watches I wish to confirm the same. Further, I wish to admit undisclosed income on account of investments in watches as disclosed above in reply to Q3. Also on the basis of issues discussed pertaining to the trust, I wish to admit that I may not be able to prove satisfactorily the utilization of funds which have been made in cash. Over all, I wish to admit an amount of Rs. 25 crores being disallowance of expenses and amounts made for construction in the hands of the trust for the different assessment years on the basis of cash withdrawals made and other cash expenses......" Consequent to the admission so made, the assessee furnished a letter dated 14-12-2015 along with a revised computation of inco....
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.... long gap between the date of declaration and the date of submission of revised computation of statement before the AO. He also noticed that the assessee has also not retracted the statement so given. He also took the view that the assessee has estopped the AO from making further investigation by making such admission. Accordingly, he held that the addition of Rs. 25.00 crores in aggregate as admitted by the assessee for AY 2010-11 to 2013-14 should be added to the total income of the assessee in the above said years. Accordingly, he directed the AO to make addition to the extent of Rs. 25.00 crores in aggregate in AY 2010-11 to 2013-14. 65. Since the above said amount of Rs. 25.00 crores related to construction of buildings, the Ld CIT(A) also held that depreciation is not admissible on the above said addition. Accordingly, he directed the AO to add 10% of the addition agreed towards building for various years towards depreciation disallowance. He also directed the AO to levy tax at maximum marginal rate on the addition of Rs. 25.00 crores and disallowance of depreciation. 66. It is the case of the assessee that its Chairman admitted that he may not be able to prove the util....
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....nts. All of them are supported by vouchers and bills also. The books of accounts have been audited and the auditors have not found any deficiency in the maintenance of books and vouchers. Hence, while filing revised computation of income on 14.12.2015 before the assessing officer, the assessee has stated that the expenses were actually spent and recorded in the books of accounts and the Chairman has agreed for disallowance for the sake of buying peace with the department. However, in the assessment order, the assessing officer has observed as under while rejecting the submission of the assessee:- "3.6 The explanation of the assessee and its submissions are taken cognizance of along with the evidences found and seized during the course of the search operations conducted. The explanation of the assessee that the said expenditures were actually spent by the assessee and recorded the same in the books of accounts of the trust maintained in the regular course of operations and that it has agreed for disallowance for the sake of buying peace with the department is not plausible, without any basis and hence is not acceptable. The findings during the course of search operations an....
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....the assessee in the statement recorded u/s 132(4) of the Act? 71. Before us, the Ld A.R placed his reliance on the decision rendered by Hon'ble Supreme Courtin the case of Pullangode Rubber Product Co. (supra), wherein it was held that the admission may be an important piece of evidence, but the same is not conclusive. It is open to the person who made the admission to show that it was incorrect. We may also refer to the decision rendered by Hon'ble Supreme Court in the case of CIT vs. V. MR.P Firm (1965) 56 ITR 67, wherein it was held that the principle of estoppels will not against the Income tax Act. The relevant observations are extracted below: "The contention is that the assessees having opted to accept the scheme, derived benefit there-under, and agreed to have their discharged debts excluded from the assets side in the balance-sheet subject to the condition that subsequent recoveries by them would be taxable income, they are now precluded, on the principle of "approbate and reprobate", from pleading that the income they derived subsequently by realization of the revived debts is not taxable income. The doctrine of "approbate and reprobate" is only a spec....
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.... (73 Taxmann 437) has held as under: "8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so he cannot assess an assessee on an amount, which is not taxable in law, even if ....
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....ed for some other purpose. The assessing officer has not done so. In fact, for the above said reasons only, the Ld CIT(A) has deleted the addition of Rs. 58.02 crores made by the assessing officer, which included the above said amount of Rs. 25.00 crores also. Hence, the Ld CIT(A), after deleting the addition of Rs. 58.02 crores, was not justified in sustaining addition to the extent of Rs. 25.00 crores simply for the reason that the assessee has accepted the same in the statement recorded u/s 132(4) of the Act. We have noticed that the assessee has submitted before the Ld CIT(A) that the said admission was given on wrong notion on fact and law. Before the AO also, the assessee has submitted that all the expenses have been duly accounted for in the books of accounts. Accordingly, we are of the view that the assessee has established that the admission made by it was incorrect. In any case, the admission was not related to Undisclosed income, which would warrant any addition, but it was only a plea to reduce the amount from the quantum of application of income, which in the present case was construction expenses incurred on buildings. The fact of construction of buildings by the asse....