TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1043
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.... and medical colleges. The assessee has been regularly filing the return and for various years the exemption u/s 11 of the Act was allowed. 2.1 A search was carried out in the premises of the assessee u/s 132 of the Act on 6.8.2015. Various documents were seized. Notice u/s 153A of the Act was issued for assessment years 2010-11 to 2015-16. For the assessment year 2016-17, a notice u/s 143(2) of the Act was issued. The assessments were completed u/s.153A of the Act up to assessment year 2015-16 and u/s 143(3) of the Act for the assessment year 2016-17. The assessee filed appeals against the assessment orders before the learned Commissioner of Income Tax (Appeals)-11, Bangalore. The learned Commissioner of Income Tax (Appeals)-11, Bangalore passed orders on 28.02.2020 dismissing the appeals. Further appeals were filed before the Tribunal, and vide its order dated 16.08.2021 in ITA Nos. 500 to 506/Bang/2020, the Tribunal substantially allowed the appeals and held that exemption u/s. 11 of the Act cannot be denied. The assessee as well as Principal Commissioner of Income-Tax have filed appeals before the Hon'ble Karnataka High Court. 2.2 When the assessment proceedings were pend....
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....014-15, 2015-16 and 2016-17, no fresh incriminating materials were found during the search conducted on 10.10.2019. Even in the assessment orders passed u/s. 153A of the Act consequent to the second search for the above assessment years, the learned assessing officer simply confirmed the total income determined in the earlier assessment orders passed u/s. 153A of the Act even though the Tribunal had deleted all the additions. In the Order Giving Effect (OGE) to the ITAT Order for AY 2014-15 to 2016-17, the entire additions made were deleted but simply confirmed the total income determined in the earlier assessment orders passed u/s. 153A of the Act in the assessment orders passed on 30.09.2021 consequent to the second search conducted on 10.10.2019. Based on the directions given by the Tribunal in ITA No. 1463/Bang/2018, the learned Principal Commissioner of Income Tax (Central), after giving an opportunity of being heard to the assessee, confirmed the earlier order cancelling the registration. Ld. A.R. submitted that the main reason for upholding the cancellation of registration as under; a. The department has filed an appeal against the order of the Tribunal in appeal no. 500 t....
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....learned Principal Commissioner of Income Tax cannot take the aid of these assessment orders for denying the restoration of registration u/s 12A of the Act. 2.8 The Ld. A.R for the assessee also submitted that the registration having been granted by learned Commissioner of Income Tax (Exemption), the order passed by Principal Commissioner, Central Circle is without jurisdiction. Transfer of jurisdiction of assessing officer to Central Circle u/s 127 does not clothe the respondent with powers that could be exercised only by Director of Exemption. It is trite law that authority granting registration alone has the powers to cancel the same. Hence, the learned respondent cannot assume jurisdiction to cancel the registration just because the jurisdiction of assessing officer has been transferred to an officer who is subordinate to the respondent. 2.9 In view of the above submissions, Ld. A.R. prayed that the Tribunal be pleased to direct the learned Principal Commissioner of Income Tax to restore the registration u/s 12A of the Act with immediate effect. 3. The Ld. D.R. relied on the order of Principal CIT and submitted the Ld. Principal CIT had cancelled the registration based on the....
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....ues urged by the assessee before us require re-examination at the end of Ld. Principal CIT, who can take judicial view of the matters after considering the order passed by the Tribunal. 10. Accordingly, we set aside the order passed by Ld. Principal CIT and restore all the issues to his file for examining the claims of the assessee. After affording adequate opportunity to the assessee, Ld. Principal CIT may take appropriate decision in accordance with law on all the issues. 11. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes." 5. Consequent to this, Ld. Principal CIT passed a fresh order vide his order dated 18.2.2022 confirming his earlier order by cancelling the registration. Admittedly, the Principal CIT considered the various discrepancies found during the course of search action on 6.8.2015. Consequent to search action on 6.8.2015, assessment orders are framed u/s 153A of the Act for the assessment years 2010-11 to 2016-17. These orders are subject matter of appeal before Ld. CIT(A) and he disposed of appeals vide his order dated 28.2.2020 confirming the action of the AO. Further, these orders of Ld. CIT(A) were subject matte....
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....ugned document was a non-speaking document inasmuch as it does not contain any intelligible narration in support of the inference drawn by the Assessing Officer that it reflected sales carried out by the assessee outside the regular books of account. When a dumb document, is to be made the basis to fasten tax liability on the assessee, the burden is on the Revenue to establish with corroborative evidence that the nature of entries contained therein reflect income and also that such income was in the control of the assessee. Thus, Revenue has to establish, with necessary corroborative evidence, that various entries contained in the seized document reflect sales of rice and broken rice effected by the assessee. Considering the entirety of circumstances, in the absence of any material to support the nature and ownership of the entries found in the seized document, no addition is permissible in the hands of the assessee as undisclosed income by merely arithmetically totalling various figures jotted down on such document. 186. Further the AO relied on the statement of Shri Nagaraj, Secretary wherein the AO mentioned that Mr. Nagaraj was aware of the transactions and confirmed it. The ....
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....NRI quota seats and some other seats. These candidates have to make payments in cash for which no receipts are issued. But the AO has not examined Mr. Abrar or any other alleged middlemen. In the absence of such examination, the statement of Shri Srinivas that middlemen were engaged for seat conversion cannot be relied upon. 189. The seized material A/DUU/03 which is placed on record at PB page no 669 to 775 which shows certain payment entries and it is very strange to believe that the assesse has authorised any person to write it as it does not contain any attestation from the assesse side being not having any name or seal of the assesse. 190. The seized material A/DUU/04 which is placed on record at PB page no 776 to 864 which shows certain payment entries and it is very strange to believe that the assesse has authorised any person to write it as it does not contain any attestation from the assesse side being not having any name or seal of the assesse. It also shows certain amount taken from PG students. However there is no attestation to this document from the trust side to suggest that it was authorised by the assesse. Being so no credence to be given to this document. 19....
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....ies relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 of Evidence Act so a....
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....f Rs.70,000 towards corpus donation by cheque. (viii) PB 1784 - Letter from P Kumara Swamy confirming the voluntary payment of Rs.50,000 towards corpus donation by cheque. (ix) PB 1787 - Letter from B S Amarnatha confirming the voluntary payment of Rs.50,000 towards corpus donation by cheque. (x) PB 1790 & 1791 - Letter from Dr.C.L.Gayathridevi confirming the voluntary payment of Rs.50,000 towards corpus donation by cheque. (xi) PB 1793 - Letter from B P Ravi Kumar confirming the voluntary payment of Rs.25,000 towards corpus donation by cheque. 200. In all the above cases the voluntary contribution towards corpus donation has been received by cheque and duly accounted in the books of account of the assesse. There are also some photocopy of bank receipts and cheque receipts other than this which are insignificant papers does not suggest any material evidence. 201. The seized material A/DUU/14 is digital data. According to the AO, it shows unaccounted capital receipts received in cash from Management/NRI quota students utilized for payment to political parties as per instruction of Mr. G.H. Nagaraj. These digital data are used by the AO without providing any opportunity o....
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....upon since no opportunity to cross examine Mr. Goli Srinivas was provided as discussed earlier. 207. The assessee vide letter dated 22.02.2017 asked for copies of the statements recorded from the students, parents and donors during the search proceedings and also opportunity to cross-examine the parties. Further copy of statements recorded and cross-examination of the parties was requested by the assessee's letter dated 09.12.2017. Vide assessee's letter dated 22.02.2017, copies of seized / incriminating material relied upon to make the addition was requested. The assessee vide letter dated 29.10.2017 also requested for documents in digital form taken at the time of search u/s. 132. 208. The AO vide letter dated 01.08.2017 furnished copies of seized material A/DUU/01 to A/DUU/17 to the assessee. However, it is crucial to note that the assessee's request for cross-examination of students, parents and donors of capitation fees was not provided by the revenue authorities. 209. The assessee by letter dated 09.12.2017 made submissions that collection of amounts by Shri G.H. Nagaraj, Secretary of the trust were on his own and spent a portion of the amount on the infrastructure and ....
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....he Adjudicating Authority. (para 6) Assesseehad contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price-list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price-list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. (para 7) If the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show-Cause Notice. (para 8)" 212. The Delhi Tribunal in the case of Veena Gupta v. ACIT in ITA No.5662/Del/2018 dated 27.11.2018 relying on the above judgment of Hon'ble Supreme Court in the case of Andaman Timber....
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....0. The High Court ought to have held that there were no materials to justify the assessment of Rs. 30,000 from out of the sum of Rs. 61,000, for income-tax and excess profits tax and business profits tax purposes, representing the value of the high denomination notes which were encashed." 214. Further the Hon'ble Supreme Court in the case of CIT v. Odeon Builders (P.) Ltd., 418 ITR 315 (SC) head-note is as follows:- "Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers a....
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....ne a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the corner-stones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by cross-examination and re-examination, if necessary. 9. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. Without the truth being tested no oral evidence can be admissible evidence and could not form the basis of any inference against the adverse parties. We have also examined the records and we find that this Shri Sukla was examined by a number of officers. The Assistant Director of Investigation examined him on August 4, 1987, and in reply to question No. 2 in that deposition he confirmed that he was a dealer in lubricating oil since 1977. In reply to question No. 3, he confirmed having been assessed to income-tax. Again, in re....
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....er to counter the comparative statement cited by the assessee before he can have the option to estimate the gross profit. Again, it is the comparative instance that alone can be the foundation of such estimate in case the accounts are really found to be unreliable and requiring to be rejected. Therefore, in the interest of justice for both the parties, the assessee and the Revenue, it is necessary for us to direct the Tribunal to remand the case to the Assessing Officer for reconsidering the whole matter in the light of the observations made by us in the foregoing and redo the assessment accordingly. All opportunities should be given to the assessee in order to lead any evidence that the assessee may feel necessary to rebut the case against him. As a result we decline to answer the question." 217. As held by the Hon'ble Calcutta High Court in the above judgment, in the present case, Mr. Nagaraj cannot be considered as a reliable witness. More so, when the assessee was not given any opportunity to cross-examine him. In this regard, we also place reliance on the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT, 125 ITR 713 (SC) wherein it was held t....
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....he trust collected the unaccounted capitation fees on his own without the knowledge of the trustees or without authorisation of the committee of trustees and also out of it he has spent Rs.14,611.94 lakhs for the purpose of trust activities. It was also reiterated that the committee never authorised Shri G H Nagraj for collection of any fees or spending any amount for trust activities. The assessing officer considered this letter as an acceptance of collection of capitation fees without considering the real meaning of that letter. It cannot be construed as the acceptance of collection of capitation fees by assessee. It was clearly stated that if it is collected, it is unauthorised collection by the Secretary and Shri G H Nagraj has to explain to the Income Tax authorities, even after considering the expenditure incurred out of it for the purpose of trust activities. In our opinion assessment in search cases has to be framed on the basis of seized material bought on record and not on the basis of confession. The action of assessing officer placing reliance on the letter of assessee dated 09-12-2017 is unjustified. 221. Further, there was an allegation by AO that assessee has recei....
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....observations that the responses given by the said parent remained the same during the course of cross examination by assessee and he reiterated that the parents have never been cross-examined by the appellant. Had there was a cross-examination, the DR very well could have produced the copy of the same for our consideration. The DR failed to do so. Hence, it is observed that the assessee was not afforded any opportunity to cross-examine any of the persons including the parents whose statements were relied upon for the purpose of making assessment. Such statements cannot be relied upon. Reliance was placed upon by the AR on various case law is support the case of the assessee. 227. Further, the AO recorded at page 125 of his order that he has sent summons to parents of students out of which only 5 students statements were recorded. Only two persons confirmed the payment of capitation fee. Vide assessee's letter dated 02.12.2017 assessee asked for information about enquiry with the students. No information was provided by the AO to the assessee. In this regard, statement of 2 persons out of 800 cannot be relied upon and it is not appropriate to come to the conclusion that these are ....
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....es and also Medical Council of India. In such circumstances, it is not possible to conclude on the basis of various loose sheets and jottings found during the search action u/s. 132 that assessee has collected unaccounted capitation fees from management and NRI quota. 229. Further, the Bangalore Bench in the case of Anand Social & Education Trust in ITA Nos. 2542-2548(B)/2017 dated 29.05.2020 by placing reliance on the judgment of Hon'ble Madras High Court in the case of Balaji Educational & Charitable Public Trust, 56 taxmann.com 182 in similar circumstances observed that the AO had not conducted any enquiry with the students or parents or others. The cash seized during the search was accepted as not belonging to the assessee. There was no complaint received from any student or parent regarding capitation fee charged by the institution. In the above case also the AO had estimated the capitation fee received from the students under the management quota for various years. The Hon'ble Madras High Court held it to be a perverse inference. Further the Tribunal observed the AO had only drawn certain inference on surmises and conjectures. He did not conduct any independent enquiry with....
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....ion fees from around 800 students for admission in various courses. Out of 800, 5 students/parents responded to the AO's letter and out of them 2 persons have given statement. There is no discussion in Assessment order with regard to other 3 persons. In our opinion the statement of 2 cannot be basis for making such huge additions on collection of capitation fees. It cannot be considered as appropriate sample to frame the assessment on the basis of their statement. Further, the assessee requested for cross examination of all the parties whoever have given the statements against the assessee, if any, which was not provided at all. In view of this, such statements cannot be relied upon. The department despite its attempts failed to collect any corroborative information regarding collection of capitation fees, except relying on uncorroborated entries in the loose papers/Excel sheets, wants to frame the assessments in all these assessment years relying upon the same which is not acceptable. The revenue authorities bound to follow the principle of natural justice and ought to have given proper opportunity of examination and cross examination of the parties concerned whose statements are ....
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....duct. The circumstances surrounding the case are also not enough to reject the assessee's explanation. We have considered all the material on record and also the statement of the parties as discussed in the earlier paragraphs. We are of the opinion that the department cannot rely on those statements, more so when it was not confronted to the assessee for cross-examination and the same cannot be relied upon. The department failed to collect proper information from any source corroborating payment of capitation fees, except in corroborating entries in the loose sheets. All attempts for corroboration failed. There is nothing to suggest that the trust has deviated from the objects for which registration was granted and not applied the funds for its objects. No evidence was brought on record to show that amount of alleged capitation fees which have been collected was misused by the assessee or by any interested persons. There is no instance of recovery of any assets commensurate with the alleged estimated unaccounted collection of capitation fees as found by the AO. The activities of the trust are genuine. There is no allegation by the lower authorities that activities of the trust are ....
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....f the society and the conclusion of the CIT(Appeals) was that extra tuition fees was collected by Mr. Balachander on his own and society has nothing to do with extra tuition fees collection. Being so, the Tribunal held that the assessee cannot be faulted and approval cannot be withdrawn so as to deny the benefit of section 11 of the Act. The relevant observations of the Tribunal are as follows:- ""In this regard, the ld. counsel for the assessee brought to our notice that the agreed tuition fee which the Society can collect for admission has also been collected and this is duly reflected in the statement found in the seized documents. It was submitted that the total collections in the form of DD was a sum of Q 1,16,74,975 and the amount stated to have been deposited by the Secretary in the Head Office is only a sum of Q 80,000 on 02.06.2005 and Q 14,33,500 on 19.10.05. It was submitted that the reference in the seized document might be with regard to the normal tuition fee which the society can collect. It was submitted that the entries in page 54 cannot be conclusive to show that the Secretary was also involved in collecting the ETF. We are of the view that the submissions made ....
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....s for the first reason put forth for cancellation of registration, viz., collection of capitation fee, it is submitted that in the course of search, excel sheets were found containing the names of students, names of parents and the amount. In the course of search and, thereafter, statements of chairman of the assessee trust were recorded on a number of occasions, with reference to the entries in these excel sheets. It was explained that circumstances in which the excel sheets were found were not ascertainable. It was contended that uncorroborated notings in the excel sheets should not be acted upon to derive any inference against the society. In support of this contention that the said excel sheets are not reliable, the learned counsel for the assessee put forth the following reasons : (a) The notings in the excel sheets lacked corroboration of the notings although the Department attempted in that direction. (b) In course of search and post-search investigation, in the statements recorded under s. 132(4)/131, chairman of the assessee trust, Sri Srinivasa Rao expressed his inability to explain the circumstances in which those sheets were found from the premises of the assessee-s....
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....ecord that the Department has typed some information by making use of assessee's computer and made part of the Panchnama. This fact was pointed out by the chairman of the assessee, Sri B. Srinivasa Rao in the course of his statement recorded on 17th Dec, 2009. This act on the part of the search party raises an eyebrow. (i) The Dy. Director of IT in course of post-search investigation made extensive enquiries to corroborate the notings in the excel sheets. One of the steps taken by him was that he summoned all the parents of the students under s. 131 to take evidence. In course of assessment proceedings, the assessee made requests to supply the copies of these statements. Repeated requests made by the assessee fell in deaf ears and so far these statements have not been provided. On being directed by the AO in course of assessment proceeding, the assessee contacted the office of Director General of IT and reminded on a number of occasions but no information was supplied, despite the fact that this fact was also brought to the notice of Director General of IT. As a principle, neither the assessee can suppress the best evidence in his possession nor the Department. It is settled ....
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....As regards the presumption under s. 132(4A), it was submitted that a loose sheet is not a book/document so as to raise the presumption. For this proposition, reliance was placed on the decision of Apex Court in the case of CBI v. V.C. Shukla [1998] 3 SCC 410. Further the presumption in this section is not mandatory. This can supplement but cannot supplant evidence. Nothing was found by the Department to support their suspicion. (m) Therefore, the Excel sheets which are not speaking either by itself or in the company of others, or corroborated by enquiry, cannot be the basis of any inference that capitation fees were collected and not entered in the accounts to cancel registration. 239. Thus, it is seen from the seized material and Excel sheets that these are handwritten loose documents and Excel sheet print-outs taken from the computer and undisclosed income of the assessee is determined on the basis of these documents. There is no direct evidence or conclusive evidence to prove the collection of the capitation fees. The statements of parties of whosoever is relied upon are evasive replies given to the revenue authorities on the basis of which the AO made an estimate of collect....
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....bsence of any corroborative material. If it is circumstantial evidence in the form of loose sheets and notebook, it is not sufficient to come to the conclusion that there is conclusive evidence to hold that assessee has collected unaccounted capitation fees. The notes in the diary/loose sheets are required to be supported by corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of revenue that assessee is collecting huge unaccounted capitation fees in the guise of carrying on educational activities. 241. The contention of the ld. DR is that cross-examination of parties whose statements were relied on by the AO to frame the assessment need not be given. On the other hand, if it is required to be given, the issue may be remitted back to the AO to give such opportunity. For this purpose, he relied on the judgment of the Hon'ble Allahabad High Court in the case of Moti Lal Padampat Udyog Ltd. v. CIT, 293 ITR 565 (All) w....
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....in the case of ITO v. M. Pirai Choodi, 334 ITR 262 (SC) wherein the facts are that the department refused to accept the interest income shown by the assessee placing reliance on a statement alleged to have been obtained from the Village Administrative Officer behind the back of the petitioner, overlooking the material furnished by the assessee to substantiate his agricultural income and without giving opportunity to cross-examine the Village Administrative Officer, violating the principles of natural justice. Therefore, writ petition could not be dismissed on alternative remedy and assessment order could not be quashed. On further appeal by the department, the Honb'le Supreme Court held that that instead of setting aside the assessment order, the High Court should have remitted the matter to the Assessing Officer to grant opportunity of cross-examination of the concerned witnesses. Further the assessee failed to avail of the statutory remedy. The assessee was given to move the CIT(Appeals). 244. Coming to the reliance placed by the ld. DR on the order of the Tribunal in the case of Centurion Investment & International Trading Co. (P.) Ltd. v. ITO, 126 ITD 356 (Del) wherein it wa....
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....such a nature, which goes to the root of the proceedings. It can be set aside for being re-done de novo. The Commissioner (Appeals) should not have upheld the addition on the basis of such a statement. [Para 24] The omission to allow cross-examination merely prevents the Assessing Officer from making an addition and can be corrected by allowing the cross-examination and the Assessing Officer can be directed to proceed further to examine the matter afresh on the basis of cross-examined statement. The power of setting aside the order of assessment, where it is illegal, is inherent in any Appellate Court. Its order would be perfectly legal order in directing the Assessing Officer to issue notice to the assessee before making an assessment because it was not satisfied regarding the correctness of the assessee's return. The Tribunal/ Commissioner (Appeals) has ample jurisdiction to give directions to the Assessing Officer to comply with the requirements of law. It has inherent power to set aside illegal order of assessment and direct the Assessing Officer to comply with requirements while making de novo assessment. [Para 25]" 245. In our opinion, the facts of the present case before....
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....essee into tax net by merely pressing to service the provision of Sec 132(4A) r.w.s Sec 292C of the IT act, which creates deeming fiction on the assessee subject to search wherein it may be presumed that any such document found during the course of search from the possession and control of such document are true. What has to be noted here is that deemed presumption cannot bring such a document in the tax net and the presumption is rebuttable one and the deemed provisions have no help to the department. In our opinion, in these cases addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vague noting's in the absence of any corroborative material and these material cannot be considered as transacted into collection of capitation fees by assessee giving rise to income which are not disclosed in the regular books of accounts by assessee. We place reliance on the following judgements in support of our above findings: (i) CIT vs D.K.Gupta 174 Taxman 476 (Delhi) (ii) Ashwini Kumar vs ITO 39 ITD 183 (Delhi) (iii) S.P.Goyal vs DCIT (Mum) (TM) 82 ITD 85 (MUM) (iv) D.A.Patel vs DCIT 72 ITD 340 (Mum) (v) Amarjeet Singh Bakshi (HUF) vs....
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....articularly in backward areas like Kolar. For this purpose the trust has established educational institutions. 252. It is submitted that exemption under sec 11 can be denied only under certain specific circumstances. Section 11(1) reads as under:- "11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, 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 per cent of the income from such property; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is n....
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....s relied upon the statement under section 132(4) of Sri. Goli V. Srinivas recorded on 06.08.2015. 256. In the submissions made in respect of ground number 7. the appellant has established that the seized material is not incriminating in nature. Therefore, it is not conclusive proof for receipt of capitation fee. The appellant reiterates those submissions. Under such circumstances, the AO erred in relying on such material to deny exemption under section 11. The AO has concluded that the appellant has received capitation fee merely on the basis of statements and unsigned documents which cannot be relied on as evidence. As far as the statements of Mr. Srinivas and Mr. Nagaraj are concerned, the appellant reiterates that they have not acted at the behest of the trust. 257. The appellant has stated categorically that the said loose sheets / note books referred to above have not been maintained by it. The mandate under section 11(1)(a) is that "income derived from property held under trust" should be applied for charitable purposes. Para 9 of the trust deed states that the property of the trust shall be the initial contributions and such other properties as may be donated or otherwis....
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....he only conclusion was that there was no trust of the business because there was no obligation to carry on the business. That was the only conclusion which the Tribunal arrived at and when one analyses the order of the Tribunal and finds that its approach is wrong, the conclusion is of no consequence." 259. The above decision has been affirmed by the Hon'ble Supreme Court in CIT v. K T Doctor [1998] 230 ITR 744 (SC). 260. One needs to put a dividing line between what is done by the personnel of the trust in their official capacity and their personal capacity. The trust cannot be held responsible for the acts of the personnel of the trust in their personal capacity. Therefore, the consequences of such acts cannot affect the trust in any manner including its eligibility to claim exemption u/s. 11. When the trust has neither received the alleged capitation fee nor has control on such alleged capitation fee where is the question of it being responsible for the receipt and utilization of the same. 261. In view of the above submissions, it is submitted that the appellant has not diverted any funds for the benefit of trustees and there is no violation of section 13(1)(c)(ii). 262....
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....O that appellant has received capitation fee is perverse as it is not supported by any evidence. Therefore, this by itself would also destroy the allegation that the funds are utilized for illegal activities because when the very existence of source from which funds are said to have been diverted has not been proved, the allegation of diversion should fail. 266. Without prejudice to the above, regarding the allegations regarding expenditure on illegal activities, the AO has alleged that the activities of the appellant are not in accordance with the objects of the trust and it has been used as a conduit for tax evasion, it was submitted that the allegation of deviations from the objects of the trust is based on the seized documents. The appellant has already established that these documents have no connection whatsoever with the trust. These are privately maintained by some other person. And if they have spent some money out of such collection, it cannot be said that trust has carried on its activities in violation of its objects. Therefore, the exemption u/s 11 cannot be denied on this ground. 267. The various allegations of the AO regarding payment for illegal activities and b....
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....t and in violation of laws governing elections in India." [Para 7.10, page 103] 270. The learned AR submitted that the AO relying upon a stray entry at page 85 of the seized material marked as A/DUU/13 and the statement of Sri. Goli V. Srinivas and Sri. G H Nagaraj has generalized that the appellant has diverted funds for funding elections for candidates of various political parties. The replies given by Sri. Goli V. Srinivas and Sri. G H Nagaraj does not divulge the details of political parties to whom such payments have been made. The AO also has not brought on record as to whether any elections did take place during the relevant period when the alleged payments were made. Just because the Chairman is a politician, it does not mean that payments are made to political parties. It is submitted that the allegations of the AO are incorrect. There is nothing either in the said page 85 of the seized material or the statement of Sri. Goli V. Srinivas and Sri. G H Nagaraj to hold that the appellant has diverted the funds of the trust for funding elections. The appellant has not authorized such payments. The entry has been made by Mr. Srinivas at the behest of Sri G H Nagaraj in his per....
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.... have been diverted for funding elections is perverse as it is not based on cogent evidence. 272. Without prejudice to the above, it is submitted that the seized material marked as A/DUU/02 to A/DUU/04 and A/DUU/13 do not contain any entry pertaining to FY 2009-10, relevant to AY 2010-11. Therefore, this finding of the AO cannot be extended to AY 2010-11 even on this ground. Counter to the allegation: Payments to agents 273. The AO has, at para 5.2.3.1d, page 60, tabulated his analysis of seized material no. A/DUU/2 with respect to alleged payments made to agents. He also relied upon page 5 of seized material no. A/DUU/10. The AO has extracted the relevant portion from the statement of G H Nagaraj with reference to payment to agents. He has also extracted at the said paragraph, pages 71 and 72, the replies received from Sri. Goli V. Srinivas when he was confronted with the aforementioned entries in seized material no. A/DUU/02. 274. At pages 78 and 79, the AO has extracted the relevant portion of the statements of Sri. Goli V. Srinivas recorded on 06.08.2015 under section 132(4) and on 28.11.2017 under section 131 with reference to role of agents. 275. Relying upon the ab....
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....ter to the allegation: Payment of kickbacks and promotion of corruption 278. The AO has, at page 62, tabulated his analysis of seized material no. A/DUU/2 with respect to alleged payments made to MCI Inspectors. He has extracted the relevant portion from the statement of Sri. Goli V. Srinivas with reference to the aforementioned entries in seized material no. A/DUU/02. At page 70, the AO extracted the statement under section 131 of Sri. Goli V. Srinivas recorded on 28.11.2017 pertaining to deposition before CBI. 279. Relying upon the above materials, the AO at serial no. 5, page 100, para 7.1 of the AO , alleged as under: "The trust funds have been mis-utilized for payment of gifts and bribes during MCI Inspections to unknown officials /persons as seen from seized material vide Annexure A/DUU/02 (such entries found in multiple pages)." 280. At para 7.8, page 102 of the assessment order, the AO has alleged "Payment of kickbacks and promotion of corruption" observing as under:- "Regular kickbacks in the form of cash, silver plates, gold chains, gifts, etc have been paid of inspectors from medical council of India, in order to receive favorable inspection reports. This also ....
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....the AO that it had paid bribe to MCI inspectors. The AO, in the final assessment order, has not addressed the objections taken by the appellant. It means that the AO has not disagreed with the contentions of the appellant. That being the case, the AO erred in retaining the perverse findings in the final assessment order. 288. Without prejudice to the above, the material relied upon by the AO contains dates falling in FY 13-14. Sri G H Nagaraj in the statement under section 132(4) recorded on 20.08.2015 in reply to question no. 8 has stated that MCI Inspection takes place every year till the year of recognition and once recognition is granted, the inspection is made once in 5 years. Deemed University recognition was granted in the year 2006. That being the case, how can there be occasion of making any payments to MCI Inspectors. Therefore, there is not even circumstantial evidence for him to extrapolate one stray entry. At worst, the finding of the AO regarding payment to MCI Inspectors is to be restricted only to AY 14-15 and it cannot be extended to other years. This is without prejudice to our claim that no bribes were paid to MCI inspectors. 289. Therefore, this ground canno....
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....e has nowhere accepted in his statement that he has access to any such documents. That being the case, he cannot make an authoritative statement that the "........paid for various 80G receipt holders who had made cheque payment to our organization for the period..................to avail benefit under the Income Tax Act." The said statement cannot be relied upon in the absence of cogent material. The AO has alleged that the appellant has not submitted anything to prove that the donations received are genuine. It is submitted that the appellant has received donations through cheque and it has issued receipts for the same. 292. Further, it was stated that statements whatever relied on by the AO was not confronted to the assessee. Hence, it may not be relied upon. Counter to allegation: "Additional Salary Payments made to staff" 293. The ld. AR submitted that the appellant denies the allegation that it has paid remuneration in cash to enable the faculty to evade tax. The allegation made by the AO is absolutely baseless. The AO has not brought on record any material to prove his statement. In fact, while dealing with the claim of the appellant regarding deduction of expenditure, ....
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....as denied on the reasons that assessee has collected unaccounted capitation fee from management and NRI quota which is based on unsupported seized material on which no opportunity to cross-examine was given to the assessee. Hence we have observed that no addition can be made on this basis. Now coming to the activities of the assessee, no material has been brought on record that the assessee has not solely existed for the purpose of carrying out educational activities and books of account have not been rejected. It cannot be said that the activities carried on by the assessee is not genuine. In our opinion, the assessee solely existing for non-profit purpose. Unless the department shows that there was breach of conditions laid down for grant of exemption u/s. 11 of the Act, the benefit of exemption u/s. 11 cannot be denied. The assessee enjoyed registration granted during this period and the assessee also demonstrated that the assessee's predominant objects remain the same i.e., carrying out the charitable activities for the purpose of advancement of education and not to earn profit. Earning surplus income by carrying out educational activities is not a reason to deny exemption u/s.....
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....der section 143(3) for the impugned assessment year. 298. The ld. AR submitted that a perusal of the computation of income shows that the surplus before claiming exemption under section 11(1)(a) is Rs. 6,85,70,097. The same has been arrived at as under:- Gross receipts 58,73,36,562 Less: Application of income Revenue Expenditure as per Income & Expenditure Account (excluding depreciation) 44,58,41,894 Capital Expenditure 7,29,24,571 Total application of income 51,87,66,465 Balance 6,85,70,097 Less: Exemption u/s 11(1)(a) [15% of gross receipts - Restricted to surplus available] 6,85,70,097 Total income Nil 299. It is submitted that the surplus considered by the AO in the computation of total income in the order dated 30.12.2017 passed under section 153A is also Rs. 6,85,70,097. Therefore, the same is before the claim for depreciation. The AO also added back the capital expenditure claimed as application of income as exemption under section 11 is denied. Therefore, the observation of the AO that the appellant has claimed depreciation is incorrect. 300. Therefore, without prejudic....
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....years. The AO has added Rs. 27,42,00,000 towards undisclosed cash receipts in AY 2010-11. Similar is the position in other assessment years. The break-up of the same for AY 2010-11 is as under:- Description of course Alleged unaccounted cash generated during FY 2009-10 (Amount in Rs.) UG-MBBS course 12,34,00,000 PG course 15,08,00,000 Total 27,42,00,000 307. The AO has computed the alleged undisclosed cash receipts from UG-MBBS course and PG course for the impugned assessment year AY 2010-11. The relevant computation for AY 2010-11 is given at page 149 [UG-MBBS course] and page 151 [PG course]. He has computed the capitation fee and unaccounted cash generated in respect of UG-MBBS course for AY 2010-11 as under:- Column heading as per the table given at page 149 of the assessment order Column reference Total Seats D 150 No. of seats where capitation fee is collected E 63 (*) Package price (Rs. In lakh) F 35 Regular fee per seat for the course (Rs. In lakh) G 15.41 Unaccounted cash component generated per seat per course (Rs. In lakh) F - G = H 19.59 Total unaccounted cash generated as per seized material (Rs. In lakh) I - Est....
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....nderstand the meaning and nature of entries. Hence, in the absence of any other corroborative material, we are of the view that the said document should only be construed as dumb document. We also find no reason for extrapolating the figures into lakhs. Hence the addition made by the AO has to be taken as an addition made on surmises and conjectures, which is liable to be deleted. We notice that the co- ordinate bench of Tribunal has also taken an identical view in the assessee's own case in the order dated 29-04-2015 passed in ITA No.3890/Mum/2013 and others relating to AY 2006-07 to 2008-09. We notice that the assessee has given detailed explanations before the Ld CIT(A) and hence the Ld CIT(A) has deleted the addition by placing reliance on the decisions referred supra. Under these set of facts, we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue. Accordingly we uphold the order passed by him on this issue." 310. Moreover in all the other pages of seized material A/DUU/06, there is nothing even remotely suggesting that some cash has been collected. Hence, the reliance on page 151 to estimate the total unaccounted cash generation is uncalled ....
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....capitation fee during the FY 2009-10 just because he found certain material pertaining to AY 2009-10 which, according to him purportedly represented proof for alleged capitation fee received during FY 2008-09. Assuming but without admitting that the material pertaining to FY 2008-09 represents evidence for alleged capitation fee received during that year, it is submitted that a presumption cannot be drawn that there must have been similar receipt even during FY 2009-10 in the absence of incriminating material pertaining to FY 2009-10. The appellant relies on the following decisions:- * In Anjaneya Brick Works. v. ACIT (INV.). 2002 (1) TMI 256 - ITAT Bangalore / 74 TTJ 921, the Tribunal held as under: "(iii). The first limb of arguments of the learned authorised representative is that so far as the asst. yr. 1991-92 in the case of M/s. Anjaneya Brick Works is concerned, there is no evidence of suppression of income. We are convinced by the arguments of learned authorised representative to that effect. This is almost settled principle of law that mere existence of evidence to support concealment of income for the next assessment year (i.e. 1992-93 in this case) cannot be made a b....
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....nt case, the books of account were examined by the Assessing Officer in the middle of the accounting year. Merely because there were some discrepancies in the pre-search period, it cannot lead to any presumption that the discrepancies would have continued in the postsearch period particularly when there was factually no evidence at all as found by both the authorities below to support such a view." * In CIT v. M/S Thakkar Popatlal Velji Sales Ltd. 2016 (4) TMI 336 - Bombay High Court's case the registers evidencing sales were found for the period August 2005 to September 2005. The Revenue sought to extrapolate the sales recorded therein for the entire assessment year. The Tribunal rejected the contention of the Revenue and held as under:- "9. So far as the next submission on behalf of the Revenue viz. of extrapolation of evidence found during search is concerned, this Court in All Cargo Global Logistics Ltd. (supra) had negatived the revenue's submission before it that the assessment under section 153A of the Act is not to be restricted only to the incriminating material found during the course of search but would extend to other material also. Therefore in the facts of pre....
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....als relating to academic years 2008-2009 and 2009-2010. In other words, instead of estimating the unaccounted receipt for the academic years 2003-2004 to 2007- 2008 (A.Ys. 20042005 to 2008-2009) on the basis of seized material relating to academic year 2008-2009 and 2009-2010 (A.Ys. 2009-2010 and 2010-2011 respectively), the AO shall take into consideration the seized material as well as other material what was available during the course of assessment relating to very same assessment years for determining the unaccounted income. For this purpose, we place reliance upon the Orders of the Tribunal in the case of DCIT vs. Royal Marwar Tobacco Product (P) Ltd. (2009) 120 TTJ (Ahd.) 387, CIT vs. Anil Bhalla (322 ITR 191) (Del). In this case search and seizure was carried out in the premises of the assessee and the premises of a company of which the assessee was a director. The Assessing Officer made additions under the head of unexplained expenditure under section 69C of the Income-tax Act, 1961." 314. The AO regarding the Evidence of opening balance on 1/4/2010 observed upon examination of seized material relating to payments, that there is an opening cash balance of Rs. 81 lakhs as....
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.... is no mention at all of the evidences which the assessing officer sought to rely upon in the assessment order. The reliance upon material to which the appellant is not put to notice is against the principles of natural justice. The appellant, in its reply dated 23.12.2017 to the said notice had objected to reliance on the said page 151 of the seized material no A/DUU/06 for proposing addition for AY 2010-11. In order to counter this objection, the AO sought to rely upon material pertaining to FY 2008-09. This shows that the AO has done the assessment with a prejudiced mind. He has decided to make the addition sans any material which warranted the same. 318. Without prejudice to the above, it is also pertinent to note that the AO relied upon data pertaining to AY 2009-10 though it doesn't fall within the block of 6 years contemplated under section 153A(1). It is submitted that the authorized officer is not permitted to seize the material belonging to a period which doesn't fall or is unlikely to fall within the period of 6 assessment years contemplated by section 153A. As stated earlier, the search can be initiated if the authorizing officer has reason to believe that in consequ....
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....the assessment order Column reference Total Seats D 68 No. of seats for which capitation fee is collected E 42 Unaccounted cash component generated per seat per course (Rs. In lakh) F - Total unaccounted cash generated as per seized material (Rs. In lakh) G - Estimation of total unaccounted cash generated (Rs. In lakh) H 1508 321. The ld. AR submitted that column F which deals with "Unaccounted cash component generated per seat per course" and the column G which deals with "Total unaccounted cash generated as per seized material" are blank so far as AY 2010-11 is concerned. It means that the AO has acknowledged that there is no incriminating material to prove that the appellant has received unaccounted fee in cash during the financial year 2009-10. 322. Without prejudice to the above, it is not known as to how the AO has adopted the no. of seats in respect of which capitation fee is received at 42. The quota of total seats for assessment year 2010-11 is 55, out of which 80% seats are reserved under merit quota. The management quota is only 20% which works out to 11. One fails to understand as to how one can estimate that cash was collected fr....
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.... all and in the absence of incriminating material, it is not sustainable and hence, is liable to be quashed. 327. Though the AO has considered various materials, at various places in the assessment order, when it came to computation of unaccounted cash for AY 201011, he has sought to make an estimation purely based on data for some other year or years. This means that he has implicitly acknowledged that no incriminating material is found for AY 2010-11 in respect of both UG-MBBS course as well as PG course. The analysis of the documents and the conclusions arrived at based on such analysis made in the assessment order is not relevant for AY 2010-11 at all. Assessment under section 143(3) of the Act was completed in the case of AY 201011 on 12.03.2013. Hence, the assessment for AY 10-11 is unabated. No addition can be made in the absence of incriminating material. Therefore, the entire assessment under section 153A for AY 2010-11 is liable to be quashed in the absence of incriminating material found and seized in respect of the said assessment year. 328. Without prejudice to the above, the appellant has analysed the seized material and arrived at the alleged unaccounted cash gen....
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....0-11 only. The AO has disallowed donation of Rs. 10,00,000 under section 37 of the Act. At page 192 he held that "The donations if any made by the assessee as not being for the purpose of business are disallowed u/s 37." He has not demonstrated as to how the donation made has no nexus to activities of the appellant. It was submitted that the appellant donated Rs. 10,00,000 to Vijayalakshmi (R L Jalappa Education Foundation) through cheque. 332. Without prejudice to the main contention that the appellant is not engaged in any commercial activities and that the appellant is entitled to exemption under section 11, it is submitted that the donation of Rs. 10,00,000 is allowable as deduction under section 37 of the Act. Section 37 of the Act as it stood during the relevant period is as under: "37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explana....
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.... v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC) held that "The expression "for the purpose of the business" is wider in scope than the expression "for the purpose of earning profits". Its range is wide : it may take in not only the day to day running of a business but also the rationalization of its administration and modernization of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title ; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. 336. Alternatively, it is submitted that the appellant is entitled to deduction u/s. 80G in respect of the donations given to the above enti....