TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 357
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....al college, Dental college, physiotheraphy, Biotechnology and Nursing colleges at Nerul, Navi Mumbai. Shri Vijay D Patil and Smt. Shivani Patil are the main trustees. Shri Vijay D Patil is the President/Chancellor. Smt. Shivani Patil is the spouse of Shri Vijay D Patil. 3. The revenue carried out search and seizure operations in the hands of the assessee on 27-07-2016 u/s. 132 of the Act. It was concluded on 01-08- 2016. Consequent thereto, the assessments of AY 2013-14 to 2016-17 were completed u/s. 153A r.w.s 143(3) of the Act. The assessment of AY 2017-18, being the year of search was completed u/s. 143(3) of the Act. The case of the revenue is that the assessee has collected Capitation fees though various employees for giving admission to students in various courses conducted by it. Such collection of capitation fees has not been accounted in the books and further, it was in violation of the clauses of the Trust deed and also Maharashtra Educational Institutions (Prohibition of Capitation fee) Act. Accordingly, the AO held that the assessee cannot be considered to be carrying on any charitable activity and accordingly denied exemption u/s. 11 of the Act in all the years under ....
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....ons in some of the years. 5. We notice that all the issues revolve around the question as to whether the assessee has collected Capitation fees or not?. All the additions made by the AO were consequent to his view that the assessee has collected capitation fees. While the assessee denies collection of any capitation fee, the case of the AO is that the various evidences coupled with the Statements recorded from key employees prove that the assessee has collected capitation fees from students for giving admissions to them. Hence, we are of the view that we should first adjudicate above question. In our view, the decision rendered to the above said question will determine the sustainability of most of other additions made by the AO. 6. It is pertinent to note that the search officials did not unearth any material from the assessee which revealed collection of capitation fees. All the materials were seized from the residences of employees only. We notice that the assessing officer has relied upon the statements given by employees of the assessee and also upon documents evidencing collection of capitation fees seized from them. The names of those employees are given below:- (a) Shri....
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.... surety for future payment and same is returned/destroyed once cash is received finally. Further there are certain brokers who meet the management directly. After approval from Mr Vijay Patil (President, D Y Patil University, Nerul) and Mrs Shivani Patil names are finalized and list is sent to University Registrar for enrollment. My role in whole process is of taking basic details of students interested in paying capitation fees and getting the same approved from Mr Vijay Patil (President, D Y Patil University, Nerul) and Mrs Shivani Patil and sequent collection of cash. Further I spent/disburse the cash as per direction of Sh Vijay Patil. (President, D Y Patil University, Nerul)" (d) He admitted that the brown diary titled "Royal Diary - JAYPEE" belongs to him and entries therein were made by him. He admitted that the entries represented cash collected by him and expenditure met by him as per the directions of Shri Vijay Patil. (e) The amounts were written in codes/symbols and Shri Pratap Patil deciphered the same. He explained that all the receipts and payments were entered as per the instructions received from Shri Vijay Patil. (f) The data found in the Pen drive was expla....
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....eted/modified by Shri Tukaram Patil. Hence, he has given details of capitation fees out of his memory. Accordingly, the AO has mainly relied upon the answers given by Shri Tukaram Patil to various questions posed to him in the statement taken u/s. 132(4) of the Act. The gist of observations made by the AO is summarised below:- (a) Since the data in those pen drives were deleted by Shri Tukaram Patil, he has given the details of collection of capitation fee out of his memory. (b) He has admitted that capitation fees are being collected and also identified persons who are handling cash with regard to each of the institutions. (c) Out of his memory, he could furnish the names of 18 students, the course in which they were admitted and also the exact amount of capitation fee collected from each of the students. He also stated that the capitation fees were refunded to five students. (d) He also furnished details of payments made by him, which was noted in the modified excel sheet "cheque print.xls". While giving answer to Q. No.38, he could summarise the details of aggregate receipts amounting to Rs. 15.15 crores and total payments aggregating to Rs. 15.15 crores made out of thos....
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....fees. The AO made enquiries with the parent (named Shri Shahnawaz Kheraj) u/s. 131 of the Act and he admitted that he has given Rs. 50.00 lakhs to the representatives of assessee trust in the Nerul office for admitting his daughter into MBBS. He got the refund, since his daughter changed her mind. (e) Shri Unmesh Khanvilkar also explained the process of taking capitation fee or donation in the form of cash over and regular fees as under:- "Sir, the students/parents approach the admission cell department which in front the Presidents' Office in Dr D Y Patil University Building. The Students/parents first meet the receptionist who directs the parents/ students to people sitting in the administration cell department. There are four people who sit in the administration cell department namely Tukaram Patil, D D Kolte, Pratap Patil and myself. We are told in advance about the rates (payment per seat) of seat in different courses by Mr Vijay Patil and Mrs Shivani Patil. These rates are told to us verbally on weekly basis. Once the student agrees to pay the donation/capitation in cash we ask for Xerox of the Basic Documents like college leaving certificate and mark-sheet. The names of ....
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....) He also expressed his ignorance as to how Shri Vijay Patil maintains the data of total collection of capitation fee in cash. (i) Shri Unmesh Khanvilkar had stated that a sum of Rs. 1.25 crores was collected from a student named Shri Choudhary for admitting him in PG-pediatrics. The AO examined Shri Mohsin Abbar Chaudhary, father of the student. He admitted in his statement that he has paid a sum of Rs. 1.25 crores by way of cheque to M/s D Y Patil Sports Academy. He also admitted that he was guided by the persons in the University to pay donation of Rs. 1.25 crores to M/s D Y Patil Sports Academy for securing M D Pediatrics seat for his daughter. The AO has noted that the assessee was given opportunity of cross examination, but the assessee did not avail the same. (j) Shri Unmesh Khanvilkar also confirmed the data available in his laptops regarding collection of capitation fee. As per the same, the total capitation fees collected year wise was noted by the AO as under and the same was assessed in the respective years:- Assessment year Amount in lakhs 2015-16 2858.00 2016-17 5243.50 2017-18 4476.00 (k) The AO also assessed aggregate amount of cash of Rs. 19,40,26,500....
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.... Further I spent/disburse the cash as per direction of Sh Vijay Patil." (We have extracted earlier the answer given by Shri Pratap Patil and Shri Unmesh Khanvilkar to an identical question posed to both of them. It can be noticed that this reply given by Shri D D Kolte verbatim copy of the replies given by Shri Pratp Patil and Shri Unmesh Khanvilkar with same grammatical mistakes and different types of salutation to the name of trustees.) (c) The revenue also seized some loose papers from Shri Datta Patil, who was attendant of Shri D D Kolte. When questioned about the same, Shri DD Kolte admitted that they were given to Datta Patil on 26-07-2017, being the day prior to the date of search. He also explained the contents of the documents, which were in the nature of list of students who have applied for admission and the students, who were given admission in various courses. The documents also contained details of cash given to Shri Tukaram Patil, details of students who paid cash. Some pages of the documents contained the details of names of students and cash paid by them for admission into Ayurveda course, Architecture course. (d) The revenue also found cash of Rs. 96.30 lakh....
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....from Shri Sunil Gaikwad and it contained data relating to collection of capitation fees. (e) The total capitation fees received by Shri Sunil Gaikwad was determined as Rs. 4.55 crores in FY 2016-17 (Cash of Rs. 1.90 crores and Rs. 59.75 lakhs seized plus cash of Rs. 2.05 crores handed over to Shri Tukaram Patil). Since all these collections were related to another trust, viz., M/s Ramrao Adik Education Society, the AO did not assess the above said amount in the hands of the assessee. (f) The AO has stated that Shri Sunil Gaikwad has also collected Rs. 161.50 lakhs in aggregate from three students in 2014 for admission into BDS, MD-Medicine and MDS -Pedo). All these three courses are conducted by the assessee herein. Hence, the AO assessed the same in the hands of the assessee in AY 2015-16. 12. It is pertinent to note that all these five persons have retracted their statements given by them on 16-08-2016, i.e., within15 days from the date of conclusion of search. The AO, however, held that these retractions are afterthought. He has given the reasons for ignoring the retractions at pages 94 - 95 of the assessment order relating to AY 2017-18. The reasons given by the AO are sum....
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....rein the Hon'ble Apex Court has held that the right person and the right person alone has to be taxed by the I T Authorities. Accordingly, the AO has expressed the view that these employees cannot be considered as right persons to be taxed, when one looks at their earning capacity, statements, incriminating evidences and other surrounding circumstances. Accordingly, the AO held that the capitation fees collected by these persons are taxable as income of the assessee trust only. 14. The AO has also referred to the statement given by the trustee Smt Shivani Patil, more particularly, following answer given by her:- Q 52 Please provide the fees for management seats reserved in each of the college specified above. Ans:- I don't know about the management seats for engineering college. This year the admission for Dental College have not been done. As per my knowledge, last year the seats were sold for typically 7 - 8 lakhs per seat. For MBBS the price is typically 30 - 40 lakh. However for post graduate seats the prices is higher than MBBS. However, I don't know the exact figure. The management rates for Ayurveda and Physiotheraphy is typically 4 - 5 lakhs per seat as these are not s....
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....arch conducted in the hands of certain other persons, viz., Smt Taruna Maheswari and Shri Pravin Patil, also revealed that they have received money allegedly from Shri Vijay D Patil or from the employees on his instructions. The AO took the view that those money transactions have also been done out of capitation fee collections only. Accordingly, he assessed those payments on protective basis. Apart from the above, the AO held that some of the expenses accounted for by the assessee represent bogus purchases. Though the assessee contended that it is genuine purchase, yet the AO did not accept the same and accordingly disallowed the purchases amount. The details of those transactions are discussed below:- (a) The AO has referred to the search conducted in the hands of Smt Taruna Maheswari, the CFO of another trust named Ajeenkya D Y Patil University, Pune. One diary was recovered from her (which was kept with her sister named Smt Poornima Chechani), where contained the details of payments received from Shri Vijay D Patil or his employees Tukaram Patil or Sadhashiv Patil. It was explained by her that Shri Vijay D Patil has made investments in the projects floated by Shri Ajeenkya Pa....
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....017-18. (d) From the documents seized from Shri Tukaram Patil, expenses and payments aggregating to Rs. 1915.77 lakhs was noticed. The AO assessed the same on protective basis in AY 2017-18 holding the same as application of amount collected as capitation fee. (e) The AO has also examined the Answer/OMR sheets relating to Entrance Examination and noticed that there were differences in signature between attendance sheet and OMR sheets in respect of certain students. In some place, the signature of student was found missing. The AO compared the name of the student whose signature was not available with the list of students who have alleged to have paid capitation fee and accordingly drew inference that these manipulations have happened in respect of those students only. Accordingly, he examined some of those students. However, all of them replied that they do not remember about the signature part. It is pertinent to note that the AO did not ask specific questions about payment of capitation fee, if any, by the students. The reasoning given by the AO in this regard is that the students are under the control of college management and hence they will not tell the truth. Accordingly,....
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....apitation fee. The assessing officer has listed out the cash found at various places aggregating to Rs. 3072.19 lakhs at page 145 of the assessment order relating to AY 2017-18. Shri Vijay D Patil expressed his inability to explain the same. According to Ld A.R, the said list contained items, which are not related to the persons connected with the assessee-trust. With regard to the capitation fee, Shri Vijay Patil stated that the employees might have collected it on their own without his knowledge or University or without his authority. He also categorically stated that he has not given any instruction to anyone on money matters not recorded in the books. 18. We heard the parties and perused the record. It is the case of the assessee that none of these materials was seized from it. Further, they do not belong to it also. All these materials were seized from the residences of the respective employees and the assessee was not aware of those transactions. It was also contended that the revenue did not seize any material from the assessee that will corroborate the documents seized from the residence of employees. Accordingly, it was contended that the assessee cannot be burdened with ....
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.... Car parked in DY Patil campus 5. Shri Bhagirath Patil 65,00,000 In his Parel residence TOTAL 24,26,28,000 Apart from the above, cash aggregating to Rs. 2,38,87,500/- and jewellery worth Rs. 11,62,50,820/- was seized from the lockers/residence of Smt. Shivani Patil. Even though the AO has discussed about these items, as noticed earlier, the AO did not make any addition in the hands of assessee in respect of the cash/jewellery seized from Smt Shivani Patil. Further, a sum of Rs. 65.00 lakhs was seized from Shri Bhagirath Patel, who has claimed initially that the said sum was received from Smt Shivani Patil, but retracted from it later. 20. We noticed that the AO had relied upon on the evidences seized from various persons. He has also relied upon the statements given by them. Based on the above, the AO has drawn adverse inferences against the assessee and has also come to the conclusion that the assessee has received capitation fees for admitting students. The assessee, however, has contended that the inferences drawn by the AO are not correct. The Ld A.R advanced his arguments to rebut the observations made/presumption drawn by the AO. The contentions of the....
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....ges 279 & 280 of paper book relating to AY 2015-16. This information further supports the case of the assessee trust that it is not collecting capitation fees. Some employees may be doing it without the knowledge of the assessee trust. (f) With regard to the entries made in the Diary, Shri Pratap Patil could explain the contents of the same, since he only has maintained it. In the diary, he has also noted the name of brokers and doctors. However, none of the brokers/doctors has been examined to corroborate the entries and to link the same with the assessee trust. (g) If the contents of pen drive & diary are presumed for a moment to be in the knowledge of the assessee trust, then the trust will not take the risk of allowing Shri Pratap Patil to keep the secret data with him, as there is a possibility of manipulating the entries to his advantage and to the detriment of the assessee trust. (h) Though Shri Pratap Patil has originally stated that the capitation fees are collected on behalf of the assessee trust, later he has filed retraction affidavit on 16-08-2016 (within 15 days from the date of conclusion of search). The retraction has also been confirmed by him in the statemen....
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....n drives. (c) Since the data has been deleted by him, the information about details of students and amount of capitation fees collected from them have been given by him 'out of his memory'. Hence it is a case of oral evidence, which is not supported by any credible material. Hence the information so furnished by him could not have been relied upon by the AO. In any case, the AO did not conduct any enquiry with any of those students in order to find out the veracity of the said information. (d) He also claims to have remembered name of five students to whom amounts were refunded. Again it is a case of oral evidence only and the same is not supported by any other material. No enquiry was conducted by the AO with those five students to find out its veracity. (e) Statement of oath dated 31-07-2016 has been signed by witnesses on 30-07-2016. Hence the statement loses its credibility. (f) Though Shri Tukaram Patil has originally stated that the capitation fees are collected on behalf of the assessee trust, later he filed retraction affidavit on 16-08-2016 (within 15 days from the date of conclusion of search). The retraction has been confirmed by him in the statement taken u/s. 1....
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....o be in the knowledge of the assessee trust, then the trust will not take the risk of allowing him to keep the records, as there is a possibility of manipulating the entries to his advantage and to the detriment of the assessee trust. (f) No document or material corroborating the entries found in the laptop was found from the premises of the assessee trust. (g) The AO has presumed that the donation of Rs. 1.25 crores given by a parent named Shri Mohan Abbas Chaudhary to D Y Patil Sports Academy is the capitation fee collected to give seat in the Medical college. However, it is only a presumption of the AO. The seat was given on merit. The donation was voluntary and it has been duly accounted for. (h) Though he has originally stated that the capitation fees are collected on behalf of the assessee trust, later he has filed retraction affidavit on 16-08-2016 (within 15 days from the date of conclusion of search). The retraction has been confirmed by him in the statement taken u/s. 131 of the Act during the course of assessment proceedings. (i) While the AO has accepted the statement that the capitation fee has been collected on behalf of the assessee trust, the AO did not acce....
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....e) While the AO has accepted the statement that the capitation fee has been collected on behalf of the assessee trust, the AO did not accept his retraction. It is a case of admission and retraction of the employee of the assessee trust. The assessee trust is not concerned as to what he said in admission/retraction. Hence assessee-trust cannot be subjected to addition on the basis of the statement of the employees. (f) Cash of Rs. 96,30,000/- was seized from his car. He has owned up the same and declared the same as his income under Income Declaration Scheme, 2016. (E) SUNIL GAIKWAD:- (a) The data is kept in his personal laptop. If they are within the knowledge of the assessee trust, then the trust will not take the risk of allowing him to keep the records, as there is a possibility of manipulating the entries to his advantage and to the detriment of the assessee trust. (b) Total cash of Rs. 2.49 crores was found from his locker & residence of his attendant. If it belongs to trust, why should they keep the cash with him? (c) Though he has originally stated that the capitation fees are collected on behalf of the assessee trust, later he filed retraction affidavit on 16-08-2....
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....y them is not binding upon the assessee. (i) Dr Bhupendra Badhe has stated to have given capitation fee to a person named Shri Sanjay Pawar, who is not an employee of trust. He has not stated that he has paid cash to the trust. (ii) It can be noticed that the survey officials did not ask Dr Pramod Gandhi any question on payment of capitation fees to the trust. (iii) It can be noticed that the survey officials did not ask Dr Santhosh Pillai any question on payment of capitation fees to the trust. (e) Statements taken from various Parents:- (i) Most of the persons have paid donation through banking channels. Those donations cannot be considered to be Capitation fees. All the donations have been recorded in the books. (ii) Those parents, who had paid cash, have admitted that they have received cash from the trust. (iii) None of the parents has admitted that they have paid capitation fee to the trust. (iv) Shri Vijay Patil has also admitted that they used receive fees in cash also. (f) Statements taken from 3 more parents:- All the three parents have stated that they have given donations only and admission was obtained on merits. (g) Statements taken from driver (....
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....rroborating the same with any other material available with the assessee, i.e., it is the case of the assessee that these materials, per se, do not have any evidentiary value for arriving at the conclusion that the assessee-trust was collecting capitation fees, unless any other independent material was brought in to corroborate such a conclusion. In support of this contention also, the assessee placed reliance on certain case laws. 23. Before us, the Ld A.R has filed written submissions summarizing his contentions on the above said two points discussed in the earlier paragraphs. The relevant portion of the written submissions is extracted below, for the sake of convenience:- "14.1. The impugned additions are based on seizure of (i) laptops (ii) loose papers (iii) pen drives and (iv) diary. Further, there is no dispute that all these evidences are found in the possession of others and not in the possession of the assessee. They are either print-out taken from laptops or loose papers. The name of the assessee-trust is not mentioned on any document found/print-out taken from the pen-drives/laptops, loose papers. Hence they have to be treated as dumb documents/documents having no ev....
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.... such, per sub-section (4A) it is presumed that - (i) such books of account, other documents and cash belong to such person (ii) the contents of such books of account and other documents are true, vis-àvis the persons in whose possession or control they are found (iii) the appellants, not being person from whose possession the said books of account and other documents are bound, the presumption of section 132(4A) in respect of these books of account, and other documents, etc shall not apply and consequently, the appellants are not required to rebut or explain the documents seized from other persons, being the employees. Reliance is placed on following case laws: - * Startex (India) (P.) Ltd vs DCIT - 84 ITD 320 (Mum) "The presumption under section 132(4A) is in respect of the person in whose possession the books or documents are found. The use of the words 'to such person' in the said section means the person in whose possession the books of account or documents are found. Clause (ii) of section 132(4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person in whose possession the books o....
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....assessee but he has failed to note that admission of others cannot be read in evidence against third party unless there is corroborative evidence on record. The maker of the admission can bind himself but how he can bind others from his statement without there being any corroborative evidence on record is not known in the law. As noted above, even Shri Ajay Arora in his statement, denied any on money paid by the assessee. No evidence was found in the case of the assessee that assessee has paid any on money before the date of the search or that the assessee was required to pay any on money after the date of the search. The AO merely considering the business relation between assessee and Arora Brothers presumed that since they have admitted payment of on money therefore, assessee might have also paid the on money. If Arora Brothers have not recorded any entry in their books of account as noted by the AO, how assessee could be blamed. The above conclusion of the AO is not supported by any material or evidence. The conclusion of the AO is purely based upon suspicion and surmises. It is settled law that suspicion howsoever strong may be could not take place of legal proof." 14.3 The A....
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....ions of arithmetic. A book which contains successive entries of items may be a good memorandum book; but until those entries are totalled or balanced, or both, as the case may be, there is no reckoning and no account. In the making of totals and striking of balances from time to time lies the chief safeguard under which books of account have been distinguished from other private records as capable of containing substantive evidence on which reliance may be placed." We have no hesitation in adopting the reasoning adumbrated in the above observations. The underlined portion of the above passage supports the contention of Mr. Altaf Ahmed and rebuts that of Mr. Sibal that Mr 71/91 is only a memorandum for the entries made therein are totalled and balanced. We are, therefore, of the opinion that MR71/91 is a 'book of account' as it records monetary transactions duly reckoned. ........... In response Mr. Sibal submitted that the evidence that has been collected during investigation only shows that the entries were made by J. K. Jain and that the Jain brothers had put certain signatures against some of those entries it there is no evidence whatsoever to prove that monies wer....
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....f the Act. This Court further observed that where the entries were not admitted it was the duty of the Bank, if it relied on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. ........... The same question came up for consideration before different High Court on a number of occasions but to eschew prolixity we would confine our attention to some of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 Madras 132] one of the learned judges constituting the Bench had this to say: "S.34, Evidence Act, lays down that the entries in books of account, regularly kept in the course of business are relevant, but such a statement will not alone be sufficient to charge any person with liability. That merely means that the plaintiff cannot obtain a decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. he will have to show further by some independent evidence that the entries re....
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....(supra ) I.D. Dua,. (as he then was) speaking for the Court observed that such entries though relevant were only corroborative evidence and it is to be shown further by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance with those entries. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness; fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in evidence under Section 34 are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, deleve into or decide upon the contention raised by Mr. Altaf Ahmed in this regard. Suf....
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.... from the employees of the Trust are part of capitation fees collected by the assessee. But the fact remains that the revenue did not find any document/material/evidence with the assessee, which will corroborate the allegation of collection of capitation fees from the students. 25. We also notice that the presumption given in sec. 132(4A) and section 292CC of the Act has been explained by the Tribunal in the case of Startex (India)(P) Ltd (supra), wherein it was held that the presumption shall apply to the person from whom the documents were seized. In Sheth Akshay Pushpavadan vs. DCIT (supra), it was held that the addition cannot be made on the basis of material seized from/statement given by a third party, unless those materials were corroborated with any other evidence and opportunity of cross examination was given. The Law on presumption given in sec. 132(4A) has been explained by Hon'ble Delhi High Court in the case of CIT vs. Radico Khaitan (2017)(83 taxmann.com 375)(Delhi) as under:- "24. Section 132 no doubt mandates a presumption in respect of search and seizure operations; yet textually the presumption relates to material documents and books of account seized of from t....
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....inters for further investigation were the discovery of material and evidence, which the revenue claim pointed to the assessee's failure to disclose full facts and income, should have resulted in further investigation and unearthing of material in the form of seized documents from the assessee's premises. Unfortunately the linkage between the material seized from the assessee's premises and those from UPDA's premises as well as the statement of Sh. Miglani was not established through any objective material. It is now settled law that block assessments are concerned with fresh material and fresh documents, which emerge in the course of search and seizure proceedings; the revenue has no authority to delve into material that was already before it and the regular assessments were made having regard to the deposition, the inability of the revenue to establish as it were, that the assessee's expenditure claim was bogus, or it had underreported income and that it resorted to over invoicing and diversion of funds into the funds allegedly maintained by the UPDA, was not established. The findings of the Commission therefore cannot be faulted as contrary to law. The Hon'bl....
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....come. Admittedly, no other evidence is recovered during the course of search to prove that in fact any payment of Rs. 30 crores outside the books of account has been made by the assessee to Sri S.K. Jatia. The AO has made addition in the case of the assessee in respect of payment of Rs. 30 crores made to Sri S.K. Jatia. Even in the seized diary the narration is "Adharshila Jatia [Anil Bhalla]". Neither Sri S.K. Jatia nor Anil Bhalla were examined by the AO during the course of assessment proceedings. Therefore, we fail to understand as to how the addition could be sustained in the hands of the assessee. It appears from the above circumstances that the department has made subsequent enquiries against the assessee in order to connect the assessee with the diary in question but such things are not permitted as is held by Bombay Bench of I.T.A.T. in the case of Sundar Agencies (supra). No addition could be made in the block assessment on the basis of assumption and presumptions. Merely some material is recovered during the search, no addition could be made in the hands of the assessee on the basis of some subsequent enquiries and that too purely on assumption and presumptions. The AO o....
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.... basis of an addition entirely hinging upon the interpretation of certain figures in a diary would be flawed. For these reasons, this Court is of the opinion that since the inference drawn with respect to findings are based on essentially factual materials which were analyzed by the CIT and the ITAT, there is no reason to interfere with those findings. This question is accordingly answered against the Revenue and in favour of the assessee." In this case also, it has been reiterated that corroboration of material seized from other persons with any other independent material is necessary for making addition on the basis of materials seized from other persons. 28. In the instant case, all the documents/materials have been seized from the employees only. It has been categorically stated by the trustees of the assessee trust that have not authorized anyone to collect capitation fees. The trustee has also stated that the employees might have collected it without the authority of the trust. Under the principle of vicarious liability, the employer is normally liable for any act performed by his employees during the course of employment. However, when an employee does anything that is nei....
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....s not accounted for. For the said reasons, the Assessing Officer treated the sum of Rs. 30,00,000/- as unaccounted income of the assessee. 11.2 Before the CIT(A), assessee reiterated that the paper was found and seized from Mr. Bharat G. Shah and not from the assessee. Further, there was no material to say that such seized material related to the assessee for any of his activities. The assessee also pointed out that such loose papers were printed account papers and on top of it is written "Trial Data" and that assessee had no knowledge as to who has written or printed the same. 11.3 The CIT(A) has considered the submissions put forth by the assessee and found that there was no material brought on record to establish that the seized papers belonged to the assessee. The CIT(A) also found that the seized documents do not indicate who is the recipient of the amounts mentioned and in what connection the money was paid. According to the CIT(A), merely because there is an account appearing in the account books of the assessee in the name of Mr. Suresh Agarwal, it would not lead to an assumption that the seized document reflect transactions between assessee and Mr. Suresh Agarwal. In f....
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....ve the said statement of the Chairman. Hence the statement of Shri Vijay D Patil cannot be taken support of by the AO. (b) The AO has relied upon the statement given by another trustee Smt Shivani Patil, who is the spouse of Shri Vijay Patil, particularly on the following answer given by Smt Shivani Patil to arrive at the conclusion that she has admitted that the trust was collecting capitation fee. Q 52 Please provide the fees for management seats reserved in each of the college specified above. Ans:- I don't know about the management seats for engineering college. This year the admission for Dental College have not been done. As per my knowledge, last year the seats were sold for typically 7 - 8 lakhs per seat. For MBBS the price is typically 30- 40 lakh. However for post graduate seats the prices is higher than MBBS. However, I don't know the exact figure. The management rates for Ayurveda and Physiotheraphy is typically 4-5 lakhs per seat as these are not sought after courses." However, it is the contention of the assessee that she has not mentioned about Capitation fee at all. She has only stated that the fees of management seats are higher than the regular seats. A pe....
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.... since details of receipts by way of cheques were found to be true. We are unable to agree with the said opinion expressed by the AO. We notice that the AO is referring to two different files found in the pen drive, i.e., one file contained details of receipts by way of cheques, another file contained details of receipts by way of cash and yet another file contained payment details. There should not be any dispute that the pen drive is in the nature of 'Storage vault' containing several files. Each file may contain different details and hence it may not be proper to hold that the contents of one file, if found to be correct then the content of other files are also to be considered as true. The opinion of the AO may be accepted, if the same file contains details of partly accounted and partly unaccounted transactions, which is not the case. Further, the assessee herein is contending that the collection of capitation fee is an un-authorised act of the employees. The assessee is not accepting the transactions noted down in the pen drive. Hence, we are of the view that the AO was not right in extending the interpretation given to one file to another file. The Ld A.R contended that Shri....
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....s detail also does not support the case of the AO. (e) We also notice that the revenue has questioned the trustees, viz., Shri Vijay Patil and Smt Shivani Patil. We noticed earlier that both of them have denied collection of capitation fees. We notice that the revenue did not question other trustees with regard to the allegation of collection of capitation fees. We also notice that the officials at helm of affairs, viz., Vice Chancellor, Controller of Examinations were also not questioned. (f) The AO had placed reliance on the statements given by the employees, trustee and certain employees of another trust. However, all of them have retracted the statements given by them. We notice that most of them have retracted within 15 days from the date of conclusion of search. The AO however rejected the retraction by holding that the same is an afterthought and without any reasoning. However, we notice that they have stated that they were under mental pressure when the statement u/s. 132(4) of the Act was taken from them and could not give proper reply. The Ld A.R also submitted that, since the employees have collected capitation fees without the authority of the assessee trust, natura....
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....thiness of the transactions recorded therein. We notice that the AO has only presumed that the payments have been given by Shri Vijay Patil, as noted in the above said documents, out of the capitation fees only. However, no material was available to support the above said presumption of the AO. If at all any such payment has been made by Shri Vijay D Patil, it may be his personal transaction and hence it is nothing to do with the assessee trust. Both the above said parties have initially stated that they had received money from Tukaram Patil and others, but later retracted it. In any case, no contra entry was available in the record maintained by Shri Tukaram Patil. Further, the revenue did not examine Tukaram Patil with regard to the entries of receipt of cash noted by Taruna Maheswari and Pravin Patil. In any case, those transactions are between two parties and there is no other material to show that the said transactions, if at all true, were related to the assessee. The foregoing discussions would show that the above said statements/materials do not vindicate or link the information/evidences found from the employees. The revenue also did not find/seize any credible material f....
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....doing so, the Assessing Officer estimated the collection of contributions on the basis of the number of seats available under management quota multiplied by the amount of contribution attributable to individual seats. Any determination for purpose of tax cannot be based on hypothetical facts or conjectures or surmises. The inference drawn by the Original Authority is based on probability. 7.6 With regard to the seizure of cash of over Rs. 44 Lakhs from the residence of the Chairman of the Assessee Trust, it is not in dispute that the said sum has been assessed in the hands of the Chairman for the assessment year 2008-2009 and the same was received from the petrol pump business, the turnover of which is more than Rs. 30 Crores. Moreover, the Assessing Officer has accepted the disclosure of the seized cash as the income of the individual and, therefore, in our considered opinion, it cannot be said that assessee trust had accepted contributions by way of capitation fee. The said issue cannot be used both ways. The assessment of the undisclosed income at the hand of the individual ends the issue there. It has no relevance to the affairs of the Trust and there is no material to hold s....
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....s 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 carrying on activities of the trust. The distinction is obvious that if the department wanted to make out a case of violation of Section 13 of the Act by the trust, it cannot be based on the perception of the Assessing Officer that donations to the trust are not ....
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....ad brought corroborative evidences in the form of refund of capitation fees, recommendation seeking waiver/reduction in capitation fee/donation. Further, enquiries were made with three persons and they have confirmed payment of capitation fees. Most importantly, the incriminating materials in the form of loose sheets were found at the premises of the assessee therein. Under these set of facts, it was held that the loose sheets would have evidentiary value. On the contrary, in the instant case, no material was found/seized from the premises of the assessee. The materials were found at the residences of the employees. The assessee has categorically denied collection of capitation fees. The AO could not bring any material on record to link those materials with the assessee or to prove that the assessee only was indulging in collection of capitation fees. Accordingly, we are of the view that the decision rendered by Pune bench of Tribunal in the case of Sinhagad Technical Education Society (supra) is not applicable to the facts of the present case. (b) The Ld D.R also relied upon the decision rendered by Hon'ble Delhi High Court in the case of CIT vs. Jansampark Advertising & Marketi....
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....75 2017-18 54.950 The order passed by Ld CIT(A) on this issue would stand set aside and the AO is directed to delete these addition in all the years under consideration. 36. We have noticed that the AO has rejected the books of accounts on the reasoning that the assessee has not accounted for capitation fees. Since we have held that there is no evidence to show that the assessee has collected capitation fees, the very foundation for rejecting the book results would fail. Accordingly, we hold that there was no justifiable reason to reject the books of accounts. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in all the years under consideration and hold that the books of accounts of the assessee trust should be accepted in all the years under consideration. 37. We have noticed that the assessing officer has rejected the claim for exemption u/s. 11 of the Act on the reasoning that the assessee cannot be considered to be a charitable trust, when it collects capitation fees. In the earlier paragraphs, we have held that there is no evidence to show that the assessee has collected capitation fees. Hence the reasoning given by the AO to reject the claim for exem....
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....Sangham vs. DDIT (Exemption) reported in (2023)(146 taxmann.com 367)(Kar), wherein identical points were examined. The relevant observations made by Hon'ble Karnataka High Court are extracted below:- "9. We have carefully considered the rival contentions and perused the records. 10. Assessee claims to be a charitable society and obtained certificate under section 12(A) of the Act. 11. The assessee has received donations and shown it in the Income and Expenditure account. By the impugned order, the ITAT has denied the benefit under section 11 of the Act. 12. Section 11(1)(d) of the Act relied upon by Shri. Sanmathi, makes it clear that the voluntary donation made with a specific direction shall form a part of the corpus. The person who makes a contribution can make such contribution either with a specific direction or without any direction. Section 11(1)(d) of the Act refers to only such contribution which are made for a specific purpose. For example, the donor may desire that his donation be used for construction of a building. If no direction is given by the donor, the money received by the assessee shall be taxable subject to such exemption which may be claimed under sect....
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.... 36. Even if the contributions are treated as not voluntary what could be the legal consequence of that finding? Whether the Revenue will treat such (31) involuntary contributions as capital and give exemption from taxation? No, it will not. The Revenue will still find such involuntary contribution as income liable for taxation. If so, what is the real distinction between voluntary contribution and involuntary contribution as far as the taxation of charities is concerned? In both cases, it will be brought for taxation if the assessee has not utilised the contributions for charitable purposes. 37. The expression "voluntary contributions" is used in the Act instead of "contributions" to highlight the principle of non-compulsion in matters of participating in charitable activities and to underline the gratuitous nature of donations and charitable activities. There is no compulsion in making contributions to charities. If the expression was "contributions" there could be a naunce of compulsion like contribution to provident fund and the like. 38. Therefore, we find that whether it is treated as voluntary or involuntary, the only course of action available before law is to see whet....
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.... of any other statutory provision. He also adverted to section 12(AA) (4) (b) of the Act and contended that the said provision has been substituted with effect from 1-9-2019, giving power to the Principal Commissioner or the Commissioner of Income-tax to cancel the registration of a trust or institution. Thus, it is clear that should there be any violation with regard to receipt of capitation fee, the Assessing Officer could not have denied the benefit under section 11 of the Act so long as the certificate is in force. Admittedly, assessee's certificate was in force. Though it was cancelled by the Revenue it has been restored by an order passed by this Court in ITA.No.421/2013. 17. In view of the above, these appeals merit consideration in favour of the assessee." Identical view has been expressed by Hon'ble Karnataka High Court in another case, viz., PCIT vs. Rashtreeya Shiksha Samithi Trust (2023)(152 taxmann.com 664)(Kar) as under:- "7. We have carefully considered rival contentions and perused records. 8. This court in Kammavari Sangham has held that so long as the exemption certificate is in force, the assessee is entitled for its benefit. In New Noble Educational S....
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....le Educational Society's case (supra) is concerned, the Apex Court has held that the registration under different statues is also a relevant consideration while deciding the application for approval under section 10(23C) of the Act. In the case on hand, we are not dealing with a situation where the IT Department was considering any application for granting exemption. On the other hand, the department had issued the exemption certificate and the AO on an incorrect assumption has treated the money collected by the assessee as capitation fee under the KEI (Prohibition of Capitation Fee) Act. Therefore, the said authority does not lend any support to the Revenue. This court has already taken a view in Kammavari Sangham's case (supra) and the same is applicable to the facts of this case. 11. In view of the above, this appeal by the Revenue must fail .." Accordingly, we hold that the assessee should be granted exemption u/s. 11 of the Act in all the years under consideration. We order accordingly. 41. In view of the foregoing discussions, we hold that the corpus donations received in the form of development fees and also other corpus donations are eligible for exemption u/s. ....
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....been brought into the statute with effect from AY 2015-16 only. Accordingly, we direct the AO to allow depreciation on the opening value of assets in AY 2013-14 and 2014-15. For other years, the disallowance of deprecation should be restricted only on those assets, whose value has been allowed as application of income in the earlier years. 45. The AO has rejected the claim of set off of deficit brought forward from earlier years. Since we have restored the exemption u/s. 11 of the Act to the assessee, the claim of the assessee is allowable as per the decision rendered by Hon'ble Bombay High Court in the cases of DIT (E) vs. Maharashtra Industrial Development Corporation (ITA No.2652 of 2011) and CIT vs. Institute of Banking (264 ITR 110)(Bom). Accordingly, we direct the AO to allow set off of deficit brought forward from earlier years. 46. In AY 2013-14, the assessee has sold assets having value of Rs. 20.00 lakhs. The AO assessed the sale value of Rs. 20.00 lakhs as income of the assessee. The reasoning given by the AO is that the value of assets was treated as application of income at the time of purchase and hence the sale value should be treated as income. It is the submissio....
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....and offered the same as their income under Income Disclosure Scheme, 2016. Since the AO had made addition on account of capitation fee receipts in the hands of the assessee in all the years under consideration and since the cash balance seized from the employees was treated as part of capitation fee, he did not make addition of cash balance separately. However, in order to safeguard the interests of revenue, the AO added the cash balance seized from Shri Pratap Patil (Rs.74,96,500/-) and from Shri Unmesh Khanvilkar (Rs.19,40,26,600/-) on protective basis. The Ld CIT(A) deleted the protective additions. However, he held that the same shall become substantive additions, if the additions on account of capitation fee are deleted by the higher appellate forum. Hence the assessee has raised an additional ground challenging the above said decision of Ld CIT(A) in Asst.Year 2017-18. 48.1 We heard the parties on this issue and perused the record. We have deleted the additions relating to capitation fee in the earlier paragraphs holding that there is no evidence to show that the assessee trust has collected capitation fee. Hence the additions relating to above said cash balances will have t....
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....on protective basis. Noticing the same, the Ld CIT(A) took the view that there is no requirement to take a different view in respect of Rs. 2.15 crores and Rs. 609.91 lakhs referred above. Accordingly, he held that both the above said amounts should also be considered as having been paid out of unaccounted capitation fees. Since the Ld CIT(A) has confirmed the additions relating to capitation fees, he took the view that payments made out of the same should not be assessed again. Accordingly, he deleted the addition of Rs. 2.15 crores and Rs. 609.91 lakhs made in AY 2014-15 and 2016-17 respectively. 49.4 We have heard the parties and perused the record. We have held that the information found in the pen drive/laptop of employees cannot be considered as credible evidences, unless they have been corroborated with any other evidence. Accordingly, no credence could be given to the abstract entries made in the pen drive/laptop. Accordingly, we are of the view that the AO could not have made additions on the basis of those information. Accordingly, we confirm the decision of Ld CIT(A) in deleting the additions in both the years for the reasons discussed above. 50. The revenue is aggriev....