TaxTMI 
TaxTMI 
2025 (6) TMI 53
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....missioner of Income Tax (Appeals) ('Ld. CIT(A)') in so far as it is against the Appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case. 2. The order of passed by the LAO and the Ld. CIT(A) is also bad in law on account and not in accordance with the provisions of the Act to the extent they are prejudicial to the Appellant. 3. The LAO's order and the order of the CIT(A), to the extent that the same is prejudicial to the Appellant, is bad in law in that the LAO and CIT(A) have erred in arriving at their respective conclusions in the assessment order based on 'dumb' diaries and 'dumb' seized material. 'Fee not received / fee refunded' of Rs. 7.65,54,000/- 4. The Ld. CIT(A) has erred in not considering that the amounts pertaining to 'fee not received / fee refunded' has in fact been received by the Appellant, for all but approx. Rs. 56 lakhs. Here, the LAO erred in not considering the supplementary submissions made before him on 28 March 2024. 5. Without prejudice to the above, the LAO erred in holding that the sum of Rs. 5,24,54,000/- (comprised in the sum....
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.... the Act. 13. The Appellant craves leave to add, alter, amend, substitute change and delete any of the grounds of appeal. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered." 3. The ld. AO in ITA Nos.1207/Bang/2024 has raised the following grounds of appeal:- "1. Based on the facts and circumstance of the case, whether the Ld. CIT(A) was correct in allowing the additions made by the A.O. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was correct in allowing the addition made on account of unexplained receipts of Rs. 94,75,000/- when the same was not disclosed in the return of income filed under section 139 of the Act. 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in restricting disallowance to the extent of Rs. 76,56,000/- made on account of unexplained expenditure of Rs. 1,21,75,000/-, 4. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in restricting disallowance to the extent of Rs. 5,24,54,000/- made on account of unexplained expenditure of Rs. 7,65,54,000/-. 5. Any other g....
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....3 and admissions of first academic year were in progress at the time of search & seizure. The seized evidences revealed that Rs. 7.60 crores were collected till the date of search, but only Rs. 4,02 crores were deposited in the bank account. 8. Based on the above information, the statement of Mr. H B Shivaram, author of the document was recorded on 22.7.2013 and accounting entries under the head "PP" was asked for. During the course of assessment proceedings, the assessee was also asked this question, but assessee claimed that these entries are accounted for, but did not provide the details of bank account. Therefore, after verification of the information, the ld. AO issued a show cause notice to explain why a sum of Rs. 7,74,75,000/- shall not be included las undisclosed income u/s. 69 of the Act. The assessee submitted that the above amount is spent for charity and donation and for the purposes of the objects of the trust and therefore same is not required to be added. Assessee also questioned how the AO has arrived at the above sum. The ld. AO rejected the contention of the assessee as no proper document and proof was furnished. With respect to the question that how the above s....
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....h Nath Swamy, whose statement was recoded u/s. 132(4) on 18.7.2023 also confirmed the same. Thus, the assessee was given a show cause notice to explain why a sum of Rs. 1,21,75,000/- should not be treated as undisclosed expenditure u/s. 69C of the Act. In response to the same, the assessee denied to have made any payment to any broker. The ld. AO rejected the contention of the assessee as the diaries have clear details. Accordingly, with respect to this item, total of Rs. 1,21,75,000/- was added to total income of assessee u/s. 69C of the Act as unexplained expenditure and benefit of section 11 was denied. 11. The fourth item was with respect to unexplained receipt. On the basis of various diaries found, the ld. AO reached at the conclusion that a sum of Rs. 94,75,000/- is unexplained receipt in the diaries where identity, credit worthiness and genuineness of voluntary contribution is not proved. Therefore show cause notice was issued. The assessee submitted that payments of the above amount is voluntary payment by the students. There is no compulsion for making such payment. The same is already recorded in the books of account of the assessee trust and therefore no addition shoul....
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.... of the three reliefs granted by the CIT(A) against the LAO's action as follows: i. CIT(A) granted relief for a sum of Rs. 45,19,000/- on the basis that this represents income and not expenditure as was demonstrated by the Appellant. ii. CIT(A) granted relief for a sum of Rs. 241,00,000/- on the basis that this represents double counting of the same items and hence double addition. 16. The Revenue has not challenged the reliefs granted by the CIT(A) in respect of the exemption claim by the Appellant as well as a sum of Rs. 94,75,000/- being voluntary donations. The CIT(A) granted this relief considering the ruling of the Hon. Bangalore ITAT in the Appellant's sister concern's case in ITA 1258 and 1259 / Bang / 2008 dated 31.12.2008 and affirmed by the Karnataka High Court in ITA 800 / 2012 dated 07.01.2019. 17. Thus, ld. CIT(A) has passed his order dated 31.03.2024. Appeals impugn the additions by the Ld. Assessing Officer ('LAO') and affirmed/ deleted by the Commissioner of Income-tax (Appeals)-15 ('CIT(A)'). These are as follows: i. PP receipts - Rs. 774,75,000; [ Ground no 10 and 11 of Assessee's Appeal] ii. Fee refunded / fee not received - Rs. 524,54,000/- (CIT(A....
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....ddress and phone numbers while some do not. v. These also contain certain amounts purportedly paid by them by cash or DD or cheque with dates. vi. In many of the pages, the amounts due from the students on various dates is mentioned. Here, in many instances, some of these dues have amounts written against them as received while many instances also do not have such amounts. vii. Thus, in many instances, no amounts have been stated to be received from these students, per the diary. viii. Some line items in these diary entries have been marked out as the concerned amounts being remitted to the bank. ix. The diaries do not state whether the student has agreed to comply with paying the amounts mentioned in the diaries. x. Wherever amounts have been received, in some instances, the students or their representatives have signed. In some instances, such signatures are not present. xi. It is unclear if the handwriting in the diaries are that of HBS or some other person or both since the handwritings differ from page to page. xii. No signature of HBS is available. There is no signature of any person from the Appellant-Trust is also there. xiii. Some of these pages have ment....
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....und of the money, the Assessee's submissions cannot be accepted. 12. On the unexplained expenditure, these relate to marketing and promotion charges recorded in the diaries which have been supposedly paid to brokers / agents. 13. Services of these persons have been used for soliciting students for admissions into the college. 14. The sources are not recorded in the books; this constitutes undisclosed income. 15. There is no explanation also as to why the same has been paid or there is no proof that to has been spent towards the objectives of the trust. 23. The ld CIT (A) has confirmed the addition subject to deletion of duplicate entries based on these diaries. 24. Countering the findings on these documents of the ld. AO and Ld CIT (A), the ld AR has stated that:- i. The Ld. AO states that HBS is a manager of the trust and also held various positions in the organization. The basis for this not known. HBS is not even a trustee of the Assessee- Trust. ii. As stated by HBS, he is an employee of the Sri Adichunchanagiri Institute of Technology, Chikkamagalur, and draws salary from there. Considering this, there is no basis to state that HBS is a manager of the trust or a ....
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....ourse of the assessment proceeding. xv. The LAO has obtained sworn statements from: a. Sri M E Mohan, Principal of BGS Global Institute of Medical Sciences, Kengeri, Bangalore. b. Sri Sri Prakashnatha Swamiji, BGS Global Institute of Medical Sciences, Kengeri, Bangalore. xvi. None of the above or even the other trustees of the Assessee- Trust were confronted this statement of HBS. xvii. The LAO has stated that the searched premises at Vijayanagar, Bangalore was used for admission into the medical college at Nagamangala, Mandya, which was the older college of the Group. It is relevant to note that the search did not result in examination of any persons at the medical college at Nagamangala, Mandya, for whom purportedly HBS was collecting fees. In fact, only the Vijayanagar and Kengeri premises of the Appellant, out of 500+ institutions of the Assessee-Trust were part of the search. xviii. Further, no circumstantial evidence in the form of any unaccounted cash, jewellery or investments outside the books of account was found in course of search in the case of assessee. xix. The Ld. AO has also not enquired from HBS whether the sums referred to therein were handed over to....
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....ii. Many of the pages in many of the diaries that have formed the basis for the addition have been authored by unknown persons not at all authorized by the Assessee. xxix. It can also be seen that in his sworn statement (Q 3 in page 766 of the PBC), HBS mentions that any difference in the shortcomings would be reported to tax. The Assessee is not aware as to the authority based on which HBS made these statements. xxx. For all of the above reasons, the diaries should be considered as notes for reference of and for HBS and cannot form basis of any addition. 25. It was also the submission of the ld AR that all these additions have been made on the basis of various diaries seized during the course of search which are dumb documents. So, no additions could have been made on basis of such documents. 26. The ld AR to support his contentions relied up on plethora of decisions :- a. Padmashree Dr. D.Y. Patil University v. DCIT (ITA 3264 to 3268 / Mum / 2022 dated 04.01.2024 b. Karnataka HC in DCIT v. Sunil Kumar Sharma (159 taxmann.com 179) c. Bangalore ITAT in Ananda Social & Education Trust v. ACIT (ITA 2542 to 2548 / Bang / 2017 dated 29.05.2020) d. Bangalore ITAT in Sri De....
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....has not been received. This implies that to the extent the student again approaches the diary-writer/ author on the payment of the balance fees, the amount is considered as paid and the date of receipt is recorded. If the student does not approach the diary-writer/ author on the payment of the balance fees but pays it directly to the Appellant, there will be no entry in the diary. However, the same will be reflected in the Appellant's books in the subsequent years. 30. It was further submitted that :- i. Since the owner of the diaries is HBS, it is he who has to explain the entries in the diaries and specifically whether the sums referred to therein were handed over formally to the Appellant. The LD. AO has not enquired on this aspect from HBS. ii. Further, the LD. AO adopts the approach of accepting HBS statements on amounts purportedly received from students etc. as fees, but discards HBS statements on the amounts where he says the fees are refunded or are not due. Thus, on the same statement of HBS, the LD. AO construes his averments on inflows as incomes but not outflows as refunds. iii. Without prejudice to the preceding submissions, the Appellant submits that to the ex....
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....IT 146 taxmann.com 553, the division bench decision in case of 159 taxmann.com 179 and further dismissal of special leave petition against the above decision by the honourable Supreme Court in 168 taxmann.com 77 decision of the coordinate bench in case of Shri Devraj Urs educational trust for backward classes versus ACIT ITA number 500 - 506 Bangalore 2020 dated 16/08/2021, decision of the honourable Supreme Court in case of common causes versus Union of India 77 taxmann.com 245, in fact to support the other grounds also including this ground assessee has relied upon 19 judicial precedents which were placed in two volumes of case law compilation. 31. The ld. DR relied up on the findings of the ld. Lower authorities. The learned Department representative specifically referred to the normal learning assessing officer in paragraph number 6 and submitted that the assessee repeatedly stated that the amount has been reflected in the books of account but did not give any evidence to support its claim. He further referred to the submission of the assessee before the assessing officer dated 8/1/2016 and the finding of the learned assessing officer in subsequent paragraphs to show that addi....
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....ents for admission process, but the expenditure paid to the agents are never recorded in the books of account During the assessment proceedings also the assessee refused to have made such payment. When a show cause notice was issued for addition as undisclosed expenditure u/s. 69C of the Act, the assessee once again denied to have made any payment to any broker. It was further stated that details of advertisement expenditure incurred are already in the books of account. The assessee also stated the statement of Dr. Mohan also does not make any reference to any commission payment and further the statement of Prakash Nath Swamy also do not record of any unexplained expenditure and therefore there is no question of any addition. The ld. AO rejected the contention of the assessee stating that the diaries have clear details of these expenses on various pages. Therefore, after analysing the seized material, he made an addition of Rs. 1,21,75,000/- of marketing expenditure contained in 3 seized diaries u/s. 69C of the At. 34. On appeal before the ld. CIT(A), the ld. CIT(A) categorically noted that the diaries have verified statement of the office bearer and when the assessee was afforded....
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.... amounts that is paid for admission into the college. The details also contained the amounts fixed, the date on which the sum has been paid, amount further payable at various due dates along with signature. The assessee was asked to explain the contents of these diaries. The ld. AO pointed out that there are entire in the diaries in the nature of "PP". When Mr. Shivaram was asked to show that when this money was deposited in the bank account, it was stated that "PP" referred to Parama Poojya for reference of late Shri Balagangadharanatha Swamiji, who passed away in early 2013. This money was handed over to that Swamiji. The AO on the basis of the above explanation firstly computed the details of Rs. 18,99,65,000/- of the entries of "PP" account. He also referred to the statement of Mr. Shivaram recorded on 22.7.2013 to corroborate the above findings. During the course of assessment proceedings, the AO asked the assessee to explain the same. The assessee explained that all these entries are accounted for in the books of account. The AO found that out of the above sum Rs. 7,74,75,000/- belongs to assessment year in question i.e., AY 2011-12. Thus he gave an opportunity to the assesse....
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....er to Sri Sri BGS for charitable purposes. He has also stated that the trust will offer the undisclosed income for tax for the amounts that have not been remitted to the bank. ii. The Appellant in the course of the assessment did not offer this income to tax. In its initial submission dated 14.12.2015, the Appellant stated that the money mentioned against the head PP (Param Pujya) in the diaries was spent by HH Sri Sri Sri Balagangadharanatha Swamiji ('Late SSS BGS'). These items of charity and donations have been accounted in the books of account as and when incurred. However, in the absence of full details, it may not be possible to presently identify these items. Vide submission dated 08.01.2016, it subsequently stated that the amounts were spent for charity and donations and for the purpose of the objects of the trust and hence, there is no question of any addition on this account. iii. The Appellant stated that as much as this was a shocking allegation, it is to be noted that the Late SSS BGS was a sannyasi. As a sannyasi, He was not supposed to have any worldly assets and he did not have any such assets. Further, upon his Lingaikya in January 2013, it is not anybody's cas....
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....atements on the outflow. viii. We also understand that HBS was subjected to assessment proceedings after the search, but none of the sums that are arraigned as belonging to the Appellant have been confronted and considered as his income. Why these sums were not questioned in the hands of HBS is not known to the Appellant, when in fact, it would have been fit and proper to examine this aspect. ix. appellant submits that LAO has incorrectly considered amounts referred to in the diaries as income. Mere mention of amounts in the diaries will not constitute income unless it is evidenced by existence of cash, money or assets that can be identified to the Appellant or can be stated to be owned by the Appellant. The LAO has not undertaken any exercise to demonstrate that the Appellant has in its possession cash, money or assets representing the amounts mentioned in the diaries. The LAO has also not been able to demonstrate these aspects in the case of HBS, Sri Shekar Swami, HH BGS or the Appellant itself. Mere mentioning of amounts in a diary does not imply that the same amounts to income. This is especially when the amounts have not been confirmed by any person other than HBS. Hence i....
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....sessee. 44. Therefore, the two items are out go and one item of fee income is the receipt. All 3 additions are based on the basis of seized diaries. These seized diaries are written by Mr. H.B. Shivaram. Mr. H.B. Shivaram was neither the employee of the assessee nor the trustee. It is a fact that the ld. AO also confirmed that these seized diaries are maintained by Mr. H.B. Shivaram. The statement of Mr. Shivaram was recorded on 18.7.2013, 22.7.2013, 7.8.2013, 13.9.2013 and on 16.9.2013. Therefore, the moot question that arises is whether the above addition can be made on the basis of said loose diaries in the hands of the assessee. 45. Identical question arose in the case of Sri Devaraj Urs Education Trust for Backward Classes v. ACIT, in ITA Nos.500 to 506/Bang/2020 dated 16.8.2021 wherein the coordinate Bench held that since the impugned seized papers are undated does not have acceptable narration, do not bear the signature of assessee or any other party, these documents are in the nature of dumb documents and no addition can be made based on these documents. Coordinate bench dealt with the identical issues of Fees income which was added on the basis of seized documents[ diari....
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....rib) 276 wherein it was held that even when the assessee disputed the correctness of the statement recorded u/s. 132(4) and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee and held that testimony of witnesses has to be discharged as there was no material with the department on the basis of which it could justify its action. Further in the case of M/s Obulapuram Mining Company Pvt. Ltd. v. DCIT 2016 (7) TMI 1435, the ITAT Bangalore held that in the absence of third party being made available for cross-examination despite repeated requests by the assessee, his statement could not be relied upon detriment to the assessee. This decision was based on the judgment of the Hon'ble Delhi High Court in the case of CIT v. Pradeep Kumar Gupta, 303 ITR 95 (Del). 182. The contention of the ld. DR is that the department relied upon the statement of assessee's own employee, who need not cross-examine its own employee and there is no mistake in not providing opportunity of cross-examination to the assessee. However, we are not in agreement with the contention of the ld. DR. The right to cross-examine is not dependent upon the assessee's relations....
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....ing in loose sheets of papers seized from premises of another person in course of search action on such other person. It is a fact that the said rough loose sheets of papers scribbled by some anonymous person and seized in course of search of another person cannot be termed as 'documents' having any evidentiary value within the meaning of section 132 or section 132A of the Act. Thus, the entire assessment u/s 153A of the Act in case of the assessee rests on shaky and incorrect foundation and thus deserves to be quashed. 183. In view of the aforesaid judgments, since the impugned seized papers are undated, have no acceptable narration and do not bear the signature of the assessee or any other party, they are not in the nature of self-speaking documents having no evidentiary value and cannot be taken as a sole basis for determination of undisclosed income of the assessee. When documents like the present loose sheets of papers are recovered and the Revenue wants to make use of it, the onus rests on the Revenue to collect cogent evidence to corroborate the noting therein. The Revenue has failed to corroborate the noting by bringing some cogent material on record to prove conc....
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....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 AO has not referred to the following answers of Mr. Nagaraj to Question Nos.8 to 11:- (a) In answer to Q.8 to the statement recorded on 13.8.2015, [page 2164 PB), he has stated that he does not know anything about the entries made in the loose sheets. (b) In answer to Q14 (page 2165 PB), he denied any consideration paid to MCA Inspectors nor any cash paid to donors to enable them claim 80G deduction. (c) In answer to Q.8 (page 2167 PB), in the statement record on 21.9.2015, he did not agree to disclose any amount as undisclosed income of the trust. (d) In answer to Q. 14 (page 2183 PB) of statement recorded on 13.10.2015, he denied payment of cash to any donor. (e) In answer to Q.22 (pg. 2191 PB), he emphatically denied that any cash was received from student/parent in response to statement of Shri Rangaraju (pg. 2189 & 2190 PB). (f) In answer to Q.24 (pg. 2192 PB), he denied collection of....
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....sse 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. 191. The seized material A/DUU/05 to 09 is not relied upon by the AO while framing assessment and making additions, hence no findings are required. 192. The seized materials A/DUU/10 are placed in pages 1420 to 1554 of PB. The AO relied on page 5 placed at page 1549 of PB. According to AO, this amount has been paid to agents for seat conversion. The AO mentioned about this in page 61 of assessment order and there is only reference to page 5 of seized material (placed at 1549 of the paper book) in this order. According to him, it contains details of cash payments made to agents. We have carefully gone through the above seized material. In our humble opinion this seized material does not show any payment which has been made to an agent for seat conversion. Being so, as discussed earlier, these are loose sheets having no signature of any person, cannot be treated as incriminating material without any sup....
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....gularly 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 as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by the Court. There has to be some relevant and admissible evidence and some cog....
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....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 of cross-examination of Mr. Srinivas. There is no evidence to show that assessee has authorised collection of these payments. These are repeat of hard copy of A/DUU/01. With regard to the digital evidence, the purpose of such electronic record is n....
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....elying upon the very same seized material. 203. The Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2017 (5) TMI 1354 held that it is clear that the presumption of facts u/s 292C of the Act is not a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is "may be" and not "shall". Secondly, such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact not a presumption of law. In the present case, the assessee from the very beginning stated that the documents found during the course of search did not belong to him. Therefore, the addition made by the AO is only on the basis of surmises and conjecture without bringing any cogent material on record to substantiate that the assessee was engaged in the business of gold and jewellery and the AO had not brought any material on record to substantiate that the denial of the assessee was false. 204. Unless the burden of proving that the materials and cash belong to the assessee is discharged those materials can neither be seized under section 132 nor relied upon to make assessment under section 153A. Therefore, the seizure of such ....
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....9. 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 development activities. 210. In our opinion, the statement of Mr. G.H. Nagaraj, who is Secretary of the trust cannot be considered as true and correct. He has changed his versions and proved to be an evasive person as a witness. At one stage, he admitted collection of fees over and above the prescribed fees and not paid the same back to the institution. There was a letter dated 09.12.2017 wherein the trustee stated that Mr. G.H. Nagaraj collected the amount from students / parents and spent the amount for the activities of the trust. He alone has to explain the collection of fees to the income-tax authority. Therefore, his statements are contradictory in nature. No value could be attached to his statement and his conduct is neutralizing the value as a witness. Further, the AO in para 3.4 the tabulated statement in response to assessee's submission at page 206- 207 of his order noted as follows:- "Shri G.H. Nagaraj, has time and again changed his position Therefore that vers....
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....w-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 Industries (supra) quashed the assessment order on the reason of not providing cross-examination of witnesses whose statements were recorded. 213. The Hon'ble Supreme Court in the case of Mehta Parikh & Co. v. CIT, 30 ITR 181 held as under:- "In the instant case a mere calculation of the nature indulged in by the ITO or the AAC was not enough, without any further scrutiny, to dislodge the position taken up by the assessee, supported as it was, by the entries in the cash book and the affidavits put in by the assessee before the AAC. The Tribunal also fell into the same error. It could not negative the possibility of the assessee being in possession of a substantial number of these high denomination currency notes. It, however, considered that it was impossible for the assessee to have had 61 such notes in the cash balance in their hands on 12-1-1946, and then it applied a rule of the thumb treating 31 out of such 61 notes as within the bounds of possibility, excluding....
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....itial 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 and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee]" 215. The Hon'ble High Court of Karnataka in Kothari Metals v. ITO, 377 ITR 581 (Karn) held as under:- "Held, allowing the appeal, that the non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. Since such reasons had not been furnished to the appellant, even though a request for them had been made, proceedings for the re-assessment could not have been taken further on this ground alone. Besides this, the statement of some other person which was recorded was the basis of reassessment and the assessee was asked to explain it but t....
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....t 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 reply to question No. 4, he explained that he used to purchase lubricating oil from different garages as well as through various brokers. Such lubricating oil was processed by him in his factory for sale. All payments were received by him through account payee cheques. In reply to question No. 5, he stated that he had seven full-time employees whose names are mentioned by him. He also claimed to have maintained books of account like sales books, purchase books, cash books and sale bills. In reply to question No. 18, he, on his own, stated that his big customers were the Reliance Oil Mills and Eastern Commercial Enterprises, the assessee, in the present reference. As for his cash withdrawals, he explained that his business required ready cash for purchase of raw materials which explained his large drawings of cash from the bank. Learned counsel then cited a host of decisions to bring home the point that no evidence or document can be relied upon unless it is shown to the as....
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....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 that evidence collected from witness cannot be considered without giving opportunity of cross-examination to the assessee. 218. We have also carefully gone through the statement of Mr. G H Nagraj, Secretary of the assessee trust. It was mainly discussed in Page no 64, 65, 74, 75 and 76 of assessment order. He was asked to explain the seized materials A/DUU/03 and A/DUU/13 on 13-08-2015. He has confirmed the collection of capitation fees on some occasions. However, on certain occasions when confronted, the statements of some persons who has stated that they have paid the capitation fees in cash, he denied the collection of capitation fees which is evident from the answer to question no. 16 of his statement recorded on 16-10-2015 which is placed on record in PB 2183. He also stated that the payment from the persons which alleged to have been received is only in the form of cheque and they are genuine donations. In answer to question no 22 he has stated that the statement ....
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....ord 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 received donation in return for giving cash to them and facilitated to the donor to claim deduction u/s 80G and accordingly AO observed that donation is bogus. After examining one donor by name Shri Hanumantharaya whose statement is available on record on PB page no 2181. Shri Nagaraj when confronted him with regard to his statement, he denied the same. Being so, it cannot be held that the assessee received any bogus donation. 222. There was an allegation by AO that assessee made illegal payments into MCI officials. According to ld. DR the seized material marked as A/DUU/02 shows such alleged payment. The Secretary Shri Nagraj deposed before the authorities and recorded his statement on 13-08-2015 placed at PB page no 2165 that the Officials of MCI refused to receive any gifts and there was no any payment of cash to them. There was no examination of recipient such allegation cannot be made without examining the concerned parties and no adverse inference could be drawn aga....
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....iry 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 full proof of evidence which the AO can rely upon. Reliance on this incomplete statement cannot be appreciated as held by the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT, 125 ITR 713 (SC) as follows:- "Held, reversing the decision of the High Court, (i) on the facts, that the two letters dated February 18, 1955, and March 9, 1957 did not constitute any material evidence which the Tribunal could take into account for the purpose of arriving at the finding that the sum of Rs. 1,07,350/- was remitted by the assessee from Madras, and if these two letters were eliminated, there was no material evidence at all which could support its finding. The statements of managers in those two letters were based on hearsay, as in the absence of evidence, it could not be taken that he must have been in charge of the Madras office on October 16, 1946, so as to have personal knowledge. The department ought to have called upon the manager to produce the documents and....
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.... 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 the related party to find out the truth. He has also not brought any material on record to show that the explanation given by the assessee was not correct. In any case, the assessee was not given opportunity to cross-examine the parties whoever managed the diary. Accordingly, the Tribunal deleted the addition by placing reliance on the judgment of Balaji Educational & Charitable Public Trust (supra). 230. In this case also, the addition made by the AO is based on unsubstantiated loose sheets and jottings without proper cross-examination of the person who has admitted the contents therein. Being so, it cannot be stated as full proof of material evidence to substantiate the addition. In our opinion seized documents do not support the AO's contention that assessee has received unaccounted capitation fees for admission of the students to the college. It also does not suggest that the assessee has paid commission to agents to bring the students for admission to colleg....
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....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 relied upon to frame the assessment. In our opinion the discovery of documents not only sufficient to conclude the collection of unaccounted capitation fees, cross examination of concerned parties is also important. 232. Further at a cost of repetition, we observe that the revenue authorities recorded statement of only 5 students out of more than 800 students and out of 5 only 2 are confirmed. The two statements recorded cannot be relied upon without confronting the same to the assessee. The statement of these two persons confirming payment of capitation fees is fully uncorroborated and non-production of them for cross-examination cannot be considered as incriminating material so as to sustain the addition. The rough notings in the loose papers are not full-proof evidence without proving the correctness of the same. Nothing was recorded in the orders of lower authorities that assessee has deviated from its objects for which approval u/s. 12A was granted a....
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....sets 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 not genuine. Also there was no allegation that the activities of the trust are not carried on in accordance with the objects of the trust. There is no allegation that the assessee is not imparting education and it is an admitted fact that thousands of students are studying in the college and assessee has been carrying on educational activities imparting medical education. It fulfilled the requirement of imparting education which are not doubted or challenged by the authorities. Being so, exemption u/s. 11 of the Act cannot be denied. 235. Further reference is made to the judgment of the Hon'ble High Court of Karnataka in the case of DIT(E) V. Sri Belimatha Mahasamsthana Socio Cultural and Educational Trust, 336 ITR 694 (Karn). In this case, the assessee a social, cultural and educational trust, running educational institutions and having various professional courses filed its return of income for the AY 2001-02. The AO denied exemption u/s. 11 of the Act ....
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....ormal 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 on behalf of the assessee in this regard appear to be convincing. In this regard, we also find that Indira Devi, who is stated to have written letter dated 08.12.07, has not been examined by the AO . In those circumstances, it cannot be said that the seized document on which the AO has placed reliance conclusively proves that it was only the Society which received the ETF. On the other hand, the circumstances pointed out by the Society only go to show that it was MJB who was collecting ETF without the knowledge and authority of the Society." * ACIT v. Mamatha Educational Society 2015 (8) TMI 367 - ITAT Hyderabad [Paragraphs 24 and 25] * In CIT v. KLE University [ITA No. 5016 of 2012 C/W 5017 of 2012], the Hon'ble Karnataka High Court held as under:- "11. Our answer to the above point is in the affirmative for the following reasons : (i) that the donations received by the society cannot be construed as capitation fee for the admission of students by t....
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....estigation, 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-society. ( c) Despite repeated questioning on various occasions, the said Srinivasa Rao denied that the assessee-society has collected capitation fee from any student. (d) The computer printout was not recovered/retrieved from any of the computers maintained in the society's office at the time of search, although the same were verified and that too with the recovery tool which is a usual method adopted by the Department at the time of search. (e) In the course of assessment proceedings, the seized hard disks were operated in the office of the AO with the help of IBM official but there was no impression in the hard disk that the same was typed and prepared in any of the computers belonging to the society. No data conforming to the notings in the excel sheets could be found from the seized computer hard disks. He submitted that the only purpose of scanning the seized hard disk was intended for recovery of the excel sheets so as to corroborate the s....
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....rmation 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 principle that whenever the assessee desires, he can have access to all information, whether favourable or adverse to him as laid down in Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 (SC), SMC Share Brokers Ltd. v. CIT [2008] 22 SOT 7 (Delhi)(URO), CIT v. Simon Carves Ltd. [1976] 105 ITR 212 (SC). In this case the assessee has every reason to believe that the evidences tendered by the parents, who were Departmental witnesses, were all favourable to assessee and therefore, the Department was apprehensive of providing these statements as the same would go against the Department. The conduct of the Department is not fair as the notings in the Excel sheets formed the basis of addition and subsequent cancellation. Assessee is enclosing herewith some of the summons issued to the parents who appeared to give testimony. (j) Even the AO failed to summon these witnesses in course of assessment proceedings for corroboration when the assessee w....
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.... 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 collection of capitation fees. This is only based on conjectures and surmises and only on circumstantial evidence. The AO failed to established the link between the seized material and the capitation fees which resulted in creation of any unaccounted assets in the form of possession of money, bullion, jewellery or other articles or any immovable properties in the name of the trust or the trustees. 240. In our opinion, the unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words "may be presumed" in section 132(4) of the Act given an option to the AO concerned to presume these things, but it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee is having every right to rebut the same. The entire case depends upon the rule of evidence. There is no conclusive presumption with regard to unsubstantiated seized material to come to the conclusion....
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.... 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) wherein it was held that : "It was not in dispute that the adverse material which was found by the Income-tax authorities during the course of search in the business premises of 'V' had been confronted to the assessee who was having regular business dealing with the said firm. Some of the entries, recorded in the rough cash book seized during the search operation, tallied with the entries recorded in the regular books of account of the assessee as also that of 'V'. The assessee was issued the copy of the rough cash book as also the statements of partners of 'V'. It had submitted its reply by letters. The explanation furnished by the assessee had been disbelieved. In one letter, the opportunity to crossexamine the partners and the employees of 'V was sought for in the event their statements had not already been recorded with a request that they might be summoned and their statements on oath be recorded in their presence. The said request was made in the ....
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....ee 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 was held as follows:- "It was a matter of record that the assessee had not been allowed the cross-examination of the party whose statement had been used against it in making the assessment. The addition was, thus, in violation of principles of natural justice. Not allowing cross examination is a defect which is procedural in nature. It is only a procedural requirement to be complied with before making the assessment under the Act. Not following the procedural provisions like allowing cross examination will not make an assessment null and void. At most it can be an irregularity liable to be cured and in such a case, the assessment can be set aside to be redone. An addition made does not cease to be an addition merely by reason of want of cross-examination. It will be a proceeding liable to be challenged and corrected. [Para 13] The order of the Assessing Officer though was vitiated by an illegality which supervened, not at the initial stage of the proce....
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.... 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 us are entirely different. In the present case, we have already held that there are various loose sheets, scribblings, jottings and Excel sheets taken from the computer having no signature or authorization from the assessee's side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, it does not show any recovery of the undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. In such circumstances, we are of the opinion that the decisions relied on by the ld. DR cannot be applied to the facts of the assessee's case. 246. Further it is to be noted that we have already relied on the Supreme Court judgment in Andaman Timber Industries v. Commissioner of Central Excise, 281 CTR 241 (SC) wherein it was held that opportunity of cross-examination not given leads to nullity and as....
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....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 ACIT 86 ITD 13 (Delhi) (TM) (vi) Nagarjuna Construction Co Ltd vs DCIT 23 Taxman.com 239 (vii) CIT vs C.L.Khatri 174 Taxman 652 (viii) T.S.Venkatesan vs ACIT 74 ITD 298 (ix) CIT vs Atam Valves Pvt Ltd 184 Taxman 6 (P&H) 248. Thus, we are agreeing with the contention of ld. AR that placing reliance on the seized material is not proper and all the additions on the basis of the above are deleted in all the assessment years since,: i) no opportunity to cross-examine the persons whose statements have been relied upon is afforded; ii) some of the statements have been recorded under section 131 by the authorized officer subsequent to completion of search; iii) there is no documentary evidence either to support the statements of Sri. Goli V. Srinivas or of the parents of the students; and iv) the seized material are in the form of various loose sheets, scribblings, jottings and Excel sheets taken from the computer having no signature or auth....
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....he 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 not in excess of fifteen per cent of the income from such property; (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India: Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution." 253. As long as the income derived from the property held for charitable purposes has been spent for the....
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...."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 otherwise acquired by the trust. Therefore, income from such property should be applied for charitable purposes in order to claim benefit of section 11(1)(a). Para 5 of the trust deed states that "The properties, the assets, effects, funds and the like of the trust shall vest upon the Trust, the trustees perpetually and irrevocably for the due fulfilment and effectuation of the object, and the purpose of the SRI DEVARAJ URS EDUCATIONAL TRUST FOR BACKWARD CLASSES / CASTES." All the donations, gifts, etc, shall be taken over possession only in the name of the Trust and the Chairman or the Secretary in his official capacity as a true representations of the Trust and can never be in his personal capacity." 258. Trust has responsibility only vis-à-vis what is received in its name by the Chairman or Secretary in their official capacity. The trust cannot be made accountable for what the trust personnel have received in their personal capacity by ab....
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....esponsible 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)." 46. The Ld DR could not controvert the findings of This decision and also the reasoning and its applicability to the facts before us. 47. Similar view has been taken by the coordinate Bench in the case of Padmasri Dr. D.Y. Patil University in ITA No.3264/Mum/2012 [2024] 159 taxmann.com 353 (Mumbai - Trib.) In both the above cases, the statement of the employees of those trusts were also relied upon along with seized diary and the additions have been made. In the present case also, the addition has been made on the fee refunded and unaccounted income of fees handed over to Swamiji under the account head "PP" are only based on the statement of Mr. H.B. Shivaram with respect to unexplained expenditure of marketing expenditure. 48. The AO has further relied upon statement of Dr. Mohan and Secretary of the trust. Both these statements does not confirm that any of the expenditure incurred by the assessee is not accounted for. The addition on account ....
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....uch money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." The lack of corroborative evidence to show how the loose sheets found at the house of Sri K Rajandran are connected to the Respondents herein, or their occupation, is evident from the panchanama provided by the Assessing Officer. 22. The entire allegation is made out on the basis of loose sheets of documents, which does not come under the ambit and scope of 'books of entry' or as 'evidence' under the Indian Evidence Act. 23. In view of the aforementioned aspects, we have carefully examined the law declared by the Hon'ble Apex Court with regard to acceptance of diaries/loose sheets by the respondent- Revenue. In the case of V.C. Shukla....
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....per cannot be termed as 'book' for they can be easily detached and replaced. In dealing with the work 'book' appearing in Section 34 in Mukundram vs. Dayaram [AIR 1914 Nagpur 44], a decision on which both sides have placed reliance, the Court observed:- " In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book...I think the term "book" in S. 34 aforesaid may properly' be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of S. 34, and I have no hesitation in holding that unbound sheets of paper in whatever quantity, though filled up with one continuous account, are not a book of accoun....
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....y can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arised to do for his future purpose. Admittedly the said diaries were not being maintained on day-to day basis in the course of business. There is no mention of the dates on which the alleged payment were made. In fact the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. they have been shown in abreviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to." 20. Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and the small pads are 'books' within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor they were regularly kept in the course of business. he submitted that at best it could be said that those books were memoranda kept by a....
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....ntries 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 the were in accordance with facts. 282. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court." 26. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, we are of the view that the action taken by the respondent/Revenue against the Assessee based on the material contained in the diaries/loose sheets, ar....