2014 (7) TMI 1292 - AT - Income Tax

Addition towards unaccounted capitation fees for the course of Nursing - amount as collected in addition to the regular fee payable by each student - amount kept outside the books of account - misappropriation of income - Held that - The assessee could have accounted the receipts as and when received under a particular provisional head. When the admission process is over the provisional head could be closed by transferring the amounts to fees and dues account in the case of applicants admitted for the Nursing course and by returning the amounts in respect of the applicants not selected for the course. Therefore the explanation of the assessee that the amounts were not recorded in the books of account for the reason that the admission process was not complete at the time of search is not acceptable in law. The details must be properly recorded atleast in a rough book. It is a clear case that the entire amount of was blacked out of the records of the assessee. The assessee has never explained how finally this amount was adjusted or accounted in the books of account. The assessee has not furnished the details that how much amounts were returned to the applicants who were not admitted to the Nursing course. Assessee society had collected capitation fees from the students admitted to the Nursing course and those capitation fees were kept outside the books of the assessee. Therefore the Assessing Officer is justified in treating the sum as unaccounted capitation fees. - Decided against assessee.

Summary

Issues:
Appeal against deletion of addition of unaccounted capitation fees for Nursing course.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income-tax(Appeals) for the assessment year 2008-09. The Revenue pointed out an omission in the common order of the Tribunal regarding the addition of Rs. 18 lakhs towards unaccounted capitation fees collected for the Nursing course. The Tribunal recalled its order to decide this issue specifically.

2. The Assessing Officer found that the assessee society collected Rs. 50,000 from each student admitted to the Nursing course, in addition to regular fees. Demand drafts totaling Rs. 18 lakhs were found during a search, unaccounted for in the books. The assessing authority treated this as unaccounted capitation fees and added it to the taxable income. The Commissioner of Income-tax(Appeals) accepted the explanation that the amounts were collected from applicants and would be accounted for after the admission process was completed, thus deleting the addition.

3. The Tribunal found the assessee's explanation lacking merit. Even if collected pending admission, the amounts should have been recorded in provisional accounts. Failure to account for such a significant sum was unjustifiable. The Tribunal concluded that the capitation fees were indeed collected but kept outside the books, justifying the Assessing Officer's decision to treat it as unaccounted income.

4. The Tribunal set aside the Commissioner's order, restoring the addition of Rs. 18 lakhs as unaccounted capitation fees. The appeal filed by the Revenue was partly allowed, emphasizing the importance of timely and accurate accounting practices. The order was pronounced on July 31, 2014, in Chennai.