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2022 (4) TMI 1173 - AT - Income TaxExemption u/s 11 - appellant society had undisclosed income - appellant had been indulging in collection of the capitation fees - Reliance on statement recorded from the students and their parents u/s. 131 or 133(6) - As per assessee statement recorded u/s. 132(4) cannot be discarded merely because the retractment statements were filed - CIT(A) confirmed the findings of the Assessing Officer that the appellant society had been accepting the cash donations or capitation fees outside the books of accounts towards admission of the students under the management quota in the various institutions run by the appellant society - as course of search and seizure operations, the Investigation Wing of the Department unearthed certain loose sheets - HELD THAT:- It is settled position of law that the admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect as held by the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Company Ltd. vs. State of Kerala & Another [1971 (9) TMI 64 - SUPREME COURT] An admission, if clearly and unequivocally made, is the best evidence against the party making it and though not conclusive, shifts the onus on the maker on the principle that "what a party himself admits to be true may reasonably be presumed to be so and until the presumption was rebutted the fact admitted must be taken to be established" [Thiru John v. Returning Officer [1977 (4) TMI 173 - SUPREME COURT]]. In the light of this above legal position, the statement voluntarily made by the assessee could form the basis of assessment. As retraction statements can be said to be self-serving and no credence can be given and the retraction statements looses significance and an afterthought. Therefore, the statement recorded u/s. 132(4) cannot be discarded merely because the retractment statements were filed. The statements u/s. 132(4) are true and correct and brings out the correct picture as at that time the maker of the statement is uninfluenced by external agencies and it is the statements are recorded in the presence of the independent witnesses. Therefore, in our considered opinion, the so-called retraction statements are simple a self-serving statements without any material and cannot override the statements recorded u/s. 132(4) of the Income Tax Act. The reliance placed by the ld. Counsel on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sunil Agarwal,[2015 (11) TMI 286 - DELHI HIGH COURT] cannot come to the rescue of the appellant herein for the reason that in the said case the assessee apart retracting the statement also discharged the onus of proving the statement is incorrect through cogent material We have no hesitation to hold that the so called retraction statements cannot be given any credence, on the other hand, the statements given by three persons named above u/s. 132(4) of the I.T. Act carries more evidentiary value and cannot be discarded. Assessing Officer also brought corroborative evidence in the form of the evidence showing refund of capitation fees, recommendation letters given by VIPs of the locality seeking waiver/reduction in the capitation fees/donations, exchange the SMS messages between Shri Arvind Deshpande and Shri Sharad Bhosale and Dr. Janardan Garde and admission agent, Shri Surendra Nagar. This corroborative evidence remains uncontroverted by the appellant society. Thus, there is a conclusive evidence brought on record by the Assessing Officer to hold that the appellant had been indulging in collection of capitation fees from the students at the time of admission in various courses under the management quota. The contention raised on behalf of the appellant that the addition on account of capitation fees cannot be sustained for the reason of the failure of the Assessing Officer to consider the statement recorded from the students and their parents u/s. 131 or 133(6), even assuming for a moment that the students and their parents have denied having paid any capitation fees, no credence can be given to their testimony as the students and their parents are complementary and supplementary to the appellant society as they are undergoing studies in the institution run by the appellant society and any adverse testimony against the appellant society would also result in adverse consequences to them under the provisions of the Income Tax Act. Thus, the testimony by students and their parents is only self-serving, hence no credence can be given. It is settled position of law that the amount of capitation fees received over and above the prescribed under the provisions of the Maharashtra Educational Institution (Prohibition of Capitation Fees) Act, 1987 is not eligible for exemption u/s. 11 as the practice of collection of capitation fees is contrary to the law laid down by the Hon'ble Apex Court in the case of Islamic Academy Of Education And Another vs. State Of Karnataka And Others,[2003 (8) TMI 469 - SUPREME COURT] and also against public policy and the contrary to the provisions Maharashtra Educational Institution (Prohibition of Capitation Fees) Act, 1987. Thus, the appellant is not eligible for exemption of income of capitation fees received outside books of accounts u/s. 11 and the Assessing Officer had rightly brought to tax. Accordingly, the ground appeal no. 1 to 7 stands dismissed. Denying the exemption u/s. 11 of the entire income for violation of provisions of section 13(1)(c) on receipt of the capitation fees - Hon'ble Supreme Court in the case of Director of Income-tax vs. Bharat Diamond Bourse [2002 (12) TMI 8 - SUPREME COURT] wherein, the Hon'ble Apex Court held that when specified person in the present case, President of the appellant society because of the position as a trustee, misuses his powers by lending himself or taking away the income or the funds of the trust, then it tantamount to breach of the trust indicating that the trust was formed for a personal gain and, therefore, it cannot be said that the objects of the appellant society are charitable and, therefore, the income of the appellant trust does not qualify for exemption u/s. 11 of the Act. Therefore, we uphold the action of the Assessing Officer in denying the exemption on the whole of income derived by the appellant society. We must clarify here that though the AO denied the exemption of entire income u/s. 11 for the reason of alleged violation of provisions section 13(1)(c) of the Income Tax Act, though the action of the AO denying the exemption on entire income is untenable under law for violation of provisions of section 13(1)(c), the action of the AO is upheld by us in view of our findings that the appellant society was formed with for the purpose of private gains. Thus, we do not find any merit in the ground of appeal raised by the appellant society and stands dismissed. Disallowance of prior period expenses - AO disallowed as sum by holding that the expenditure is pertaining to the prior period - HELD THAT:- No evidence is filed before us demonstrating that the liability for this expenditure was crystallized for the previous year relevant to the assessment year under consideration when the income of the appellant society has been assessed to tax. The action of the Assessing Officer on this issue is totally justified. Hence, we do not find any merit in the ground of appeal no. 10 and the same stands dismissed. Income of the appellant society not attributable to the violation of provisions of section 13(1)(c) shall be taxed at normal rate of tax - HELD THAT:- This finding of the ld. CIT(A) contrary to the plain provisions of section 164 of the Act, according to which, the beneficiaries of the trust are unknown. The income of the trust shall be assessed at maximum marginal rate of tax. Therefore, the findings of ld. CIT(A) are hereby reversed, the grounds of appeal filed by the Revenue stands allowed
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