TMI Blog2011 (7) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... this can be used with reference to any piece of evidence found during the course of search. In this case, no such piece of evidence or to say any incriminating evidence was either found or seized. In our well considered view, this addition could not have been made at all in the hands of the assessee-trust on the basis of such evidence. With regard to involuntary statement, extracted from the deponent, the Central Board of Direct Taxes has issued instructions, wherein it has been directed that search party shall not obtain confessions. So, the admission made u/s 132(4) by the concerned officer cannot be treated even as a valid piece of evidence. There being no incriminating document having been found or seized during search and the statement also being abstruse, the addition in question has no legs to stand on. Had there been a valid statement, even then, solely on the basis thereof, addition could not have been made. The decisions of the hon'ble Supreme Court in the case of COMMISSIONER OF INCOME-TAX, WEST BENGAL II VERSUS DURGA PRASAD MORE [ 1971 (8) TMI 17 - SUPREME COURT and SUMATI DAYAL VERSUS COMMISSIONER OF INCOME-TAX [ 1995 (3) TMI 3 - SUPREME COURT] , which spea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee. - ITA Nos. 99/Mds/2011, 204/Mds/2011, 100/Mds/2011 and 205/Mds/201 - - - Dated:- 18-7-2011 - Order Hari Om Maratha (Judicial Member).- The above captioned appeals pertain to the assessment year 2008-09. There are two separate assessees of the same group. In each assessee's case, the cross appeals have been filed. Therefore, for the sake of convenience and brevity, we are proceeding to decide them by a common order. I. T. A. Nos. 100/Mds/2011 and 205/Mds/2011 in the case of M/s Saveetha Medical and Educational Trust 2. The above named cross-appeals are directed against the order of the learned Commissioner of Income-tax (Appeals), Salem, dated November 26, 2010, for the assessment year 2008-09. 3. Briefly stated, the facts of the case are that the assessee, M/s Saveetha Medical and Educational Trust, is a society registered under the Tamilnadu Societies Registration Act and is also registered as a charitable trust under section 12A of the Income-tax Act, with the Commissioner of Income-tax, Coimbatore. The assessee-trust runs an engineering college affiliated to Anna University, Chennai and also runs a college of occupational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hearing and prayed that the addition may kindly be deleted. 5. The Revenue has raised the following grounds in its appeal: 1.(a) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition made by the Assessing Officer towards capitation fees collected from the students at ₹ 5,37,00,000. 1.(b) The learned Commissioner of Income-tax (Appeals) has failed to give adequate weight to the sworn statement under section 132(4) deposed by Dr. B. Muthukumaran, special officer of the institution which proved the fact that the institution collected capitation fees for admission to the management quota, that the amounts were collected by cash and that no books were maintained for that purpose. 1.(c) The learned Commissioner of Income-tax (Appeals) has failed to note that the finance officer Sri. T. A. Varadarajan had not denied the receipt of capitation fees but only stated that he did not know the details. 1.(d) The learned Commissioner of Income-tax (Appeals) has failed to note that the burden of proof that the institution did not receive capitation fees was not discharged by the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with section 13(1)(c) and 13(1)(d). 2.(d) The learned Commissioner of Income-tax (Appeals) ought to have applied well settled principle of law that in the income-tax proceedings, facts of life, human probabilities and economic realities cannot be ignored and upheld the additions since one cannot expect direct evidence especially when the funds of the trust are diverted for personal benefits of the trustee. 2.(e) The learned Commissioner of Income-tax (Appeals) has failed consider the ratio of the following case laws mentioned in the assessment order : (i) Maddi Venkataraman and Co. P. Ltd. v. CIT [1998] 229 ITR 534 (SC). (ii) Vodithala Education Society v. Asst. DIT (Exemption) [2008] 20 SOT 353 (Hyd). 3. The appellant craves leave to add, to amend or alter the above grounds of appeal as may be deemed necessary. Relief claimed in appeal Relief claimed in appeal The order of the learned Commissioner of Income-tax (Appeals) may be set aside and the order of the Assessing Officer be restored. 6. The first issue raised in the Revenue's appeal is regarding deletion of an addition of ₹ 5,37,00,000 made towards capitation fees allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 x 3 lakhs ₹ 120 lakhs ₹ 537 lakhs 8. The Assessing officer has opined that the capitation fees so collected cannot tantamount to voluntary contribution or subscriptions to the corpus of the society but are in the nature of donations and capitation fees. However, this addition has been deleted by the learned Commissioner of Income-tax (Appeals) by observing that no such addition can be made solely on the basis of statements recorded under section 132(4) of the Act and there being no related evidence having been found during search showing receipt of such donations. He has also found that no one has really accepted having received donation/capitation fees as has been alleged by the Assessing Officer. 9. We have examined the entire record before us. We have also treaded through the statements in question. Almost identical lines of arguments were taken by both sides as were taken before the learned Commissioner of Income-tax (Appeals). We have cogitated the entire facts, evidence and oral submissions in the light of the provisions of the Act and related precedents. We have gone through the entire stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the president/ management trustee of the trust, never accepted having receipt of capitation fees or donation and he had rejected and denied the statement of Dr.B. Muthukumaran. Statement of Dr. N. M. Veeraiyan was recorded under section 131 on November 9, 2007, in which he has stated that whatever was received from the students was reflected in the books of account. This statement confirms the contention of the assessee that some well wishers were giving donations which were duly received and reflected in the books of account. In fact, the statement of Dr. N. M. Veeraiyan was recorded under section 131 on November 9, 2007 which has also been made a basis for this addition. He was not examined under section 132(4) of the Act. A statement made under section 131 cannot be equated with a statement recorded under section 132(4) of the Act. A statement recorded under section 132(4) is a valid and relevant piece of evidence but a statement recorded under section 131 is not so relevant. Nevertheless, even a statement recorded under section 132(4) cannot be made a sole basis for any such addition unless corroborated by seized material. If any admission is made in a statement recorded unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is nothing on record to co-relate between any such reality of life to which the Assessing Officer is pointing to. Who prevented the Assessing Officer to record the statements of the students ; or their wards ? On simple conjectures and surmises, no addition can be made under the Income-tax Act, 1961. We, therefore, confirm the order of the learned Commissioner of Income-tax (Appeals) in deleting the addition of ₹ 5,37,00,000. 11. The other issue raised by the Revenue is in relation to deletion of the addition made towards excess income under the income and expenditure account as per the proviso to section 164(1) amounting to ₹ 4,12,67,096. To understand this issue correctly, we extract paragraphs 23 to 26 of the learned Commissioner of Income-tax (Appeals)'s order, hereinbelow : 23. With regard to addition of ₹ 4,12,67,096 in respect of excess income under the income and expenditure account as per the proviso to section 164(1) the Assessing Officer has made his observation as under : 'During the course of the search, Dr. N. M. Veeraiyan, president/ managing trustee, had admitted that he has invested his undisclosed income in movable and imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 13 of the Income-tax Act, 1961, thereby disqualifying themselves from claiming exemption under section 11 of the Income-tax Act, 1961. The assessee was registered as public charitable trust under section 12AA of the Income-tax Act 1961. But the assessee has collected donations from the students for the purpose of admissions to its institutions. Thus the assessee has exploited the assets of the society for a commercial, consideration of earning profits by collecting money from students in excess of the fees prescribed by the Government in lieu of admission to various courses under the management quota. In view of the aforesaid facts it is held that the assessee has rendered themselves ineligible to claim the exemptions available under section 11 of the Income-tax Act, 1961. In reply to the show-cause notice, the assessee had filed a letter dated December 24, 2009 objecting to the various issues. Those issues have been discussed in detail supra. In the said letter, the assessee had stated the statement recorded from Dr. B. Muthukumaran was under threat and coercion. The assessee's claim in this regard is not correct. It is evident from the panchnama dated Aug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of capitation fee. The appellant also further argues that when the Department had information about receipt of capitation fee by the appellant based on which the search was conducted, why the Assessing Officer had made huge addition in respect of capitation fee and holding that the appellant had violated section 13(1)(c) only by applying the test of human probabilities and surrounding circumstances. During the course of survey under section 133A on August 13, 2007 only Dr. N. M. Veeraiyan, his family members vide answer to question No. 29. Again on August 29, 2007 during the course of enquiry under section 131 he had further increased the offer by ₹ 25 lakhs in his hands in addition to the earlier offer. The admission of income by Dr. N. M. Veeraiyan was never on behalf of the trust but only in respect of himself and his family members. He was not enquired about the source of unaccounted income. By applying the test of human probabilities and surrounding circumstances the appellant had not violated the provision of section 13(1)(c) for the following facts : 1. As submitted earlier the appellant had not received any capitation fee/donation from the students for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 4,12,67,096 made in respect of excess income as per the income and expenditure account as per the proviso to section 164(1) by the Assessing Officer. 12. Similar arguments were advanced by both parties before us. We are totally in agreement with the finding of the learned Commissioner of Income-tax (Appeals). When we have already held that there is no proof that the assessee had collected capitation fees in the guise of donation as has been alleged, there is no violation of the Tamil Nadu Educational Institutions (Prohibition of Collection of Capitation Fee) Act, 1992. The donation received/voluntarily given by anybody to charitable institutions towards its corpus is a permissible and legal activity and not an illegal activity terminating into denial of exemption under section 11. There is no evidence on record to show a link between the investments made in the hands of Dr.N.M. Veeraiyan with the trust's activities as per the provisions of section 164(1) read with section 13(1)(c) and 13(1)(d). Therefore, this addition cannot be sustained in the eye of law in view of our above observation. Accordingly, we confirm this impugned deletion and dismiss the appeal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of students and the details of fees collected were found in the computer at the time of survey itself. The assessee had also explained the cash balance through letter dated November 9, 2007 before the Assistant Director of Income-tax, which is recorded in the assessment order also. The Assessing Officer issued summons under section 131 to the students and their sworn statements were recorded in which the students have admitted payment of such fees. The cumulative effect of these observations is that this amount cannot be so easily added in the hands of the assessee as it stands explained on record. On one side, the Department wanted to rely on the statement recorded during survey to make huge additions and on the other hand, they were reluctant in accepting the statements of students which were recorded by them after summoning them under section 131 of the Act. In our considered opinion, the entire cash stands fully and satisfactorily explained and cannot be sustained in the hands of the assessee. 16. In the result, the appeal of the assessee stands allowed. I. T. A. Nos. 99/Mds/2011 and 204/Mds/2011 in the case of M/s Saveetha Institute of Medical and Technical Sciences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prasad More [1971] 82 ITR 540 (SC), Juggilal Kamlapat v. CIT [1969] 73 ITR 702 (SC) and Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) and upheld the additions since one cannot expect direct evidence especially when the evidence is expected to be destroyed on a day to day basis. 2.(a) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition made by the Assessing Officer towards excess of income as per the income and expenditure account as per the proviso to section 164(1) amounting to ₹ 5,26,21,407. 2.(b) The learned Commissioner of Income-tax (Appeals) has failed to note that the assessee collected capitation fees in the guise of donation and violated the Tamil Nadu Educational Institutions (Prohibition of Collection of Capitation Fee) Act, 1992 and hence the activities of the assessee have become illegal and not genuine and accordingly the income is not eligible for exemption under section 11. 2.(c) The learned Commissioner of Income-tax (Appeals) has failed to appreciate that source for the investments in the hands of Dr.N.M. Veeraiyan have not been explained and hence the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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