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2016 (1) TMI 223 - RAJASTHAN HIGH COURT

2016 (1) TMI 223 - RAJASTHAN HIGH COURT - TMI - Tuition fee refunded by cash disallowed being not verifiable - assessee is running an institute providing coaching for IIT entrance examination - Held that:- Admittedly even the AO is satisfied about majority of the payments which has not been doubted and on random basis the AO found that out of 175 payments, eleven payments were doubted but he chose to add entire amount in assessment year 2005-06 and @ 20% in the assessment year 2008-09. On furthe .....

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> For the assessment year 2008-09, on the same facts and circumstances though the AO in this year disallowed ad hoc amount @ 20% of the amount paid in cash at ₹ 18,19,487/- which was on ad hoc basis, but CIT(A) after analysing the material available and placed on record by the assessee, came to the conclusion that the disallowance is required to be made only to the extent of ₹ 2,50,000/-. This was also upheld by the Tribunal on a further appeal by both the sides. Therefore, when bot .....

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interest from the persons, to whom the assessee advanced short term loan/advance, the AO could not disallow part of the interest. It is also an admitted fact, as observed by the Tribunal, that the AO .vas not able to pin pointedly come to a definite conclusion that how interest bearing loans had been diverted towards interest free advances and since the AO was not able to prove nexus between interest bearing loans vis-a-vis interest free loans/advances, therefore, in our view as well, once the .....

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ndent : Mahendra Gargiya JUDGMENT These appeals, under Section 260A of the Income Tax Act, (for short 'the Act') are directed against the orders of the Income Tax Appellate Tribunal dated 8.7.2011 (in Appeal No. 12/2012) and 18.10.2012 (in Appeal No. 9/2013) and are relevant for the assessment years 2005-06 and 2008-09. 2. Briefly stated the facts relevant for disposal of the present appeals are that the respondent assessee is running a coaching institute at Kota in the name and style of .....

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sment year 2005-06 the assessee returned/refunded an amount of ₹ 83,73,040/- and to the extent of cash payments the amount was disallowed and added at ₹ 21,51,100/- to various students and ₹ 3,01,16,173/- in the assessment year 2008-09 and to the extent of cash payments the amount @ 20% was disallowed and added at ₹ 18,19, 487/-. (2) disallowance of interest to the extent of ₹ 8,03,702/- in the assessment year 2005-06 and ₹ 5,80,080/- in the assessment year 20 .....

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unded by cash, since the same being not verifiable, the amount stood disallowed. During the course of proceedings the assesses was directed to file confirmatory letters or/and other material to justify the claim of aforesaid payments. While it is claim of the assessee that to the maximum possible extent confirmations/certificates were filed and prior to that they had obtained receipts wherever amount was refunded. However, the same did not find favour with the AO and he disallowed the aforesaid .....

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he could have advanced money to that extent. However, this also did not find favour with the AO and accordingly disallowed the interest. 5. The matter was carried in appeal before the CIT(A). Insofar as refund of the tuition fee is concerned, the CIT (A), after analysing the material placed on record and the evidence led by the assessee, and after perusing various confirmations/certificates/receipts held that only an amount to the extent of ₹ 86,500/- in the assessment year 2005-06 was no .....

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l by the revenue before the Income Tax Appellate Tribunal, where the assessee filed cross-objections. The Tribunal, after analysing the issue relating to refund of tuition fee, granted further relief and upheld addition to the extent of ₹ 60,200/- for the assessment year 2005-06 and upheld the addition to the extent of ₹ 2,50,000/- in the assessment year 2008-09. Insofar as interest is concerned, the disallowance was deleted. 7. Learned counsel for the revenue contended that huge tui .....

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d that' the receipts produced before the AO were doubtful in nature and the receipts did not inspire confidence and thus, the AO was . well justified in making a disallowance/addition only to the extent the assessee was unable to satisfy. She further contended that both the appellate authorities have not considered the issue in the right perspective and no case was made out by the assessee for deletion of the amount which was rightly made by the AO. Secondly, insofar as the issue of interest .....

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. Per contra, learned counsel for the assessee contended: (1) insofar as refund of fee is concerned, the assessee had produced adequate material and evidence in the shape of confirmations/certificates/receipts of the various students/(parents) who for diverse reasons moved out of the institute for taking coaching elsewhere. He also contended that it is not that the entire tuition fee was refunded and as per the agreement/understanding with the students/(parents), only some amount was refunded to .....

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97 students and so was in the subsequent assessment year, and this is an ongoing process. (2) insofar as the issue relating to disallowance of interest is concerned, he contended that the appellate authorities have found a finding of fact that the assessee had a huge capital of his own at the beginning of the financial year and to that extent he was free to advance interest free loans to friends and relatives, and the Income Tax Act does not debar from advancing money without interest, when one .....

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and admittedly some of the students after joining the institute and having paid tuition fee, for diverse reasons may not be interested in pursuing with the coaching or opted to have a chance in a different institute and the AO in the assessment year 2005-06 noticed that 497 students opted for refund of fee out of which 175 students were paid refunds in cash amounting to ₹ 21,51,100/-. The AO directed for providing material, basis and evidence with regard to refund of fee to the students o .....

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ther students about non receipt of refund and drawing inference, the AO disallowed the entire repayment of the amount by cash. Some additional material/evidence was placed by the assessee before the CIT(A) as it was noticed that adequate opportunity was not granted by the AO. The CIT(A) admitted the additional evidence, and such additional evidence which was placed before him was forwarded to the AO for comments and it has been observed by the CIT(A) that the AO did not make any adverse comment .....

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icted addition to the extent of ₹ 86,500/-. The Tribunal on a further appeal went into the issue once again and further considered the evidence which was available not only with the AO but before the CIT(A), and came to the conclusion that addition to the extent of only ₹ 60,200/- was required to be made as the Tribunal was of the further view that the explanation insofar as refund of fee relating to two more students was acceptable, Admittedly, only part of the tuition fee has been .....

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aving been led before the CIT(A) both the appellate authorities further analysed the evidence and came to the conclusion that addition if required, could be only to the extent of ₹ 60,200/- (ITAT). Both the appellate authorities have considered confirmations/certificates/receipts and other material and once the entire material had been considered, we see no reason to interfere. Even the AO found fault in few cases only and was satisfied in majority of cases. 11.1 For the assessment year 20 .....

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ave upheld ad hoc addition, therefore, in our view, when estimate has been made even by the AO, it was partly modified by the first appellate authority and upheld by the Tribunal, is also based on appreciation of evidence and is thus a finding of fact and no substantial question of law can be said to arise in this year as well. 12. As far as the disallowance of interest is concerned, admittedly the assessee had an opening capital of ₹ 5,70,74,967/- of his own and the advances, if at all, b .....

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377; 10,99,099/- to the bank against loan and over draft, and it is out of the amount which has been paid by the assessee at ₹ 10,99,099/- that the AO has disallowed the interest. 13. Taking into consideration the fact as noticed hereinabove, in our view as well, when there was no agreement to charge interest from the persons, to whom the assessee advanced short term loan/advance, the AO could not disallow part of the interest. It is also an admitted fact, as observed by the Tribunal, that .....

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