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2011 (5) TMI 1061 - ITAT CHENNAI

2011 (5) TMI 1061 - ITAT CHENNAI - TMI - I.T.A. Nos. 451 to 457/Mds/2011 - Dated:- 23-5-2011 - Hari Om Maratha (Judicial Member) And N. S. Saini (Accountant Member) For the Assessee : G. Baskar For the Department : Tapas Kumar Dutta ORDER These are appeals filed by the assessee directed against the separate orders u/s 263 of the Income-tax Act, 1961 [in short, the Act] passed by the ld. CIT, Central-II, Chennai all dated 28.12.2010 for Assessment Years 2002-03 to 2008-09 respectively. Since the .....

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s de novo, in accordance with law, as he had passed order u/s 12AA(3) on 16.3.2010 withdrawing registration granted u/s 12AA from Assessment Year 2001-02 onwards. 3. At the very outset, the ld. A.R. of the assessee Shri G. Baskar submitted that the Tribunal in assessee s own case in ITA No. 444/Mds/2010 vide order dated 24.12.2010 vacated the order of the Commissioner of Income-tax dated 16.3.2010 passed u/s 12AA of the Act cancelling registration of the assessee-trust and directing him to resto .....

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ated the assessment orders passed by the A.O. for the Assessment years 2002-03 to 2008-09 in the case of the assesee allowing benefit of application for charitable pruposes and permissible accumulation as per the proviions of Sec.11 & 12 were treated in the impugned order as erroneous and prejudicial to the interest of the Revenue. The Ld. CIT therefore set aside the original assessment orders as passed by the AO by observing as under:- "I have considered the written submissions of the .....

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the interest of revenue. The relevant fact is to consider whether the assessment order is erroneous and prejudicial to the interest of the revenue or not due to the withdrawal of Registration u/s.12AA(3). After consideration of the facts and circumstances of the case and replies of the assesee I have come to the conclusion that the assessment order is erroneous and prejudicial to the interest of the revenue for the followign reasons:- (i) As per Section 12 of the I.T.Act, 1961, provisions of se .....

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essment will yield larger revenue and hence in such a situation, the Commissioner can exercise his revisionary powers u/s.263 of the I.T.Act and pass appropriate order accordingly. Reliance is placed onthe order of the Madras High Court int he case of CIT Vs. Swamy (C.R.K.)(2002) 254 ITR 158 (Mad.). For example, which completign the assessment u/s.153A of the I.T.Act, the AO had allowed accumulation of income at 25% of ₹ 4,04,39,633/- (Rs.1,03,34,958) and did not take it into account as in .....

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tion of income u/s.11 only if the Registration u/s.12AA is available to the assessee. Hence, utilization of the receipts in such fixed assets should not have been allowed as a deduction even to the extent of 50% which makes the order erroneous as well as prejudicial to the interest of revenue because, if consequential benefit u/s.11 is to be withdrawn because of the withdrawal of the registration, the assessment would bring in larger revenue. Hence, after a careful consideration of facts and cir .....

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to the assesse trust came before Tribunal who vide order dated 24.12.2010 in ITA No.444/Mds.10 held as under:- "17. We heard both sides in details and considered the issue. 18. In the light of the judgment of the Director of Income-tax (Exemptions) & another vs. Sri Belimatha Mahasamsthana Socio Cultural & Educational Trust (46 DTR (Kar.) 290 and the decision of the I.T.A.T., Pune A Bench in the case of Maharashtra Academy Of Engineering & Educational Research (Maeer) v. Commiss .....

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s to pay capitation fee have to be examined in the hands of those donors. The assessee has nothing to do with the legality or illegality of the sources in the hands of those donors. The capitation fee could be unexplained in the hands of the persons making the donations. The Commissioner of Income-tax could direct his investigations to the sources of those persons who have given big amounts by way of donations presumably for allotment of seats in professional institutions. As far as, the assesse .....

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is taxable, it should be taxed. If the assessee has not applied the capitation fees collected even in violation of the Prohibition Act for the purposes for which the trust was established, there is a case for Revenue. If the assessee has applied its entire income including capitation fees exclusively for the purposes for which it is established, the Revenue has no case. This is the sum and substance of the above two decisions relied on by the learned Counsel appearing for the assessee. 20. As f .....

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trust by way of the alleged capitation fees, donations, corpus donations and also fees collected from the students. Therefore, there is no de facto case against the assessee that the income has not been applied for educational activities. 21. Now the case is that of diversion of funds. Regarding seizure of cash in the course of search at the registered office of the assessee-trust, we find the reply furnished by the assessee-trust is convincing that the total cash as on the day of search was mor .....

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course of search is not a ground to make an allegation that the trustees have diverted the funds of the assesseetrust for activities other than charitable activities. 22. The assessee has furnished the details of payments made by Dr. C.K.Velayuthan Nair towards capitation fee for obtaining a medical seat for his daughter as reflected in the account maintained with Tamilnadu Mercantile Bank. It is established that those funds have not been flown out of the funds of the assessee-trust. The paymen .....

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njoyed such properties for conducting its educational activities and the deposits not non-refundable. Therefore, regarding the functional and legal character of the deposits, there is no case against the assessee. The case could only be in respect of quantum of deposits which according to the Commissioner of Income-tax is highly disproportionate to the annual rent paid by the assesseetrust. In this context, it is to be seen that the total amount spent by the trust for constructing buildings and .....

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flected in the books of account. The case of the Commissioner of Income-tax would have been better if there is nothing on record to show that huge amount on lease deposits received by Dr. Velayuthan Nair were used for the personal benefit of Dr. Velayuthan Nair or his family members or relatives. Revenue has also no case that Mr. Prasad had used money for his personal purposes. 24. In the facts and circumstances of the case and in the light of the decision of the Hon ble Karnataka High Court in .....

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