TMI Blog2019 (9) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... the statements so given by them. The Ld CIT(A) has observed that the prohibition to collect capitation fee has been implemented by the Government of Karnataka under Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984. AO has not brought any material on record that any action has been taken upon the assessee under the above Act. All these facts would show that it is the AO, who has taken the view that the development fee collected by the assessee is in the nature of Capitation fee and said view can only be held to be an inference drawn by the AO on the basis of surmises and conjectures. CIT(A) has also taken support of the decision rendered in the case of Balaji Educational and Charitable Public Trust [2015 (4) TMI 342 - MADRAS HIGH COURT] wherein under identical set of facts, the Hon'ble High Court held that there is no material to show that the donations were not voluntary CIT(A) had deleted additions made by the AO and also held that the development fees collected by the assessee cannot be considered as Capitation fee. In the foregoing paragraphs, we have upheld the view taken by the CIT(A) on all the above said issues. Hence, the very founda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of ₹ 25.00 crores in aggregate made in AY 2010-11 to 2013-14. CIT(A) has sustained the addition to the extent of ₹ 25.00 crores, he took the view that the same may also represent inflation of construction expenses and hence depreciation claimed thereon should be disallowed. Accordingly he has directed the AO to disallow depreciation on the above said amount of ₹ 25.00 crores. The above said inference drawn by Ld CIT(A) is misplaced, since it is not the case of assessing officer at all. The AO has taken the view that the amount of ₹ 58.02 crores was not spent for the objects of the Trust. Hence the question was not related to inflation of expenses, but related to whether the expenses were incurred for the objects of the trust or not. We have deleted the addition sustained by Ld CIT(A) in the previous paragraphs. Hence, the disallowance of depreciation, being consequential in nature, would not survive on its own - Decided in favour of assessee. - 709/Bang/2018, 710/Bang/2018, 711/Bang/2018, 712/Bang/2018, 1142//Bang/2018, 1143/Bang/2018, 1144/Bang/2018,1145/Bang/2018,1146/Bang/2018,1147/Bang/2018, 1148/Bang/2018, CO No. 88/Bang/2018, CO N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to exemption u/s 11 of the Act, thus reversing the decision of the assessing officer in rejecting the claim for said exemption. Following grounds have been urged in all the years in respect of above said issue:- (i) Whether in the facts and circumstances of the case, the CIT(A) erred in granting benefit of exemption u/s 11 to the assessee even though the trust applied its income for purposes other than those admissible u/s 11(2)(b) read with section 11(5) by diverting to its trustees and other specified persons. (ii) Whether in the facts and circumstances of the case, the CIT(A) erred in granting benefit of exemption u/s 11 to the assessee even though the trust utilized its income in contravention of the provisions of section 13(1)(c) for the benefit of the persons specified in section 13(3) in support of which there are clear documentary evidences available in the seized material as also referred to in the assessment order by the Assessing Officer. (iii) Whether in the facts and circumstances of the case, the CIT(A) erred in ignoring the noting in the seized material and also the admission of Principal Person u/s 132(4) which clearly established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 476.00 lakhs relating to payment made for non-specified purposes in cash to contractor, other related concerns, promoters etc. *** These two additions of ₹ 703.00 lakhs and ₹ 554.50 lakhs have been made in AY 2013-14 only. However, the revenue has inadvertently raised the above said issues in AY 2012-13 and 2014- 15 also. Hence the ground relating to the above said additions raised in AY 2012-13 and 2014-15 has been dismissed by Ld CIT(A) by observing that it does not arise out of assessment order. For the very same reason, we dismiss the said ground in AY 2012-13 and 2014-15. 5. The facts relating to the case are stated in brief. The assessee herein is a company registered u/s 25 of the Companies Act. It is registered as a Charitable institution u/s 12A of the Income tax Act by DIT (Exemption), Bangalore vide his order dated 01-04-2002 in file No. DIT(E)/12a/Vol.III/S-1218/W-2/02-03. It runs educational institutions including an Engineering College by name Sapthagiri College of Engineering and a medical college by name Sapthagiri Institute of Medical Science and Research Centre in Bangalore. 6. The revenue carried out search and seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, the assessee agreed for disallowance of above said amount from the claim of Application of income for the purposes of sec.11(1)(a) of the Act, vide its letter dated 13.09.2013. The assessee also furnished to the AO a revised computation of total income on 14.12.2015excluding the above amounts from the claim of application of income alongwith following explanations:- The Trust has incurred certain expenditures towards construction of building and has made cash payments to contractors and other suppliers. In the search proceedings, on these findings of the department, we have agreed for the disallowance of sum of ₹ 25.00 Crores, out of application of funds of the trust in the capital and other related expenditures. However, we would like to further state that, the above application of funds have been actually incurred towards construction of Medical College building and the same is run by the Trust and the payment has been made for the same for various persons. The Trust is managing Medical, engineering colleges and Hospital as per the objects of the Trust In the said premises The above said disallowance has been accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 ------------------ 58,02,00,000 ============ Since the AO added the above said amount of ₹ 58.02 crores to the total income in the three years cited above respectively, there was no necessity to make addition of ₹ 25.00 crores voluntarily offered by the assessee in AY 2010-11 to 2013-14, since it formed part of the above said amount of ₹ 58.02 crores. It is also pertinent to note that the AO made the above said additions u/s 69C of the Act as unexplained expenditure. 9. The AO noticed that the assessee has paid following amount as unsecured loans to the following related persons in the year relevant to AY 2013-14:- Srinivasa Enterprises - 133 lakhs Sri G Dayanand - 570 lakhs --------- 703 lakhs ===== ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the years to the total income of the assessee in the assessment order passed u/s 143(3) of the Act. However, he deleted the said additions in the rectification order passed u/s 154 of the Act on noticing that the assessee has already disclosed the same as its receipts. 12. Since the assessing officer was of the view that the assessee has collected capitation fee under the name of development fees over and above notified fees and further, since the assessee has engaged agents for soliciting the students for admission in its institutions, the AO took the view that these activities are not charitable in nature. He took support of following decisions to hold that the collection of capitation fee is not a charitable activity:- a. Miss Mohini Jain vs. State of Karnataka (1992)(2 SCC 666) b. Islamic Academy of Education vs. State of Karnataka (2003)(6 SCC 697) Accordingly, he took the view that the collection of capitation fee is against constitutional scheme and prohibited by State enactment. Further, as discussed in the earlier paragraphs, the AO had held that the assessee has violated the provisions of sec.13(1)(c) r.w.s 13(3) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,78,50,636 2014-15 4,76,00,000 18,62,46,418 2,44,75,837 The Ld CIT(A) noticed that the amount spent on buildings in the year relevant to AY 2013-14 was only ₹ 1922 lakhs (10.43 + 8.79), whereas the AO has made an addition of ₹ 4333 lakhs. Hence the Ld CIT(A) expressed the view that the AO should have identified the expenses, which were incurred in cash and for which no voucher was produced. Accordingly, the Ld CIT(A) opined that the AO could not have made these additions without pointing out the violation of provisions of the Act in respect of any particular item of expenditure. Accordingly, the Ld CIT(A) deleted the above said additions. 15. The Ld CIT(A), on the contrary, expressed the view that the voluntary offer of ₹ 25.00 crores made by the assessee should be sustained. He expressed the view that the Statement was made voluntarily by the assessee and hence there is no reason as to why such a statement should not be relied upon by the AO. The Ld CIT(A) took support of following decision in this regard:- (a) CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e could ascertain the actual nature of transactions after examining the seized materials. The Ld CIT(A), accordingly, took the view that the explanations now furnished before him are proper and are also based on supporting documents. Accordingly, he deleted the addition of ₹ 703.99 lakhs made in AY 2013-14. 18. With regard to the addition of ₹ 554.50 lakhs, the Ld CIT(A) accepted the contentions of the assessee that the AO has made this addition on surmises and suspicion without bringing any supporting material. Accordingly he deleted this addition also. 19. Aggrieved by the orders passed by Ld CIT(A), both the parties are in appeal before us on the issues narrated earlier. 20. The Ld D.R submitted that the Ld CIT(A) was not justified in reversing the decision of the AO and allowing exemption u/s 11 of the Act. He submitted that the search action has shown that the assessee has not applied its income for the objects of the trust. When this fact was confronted by the search team, the assessee has agreed for addition of ₹ 25.00 crores. Further, the AO has also noticed that the assessee has diverted funds in violation of sec.13(1)(c) r.w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption u/s 11 of the Act. 24. The Ld A.R, on the contrary, submitted that the assessing officer has added ₹ 993 lakhs, ₹ 4333 lakhs and ₹ 476 lakhs respectively in AY 2012-13, 2013-14 and 2014-15. However, the AO has not given the basis for arriving at the above said amounts in the assessment orders. He submitted that the above said additions have been made on the reasoning that the assessee has incurred construction expenses by way of cash. He submitted that there is no bar in incurring construction expenses in cash, since they are capital expenses and further the provisions of sec.40A(3) shall not apply to the assessee. He submitted that the assessee has accounted for all the expenses including those incurred by paying cash in the books of accounts. Entire expenses have been incurred for construction of buildings only for medical college. Further, all the expenses are duly supported by vouchers and the books of accounts of the assessee have been audited. He submitted that the auditors have not found any deficiency either in the maintenance of vouchers or in books of accounts. Accordingly, he submitted that there is no reason to hold that the expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the amount of application of income on the reasoning that the assessee may not be in a position to furnish vouchers. However, the assessee has clarified in its letter dated 14-12-2015 furnished before the AO, that the assessee has offered so at the time of search, since he was under the opinion that the assessee could not furnish all the related evidences in connection with the expenditure incurred for construction of the college and hospital. It was reiterated that the expenditure was actually spent by the assessee and it has been duly recorded in the books of accounts of the assessee trust. It was also clarified that the assessee had accepted for the disallowance of ₹ 25.00 crores for the sake of buying peace from the department. Accordingly, it was contended that there was no violation of the objects of Trust and hence the question of withdrawing exemption u/s 11 of the Act does not arise. Accordingly, the assessee had requested the AO to drop the proposal. 27. The Ld A.R submitted that the assessing officer did not make addition of ₹ 25.00 crores in aggregate surrendered by the assessee in the statement taken u/s 132(4) of the Act in AY 2010- 11 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, he added the Development fee collections as income of the assessee. He has also taken the view that such collections would violate constitutional provisions and hence non-charitable in nature. The Ld A.R submitted that the AO has passed rectification orders u/s 154 of the Act subsequently and deleted the additions of Development fees made by him in all the years. He submitted that the assessing officer has placed his reliance on statement taken from a person who claimed himself to be the counsellor of the assessee and also a staff of the assessee. However, the AO did not allow the assessee the opportunity of cross examining them and hence the assessing officer could not have placed his reliance on their statements. He submitted that the AO has issued letters to 17 donors, but did not get proper reply. He submitted that the AO left his investigation at that stage and did not lead it to logical conclusions. He submitted that the AO has not brought any material on record to show that the assessee has collected capitation fees. He submitted that the development fee represents voluntary donations, which is proved by the fact that the fee so collected from people varies in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t point of time. He submitted that the assessee has since duly accounted for all the expenditure in the books of accounts, which has also been duly audited. Accordingly he submitted that the basis on which the amount of ₹ 25.00 crores was offered by the assessee no longer exists. (c) He submitted that the assessing officer did not make addition of ₹ 25.00 crores in the assessment orders passed by him for AY 2010-11 to 2013-14. It is the Ld CIT(A) who has added the amount of ₹ 25.00 crores in aggregate in the above said years. He submitted that the addition was made by Ld CIT(A) only for the reason that the assessee has agreed for the addition. The Ld A.R submitted that the assessee had agreed for reduction of amount from the amount of application of income and did not agree for addition to total income. (d) The LdA. R submitted that the Hon'ble Supreme Court has held in the case of Pullangode Rubber Produce Co. Vs. State of Kerala (1973)(91 ITR 18) has held as under:- An admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. It is open to the person who made the admission to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds construction only and this fact has not been disproved by the AO. He further submitted that the AO, on the contrary, has not given any basis for arriving at the figure of ₹ 58.02 crores added by him in AY 2012-13 to 2014-15. Hence the Ld CIT(A) has held that the addition so made by the AO was adhoc and without any basis. 34. At this stage, the bench asked the Ld D.R to provide the basis on which the AO has arrived at the figure of ₹ 58.02 crores, which was added in AY 2012-13 to 2014-15. The Ld D.R submitted that the relevant materials were not available with him and sought two weeks time to furnish the same. Accordingly, the Ld D.R was given time up to 26-06-2019 to furnish the basis of arriving at the figure of ₹ 58.02 crores. However, till date, the revenue has not furnished any details relating to the same. 35. We heard rival contentions and perused the record. The assessee herein is a charitable institution registered u/s 12AA of the Act. Hence the provisions of sec.11 to 13 shall apply to the assessee for computation of income. Under section 11 of the Act, the income derived from property held under trust wholly for charitable or rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 ₹ 6.00 crores 2012-13 ₹ 7.50 crores 2013-14 ₹ 7.50 crores ------------ ₹ 25.00 crores ========= The assessee has agreed for disallowance of above said amounts from out of Application of income for the purposes of sec.11(1)(a) of the Act, meaning thereby, the assessee intended that the above said amounts should be reduced from the amount claimed as applied for the objects of the trust, i.e., it was not the intention of the assessee to offer the above said amount as its undisclosed income, which would warrant separate addition. In fact, the question of undisclosed income shall not arise in the facts of the present case. The assessee has also furnished revised computation of income on 14.12.2015 along with a detailed explanation, which was extracted earlier by us. However, it is pertinent to note that the assessing officer did not make above said additions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the other issues may be decided first, since the decision taken on those issues would help to decide the above said issue. Accordingly, we shall first take up the issue of addition of ₹ 58.02 crores made by the AO in AY 2012-13 to 2014-15. The AO has initially observed as under in the assessment order:- During the course of search and seizure operations u/s 132 of the I T Act 1961 on 18-07-2013, several instances of payments made for non-specified purposes in cash to contractors, other related concerns, to promoters etc were found. The year wise break up is as under: Asst. Year Amount 2012-13 9.93 crores 2013-14 43.33 crores 2014-15 4.76 crores --------- 58.02 crores ======= The assessee furnished a reply dated 14.12.2015 stating that it has maintained proper books and all the expenditure has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eys spent on buildings. No other particular expenditure has been referred to, nor has the concerns to whom payments are made have been mentioned. Quoting of the statement recorded from the Managing Director during search demonstrates that the Assessing Officer concentrated on cash spent for construction only. No other purpose for which huge cash has been spent has been mentioned in the assessment order. Therefore, the addition made in the assessment order and the addition to building is compared below:- Asst. year Additions made By AO Spent on building as per Balance Sheet Work in Progress 2012-13 9,93,00,000 59,86,33,201 5,18,36,069 2013-14 43,33,00,000 10,43,89,317 8,78,50,636 2014-15 4,76,00,000 18,62,46,418 2,44,75,837 48. For the assessment year 2013-14, when the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng buildings for its medical college during the years relevant to AY 2010-11 onwards. We have noticed that the amount spent on construction is treated as application of income for the objects of the trust and hence would qualify for exemption u/s 11 of the Act. We have noticed that the assessee has spent its income derived from property held under the trust on construction of buildings and accordingly claimed the same as application of income. The case of the assessing officer is that, during the course of search proceedings, several instances of payments made in cash to contractors, other related concerns, to promoters etc., were found. The AO has taken the view that the cash payments so made represent income applied for non-specified purposes.Accordingly he has proceeded to add ₹ 58.02 crores to the total income in AY 2012-13 to 2014-15.However, as observed by Ld CIT(A), the assessing officer has not listed out the details of such payments, which were given for non-specified purposes. Even though, the assessing officer has stated that the payments have been made to contractors, other related concerns, to promoters etc., the Ld CIT(A) has concluded that the impugned amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has also observed so. Hence the revenue was asked to furnish the details as to how the above said amounts were arrived. As noticed earlier, the revenue could not furnish the details. 45. Hence, we are of the view that the Ld CIT(A) was justified in holding that the addition of ₹ 9.93 crores, ₹ 43.33 crores and ₹ 4.76 crores made in AY 2012-13 to 2014-15 respectively is without any basis and without pointing any particular violation in respect of any particular item of expenditure. We have also noticed that the assessing officer has not rejected the books of accounts. The submission of the assessee is that its books of accounts have been audited and the auditors have not found out any deficiency in the maintenance of books of accounts or vouchers. In our view, there is merit in the above said submissions and hence the AO was not justified in ignoring the books of accounts. Another important point we notice is that the assessing officer has accepted the fact of application of income towards construction of building, but chose to reject only a portion of expenses incurred on construction on the reasoning that the same has been incurred by way of cash. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec.11(1) and sec.11(2), since it is the AO who has held that the payments made in cash should be considered as payment for non-specified purposes. It is also pertinent to note that the provisions of sec. 13 of the Act are not applicable to the alleged application for non-specified purposes . Accordingly, we are of the view that the AO was not justified in assessing the income so considered as spent for nonspecified purposes , as it is against the scheme of taxation of Charitable trusts. 47. In the instant case, the AO has added the impugned amount of ₹ 58.02 crores, as if it were undisclosed income of the assessee, which is not legally correct.In our view, the amount so applied for purposes other than the objects of the trust shall not represent undisclosed income of the assessee, since there is difference between receipt of income and application of income . The former is generation of receipts and the later is spending of those receipts. In any case, we have held that there is no basis for making the addition of ₹ 58.02 crores in AY 2012-13 to 2014-15. Accordingly, we are of the view that the Ld CIT(A) was justified in cancelling the above said additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Rule 46A by admitting additional evidences. However, the Ld A.R submitted the assessee has ascertained the correct nature of contents of seized materials only subsequently and accordingly, it could offer proper explanations before the Ld CIT(A), i.e, the transactions recorded in the seized material represent transactions entered between M/s Hotel Solitaire and above said persons. We also notice that the assessee has produced bank statement of Hotel Solitaire to show that the transactions recorded in the seized material matches with the transactions entered in the bank statement. Hence the purpose of producing bank statement was only to show that the seized materials do not belong to the assessee. 51. We notice that the Ld CIT(A) has given a clear finding that the transactions recorded in the seized materials do not belong to the assessee. However, since the bank statements were not available before the AO, for the limited purpose of examining the bank statement we are restoring this issue to the file of Assessing officer. However, in principle, we agree with the view taken by Ld CIT(A) on this issue. 52. The next issue relates to the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red. Except the names and amounts and the allegation that cash withdrawals have been made, no other particulars are available. There is no reference to any seized material. The bank from which cash withdrawal was made, the date of withdrawal and when the amount was paid to the parties are all missing. Whether the cash withdrawal was made on a single day or is it the aggregate of the amounts withdrawn in a week, a month or a year has also not been specified. To cap it all, the Assessing Officer has made the addition with the caption Payments made to related persons . But in the discussion part, there is no mention about the purpose of alleged payments. Without such basic details, the Assessing Officer could not have put across to the appellant, whether the same have been entered in the books of account, much less question the violation of the provisions of sec.13(1)(c) and 13(3) of the Act. The withdrawal of cash from the bank is not unusual feature, that too for an institution of the size of the appellant. It is for the Assessing Officer to first find out the link between the cash withdrawal and the possible purpose for which the same has been utilized which has enured to the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons mentioned above. The AO should have furnished the break-up details and he himself could have compared the said details of cash withdrawals with the books of accounts in order to ascertain as to whether the impugned withdrawals were actually given to the above said persons or not. The AO could have also asked explanations from the assessee by furnishing the breakup details. The AO has not carried out any of the above said steps. On the contrary, it is the submission of the assessee that all cash withdrawals made from the bank have been duly accounted for in the books of accounts and no payment, as alleged by the AO, has been made to the above said three persons during the year relevant to AY 2013-14. According to the assessee, it has furnished the above said explanations on the basis of books of accounts. Hence we are of the view that there is merit in the contention of the assessee that the AO has made the impugned addition on surmises and conjectures.Accordingly, we are of the view Ld CIT(A) was justified in deleting this addition. 56. The next issue relates to the rejection of exemption claimed by the assessee u/s 11 of the Act. The AO held so by considering the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse to the appellant, should be put across to the appellant to rebut the same, as otherwise the conclusion would be one-sided. The Assessing officer has himself after being satisfied about the accounting of Development fees and bringing into the books of account deleted the addition made in the assessment in his rectification order passed later, which will be adverted to in the subsequent part of this order. With regard to siphoning off of funds in violation of Section 13, the same has been dealt with in the latter part of this order. There is no doubt there is a prohibition contained in Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984 to collect capitation fees by educational institutions and the authorities have been empowered to inspect, enquire and investigate as to whether an institution is collecting capitation fee in contravention of the provisions of the said Act. But the power of inspection etc., is vested with Government of Karnataka. The Income tax Act does not refer to the source of income, but prescribes the manner in which income has to be applied to meet the objects of the Trust. The benefit of Section 11 of the Act can be rejected on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Islamic Academy of Education vs. State of Karnataka (2003) 6 SCC 697, the State of Karnataka has fixed certain percentage of seats to be filled on merits, and a small percentage has been left to be filled up by Management Quota. The Management has to have some discretion in order to provide infrastructure, laboratory, hospital, faculty etc., to run the institutions to the requisite standard. The Assessing Officer has further referred to the decision of ITAT Hyderabad in the case of Vodithala Education Society vs. ADIT (2008)(20 SOT 353), wherein the ITAT has referred to the decision of the Madras High Court in the case of T.Devasahaya Nadar vs. CIT (51 ITR 20). The appellant has brought out in its written submissions a plethora of case laws to meet the points raised by the Assessing Officer. The very same Madras High Court in the case of COMMISSIONER OF INCOME TAX vs. BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST (2015) 374 ITR 0274 (Mad) has held that so long as there is no involuntary nature of collection, exemption to the trust cannot be denied. The observation of the Madras High Court is extracted below: 7.7 In our considered opinion, based on the loose sheets and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of the Assessing Officer, as has been rightly held by the Commissioner of Income Tax (Appeals) and the Tribunal, is not supported by documents, but on the basis of Assessing Officer's inference. It cannot be now stated that something was not furnished, nevertheless, he tallied all the materials and came to the conclusion as stated above. If the Assessing Officer has tallied the figures then the assessees case of actual contribution to Trust has to be accepted. It has been shown in the return of income. A bald statement in paragraph (7) of the assessment order that the assessee is not carrying on charitable activities for the purpose of Section 13 read with Section 11 of the Act appears to be the mainstay of the department's case. 7.10 In effect, it is clear that the authority has confused himself with the admission of students in management quota with the carrying on activities of the trust. The distinction is obvious that if the department wanted to make out a case of violation of Section 13 of the Act by the trust, it cannot be based on the perception of the Assessing Officer that donations to the trust are not voluntary. We hasten to add that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is in the nature of Capitation fee, since it is over and above the fees prescribed by the Government. However, the submission of the assessee is that the development fee so collected represents voluntary donation given by the donors. The Ld CIT(A) has given a finding that the assessee has not received development fee from all the students and further the quantum of donation varies from one person to another. In the instant case, the AO has not brought on record any credible material to prove that the donations were not voluntary. The AO had placed his reliance on the statement given by two persons named Shri K J Pramod and Sri Shivarame Gowda. However, the AO has not allowed the opportunity of cross examining them. Further the statements so given by them is contrary to the books of accounts, i.e., no evidence was found to show that the assessee has collected money outside the books of accounts. It is stated that all the amounts collected by the assessee has been duly accounted for in the books of account. Hence the AO could not have placed his reliance on the statements so given by them. The Ld CIT(A) has observed that the prohibition to collect capitation fee has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to question no.6, Shri G Dayanand has stated as under:- In my submission earlier, I had admitted ₹ 4.99 crore on account of cash deposits in bank account of my proprietorship concern, investment in jewellery and watches I wish to confirm the same. Further, I wish to admit undisclosed income on account of investments in watches as disclosed above in reply to Q3. Also on the basis of issues discussed pertaining to the trust, I wish to admit that I may not be able to prove satisfactorily the utilization of funds which have been made in cash. Over all, I wish to admit an amount of ₹ 25 crores being disallowance of expenses and amounts made for construction in the hands of the trust for the different assessment years on the basis of cash withdrawals made and other cash expenses Consequent to the admission so made, the assessee furnished a letter dated 14-12-2015 along with a revised computation of income for assessment years 2010-11 to 2013-14 reducing following amounts from application of income . Asst. Year Amount 2010-11 ₹ 4.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64. Before Ld CIT(A), the assessee pleaded that the admission of ₹ 25.00 crores was made by the Chairman on mistaken notion on both fact and law. However, Ld CIT(A) noticed that there was long gap between the date of declaration and the date of submission of revised computation of statement before the AO. He also noticed that the assessee has also not retracted the statement so given. He also took the view that the assessee has estopped the AO from making further investigation by making such admission. Accordingly, he held that the addition of ₹ 25.00 crores in aggregate as admitted by the assessee for AY 2010-11 to 2013-14 should be added to the total income of the assessee in the above said years. Accordingly, he directed the AO to make addition to the extent of ₹ 25.00 crores in aggregate in AY 2010-11 to 2013-14. 65. Since the above said amount of ₹ 25.00 crores related to construction of buildings, the Ld CIT(A) also held that depreciation is not admissible on the above said addition. Accordingly, he directed the AO to add 10% of the addition agreed towards building for various years towards depreciation disallowance. He also directed the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenses incurred by the assessee towards construction of buildings. 68. It is the submission of the assessee that all the expenses incurred by it in cash towards construction of buildings have been duly recorded in the books of accounts. All of them are supported by vouchers and bills also. The books of accounts have been audited and the auditors have not found any deficiency in the maintenance of books and vouchers. Hence, while filing revised computation of income on 14.12.2015 before the assessing officer, the assessee has stated that the expenses were actually spent and recorded in the books of accounts and the Chairman has agreed for disallowance for the sake of buying peace with the department. However, in the assessment order, the assessing officer has observed as under while rejecting the submission of the assessee:- 3.6 The explanation of the assessee and its submissions are taken cognizance of along with the evidences found and seized during the course of the search operations conducted. The explanation of the assessee that the said expenditures were actually spent by the assessee and recorded the same in the books of accounts of the trust mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es only for the reason that the assessee has admitted the same in the statement taken u/s 132(4) of the Act and further the assessee has not retracted the same. The question that needs to be addressed is whether the addition could be made merely on the basis of admission made by the assessee in the statement recorded u/s 132(4) of the Act? 71. Before us, the Ld A.R placed his reliance on the decision rendered by Hon'ble Supreme Courtin the case of Pullangode Rubber Product Co. (supra), wherein it was held that the admission may be an important piece of evidence, but the same is not conclusive. It is open to the person who made the admission to show that it was incorrect. We may also refer to the decision rendered by Hon'ble Supreme Court in the case of CIT vs. V. MR.P Firm (1965) 56 ITR 67, wherein it was held that the principle of estoppels will not against the Income tax Act. The relevant observations are extracted below: The contention is that the assessees having opted to accept the scheme, derived benefit there-under, and agreed to have their discharged debts excluded from the assets side in the balance-sheet subject to the condition that subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field. 73. The Hon'ble Calcutta High court in case of CIT V. Bhaskar Mitter (73 Taxmann 437) has held as under: 8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no scope for presuming that the said expenses were not spent for attaining objects of the trust. If that was real position, then it is the duty of the assessing officer to give a finding with corroborative evidences that the amount claimed to have been spent for construction of buildings were not actually spent for that purpose, but diverted for some other purpose. The assessing officer has not done so. In fact, for the above said reasons only, the Ld CIT(A) has deleted the addition of ₹ 58.02 crores made by the assessing officer, which included the above said amount of ₹ 25.00 crores also. Hence, the Ld CIT(A), after deleting the addition of ₹ 58.02 crores, was not justified in sustaining addition to the extent of ₹ 25.00 crores simply for the reason that the assessee has accepted the same in the statement recorded u/s 132(4) of the Act. We have noticed that the assessee has submitted before the Ld CIT(A) that the said admission was given on wrong notion on fact and law. Before the AO also, the assessee has submitted that all the expenses have been duly accounted for in the books of accounts. Accordingly, we are of the view that the assessee has establi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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