TMI Blog2024 (1) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed by his employees during the course of employment. However, when an employee does anything that is neither directed nor controlled by the employer, then the said action of employee cannot be considered to be within the scope of his employment. In that kind of situation, the employer is not liable for the action of the employee and hence is not liable for damages. A.R further submitted that the relevant news paper report is placed at pages 279 280 of paper book relating to AY 2015-16. This information further supports the case of the assessee trust that it is not collecting capitation fees and only the employees might have collected money without its authority. We notice that the co-ordinate bench of Tribunal, in the case of Anil Mahavir Gupta [ 2016 (10) TMI 163 - ITAT MUMBAI ] has considered the issue as to whether the documents seized from employees could be relied upon for making addition in the hands of the assessee. It was decided in favour of the assessee As statements/materials do not vindicate or link the information/evidences found from the employees. The revenue also did not find/seize any credible material from the assessee trust to corroborate the informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on presumptions. In that view of the matter, it cannot be said that the trustees have siphoned off money belonging to the assessee trust. Hence it cannot be said that there was violation as mentioned in the provisions of sec.13 of the Act. Assessee should be granted exemption u/s. 11 of the Act in all the years under consideration - we hold that the corpus donations received in the form of development fees and also other corpus donations are eligible for exemption u/s. 11 of the Act. AO did not allow capital expenditure incurred by the assessee as application of income, since he had denied exemption u/s. 11 - Since we have restored the exemption u/s. 11 to the assessee, the income of the assessee for all the years under consideration has to be computed in accordance with the provisions of sec.11 of the Act. Hence the capital expenditure incurred by the assessee is required to be treated as application of income. Thus direct the AO to allow the above said capital expenditure incurred by the assessee as application of income u/s. 11(1) of the Act. Levy tax u/s. 115BBE - As the income has to be computed for all the years in terms of sec.11 of the Act. Accordingly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee trust. Hence there is no reason to make this addition in the hands of the assessee on substantive basis, since the onus to explain the cash balances will lie upon Shri Pratap Patil and Shri Unmesh Khanvilkar. We noticed that both these persons have owned up the cash balances and offered the same as their income under Income declaration Scheme, 2016. Accordingly, we direct the AO to delete both the above said additions in AY 2017-18. - Shri B.R. Baskaran (AM) And Shri Pavan Kumar Gadale For the Assessee : Shri Neelkanth Khandelwal For the Department : Shri K.C. Selvamani ORDER PER BENCH :- The assessee has filed appeals for AY 2013-14 to 2017-18. The revenue has filed appeals for AY 2014-15, 2016-17 and 2017-18. All of them are directed against the common order dated 15-12-2022 passed by Ld CIT(A)-49, Mumbai. Since most of the grounds urged by the assessee are common in nature and since they arise out of common set of facts, all these appeals were heard together and are being disposed of by this common order, for the sake of convenience. 2. The facts relating to the case are set out in brief. The assessee is a charitable trust. It has been gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal expenditure as application of income, (c) rejected claim for set off of carry forward amount of deficit as application, (d) rejected depreciation on opening balance of assets etc. In some of the years, the AO made certain other additions also out of which some were added on substantive basis and others were added on protective basis also. We shall deal with all of them in the ensuing paragraphs. 4. In the appellate proceedings before Ld CIT(A) also, the assessee contended that it has not collected capitation fees as alleged by the AO. It submitted that the employees might have done so without the knowledge and authority of the trustees. However, the Ld CIT(A) also did not accept the contentions of the assessee and accordingly confirmed additions relating to Capitation fees. Consequent thereto, he held that the protective additions made by AO are not required. Accordingly, he deleted additions made on protective basis and also granted partial relief in respect of certain additions. The Ld CIT(A) also confirmed the denial of exemption u/s. 11 of the Act and consequential additions. The assessee had also raised certain legal contentions before Ld CIT(A). All of them we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of cash. (b) He submitted that the capital fees/donations are not accounted in the books of accounts. (c) He also explained the process of collection of capitation fees as under in answer to Q no.15:- Sir, the students/parents approach the admission cell department which in front of the Presidents Office in Dr D Y Patil University Building. The Students/parents first meet the receptionist who directs the parents/students to people sitting in the administration cell department. There are four people who sit in the administration cell department namely Tukaram Patil, Dr Unmesh Khanvilkar, D D Kolte and myself. We are told in advance about the rates (payment per seat) of seat in different courses by Mr Vijay Patil (President, D Y Patil University, Nerul) and Mrs. Shivani Patil. These rates are told to us verbally on weekly basis. Once the student agrees to pay the donation/capitation in cash we ask for Xerox of the Basic Documents like college leaving certificate and mark-sheet. The names of students and the capitation fee that they are willing to pay are discussed with Mr. Vijay Patil (President, D Y Patil University, Nerul) and Ms Shivani Patil. The capitation fee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese files have to be read in totality, meaning thereby, it has to be taken that the payments mentioned in another file should also be considered to be true. With regard to certain details, he admitted that he received names only from Ms. Shivani Patil and did not collect any cash as capitation fees. (i) Based on the details found in the pen drive and diary, the assessing officer collated the amount of capitation fees year wise as under and added the same in the hands of the assessee in the respective assessment years:- Financial Year Asst. Year Amount (Rs. In lakhs) 2012-13 2013-14 229 2013-14 2014-15 1848 2014-15 2015-16 319 2015-16 2016-17 104 2016-17 2017-18 1330 The Ld CIT(A) confirmed the additions in AY 2013-14 to 2016-17 (FY 2012-13 to 2015-16). In AY 2017-18, the assessee contended before Ld CIT(A) that there is double addition to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unmesh Khanvilkar. He is said to be a close confidant of Shri Vijay D Patil. He is an employee of a college run by assessee trust. He was also subjected to search and substantial amount of cash and digital data relating to capitation fee were found and seized. He had kept cash at different places. Two laptops were found and seized from his residence. He also admitted collection of capitation fees from students. The gist of observations made by the AO is summarized below:- (a) An aggregate amount of Rs. 19,40,26,500/- in aggregate was seized from his residence at Vashi, residence at Chembur (E), residence of Santosh Navalkar (Driver of Shri Unmesh Khanvilkar) and Room no.702 of P G Hostel in D Y Patil University. (b) He has admitted that a sum of Rs. 40.00 lakhs only belongs to him and the remaining amount of cash belongs to the assessee trust. He admitted that the cash represented capitation fees collected from 2014 onwards from students. He also admitted that the capitation fees have been received as per the directions given by Shri Vijay Patil. (c) He also gave details of capitation fees charged for each of the course and also stated that the capitation fee is determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. My role in whole process is of taking basic details of students interested in paying capitation fees and getting the same approved from Mr Vijay Patil and Mrs Shivani Patil and subsequent collection of cash. Further I spent/disburse the cash as per direction of Sh Vijay Patil. (We have extracted the answer given by Shri Pratap Patil earlier to the similar question posed to him. It can be noticed that this reply of Shri Unmesh Khanvilkar is verbatim copy of the reply given by Shri Pratp Patil with same grammatical mistakes and different type of salutation to the name of trustees.) (f) With regard to cash kept with his driver named Shri Santosh Narvekar, he stated that he received a phone call from Shri Vijay Patil directing him not to keep cash and documents in D Y Patil Campus on the night of 26/7/2016, i.e., the prior to the date of search. Hence he kept the cash with his driver. (g) He also gave the details of range of capitation fee that is being collected for various courses. With regard to the capitation fees collected, he submitted that he is looking after collection from academic year 2014- 15 onwards. He also submitted that the details of capitation fee col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in cash. The observations of AO in this regard are summarized below:- (a) Shri D D Kolte explained meticulously the contents of the loose papers. He admitted that the capitation fee is accepted in cash for admission in BAMS, Architecture and physiotheraphy courses. (b) He explained the process of taking capitation fee or donation as under:- Sir, the students/parents approach the admission cell department which in front the Presidents Office in Dr D Y Patil University Building. The Students/parents first meet the receptionist who directs the parents/students to people sitting in the administration cell department. There are four people who sit in the administration cell department namely Tukaram Patil, Dr Unmesh Khanvilkar, Pratap Patil and myself. We are told in advance about the rates (payment per seat) of seat in different courses by Mr Vijay Patil and Mrs Shivani Patil. These rates are told to us verbally on weekly basis. Once the student agrees to pay the donation/capitation in cash we ask for Xerox of the Basic Documents like college leaving certificate and mark-sheet. The names of students and the capitation fee that they are willing to pay are discussed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee trust herein and the same was assessed as income of the assessee in AY 2017-18. (f) Out of Rs. 2.74 crores, the AO noticed that Shri D D Kolte has handed over a sum of Rs. 2.50 crores to Shri Tukharam Patil. Hence the remaining amount that could be available with Shri D D Kolte was Rs. 24 lakhs. We noticed earlier the search official found cash of Rs. 96.30 lakhs from the car of Shri D D Kolte. The AO took the view that above said cash of Rs. 96.30 lakhs consisted of cash of Rs. 24 lakhs belonging to the assessee and the balance amount of Rs. 72.30 lakhs belonging to Ramrao Adik Education society. Since the AO made addition of Rs. 2.74 crores towards the collection of capitation fees by D D Kolte, no separate addition was made towards cash amount of Rs. 96.30 lakhs seized from him. 11. We shall now take up the case of Shri Sunil Maruti Gaikwad. He is the Registrar for M/s Ramrao Adik Education Society, which runs an Engineering College. The observations of the AO in respect of Shri Sunil Gaikwad are summarized below:- (a) Shri Tukaram Patil has admitted that the cash matters of engineering college are being handled byShri Sunil Gaikwad. (b) He also explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their possession. (e) The denial of Shri Vijay D Patil about receipt of capitation fee is not correct. He has no answer/explanation for the cash seized from his employees. Explanation of gifts received from marriage with regard to cash and jewellery found in his house is not correct. The source of the cash and jewellery shall be unaccounted capitation fees only. It is in direct violation of sec. 13(1)(c) and sec. 13(2)(g) r.w.s 13(3) of the Act as the capitation fees collected by the assessee trust has been diverted for the persons specified u/s. 13(3) of the Act. (f) In the survey conducted on 3 students/parents, they have accepted payment of capitation fees. (g) These employees did not complain about any coercion or pressure put in by the search officials. No police complaint was made. Subsequently, the AO again examined all these employees u/s. . 131 of the Act during the course of assessment proceedings. These employees said that they were not well when the statements were taken u/s. . 132(4) of the Act. They also said that their employer has not taken any action against them yet. The AO also confronted the admissions made by these employees before Shri Vijay D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Smt Shivani Patil. The AO noted that she could not explain their sources properly. But no separate addition of these two items was made in the hands of the assessee. It is also pertinent to note that Smt Shivani Patil has also retracted her statement and the same was ignored by the AO. 15. The revenue also seized cash of Rs. 65.00 lakhs from a person named Shri Bhagirath Patil. A statement was taken from him on 29-07-2016 u/s. 132(4) of the Act. He admitted that the said cash belongs to Smt Shivani Patil and it was handed over to him by her on 26-07-2016 for safe custody, i.e., one day prior to the date of search. However, he owned up the money later in another statement taken from him on 26-12-2018, wherein he explained that the said cash represented his cash in hand as per return of income, which included his agricultural income. He also filed revised return of income for AY 2016-17 and proved availability of cash balance with him. The AO, however, did not accept the same. He took the view that the above said amount of Rs. 65.00 lakhs has been generated through collection of Capitation fees only. The reason is that Smt Shivani Patil had stated in her statement (Q No.60) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Capitation fee on the basis of information seized from various employees, he took the view that no separate addition of Rs. 30.20 is called for. Accordingly, the AO assessed the amount of Rs. 30.20 crores on protective basis to save the interests of revenue. (b) The AO also referred to the documents seized from Shri Pravin Patil, the Chief Administrator of another trust M/s Ajeekya D Y Patil University, Pune. The said documents revealed that he has received a sum of Rs. 25.00 crores from a person noted as TP during the financial year 2015-16 relevant to AY 2016-17. The said person was identified as Tukaram Patil by Shri Pravin Patil. Accordingly, the AO took the view that the source of payment of Rs. 25.00 crores is the capitation fee collected by the assessee trust and assessed the same on protective basis in AY 2016-17. It is pertinent to note that both Smt Taruna Maheswari and Shri Pravin Patil have retracted the statement given by them u/s. 132(4) of the Act. The AO declined to accept the retraction for the reason that they had given the statement earlier without coercion and they did not lodge any complaint with Police people. Accordingly, the AO held that the retr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (g) It is the case of the AO that many parents have admitted payment of donation to various institutions belonging to the assessee s group. A list of 10 students is given at pages 137 138 of the assessment order relating to AY 2017-18. Out of them, Shri Hetal Kumar Joshi, Dr Shreyak Prafulla Kadu, Shri Shahnawaz Khairaj and Shri Tariq Ahmed Ansari have admitted payment of cash to the assessee. However, they have also admitted that the cash was returned to them, since they did not take admission. Remaining parents had given donation by way of cheque only. Accordingly, this fact also reinforces his conclusion that the assessee has collected capitation fees. (h) During the search conducted in the case of Ajeenkya D Y Patil Group, it was noticed that they were obtaining bogus bills towards purchases. During the course of their assessment proceedings, certain evidences indicating bogus purchases made by the assessee trust were found. The total value of bogus purchases was Rs. 99.51 lakhs. However, the assessee submitted that the purchases to the tune of Rs. 84.50 lakhs were not bogus. The AO did not accept the same and added the amount of Rs. 84.50 lakhs as income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion that the assessee-trust was collecting capitation fees. On the contrary, the Ld D.R fully relied upon the assessment order and submitted that the AO has made thorough enquiries relating to this issue, i.e., the AO has brought on record a number of materials and also relied upon the statements given by various persons. Accordingly, the Ld D R submitted that all of them establish the fact that the assessee was collecting capitation fees. 19. The nature of materials collected by the revenue and their place of seizure has been tabulated by Ld A.R as under. We notice that the AO has relied upon these materials in order to conclude that the assessee was collecting capitation fees by way of cash from students for giving admissions to them. S.No. Name of Employee Items seized Place of seizure 1. Shri Pratap Patil Pen drive and brown diary Residential premises of Shri Pratap Patil 2. Shri Tukaram Patil 2 pen drives First pen drive kept with Narendra Gaikwad and Second pen driv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We noticed that the AO had relied upon on the evidences seized from various persons. He has also relied upon the statements given by them. Based on the above, the AO has drawn adverse inferences against the assessee and has also come to the conclusion that the assessee has received capitation fees for admitting students. The assessee, however, has contended that the inferences drawn by the AO are not correct. The Ld A.R advanced his arguments to rebut the observations made/presumption drawn by the AO. The contentions of the assessee in this regard are summarized below in respect of each of the employees:- (A) PRATAP PATIL:- (a) The pen drive and diary have been seized from the residence of Shri Pratap Patil. It is not mentioned anywhere that both the above said items belong to the assessee trust. Hence they should be considered as his personal items. The revenue did not find any material with the assessee which could link it with the documents seized from Shri Pratap patil. (b) Blank cheques are also found at his residence only. He has stated that the cheques were collected as security for the balance amount due from students. If the assessee trust is collecting capitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee trust, then the trust will not take the risk of allowing Shri Pratap Patil to keep the secret data with him, as there is a possibility of manipulating the entries to his advantage and to the detriment of the assessee trust. (h) Though Shri Pratap Patil has originally stated that the capitation fees are collected on behalf of the assessee trust, later he has filed retraction affidavit on 16-08-2016 (within 15 days from the date of conclusion of search). The retraction has also been confirmed by him in the statement taken u/s. 131 of the Act during the course of assessment proceedings. Hence the statement given by him could not have been relied upon by the AO. (i) While the AO has accepted the statement that the capitation fee has been collected on behalf of the assessee trust, he did not accept his retraction. Both admission of certain information and retraction of the same have been done by the concerned employee. The assessee trust is not concerned as to what he said in admission/retraction. Hence assessee-trust cannot be subjected to addition on the basis of the statement of the employees. (j) Shri Pratap Patil has owned up the cash of Rs. 74,96,500/- se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported by any other material. No enquiry was conducted by the AO with those five students to find out its veracity. (e) Statement of oath dated 31-07-2016 has been signed by witnesses on 30-07-2016. Hence the statement loses its credibility. (f) Though Shri Tukaram Patil has originally stated that the capitation fees are collected on behalf of the assessee trust, later he filed retraction affidavit on 16-08-2016 (within 15 days from the date of conclusion of search). The retraction has been confirmed by him in the statement taken u/s. 131 of the Act during the course of assessment proceedings. (g) While the AO has accepted the statement that the capitation fee has been collected on behalf of the assessee trust, the AO did not accept his retraction. It is case of admission and retraction by the employee of the assessee trust. The assessee trust is not concerned as to what he said in admission/retraction. Hence assessee-trust cannot be subjected to addition on the basis of the statement of the employees. (h) Hence the entries found in the pen drives will not have any evidentiary value. Accordingly, both receipts and payments noted therein cannot be used against the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit. The donation was voluntary and it has been duly accounted for. (h) Though he has originally stated that the capitation fees are collected on behalf of the assessee trust, later he has filed retraction affidavit on 16-08-2016 (within 15 days from the date of conclusion of search). The retraction has been confirmed by him in the statement taken u/s. 131 of the Act during the course of assessment proceedings. (i) While the AO has accepted the statement that the capitation fee has been collected on behalf of the assessee trust, the AO did not accept his retraction. It is a case of admission and retraction of the employee of the assessee trust. The assessee trust is not concerned as to what he said in admission/retraction. Hence assessee-trust cannot be subjected to addition on the basis of the statement of the employees. (j) The AO has referred to a pre-printed form and statement on oath u/s. 131 of Mr Shahnawaz Kheraj. It is submitted that there is nothing written on this pre-printed note to suggest that the assessee-trust has been collecting capitation fees. (k) Shri Unmesh Khanvilkar has owned up the cash of Rs. 19.40 crores seized from him and declared the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal laptop. If they are within the knowledge of the assessee trust, then the trust will not take the risk of allowing him to keep the records, as there is a possibility of manipulating the entries to his advantage and to the detriment of the assessee trust. (b) Total cash of Rs. 2.49 crores was found from his locker residence of his attendant. If it belongs to trust, why should they keep the cash with him? (c) Though he has originally stated that the capitation fees are collected on behalf of the assessee trust, later he filed retraction affidavit on 16-08-2016 (within 20 days from the date of search). The retraction has been confirmed by him in the statement taken u/s. 131 of the Act during the course of assessment proceedings. (d) While the AO has accepted the statement that the capitation fee has been collected on behalf of the assessee trust, the AO did not accept his retraction. It is a case of admission and retraction of the employee of the assessee trust. The assessee trust is not concerned as to what he said in admission/retraction. Hence assessee-trust cannot be subjected to addition on the basis of the statement of the employees. (e) He has owned up the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking channels. Those donations cannot be considered to be Capitation fees. All the donations have been recorded in the books. (ii) Those parents, who had paid cash, have admitted that they have received cash from the trust. (iii) None of the parents has admitted that they have paid capitation fee to the trust. (iv) Shri Vijay Patil has also admitted that they used receive fees in cash also. (f) Statements taken from 3 more parents:- All the three parents have stated that they have given donations only and admission was obtained on merits. (g) Statements taken from driver (Mr Rajesh Sadashiv Sawant); Shri Sandeep Gopalrao Patil and Mrs Manasvi Naik. They are low level employees. How they can be aware of the intricate details of admission process?. Their statement was not taken on Oath. Hence the AO cannot rely on their statement. Shri Sandeep Gopalrao Patil and Mrs Manasvi have stated about the Mac Desktop of Shri Vijay Patil. The AO did not refer to the said computer in the entire assessment order. The AO also refers to the statement taken from Dr V R Badhwar, Dean. There is no mention about capitation fees. 21. The contentions of the assessee, as noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant portion of the written submissions is extracted below, for the sake of convenience:- 14.1. The impugned additions are based on seizure of (i) laptops (ii) loose papers (iii) pen drives and (iv) diary. Further, there is no dispute that all these evidences are found in the possession of others and not in the possession of the assessee. They are either print-out taken from laptops or loose papers. The name of the assessee-trust is not mentioned on any document found/print-out taken from the pen-drives/laptops, loose papers. Hence they have to be treated as dumb documents/documents having no evidentiary value. No addition can be made simply on the basis of notings on such sheets/loose papers in the absence of corroborative materials. No circumstantial evidence in the form of any unaccounted cash belonging to the appellants or investment outside the books was found during search. Further, even the diary was not found in possession of Trust and hence, it is submitted that, it cannot be considered as regular books of account maintained by the appellant-trust in absence of any such marking or name on the diary. 14.2. The appellants, from the very inception, have denied hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explain the documents seized from other persons, being the employees. Reliance is placed on following case laws: Startex (India) (P.) Ltd vs DCIT 84 ITD 320 (Mum) The presumption under section 132(4A) is in respect of the person in whose possession the books or documents are found. The use of the words to such person in the said section means the person in whose possession the books of account or documents are found. Clause (ii) of section 132(4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person in whose possession the books of account or the documents are found. Therefore, so far as the case of N.S. was concerned, the revenue authorities might presume that the books of account or documents found from his possession were correct. However, while utilising those documents in the case of any other person (i.e., the person other than N.S.), there could not be any presumption about the correctness of such books or documents. Therefore, the presumption under section 132(4A) is applicable only against the person in whose possession books of account or other documents are found an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was required to pay any on money after the date of the search. The AO merely considering the business relation between assessee and Arora Brothers presumed that since they have admitted payment of on money therefore, assessee might have also paid the on money. If Arora Brothers have not recorded any entry in their books of account as noted by the AO, how assessee could be blamed. The above conclusion of the AO is not supported by any material or evidence. The conclusion of the AO is purely based upon suspicion and surmises. It is settled law that suspicion howsoever strong may be could not take place of legal proof. 14.3 The AO has assumed that cash, papers and documents found in the possession of the employees actually belong to the assessee-trust. The AO has also assumed that the employees are acting at the behest of the assessee-trust. It is submitted that such an assumption by the AO is baseless, incorrect and hence, bad in law. There is no dispute that cash and other evidence are found from the residential premises of the employees. Further, wherever the cash and other evidence are found in the premises of the Institute, it was found in the control of the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the above observations. The underlined portion of the above passage supports the contention of Mr. Altaf Ahmed and rebuts that of Mr. Sibal that Mr 71/91 is only a memorandum for the entries made therein are totalled and balanced. We are, therefore, of the opinion that MR71/91 is a 'book of account' as it records monetary transactions duly reckoned. .. In response Mr. Sibal submitted that the evidence that has been collected during investigation only shows that the entries were made by J. K. Jain and that the Jain brothers had put certain signatures against some of those entries it there is no evidence whatsoever to prove that monies were actually paid by the Jains and received by the payees as shown in the entries, without proof of which no case, even prima facie, could be said to have been made out against any of them. According to Mr. Sibal and Mr. Jethmalani, learned Counsel for Shri Advani by more proof of a document the truth of the contents thereof is to proved and independent evidence for that purpose is required. In absence of any such evidence, they contended, no liability can be foisted under Section 34. The rationale behind admissibility o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 Madras 132] one of the learned judges constituting the Bench had this to say: S.34, Evidence Act, lays down that the entries in books of account, regularly kept in the course of business are relevant, but such a statement will not alone be sufficient to charge any person with liability. That merely means that the plaintiff cannot obtain a decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. he will have to show further by some independent evidence that the entries represent real and honest transactions and that the moneys were paid in accordance with those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in books of account, and I take it that any relevant fact s which can be treated as evidence within the meaning of the Evidence Act would be sufficient corroboration of the evidence furnished by entries in books of account if true. While concurring with the above observations the other learned Judge stated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in evidence under Section 34 are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, deleve into or decide upon the contention raised by Mr. Altaf Ahmed in this regard. Suffice it to say that the statements of the for witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he presumption shall apply to the person from whom the documents were seized. In Sheth Akshay Pushpavadan vs. DCIT (supra), it was held that the addition cannot be made on the basis of material seized from/statement given by a third party, unless those materials were corroborated with any other evidence and opportunity of cross examination was given. The Law on presumption given in sec. 132(4A) has been explained by Hon ble Delhi High Court in the case of CIT vs. Radico Khaitan (2017)(83 taxmann.com 375)(Delhi) as under:- 24. Section 132 no doubt mandates a presumption in respect of search and seizure operations; yet textually the presumption relates to material documents and books of account seized of from the assessee's premises and the presumption that can be made from it, not from materials seized and statement recorded, of third parties. Only if the materials that are sought to be relied upon emanate from the premises of the party subject to assessment, that the presumption can be drawn. This is evident from Sections 132 (4) and (4A) of the Act, which read as follows: Section 132 . (4) The authorised officer may, during the course of the search or seizure, examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni was not established through any objective material. It is now settled law that block assessments are concerned with fresh material and fresh documents, which emerge in the course of search and seizure proceedings; the revenue has no authority to delve into material that was already before it and the regular assessments were made having regard to the deposition, the inability of the revenue to establish as it were, that the assessee's expenditure claim was bogus, or it had underreported income and that it resorted to over invoicing and diversion of funds into the funds allegedly maintained by the UPDA, was not established. The findings of the Commission therefore cannot be faulted as contrary to law. The Hon ble Delhi High Court has explained that the presumption given in sec. 132(4A) could be applied only to the materials found with the searched person. If any material is found from some other person, the above said presumption could not be extended to the assessee. In that case, the revenue is under an obligation to establish that the information available in the materials is relatable to the assessee and allegation made in that material against the assessee has to be pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of assessment proceedings. Therefore, we fail to understand as to how the addition could be sustained in the hands of the assessee. It appears from the above circumstances that the department has made subsequent enquiries against the assessee in order to connect the assessee with the diary in question but such things are not permitted as is held by Bombay Bench of I.T.A.T. in the case of Sundar Agencies (supra). No addition could be made in the block assessment on the basis of assumption and presumptions. Merely some material is recovered during the search, no addition could be made in the hands of the assessee on the basis of some subsequent enquiries and that too purely on assumption and presumptions. The AO observed in the assessment order while making the addition that he made enquiries from the villagers. This was the main reason to make up the theory of the payment made outside the books of account on the basis of inference drawn on estimate basis. It is an admitted case that the villagers had a dealing with M/s Aadharshila Towers Private Ltd. for selling of their land. These transactions were not at all connected with the assessee. The villagers have not made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso, it has been reiterated that corroboration of material seized from other persons with any other independent material is necessary for making addition on the basis of materials seized from other persons. 28. In the instant case, all the documents/materials have been seized from the employees only. It has been categorically stated by the trustees of the assessee trust that have not authorized anyone to collect capitation fees. The trustee has also stated that the employees might have collected it without the authority of the trust. Under the principle of vicarious liability, the employer is normally liable for any act performed by his employees during the course of employment. However, when an employee does anything that is neither directed nor controlled by the employer, then the said action of employee cannot be considered to be within the scope of his employment. In that kind of situation, the employer is not liable for the action of the employee and hence is not liable for damages. We noticed earlier that Shri Pratap patil had stated that he has recorded transactions on instruction from Shri Abhijit Shirke. The Ld A.R submitted that the very same Shri Abhijit Shirke was ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count papers and on top of it is written Trial Data and that assessee had no knowledge as to who has written or printed the same. 11.3 The CIT(A) has considered the submissions put forth by the assessee and found that there was no material brought on record to establish that the seized papers belonged to the assessee. The CIT(A) also found that the seized documents do not indicate who is the recipient of the amounts mentioned and in what connection the money was paid. According to the CIT(A), merely because there is an account appearing in the account books of the assessee in the name of Mr. Suresh Agarwal, it would not lead to an assumption that the seized document reflect transactions between assessee and Mr. Suresh Agarwal. In fact, the CIT(A) infers that the document reflects transaction between Mr. Bharat G. Shah and Mr. Suresh Agarwal, as the document was found in the possession of Bharat G. Shah. Under these circumstances, CIT(A) has deleted the addition in the hands of the assessee. 11.4 Before us, the ld. Departmental Representative pointed out that the employee from whom the impugned loose papers were found is a trusted employee of the assessee and the notings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment seats reserved in each of the college specified above. Ans:- I don t know about the management seats for engineering college. This year the admission for Dental College have not been done. As per my knowledge, last year the seats were sold for typically 7 8 lakhs per seat. For MBBS the price is typically 30- 40 lakh. However for post graduate seats the prices is higher than MBBS. However, I don t know the exact figure. The management rates for Ayurveda and Physiotheraphy is typically 4-5 lakhs per seat as these are not sought after courses. However, it is the contention of the assessee that she has not mentioned about Capitation fee at all. She has only stated that the fees of management seats are higher than the regular seats. A perusal of the above said reply given by Smt Shivani Patil, in our view, does not show that she has confessed anything about collection of capitation fee. We notice that this aspect has been clarified by Shri Vijay Patil also in his statement in the following questions answers:- Q 8:- I am showing you the statement of Smt Shivani Patil recorded u/s. 132(4) from 27-07-2016 to 31-07-2016 wherein at Q.51 onwards it has been stated capitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the nature of Storage vault containing several files. Each file may contain different details and hence it may not be proper to hold that the contents of one file, if found to be correct then the content of other files are also to be considered as true. The opinion of the AO may be accepted, if the same file contains details of partly accounted and partly unaccounted transactions, which is not the case. Further, the assessee herein is contending that the collection of capitation fee is an un-authorised act of the employees. The assessee is not accepting the transactions noted down in the pen drive. Hence, we are of the view that the AO was not right in extending the interpretation given to one file to another file. The Ld A.R contended that Shri Pratap patil was having access to the records of the college and it is quite possible that he might have copied the file relating to receipt of fees by way of cheques. Accordingly, he contended that it does not mean that the information contained in other files should also be considered to be correct. In any case, since there is no material to link these payment details to the assessee, the same cannot be used against the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cellor, Controller of Examinations were also not questioned. (f) The AO had placed reliance on the statements given by the employees, trustee and certain employees of another trust. However, all of them have retracted the statements given by them. We notice that most of them have retracted within 15 days from the date of conclusion of search. The AO however rejected the retraction by holding that the same is an afterthought and without any reasoning. However, we notice that they have stated that they were under mental pressure when the statement u/s. 132(4) of the Act was taken from them and could not give proper reply. The Ld A.R also submitted that, since the employees have collected capitation fees without the authority of the assessee trust, naturally they would be under the threat of exposure. Hence, in order to save their skin, they might have stated initially that the capitation fees were collected upon the instruction of Shri Vijay Patil. Subsequently, when they reached proper mental state, they have filed retraction statements. The Ld A.R also submitted that the cash was recovered from the employees only and not from the assessee trust. The Ld A.R submitted that, it rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee trust. Both the above said parties have initially stated that they had received money from Tukaram Patil and others, but later retracted it. In any case, no contra entry was available in the record maintained by Shri Tukaram Patil. Further, the revenue did not examine Tukaram Patil with regard to the entries of receipt of cash noted by Taruna Maheswari and Pravin Patil. In any case, those transactions are between two parties and there is no other material to show that the said transactions, if at all true, were related to the assessee. The foregoing discussions would show that the above said statements/materials do not vindicate or link the information/evidences found from the employees. The revenue also did not find/seize any credible material from the assessee trust to corroborate the information/document seized from the employees. In respect of alleged receipt of capitation fee and in respect of payments recorded in the materials, the AO did not make enquiries with the payer/recipient of money. In the absence of any independent material to link/vindicate the information found from the employees, we are of the view that the AO could not have made additions on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cash of over Rs. 44 Lakhs from the residence of the Chairman of the Assessee Trust, it is not in dispute that the said sum has been assessed in the hands of the Chairman for the assessment year 2008-2009 and the same was received from the petrol pump business, the turnover of which is more than Rs. 30 Crores. Moreover, the Assessing Officer has accepted the disclosure of the seized cash as the income of the individual and, therefore, in our considered opinion, it cannot be said that assessee trust had accepted contributions by way of capitation fee. The said issue cannot be used both ways. The assessment of the undisclosed income at the hand of the individual ends the issue there. It has no relevance to the affairs of the Trust and there is no material to hold so. 7.7 In our considered opinion, based on the loose sheets and cash seized, which have been held as irrelevant to the present issue, it cannot be held that for all the assessment years the assessee received capitation fee for admission of students in the management quota. This is a perverse inference. Without conducting any enquiry in this regard to make allegation is unsustainable. The information obtained from the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer 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 no material to support the plea that the donations are not voluntary. 7.11 Having invoked Section 13, the mainstay of the case of the department should be based on the activities of the trust to plead that the same are not in consonance with Section 13 of the Act and, therefore, exemption under Section 11 of the Act should be denied, which we find is abysmally silent in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the loose sheets would have evidentiary value. On the contrary, in the instant case, no material was found/seized from the premises of the assessee. The materials were found at the residences of the employees. The assessee has categorically denied collection of capitation fees. The AO could not bring any material on record to link those materials with the assessee or to prove that the assessee only was indulging in collection of capitation fees. Accordingly, we are of the view that the decision rendered by Pune bench of Tribunal in the case of Sinhagad Technical Education Society (supra) is not applicable to the facts of the present case. (b) The Ld D.R also relied upon the decision rendered by Hon ble Delhi High Court in the case of CIT vs. Jansampark Advertising Marketing P Ltd (2015)(56 taxmann.com 286)(Delhi) and contended that the Tribunal may conduct proper enquiry, if the AO had failed to discharge his functions properly. In our view, this decision will also not apply to the facts of present case. We have noticed that there was no material to link the assessee with the materials seized from the employees and hence the very inference drawn by the AO was rejected by us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. We have noticed that the AO has rejected the books of accounts on the reasoning that the assessee has not accounted for capitation fees. Since we have held that there is no evidence to show that the assessee has collected capitation fees, the very foundation for rejecting the book results would fail. Accordingly, we hold that there was no justifiable reason to reject the books of accounts. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in all the years under consideration and hold that the books of accounts of the assessee trust should be accepted in all the years under consideration. 37. We have noticed that the assessing officer has rejected the claim for exemption u/s. 11 of the Act on the reasoning that the assessee cannot be considered to be a charitable trust, when it collects capitation fees. In the earlier paragraphs, we have held that there is no evidence to show that the assessee has collected capitation fees. Hence the reasoning given by the AO to reject the claim for exemption u/s. 11 would fail. We also notice that the registration granted to the assessee u/s. 12A of the Act has not been withdrawn. Hence, under the provisions of sec.11 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ka High Court are extracted below:- 9. We have carefully considered the rival contentions and perused the records. 10. Assessee claims to be a charitable society and obtained certificate under section 12(A) of the Act. 11. The assessee has received donations and shown it in the Income and Expenditure account. By the impugned order, the ITAT has denied the benefit under section 11 of the Act. 12. Section 11(1)(d) of the Act relied upon by Shri. Sanmathi, makes it clear that the voluntary donation made with a specific direction shall form a part of the corpus. The person who makes a contribution can make such contribution either with a specific direction or without any direction. Section 11(1)(d) of the Act refers to only such contribution which are made for a specific purpose. For example, the donor may desire that his donation be used for construction of a building. If no direction is given by the donor, the money received by the assessee shall be taxable subject to such exemption which may be claimed under section 11 of the Act. 13. In the instant case, it is not in dispute that the entire amount received as 'contribution' has been shown in the Income and E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involuntary contributions as capital and give exemption from taxation? No, it will not. The Revenue will still find such involuntary contribution as income liable for taxation. If so, what is the real distinction between voluntary contribution and involuntary contribution as far as the taxation of charities is concerned? In both cases, it will be brought for taxation if the assessee has not utilised the contributions for charitable purposes. 37. The expression voluntary contributions is used in the Act instead of contributions to highlight the principle of non-compulsion in matters of participating in charitable activities and to underline the gratuitous nature of donations and charitable activities. There is no compulsion in making contributions to charities. If the expression was contributions there could be a naunce of compulsion like contribution to provident fund and the like. 38. Therefore, we find that whether it is treated as voluntary or involuntary, the only course of action available before law is to see whether such contributions have been treated by the assessee as the income and also applied for charitable (30) purposes. This reasoning of the Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from 1-9-2019, giving power to the Principal Commissioner or the Commissioner of Income-tax to cancel the registration of a trust or institution. Thus, it is clear that should there be any violation with regard to receipt of capitation fee, the Assessing Officer could not have denied the benefit under section 11 of the Act so long as the certificate is in force. Admittedly, assessee's certificate was in force. Though it was cancelled by the Revenue it has been restored by an order passed by this Court in ITA.No.421/2013. 17. In view of the above, these appeals merit consideration in favour of the assessee. Identical view has been expressed by Hon ble Karnataka High Court in another case, viz., PCIT vs. Rashtreeya Shiksha Samithi Trust (2023)(152 taxmann.com 664)(Kar) as under:- 7. We have carefully considered rival contentions and perused records. 8. This court in Kammavari Sangham has held that so long as the exemption certificate is in force, the assessee is entitled for its benefit. In New Noble Educational Society's case (supra) relied upon by Shri Sanmathi, it is held that the compliance with registration under the different tax law is also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant consideration while deciding the application for approval under section 10(23C) of the Act. In the case on hand, we are not dealing with a situation where the IT Department was considering any application for granting exemption. On the other hand, the department had issued the exemption certificate and the AO on an incorrect assumption has treated the money collected by the assessee as capitation fee under the KEI (Prohibition of Capitation Fee) Act. Therefore, the said authority does not lend any support to the Revenue. This court has already taken a view in Kammavari Sangham's case (supra) and the same is applicable to the facts of this case. 11. In view of the above, this appeal by the Revenue must fail .. Accordingly, we hold that the assessee should be granted exemption u/s. 11 of the Act in all the years under consideration. We order accordingly. 41. In view of the foregoing discussions, we hold that the corpus donations received in the form of development fees and also other corpus donations are eligible for exemption u/s. 11 of the Act. The details of additions made by the AO are tabulated below:- Asst. Year Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) on this issue in all the years under consideration and direct the AO not to levy tax u/s. 115BBE of the Act. 44. The assessing officer has denied depreciation on opening balance of assets on the reasoning that the value of concerned assets has been treated as application of income. We notice that such embargo to claim depreciation on the assets, whose value has been allowed as application of income has been brought into the statute with effect from AY 2015-16 only. Accordingly, we direct the AO to allow depreciation on the opening value of assets in AY 2013-14 and 2014-15. For other years, the disallowance of deprecation should be restricted only on those assets, whose value has been allowed as application of income in the earlier years. 45. The AO has rejected the claim of set off of deficit brought forward from earlier years. Since we have restored the exemption u/s. 11 of the Act to the assessee, the claim of the assessee is allowable as per the decision rendered by Hon ble Bombay High Court in the cases of DIT (E) vs. Maharashtra Industrial Development Corporation (ITA No.2652 of 2011) and CIT vs. Institute of Banking (264 ITR 110)(Bom). Accordingly, we direct th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e noting made by a third person, i.e., Taruna Maheswari. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the addition of Rs. 84.50 lakhs made by the AO in AY 2014-15. Accordingly, we direct the AO to delete this addition. 48. We have noticed earlier that the revenue has seized cash from various employees of the assessee. We have also noticed that all the employees have owned up the cash and offered the same as their income under Income Disclosure Scheme, 2016. Since the AO had made addition on account of capitation fee receipts in the hands of the assessee in all the years under consideration and since the cash balance seized from the employees was treated as part of capitation fee, he did not make addition of cash balance separately. However, in order to safeguard the interests of revenue, the AO added the cash balance seized from Shri Pratap Patil (Rs.74,96,500/-) and from Shri Unmesh Khanvilkar (Rs.19,40,26,600/-) on protective basis. The Ld CIT(A) deleted the protective additions. However, he held that the same shall become substantive additions, if the additions on account of capitation fee are deleted by the higher appellate forum. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2.15 crores as unexplained expenditure of the assessee in AY 2014-15 and assessed the same u/s. 69C of the Act. 49.2 In the similar manner, the details of payments made to various persons in financial year 2015-16 have been noted down in the Excel sheet. The aggregate amount of the same was 609.91 lakhs. The AO has extracted the same at pages 30 31 of the assessment order relating to AY 2017-18. The AO treated the same as unaccounted expenditure of the assessee in AY 2016-17 and assessed the same u/s. 69C of the Act. 49.3 The Ld CIT(A) noticed that the AO has taken the view, in respect of other payments/expenditure, that they have been incurred out of capitation fees collected. Hence the AO had made the additions of other such kind of payments/expenditure on protective basis. Noticing the same, the Ld CIT(A) took the view that there is no requirement to take a different view in respect of Rs. 2.15 crores and Rs. 609.91 lakhs referred above. Accordingly, he held that both the above said amounts should also be considered as having been paid out of unaccounted capitation fees. Since the Ld CIT(A) has confirmed the additions relating to capitation fees, he took the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance and the said return of income has been accepted. Accordingly, it was contended that no addition is called for. In the alternative, it is submitted that the assessing officer should not have added the above said amount, once he has taken the view that the same has been sourced from capitation fees. The Ld CIT(A) accepted the alternative contention of the assessee and accordingly, he deleted the addition of Rs. 65.00 lakhs. 50.2 We heard the parties on this issue and perused the record. First of all, we notice that it was a transaction between Smt Shivani Patil and Shri Bhagirath Patil. Nowhere, it is mentioned by both of them that this amount of Rs. 65.00 lakhs has got any connection with the assessee trust. The AO has given credence to the statement of Smt Shivani Patil, wherein she had said that she received a sum of Rs. 60.00 lakhs from Shri Pratap Patil one week earlier to the date of search. The submission of the assessee is that the records maintained by Shri Pratap Patil do not show any such payment to her. It is not the case of the AO that Shri Pratap Patil has also confirmed the said payment of Rs. 60 lakhs made to Smt Shivani Patil, meaning thereby, the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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