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TMI Blog2025 (5) TMI 1640X X X X Extracts X X X X X X X X Extracts X X X X ..... College and is also having income from other sources. For the AY 2016-17 assessee has filed return of income on 29.9.2016. The same was processed u/s. 143(1) of the Act. Thereafter a survey u/s. 133A of the act was conducted at the premises of assessee on 06.9.2017. It is pertinent to note here that this survey has been converted into search on the same day and hence search was carried out on the assessee on 06.09.2017. 3. During the course of search total 300 receipts were seized and impounded by the search team marked as Annexure ABDCH/01, ABDCH/02 & ABDCH/03. It is an admitted fact that out of these 300 receipts 124 receipts have been issued on receipt of payment as evident from the fact that only the counterfoils were there. These 124 receipts were duly accounted by the assessee in its books of account. The remaining 176 receipts have been prepared and kept ready in the receipt books. However these receipts were not entered in the books of account. It is relevant to mention here that these 176 receipts were also containing the original and duplicate in the receipt book itself. It is the case of assessee that since the payments have not come, the original receipts were there an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IT Act from the responsible person, accountant of the trust Shri Parasuram Jawargikar who admitted that the receipts found in the seized materials were never accounted in the books of accounts of the trust and the entire collection of unaccounted receipts in cash was handed over to Shri. Abdul Mujeeb who is the Secretary of the trust. (iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the addition was made based on the statement recorded u/s. 132(4) of the IT Act from the secretary of the trust Shri. Abdul Mujeeb, who confirmed that the entries found in the seized material were unaccounted receipts and distributed among the trustees of the assessee and spent for various purposes other than trust activities. (iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deciding that the total income of the assessee trust to be arrived after allowing exemption as per provisions of section 11 of the IT Act, without appreciating the fact -that the receipts found in the seized materials are unaccounted and have not been applied for the purpose of education and other chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee unaccounted cash receipts were there. 10. Now the second question would arise, whether once the assessee trust has received unaccounted cash receipts, then exemption u/s. 11 is available to those unaccounted cash or not. In our view, this issue is required to be examined in view of the fact as to whether the amount received was received as course fees or as capitation fee. The assessee has filed copies of the seized receipt book in paperbook Vol. III running from pages 1 to 141. For the sake of convenience, we are reproducing the same receipt hereunder:- 11. Perusal of the above receipts would show that the assessee has received cash from the students for the MD Seat under the Management Seat. It is universally accepted now that management seats are given after receiving the capitation fees. Therefore, we are of the firm view that the amount of fees which was received by the assessee was in the nature of capitation fee though it is mentioned as Management fee in the receipt book unearthed during search. 12. Now the next issue would arise, whether assessee is entitled to deduction u/s. 11(a) of the Act on this receipt. For this proposition, the ld. DR has filed copy of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rather, the former should be understood to be closely akin to the phrase 'solely'. Put otherwise, there is no scope for the purposes being partially public or religious in nature. It would not be sufficient if some of the objects are charitable or religious in nature. The Supreme Court in East India Industries (Madras) (P.) Ltd. v. CIT [1967] 65 ITR 611 (SC), while referring to the case of Maulana Mohammad Ibrahim Riza Malak v. CIT, Nagpur 1930 SCC OnLine PC 43, has held as under:- "6. The view that we have expressed is borne out by the decision of the Judicial Committee in Mohammad Ibrahim Riza v. CIT [57 IA 260] in which it was held that if there are several objects of the trust, some of which are charitable and some non-charitable, and the trustees have unfettered discretion to apply the income to any of the object, the whole trust would fail and no part of the income would be exempt from tax. The same view has been expressed by the Court of Appeal in Oxford Group v. Inland Revenue Commissioners [(1949) 2 All ER 537] . 27. In the landmark decision of TMA Pai Foundation (supra), the Supreme Court took a view that charging of capitation fee must be forbidden and the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the entitlement of benefits encapsulated in Section 11 and 12 of the Act, the High Court of Madras in the case of Mac Public Charitable Trust (supra) has held that collection of amount in excess of what has been prescribed as fee would render the objective of 'charity' a farce and the same shall disentitle the assessee from claiming benefits under the said provisions. The relevant paragraphs of the said decision are reproduced as under: - "38. Upon a conjoint reading of the above legal provisions, it is manifest that charitable purpose, as contemplated under the Act though would include education, would not include the advancement of any other object of general public utility, if the object involved is the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Thus, it is clear that section 10(23C) and section 11 deal with income that are not to be treated as part of total income. Section 10(23C) exempts the income receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of exemption under section 11 is also liable to be rejected. The word "genuine" must be read as in compliance with all the laws of the land. If the institution or trust is used as a cloak to violate law, irrespective of whether any benefit is achieved or not, the benefit of registration cannot be permitted to accrue to the assessee. Section 12AA(3) is an independent provision as the right to cancel the registration is not restricted just towards the fulfilment or not of the objects of the trust or association. *** 41. Juxtaposing the provisions of both the Acts, viz., Income- tax Act, 1961 and the Tamil Nadu Educational Institutions (Prohibition of Collection of Capitation Fee) Act, 1992, with each other, it is explicit that collection of any amount in excess of what has been prescribed as fee or in the nature of donation or voluntary contribution either directly or indirectly to the institution or through some other person or institution or trust, as quid pro quo for the seat in any educational institution, would render the activity of both the entities ungenuine. Such actions would render the object of "charity" a farce and the transaction will have to be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to notice of the higher officials by filing duly sworn affidavit or statement supported by convincing evidence. Such a statement when recorded at two stages cannot be discarded summarily in cryptic manner by observing that the assessees in the belatedly filed affidavit have retracted from their statements. Such retraction is required to be made as soon as possible or immediately after the statement of the assessees was recorded. Duration of time when such retraction was made, assumes significance and in the present case, retraction has been made by the assessees after eight months to be precise, 237 days. [Para 61]" 16. In view of the above observations of the Hon'ble Madras High Court, we do not find any force in the argument of the ld. counsel for the assessee and hence the retraction made is termed as an afterthought and same is not relevant. 17. We further note that the ld. CIT(A)'s observation that the AO should have ascertained the total income of the appellant by adding unaccounted cash receipts to the declared income of the appellant and verified whether there was any accumulation of income over and above 15% or not, is not at all relevant having regard to the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee has raised certain legal ground vis-à-vis making reference to valuation cell. However these grounds were not raised before the lower authorities and no application for admission of additional ground has been filed before us. Further no material has been placed before us to support the averments made in this ground. Not a single argument has been made by the ld. counsel for the assessee with respect to this ground. Therefore, the same is dismissed. 25. Similarly, in respect of ground no.6 also, the ld. counsel for the assessee has failed to demonstrate with the help of any material as to how the assessment is time barred and hence it is dismissed. 26. Ground Nos.7 & 8 are no more relevant because we have allowed the departmental appeal. 27. In ground No.9 the assessee has contended that claim of carry forward of adjustment of previous year expenses is not allowed by the AO. However, no argument has been advanced before us for this ground. 28. Ground No.10 regarding levy of interest u/s. 234A, B & C is mandatory and consequential and therefore this ground is dismissed. 29. The appeal of the assessee is dismissed. 30. In the result, the appeals of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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