Income Tax Appellate Tribunal - Chennai
Saveetha Institute Of Medical And ... vs Assessee on 26 November, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
CHENNAI BENCH 'B' : CHENNAI
[BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND
SHRI HARI OM MARATHA, JUDICIAL MEMBER]
I.T.A No. 99/Mds/2011
Assessment year : 2008-09
M/s Saveetha Institute of vs The ACIT
Medical & Technical Sciences Central Circle
333, Brough Road Salem
Erode 638 001
[PAN - AAFTS8045L ]
(Appellant) (Respondent)
I.T.A No. 204/Mds/2011
Assessment year : 2008-09
The ACIT vs M/s Saveetha Institute of
Central Circle Medical & Technical Sciences
Salem 333, Brough Road
Erode 638 001
(Appellant) (Respondent)
I.T.A No. 100/Mds/2011
Assessment year : 2008-09
M/s Saveetha Medical & vs The ACIT
Educational Trust Central Circle
333, Brough Road Salem
Erode 638 001
[PAN - AAAAS7555D ]
(Appellant) (Respondent)
:- 2 -: ITA 99&100/11
204 & 205/11
I.T.A No. 205/Mds/2011
Assessment year : 2008-09
The ACIT vs M/s Saveetha Medical &
Central Circle Educational Trust
Salem 333, Brough Road
Erode 638 001
(Appellant) (Respondent)
Assessee by : Shri S.Sridhar, Advocate
Department by : Shri P.B.Sekaran, CIT/DR
ORDER
PER HARI OM MARATHA, JUDICIAL MEMBER:
The above captioned appeals pertain to assessment year 2008-
09. There are two separate assessees of the same group. In each assessee's case, cross appeals have been filed. Therefore, for the sake of convenience and brevity, we are proceeding to decide them by a common order.
I.T.A.Nos.100/Mds/2011 & 205/Mds/2011 in the case of M/s Saveetha Medical & Educational Trust
2. The above named cross appeals are directed against the order of the ld. CIT(A), Salem, dated 26.11.2010, for assessment year 2008-09.
:- 3 -: ITA 99&100/11
204 & 205/11
3. Briefly stated, the facts of the case are that the assessee, M/s Saveetha Medical & Educational Trust, is a society registered under the Tamilnadu Societies Registration Act and is also registered as a charitable trust u/s 12A of the Income-tax Act, with the CIT, Coimbatore. The assessee-trust runs an Engineering College affiliated to Anna University, Chennai and also runs a College of Occupational Therapy. A search u/s 132 of the Act was conducted in this case including its group cases on 13.8.2007. During the course of search, certain incriminating evidences including cash sum of ` 20 lakhs were found and seized from M/s Saveetha Engineering College. As a sequel to this search, notice u/s 153A was issued to the assessee. The assessee-trust filed return in response thereof on 17.9.2009 admitting NIL income. On the basis of document seized and statements recorded, the ACIT, Central Circle (Assessing Officer) has made the following additions:
Income Returned ` NIL
Add:
1. Capitation fees collected from the ` 5,37,00,000 student
2. Unaccounted cash ` 21,26,923
3. Excss income as per Income & ` 4,12,67,096 Expenditure account as per proviso to section 164(1) Total ` 9,70,94,019 :- 4 -: ITA 99&100/11 204 & 205/11
4. Aggrieved, the assessee filed appeal before the ld. CIT(A), who, in turn, vide his detailed order, has partly allowed the appeal. Hence, both the parties are in appeal. The assessee has raised the following grounds of appeal:
1) The order of the commissioner of Income Tax (Appeals), Salem is opposed to Law, facts and in the circumstances of the case.
2) The Commissioner of Income Tax (Appeals) erred in sustaining the addition in respect of seized cash of ` 21,26,923/-.
3) The Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the seized cash was explained to the Additional Director of Income Tax that it represents tuition fees collected from the students.
4) The commissioner of Income Tax (Appeals) erred in not appreciating the fact that the seized cash was properly explained even before the Assistant Commissioner of Income Tax, Central Circle, Salem.
5) The Commissioner of Income Tax (Appeals) failed to consider the fact that the students were produced before the Assistant Commissioner of Income Tax, Central Circle, Salem and statements were recorded from them and they confirmed the payment of tuition fees.
6) The appellant craves lave to file additional grounds/arguments at the time of hearing and prayed that the addition may kindly be deleted."
5. The Revenue has raised the following grounds in its appeal:
"1.a On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition made by the A.O. towards capitation fees collected from the students at ` 5,37,00,000.:- 5 -: ITA 99&100/11
204 & 205/11
1.b The learned CIT(A) has failed to give adequate weight to the sworn statement u/s 132(4)deposed by Dr.B.Muthukumaran, Special Officer of the institution which proved the fact that the institution collected capitation fees for admission to the management quota, that the amounts were collected by cash and that no books were maintained for that purpose.
1.c The learned CIT(A) has failed to note that the finance officer Sri.T.A.Varadarajan had not denied the receipt of capitation fees but only stated that he did not know the details .
1.d The learned CIT(A) has failed to note that the burden of proof that the institution did not receive capitation fees was not discharged by the institution since Dr.N.M. Veeraiyan merely denied the statement of Dr.B.Muthukumaran without any evidence or he could not produce Dr.B.Muthukumaran for cross examination.
1.e The learned CIT(A) has failed to note that the letter dated 26.08.2003 from the Director of Medical Education/Chairman, Grievance Committee reveals the fact that the assessee used to charge excess fee against the prescribed fee structure and hence this proves the receipt of capitation fees by the institution.
1.f The learned CIT(A) has failed to note that the evidentiary value of a deposition statement which is otherwise admissible is not wiped out in the absence of corroboration as observed in several case laws mentioned in the assessment order.
1.g The learned CIT(A) ought to have applied well settled principle of law that in the income-tax proceedings, facts of life. human probabilities and economic realities cannot be ignored as held in the case of CIT VS Durgaprasad More 82 ITR 540 (SC), Juggilal Kamlapat Vs CIT 73 ITR 702 (SC) and Sumati Dayal v. CIT 214 ITR 801(SC) and upheld the additions since one cannot expect direct evidence especially when the evidence is expected to be destroyed on a day to day basis.:- 6 -: ITA 99&100/11
204 & 205/11
2.a On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition made by the A.O. towards excess of income as per income & expenditure account as per proviso to section 164(1) amounting to ` 4,l2,67,096.
2.b The learned CIT(A) has failed to note that the assessee collected capitation fees in the guise of donation and violated the Tamil Nadu Educational Institutions (Prohibition of collection of Capitation Fees) Act, 1922 and hence the activities of the assessee have become illegal and not genuine and accordingly the income is not eligible for exemption u/s 11.
2.c The learned CIT(A) has failed to appreciate that source for the investments in the hands of Dr.N.M. Veeraiyan have not been explained and hence the A.O. was justified in linking the investments with the income of the society and thereby applying the provisions of section 164(1) r.w.s 13(1)(c) and 13(1)(d).
2. d The learned CIT(A) ought to have applied well settled principle of law that in the income-tax proceedings, facts of life, human probabilities and economic realities cannot be ignored and upheld the additions since one cannot expect direct evidence especially when the funds of the trust are diverted for personal benefits of the trustee.
2.e The learned CIT(A) has failed consider the ratio of the following case laws mentioned in the assessment order
i) Maddi Venkatraman and Co.(p) Ltd vs CIT, 229 ITR 534(S.C)
ii) Vodithala Education Society vs ADIT(Exem). 20 SOT 353(ITAT, Hyd.)
3. The appellant craves leave to add, to amend or alter the above grounds of appeal as may be deemed necessary.
:- 7 -: ITA 99&100/11
204 & 205/11 RELIEF CLAIMED IN APPEAL The order of the learned CIT (Appeals) may be set aside and the order of the Assessing Officer be restored."
6. The first issue raised in Revenue's appeal is regarding deletion of an addition of `5,37,00,000/- made towards capitation fees allegedly collected from the students. The facts apropos this issue are that this addition is solely based on the sworn statement recorded u/s 132(4) on 133.8.2007 from Dr B.Muthukumaran, a Special Officer in Saveetha Engineering College. While answering Question No.18, Dr.B.Muthukumaran had stated that the college collected capitation fees as donation from students admitted against Management Quota. In reply to Question No.19, he had further stated that the donations were collected in cash, and for donations cheques/DDs were not accepted. He stated that ` 3 lakhs was taken as donation from each student for admission to the course under the control of Anna University. However, this amount was ` 1 lakh for admission in Saveetha University. He also stated in his statement that regarding this amount, no books of account were maintained. A loose sheet No.56 was seized as Annexure Ann/B&D/MR/S dated 13.8.2007 which contained the details of the number of seats allotted under the Management Quota and under the Government Quota. The averments on sheet No.56 are reproduced below: :- 8 -: ITA 99&100/11
204 & 205/11 Anna University Management Govt. Quota Total quota For B.E Course 139 ... 139 Lateral Entry 40 ... 40 Saveetha Univeristy For B.E.Course 127 29 156 For P.G. Course 43 ... 43
7. Similar statement was recorded from Dr.N.M.Veeraiyan, President of the society and while answering to Question No.2, he stated that they had collected donations from the students admitted to various courses and also from other well-wishers during the past years also. The Assessing Officer, as per the version of the loose sheet No.56 which contained number of management students admitted to various courses, and relying on the statement recorded u/s 132(4) of the act, has computed capitation fees as under:
Anna University B.E. 139 x 3 lakhs ` 417 lakhs Lateral entry 40 x 3 lakhs ` 120 lakhs ` 537 lakhs
8. The Assessing Officer has opined that the capitation fees so collected cannot tantamount to voluntary contribution or subscriptions to the corpus of the society but are in the nature of donations and capitation fees. However, this addition has been deleted by the ld. CIT(A) by observing that no such addition can be made solely on the :- 9 -: ITA 99&100/11 204 & 205/11 basis of statements recorded u/s 132(4) of the Act and there being no related evidence having been found during search showing receipt of such donations. He has also found that no one has really accepted having received donation/capitation fees as has been alleged by the Assessing Officer.
9. We have examined the entire record before us. We have also treaded through the statements in question. Almost identical lines of arguments were taken by both sides as were taken before the ld. CIT(A). We have cogitated the entire facts, evidence and oral submissions in the light of provisions of the Act and related precedents. We have gone through the entire statement of Dr.B.Muthukumaran, a copy of which is enclosed in the paper book. From this statement, it is evidenced that the portion on which the Assessing Officer is relying has been recorded after the verification that too on the next day. The search party had added more questions viz. Question No.18 &19. There is a whisper of collection of capitation fees. But nowhere else there is such an admission made by him. The document No.56 on which heavy reliance has been placed by the Assessing Officer is nothing but a piece of paper containing details of number of seats allotted to Management Quota and Government Quota. This document cannot be said to be even an :- 10 -: ITA 99&100/11 204 & 205/11 incriminating document because this is a declared truth which is also recorded in the books of the trust. The statement recorded after the verification cannot be accepted without doubt. So, we can safely conclude that document No.56 cannot be treated as incriminating document by any stretch of imagination. Nothing incriminating is scribe on it. Nothing has been mentioned on this piece of paper regarding collection of any capitation fees or even the amount of fees which is legally chargeable. Hence, we cannot give meaning in one way or the other, more specifically, suitable to the Revenue's interest on the basis of alleged statement, which heavily suffers from contradictions and also stand refuted by the management when these statements were put to them during the course of assessment proceedings. It was categorically denied to have collected any capitation fees. After verification when something is recorded which is contrary to the main body of statement, it cannot be accepted as a voluntary statement. There being no incriminating evidence regarding receipt of capitation fees, particularly when no document was put to Dr.B.Muthukumaran regarding charging of capitation fees, such a statement cannot be made a basis for making such a huge addition. His statement was rather denied by the Managing Trustee/President. Shri T.A.Varadgarajan, Finance Manager also denied the statement of Dr.B.Muthukumaran. In any other case, even one goes by this :- 11 -: ITA 99&100/11 204 & 205/11 statement, this would not make any meaningful sense. Dr.B.Muthukumaran has stated that the money had been handed over to one Shri Saravanan, Accounts Officer, but Shri Saravanan was never enquired by the Department. The statement of Dr.N.M.Veeraiyan, who is the President/Mangement Trustee of the trust, never accepted having receipt of capitation fees or donation and he had rejected and denied the statement of Dr.B.Muthukumaran. Statement of Dr.N.M.Veeraiyan was recorded u/s 131 on 9.11.2007, in which he has stated that whatever was received from the students was reflected in the books of account. This statement confirms the contention of the assessee that some well wishers were giving donations which were duly received and reflected in the books of account. In fact, the statement of Dr.N.M.Veeraiyan was recorded u/s 131 on 9.11.2007 which has also been made a basis for this addition. He was not examined u/s 132(4) of the Act. A statement made u/s 131 cannot be equated with a statement recorded u/s 132(4) of the Act. A statement recorded u/s 132(4) is a valid and relevant piece of evidence but a statement recorded u/s 131 is not so relevant. Nevertheless, even a statement recorded u/s 132(4) can not be made a sole basis for any such addition unless corroborated by seized material. If any admission is made in a statement recorded u/s 132(4), this can be used with reference to any piece of evidence found :- 12 -: ITA 99&100/11 204 & 205/11 during the course of search. In this case, as we have stated above, no such piece of evidence or to say any incriminating evidence was either found or seized. What was found was a noting giving break-up of number of students who were admitted under different quotas in various courses. In our well considered view, this addition could not have been made at all in the hands of the assessee-trust on the basis of such evidence. Recording of some questions after verification could be viewed as a involuntary statement, extracted from the deponent. In any case, a possibility of such inference is always there. With regard to such statement, the CBDT has issued instructions vide Circular No.286/2/2003-IT, wherein it has been directed that search party shall not obtain confessions. So, the admission made u/s 132(4) by the concerned officer cannot be treated even as a valid piece of evidence. There being no incriminating document having been found or seized during search and the statement also being abstruse, the addition in question has no legs to stand on. Had there been a valid statement, even then, solely on the basis thereof, addition could not have been made. This is a well settled principle of law by now and there are umpteen decisions in support of this view.
10. We are not convinced with the ld.DR that the letter dated 26.8.2003 written by the Director of Medical Education/Chairman, :- 13 -: ITA 99&100/11 204 & 205/11 Grievance Committee alleging that the assessee was charging excess fee against the prescribed fee structure would prove the receipt of capitation fees by the assessee particularly when this is a search case and nothing was found during search to support this allegation. The decisions of Hon'ble Supreme Court in the case of CIT vs Durgaprasad More, 82 ITR 540 and Sumati Dayal vs CIT, 214 ITR 801, which speak about human probabilities and realities which have to be taken into consideration while dealing with income-tax matters. In fact, this is not such a case. The ratio decidendi of these decisions would not apply in the absence of any direct piece of evidence available on record. The reality of life which may be treated as such in a particular case, may not be reality of life in another case. There is nothing on record to co- relate between any such reality of life to which the Assessing Officer is pointing to. Who prevented the Assessing Officer to record the statements of the students; or their wards? On simple conjectures and surmises, no addition can be made under the Income-tax Act, 1961. We, therefore, confirm the order of the ld. CIT(A) in deleting the addition of ` 5,37,00,000/-.
11. The other issue raised by the Revenue is in relation to deletion of addition made towards excess income as per income and expenditure account as per the proviso to section 164(1) amounting to :- 14 -: ITA 99&100/11 204 & 205/11 ` 4,12,67,096/-. To understand this issue correctly, we extract paras 23 to 26 of the ld. CIT(A)'s order , herein below:
"23. With regard to addition of ` 4,12,67,096/-·in respect of excess income as per Income and Expenditure Account as per proviso to section 164(1) the Assessing Officer has made his observation as under:
"During the course of the search, Dr. N.M. Veeraiyan, President/Managing Trustee had admitted that he has invested his undisclosed income in movable and immovable properties like gold jewellery and construction/furnishing of residential house. On the other hand the President did not establish the source for the aforesaid undisclosed investments. The seized materials and the sworn statements point towards the preponderance of probability that the unaccounted receipts of donation/ capitation fees on admission of students through the management quota were diverted to the personal investments of Dr. N.M. Veeraiyan, President/ Managing Trustee of the Society. Considering the above, the assessee-society has violated section 13(1) / 13(1)(c) which reads as under:
"13(1) - Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof -
13(1)(c)(ii) - if any part of such income or any property of the trust or the institution is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section(3)."
In the instant case, donations receipts of the trust have been diverted to the personal investment of President Dr. N.M. Veeraiyan. This fact cannot be ignored because of the human probabilities and surrounding circumstances as laid down by the Hon. Supreme Court of India in the cases of CIT Vs. Durga Prasad More 82 ITR 540 and Sumati Dayal Vs. CIT 214 ITR 801.
:- 15 -: ITA 99&100/11
204 & 205/11 The assessee has invested in movable and immovable assets like gold jewellery and construction/furnishing of residential building. Dr.N.M.Veeraiyan, the President has also admitted to having received donations from students which is nothing but capitation fees. Further, Dr.N.M.Veeraiyan has admitted undisclosed income during the year. Under these circumstances it is clear that the trust has used a part of its income indirectly for the personal benefit of the member within the meaning of sub clause (ii) of clause (c) of sub- section (1) of section 13 of the IT Act,1961 and thereby disqualifying themselves from claiming exemption u / s 11 of the IT Act, 1961.
I am therefore, satisfied from the evidences available from seized materials and from the sworn statements of the President, Dr.N.M.Veeraiyan that the assessee has used part of the income of the society for the personal benefit of the person referred to in clause (cc) of sub-section (3) of section 13 of the IT Act, 1961, thereby disqualifying themselves from claiming exemption u/ s 11 of the IT Act, 1961.
The assesses was registered as Public Charitable Trust under Section 12 AA of the LT. Act 1961. But the assessee has collected donations from the students for the purpose of admissions to its institutions. Thus the assessee has exploited the assets of the society for a commercial. consideration of earning profits by collecting money from students in excess of the fees prescribed by the Government in lieu of admission to various courses under the management quota.
In view of the aforesaid facts it is held that the assessees have rendered themselves ineligible to claim the exemptions available u/s 11 of the Income-tax Act, 1961. In reply to the show cause notice, the assessee had filed a letter dated 24.12.2009 objecting to the various issues. Those issues have been discussed in detail supra. In the said letter, assessee had stated the statement recorded from Dr. B. Muthukumaran was under threat and coercion. Assessee's claim in this regard is not correct. It is evident from the Panchnama dated 14.08.2007 and the statement itself. In the Panchnama dated 14.08.2007 in 81 No.6, it has been stated that .... No coercion, threat, inducement, promise. or other undue influence. was brought about to bear on the deponent .... 'This document :- 16 -: ITA 99&100/11 204 & 205/11 has been signed by the assessee, two panches and the authorized officer. Hence it is clear that assesse's claim is only an afterthought and is far from the truth.
Considering the above legal and factual position, it is held that the society is not eligible to claim exemption under section 11 and 12 of the LT. Act, 1961.
Accordingly the incomes of the society are taxable under the proviso of section 164(1) which reads as under:
"Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or 12 by virtue of the provisions contained in clause (c) or clause (d) of the sub section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate."
24. On behalf of the appellant with regard to the above addition it is submitted that, the appellant had not violated the provisions of Sec. 13(1) (c) Since at the first instance as explained earlier the appellant had not received any capitation fee. It is worthwhile and pertinent to look into the purpose for which the search was conducted, which was discussed by the Assessing- Officer In Page No 1 and 2 of the assessment orders which is as follows:
"Search u/ s 132 of the LT. Act was conducted on 13.08.2007 in the cases of M/ s. Saveetha Institute of Medical and Technical Science based on the information that the group has accepted huge sum of money as capitation fees at the time of admission in addition to the normal fees specified by Government / University."
25. In this context it is highlighted why the Department had not categorically found any incriminating document or material about the receipt of capitation fee and why the Department had not obtained specific disclosure from Dr. N. M. Veeraiyan that the income admitted was only in respect of capitation fees when it had conducted search based on the information that the appellant had accepted huge sum of money as capitation fees. If that be the case :- 17 -: ITA 99&100/11 204 & 205/11 all said and done why the Department had not unearthed any concrete evidence regarding the receipt of capitation fee. The appellant also further argues that when the Department had information about receipt of capitation fee by the appellant based on which the search was conducted, why the Assessing Officer had made huge addition in respect of capitation fee and holding that the appellant had violated Sec 13(1)(c) only by applying the test of human probabilities and surrounding circumstances. During the course of survey u/s 133 A on 13.08.2007 only Dr. N.M. Veeraiyan, his family members vide Answer to Q NO. 29. Again on 29.08.2007 during the course of enquiry u/s 131 he had further increased the offer by ` 25 Lakhs in his hands in addition to the earlier offer. The admission of income by Dr. N.M. Veeraiyan was never on behalf of the trust but only in respect of himself and his family members. He was not enquired about the source of unaccounted income. By applying the test of human probabilities and surrounding circumstances the appellant had not violated the provision of Sec 13(1)(c) for the following facts:
1. As submitted earlier the appellant had not received any capitation fee / Donation from the students for the year under/consideration.
2. There was no finding by the Assessing Officer that the search party unearthed any concrete evidence determining the receipt of alleged capitation fee by the appellant.
3. There was nothing on record to show that only the alleged capitation fee was utilized for the personal benefits of the trustees / members.
4. Nothing was confronted to Dr. N.M. Veeraiyan regarding the receipt of alleged capitation fee which was utilized by him and offered as income especially when the disclosures were .made in the hands of the trustees / members in their personal capacity for which the trustee / members filed the returns admitting the income in respect of the disclosure made by them.:- 18 -: ITA 99&100/11
204 & 205/11
26. I have gone through the assessment order. I have also carefully gone through the submissions of the AR. As pointed out by the AR and as per my findings discussed earlier the appellant Trust/ Society had not received any capitation fee. The so called admission made by Dr.N.M.Veeraiyan during the course of search and survey operations /in respect of income of family members, was also in their personal hands. The admission of the above income was also not in respect any receipt of capitation fee. Since the Appellant Trust/ Society had not received any capitation fee, the diversion of the same for the personal benefits of the trustee /members does not arise.
Further there was also no incriminating material found or seized during the course of search revealing diversion of any sort of money from the trust to the trustees/members of the appellant. As submitted by the AR, the family members i.e., trustees/members filed the returns consequent to search admitting the income declared during the course of search and paid the taxes which has been accepted by the Assessing Officer during the assessment proceedings, which emphasises that there can not be any diversion of money from the appellant Society. Therefore the Appellant had not violated the provisions of sec.13(1)(c) there by not rendering themselves ineligible to claim exemption u/s 11 and 12 of the Income-tax Act. For the above reasons, I hold that the appellant is eligible to claim exemption u/s11 and 12 of the Income Tax Act, which they were claiming over the years. I therefore, delete the addition of ` 4,12,67,096/- made in respect of Excess income as per the Income and Expenditure Account as per proviso to S.l64(1) by the Assessing Officer."
12. Similar arguments were advanced by both the parties before us. We are totally in agreement with the finding of the ld. CIT(A). When we have already held that there is no proof that the assessee had collected capitation fees in the guise of donation as has been alleged, there is no violation of Tamil Nadu Educational Institutions (Prohibition of collection of Capitation fees) Act, 1922. The donation :- 19 -: ITA 99&100/11 204 & 205/11 received/voluntarily given by anybody to charitable institutions towards its corpus is a permissible and legal activity and not an illegal activity terminating into denial of exemption u/s 11. There is no evidence on record to show a link between the investments made in the hands of Dr.N.M.Veeraiyan with the trust's activities as per the provisions of section 164(1) r.w.s 13(1)© and 13(1)(d). Therefore, this addition cannot be sustained in the eyes of the law in view of our above observation. Accordingly, we confirm this impugned deletion and dismiss the appeal of the Revenue.
13. In the result, the appeal of the Revenue stands dismissed.
14. In assessee's appeal, the only issue raised is regarding sustained addition of ` 21,26,923/- found as cash and seized by the Department during search. The case of the assessee is that this cash stands explained from out of tuition fees by the trust. On the contrary, the case of the Revenue is that this cash seized during search does not stand properly explained, hence, the action of the ld. CIT(A) is correct. The ld.AR stated that this amount represent tuition fees, petty cash, caution deposit, application amount and transport fee from students. The ld. CIT(A) has simply mentioned that after considering the written submission made on behalf of the assessee and not in agreement with the explanation offered for unaccounted cash and hold the cash to be :- 20 -: ITA 99&100/11 204 & 205/11 unaccounted cash of the assessee-trust. In this regard, the version of the ld.AR is that b in his statement recorded on 13.8.2007 vide reply to Question No.16 has clearly stated that the cash was from tuition fees (` 17,09,000), petty cash (` 10,153), caution deposit for disbursement to students (` 1,33,000), application amount received from students (` 2,36,770) and transport fees of College of Engineering (` 15,000). It was stated in this very statement that regarding fees collected, no record or register is maintained because after collecting the fees, they were entered in a file in the computer and later the amounts were paid into the bank in the name of students from whom these are collected. It was stated that the challans were obtained which would be subsequently handed over to the respective students. The old books are kept in the Head Office[Trust Office] located at Saveetha Dental College premises, 162 PH Road, Chennai. While replying to Question No.10, it was clearly stated that ` 17,09,000/- related to fees of 25 students for which Dr.B.Muthukumaran has stated that the receipt for these fees were not given to the students since they have not been paid into the bank and obtained relevant challans.
15. After considering the rival submission, we have found that whatever has been stated by the ld.AR is correct as per records. A list of students and the details of fees collected were found in the :- 21 -: ITA 99&100/11 204 & 205/11 computer at the time of survey itself. The assessee had also explained the cash balance through letter dated 9.11.2007 before the ADIT, which is recorded in the assessment order also. The Assessing Officer issued summons u/s 131 to the students and their sworn statements were recorded in which the students have admitted payment of such fees. The cumulative effect of these observations is that this amount cannot be so easily added in the hands of the assessee as it stands explained on record. On one side, the dept wanted to rely on the statement recorded during survey to make huge additions and on the other hand, they were reluctant in accepting the statements of students which were recorded by them after summoning them u/s 131 of the Act. In our considered opinion, the entire cash stands fully and satisfactorily explained and cannot be sustained in the hands of the assessee.
16. In the result, the appeal of the assessee stands allowed. I.T.A.Nos. 99/Mds/2011 & 204/Mds/2011 in the case of M/s Saveetha Institute of Medical & Technical Sciences
17. The cross appeals in this case are directed against the order of the ld. CIT(A), Salem, dated 26.11.2010, for assessment year 2008-09.
18. In Revenue's appeal, following grounds have been raised: :- 22 -: ITA 99&100/11
204 & 205/11 "1.a On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition made by the A.O. towards capitation fees collected from the students at ` 1,27,00,000.
1.b The learned CIT(A) has failed to give adequate weight to the sworn statement u/s 132(4)deposed by Dr.B.Muthukumaran, Special Officer of the institution which proved the fact that the institution collected capitation fees for admission to the management quota, that the amounts were collected by cash and that no books were maintained for that purpose.
1.c The learned CIT(A) has failed to note that the finance officer Sri.T.A.Varadarajan had not denied the receipt of capitation fees but only stated that he did not know the details .
1.d The learned CIT(A) has failed to note that the burden of proof that the institution did not receive capitation fees was not discharged by the institution since Dr.N.M. Veeraiyan merely denied the statement of Dr.B.Muthukumaran without any evidence or he could not produce Dr.B.Muthukumaran for cross examination.
1.e The learned CIT(A) has failed to note that the letter dated 26.08.2003 from the Director of Medical Education/Chairman, Grievance Committee reveals the fact that the assessee used to charge excess fee against the prescribed fee structure and hence this proves the receipt of capitation fees by the institution.
1.f The learned CIT(A) has failed to note that the evidentiary value of a deposition statement which is otherwise admissible is not wiped out in the absence of corroboration as observed in several case laws mentioned in the assessment order.
1.g The learned CIT(A) ought to have applied well settled principle of law that in the income-tax proceedings, facts of life. human probabilities and economic realities cannot be ignored as held in the case of CIT VS Durgaprasad More 82 ITR 540 (SC), :- 23 -: ITA 99&100/11 204 & 205/11 Juggilal Kamlapat Vs CIT 73 ITR 702 (SC) and Sumati Dayal v. CIT 214 ITR 801(SC) and upheld the additions since one cannot expect direct evidence especially when the evidence is expected to be destroyed on a day to day basis.
2.a On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition made by the A.O. towards excess of income as per income & expenditure account as per proviso to section 164(1) amounting to ` 5,26,21,407.
2.b The learned CIT(A) has failed to note that the assessee collected capitation fees in the guise of donation and violated the Tamil Nadu Educational Institutions (Prohibition of collection of Capitation Fees) Act, 1922 and hence the activities of the assessee have become illegal and not genuine and accordingly the income is not eligible for exemption u/s 11.
2.c The learned CIT(A) has failed to appreciate that source for the investments in the hands of Dr.N.M. Veeraiyan have not been explained and hence the A.O. was justified in linking the investments with the income of the society and thereby applying the provisions of section 164(1) r.w.s 13(1)(c) and 13(1)(d).
2. d The learned CIT(A) ought to have applied well settled principle of law that in the income-tax proceedings, facts of life, human probabilities and economic realities cannot be ignored and upheld the additions since one cannot expect direct evidence especially when the funds of the trust are diverted for personal benefits of the trustee.
2.e The learned CIT(A) has failed consider the ratio of the following case laws mentioned in the assessment order
i) Maddi Venkatraman and Co.(P) Ltd vs CIT, 229 ITR 534(S.C)
ii) Vodithala Education Society vs ADIT(Exem). 20 SOT 353(ITAT, Hyd.) :- 24 -: ITA 99&100/11 204 & 205/11
3. The appellant craves leave to add, to amend or alter the above grounds of appeal as may be deemed necessary.
RELIEF CLAIMED IN APPEAL The order of the learned CIT (Appeals) may be set aside and the order of the Assessing Officer be restored."
19. In assessee's appeal, following grounds have been raised:
"1. The order of the commissioner of Income Tax (Appeals), Salem is opposed to Law, facts and in the circumstances of the case.
2. The Commissioner of Income Tax (Appeals) erred in sustaining the addition in respect of seized cash of ` 3,69,950/-.
3. The Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the seized cash was explained to the Additional Director of Income Tax that it represents tuition fees collected from the students.
4. The commissioner of Income Tax (Appeals) erred in not appreciating the fact that the seized cash was properly explained even before the Assistant Commissioner of Income Tax, Central Circle, Salem.
5. The Commissioner of Income Tax (Appeals) failed to consider the fact that the students were produced before the Assistant Commissioner of Income Tax, Central Circle, Salem and statements were recorded from them and they confirmed the payment of tuition fees.
6. The appellant craves lave to file additional grounds/arguments at the time of hearing and prayed that the addition may kindly be deleted."
20. In Revenue's appeal, the facts and circumstances leading to the additions of ` 1,27,00,000/- towards capitation fees collected from :- 25 -: ITA 99&100/11 204 & 205/11 the students and ` 5,26,21,407/- as per the proviso to section 164(1), which have been deleted by the ld. CIT(A) are mutatis mutandis, same and similar as in the case of M/s Saveetha Medical & Educational Trust, except the amounts involved therein. Therefore, with the parity of similar reasoning, we dismiss Revenue's appeal.
21. In assessee's appeal, addition of ` 3,69,500/- was made on account of cash seized, which according to the Department is not properly explained, but the facts and the evidences and reasonings for making addition are same and similar which are in the above mentioned assessee's case. Therefore, with the similar reasoning, we delete this addition and allow assessee's appeal.
22. To summarize the result - both the appeals of the Revenue stand dismissed whereas that of the assessee stand allowed.
Order pronounced in the open court on 18.7.2011.
Sd/- Sd/-
(DR. O.K. NARAYANAN) (HARI OM MARATHA)
VICE-PRESIDENT JUDICIAL MEMBER
Dated: 18th July, 2011
RD
Copy to: Appellant/Respondent/CIT(A)/CIT/DR