M/s. Saveetha Medical and Educational Trust, Erode v. ACIT, Salem

ITA 100/CHNY/2011 | 2008-2009
Pronouncement Date: 18-07-2011 | Result: Allowed

Appeal Details

RSA Number 10021714 RSA 2011
Assessee PAN AAFTS8045L
Bench Chennai
Appeal Number ITA 100/CHNY/2011
Duration Of Justice 5 month(s) 25 day(s)
Appellant M/s. Saveetha Medical and Educational Trust, Erode
Respondent ACIT, Salem
Appeal Type Income Tax Appeal
Pronouncement Date 18-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 18-07-2011
Date Of Final Hearing 30-06-2011
Next Hearing Date 30-06-2011
Assessment Year 2008-2009
Appeal Filed On 24-01-2011
Judgment Text
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 MEDICAL & TECHNICAL SCIENCES 333 BROUGH ROAD ERODE 638 001 VS THE ACIT CENTRAL CIRCLE SALEM [PAN AAFTS8045L ] (APPELLANT) (RESPONDENT) I.T.A NO. 204/MDS/2011 ASSESSMENT YEAR : 2008-09 THE ACIT CENTRAL CIRCLE SALEM VS M/S SAVEETHA INSTITUTE OF MEDICAL & TECHNICAL SCIENCES 333 BROUGH ROAD ERODE 638 001 (APPELLANT) (RESPONDENT) I.T.A NO. 100/MDS/2011 ASSESSMENT YEAR : 2008-09 M/S SAVEETHA MEDICAL & EDUCATIONAL TRUST 333 BROUGH ROAD ERODE 638 001 VS THE ACIT CENTRAL CIRCLE SALEM [PAN AAAAS7555D ] (APPELLANT) (RESPONDENT) ITA 99&100/11 204 & 205/11 :- 2 -: I.T.A NO. 205/MDS/2011 ASSESSMENT YEAR : 2008-09 THE ACIT CENTRAL CIRCLE SALEM VS M/S SAVEETHA MEDICAL & EDUCATIONAL TRUST 333 BROUGH ROAD ERODE 638 001 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.SRIDHAR ADVOCATE DEPARTMENT BY : SHRI P.B.SEKARAN CIT/DR O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THE ABOVE CAPTIONED APPEALS PERTAIN TO ASSESSME NT YEAR 2008- 09. THERE ARE TWO SEPARATE ASSESSEES OF THE SAME G ROUP. IN EACH ASSESSEES CASE CROSS APPEALS HAVE BEEN FILED. TH EREFORE 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 O F M/S SAVEETHA MEDICAL & EDUCATIONAL TRUST 2. THE ABOVE NAMED CROSS APPEALS ARE DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) SALEM DATED 26.11.2010 FOR ASS ESSMENT YEAR 2008-09. ITA 99&100/11 204 & 205/11 :- 3 -: 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE M/S SAVEETHA MEDICAL & EDUCATIONAL TRUST IS A SOCIETY REGISTERED UNDER THE TAMILNADU SOCIETIES REGISTRATION ACT AND IS ALSO RE GISTERED AS A CHARITABLE TRUST U/S 12A OF THE INCOME-TAX ACT WIT H THE CIT COIMBATORE. THE ASSESSEE-TRUST RUNS AN ENGINEERIN G COLLEGE AFFILIATED TO ANNA UNIVERSITY CHENNAI AND ALSO RUNS A COLLEGE OF OCCUPATIONAL THERAPY. A SEARCH U/S 132 OF THE ACT WAS CONDUCTE D 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 COL LEGE. AS A SEQUEL TO THIS SEARCH NOTICE U/S 153A WAS ISSUED TO THE A SSESSEE. THE ASSESSEE-TRUST FILED RETURN IN RESPONSE THEREOF ON 17.9.2009 ADMITTING NIL INCOME. ON THE BASIS OF DOCUMENT SEIZED AND ST ATEMENTS RECORDED THE ACIT CENTRAL CIRCLE (ASSESSING OFFIC ER) HAS MADE THE FOLLOWING ADDITIONS: INCOME RETURNED ` NIL ADD: 1. CAPITATION FEES COLLECTED FROM THE STUDENT ` 5 37 00 000 2. UNACCOUNTED CASH ` 21 26 923 3. EXCSS INCOME AS PER INCOME & EXPENDITURE ACCOUNT AS PER PROVISO TO SECTION 164(1) ` 4 12 67 096 TOTAL ` 9 70 94 019 ITA 99&100/11 204 & 205/11 :- 4 -: 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHO IN TURN VIDE HIS DETAILED ORDER HAS PARTLY ALLOWE D THE APPEAL. HENCE BOTH THE PARTIES ARE IN APPEAL. THE ASSESSEE HAS R AISED THE FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) SALEM IS OPPOSED TO LAW FACTS AND IN TH E CIRCUMSTANCES OF THE CASE. 2) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE ADDITION IN RESPECT OF SEIZED CASH O F ` 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 PRODUCE D 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 ADDITI ON MADE BY THE A.O. TOWARDS CAPITATION FEES COLLECTED FROM THE STUDENTS AT ` 5 37 00 000. ITA 99&100/11 204 & 205/11 :- 5 -: 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 INSTITUT ION 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 RECEI VE CAPITATION FEES WAS NOT DISCHARGED BY THE INSTITUTI ON 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 TH E 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 TH E EVIDENTIARY VALUE OF A DEPOSITION STATEMENT WHICH I S 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 WE LL 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. ITA 99&100/11 204 & 205/11 :- 6 -: 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 CAPITATI ON FEES) ACT 1922 AND HENCE THE ACTIVITIES OF THE ASSESSEE HAVE BECOME ILLEGAL AND NOT GENUINE AND ACCORDINGLY THE INCOME IS NOT ELIGIBLE FOR EXEMPTIO N 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 WEL L SETTLED PRINCIPLE OF LAW THAT IN THE INCOME-TAX PROCEEDINGS FACTS OF LIFE HUMAN PROBABILITIES AND ECONOMIC REALITIES CANNOT BE IGNORED AND UPHELD THE ADDITION S SINCE ONE CANNOT EXPECT DIRECT EVIDENCE ESPECIALLY WHEN THE FUNDS OF THE TRUST ARE DIVERTED FOR PERSON AL BENEFITS OF THE TRUSTEE. 2.E THE LEARNED CIT(A) HAS FAILED CONSIDER THE RAT IO 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). 2 0 SOT 353(ITAT HYD.) 3. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR A LTER THE ABOVE GROUNDS OF APPEAL AS MAY BE DEEMED NECESSARY. ITA 99&100/11 204 & 205/11 :- 7 -: 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 REVENUES APPEAL IS RE GARDING 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 STA TEMENT RECORDED U/S 132(4) ON 133.8.2007 FROM DR B.MUTHUKUMARAN A SPEC IAL OFFICER IN SAVEETHA ENGINEERING COLLEGE. WHILE ANSWERING QUES TION NO.18 DR.B.MUTHUKUMARAN HAD STATED THAT THE COLLEGE COLLE CTED CAPITATION FEES AS DONATION FROM STUDENTS ADMITTED AGAINST MAN AGEMENT QUOTA. IN REPLY TO QUESTION NO.19 HE HAD FURTHER STATED T HAT THE DONATIONS WERE COLLECTED IN CASH AND FOR DONATIONS CHEQUES/D DS WERE NOT ACCEPTED. HE STATED THAT ` 3 LAKHS WAS TAKEN AS DONATION FROM EACH STUDENT FOR ADMISSION TO THE COURSE UNDER THE CONTR OL OF ANNA UNIVERSITY. HOWEVER THIS AMOUNT WAS ` 1 LAKH FOR ADMISSION IN SAVEETHA UNIVERSITY. HE ALSO STATED IN HIS STATEME NT 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 ALLOTT ED UNDER THE MANAGEMENT QUOTA AND UNDER THE GOVERNMENT QUOTA. THE AVERMENTS ON SHEET NO.56 ARE REPRODUCED BELOW: ITA 99&100/11 204 & 205/11 :- 8 -: ANNA UNIVERSITY MANAGEMENT QUOTA GOVT. QUOTA TOTAL 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.VEERAIYA N PRESIDENT OF THE SOCIETY AND WHILE ANSWERING TO QUE STION 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 VERS ION OF THE LOOSE SHEET NO.56 WHICH CONTAINED NUMBER OF MANAGEMENT S TUDENTS ADMITTED TO VARIOUS COURSES AND RELYING ON THE ST ATEMENT RECORDED U/S 132(4) OF THE ACT HAS COMPUTED CAPITATION FEE S 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 CAPITATIO N FEES SO COLLECTED CANNOT TANTAMOUNT TO VOLUNTARY CONTRIBUTI ON 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 ITA 99&100/11 204 & 205/11 :- 9 -: BASIS OF STATEMENTS RECORDED U/S 132(4) OF THE ACT AND THERE BEING NO RELATED EVIDENCE HAVING BEEN FOUND DURING SEARCH SH OWING RECEIPT OF SUCH DONATIONS. HE HAS ALSO FOUND THAT NO ONE HAS REALLY ACCEPTED HAVING RECEIVED DONATION/CAPITATION FEES AS HAS BEE N ALLEGED BY THE ASSESSING OFFICER. 9. WE HAVE EXAMINED THE ENTIRE RECORD BEFORE US. W E HAVE ALSO TREADED THROUGH THE STATEMENTS IN QUESTION. ALMOST IDENTICAL LINES OF ARGUMENTS WERE TAKEN BY BOTH SIDES AS WERE TAKEN BE FORE THE LD. CIT(A). WE HAVE COGITATED THE ENTIRE FACTS EVIDEN CE AND ORAL SUBMISSIONS IN THE LIGHT OF PROVISIONS OF THE ACT A ND RELATED PRECEDENTS. WE HAVE GONE THROUGH THE ENTIRE STATEM ENT OF DR.B.MUTHUKUMARAN A COPY OF WHICH IS ENCLOSED IN T HE PAPER BOOK. FROM THIS STATEMENT IT IS EVIDENCED THAT THE PORTI ON ON WHICH THE ASSESSING OFFICER IS RELYING HAS BEEN RECORDED AFTE R THE VERIFICATION THAT TOO ON THE NEXT DAY. THE SEARCH PARTY HAD AD DED MORE QUESTIONS VIZ. QUESTION NO.18 &19. THERE IS A WHIS PER OF COLLECTION OF CAPITATION FEES. BUT NOWHERE ELSE THERE IS SUCH AN ADMISSION MADE BY HIM. THE DOCUMENT NO.56 ON WHICH HEAVY RELIANCE HA S BEEN PLACED BY THE ASSESSING OFFICER IS NOTHING BUT A PIECE OF PAPER CONTAINING DETAILS OF NUMBER OF SEATS ALLOTTED TO MANAGEMENT Q UOTA AND GOVERNMENT QUOTA. THIS DOCUMENT CANNOT BE SAID TO BE EVEN AN ITA 99&100/11 204 & 205/11 :- 10 - : INCRIMINATING DOCUMENT BECAUSE THIS IS A DECLARED T RUTH 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 I NCRIMINATING DOCUMENT BY ANY STRETCH OF IMAGINATION. NOTHING I NCRIMINATING IS SCRIBE ON IT. NOTHING HAS BEEN MENTIONED ON THIS P IECE 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 TH E REVENUES INTEREST ON THE BASIS OF ALLEGED STATEMENT WHICH HEAVILY S UFFERS FROM CONTRADICTIONS AND ALSO STAND REFUTED BY THE MANAGE MENT WHEN THESE STATEMENTS WERE PUT TO THEM DURING THE COURSE OF AS SESSMENT PROCEEDINGS. IT WAS CATEGORICALLY DENIED TO HAVE C OLLECTED ANY CAPITATION FEES. AFTER VERIFICATION WHEN SOMETHING IS RECORDED WHICH IS CONTRARY TO THE MAIN BODY OF STATEMENT IT CANNOT B E ACCEPTED AS A VOLUNTARY STATEMENT. THERE BEING NO INCRIMINATING EVIDENCE REGARDING RECEIPT OF CAPITATION FEES PARTICULARLY WHEN NO DO CUMENT 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 TRU STEE/PRESIDENT. SHRI T.A.VARADGARAJAN FINANCE MANAGER ALSO DENIED THE STATEMENT OF DR.B.MUTHUKUMARAN. IN ANY OTHER CASE EVEN ONE G OES BY THIS ITA 99&100/11 204 & 205/11 :- 11 - : STATEMENT THIS WOULD NOT MAKE ANY MEANINGFUL SENSE . DR.B.MUTHUKUMARAN HAS STATED THAT THE MONEY HAD BEE N 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 TR USTEE OF THE TRUST NEVER ACCEPTED HAVING RECEIPT OF CAPITATION FEES OR DONATION AND HE HAD REJECTED AND DENIED THE STATEMENT OF DR.B.MU THUKUMARAN. 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 W ERE GIVING DONATIONS WHICH WERE DULY RECEIVED AND REFLECTED IN THE BOOKS OF ACCOUNT. IN FACT THE STATEMENT OF DR.N.M.VEERAIYA N WAS RECORDED U/S 131 ON 9.11.2007 WHICH HAS ALSO BEEN MADE A BASIS F OR THIS ADDITION. HE WAS NOT EXAMINED U/S 132(4) OF THE ACT. A STAT EMENT 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 AN D 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 CORROBORA TED BY SEIZED MATERIAL. IF ANY ADMISSION IS MADE IN A STATEMENT RECORDED U/S 132(4) THIS CAN BE USED WITH REFERENCE TO ANY PIEC E OF EVIDENCE FOUND ITA 99&100/11 204 & 205/11 :- 12 - : DURING THE COURSE OF SEARCH. IN THIS CASE AS WE H AVE STATED ABOVE NO SUCH PIECE OF EVIDENCE OR TO SAY ANY INCRIMINATING EVIDENCE WAS EITHER FOUND OR SEIZED. WHAT WAS FOUND WAS A NOTI NG GIVING BREAK-UP OF NUMBER OF STUDENTS WHO WERE ADMITTED UNDER DIFFE RENT 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 AFTE R VERIFICATION COULD BE VIEWED AS A INVOLUNTARY STATEMENT EXTRACTED FR OM THE DEPONENT. IN ANY CASE A POSSIBILITY OF SUCH INFERENCE IS ALW AYS THERE. WITH REGARD TO SUCH STATEMENT THE CBDT HAS ISSUED INSTR UCTIONS VIDE CIRCULAR NO.286/2/2003-IT WHEREIN IT HAS BEEN DIRE CTED THAT SEARCH PARTY SHALL NOT OBTAIN CONFESSIONS. SO THE ADMISS ION MADE U/S 132(4) BY THE CONCERNED OFFICER CANNOT BE TREATED EVEN AS A VALID PIECE OF EVIDENCE. THERE BEING NO INCRIMINATING DOCUMENT HA VING BEEN FOUND OR SEIZED DURING SEARCH AND THE STATEMENT ALSO BEIN G 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 EDUCAT ION/CHAIRMAN ITA 99&100/11 204 & 205/11 :- 13 - : GRIEVANCE COMMITTEE ALLEGING THAT THE ASSESSEE WA S CHARGING EXCESS FEE AGAINST THE PRESCRIBED FEE STRUCTURE WOULD PRO VE THE RECEIPT OF CAPITATION FEES BY THE ASSESSEE PARTICULARLY WHEN T HIS 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 C IT VS DURGAPRASAD MORE 82 ITR 540 AND SUMATI DAYAL VS CIT 214 ITR 8 01 WHICH SPEAK ABOUT HUMAN PROBABILITIES AND REALITIES WHICH HAV E TO BE TAKEN INTO CONSIDERATION WHILE DEALING WITH INCOME-TAX MATTERS . IN FACT THIS IS NOT SUCH A CASE. THE RATIO DECIDENDI OF THESE DECISION S WOULD NOT APPLY IN THE ABSENCE OF ANY DIRECT PIECE OF EVIDENCE AVAILAB LE ON RECORD. THE REALITY OF LIFE WHICH MAY BE TREATED AS SUCH IN A P ARTICULAR CASE MAY NOT BE REALITY OF LIFE IN ANOTHER CASE. THERE IS N OTHING ON RECORD TO CO- RELATE BETWEEN ANY SUCH REALITY OF LIFE TO WHICH TH E ASSESSING OFFICER IS POINTING TO. WHO PREVENTED THE ASSESSING OFFICER T O RECORD THE STATEMENTS OF THE STUDENTS; OR THEIR WARDS? ON SIM PLE 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 RELAT ION TO DELETION OF ADDITION MADE TOWARDS EXCESS INCOME AS PER INCOM E AND EXPENDITURE ACCOUNT AS PER THE PROVISO TO SECTION 1 64(1) AMOUNTING TO ITA 99&100/11 204 & 205/11 :- 14 - : ` 4 12 67 096/-. TO UNDERSTAND THIS ISSUE CORRECT LY 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 ACCO UNT AS PER PROVISO TO SECTION 164(1) THE ASSESSING OFFI CER HAS MADE HIS OBSERVATION AS UNDER: 'DURING THE COURSE OF THE SEARCH DR. N.M. VEERAIYA N 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 TH E OTHER HAND THE PRESIDENT DID NOT ESTABLISH THE SOURCE FOR THE AFORESAID UNDISCLOSED INVESTMENTS. THE SEIZED MATER IALS AND THE SWORN STATEMENTS POINT TOWARDS THE PREPONDERANCE OF PROBABILITY THAT THE UNACCOUNTED R ECEIPTS OF DONATION/ CAPITATION FEES ON ADMISSION OF STUDEN TS THROUGH THE MANAGEMENT QUOTA WERE DIVERTED TO THE PERSONAL INVESTMENTS OF DR. N.M. VEERAIYAN PRE SIDENT/ MANAGING TRUSTEE OF THE SOCIETY. CONSIDERING THE AB OVE THE ASSESSEE-SOCIETY HAS VIOLATED SECTION 13(1) / 1 3(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 PR ESIDENT DR. N.M. VEERAIYAN. THIS FACT CANNOT BE IGNORED BEC AUSE OF THE HUMAN PROBABILITIES AND SURROUNDING CIRCUMSTANC ES 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. ITA 99&100/11 204 & 205/11 :- 15 - : 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 T O HAVING RECEIVED DONATIONS FROM STUDENTS WHICH IS NO THING 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 M EMBER WITHIN THE MEANING OF SUB CLAUSE (II) OF CLAUSE (C) OF SUB- SECTION (1) OF SECTION 13 OF THE IT ACT 1961 AND TH EREBY 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 C LAUSE (CC) OF SUB-SECTION (3) OF SECTION 13 OF THE IT ACT 196 1 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 FO R A COMMERCIAL. CONSIDERATION OF EARNING PROFITS BY COL LECTING MONEY FROM STUDENTS IN EXCESS OF THE FEES PRESCRIBE D BY THE GOVERNMENT IN LIEU OF ADMISSION TO VARIOUS COUR SES UNDER THE MANAGEMENT QUOTA. IN VIEW OF THE AFORESAID FACTS IT IS HELD THAT THE ASSESSEES HAVE RENDERED THEMSELVES INELIGIBLE TO CL AIM THE EXEMPTIONS AVAILABLE U/S 11 OF THE INCOME-TAX A CT 1961. IN REPLY TO THE SHOW CAUSE NOTICE THE ASSES SEE HAD FILED A LETTER DATED 24.12.2009 OBJECTING TO THE VA RIOUS ISSUES. THOSE ISSUES HAVE BEEN DISCUSSED IN DETAIL SUPRA. IN THE SAID LETTER ASSESSEE HAD STATED THE STATEME NT RECORDED FROM DR. B. MUTHUKUMARAN WAS UNDER THREAT AND COERCION. ASSESSEE'S CLAIM IN THIS REGARD IS NOT CO RRECT. 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 THR EAT INDUCEMENT PROMISE. OR OTHER UNDUE INFLUENCE. WAS BROUGHT ABOUT TO BEAR ON THE DEPONENT .... 'THIS DO CUMENT ITA 99&100/11 204 & 205/11 :- 16 - : HAS BEEN SIGNED BY THE ASSESSEE TWO PANCHES AND TH E 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 I T IS HELD THAT THE SOCIETY IS NOT ELIGIBLE TO CLAIM E XEMPTION 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 NO T 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 L OOK INTO THE PURPOSE FOR WHICH THE SEARCH WAS CONDUCTED WHI CH 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 DEP ARTMENT HAD NOT CATEGORICALLY FOUND ANY INCRIMINATING DOCUM ENT OR MATERIAL ABOUT THE RECEIPT OF CAPITATION FEE AND W HY THE DEPARTMENT HAD NOT OBTAINED SPECIFIC DISCLOSURE FRO M DR. N. M. VEERAIYAN THAT THE INCOME ADMITTED WAS ONLY I N RESPECT OF CAPITATION FEES WHEN IT HAD CONDUCTED SE ARCH BASED ON THE INFORMATION THAT THE APPELLANT HAD ACC EPTED HUGE SUM OF MONEY AS CAPITATION FEES. IF THAT BE TH E CASE ITA 99&100/11 204 & 205/11 :- 17 - : 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 T HE DEPARTMENT HAD INFORMATION ABOUT RECEIPT OF CAPITA TION 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 T HAT THE APPELLANT HAD VIOLATED SEC 13(1)(C) ONLY BY APPLYIN G THE TEST OF HUMAN PROBABILITIES AND SURROUNDING CIRCUMSTANCES. DURING THE COURSE OF SURVEY U/S 13 3 A ON 13.08.2007 ONLY DR. N.M. VEERAIYAN HIS FAMILY MEMBERS VIDE ANSWER TO Q NO. 29. AGAIN ON 29.08.200 7 DURING THE COURSE OF ENQUIRY U/S 131 HE HAD FURTHE R INCREASED THE OFFER BY ` 25 LAKHS IN HIS HANDS IN ADDITION TO THE EARLIER OFFER. THE ADMISSION OF INC OME BY DR. N.M. VEERAIYAN WAS NEVER ON BEHALF OF THE TRUS T 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 VIO LATED THE PROVISION OF SEC 13(1)(C) FOR THE FOLLOWING FAC TS: 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. ITA 99&100/11 204 & 205/11 :- 18 - : 26. I HAVE GONE THROUGH THE ASSESSMENT ORDER. I HA VE ALSO CAREFULLY GONE THROUGH THE SUBMISSIONS OF THE AR. AS POINTED OUT BY THE AR AND AS PER MY FINDINGS DISCUS SED EARLIER THE APPELLANT TRUST/ SOCIETY HAD NOT RECEIV ED ANY CAPITATION FEE. THE SO CALLED ADMISSION MADE BY DR.N.M.VEERAIYAN DURING THE COURSE OF SEARCH AND SU RVEY 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 CAPIT ATION FEE. SINCE THE APPELLANT TRUST/ SOCIETY HAD NOT REC EIVED ANY CAPITATION FEE THE DIVERSION OF THE SAME FOR T HE PERSONAL BENEFITS OF THE TRUSTEE /MEMBERS DOES NOT ARISE. FURTHER THERE WAS ALSO NO INCRIMINATING MATERIAL FO UND OR SEIZED DURING THE COURSE OF SEARCH REVEALING DIVERS ION OF ANY SORT OF MONEY FROM THE TRUST TO THE TRUSTEES/ME MBERS OF THE APPELLANT. AS SUBMITTED BY THE AR THE FAMILY M EMBERS I.E. TRUSTEES/MEMBERS FILED THE RETURNS CONSEQUENT TO SEARCH ADMITTING THE INCOME DECLARED DURING THE COU RSE OF SEARCH AND PAID THE TAXES WHICH HAS BEEN ACCEPTED B Y THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS WHICH EMPHASISES THAT THERE CAN NOT BE ANY DIVERSIO N OF MONEY FROM THE APPELLANT SOCIETY. THEREFORE THE APP ELLANT HAD NOT VIOLATED THE PROVISIONS OF SEC.13(1)(C) THE RE 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 EXEMPT ION U/S11 AND 12 OF THE INCOME TAX ACT WHICH THEY WERE CLAIM ING OVER THE YEARS. I THEREFORE DELETE THE ADDITION O F ` 4 12 67 096/- MADE IN RESPECT OF EXCESS INCOME AS P ER THE INCOME AND EXPENDITURE ACCOUNT AS PER PROVISO TO S. L64(1) BY THE ASSESSING OFFICER. 12. SIMILAR ARGUMENTS WERE ADVANCED BY BOTH THE PARTIE S 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 TH E ASSESSEE HAD COLLECTED CAPITATION FEES IN THE GUISE OF DONATION AS HAS BEEN ALLEGED THERE IS NO VIOLATION OF TAMIL NADU EDUCATIONAL IN STITUTIONS (PROHIBITION OF COLLECTION OF CAPITATION FEES) ACT 1922. THE DONATION ITA 99&100/11 204 & 205/11 :- 19 - : 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. THER E IS NO EVIDENCE ON RECORD TO SHOW A LINK BETWEEN THE INVESTMENTS MADE IN THE HANDS OF DR.N.M.VEERAIYAN WITH THE TRUSTS ACTIVITIES AS PE R THE PROVISIONS OF SECTION 164(1) R.W.S 13(1) AND 13(1)(D). THEREFOR E 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 ASSESSEES 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 TR UST. ON THE CONTRARY THE CASE OF THE REVENUE IS THAT THIS CASH SEIZED DU RING SEARCH DOES NOT STAND PROPERLY EXPLAINED HENCE THE ACTION OF THE LD. CIT(A) IS CORRECT. THE LD.AR STATED THAT THIS AMOUNT REPRESENT TUITIO N FEES PETTY CASH CAUTION DEPOSIT APPLICATION AMOUNT AND TRANSPORT F EE FROM STUDENTS. THE LD. CIT(A) HAS SIMPLY MENTIONED THAT AFTER CONS IDERING THE WRITTEN SUBMISSION MADE ON BEHALF OF THE ASSESSEE AND NOT I N AGREEMENT WITH THE EXPLANATION OFFERED FOR UNACCOUNTED CASH AND HO LD THE CASH TO BE ITA 99&100/11 204 & 205/11 :- 20 - : UNACCOUNTED CASH OF THE ASSESSEE-TRUST. IN THIS RE GARD 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 STUDEN TS ( ` 2 36 770) AND TRANSPORT FEES OF COLLEGE OF ENGINEER ING ( ` 15 000). IT WAS STATED IN THIS VERY STATEMENT THAT REGARDING F EES COLLECTED NO RECORD OR REGISTER IS MAINTAINED BECAUSE AFTER COLL ECTING THE FEES THEY WERE ENTERED IN A FILE IN THE COMPUTER AND LATER TH E AMOUNTS WERE PAID INTO THE BANK IN THE NAME OF STUDENTS FROM WHOM THE SE 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 A T SAVEETHA DENTAL COLLEGE PREMISES 162 PH ROAD CHENNAI. WHILE REPL YING 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 THA T THE RECEIPT FOR THESE FEES WERE NOT GIVEN TO THE STUDENTS SINCE THE Y HAVE NOT BEEN PAID INTO THE BANK AND OBTAINED RELEVANT CHALLANS. 15. AFTER CONSIDERING THE RIVAL SUBMISSION WE HAV E 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 ITA 99&100/11 204 & 205/11 :- 21 - : COMPUTER AT THE TIME OF SURVEY ITSELF. THE ASSESSE E HAD ALSO EXPLAINED THE CASH BALANCE THROUGH LETTER DATED 9.11.2007 BEF ORE THE ADIT WHICH IS RECORDED IN THE ASSESSMENT ORDER ALSO. TH E ASSESSING OFFICER ISSUED SUMMONS U/S 131 TO THE STUDENTS AND THEIR SW ORN STATEMENTS WERE RECORDED IN WHICH THE STUDENTS HAVE ADMITTED P AYMENT OF SUCH FEES. THE CUMULATIVE EFFECT OF THESE OBSERVATIONS IS THAT THIS AMOUNT CANNOT BE SO EASILY ADDED IN THE HANDS OF THE ASSES SEE AS IT STANDS EXPLAINED ON RECORD. ON ONE SIDE THE DEPT WANTED TO RELY ON THE STATEMENT RECORDED DURING SURVEY TO MAKE HUGE ADDIT IONS AND ON THE OTHER HAND THEY WERE RELUCTANT IN ACCEPTING THE ST ATEMENTS OF STUDENTS WHICH WERE RECORDED BY THEM AFTER SUMMONIN G THEM U/S 131 OF THE ACT. IN OUR CONSIDERED OPINION THE ENTIRE C ASH STANDS FULLY AND SATISFACTORILY EXPLAINED AND CANNOT BE SUSTAINED IN THE HANDS OF THE ASSESSEE. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE STAND S ALLOWED. I.T.A.NOS. 99/MDS/2011 & 204/MDS/2011 IN THE CASE O F M/S SAVEETHA INSTITUTE OF MEDICAL & TECHNICAL SCIEN CES 17. THE CROSS APPEALS IN THIS CASE ARE DIRECTED AGAI NST THE ORDER OF THE LD. CIT(A) SALEM DATED 26.11.2010 FOR ASSESS MENT YEAR 2008-09. 18. IN REVENUES APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED: ITA 99&100/11 204 & 205/11 :- 22 - : 1.A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON 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 INSTITUT ION 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 RECEI VE CAPITATION FEES WAS NOT DISCHARGED BY THE INSTITUTI ON 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 TH E 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 TH E EVIDENTIARY VALUE OF A DEPOSITION STATEMENT WHICH I S 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 WEL L 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) ITA 99&100/11 204 & 205/11 :- 23 - : 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 CAPITATI ON FEES) ACT 1922 AND HENCE THE ACTIVITIES OF THE ASSESSEE HAVE BECOME ILLEGAL AND NOT GENUINE AND ACCORDINGLY THE INCOME IS NOT ELIGIBLE FOR EXEMPTIO N 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 WEL L SETTLED PRINCIPLE OF LAW THAT IN THE INCOME-TAX PROCEEDINGS FACTS OF LIFE HUMAN PROBABILITIES AND ECONOMIC REALITIES CANNOT BE IGNORED AND UPHELD THE ADDITION S SINCE ONE CANNOT EXPECT DIRECT EVIDENCE ESPECIALLY WHEN THE FUNDS OF THE TRUST ARE DIVERTED FOR PERSON AL BENEFITS OF THE TRUSTEE. 2.E THE LEARNED CIT(A) HAS FAILED CONSIDER THE RAT IO 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). 2 0 SOT 353(ITAT HYD.) ITA 99&100/11 204 & 205/11 :- 24 - : 3. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR A LTER 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 ASSESSEES APPEAL FOLLOWING GROUNDS HAVE BEEN R AISED: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) SALEM IS OPPOSED TO LAW FACTS AND IN THE CIRCUMSTA NCES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE ADDITION IN RESPECT OF SEIZED CASH O F ` 3 69 950/-. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE SEIZED CASH WAS EXPL AINED TO THE ADDITIONAL DIRECTOR OF INCOME TAX THAT IT RE PRESENTS TUITION FEES COLLECTED FROM THE STUDENTS. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT APPRECIATING THE FACT THAT THE SEIZED CASH WAS PROP ERLY 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 REVENUES APPEAL THE FACTS AND CIRCUMSTANCES LEADING TO THE ADDITIONS OF ` 1 27 00 000/- TOWARDS CAPITATION FEES COLLECTED FR OM ITA 99&100/11 204 & 205/11 :- 25 - : 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 MUTAT IS MUTANDIS SAME AND SIMILAR AS IN THE CASE OF M/S SAVEETHA MEDICAL & EDUCATIONAL TRUST EXCEPT THE AMOUNTS INVOLVED THEREIN. THEREFORE WI TH THE PARITY OF SIMILAR REASONING WE DISMISS REVENUES APPEAL. 21. IN ASSESSEES APPEAL ADDITION OF ` 3 69 500/- WAS MADE ON ACCOUNT OF CASH SEIZED WHICH ACCORDING TO THE DEPA RTMENT IS NOT PROPERLY EXPLAINED BUT THE FACTS AND THE EVIDENCES AND REASONINGS FOR MAKING ADDITION ARE SAME AND SIMILAR WHICH ARE IN T HE ABOVE MENTIONED ASSESSEES CASE. THEREFORE WITH THE SIM ILAR REASONING WE DELETE THIS ADDITION AND ALLOW ASSESSEES 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) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 18 TH JULY 2011 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR