2012 (4) TMI 662 - AT - Income Tax

Summary

Issues Involved:
1. Cross-examination of the Clerk of Ramrao Adik Education Society.
2. Appreciation of the Settlement Petition filed by Ramrao Adik Education Society.
3. Deletion of addition of Rs. 18,27,500/- on account of unaccounted capitation fees.
4. Validity of reopening the assessment u/s 147 of the Act.

Summary:

Issue 1: Cross-examination of the Clerk of Ramrao Adik Education Society
The learned CIT(A)-I, Surat erred in holding that the A.O. had not afforded cross-examination of the Clerk of Ramrao Adik Education Society, despite the fact that the Clerk had admitted the receipt of capitation fees from the assessee before the authorized Officer during the course of search in his statement on oath. The AO issued summons to the Clerk, but he did not attend. The learned CIT(A) asked the AO to give cross-examination opportunity to the assessee, but the Clerk did not cooperate.

Issue 2: Appreciation of the Settlement Petition filed by Ramrao Adik Education Society
The learned CIT(A) did not appreciate that Ramrao Adik Education Society had filed a settlement petition before the Settlement Commission, Mumbai, wherein they surrendered the entire amount of capitation fees received, including those from the assessee. However, the Society did not provide a student-wise breakup of the surrendered amount.

Issue 3: Deletion of addition of Rs. 18,27,500/- on account of unaccounted capitation fees
The learned CIT(A) deleted the addition made by the AO of Rs. 18,27,500/- on account of unaccounted capitation fees paid by the assessee to Ramrao Adik Education Society for securing admission of his son in the M.B.B.S. course. The CIT(A) observed that the AO failed to provide cross-examination of Shri Shashikant Mandavkar, who had given a statement regarding the donation. The AO did not bring any other evidence on record for making the addition, and the statement of Shri Mandavkar could not be admitted as evidence. Therefore, the diary entry could not be relied upon for making the addition.

Issue 4: Validity of reopening the assessment u/s 147 of the Act
The learned CIT(A) held that the reopening of the assessment was valid as the AO had specific outside information along with prima facie evidence in the form of a diary noting and statement of the person who wrote the diary. The AO acted independently on the basis of this information and not on the directions of any higher authority. The assessee's argument that there was no objective satisfaction on the part of the AO for reopening the assessment and that the reopening was wrong because the name mentioned in the diary was that of the assessee's son and not the assessee was not accepted.

Conclusion:
The appeal by the Revenue and the cross-objection filed by the assessee were both dismissed. The order of the learned CIT(A) deleting the addition of Rs. 18,27,500/- was upheld, and the reopening of the assessment u/s 147 was confirmed as valid.