2012 (4) TMI 687 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for claiming exemption u/s 11 of the Income-tax Act, 1961.
2. Confirmation of additions for various Assessment Years.
3. Improper maintenance of books of account.
4. Control and management of the society.
5. Siphoning of excess funds.
6. Receipt of capitation fees.

Summary:

1. Eligibility for claiming exemption u/s 11:
The appeals by the Revenue challenge the orders of the CIT(A) allowing the assessee's claim for exemption u/s 11 of the Income-tax Act, 1961. The CIT(A) had found the capitation fees brought to tax on estimation by the AO fit for deletion based on the facts and circumstances on record. The Revenue argued that the search proceedings clarified that the assessee was not entitled to exemption u/s 11, as the purported cancellation of registration u/s 12AA was subsequent to the date of search and appealed before the Tribunal. The Tribunal had adjudicated allowing the assessee to continue with the registration, which was further challenged by the Revenue before the Hon'ble High Court u/s 260A.

2. Confirmation of additions for various Assessment Years:
The assessee appealed against part confirmation of additions for AYs 2000-01 to 2004-05. The CIT(A) had confirmed unsecured loans of Rs. 30.77 lakhs for AY 2001-02 and Rs. 6 lakhs for AY 2002-03, and purchases of laboratory equipment amounting to Rs. 3,85,865 for AY 2004-05 as bogus. The Tribunal upheld the CIT(A)'s order on these issues, noting the lack of supportive material from the assessee to demolish the stand taken by the AO and CIT(A).

3. Improper maintenance of books of account:
The AO found discrepancies in the maintenance of books of account, such as non-tallying computerized day books and manual cash books, incomplete ledgers, and unrecorded excess money received from students. The Tribunal noted these discrepancies but upheld the CIT(A)'s order allowing exemption u/s 11, as the AO's estimation of capitation fees was based on assumptions and not on specific evidence from the search documents.

4. Control and management of the society:
The society was controlled and managed by the founder and his family members, who were found to have amassed significant wealth through unaccounted money and capitation fees. The Tribunal noted these findings but upheld the CIT(A)'s order allowing exemption u/s 11, as the AO's estimation of capitation fees was not substantiated by specific evidence from the search documents.

5. Siphoning of excess funds:
The search revealed that excess funds collected from students were handed over to the chairman and not deposited in the society's bank account. The Tribunal noted these findings but upheld the CIT(A)'s order allowing exemption u/s 11, as the AO's estimation of capitation fees was based on assumptions and not on specific evidence from the search documents.

6. Receipt of capitation fees:
The AO found evidence of the society collecting capitation fees in excess of the admission fees fixed by the Industries Department, Govt. of Odisha. The Tribunal noted these findings but upheld the CIT(A)'s order allowing exemption u/s 11, as the AO's estimation of capitation fees was based on assumptions and not on specific evidence from the search documents.

Conclusion:
The Tribunal upheld the CIT(A)'s order allowing the assessee's claim for exemption u/s 11, dismissing the Revenue's appeals and allowing the assessee's cross objections. The Tribunal also partly allowed the assessee's appeals for AY 2004-05 by deleting the addition of Rs. 3.86 lakhs for laboratory equipment purchases, while dismissing the appeals for AYs 2001-02 and 2002-03 due to lack of supportive material from the assessee.