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2013 (11) TMI 826 - AT - Income TaxCancellantion of registration u/s 12AA(3) of the Income tax Act - Assessee is running a medical college at Karimnagar and has also established a 750 bedded hospital at Nanganur village of Karimnagar District - For the first reason put forth for cancellation of registration, viz., collection of capitation fee, it is submitted that in the course of search, one Excel sheets were found containing the names of students, names of parents and the amount. In the course of search and, thereafter, statements of chairman of the assessee trust were recorded on a number of occasions, with reference to the entries in these Excel sheets. It was explained that circumstances in which the Excel sheets were found was not ascertainable. It was contended that uncorroborated notings in the Excel sheets should not be acted upon to derive any inference against the society - Reasons for cancellation of registration are that the assessee has violated the provisions of sections 11 and 12 of the Act and the assessee has not conducted itself in accordance with the object for which it was established and registered u/s. 12A of the Act. Seized material in the form of Excel sheets said to be recovered from the assessee s office cannot be considered as sufficient evidence so as to decide collection of capital fees by the assessee as it lacked independent corroboration. The Department failed to collect sufficient evidence to show that the assessee has actually collected the amount mentioned in the Excel sheets and the statement of Sri B. Srinivasa Rao is also not supporting the collection of capitation fees by the assessee. Moreover, no data confirming the contents of Excel sheets were recovered from the seized computer hard disk. In the absence of corroborative material, the Excel sheets recovered from the computer cannot be considered as a sufficient evidence so as to confirm collection of capitation fee. The seized material being Excel sheets which is an unsigned document and not being identified by the Department regarding author of these Excel sheets and it cannot be considered as an independent evidence. Being so, it has no evidentiary value as held by the co-ordinate Bench in the case of Smt. K.V. Lakshmi Savitri Devi vs. ACIT 2013 (11) TMI 805 - ITAT HYDERABAD Evidence collected by the Revenue authorities is not sufficient to establish the stand that the assessee has collected the capitation fee/excess fee for admission under management quota seats in assessee society - Entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to the normal course of human thinking and conduct and human probability - Applying this principle to the present case, difficulty in rejecting the assessee s plea as opposed to the normal course of human conduct. The circumstances surrounding the case also not strong enough to reject the assessee s plea - Department cannot rely on party s statements, more so, when it was not confronted to the assessee for cross examination, the same cannot be relied upon - Assessee society cannot be deprived of the registration granted to the assessee u/s. 12AA of the Act Decided against the Revenue. Re-opening of assessment u/s 147 of the Income tax act Search u/s 132 has unearthed material which revealed collection of amounts by the assessee over and above the fee prescribed by the Government for admission into medical courses particularly in respect of students admitted in the academic years 2006-07, 2007-08 and partly for 2009-2010. The said material found at the time of search did not reveal anything specifically relating to assessment year 2003-04, which is the year under appeal Held that - In the absence of any specific and concrete material possessed by the assessee to suggest collection of amounts over and above the prescribed fee, at the time of initiating proceedings under S. 147, the reopening of assessment cannot be held to be legal or valid, and it has to be held to be just based on the suspicion that the assessee might have collected such amounts even in the year under appeal - Issue relating to the legality and validity of the reopening of assessment under S. 147 decided in favour of the assessee.
Issues Involved:
1. Cancellation of registration under Section 12AA(3) of the Income-tax Act. 2. Collection of capitation fees by the assessee society. 3. Legality and validity of reopening assessments under Section 147 of the Act. 4. Entitlement of the assessee to exemption under Sections 11 and 10(23C) of the Act. 5. Extrapolation of evidence from subsequent years to the assessment year in question. Issue-wise Detailed Analysis: 1. Cancellation of Registration under Section 12AA(3): The primary grievance of the assessee was against the cancellation of registration under Section 12AA(3) by the CIT. The CIT canceled the registration on the grounds that the assessee society collected fees over and above the government-prescribed fees and did not account for these in the regular books, thereby violating Sections 11 and 13 of the Act. The CIT's decision was based on seized materials during a search operation, which allegedly showed discrepancies in the financial affairs of the society. However, the Tribunal found that the seized materials, primarily Excel sheets, lacked corroboration and were not authenticated. The Tribunal concluded that the activities of the trust were genuine and aligned with its objects, thus restoring the registration under Section 12AA. 2. Collection of Capitation Fees: The AO reported that the assessee society collected capitation fees, which were not accounted for in the books. The CIT relied on seized Excel sheets to support this claim. The assessee argued that these sheets were uncorroborated and lacked evidentiary value. The Tribunal noted that the statements from parents and other witnesses did not conclusively support the collection of capitation fees. The Tribunal emphasized that the Excel sheets were not authenticated and lacked corroboration, making them insufficient evidence to cancel the registration. 3. Legality and Validity of Reopening Assessments under Section 147: The AO reopened the assessment for the year 2003-04 based on evidence found during a search for subsequent years. The CIT(A) held that the AO's action was speculative and lacked specific material for the year under consideration. The Tribunal upheld this view, stating that the reopening of assessment must be based on concrete material specific to the year in question. The Tribunal found that the AO's extrapolation of evidence from subsequent years was not justified, thus invalidating the reopening of the assessment. 4. Entitlement to Exemption under Sections 11 and 10(23C): The AO denied the exemption under Sections 11 and 10(23C) on the grounds of alleged capitation fee collection. The Tribunal found that the evidence for such collection was not conclusive. The Tribunal also noted that the withdrawal of approval under Section 10(23C) was effective from the assessment year 2007-08, not affecting the year under consideration. Consequently, the Tribunal held that the assessee was entitled to exemption under Sections 11 and 10(23C) for the assessment year 2003-04. 5. Extrapolation of Evidence: The AO extrapolated the evidence of capitation fee collection from subsequent years to the assessment year 2003-04. The Tribunal found this approach unjustified, as there was no specific evidence for the year 2003-04. The Tribunal emphasized that any estimation of unaccounted receipts must be based on material relevant to the assessment year in question. The Tribunal rejected the AO's reliance on the jurisdictional High Court's decision in Rajnik & Co., stating that the facts of the present case did not support such extrapolation. Conclusion: The Tribunal allowed the assessee's appeal, restoring the registration under Section 12AA and holding that the assessee was entitled to exemption under Sections 11 and 10(23C). The Tribunal dismissed the Revenue's appeals, invalidating the reopening of assessments and rejecting the extrapolation of evidence from subsequent years. The Tribunal emphasized the need for concrete and corroborated evidence in such cases.
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