2014 (2) TMI 1069 - AT - Income Tax

Addition made u/s 69B of the Act - Undisclosed sale consideration for the purchase of a land - Claim of Exemption u/s 10(23C)(iiiad) of the Act - Survey action under S.133A - validity of statement which was retracted later Held that - In view of the retraction made by the said person, the Assessing Officer should not have simply gone by the contents of the letter dated 18.12.2010, without bringing on record any corroborative evidence Relying upon Mehta Parikh V/s. CIT 1956 (5) TMI 4 - SUPREME Court once an affidavit is filed by a person, the contents thereof have to be taken as true, unless established otherwise - Even assuming that the assessee paid any amount over and above the consideration disclosed in the sale deed, the payment of such amount was for the purpose of advancement of the objects of the assessee-society, viz. education, and consequently even on that ground, there is no justification for any addition, since its income is, as it is, exempt from tax - The claim of exemption under S.10(23C)(iiiad) in respect of any income means the same is exempt provided the educational institution solely exists for educational purpose and not for the purpose of profit. The assessee society is exiting solely for purpose of carrying on educational activities, through its institutions - When such educational institution is approved by the prescribed authority and when the assessee also applies its income for the income or accumulates the same for subsequent application, wholly and exclusively for its objects, the institution is entitled for exemption in respect of any income The decision in ACIT V/s. Muslim Educational Society 2009 (3) TMI 900 - ITAT COCHIN followed thus, there was no justification for the additions made by the Assessing Officer. Applicability of section 115BBC of the Act Held that - The assessee contended that the right from the beginning that it has been maintaining regular books of account, and has maintained record as to the identity of donors and the relevant details, and consequently provisions of S.115BBC are not applicable the contentions of the assessee have not been controverted by the Revenue with any supportive material The decision in Hans raj Samarak Society v. ADIT(E) 2012 (9) TMI 843 - DELHI HIGH COURT followed the assessee has maintained record of the donations with relevant details as to the identity of the donors, the provisions of S.115BBC are not applicable thus, the order of the CIT(A) set aside Decided in favour of Assessee.

Summary

Issues Involved:
1. Whether the assessee invested over and above the recorded consideration in the purchase of land.
2. The validity of the addition of Rs.79,88,520 under Section 69B of the Income Tax Act.
3. The evidentiary value of statements and documents obtained during the survey.
4. The applicability of Section 115BBC regarding anonymous donations.
5. The eligibility for exemption under Section 10(23C)(iiiad) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Investment Over and Above Recorded Consideration:
The Assessing Officer (AO) noted discrepancies in the sale consideration for land purchased by the assessee. The registered sale deed indicated a consideration of Rs.19,35,000, but a survey revealed a paper suggesting the actual consideration was Rs.99,23,520. The AO concluded that the assessee paid an excess amount of Rs.79,88,520, which was unexplained and invested outside the books of account. The CIT(A) upheld this view, finding no merit in the assessee's contentions and confirming the addition under Section 69B.

2. Validity of Addition Under Section 69B:
The AO's addition of Rs.79,88,520 under Section 69B was based on the paper found during the survey and statements from third parties. The assessee argued that these statements had no evidentiary value and that the entire income of the trust was exempt under Section 10(23C). The Tribunal found that the survey was conducted on a third party's premises, and the statements recorded were from third parties, not the assessee. The Tribunal emphasized that statements recorded during surveys have no evidentiary value unless corroborated by concrete evidence, which was lacking in this case. Consequently, the Tribunal deleted the addition.

3. Evidentiary Value of Statements and Documents:
The Tribunal highlighted that statements recorded during surveys under Section 133A do not carry evidentiary value. The statements of P. Krishna and P. Mahender, and the paper found during the survey, were not corroborated by any material evidence. The Tribunal cited various judicial precedents, including the Madras High Court's decision in Khader and Sons, which held that statements recorded during surveys have no evidentiary value. The Tribunal also noted that the assessee was not given an opportunity to cross-examine the individuals whose statements were relied upon by the AO, violating principles of natural justice.

4. Applicability of Section 115BBC:
The AO inferred that the excess amount paid by the assessee was from anonymous donations, making Section 115BBC applicable. However, the Tribunal found that the assessee maintained regular books of account and records of donors' identities, thus Section 115BBC was not applicable. The Tribunal supported this view by citing the Delhi Bench decision in Hans Raj Samarak Society v. ADIT(E).

5. Eligibility for Exemption Under Section 10(23C)(iiiad):
The Tribunal noted that the assessee society existed solely for educational purposes and not for profit. Even if the assessee paid an amount over and above the recorded consideration, it was for the advancement of its educational objectives. The Tribunal concluded that the assessee was entitled to exemption under Section 10(23C)(iiiad), as its income was applied wholly for its educational purposes.

Conclusion:
The Tribunal set aside the orders of the Revenue authorities and deleted the addition of Rs.79,88,520 made by the AO. The Tribunal emphasized the lack of corroborative evidence and the violation of principles of natural justice, ultimately allowing the assessee's appeal.