2020 (5) TMI 690 - AT - Income Tax

Addition relating to suppression of fee receipts of Management/NRI quota - addition based on document seized from the residence of the Chairman Shri P L Nanjundaswamy - contention of the assessee is that it is not aware of existence of any such document and accordingly it has disowned the same - HELD THAT - In the instant case, the AO s case is that the assessee has suppressed the fees received by it for giving admission under management/NRI quota. AO did not accept the explanations of the assessee in this regard. However, he did not bring any material on record to show that the assessee, indeed, collected fees over and above that were accounted for in the books of account. AO did not reveal/discuss the result of enquiry conducted by him by issuing notices u/s 133(6) of the Act. Hence the assessee has contended that the assessing officer did not receive any adverse reply from the students. Even though the AO has observed that huge cash was seized during the course of search, yet it was shown by the assessee that all those cash are accounted for in the books of accounts. As noticed that the Ld CIT(A) has agreed with the inferences drawn by the AO. The discussions made in the preceding paragraph would also show that the assessing officer has only drawn certain inferences on surmises and conjectures. Hence we are unable to sustain the view taken by Ld CIT(A) on this issue. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition made in AY 2009-10 towards suppression of fee on MBBS Management Quota. - Decided in favour of assessee. Addition towards suppression of fees under P.G admission - suppression of fee receipts of Post graduate seats - AO has made this addition on the basis of certain documents pertaining to the AY 2009-10 and 2014-15 - HELD THAT - AO did not conduct any independent enquiry either with the students or their parents or with any other person related to those students in order to find out the truth. He also not brought any material on record to show that the explanations given by the assessee were not correct. Hence, we are of the view that the assessing officer should not have drawn presumptions without conducting proper enquiry. The assessee has stated that the fee is not fixed uniformly for management quota seats and the same is finalized by the chairman on case to case basis. It is also undisputed fact that the revenue did not unearth any material with regard to the remaining four seats. Under these set of facts, it may not be correct on the part of the AO to presume that the assessee would have collected more fees in respect of remaining four seats. Though the AO has taken support of the diary relating to AY 2014-15 to entertain presumption that the assessee has been suppressing the fees, in our considered view, it may not be right to presume that the circumstances prevailing in one year existed in other years also. In any case, the assessee was not given opportunity to examine Mr. Manjunatha, who had maintained the diary. Accordingly, we are of the view that the ld CIT(A) was not justified in confirming this addition.Decision rendered in the case of Balaji Educational Charitable Public Trust 2015 (4) TMI 342 - MADRAS HIGH COURT would apply to this addition also. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in AY 2009-10 and direct the AO to delete the addition.- Decided in favour of assessee. Addition relating to suppression of fees of COMED-K candidates - As noticed earlier that 40% of the MBBS seats are filled up on the basis of common entrance test conducted by the association or body of professional colleges - CIT(A) deleted this addition and hence the revenue has filed this appeal - HELD THAT - There is no dispute that the fee structure under this category is lower than the fees applicable for management quota. In this kind of situation, if any student has qualified under entrance examination conducted for COMED-K category and admission is also made out of the rank list of that examination, then no one will agree to pay higher fees than that prescribed for COMED-K category. If anybody agrees to pay, the same would be against human probabilities. If the assessee had demanded higher fees, then the concerned student had right to lodge a complaint with the State Government, as it violative of the consensual agreement entered between the Association and Government. AO has not shown that any such complaint was received against the assessee by the State Government or Association. Assessee has explained that the letters issued to the prospective students, which were seized by the revenue, pertained to management quota seats. The revenue has seized letters issued to four students, out of which only two students have joined under COMED-K category. The assessee has furnished confirmation letters obtained from those two students confirming that they have paid only prescribed fees. We notice that the AO did not disprove the contents of the confirmation letters. In any case, those letters pertained to AY 2014-15 and not to the assessment year 2009-10, which is under consideration. AO has not conducted any enquiry with any of the students or their parents or any other person to support the inference drawn by him that the fees applicable to management quota seats were collected from the students admitted under cancelled seats of COMED-K category. The detailed discussions made by the Ld CIT(A) would show that the assessee has answered all the queries raised by the AO in this regard and none of the said explanations have been proved to be wrong by the assessing officer. No infirmity in the decision taken by Ld CIT(A) on this issue and accordingly confirm the deletion. - Decided against revenue.

Summary

Issues Involved:
1. Suppression of fee receipts for Management/NRI quota.
2. Suppression of fee receipts for Post Graduate seats.
3. Suppression of fee receipts for COMED-K seats.

Detailed Analysis:

1. Suppression of Fee Receipts for Management/NRI Quota:
The primary issue revolves around the addition made by the Assessing Officer (AO) based on seized documents indicating unaccounted cash receipts for MBBS seats under the Management/NRI quota. The AO relied on documents seized from the residence of the Chairman, which allegedly showed discrepancies between agreed amounts and amounts recorded in the books. The AO also referred to statements from the Chairman and other documents like visitor slips and a diary maintained by the Chairman's PA, indicating higher amounts collected but not accounted for.

The assessee contended that these documents were not reliable, were disowned by the trust, and argued that they were at the negotiation stage and not final agreements. The assessee also emphasized that the AO did not provide an opportunity to cross-examine the PA or validate the entries through independent inquiries with students or parents.

The Tribunal found merit in the assessee's arguments, noting that the AO's conclusions were based on presumptions without corroborative evidence. The Tribunal also highlighted that the AO did not conduct any independent inquiries with students or parents to substantiate the claims of unaccounted receipts. Consequently, the Tribunal directed the deletion of the addition made for suppression of fee receipts under the Management/NRI quota for all assessment years from 2008-09 to 2014-15.

2. Suppression of Fee Receipts for Post Graduate Seats:
The AO made additions based on a diary seized from the PA of the Chairman, which indicated higher amounts for PG seats than those recorded in the books. The AO extrapolated these findings to estimate unaccounted receipts for other years. The assessee argued that the diary was not reliable, the amounts were at the negotiation stage, and provided confirmation letters from students to support the recorded amounts.

The Tribunal noted that the AO did not conduct any independent inquiries to verify the claims and relied solely on the seized documents. The Tribunal found the assessee's explanations plausible and noted that the AO's additions were based on conjectures and surmises. Consequently, the Tribunal directed the deletion of the addition made for suppression of fee receipts for PG seats for all assessment years from 2008-09 to 2014-15.

3. Suppression of Fee Receipts for COMED-K Seats:
The AO presumed that the assessee collected fees for COMED-K seats at rates applicable to the Management quota, based on certain letters and documents indicating higher amounts. The assessee contended that these documents pertained to management quota seats and were at the enquiry stage. The assessee also provided confirmation letters from students confirming the fees paid as per the COMED-K quota.

The Tribunal found that the AO did not conduct any independent inquiries to substantiate the claims and relied on documents that were not directly related to the assessment years in question. The Tribunal also noted that the assessee provided sufficient evidence to rebut the AO's presumptions. Consequently, the Tribunal upheld the deletion of the addition made for suppression of fee receipts for COMED-K seats for all assessment years from 2008-09 to 2014-15.

Conclusion:
The Tribunal allowed the appeals of the assessee for all assessment years from 2008-09 to 2014-15, directing the deletion of additions made for suppression of fee receipts under the Management/NRI quota, PG seats, and COMED-K seats. The appeals of the revenue were dismissed, and the Tribunal emphasized the need for concrete evidence and independent inquiries to substantiate claims of unaccounted receipts.