2020 (9) TMI 182 - AT - Income Tax

Assessment u/s 153 A - Validity of search - denial of exemption under section 11 - Issue of Capitation Fees - Donation from the students - Presumption u/s 292C - HELD THAT - Carrying out search against the person i.e issuance of warrant of authorization against the person for raising presumption is not necessary. There should be a search and the person is whose control and possession assets/books/ documents are found may be some person or may be other. If these items are found in control and possession of the person searched then presumption would be raised against the person searched in respect of these items. But if these items are found in control and possession of some other person during the course of search then presumption would be raised against that other person. In the absence of working out of the basic parameters regarding the ownership of transactions as to how they culminate into the determination of concealed income the presumptive clauses provided u/s 132(4A) cannot be invoked in the instant case. As considered the fact of seizure of cash and its relation to the collection of capitation fees. The cash balance as per the books of account as on 18.09.2014 was 8.5 crores. The cash seized was 6.6 crores. Hence the revenue s endeavor to relate the presence of cash to collection of capitation fee false flat. The issue of cash seizure is dealt further in this order about its source accountability reconciliation and taxation thereof. There has been a sequence of admission of Shobhit Pal and Anuj Agarwal to the medical courses which has been narrated above. No examination of the students from whom the amounts purportedly have been received has been undertaken by the revenue to prove receipt of donation. The writings on the empty envelops have not been examined. Other than the loose papers there has been no evidence corroborating receipt of the amounts from these two persons to the tune of 73 lacs. We also find that no primary evidence has been available with the Revenue authorities extrapolating the amount and work out the donation purportedly received. The addition of 29.30 crores has been made on the strength of two papers wherein the amount of 65 lakhs has been purportedly written cannot be held to be valid. The reliance on the case of M/s Rohilkhand Educational Charitable Trust is found to be misplaced. Having given due consideration to of the seized material having mulled over the arguments of ld. AR and the ld. DR after going through the presumption as to assets books of accounts u/s 292C and after examining the process of admission as per UPUMCWA we hereby direct that the addition made by the Assessing Officer cannot be held to be legally valid and so as the extrapolation made by the AO for the other years. - Decided in favour of assessee. Seizure of cash - Addition on account of unexplained cash in the hands of main Trustee and Chairman of the Trust and on protective basis in the hands of the assessee trust - HELD THAT - Cash has to be assessed in the hands of the trust SRMST Bareilly. The reconciliation statement has been rejected en-bloc by the revenue. The facts or the explanation given by the assessee has not been examined by the Revenue in a right perspective so as to determine the accountability of these amounts in the regular books or not. Keeping in view the cash deposited in the bank expenses cash balance as per the books and cash found at the premises the reconciliation filed by the assessee we here by remand the matter to the file of the assessing officer for the limited purpose of verifying the cash balances with the regular books of accounts filed by the assessee as well as with the balance sheets and income and expenditure accounts available with the revenue along with the returns and the books of accounts available in the seized material. In order to arrive at a coherent decision this exercise of verification shall be carried out under the effective supervision of the officer who authorizes the officers to file appeals before the tribunal so as to avoid duplication. Addition of cash seized during the search conducted in the premises - Addition in the hands of trustee - HELD THAT - The cash seized has been treated as income of the assessee whereas it has been explained undisputedly that the cash belongs to the trust in which the assessee is a trustee. The material found during the course of search books of account and the cash found have to be examined together rather than in isolation and it should reflect the true state of affairs of the assessee. The taxation has to be done as per law in the correct hands. Since we have already adjudicated on the issue of cash seizure in the case of the trust we hereby delete the addition made in the hands of the trustee. Valuation of properties/Unexplained investment in the building - CIT(A) deleted the addition as the difference between the actual investment shown by the assessee and the estimated by the D.V.O. is only 9.86% which is less than 15% - HELD THAT - During the arguments before us the Revenue could not controvert the factual findings. Hence the addition made on account of the difference of the investment and as estimated by the D.V.O. being less than 15% the same is hereby ordered to be deleted.

Summary

Issues Involved:
1. Legality of the assessment conducted under section 153A of the IT Act.
2. Denial of exemption under section 11 of the Act.
3. Issue of Capitation Fees.
4. Cash Seizure.
5. Valuation of properties/Unexplained investment in the building.

Detailed Analysis:

1. Legality of the Assessment Conducted Under Section 153A of the IT Act:
The legality of the assessment under section 153A was questioned by the assessees. The Tribunal examined the evidence collected during the search operation, including the seized documents and cash found. It was argued that the documents found were "dumb documents" and did not conclusively prove the receipt of capitation fees. The Tribunal noted that no corroborative evidence or statements from students or parents were recorded to substantiate the claims of capitation fees. The Tribunal held that the presumption under section 132(4A) and 292C could not be invoked without basic parameters being met. Consequently, the addition made by the Assessing Officer based on these documents was not legally valid.

2. Denial of Exemption Under Section 11 of the Act:
The denial of exemption under section 11 was linked to the alleged receipt of capitation fees. The Tribunal found that the evidence presented by the Revenue was insufficient to prove that the Trust had received capitation fees. As a result, the denial of exemption under section 11 was not justified.

3. Issue of Capitation Fees:
The Revenue alleged that the Trust was charging capitation fees based on seized documents, including loose papers and visitor slips. The Tribunal examined these documents and found that they were not sufficient to prove the receipt of capitation fees. No statements from students or parents were recorded, and the handwriting on the documents was not verified. The Tribunal concluded that the addition of ?29.30 crores based on these documents was not valid.

4. Cash Seizure:
During the search, ?7,30,53,000 was found at the premises of the Trust and its trustees. The Revenue made a substantive addition in the hands of Shri Dev Murti and a protective addition in the hands of the Trust. The Tribunal examined the reconciliation provided by the Trust, which showed that the cash balance as per books was ?8.5 crores. The Tribunal found that the cash seized was duly accounted for in the books of the Trust. Therefore, the addition in the hands of Shri Dev Murti was deleted, and the matter was remanded to the Assessing Officer for verification of the cash balance with the regular books of accounts.

5. Valuation of Properties/Unexplained Investment in the Building:
The valuation of buildings of various institutions of the Trust was referred to the Valuation Cell, which reported a difference of ?4,03,72,178. The Tribunal noted that the difference between the actual investment and the estimated value by the DVO was only 9.86%, which is less than the permissible limit of 15%. Therefore, the addition made on account of the difference in valuation was deleted.

Conclusion:
The Tribunal allowed the appeals of the assessee, deleted the additions made by the Revenue, and remanded the matter of cash seizure for further verification. The appeals of the Revenue were dismissed. The Tribunal emphasized the importance of corroborative evidence and proper examination of documents before making additions based on seized materials.