2022 (5) TMI 664 - AT - Income Tax

Protective addition made in the hands of the assessee - income surrendered by the assessee in the sworn statement - estimation of capitation fee alleged to have been collected for admission of students into PG Course - HELD THAT - Tribunal, while upholding the view taken by Ld CIT(A) in deleting the addition relating to capitation fee for PG Students, has also observed that the AO was not justified in placing reliance on the above said seized documents, i.e., it is the view of the Tribunal that the seized documents do not show the collection of capitation fee from the PG students. Another important point noticed by the Tribunal is that the investigation wing had issued summons to some or all the students in the list and also recorded the statements from them - result of the said enquiry was not conveyed to the assessee in spite of specific request made in this regard. AO has also not discussed anything in the assessment order about the enquiry conducted and the results thereof. Tribunal has also expressed the view that the said investigations might not have brought out anything against the assessee. Accordingly, the Tribunal has held that the impugned seized documents lack credence and could not be relied upon. Since the allegation of collection of capitation fee from PG students itself could not be proved, the addition made on substantive basis in the hands of Venkatesha Education Society were deleted. Accordingly, the above said conclusions reached by the Tribunal would equally apply to the case of the assessee herein also. Hence the protective addition made in the hands of assessee would automatically fall to the ground. Accordingly, we do not find any reason to interfere with the decision taken by Ld CIT(A) on this issue in AY 2009-10 to 2014-15. CIT(A) in confirming addition of Rs.25 crores made by the AO on the basis of statement/letter given by the assessee - The initial declaration of Rs.20 crores was obtained in the statement taken u/s 132(4) of the Act and we have found that the same is not supported by any incriminating material. Subsequently, the amount was increased to Rs.25 crores, again without any basis. We have also noticed that the surrender was not blanket surrender as presumed by the tax authorities. We also noticed that the surrender was couched with various caveats. In any case, the surrender of income without any basis is against the circular issued by CBDT . We also noticed that the assessee has explained later before the AO that the capital gain was in his mind while making surrender. Hence the facts prevailing in the present case are totally different from the facts that prevailed in the above said cases relied upon by Ld D.R. Hence, we are of the view that these decisions cannot be taken support by the revenue. In view of the foregoing discussions, we are of the view that the order passed by Ld CIT(A) on this issue cannot be sustained. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs.25 crores made in AY 2014-15. Appeal of assessee allowed.

Summary

Issues Involved:
1. Deletion of protective addition made in the hands of the assessee for AY 2009-10 to 2014-15.
2. Confirmation of addition of Rs. 25 crores made by the AO on the basis of the statement/letter given by the assessee for AY 2014-15.

Detailed Analysis:

1. Deletion of Protective Addition:
The revenue challenged the decision of the CIT(A) in deleting the protective addition made in the hands of the assessee for AY 2009-10 to 2014-15. The AO had made these additions based on a document (A/MJM/02, Pg. 2,3,4,5,6) found during a search, which indicated capitation fees collected from students. The AO estimated the capitation fee collected from PG students and extrapolated it to all students for all years under consideration. The CIT(A) deleted these additions, holding that the seized documents did not prove the collection of capitation fees. The Tribunal upheld the CIT(A)'s decision, noting that the seized documents lacked credibility and there was no corroborative material to support the AO's conclusions. The Tribunal also observed that the investigation wing's enquiries with the students did not reveal any adverse findings against the assessee. Consequently, the protective additions made in the hands of the assessee were deleted.

2. Confirmation of Addition of Rs. 25 Crores:
The assessee challenged the addition of Rs. 25 crores made by the AO for AY 2014-15 based on a statement given under section 132(4) of the Act. The assessee had initially disclosed Rs. 20 crores during the search, which was later increased to Rs. 25 crores. The AO interpreted this disclosure as additional income related to unaccounted capitation fees. The CIT(A) confirmed the addition, agreeing with the AO's view. However, the Tribunal found that the disclosure was made under compulsion and without any basis. The Tribunal noted that the assessee had clarified that the disclosure was related to capital gains from the sale of a property, which was duly offered in the return of income. The Tribunal also observed that there was no incriminating material to support the AO's interpretation of the disclosure as unaccounted income. Therefore, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition of Rs. 25 crores for AY 2014-15.

Conclusion:
The Tribunal dismissed the revenue's appeals for AY 2009-10 to 2014-15 and allowed the assessee's appeal for AY 2014-15, resulting in the deletion of the protective additions and the Rs. 25 crores addition.