2004 (7) TMI 310 - AT - Income Tax

Summary

Issues Involved:
1. Justification of the addition made by the Assessing Officer of donations received by 'Sri Satya Sai Trust for Learning' to the income declared by the appellant.
2. Requirement for the Assessing Officer to call for objections from the appellant for the proposed addition.

Issue-wise Detailed Analysis:

1. Justification of the Addition:
The primary issue revolves around whether the donations received by 'Sri Satya Sai Trust for Learning' should be included in the income of the appellant, who is the proprietrix of Omega Academic Services (OAS). During a survey at OAS, it was found that students were making payments to the Trust as part of their fees. The Assessing Officer (AO) concluded that these donations were not genuine and were instead a mandatory part of the fees, thus constituting income for the appellant. The learned CIT(A) upheld this addition, stating that the donations were indeed part of the income of the assessee.

The appellant argued that the Trust, being a separate legal entity registered under section 12A of the Income-tax Act, 1961, should not have its donations included in her income. The appellant emphasized that the donations were voluntary and not in consideration of educational services rendered by OAS. The funds were purportedly used for charitable purposes, such as acquiring land for an educational institution for poor and needy children.

However, the Tribunal found that the donations were not voluntary. The evidence showed that no student was admitted to OAS without making a donation to the Trust, which was managed by the appellant's husband. The Tribunal concluded that the donations were a part of the total fees and not voluntary contributions. The affidavits provided by parents were deemed unreliable as they were identically worded and appeared orchestrated. Thus, the Tribunal held that the donations were rightly taxed as income of the appellant.

2. Requirement for the Assessing Officer to Call for Objections:
The appellant contended that the AO did not call for her objections to the proposed addition, which she argued was contrary to the provisions of the law. The Tribunal clarified that under section 143(3) of the Income-tax Act, the AO is not required to call for objections from the assessee for a proposed addition unless relying on extraneous evidence gathered without the assessee's knowledge. In this case, the assessment was based on information furnished by the assessee herself, and thus, the AO was not obligated to call for objections. The Tribunal found no procedural lapse in this regard.

Conclusion:
The Tribunal dismissed the appeal, confirming the addition of the donations to the appellant's income. The Tribunal held that the donations were not voluntary and were instead a part of the fees charged by OAS. Additionally, the Tribunal found no procedural error in the AO's failure to call for objections from the appellant for the proposed addition.