2014 (4) TMI 620 - AT - Income Tax

Addition u/s 69A of the Act Quantification of unaccounted investment Rejection of books of account not made Held that - During the course of search operation incriminating materials was found which disclosed investment of undisclosed income for construction of the building assessee rightly contended that the books of account were not rejected by the assessing officer - in the assessment proceedings consequent to the search, the material found during the course of search operation along with the books of account maintained in the course of regular activity has to be taken into consideration - the observation made by the CIT(A) with regard to rejection of books of account may not prejudice the interest of revenue in any way thus, there is no infirmity in the order of the CIT(A) Decided against Revenue. Opportunity of being heard Held that - The CIT(A) found that the AO suo motu rejected the objections filed by the assessee which witnessed in three or four instances of duplication - an opportunity was provided by the assessing officer on 03-12-2010 and 08-12-2010 and ultimately, the order was passed on 30-12-2010 - if further time was given to the assessee they would have explained the investment before the AO - There is a statutory limit for passing the assessment order- the AO has done everything possible within the prescribed time by affording an opportunity to the assessee thus, there is no reason to interfere with the order of the CIT(A) Decided against Revenue. Enhancement of income on account of credit mismatch Held that - The Tribunal is empowered to adjudicate the matter - The Tribunal cannot place the assessee in a worst position than he was before the CIT(A) - If the CIT(A) failed to enhance the income of the assessee, then certainly, the Tribunal also cannot enhance the income for the simple reason that the Tribunal is not empowered to place the assessee in a worst position than he was before the CIT(A) - the assessee cannot be placed in a worst position than it was before the CIT(A) - the Tribunal has no jurisdiction to enhance the taxable income due to mismatch of the account Decided against Revenue. Payment made on behalf of assessee trust Payment made to South Kerala Cashew Export Held that - The material available on record suggests that the payment was made by South Kerala Cashew Export - The assessee has produced copies of the vouchers / invoices - The assessee has also filed a reconciliation statement before the CIT(A) - CIT(A) found that the assessee could not explain a sum of Rs.2,54,782 - he confirmed the addition to the extent of Rs.2,54,782 there is no infirmity in the order of CIT(A) Decided against Revenue. Enhancement of income Difference in credits Held that - The CIT(A) has a discretion to enhance the income in exercise of his appellate jurisdiction, Tribunal cannot compel the CIT(A) to enhance the income - The CIT(A) ought to have exercised his jurisdiction since he has powers which is co-terminus with that of the assessing officer - The jurisdiction of the Tribunal cannot be extended to put the assessee in jeopardy thus, there was no infirmity in the order of the CIT(A) Decided against Revenue. Unaccounted investment Held that - In the block assessment income has to be computed primarily on the basis of the material available on record including the seized material - the seized material as well as the valuation done by the District Valuation Officer has to be taken into consideration - When the District Valuation Officer estimated the cost of construction and there is a difference in reconciliation to the extent of Rs.46,18,176, the Tribunal is of the considered opinion that this Rs.46,18,176 might have been relating to the revenue expenditure - the CIT(A) has rightly deleted the addition made by the AO Decided against Revenue. Exemption u/s 10(23C) of the Act Held that - All receipts of the assessee cannot be considered to be income of the assessee - any amount collected for admission of the students over and above the prescribed fee has to be considered as capitation fee and that cannot be construed as income of the assessee within the meaning of section 10(23C) - Collection of capitation fee is inhuman, contrary to all social norms besides being contrary to the provisions of Constitution of India Relying upon This view of ours is fortified by the judgment of the Apex Court in T.M.A. Pai Foundation & Ors vs State of Karnataka & Ors 2002 (10) TMI 739 - SUPREME COURT - the term any income has to be considered as income of the property held under the trust and the income generated in the course of running of the institution in the legal manner - It cannot include capitation fee collected for admission of the students - no material is on record to suggest that the assessee has collected any capitation fee for admission of the students - The trustees Shri Abdul Salam and Shri AA Salam happened to be businessmen and admitted that they have invested their own funds in the statement recorded u/s 132(4) of the Act - the CIT(A) has rightly deleted the addition made by the AO there was no infirmity in the order of the CIT(A) Decided against Revenue. Dropping of the enhancement proceedings Unaccounted payments made to doctor Held that - Unless the addition is made by the CIT(A) in the enhancement proceedings or the addition made by the AO is confirmed by the CIT(A), the Tribunal cannot step into the shoes of the lower authority and make the assessment - The Tribunal cannot put the assessee in a worst position than he was before the CIT(A) - In the absence of any specific addition made by the CIT(A) in the course of first appellate proceedings, the Tribunal cannot make any further addition in the course of second appellate proceedings Decided against Revenue.

Summary

Issues Involved:
1. Quantification of unaccounted investment for making additions under sections 69, 69A, etc., without rejecting the books of account.
2. Adequate opportunity provided to the assessee.
3. Enhancement of income due to credit mismatch.
4. Payment of South Kerala Cashew Export on behalf of the assessee trust.
5. Enhancement of income due to difference in credits.
6. Exemption under section 10(23C) of the Act.
7. Unaccounted payments made to doctors.
8. Estimation of cost of construction based on the District Valuation Officer's report.

Detailed Analysis:

1. Quantification of Unaccounted Investment:
The revenue appealed against the CIT(A)'s decision regarding unaccounted investments for the assessment year 2007-08. The revenue argued that the assessing officer rightly computed the undisclosed income based on seized materials during a search operation. However, the Tribunal noted that the assessing officer did not explicitly reject the books of account, which is a prerequisite for estimating income based on seized materials. The Tribunal concluded that the CIT(A)'s observation about rejecting the books of account did not prejudice the revenue's interest and confirmed the lower authority's order.

2. Adequate Opportunity Provided to the Assessee:
The revenue contended that sufficient opportunity was given to the assessee, while the assessee argued that the short notice period was insufficient due to holidays. The Tribunal found that the assessing officer provided opportunities on 03-12-2010 and 08-12-2010 before passing the order on 30-12-2010. The Tribunal acknowledged the time constraints of the assessing officer and concluded that the opportunity provided was adequate, thus upholding the lower authority's decision.

3. Enhancement of Income Due to Credit Mismatch:
The revenue argued that the CIT(A) should have enhanced the income due to credit mismatches. The Tribunal noted that the CIT(A) has the discretion to enhance income based on available material but cannot be compelled to do so. The Tribunal emphasized that it cannot place the assessee in a worse position than before the CIT(A) and confirmed the lower authority's order.

4. Payment of South Kerala Cashew Export on Behalf of the Assessee Trust:
The revenue challenged the CIT(A)'s decision regarding payments made by South Kerala Cashew Export on behalf of the assessee trust. The Tribunal found that the assessee provided reconciliation statements and vouchers, and the CIT(A) confirmed the addition only to the extent of Rs.2,54,782. The Tribunal upheld the lower authority's decision, finding no infirmity.

5. Enhancement of Income Due to Difference in Credits:
For the assessment year 2008-09, the revenue argued for enhancement due to credit differences. The Tribunal reiterated that it cannot compel the CIT(A) to enhance income and confirmed the lower authority's order, consistent with its earlier decisions.

6. Exemption Under Section 10(23C):
The Tribunal addressed the issue of exemption under section 10(23C) for the assessment year 2008-09. It clarified that "any income" under section 10(23C) refers to income generated from property held under trust and legal activities, excluding capitation fees. The Tribunal found no evidence of capitation fees collected by the assessee and confirmed the CIT(A)'s decision to delete the addition.

7. Unaccounted Payments Made to Doctors:
For the assessment year 2009-10, the revenue argued that the CIT(A) erred in dropping enhancement proceedings for unaccounted payments to doctors. The Tribunal stated that it cannot make further additions in the absence of specific additions by the CIT(A) and upheld the lower authority's decision.

8. Estimation of Cost of Construction Based on the District Valuation Officer's Report:
The Tribunal considered the estimation of construction costs for the assessment year 2008-09. It found that the CIT(A) rightly deleted the addition based on the District Valuation Officer's report and the seized material, confirming the lower authority's decision.

Conclusion:
The Tribunal dismissed the revenue's appeals and the assessee's cross objections for the assessment years 2007-08, 2008-09, and 2009-10, confirming the orders of the lower authorities. The judgments emphasized procedural correctness, adequate opportunity, and the proper interpretation of legal provisions, particularly section 10(23C) of the Act.