2023 (8) TMI 909 - AT - Income Tax

Additions u/s 69A - Denial of exemption u/s 11 - Receipt of unaccounted capitation fees in cash - Assessment of trust - AO primarily relied on the statements of third persons as recorded in the search action u/s 132 wherein, according to the AO, they had stated that the assessee received cash from students for admission to medical/dental courses - HELD THAT - As nothing was brought on record by the Revenue before us, to show that this cash found with Shri Patil represented capitation fees collected from students. The facts placed before us reveal that Shri Patil derived income from several different sources/agriculture etc; and therefore we agree with the findings of the CIT(A) that, the assumption made by the AO that this cash represented capitation fees collected from students was far-fetched and based purely on conjecture surmise. Particularly when, Shri Patil who had been examined twice by the Department viz., in the course of search and in the post search proceedings, had denied collecting capitation fees from students. It is indeed true that a simple denial is not sufficient but at the same time it is also to be seen as to whether the accusation being levelled is supported by material or corraborative evidence found in the course of search. From the facts on record, it is evident that there was no evidence found in the course of search which would show that the assessee had received capitation fees from students. Much ado has been made by the Revenue before us that since the search operation began first at the other group of DY Patil at Navi Mumbai, the assessee society had received prior information about the search operation and for that reason no corraborative evidence or material was gathered in the course of search. Without going into the veracity of this contention, we find that the Ld. CIT(A) had rightly held that, search operation being leaked cannot be an alibi for making addition in an assessment, as the assessment has to be made based on evidences and not on suspicion and conjectures. No reason to interfere with the impugned order of the Ld. CIT(A) deleting the addition made by way of capitation fees - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the addition towards unaccounted capitation fees.
2. Validity of the statements relied upon by the Assessing Officer (AO).
3. Corroboration of statements with tangible evidence.
4. Role of the trustees and other officials in the alleged capitation fees collection.
5. Evaluation of the cross-objections filed by the assessee.

Summary:

1. Legitimacy of the Addition Towards Unaccounted Capitation Fees:
The Revenue's case was based on a search conducted under Section 132 of the Income-tax Act, 1961, against the DYP-Kolhapur Group, revealing alleged capitation fees earned by the assessee Trust. The AO reopened assessments for AYs 2013-14 to 2015-16, issuing notices under Section 153C of the Act. The AO relied on statements from various individuals, estimating that the assessee collected Rs. 2 crores annually in capitation fees, thereby denying the benefit of Sections 11/12 of the Act and assessing the Trust as an Association of Persons (AOP). The CIT(A) deleted the addition, and the Revenue appealed.

2. Validity of the Statements Relied Upon by the AO:
The statements of Shri Heramb Shelke, Shri Karan Singh Vihol, Shri Vijay Shinde, and Shri Dilip Kashid were scrutinized. The CIT(A) found that these individuals did not hold any official capacity within the assessee Trust, and their statements lacked specific incriminating evidence. For instance, Shri Shelke's statement was deemed general and unsupported by tangible evidence, while Shri Vihol's statement was related to his business dealings and not the Trust. Shri Shinde's statement also did not implicate the Trust, and the cash found with him was assessed as his income from consultancy.

3. Corroboration of Statements with Tangible Evidence:
The CIT(A) noted that the statements were not corroborated by any documentary evidence found during the search. The statements of the Dean, Registrar, and Finance Officer of the college contradicted the allegations, explaining the legitimate admission process and denying knowledge of any capitation fees. The CIT(A) emphasized that the assessment should be based on evidence, not suspicion or conjecture.

4. Role of the Trustees and Other Officials:
The statements of senior functionaries, including the Dean, Finance Officer, and Registrar, were examined. They clarified the admission process and denied any involvement in capitation fees. The CIT(A) found no evidence implicating the trustees or officials in the alleged capitation fees collection. The cash found with Shri Sanjay Patil was explained as agricultural income, and there was no evidence linking it to capitation fees.

5. Evaluation of the Cross-Objections Filed by the Assessee:
Since the Revenue's appeal was dismissed, the cross-objections filed by the assessee were rendered academic and dismissed as infructuous.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere with the deletion of the addition of Rs. 2 crores towards capitation fees for AYs 2013-14 to 2015-16. The appeals of the Revenue were dismissed, and the cross-objections of the assessee were dismissed as infructuous. The judgment emphasized the need for corroborative evidence to substantiate allegations of unaccounted income.