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TMI Blog2012 (11) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have been subsequently, retracted. The retractions of those statements made by the functionaries of the society are well supported by the books of account maintained by the assessee with supporting documents and evidences. All the basic details are very much available before the assessing authority, himself. Issue decides in favour of assessee Addition on account of paper found in course of search - A sum of Rs. 23,52,000/- was stated to have been paid to the assessee – Held that:- The assessee explained that a sum of Rs.17,52,000/- had been received by cheque from Shri Amul John Jacob and it was not aware of any money received in cash. As already found in the appeal filed by the Revenue for the same assessment year 2006-07, the CIT(A) has deleted the addition of the said amount of Rs.17,52,000/- made by cheque. When the assessee had accounted for the amount received by cheque, there is no reason to go beyond, only for the reason that in the sheet of paper found in the course of search, the amount recorded was Rs.23,52,000/-. There is no direct nexus with the proposition made by the AO and the paper seized in the course of search. Therefore addition deleted. Issue in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hery. The assessee society is also running courses in Nursing and other Paramedical disciplines. The assessee is registered as a charitable society under sec.12AA of the Act. So also, the assessee society enjoys the approval for the purpose of sec.80G. As a registered charitable institution, the assessee has been legitimately enjoying the benefits of exemption from taxation as provided in sec.11 of the Act along with other enabling provisions of law. 4. While the matter being so, a search was carried out by the Revenue on 13.8.2007. The search was simultaneously carried at the premises of the assessee society, premises of the Hospital and Educational Institutions and also in the residence of the office bearers of the society. On the basis of the materials collected in the course of search, notices were issued to the assessee to file its returns for six assessment years from 2003-04 to 2008-09 under sec.153A. The returns were filed in compliance with the notices and the assessments were accordingly completed. 5. In the course of assessment proceedings, it was brought to the notice of the Revenue that the assessee society has been accepting refundable deposits from students admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded in the books of account and, therefore, such amounts could not be treated as applied for charitable purposes. Ultimately, all the additions have been made by the assessing authority under sec.68 of the Act. 8. In first appeals, the Commissioner of Income-tax(Appeals) examined the materials available on record and accepted the contentions of the assessee society in part. Wherever the parents of the students have appeared before the authorities and confirmed making refundable deposits, the Commissioner of Income-tax(Appeals) accepted the contention of the assessee society. In such cases, the Commissioner of Incometax( Appeals) held that those deposits are explained and those deposits cannot be treated as capitation fee, as alleged by the assessing authority. Such additions have been deleted by the Commissioner of Income-tax(Appeals). Wherever confirmations have not been obtained from the parents of the students, the additions were confirmed by the Commissioner of Incometax( Appeals). While deleting the additions made by the assessing authority against refundable deposits, the Commissioner of Income-tax(Appeals) has also made another direction that if the deposits are not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the additions made for the assessment years 2003-04 and 2004- 05 are very much justified. (iv) Evidences collected in the course of search and subsequent enquiry have proved that the assessee is collecting capitation fee/donation for admitting students to MBBS course. The assessee runs its Medical College as a self-financing institution. Such activity cannot be treated as a charitable activity of the assessee, as running a self-financing college itself is a business activity. Therefore, the estimated additions made for the assessment years 2005-06 to 2008-09 are justified. (v) Some of the collections by way of donation/capitation fee are not accounted in the books of account of the assessee society. In the circumstances, such amount cannot be treated as applied for charitable purposes, as those collections are not even finding a place in the books of account. 12. The learned Commissioner has further relied on the following decisions in support of his arguments : (i) P.S.Govindasamy Naidu Sons v. ACIT (Mad) 324 ITR 44 (ii) Valliammal Society v. DGIT(Inv.) (Mad) 327 ITR 337 (iii) Vodithala Education Society vs. ADIT (Exem) (ITAT, Hyd.) 20 SOT 353 (iv) CIT v. Nationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 have confirmed the refundable deposits made by them. There was not a single case where any deposits have been denied or disputed by any of the parents. These confirmations furnished by the parents of the medical students prove the case of the assessee that what have been received by the assessee society are only interest free refundable deposits. 14. The learned counsel further emphasized on the following factual premises relating to the issue of interest free refundable deposits: (i) The amounts were received from the persons as interest free refundable deposits. (ii) The manner of deposits was similar in all cases. (iii) All the deposits were received through bank instruments. (iv) The refunds were made again through bank instruments. (v) Names and particulars of all the depositors were available with the assessee and all such particulars were placed before the department. (vi) A majority of the parents have confirmed the deposits, 33 out of 54 in the first year and 42 out of 55 in the second year as per the assessment orders itself. The remaining deposits also stood confirmed as evidenced from the documents relating to the students maintained by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all these impugned assessment years under appeal. When that is the position, there is no provocation at all to go into agitating whether the assessee society is carrying on charitable activities or not. All those questions and deliberations are outside the purview of the subject matter of appeals placed before us. We find that the assessee is a registered charitable institution for all the purposes of the Income-tax Act, 1961 and therefore, there is no occasion to discuss such basic issues and fundamental matters while disposing these appeals. Therefore, we are not indulging in any such discussion as they are absolutely uncalled for. 20. The limited issue to be considered by the Tribunal in all these appeals is that whether the assessing authority is justified in making additions under sec.68 and treating those additional amounts as taxable in the hands of the assessee society. Now, let us consider the appeals one by one. 21. The Revenue has filed its appeal for the assessment year 2003-04 in ITA No.1470/Mds/2010. The ground raised by the Revenue is that the Commissioner of Income-tax(Appeals) has erred in treating the deposits of Rs. 4.2 crores as genuine, relying only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 33 students have replied in affirmative confirming that they had given interest free refundable deposits to the assessee society. The majority of the parents have given testimony in support of the statements given by the assessee society. The reason that the remaining 11 parents have not given any confirmation, does not dilute the probative value of the material evidence available on record. Minority of the parents might not be available at that point of time at the addresses available on record and it might not be possible for them to give confirmation letters within the time frame given by the authorities. Therefore, the fact that those 11 parents could not confirm the deposits, cannot be taken as an adverse finding against the assessee society. By and large, the assessee society has proved that the amounts were collected by it, by way of interest free refundable deposits. Therefore, we find that the Commissioner of Income-tax(Appeals) is justified in deleting the said addition made by the assessing authority. The Revenue fails in its appeal filed for the assessment year 2003-04. 24. In the appeal filed by the assessee for the assessment year 2003-04 in ITA No.1149/Mds/2010, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly vacated. The appeal filed by the assessee for the assessment year 2004-05 is thus, successful. 27. Next, we will consider the appeal filed by the Revenue for the assessment year 2005-06 in ITA No.1472/Mds/2010. The ground raised by the Revenue is that the Commissioner of Income-tax(Appeals) has erred in deleting the addition of Rs.4,17,77,200/- observing that the case of receipt of capitation fee is not proved. The Commissioner of Income-tax(Appeals) has examined in detail, the basis on which the Assessing Officer has made the addition. The Assessing Officer has made the addition on the basis of purported admissions made by the functionaries of the assessee society in the statements furnished by them. It is to be seen that those statements have been subsequently, retracted. The retractions of those statements made by the functionaries of the society are well supported by the books of account maintained by the assessee with supporting documents and evidences. The receipts of deposits are properly accounted and acknowledged by giving receipts. In addition to those amounts, there is no case of seizure of any speaking material to allege any collection against the assessee. Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the assessee. The assessee explained that a sum of Rs.17,52,000/- had been received by cheque from Shri Amul John Jacob and it was not aware of any money received in cash. As already found in the appeal filed by the Revenue for the same assessment year 2006-07, the Commissioner of Income-tax(Appeals) has deleted the addition of the said amount of Rs.17,52,000/- made by cheque. When the assessee had accounted for the amount received by cheque, there is no reason to go beyond, only for the reason that in the sheet of paper found in the course of search, the amount recorded was Rs.23,52,000/-. There should have been some corroborating material to show that the assessee had received any sum in cash from Shri Amul John Jacob over and above the amount received by cheque. There is no direct nexus with the proposition made by the Assessing Officer and the paper seized in the course of search. We find that no addition can be confirmed on the basis of that paper, on which both sides have no idea as to what it was. Therefore, we delete the addition of Rs. 6 lakhs sustained by the Commissioner of Income-tax(Appeals). 30. The assessee is successful in the appeal filed for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-08, we hold that the Commissioner of Incometax( Appeals) is justified in deleting the said addition. The ground raised by the Revenue is, therefore, liable to be rejected. 33. The assessee has filed an appeal for the assessment year 2008-09 in ITA No.1152/Mds/2010. The only ground raised by the assessee is that the Commissioner of Income-tax(Appeals) has erred in confirming the addition of Rs. 4.68 crores as undisclosed income. It is seen that the Commissioner of Incometax( Appeals) has confirmed the addition on the ground that those receipts were not recorded by the assessee in the books of account. This contention was also raised by the learned Commissioner in the course of his argument. But it is to be seen that there are no materials available on record to show that the assessee society had received such amounts over and above what was recorded in its books of account. The Assessing Officer has made a presumption that the assessee society might have received that much amount on the strength of students admitted for medical course. This is only an intelligent presumption. The Commissioner of Income-tax(Appeals) has also made a partial endorsement of the above erroneous presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is entitled for exemption under sec.11 or not, is the application of the funds for charitable purposes. 37. As far as the income of a charitable society is concerned, there is only one distinction, that is between corpus donations and donations other than corpus donations. Corpus donations, if so proved, do not form part of the income of a charitable society. The voluntary donations, other than corpus donations, do form part of income of a charitable society. Where an assessee has applied such entire income towards charitable purposes, of course, it is entitled for exemption under sec.11. 38. In the above backgrounds, when we examine the facts of the present case, in our view, even the additions made under sec.68, if applied for charitable purposes, cannot be treated as an independent segment of taxable income. It is to be seen that unexplained credits are added as income . Even if the additions made by the Assessing Officer under sec.68 are upheld, those amounts always do form part of income in the hands of the assessee society. Those additional income added by the Assessing Officer under sec.68 will be liable for taxation, only if those amounts are not applied for chari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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