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TMI Blog2021 (8) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... re also trustees of the trust. Shri G.H. Nagaraj is the secretary of the trust and is looking after the day to day affairs of the trust. Shri.J.P. Narayanswamy was one of the trustee and Vice President of the trust. Shri. Rajesh Jagdale was one of the trustees of the assesse trust and for this purpose the trust has established the following educational institutions and providing education to a very large number of students:- a) Medical College and Hospital b) RLJ Institute of Technology c) RLJ Industrial Training Institute d) Sri Devaraj Urs School & PU College e) Sri Devaraj Urs International Residential School f) Sri Devaraj Urs Institute of Management g) Sri Devaraj Urs Educational Trust Pharma h) Sri Devaraj Urs School/College of Nursing i) R L Jalappa Central School j) Sri Devaraj Urs Educational Trust 3. The assessee trust has been filing return of income under the Income-tax Act, 1961 ["the Act"]. It is registered u/s. 12A of the Act as on date. 4. For the AY 2010-11, original return of income was filed on 16.09.2010 and intimation u/s. 143(1) dated 30.3.2011 was issued. Exemption u/s. 11 of the Act has been granted. 5. A search u/s. 132 of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n claimed u/s. 11(1)(a) of Rs. 6,85,70,097: The AO held that assessee had collected capitation fee from various students and incurred expenditure for non-charitable purposes. Therefore the assessee trust was not carrying on the activities in a charitable manner, but in a commercial manner. Hence exemption u/s. 11(1)(a) of the Act was not available to the assessee. 6.2 Disallowance of expenditure in the nature of Capital Expenditure - Rs. 7,29,24,571 : The assessee had spent a sum of Rs. 7,29,24,571 during the previous year relevant to AY 2010-11 towards capital expenditure for the purpose of the trust. Since the exemption u/s. 11(1)(a) was denied, the AO did not allow the capital expenditure claimed as application. 6.3 Disallowance of donation - Rs. 10,00,000/-: During the previous year relevant to AY 2010-11 the assessee had donated Rs. 10,00,000 as recognized charitable institution. Since the exemption u/s. 11 of the Act was denied, the AO did not allow the payment of donation as application. 6.4 Undisclosed cash receipts - Rs. 27,42,00,000 : The Trustees in a meeting held on 06.12.2017 found that many entries in the seized material revealed that some amount has been spent for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome over Expenditure as per I&E Account 25,76,28,031 Add: Depreciation 7,29,88,721 Balance 33,06,16,752 Less: Allowable Depreciation 1,53,05,869 Balance 31,53,10,883 Add: Loss from redemption of mutual funds 8,65,293 Add: Maintenance expenses towards Benz Car 3,47,192 Taxable Income 31,65,23,368 Add: Long Term Capital gain as ROA 4,31,496 Total Taxable Income 31,69,54,864 9. Consequently, on the basis of search u/s. 132 on 6.8.2015 and on similar facts and similar reasoning as in AY 2010-11, the AO determined the total income at Rs. 46,13,25,960 on the following components:- i. Total Income as per Order u/s. 143(3) - Rs. 31,69,54,864. ii. Undisclosed cash receipts - Rs. 38,48,00,000: Here again, on the search action u/s. 132 on 6.8.2015 and on similar facts as in AY 2010-11, the AO determined the total income at Rs. 38,48,00,000 concluding that a sum of Rs. 228 lakh is entered as cash receipts in seized material. He further extrapolated that a sum of Rs. 3620 lakh would have been received which has not been accounted even in the seized material. 10. For the AY 2013-14, registration u/s. 12A of the Act continued. The return was filed on 28.9.2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the previous years, the AO held that a sum of Rs. 6,885 lakh is entered as cash receipts in seized material. He further extrapolated that a sum of Rs. 1,102 lakh would have been received which was not accounted even in the seized material. 13. For the AY 2016-17, Registration u/s. 12A and Exemption u/s. 11 of the Act continued. On the basis of search u/s. 132 on 6.8.2015 and on similar facts and same reasoning as in AY 2010-11, the AO determined the total income at Rs. 121,63,33,681 on the following components :- i. Surplus set apart u/s. 11(1)(a) - Rs. 19,21,19,133. ii. Surplus accumulated u/s. 11(2) - Rs. 5,77,28,333 : This disallowance was also made on the same ground that assessee had collected capitation fee from various students and incurred expenditure for non-charitable purposes. Therefore the activities of the trust were not charitable, but commercial. Depreciation was also denied on the same reasoning as held u/s. 11(1)(a). iii. Expenditure in the nature of Capital Expenditure - Rs. 8,21,61,215. iv. Disallowance of donations u/s 37 - Rs. 63,25,000. v. Undisclosed cash receipts - Rs. 87,72,00,000 : In this year also, as held in the previous years, the AO hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Prathibha Jewellery House v. Commissioner of Income-tax, (Appeal) [88 taxmann.com 94 (Kar)] where the writ petition was dismissed holding that law was amended by insertion of aforesaid Explanation by the Parliament in section 132 by the Finance Act, 2017 w.r.e.f. 1.4.1962 and it was held that the Appellate Authorities could not go into the reasons recorded by the concerned Income Tax Authority for directing Search action. In view of this, we are of the opinion that the assessee is precluded in challenging the validity of search action before the Tribunal. 21. Further, the same view was taken by the Tribunal in the case of Rajesh Exports Ltd. in ITA Nos.928 to 931/Bang/2017 vide order dated 27.11.2018 as follows:- "14. First, we decide the technical aspects one by one. First technical aspect is about validity of search raised in A. Ys. 2008 - 09 to 2013 - 14. In this regard, various submissions are made by both sides. As per the learned DR of the revenue, reliance has been placed on a judgment of Hon'ble apex court rendered in the case of N. K. Jewellers vs. CIT as reported in 85 Taxmann.com 361 and it is submitted that in this case, it was held that in view of the amendments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter, this ground is dismissed. 25. Ground No.5 is with regard to status of the assessee. According to the ld. AR, trust is not a person referred to in section 2(31) of the Act and the CIT(Appeals) ought to have held that assessment made on a nonexistent status is bad in law. The ld. DR relied on the order of lower authorities. 26. We have heard both the parties and perused the material on record. In this case, the assessee itself has filed return of income in the status of "trust" and the same was followed by the AO in framing assessment u/s. 153A of the Act. Being so, we do not find any infirmity in the order of AO. This ground is dismissed. 27. Ground No.6 is regarding the validity of assessment., which is a common ground in all the assessment years. According to the ld. AR, the seized material in the course of search in all the assessment years are not incriminating in nature and the AO also relied on the material handed over by the authorised officer beyond the time limit stipulated in section 132 of the Act ignoring the fact that such material has no evidentiary value in the eye of law. Approval u/s. 153A having been given mechanically without proper application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in only list of names and some figures * Few sheets consist of only list of names and some year * Few sheets consist of obscure notings made manually; They contain certain names, mobile numbers and some figures * There is nothing to show that the material belongs to the appellant; None of the sheets carry either the name or the seal of the appellant A/DUU/02 [Copy enclosed at pages no. 601 to 668 of this Paper Book] Note book (manually written) Page No. 52 to 77 of Asst. Order * Consists of certain payment entries * There is nothing to show that it belongs to the appellant. It does not contain either the name or seal of the appellant A/DUU/03 [Copy enclosed at pages no. 669 to 775 of this Paper Book] Note Book (manually written) Page No. 64 of Asst. Order * Consists of certain payment entries * There is nothing to show that it belongs to the appellant. It does not contain either the name or seal of the appellant A/DUU/04 [Copy enclosed at pages no. 776 to 864 of this Paper Book] Note book (manually written) Page No. 46, 65 & 66 of Asst. Order * Consists of certain payment entries * There is nothing to show that it belongs to the appellant. It does not con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , mobile numbers and addresses; * There is nothing to show that it belongs to the appellant. It does not contain either the name or seal of the appellant * Except page no. 5, the rest of the material has not been discussed in the assessment order * Except page no. 5, rest of the material has not been relied upon by the assessing officer * Page no. 5 contains certain obscure notings and figures. Nothing can be deciphered from the same A/DUU/11 [Copy enclosed at pages no. 1555 to 1635 of this Paper Book] Long Note Book (manually written) Page No. 100 of Asst. Order * Consists of list of names * Some obscure notings * Contains some ledger accounts; Nothing to show how those accounts are connected to the appellant * There is nothing to show that it belongs to the appellant. It does not contain either the name or seal of the appellant * Though the assessing officer has made reference to the said material at page 100 of the assessment order, he has not analysed the same. He has not stated as to how this seized material is relevant. He has not drawn reference to any specific portion of the material. A/DUU/12 [Copy enclosed at pages no. 1636 to 1697 of this Paper Book] Long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt need not be considered as incriminating material" The above observation would mean that the AO has acknowledged that the seized material are dumb documents. He relied on the decision of the Hon'ble Supreme Court in Common Cause (A Registered Society) v. UOI [2017] 394 ITR 220 (SC). 33. It was submission of the AR that the Tribunal in the case of Atul Kumar Jain v. DCIT [1999] 64 TTJ (Delhi) 786 construed the meaning of the expression "document" in the context of section 132 of the Act as under:- "6.4 We find that the Assessing Officer has made out the case for making such addition based exclusively on the said piece of paper found and seized during the course of search. It is, therefore, to be examined whether the said paper found and seized is a document having evidentiary value to prove the fact of the transaction. The word "document" has been defined in section 32 of the Indian Evidence Act to mean-any matter expressed or described upon any substance by means of letters, figures, or marks or by more than one of those means, intended to be used or which may be used for the purpose of recording that matter. The word "document" has also been similarly defined in the General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive materials to prove irrefutably that the said noting reveal either unaccounted income or unaccounted investment or unaccounted expenditure of the assessee. As discussed above, in the instant case, assessments for the impugned years have been completed u/s 153A of the Act which relates to assessment in case of search or requisition. The prerequisite condition for application of Sec. 153A of the Act is a search conducted under section 132 of the Act or any requisition made under section 132A of the Act to unearth hidden income or property. Thus, the very purpose/ essence of search conduced u/s 132 of the Act is to unearth hidden income or property or get hold of books of account or documents which has not been or will not be otherwise produced by the assessee in regular course on issue of summons or notice. In the assessee's case, as stated above, the purported search action did not lead to discovery of any unaccounted money, bullion, jewellery or other valuable article or thing. Further, no books of account revealing any undisclosed transactions of the assessee were found during the course of search. The entire assessment order revolves around scribbling in loose sheets of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged on-money receipts made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers made by some unidentified person and having no evidentiary value, is unsustainable and bad-in-law. 37. He further submitted that the AO at page 177 of his order, has observed that the decision in ACIT vs Layer Exports Pvt Ltd. 53 ITR (Trib) 416 relates to only those cases where addition is solely based on rough notings, contrary to the instant case where structured tabulations, notebooks and registers have been found and seized and also same have been corroborated with other evidence." At pages 429 and 430 of 53 ITR (Trib), in the case of Layer Exports, the observations of the AO concerned are given. The relevant extract is as under:- "Further, these papers can't be just ignored as rough nothings, as the papers actually are informal ledger accounts of the flat purchasers. These pages contain nothings regarding the value of flats (including unaccounted receipts), noting of change in sales consideration (upon bargaining etc.), details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be held to be unjustified. 40. The ld. AR submitted that the ld. AO himself stated at page 177 of the order as to when documents can be called as 'dumb' documents. A perusal of these observations would show that the AO has failed to note these are dumb documents. He has also failed to notice all the factors judicially discussed by various courts and tribunals. The AO has stated that only in three scenarios listed by him, a document can be termed as "dumb". It is not so as is evident from the various decisions discussed in this regard. Even otherwise, the material in the present case are not backed by any corroborative evidence. The inferences drawn by the AO from the documents are also not supported by any explanation. Therefore, the material, in the present case can be termed as "dumb" even as per the narrow definition adopted by the AO. The appellant strongly objected with the finding of the AO that "Also the assessee has vide submission dated 20/12/2017 accepted the contents of such material partially." Attention of was drawn to para 3 and 4 of the reply dated 09.12.2017 wherein the trustees in a meeting held on 6th December 2017 decided that to that extent the trust wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to it. The entries contained therein are not made at the behest of the executive committee of the appellant. 44. In fact, the AO has not even invoked the presumption under section 292C to hold that the seized material belongs to the appellant nor has he established that the said material belongs to the appellant. The AO has at paragraph 10(1)(a) to (e) [Pages 121 to 123 of the assessment order] has discussed the quality of evidence. He has not established as to how the seized material belongs to appellant. Merely because certain entries in such material have been initialed, it does not mean that the said material belongs to the appellant. As stated earlier, the material does not contain either the name of the appellant nor the seal of the appellant. Merely because the material is seized from the premises of the appellant, it cannot be presumed that the same belongs to the appellant. The presumption under section 292C does not apply. 45. According to AR the said seized material does not qualify even as books of accounts or other documents. Therefore, the presumption under section 292C cannot be raised in respect of the seized material. That is presumably the reason why even the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long to or pertain to or relate to the searched person. Under such circumstances, one cannot invoke the presumption under section 292C that the material seized belongs to the searched person as the assessing officer by his own action of making assessment under section 153C in the case of trustees relying upon the very same seized material. The ld. AR placed reliance on the decision of the Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2017 (5) TMI 1354 - ITAT Delhi. 48. Without prejudice to the submissions that loose sheets / note pads are neither books of accounts nor documents, it is submitted by AR that unless the burden of proving that the materials and cash belong to the assessee is discharged those materials can neither be seized under section 132 nor relied upon to make assessment under section 153A. Therefore the seizure of such material is illegal. The AO cannot rely upon such material whose seizure is illegal and the hence, assessment is void ab initio. 49. He drew our attention to the assessee's letter dated 23.12.2017 in reply to notice dated 21.12.2017 issued under sec 142(1) of the Act, wherein the assessee had taken objection to assessment in the absence of seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year so far as extrapolation of income is concerned. In these submissions, the appellant has discussed the arbitrary manner in which the assessing officer has extrapolated the income. These submissions would show that the AO has expressly in some cases and impliedly in certain other cases has conceded the fact that there is no incriminating material found based on which alleged undisclosed income could be assessed. The capricious manner in which the assessment is done is manifest in the manner in which the undisclosed income is quantified. Therefore, all said and done, the AO himself could not elevate the material seized to the level of incriminating material. This is evident from the remarks column of the table at pages 149 to 151of the assessment order wherein the AO has computed the alleged "unaccounted cash generated from UG-MBBS course and PG course conducted by the appellant. The remarks column essentially describes the material relied upon by the learned assessing officer to make the aforementioned computation. This has been discussed in detail in the separate submissions made for each of the impugned assessment years. A perusal of the same would show the desperatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t make any addition in section 153A assessment. The whole principle of an assessment which is preceded by search is that an officer specified in section 132(1) has reason to believe in consequence of information in his possession that any of the eventualities stated in section 132(1)(a) to (c) exist. So there are two stages: one stage, where the authorizing officer has information in his possession prior to the search and second stage, where the authorized officer finds during the course of search by exercising any of the powers stipulated in section 132(1)(i) to (v) for which he is authorized. Therefore, assessment under section 153A r.w.s. 132 is a unique kind of assessment where the focus is on assessing income on incriminating material and such material should be representative of concealed income. The AO cannot merely say that it is difficult to find directly incriminating evidence and hence, he wants to resort to estimation. Presence of incriminating material alone confers jurisdiction to make assessment under section 153A. It was submitted that in the specific submissions on grounds pertaining to extrapolation of income and these submissions, it is established that the seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated analysis and has considered the same for all years. As a result, there is discord between the discussion made in respect of seized material and the table wherein the alleged unaccounted cash generated has been tabulated year-wise. It is submitted that the analysis of the seized material should be made year-wise considering the true spirit of the provisions pertaining to search and seizure. If a consolidated analysis is made for all the 6 years involved, it would be end-up being a subjective analysis rather than an objective analysis. An objective analysis alone would help in determining whether the seized material would qualify as incriminating material warranting an addition in the assessment under section 153A for a particular year. Otherwise, one would end-up making addition for one assessment year based upon the analysis for another assessment year. This is against the letter and spirit of the provisions dealing with search, seizure and consequent assessment. 58. He submitted that as can be seen from the decision in Singhad Technical Education Society's case [2015] 378 ITR 84 (Bom.), the Court has reiterated the principle that no addition can be made in the absence of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions :- * The Hon'ble Supreme Court in Andaman Timber Industries v. CCE 2015 (10) TMI 442 - SUPREME COURT / 2015 (324) E.L.T. 641 (SC) * Kirloskar Investments & Finance Ltd. v. Assistant Commissioner of Income-tax [1998] 67 ITD 504 (BANG.) 61. Therefore, mere furnishing the copy of statements recorded is not sufficient. The assessee against whom the statements are to be used should be provided an opportunity to cross-examine the person who has given statement. Reliance is placed on the Hon'ble Delhi High Court in Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) (P.) Ltd. [2017] 84 taxmann.com 287 (Delhi) / [2017] 397 ITR 82 (Delhi). 62. The Hon'ble Tribunal in M/s Fateh Chand Charitable Trust v. CIT (Exemptions) Lucknow 2016 (4) TMI 1119 - ITAT Lucknow / [2016] 49 ITR (Trib) 276 held that it is settled position of law that any evidence collected at the back of the assessee cannot be used adversely unless and until it is confronted to the assessee and the assessee is allowed to cross-examine the witness, if any. It was similarly held in M/s Obulapuram Mining Company Pvt. Ltd. v. DCIT 2016 (7) TMI 1435 - ITAT Bangalore. 63. In the next judgment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised prior to taking action under clauses (i) to (v) of section 132(1). In the present case, the action under clauses (i) to (v) of section 132(1) was taken on 07.08.2015. Therefore, the jurisdiction of the authorized officer ceased on 07.08.2015. The statement of Smt. Vasudha G. Padiyar recorded under section 131 on 28.09.2015 and the statement of Sri Rangaraju recorded under section 131 on 30.09.2015 by the authorized officer are invalid. Such statements cannot be relied upon as the statements have been recorded without any power by the authorized officer. 67. The appellant vide its dated 22.02.2017 requested the assessing officer to furnish the copy of the statements of parents and students who were summoned and whose statements were recorded. It is submitted that the AO has not given copies of all the statements of the parents and students that he had recorded. While taking the statement of Sri. G H Nagaraj on 16.10.2015, the authorised officer confronted him with 2 statements alleged to have been given by parents of some students. The copy of those statements is extracted in the copy of the statement of Sri. G H Nagaraj. The authorized officer has, further, confronted Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax authorities could act provided that the material was disclosed and the assessees had opportunity to render their explanation in that behalf." 70. By not furnishing the copy of statements of the parents referred to in question 23 of the statement of Sri G H Nagaraj, it is implied that the assessing officer has not relied upon any those statements. Even in the assessment order, assessing officer has made reference only to these two statements. Therefore, though the assessing officer mentioned at para 10.3.1, page 125 of the assessment order that statements of 5 parents have been obtained, all the 5 have not been relied upon. Only 2 statements appear to have been relied upon i.e., of Smt. Vasudha G Padiyar and Sri. Rangaraju. The statements obtained from these two persons are invalid as they have been recorded without authority. Even the assessing officer has not obtained any statement from any of the parents or students. He relied solely upon the statements recorded by the authorized officer. This means that it is as good as not having obtained statement from any of the parents or students. It was submitted as stated that in the earlier submissions, the appellant has also establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontents of the statements are corroborated by material found and seized during search is not true. How can loose sheets / notepads which themselves do not qualify as reliable material corroborate any other material? In the submissions made by the appellant vide letter dated 09.12.2017, it has nowhere acknowledged the correctness of the statements of Parents. These submissions do not imply even remotely that the appellant is acknowledging that statements made by Parents are true. 75. He also drew our attention to the details of statements obtained from Sri. Goli V. Srinivas and Sri. G H Nagaraj are as under:- Date on which the statement is recorded Section under which the statement is recorded Recorded by assessing officer or authorized officer Person whose statement is recorded 06.08.2015 132(4) ACIT, Circle - 7(1)(2) R L Jalappa 04.09.2015 132(4) Authorised Officer R L Jalappa 07.08.2015 131 Authorised Officer G H Nagaraj 13.08.2015 131 Authorised Officer G H Nagaraj 13.08.2015 131 Authorised Officer G H Nagaraj 20.08.2015 132(4) Authorised Officer G H Nagaraj 21.09.2015 132(4) Authorised Officer G H Nagaraj 16.10.2015 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on 16.10.2015. The statement of Sri. G H Nagaraj and statement of parents are contradictory as discussed earlier. 77. It was further submitted that the AO has discussed regarding reliability of statements of Sri. Goli V. Srinivas. The AO has not demonstrated as to how the statement of Sri. Goli V. Srinivas is reliable evidence. Just because he is a close confidant of the trustees, it would not mean that whatever he states are to be accepted at face value without looking out for corroborating evidence to support what he has said. The AO throughout the order sought to rely upon the statement of Sri. Goli V. Srinivas. He did not make any further enquiries or collect any evidence to verify the veracity of the said statement. It is submitted that reliance on statement obtained without corroborating evidence is not tenable. As the AO has relied solely upon the statement of Sri. Goli V. Srinivas and made assessment relying upon such statement, the entire assessment should fall. 78. In a nutshell, the statements cannot be relied upon for the following reasons:- * No opportunity to cross-examine the persons whose statements have been relied upon is afforded. * Some of the statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded." * In Dr. B.G. Memorial Trust v. CIT (Exemption), Kolkata 2017 (11) TMI 1586 - ITAT Kolkata, the Tribunal held as under:- "6. We have carefully considered the entire gamut of facts, rival contentions raised by the parties before us and also the material referred to during the course of hearing. In the instant case originally Ld. CIT(Ex) cancelled the registration certificate u/s.12A of the Act vide order dated 22-2-2016. Against the order of Ld. CIT(Ex) assessee preferred an appeal who directed the Revenue to provide an opportunity of cross-examination to assessee. Accordingly, appeal was allowed for statistical purpose." 80. In this connection the ld. AR also relied on the case CIT Vs. S. Khader Khan Son reported in 352 ITR 480 (SC) where the Hon'ble Supreme Court has held that:- "Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has committed an error in ignoring the retraction made by the assessee." 81. Reliance is placed on the following decision wherein it was held that addition cannot be made based on the statement of an employee or partner in the absence of corroborative evidence:- * In CIT v. Indrajit Singh Suri 2013 (8) TMI 111 - Gujarat High Court, the Hon'ble Court held as under: "9. Question No. [G] concerns deletion of addition of Rs. 7,43,000/- and Rs. 2,00,000/- made by Assessing Officer being unaccounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted into some other asset or should have been expended away. The assessing officer has not made any attempt to identify the assets which have been created out of such unaccounted cash. It is not enough to merely allege that such huge amount of cash is collected. When the search was made, only cash of Rs. 2,67,28,900 was seized. The theory of the assessing officer is that appellant has collected capitation fee in cash and diverted the same for the benefit of trustees. The AO though made allegations on diversion of funds for the benefit of trustees, he has not proved the same with reliable evidence. 83. The AO has tabulated the amounts alleged to have been diverted to the trustees which is reproduced below:- AY G. H. Nagaraj R. L. Jalappa J. P. Narayanaswamy Rajesh Jagdale 2012-13 219,93,000 181,48,250 2013-14 966,00,000 697,09,850 614,00,000 800,00,000 2014-15 1535,68,711 380,72,104 300,00,000 400,90,000 2015-16 3275,68,850 458,55,350 250,00,000 270,00,000 2016-17 397,15,833 200,00,000 TOTAL 5997,30,561 2115,01,387 1164,00,000 1670,90,000 84. Based on the above analysis, the AO has made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A in case of appellant and hence, he chose either to invoke section 153C himself [where he has jurisdiction over the trustees] or hand over the material to the assessing officer having jurisdiction over the trustees in order to enable them to invoke section 153C in case of trustees. (ii) The seized material is not conclusive proof that it belongs to the trustees. Hence, though section 153C is invoked, only protective assessment has been sought to be made in the case of trustees. Therefore, according to the ld. AR, the seized material is not incriminating at all. 86. The assessing officer, at page 113, observed that the said Rs. 109 crores [being the funds alleged to have been diverted to trustees] is in the nature of "drawing, dividends or other such appropriation of profits" If the said Rs. 109 crores is in the nature of "drawing, dividends or other such appropriation of profits" the AO could not have made any assessment on the trustees. But despite that he has chosen to make assessment under section 153C. This leads to two inferences. The AO has, in the garb of diversion of funds to trustees, in fact made a protective assessment of a portion of the alleged unaccounted cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived around Rs. 140 crores based on the evidences forming part of the very same seized material. The AO observed how can some part of same notebook or loose sheet be true and the other part false. In this regard, it is submitted that just because the appellant has filed revised returns considering the alleged unaccounted cash receipts and cash payments, it does not mean that the appellant has conceded that it has received portion of the fee in cash. The appellant has filed revised return for reasons stated in letter dated 09.12.2017. The appellant taking cue from the manner in which the AO made the computation, made an attempt to compute the alleged unaccounted cash generated on the same lines as that of the AO. The appellant stuck to the seized material relied upon by the assessing officer. Just because the appellant filed revised returns based on its calculations taking a cue from the calculation made by the AO, it does not mean that the appellant has made any sort of concession. Mere filing of the revised returns is not an admission to the alleged offence. The appellant merely made an alternative claim. An assessee cannot be estopped from making alternative claims. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been completed prior to 06.08.2015. The assessments completed under section 143(3) would remain unabated. Under such circumstances, the assessment can be made only on the basis of incriminating material pertaining to the said year found during the course of search. This is inherent in the scheme of section 153A. If the intention of the legislature is that the entire assessment would open up in case of non-pending and unabated assessments, the second proviso to section 153A(1) would lose its relevance. It is a well-settled legal principle that one cannot artificially increase the scope of the provisions. The provisions of the statute should not be interpreted in a manner that it increases the scope of what the provision actually intends to achieve. If the entire assessment of the non-pending and unabated assessment of any assessment year is opened up, it would render the second proviso to section 153A(1) otiose. In the submissions on the ground on extrapolation of income in case of AY 2010-11, the appellant has established that there is no material leave alone incriminating material which is found and seized for AY 2010-11. Therefore, no addition can be made in an assessment unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted capitation fees in cash from those seeking admission into the medical college is a violation of The Karnataka Educational Institutions (prohibition of Capitation Fee) Act, 1984. This shows that the trust is involved in activities which are illegal and is collecting funds in the guise of charitable purpose in illegal manner. This evidences for the same include the materials seized from the premises of the trust including Annexure A/DUU/01, A/DUU/07, and A/DUU/13, apart from other seized material, wherein explicit mention of 'demand' and 'receipt' of fee in violation of the said Act has been made. Other evidences include the statements given by various persons including the accountant receiving and managing accounts of such cash collections. 93. At the cost of repetition, the ld. AR submitted that the AO erred in relying upon materials maintained by others even though the appellant had not authorized the collection of any receipts in cash or incurring expenditure in cash. The said material does not belong to the appellant. The appellant in specific submissions to ground pertaining to extrapolation of income has established that the seized materials do not belong to it. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to be quashed. 96. The AO has stated that summons was sent during the course of assessment proceedings to the aforementioned parents in order to allow cross-examination by the assessee's representatives. One of the parents appeared and reconfirmed. The ld. AR submitted that though statements of parents of 5 students were said to have been obtained, only one parent has appeared and reconfirmed the contents of his earlier statement. As the parents of 4 of the students did not appear for cross-examination, their statements cannot be relied upon as the appellant could not cross-examine them. The fact that they did not respond to the summons would show that the credibility of their statements is highly doubtful. When the appellant has neither been given copy of the statement nor has got the opportunity to cross-examine the person giving statement, such statements cannot be relied upon. 97. With regard to the AO's observations that the responses given by the said parent remained the same during the course of cross examination by assessee and he reiterated that the parents have been cross-examined by the appellant, the ld. AR submitted that the above observations are perverse. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subba Rao (supra) almost the same proposition was accepted by the Hon'ble Andhra Pradesh High Court. The Hon'ble High Court held that while estimating the income from other materials, it is the duty of the Assessing Officer to disclose such materials to the assessee and to give him an opportunity to rebut. For the same proposition, assessee's reliance on the decision in the case of M.O. Thomakutty (supra) is to be accepted. This was a case wherein the finding of the income-tax authorities was influenced by the information gathered from the Government authority, but brought without the knowledge of the assessee and the assessee was not given an opportunity to controvert the statement obtained. The stand of the revenue is that since the persons from whom statements/evidences obtained were assessee's own employees, it was not necessary to give the assessee an opportunity. We are unable to concur with the above view. The evidences being used against the assessee; as such it should have been brought to the knowledge of the assessee and the assessee should have been questioned. It was held that assessee's contention on this point is acceptable. 101. In Sunrise Tooling Systems Pvt. Ltd v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 20.08.2015 * Query no. 16 and reply in statement under section 132(4) of Sri G H Nagaraj recorded on 20.08.2015 * Query no. 16 and reply in statement under section 131 of Sri G H Nagaraj recorded on 16.10.2015 * Query no. 19 and reply in statement under section 131 of Sri G H Nagaraj recorded on 16.10.2015 * Query no. 23 and reply in statement under section 131 of Sri G H Nagaraj recorded on 16.10.2015 103. It is submitted that the AO cannot do cherry-picking while relying upon the statements recorded. The finding of the AO in page 113 of the order is perverse as such explanation is verifiable. 104. It is submitted that the finding of the AO that the appellant had admitted the contents of the seized materials vide its letter dated 09.12.2017 submitted on 20.12.2017 is perverse as it ignores the fact that it was a conditional offer and without prejudice to the main contention that no capitation fee in cash was ever authorized to be collected by the trust. 105. The AO relied on certain cheque leaves mentioned in paragraph 5.2.1.4 at pages 47 to 49 of the assessment order. It is submitted that such materials were not mentioned in any of the notices/letters issued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons with some figures. These sheets also cannot be relied upon to hold that the appellant has collected capitation fee. 110. At page 19 of the assessment order, the AO has extracted page 31 of A/DUU/01 and observed as under:- "The above exhibit is an image of seized material A/DUU/01, Page no. 31 which has information tabulated about the "Statement of MBBS Admissions for year 2014-15". In reading the above table it can easily be inferred that the third column refers to the fee "Demand" made, followed by columns of fee "collected" and "balance" fee receivable as can be seen from the column headings................From this sheet of seized material it can also be seen that in case of a majority of students listed out in the sheet, the payment of entire demand has already been made by the date of search which was in August 2015, just about one year from the admission of these students (as they all belong to 2014-15 academic year admissions.". 111. The said page 31 does not contain any details about regular fee. The AO merely presumed that the entire amount shown under demand column is received in cash. There is no information regarding regular fee. How can any unaccounted cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the AO that capitation fee is being received even from students admitted under merit quota. 114. The AO has similarly extracted certain other pages of the seized material no. A/DUU/01 and made observations which are not supported by the page relied upon. After noting the extracts of the aforementioned seized materials and the statement of Sri. Goli V. Srinivas recorded on 06.08.2015, the AO observed at page 41 of the assessment order:- "On analysis of the seized materials and the reply given by GVS to the questions asked w.r.t the seized materials goes to show that fees are received in cash. The noting are made in loose sheets to keep an account of the payment received in cash and also to keep the entry out of books. Hence it can be inferred that cash receipt is not accounted in books. Further, the reply given to questions asked from Q. No. 13 to Q. No. 17 during the course of search operation u/s 132 on 06.08.2015 by GVS again goes to show that cash is received and is not accounted in the books" 115. At pages 42 to 46 of the assessment order, the AO extracted certain pages from seized material no. A/DUU/13 and certain queries and replies from the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. From the above statement of GVS it can be inferred that capitation fee is received in cash. Brokers / agents are used as intermediaries for bringing of students for admission with the payment of capitation fee. Further from the statement it can also be inferred that the secretary and Chairman is also involved in the receipt of cash as Sri. Goli V Srinivas follows the directions given by them." 120. It is submitted that merely because the accountant has made a statement that capitation fee is received, it is not sufficient. It is necessary to corroborate with external evidence. The perusal of the entire assessment order would show that the AO merely relied upon statement of Sri. Goli V. Srinivas. He did not make any further enquiry and collect evidence to verify the veracity of the same. In fact, in the statement given on 13.08.2015, Sri. Goli V. Srinivas in response to question no. 6, partly retracted from the response given to question no. 12 in his statement recorded on 07.08.2015. Question no. 6 and reply as per the statement of Sri. Goli V. Srinivas recorded on 13.08.2015 is as under:- Q.6 I am showing you, your reply to Q. No. 12 of the statement recorded on 06.08.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all the educational institutions under the aegis of the trust except the medical college. He has stated that the medical college comes under the deemed university. So its affairs are managed by the Vice-Chancellor of the deemed university. Further in reply to question no. 13 regarding functions and duties in the capacity of Secretary of Trust, Sri. G H Nagaraj, in statement under section 131 recorded on 13.08.2015 stated that the appointment of staff and disbursement of salaries to staff to all institutions except the deemed university is taken by him. The same is ratified by the trustees during the trust meetings. In case of deemed university, the syndicate members take decisions in running the administration of the University. The deemed university is headed by the Vice-Chancellor and Registrar. Therefore, the role of Sri. G H Nagaraj is less when it comes to administration of deemed university. Sri. Jalappa in reply to question no. 25 in the statement under section 132(4) recorded on 06.08.2015 has stated that he has nothing to do with the management of medical college. That being the case, how can Sri. Goli V. Srinivas blindly obey their instructions? If Sri. Goli V. Srinivas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention that said unrealized cheques are not reliable evidence, it is submitted that there is nothing to prove that such cheques are received from merit students. 127. Without prejudice to the above, the analysis made by the AO is baseless and devoid of any merit. The AO did not even obtain statements from the candidates whom he has referred to in the assessment order at pages 47, 48 and 49 of the assessment order [where he has discussed regarding unrealized cheques] nor any of their parents. 128. It is relevant to note query no. 18 and reply in the statement under section 131 of Sri G H Nagaraj recorded on 13.08.2015. They are reproduced below: "Q. 18 Whether the above mentioned fees is for one academic year or for full duration of the course. Ans. Rs. 5,70,000 which is fixed for the meritorious students is an annual fee and $ 1,40,000 is the fees fixed for the NRI students for the entire duration of the course. Sum of Rs. 5,70,000 is normally paid in one instalment. However, in the case of NRI students as the fees payable is quite high and for the entire duration of the course, hence, the same is often paid by the students in 2 or 3 instalments as per their requests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was asked to furnish information regarding consultants engaged for getting candidates for admission in NRI / management quota, Sri. Goli V. Srinivas mentioned names of certain consultants. Neither the authorized officer nor the AO obtained the statement of the alleged agents mentioned in reply to question 14 of the statement of Sri. Goli V. Srinivas recorded on 06.08.2015. In the statement of Sri. Goli V. Srinivas recorded on 28.11.2017, Sri. Goli V. Srinivas was asked to explain in detail the role played by one Mr. Abrar in relation to the admission to medical college. The relevant queries and the replies have been reproduced at page 79 of the assessment order. The replies given by Sri. GVS are very general. No specific details are given. In fact, Mr. GVS stated that he did not have detailed idea about the role and activities of Abrar. He also stated that he did not know any further details about the other agents. It is submitted that the statement of Sri. Goli V. Srinivas is not a conclusive proof for the allegations made by the AO at page 80 that appellant engaged agents to supply candidates. Neither the authorized officer nor the AO confronted / obtained statements of any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments to brokers / agents. 134. Statement of Sri Goli V. Srinivas was obtained once again on 28.11.2017. Queries no. 12, 14 and 16 from the said statement and the relevant replies are reproduced at pages 78 and 79 of the assessment order. The perusal of the said replies would show that Sri Goli V. Srinivas did not know any details of the modus operandi of the alleged agents / brokers. The AO, when he discussed regarding the process of admission by using agents, did not consider the retraction of Sri. Goli V. Srinivas on 13.08.2015 and the ignorance of Sri Goli V. Srinivas as expressed in his statement dated 28.11.2017 regarding the modus operandi of the agents. Under such circumstances, the statement of Sri. Goli V. Srinivas is not reliable at all so far as engagement of agents in the admission process is concerned. In theory advanced by the AO with regard to conversion of merit quota into management quota, the agents play a major role. If the role of these agents is either meagre or nil, his entire theory would fall. The AO has not brought on record any material to prove the alleged role played by the agents in the admission process. Therefore, his theory of conversion of merit q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .............. From the above statement it can be adhered that all the seats to various PG and UG courses are booked in advance and advance cash is also received. All the seats are management seats and no seats are given under merit quota though entrance is a mandate for deciding the category / quota to which a student is eligible for admission. Further as the seats are converted to management quota, the deserving students are also left in lurch for want of money. The entire process shows that the institution was in existence for maximizing gains from admission process rather than for charitable purposes." 136. It was submitted that it is not known how the above discussion would ever justify the allegations made by the AO. A perusal of the letter dated 25.01.2017 would show that the AO has merely sought list of students who have been admitted to the college with the details of fee collected and donation collected, if any. The appellant filed the relevant details vide its letter dated 16.02.2017. The AO goes on to make reference to page 33 of the seized material no. A/DUU/01. The said sheet contains 9 entries. The details furnished by the appellant were of 150 students. The AO st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t capitation fee has been received from such students. 138. The AO, at paragraph 5.2.4.2, has discussed the scheme of dropouts alleged to have been carried out by the appellant. The AO sought to rely upon pages 77, 79 and 102 of seized material no. A/DUU/13. 139. It is submitted that the analysis of the AO does not emerge from the sheet of paper that he has relied upon. Why would merit students take up entrance exam with an intention to drop-out subsequently. This defies logic. Mere fact that the students have taken up entrance exam and dropped out does not mean that it is done so intentionally. The AO has not brought on record as to what benefit would such student would get. The AO has not obtained statements of either the parents of such students or of such students who have written entrance exam and dropped-out subsequently after counselling. Page 77 of the seized material no A/DUU/13 relied upon by the AO to show that drop-outs have been provided does not even give the list of candidates who have written the entrance exam and backed-out. It does not state the period. This page nowhere evidences the fact that merit students have written entrance exam and dropped out at the beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant seats would be converted into management seats and admission process would be initiated for the same. This would show that the theory of drop-outs advanced by the AO is totally incorrect. 141. The AO, at pages 84 to 86, paragraph 5.2.4.5, has discussed the violation of examination process. The AO has relied upon the statement of Sri. Goli V. Srinivas and the alleged drop-outs scheme discussed at pages 82 to 84, paragraph 5.2.4.2 of the assessment order. It was submitted that it was already established that the materials relied upon in paragraph 5.2.4.2 to support the allegation about drop-outs are no evidence at all. They do not lead a person with reasonable mind to reach a conclusion which the AO has arrived at. The statement of Sri. Goli V. Srinivas is also general and not supported by any corroborative evidence. In view of the above, the material relied upon by the AO to hold that there are violations in examination process cannot be treated as evidence and hence, the allegation regarding violation of examination process should also fall. 142. The AO has discussed the findings relating to fee collection and the alleged fee negotiations. The AO reproduced query 4 and reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 104.51 and 109.51 lakhs respectively. From this it can be inferred that the Trust has taken money in cash to prevent the fee fixation committee from fixing the course fee at a lower rate for the remaining 85% of seats in UG and PG Courses." 145. According to the ld. AR, these observations of the AO are perverse. The AO has not brought on record any material to demonstrate that the appellant has collected fee in cash from NRI students in order to influence the fee that would get fixed by the fee fixation committee in case of non-NRI students. As the concept of capitation fee does not apply to students admitted through management quota / NRI quota the AO is trying to make a case for alleged cash collected from students admitted through management / NRI quota. No statement from any of the parents of students admitted through management / NRI quota have been obtained. The AO has relied upon the alleged fee charged to one Ms Varthika and Ms Alekhya Reddy whose names appear in page 41 of seized material no. A/DUU/01 to state that fee is being collected in cash from NRI students so as to prevent fee fixation committee from fixing the course fee at a lower rate for the remaining 85% of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or to any of the students. 148. The AO discussed mode of receipts of fee and held that no receipts have been given by the Academy for the fee received by it from the students. He relied solely upon the statement of Smt. Vasudha G. Padiyar [Parent] and Sri Rangaraju T [Parent]. As discussed earlier in these submissions, it was submitted that these statements are not reliable. Sri G H Nagaraj, in the statement recorded on 16.10.2015, was confronted with the statements of the above 2 parents. He categorically stated that fee receipt is issued for every receipt of fee and that no fee is received in cash. 149. It was submitted, at this juncture, it is necessary to assail the statements of the parents relied upon on merits. The statements of Smt. Vasudha G Padiyar and Sri. Rangaraju had been confronted to Sri. G H Nagaraj while recording his statement under section 131 on 13.10.2015. We shall first discuss the statement obtained from Smt. Vasudha G. Padiyar. Question no. 7 of that statement and reply of Smt. Padiyar are as under:- "Q. 7 Whom did you meet in connection with the admission of your son? Please furnish the details of fees paid in respect of admission of your son Badragi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been confronted with the entry in the bank statement of Smt. Padiyar or her husband. The authorised officer has not stated whether any cash withdrawal was made during the relevant period by Smt. Padiyar or her husband which would support what is stated in the statement of Smt. Padiyar. He did not confront her with any such question. Moreover, there is contradiction between what is stated in the statement of Smt. Padiyar and page 53 of the seized material as noted by the authorized officer himself. There is nothing to show whether the source specified by Smt. Padiyar for payment of fee in cash is correct or not. 151. A perusal of reply to question no. 7 of Smt. Padiyar would show that the student, in question, Sri. Badragiri V. Padiyar had obtained 432nd rank. He was not interested in the branch which was offered to him in keeping with his rank. If a student does not want to take up a branch which he is entitled as per his rank, he cannot get the branch that he is interested in through merit quota as the rank does not entitle him to get seat in that branch. If he still wants to get admitted to the same college, he can do so by getting admitted only through management quota. How ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at dates Sri Rangaraju paid the relevant portion of the fee in cash. Therefore, the statement of Sri. Rangaraju that portion of fee has been paid in cash is not supported by any corroborative evidence. It is not known whether the source of income out of which the fee has been paid is verified or not. Sri Rangaraju has stated that he paid cash to Sri Goli V. Srinivas. Sri Goli V. Srinivas is not confronted with the statement of Sri Rangaraju. Even the appellant has not been permitted to cross-examine Sri Rangaraju. The authorized officer confronted page 33 of the seized material no. A/DUU/01 to Sri G H Nagaraj to evidence the payment in cash by Sri Rangaraju towards admission of his daughter C R Pavana. Sri G H Nagaraj, in reply to query no. 23, stated categorically stated that it is absolutely false. The fee has not been received in cash and that fee fixed by the committee alone is collected. 154. At page 97, the AO has stated as under: Findings relating to cash handling "Cash of around Rs. 2.7 crores was found during the course of search proceedings at the premises of the trust office. Cash was being collected at the very trust office. Shri GVS has in his statement recorded d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two parties and if both of them have no grievance with the proposition and entered into an agreement, it is voidable at the option of the person who did not know the legal provision. It is for the parties concerned or for the law enforcing authority to take proper action. In this case if the contract between APSRTC and the appellants was illegal and contrary to law, it was for the authorities who enforce Motor Vehicles Act 1988 to take action and ensure that the stage carriage permit issued to the appellants is withdrawn and appellants are visited with penalty, if any, imposable under the law. Apparently State Transport Authorities have not taken any such action. It is not for us to examine this aspect. Our examination has to be limited to examine the facts of case and agreement to arrive at the nature of transaction between the parties to see whether the transaction is covered by the definition of service or not." 157. As far as the documents referred to in various seized material, the appellant has already stated that the trust has nothing to do with them and they cannot be relied on to make any allegations against the trust. 158. A perusal of the observations of the AO that " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the theory advanced by the AO regarding alleged collection of capitation fee do not have legs to stand and hence, all allegations based on such pillars should naturally fall. 160. In view of the above, it is submitted that the allegations of the AO that the appellant has collected capitation fee are perverse being not based upon any evidence are liable to be quashed. 161. Now, to rebut the allegations regarding diversion of funds for the benefit of trustees, the ld. AR submitted that the AO has made observations that the primary objective of collecting capitation fee is to be able to misappropriate as much funds as possible for personal benefit of the trustees. This is in stark contrast to the very principles of charity of trust. It is noted that without prejudice to the illegal nature of capitation fee collection, the source of the same is application of assets of the trust itself. Large quantum of money is diverted for the benefit of the trustees, mostly in the form of direct payment of cash, and to a smaller extent in the form of expenditure for their benefit. The AO noted that from the above tabulation it can be that at least an amount of Rs. 109,47,21,948 has been siphon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that substantial amount has been paid to multiple trustees across multiple years, thereby establishing the following facts: * It was an organized activity and multiple trustees were aware of the same * There were multiple beneficiaries of such collection of capitation fee in the guise of being trustees * There was misuse of their position as trustees in order to divert the funds of the trust * The quantum of amounts tabulated in the above mentioned table shows that a large fraction of all capitation fee collected actually went into the hands of the trustees and was ultimately for their benefit." 166. It is submitted that there is nothing in the aforementioned entries which would show that the payments have been made for the personal benefit of the trustees. The AO has merely relied upon the statement of Sri. Goli V. Srinivas. The AO did not make any attempt to collect any evidences to corroborate the statement given by Sri. Goli V. Srinivas nor Sri. Goli V. Srinivas produced any evidence to support his statement. The AO has tabulated at page 59 certain entries contained in seized material no. A/DUU/2. Against few entries in the said table, under remarks column, he has sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies like Chairman, Secretary, Shri Rajesh Jagdale, Shri J P Narayanaswamy, Shri R J Rajendra and various other persons mentioned therein. Wherever the cash is mentioned that cash is given to Shri Goli Srinivas to further make payment to sundry expenses whose details are maintained by Shri Goli Srinivas in a separate expenditure book Q. 7 You are only confirming that the payments have been made by Shri Goli Srinivas as per your instruction however, you are not stating the nature of these payments Ans. It is stated that these payments have ultimately been utilized for the trust like purchasing land for the trust, development of buildings / renovation, civil works, building of compound walls, construction of temples (Anjanaya Swami Temple at Doddaballapura and Baba Mandir in Chikballapur) etc. 169. Further, queries no. 13 and 17 and their replies in statement under section 132 of Sri G H Nagaraj recorded on 20.08.2015 read as under:- "Q. 13 I am showing you page No. 2 of the seized material marked as A/DUU/01 dated 06.08.2015 seized during the course of search conducted u/s 132 on 06.08.2015. Please explain the entry dated 15.05.2015 under the caption "send to H Raju - 50- 00" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustees, it was pointed to query 15 from the statement under section 132(4) of Sri Jalappa recorded on 04.09.2015. The said query and reply are as under:- Q. 15 In whose name the residential house located at No. 147, 2nd Main, 2nd Stage, I Block, RMV Extension, Bangalore stands? Ans. This house was purchased by me way back in 1978. On 05.04.2010 I have made a will in the name of the Trust for the above mentioned property. I am submitting the copy of the will. 175. Further, query no 16 and reply from the statement of Sri. G H Nagaraj recorded under section 132(4) on 20.08.2015 are as follows:- Q. 16 I am showing you your reply to Q. No. 14 of the statement recorded on 13.08.2015 u/s 131 of the Income Tax Act wherein you have stated that certain sums were spent for renovation of the house of Chairman located in Dollars colony. Please confirm your statement Ans. Yes, I confirm that the said sum was spent for the renovation of the house of Chairman located in Dollars colony. It is further stated that the said house which was in the name of Shri R L Jalappa was donated to the trust." 176. The ld. AR submitted that the above would show that the house in which Sri Jalappa stays h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 to 600 of this Paper Book] Loose sheets (printed and manual) Page No. 39 to 48 of Asst. Order A/DUU/02 [Copy enclosed at pages no. 601 to 668 of this Paper Book] Note book (manually written) Page No. 52 to 77 of Asst. Order A/DUU/03 [Copy enclosed at pages no. 669 to 775 of this Paper Book] Note Book (manually written) Page No. 64 of Asst. Order A/DUU/04 [Copy enclosed at pages no. 776 to 864 of this Paper Book] Note book (manually written) Page No. 46, 65 & 66 of Asst. Order A/DUU/05 [Copy enclosed at pages no. 865 to 991 of this Paper Book] Spiral note book (manually written) A/DUU/06 [Copy enclosed at pages no. 992 to 1151 of this Paper Book] Note Book (manually written) A/DUU/07 [Copy enclosed at pages no. 1152 to 1308 of this Paper Book] Long note book (manually written) A/DUU/08 [Copy enclosed at pages no. 1309 to 1365 of this Paper Book] Note Book (manually written) A/DUU/09 [Copy enclosed at pages no. 1366 to 1419 of this Paper Book] Long note book (manually written) A/DUU/10 [Copy enclosed at pages no. 1420 to 1554 of this Paper Book] Long Note Book (manually written) Page No. 61 of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Infrastructure (India) (P.) Ltd., 397 ITR 82 (Del), statement recorded u/s. 132(4) did not by themselves substitute incriminating material and on that basis assumption of jurisdiction u/s. 153A and consequent addition made by AO were not justified. Further it was observed that statement u/s. 132(4) during the course of search action not only has to be offered to the assessee, but an opportunity to cross-examine has to be given. If it was not provided, it is sufficient to discard such statement which is evident from para 37 of that judgment. Similar view was taken by Lucknow Bench of the Tribunal in the case of M/s Fateh Chand Charitable Trust v. CIT (Exemptions) Lucknow 2016 (4) TMI 1119 - ITAT Lucknow / [2016] 49 ITR (Trib) 276 wherein it was held that even when the assessee disputed the correctness of the statement recorded u/s. 132(4) and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee and held that testimony of witnesses has to be discharged as there was no material with the department on the basis of which it could justify its action. Further in the case of M/s Obulapuram Mining Company Pvt. Ltd. v. DCIT 2016 (7) TMI 1435, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... futably that the said noting revealed unaccounted income or unaccounted investment or unaccounted expenditure of the assessee. The very purpose of search concluded u/s. 132 is to unearth hidden income or property or get hold of books of account or documents which has not been or will not be otherwise produced by the assessee in regular course on issue of summons or notice. In the assessee's case, as stated above, the purported search action did not lead to discovery of any unaccounted money, bullion, jewellery or other valuable article or thing. Further, no books of account revealing any undisclosed transactions of the assessee were found during the course of search. The entire assessment order revolves around scribbling in loose sheets of papers seized from premises of another person in course of search action on such other person. It is a fact that the said rough loose sheets of papers scribbled by some anonymous person and seized in course of search of another person cannot be termed as 'documents' having any evidentiary value within the meaning of section 132 or section 132A of the Act. Thus, the entire assessment u/s 153A of the Act in case of the assessee rests on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the assessee outside the regular books of account. When a dumb document, is to be made the basis to fasten tax liability on the assessee, the burden is on the Revenue to establish with corroborative evidence that the nature of entries contained therein reflect income and also that such income was in the control of the assessee. Thus, Revenue has to establish, with necessary corroborative evidence, that various entries contained in the seized document reflect sales of rice and broken rice effected by the assessee. Considering the entirety of circumstances, in the absence of any material to support the nature and ownership of the entries found in the seized document, no addition is permissible in the hands of the assessee as undisclosed income by merely arithmetically totalling various figures jotted down on such document. 186. Further the AO relied on the statement of Shri Nagaraj, Secretary wherein the AO mentioned that Mr. Nagaraj was aware of the transactions and confirmed it. The AO has not referred to the following answers of Mr. Nagaraj to Question Nos.8 to 11:- (a) In answer to Q.8 to the statement recorded on 13.8.2015, [page 2164 PB), he has stated that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the absence of such examination, the statement of Shri Srinivas that middlemen were engaged for seat conversion cannot be relied upon. 189. The seized material A/DUU/03 which is placed on record at PB page no 669 to 775 which shows certain payment entries and it is very strange to believe that the assesse has authorised any person to write it as it does not contain any attestation from the assesse side being not having any name or seal of the assesse. 190. The seized material A/DUU/04 which is placed on record at PB page no 776 to 864 which shows certain payment entries and it is very strange to believe that the assesse has authorised any person to write it as it does not contain any attestation from the assesse side being not having any name or seal of the assesse. It also shows certain amount taken from PG students. However there is no attestation to this document from the trust side to suggest that it was authorised by the assesse. Being so no credence to be given to this document. 191. The seized material A/DUU/05 to 09 is not relied upon by the AO while framing assessment and making additions, hence no findings are required. 192. The seized materials A/DUU/10 are place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in Common Cause (A Registered Society) v. UOI [2017] 394 ITR 220 (SC) observed with regard to evidentiary value that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajashekhar confirming the voluntary payment of Rs. 30,000 towards corpus donation by cheque. (v) PB 1777 - Letter from K Shantharam confirming the voluntary payment of Rs. 30,000 towards corpus donation by cheque. (vi) PB 1779 - Letter from T Venkatsubbaiah confirming the voluntary payment of Rs. 70,000 towards corpus donation by cheque. (vii) PB 1780 (Duplicate of above) Letter from T Venkatsubbaiah confirming the voluntary payment of Rs. 70,000 towards corpus donation by cheque. (viii) PB 1784 - Letter from P Kumara Swamy confirming the voluntary payment of Rs. 50,000 towards corpus donation by cheque. (ix) PB 1787 - Letter from B S Amarnatha confirming the voluntary payment of Rs. 50,000 towards corpus donation by cheque. (x) PB 1790 & 1791 - Letter from Dr.C.L.Gayathridevi confirming the voluntary payment of Rs. 50,000 towards corpus donation by cheque. (xi) PB 1793 - Letter from B P Ravi Kumar confirming the voluntary payment of Rs. 25,000 towards corpus donation by cheque. 200. In all the above cases the voluntary contribution towards corpus donation has been received by cheque and duly accounted in the books of account of the assesse. There are also some phot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice and assess or reassess the income of the other person in accordance with the provisions of section 153A. Therefore, if the material seized belongs to or pertains to or relates to a person other than the searched person, only then section 153C comes into play. Hence, it is axiomatic to state that if the material seized belongs to or pertains to or relates to some other person, it does belong to or pertain to or relate to the searched person. Under such circumstances, one cannot invoke the presumption under section 292C that the material seized belongs to the searched person as the assessing officer by his own action of making assessment under section 153C in the case of trustees relying upon the very same seized material. 203. The Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2017 (5) TMI 1354 held that it is clear that the presumption of facts u/s 292C of the Act is not a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is " may be" and not "shall". Secondly, such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact not a presumption of law. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties. Further copy of statements recorded and cross-examination of the parties was requested by the assessee's letter dated 09.12.2017. Vide assessee's letter dated 22.02.2017, copies of seized / incriminating material relied upon to make the addition was requested. The assessee vide letter dated 29.10.2017 also requested for documents in digital form taken at the time of search u/s. 132. 208. The AO vide letter dated 01.08.2017 furnished copies of seized material A/DUU/01 to A/DUU/17 to the assessee. However, it is crucial to note that the assessee's request for cross-examination of students, parents and donors of capitation fees was not provided by the revenue authorities. 209. The assessee by letter dated 09.12.2017 made submissions that collection of amounts by Shri G.H. Nagaraj, Secretary of the trust were on his own and spent a portion of the amount on the infrastructure and development activities. 210. In our opinion, the statement of Mr. G.H. Nagaraj, who is Secretary of the trust cannot be considered as true and correct. He has changed his versions and proved to be an evasive person as a witness. At one stage, he admitted collection of fees over and above the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price-list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. (para 7) If the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show-Cause Notice. (para 8)" 212. The Delhi Tribunal in the case of Veena Gupta v. ACIT in ITA No.5662/Del/2018 dated 27.11.2018 relying on the above judgment of Hon'ble Supreme Court in the case of Andaman Timber Industries (supra) quashed the assessment order on the reason of not providing cross-examination of witnesses whose statements were recorded. 213. The Hon'ble Supreme Court in the case of Mehta Parikh & Co. v. CIT, 30 ITR 181 held as under:- "In the instant case a mere calculation of the nature ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of CIT v. Odeon Builders (P.) Ltd., 418 ITR 315 (SC) head-note is as follows:- "Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by cross-examination and re-examination, if necessary. 9. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. Without the truth being tested no oral evidence can be admissible evidence and could not form the basis of any inference against the adverse parties. We have also examined the records and we find that this Shri Sukla was examined by a number of officers. The Assistant Director of Investigation examined him on August 4, 1987, and in reply to question No. 2 in that deposition he confirmed that he was a dealer in lubricating oil since 1977. In reply to question No. 3, he confirmed having been assessed to income-tax. Again, in reply to question No. 4, he explained that he used to purchase lubricating oil from different garages as well as through various brokers. Such lubricating oil was processed by him in his factory for sale. All payments were received by him through account payee cheques. In reply to question No. 5, he stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the interest of justice for both the parties, the assessee and the Revenue, it is necessary for us to direct the Tribunal to remand the case to the Assessing Officer for reconsidering the whole matter in the light of the observations made by us in the foregoing and redo the assessment accordingly. All opportunities should be given to the assessee in order to lead any evidence that the assessee may feel necessary to rebut the case against him. As a result we decline to answer the question." 217. As held by the Hon'ble Calcutta High Court in the above judgment, in the present case, Mr. Nagaraj cannot be considered as a reliable witness. More so, when the assessee was not given any opportunity to cross-examine him. In this regard, we also place reliance on the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT, 125 ITR 713 (SC) wherein it was held that evidence collected from witness cannot be considered without giving opportunity of cross-examination to the assessee. 218. We have also carefully gone through the statement of Mr. G H Nagraj, Secretary of the assessee trust. It was mainly discussed in Page no 64, 65, 74, 75 and 76 of assessment order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagraj for collection of any fees or spending any amount for trust activities. The assessing officer considered this letter as an acceptance of collection of capitation fees without considering the real meaning of that letter. It cannot be construed as the acceptance of collection of capitation fees by assessee. It was clearly stated that if it is collected, it is unauthorised collection by the Secretary and Shri G H Nagraj has to explain to the Income Tax authorities, even after considering the expenditure incurred out of it for the purpose of trust activities. In our opinion assessment in search cases has to be framed on the basis of seized material bought on record and not on the basis of confession. The action of assessing officer placing reliance on the letter of assessee dated 09-12-2017 is unjustified. 221. Further, there was an allegation by AO that assessee has received donation in return for giving cash to them and facilitated to the donor to claim deduction u/s 80G and accordingly AO observed that donation is bogus. After examining one donor by name Shri Hanumantharaya whose statement is available on record on PB page no 2181. Shri Nagaraj when confronted him with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. The DR failed to do so. Hence, it is observed that the assessee was not afforded any opportunity to cross-examine any of the persons including the parents whose statements were relied upon for the purpose of making assessment. Such statements cannot be relied upon. Reliance was placed upon by the AR on various case law is support the case of the assessee. 227. Further, the AO recorded at page 125 of his order that he has sent summons to parents of students out of which only 5 students statements were recorded. Only two persons confirmed the payment of capitation fee. Vide assessee's letter dated 02.12.2017 assessee asked for information about enquiry with the students. No information was provided by the AO to the assessee. In this regard, statement of 2 persons out of 800 cannot be relied upon and it is not appropriate to come to the conclusion that these are full-proof of evidence which the AO can rely upon. Reliance on this incomplete statement cannot be appreciated as held by the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT, 125 ITR 713 (SC) as follows:- "Held, reversing the decision of the High Court, (i) on the facts, that the two letters dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Anand Social & Education Trust in ITA Nos. 2542-2548(B)/2017 dated 29.05.2020 by placing reliance on the judgment of Hon'ble Madras High Court in the case of Balaji Educational & Charitable Public Trust, 56 taxmann.com 182 in similar circumstances observed that the AO had not conducted any enquiry with the students or parents or others. The cash seized during the search was accepted as not belonging to the assessee. There was no complaint received from any student or parent regarding capitation fee charged by the institution. In the above case also the AO had estimated the capitation fee received from the students under the management quota for various years. The Hon'ble Madras High Court held it to be a perverse inference. Further the Tribunal observed the AO had only drawn certain inference on surmises and conjectures. He did not conduct any independent enquiry with the related party to find out the truth. He has also not brought any material on record to show that the explanation given by the assessee was not correct. In any case, the assessee was not given opportunity to cross-examine the parties whoever managed the diary. Accordingly the Tribunal deleted the addition by plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... huge additions on collection of capitation fees. It cannot be considered as appropriate sample to frame the assessment on the basis of their statement. Further, the assessee requested for cross examination of all the parties whoever have given the statements against the assessee, if any, which was not provided at all. In view of this, such statements cannot be relied upon. The department despite its attempts failed to collect any corroborative information regarding collection of capitation fees, except relying on uncorroborated entries in the loose papers/Excel sheets, wants to frame the assessments in all these assessment years relying upon the same which is not acceptable. The revenue authorities bound to follow the principle of natural justice and ought to have given proper opportunity of examination and cross examination of the parties concerned whose statements are relied upon to frame the assessment. In our opinion the discovery of documents not only sufficient to conclude the collection of unaccounted capitation fees, cross examination of concerned parties is also important. 232. Further at a cost of repetition, we observe that the revenue authorities recorded statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not confronted to the assessee for cross-examination and the same cannot be relied upon. The department failed to collect proper information from any source corroborating payment of capitation fees, except in corroborating entries in the loose sheets. All attempts for corroboration failed. There is nothing to suggest that the trust has deviated from the objects for which registration was granted and not applied the funds for its objects. No evidence was brought on record to show that amount of alleged capitation fees which have been collected was misused by the assessee or by any interested persons. There is no instance of recovery of any assets commensurate with the alleged estimated unaccounted collection of capitation fees as found by the AO. The activities of the trust are genuine. There is no allegation by the lower authorities that activities of the trust are not genuine. Also there was no allegation that the activities of the trust are not carried on in accordance with the objects of the trust. There is no allegation that the assessee is not imparting education and it is an admitted fact that thousands of students are studying in the college and assessee has been carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11 of the Act. The relevant observations of the Tribunal are as follows:- ""In this regard, the ld. counsel for the assessee brought to our notice that the agreed tuition fee which the Society can collect for admission has also been collected and this is duly reflected in the statement found in the seized documents. It was submitted that the total collections in the form of DD was a sum of Q 1,16,74,975 and the amount stated to have been deposited by the Secretary in the Head Office is only a sum of Q 80,000 on 02.06.2005 and Q 14,33,500 on 19.10.05. It was submitted that the reference in the seized document might be with regard to the normal tuition fee which the society can collect. It was submitted that the entries in page 54 cannot be conclusive to show that the Secretary was also involved in collecting the ETF. We are of the view that the submissions made on behalf of the assessee in this regard appear to be convincing. In this regard, we also find that Indira Devi, who is stated to have written letter dated 08.12.07, has not been examined by the AO . In those circumstances, it cannot be said that the seized document on which the AO has placed reliance conclusively proves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were recorded on a number of occasions, with reference to the entries in these excel sheets. It was explained that circumstances in which the excel sheets were found were not ascertainable. It was contended that uncorroborated notings in the excel sheets should not be acted upon to derive any inference against the society. In support of this contention that the said excel sheets are not reliable, the learned counsel for the assessee put forth the following reasons : (a) The notings in the excel sheets lacked corroboration of the notings although the Department attempted in that direction. (b) In course of search and post-search investigation, in the statements recorded under s. 132(4)/131, chairman of the assessee trust, Sri Srinivasa Rao expressed his inability to explain the circumstances in which those sheets were found from the premises of the assessee-society. (c) Despite repeated questioning on various occasions, the said Srinivasa Rao denied that the assessee-society has collected capitation fee from any student. (d) The computer printout was not recovered/retrieved from any of the computers maintained in the society's office at the time of search, although the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) The Dy. Director of IT in course of post-search investigation made extensive enquiries to corroborate the notings in the excel sheets. One of the steps taken by him was that he summoned all the parents of the students under s. 131 to take evidence. In course of assessment proceedings, the assessee made requests to supply the copies of these statements. Repeated requests made by the assessee fell in deaf ears and so far these statements have not been provided. On being directed by the AO in course of assessment proceeding, the assessee contacted the office of Director General of IT and reminded on a number of occasions but no information was supplied, despite the fact that this fact was also brought to the notice of Director General of IT. As a principle, neither the assessee can suppress the best evidence in his possession nor the Department. It is settled principle that whenever the assessee desires, he can have access to all information, whether favourable or adverse to him as laid down in Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 (SC), SMC Share Brokers Ltd. v. CIT [2008] 22 SOT 7 (Delhi)(URO), CIT v. Simon Carves Ltd. [1976] 105 ITR 212 (SC). In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an supplement but cannot supplant evidence. Nothing was found by the Department to support their suspicion. (m) Therefore, the Excel sheets which are not speaking either by itself or in the company of others, or corroborated by enquiry, cannot be the basis of any inference that capitation fees were collected and not entered in the accounts to cancel registration. 239. Thus, it is seen from the seized material and Excel sheets that these are handwritten loose documents and Excel sheet print-outs taken from the computer and undisclosed income of the assessee is determined on the basis of these documents. There is no direct evidence or conclusive evidence to prove the collection of the capitation fees. The statements of parties of whosoever is relied upon are evasive replies given to the revenue authorities on the basis of which the AO made an estimate of collection of capitation fees. This is only based on conjectures and surmises and only on circumstantial evidence. The AO failed to established the link between the seized material and the capitation fees which resulted in creation of any unaccounted assets in the form of possession of money, bullion, jewellery or other articles o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of revenue that assessee is collecting huge unaccounted capitation fees in the guise of carrying on educational activities. 241. The contention of the ld. DR is that cross-examination of parties whose statements were relied on by the AO to frame the assessment need not be given. On the other hand, if it is required to be given, the issue may be remitted back to the AO to give such opportunity. For this purpose, he relied on the judgment of the Hon'ble Allahabad High Court in the case of Moti Lal Padampat Udyog Ltd. v. CIT, 293 ITR 565 (All) wherein it was held that : "It was not in dispute that the adverse material which was found by the Income-tax authorities during the course of search in the business premises of 'V' had been confronted to the assessee who was having regular business dealing with the said firm. Some of the entries, recorded in the rough cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee to substantiate his agricultural income and without giving opportunity to cross-examine the Village Administrative Officer, violating the principles of natural justice. Therefore, writ petition could not be dismissed on alternative remedy and assessment order could not be quashed. On further appeal by the department, the Honb'le Supreme Court held that that instead of setting aside the assessment order, the High Court should have remitted the matter to the Assessing Officer to grant opportunity of cross-examination of the concerned witnesses. Further the assessee failed to avail of the statutory remedy. The assessee was given to move the CIT(Appeals). 244. Coming to the reliance placed by the ld. DR on the order of the Tribunal in the case of Centurion Investment & International Trading Co. (P.) Ltd. v. ITO, 126 ITD 356 (Del) wherein it was held as follows:- "It was a matter of record that the assessee had not been allowed the cross-examination of the party whose statement had been used against it in making the assessment. The addition was, thus, in violation of principles of natural justice. Not allowing cross examination is a defect which is procedural in na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrected by allowing the cross-examination and the Assessing Officer can be directed to proceed further to examine the matter afresh on the basis of cross-examined statement. The power of setting aside the order of assessment, where it is illegal, is inherent in any Appellate Court. Its order would be perfectly legal order in directing the Assessing Officer to issue notice to the assessee before making an assessment because it was not satisfied regarding the correctness of the assessee's return. The Tribunal/ Commissioner (Appeals) has ample jurisdiction to give directions to the Assessing Officer to comply with the requirements of law. It has inherent power to set aside illegal order of assessment and direct the Assessing Officer to comply with requirements while making de novo assessment. [Para 25]" 245. In our opinion, the facts of the present case before us are entirely different. In the present case, we have already held that there are various loose sheets, scribblings, jottings and Excel sheets taken from the computer having no signature or authorization from the assessee's side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted here is that deemed presumption cannot bring such a document in the tax net and the presumption is rebuttable one and the deemed provisions have no help to the department. In our opinion, in these cases addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vague noting's in the absence of any corroborative material and these material cannot be considered as transacted into collection of capitation fees by assessee giving rise to income which are not disclosed in the regular books of accounts by assessee. We place reliance on the following judgements in support of our above findings: (i) CIT vs D.K.Gupta 174 Taxman 476 (Delhi) (ii) Ashwini Kumar vs ITO 39 ITD 183 (Delhi) (iii) S.P.Goyal vs DCIT (Mum) (TM) 82 ITD 85 (MUM) (iv) D.A.Patel vs DCIT 72 ITD 340 (Mum) (v) Amarjeet Singh Bakshi (HUF) vs ACIT 86 ITD 13 (Delhi) (TM) (vi) Nagarjuna Construction Co Ltd vs DCIT 23 Taxman.com 239 (vii) CIT vs C.L.Khatri 174 Taxman 652 (viii) T.S.Venkatesan vs ACIT 74 ITD 298 (ix) CIT vs Atam Valves Pvt Ltd 184 Taxman 6 (P&H) 248. Thus, we are agreeing with the contention of ld. AR that placing reliance on the seized material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property; (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. Under such circumstances, the AO erred in relying on such material to deny exemption under section 11. The AO has concluded that the appellant has received capitation fee merely on the basis of statements and unsigned documents which cannot be relied on as evidence. As far as the statements of Mr. Srinivas and Mr. Nagaraj are concerned, the appellant reiterates that they have not acted at the behest of the trust. 257. The appellant has stated categorically that the said loose sheets / note books referred to above have not been maintained by it. The mandate under section 11(1)(a) is that "income derived from property held under trust" should be applied for charitable purposes. Para 9 of the trust deed states that the property of the trust shall be the initial contributions and such other properties as may be donated or otherwise acquired by the trust. Therefore, income from such property should be applied for charitable purposes in order to claim benefit of section 11(1)(a). Para 5 of the trust deed states that "The properties, the assets, effects, funds and the like of the trust shall vest upon the Trust, the trustees perpetually and irrevocably for the due fulfilment and effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in CIT v. K T Doctor [1998] 230 ITR 744 (SC). 260. One needs to put a dividing line between what is done by the personnel of the trust in their official capacity and their personal capacity. The trust cannot be held responsible for the acts of the personnel of the trust in their personal capacity. Therefore, the consequences of such acts cannot affect the trust in any manner including its eligibility to claim exemption u/s. 11. When the trust has neither received the alleged capitation fee nor has control on such alleged capitation fee where is the question of it being responsible for the receipt and utilization of the same. 261. In view of the above submissions, it is submitted that the appellant has not diverted any funds for the benefit of trustees and there is no violation of section 13(1)(c)(ii). 262. The AO relied upon the decision of the Hon'ble Delhi High Court in Mool Chand Khairati Ram Trust v. DIT (Exemption) [2015] 377 ITR 650 (Del) and held at para 8.2, page 104 of the assessment order holding that in the instant case also the assessee has grossly violated the provisions by not applying the receipts earned through capitation fee collection, and rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Without prejudice to the above, regarding the allegations regarding expenditure on illegal activities, the AO has alleged that the activities of the appellant are not in accordance with the objects of the trust and it has been used as a conduit for tax evasion, it was submitted that the allegation of deviations from the objects of the trust is based on the seized documents. The appellant has already established that these documents have no connection whatsoever with the trust. These are privately maintained by some other person. And if they have spent some money out of such collection, it cannot be said that trust has carried on its activities in violation of its objects. Therefore, the exemption u/s 11 cannot be denied on this ground. 267. The various allegations of the AO regarding payment for illegal activities and being a conduit for tax evasion can be categorized as under: (i) Payment to political parties for funding elections (ii) Payment to agents for procuring candidates (iii) Payment of Kickbacks and promotion of corruption (iv) Payments for routing money into books and aiding tax evasion through receipt of bogus donations (v) Aiding tax evasion by making addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... political parties. The replies given by Sri. Goli V. Srinivas and Sri. G H Nagaraj does not divulge the details of political parties to whom such payments have been made. The AO also has not brought on record as to whether any elections did take place during the relevant period when the alleged payments were made. Just because the Chairman is a politician, it does not mean that payments are made to political parties. It is submitted that the allegations of the AO are incorrect. There is nothing either in the said page 85 of the seized material or the statement of Sri. Goli V. Srinivas and Sri. G H Nagaraj to hold that the appellant has diverted the funds of the trust for funding elections. The appellant has not authorized such payments. The entry has been made by Mr. Srinivas at the behest of Sri G H Nagaraj in his personal capacity and not upon authorization by the trust. There is no allegation that the relevant payment has been made out of the funds of the trust which are duly accounted. The very fact that the payment has been made out of the funds not connected to the trust, would show that the payment has been made without the authority of trust. The entry at page 85 of the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground. Counter to the allegation: Payments to agents 273. The AO has, at para 5.2.3.1d, page 60, tabulated his analysis of seized material no. A/DUU/2 with respect to alleged payments made to agents. He also relied upon page 5 of seized material no. A/DUU/10. The AO has extracted the relevant portion from the statement of G H Nagaraj with reference to payment to agents. He has also extracted at the said paragraph, pages 71 and 72, the replies received from Sri. Goli V. Srinivas when he was confronted with the aforementioned entries in seized material no. A/DUU/02. 274. At pages 78 and 79, the AO has extracted the relevant portion of the statements of Sri. Goli V. Srinivas recorded on 06.08.2015 under section 132(4) and on 28.11.2017 under section 131 with reference to role of agents. 275. Relying upon the above materials, the AO, at page 100, para 7.1 of the assessment order, alleged as under:- "The trust funds have been mis-utilized for making payments to various brokers/agents to procure students for admission into the Medical colleges and facilitation of payment of capitation fees as seen from seized material Annexure A/DUU/01 page 67, A/DUU/02 Page 61, A/DUU/13 pages 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 70, the AO extracted the statement under section 131 of Sri. Goli V. Srinivas recorded on 28.11.2017 pertaining to deposition before CBI. 279. Relying upon the above materials, the AO at serial no. 5, page 100, para 7.1 of the AO , alleged as under: "The trust funds have been mis-utilized for payment of gifts and bribes during MCI Inspections to unknown officials /persons as seen from seized material vide Annexure A/DUU/02 (such entries found in multiple pages)." 280. At para 7.8, page 102 of the assessment order, the AO has alleged "Payment of kickbacks and promotion of corruption" observing as under:- "Regular kickbacks in the form of cash, silver plates, gold chains, gifts, etc have been paid of inspectors from medical council of India, in order to receive favorable inspection reports. This also proves that the institution is not maintaining the necessary standards and complying with norms and is therefore attempting to buy the officials through bribery." 281. The AO relied upon the aforementioned material and statement of Sri. Goli V. Srinivas recorded on 07.08.2015 under sec 132(4) of the Act and statement of Sri. Goli V. Srinivas recorded on 28.11.2017 under sec 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO contains dates falling in FY 13-14. Sri G H Nagaraj in the statement under section 132(4) recorded on 20.08.2015 in reply to question no. 8 has stated that MCI Inspection takes place every year till the year of recognition and once recognition is granted, the inspection is made once in 5 years. Deemed University recognition was granted in the year 2006. That being the case, how can there be occasion of making any payments to MCI Inspectors. Therefore, there is not even circumstantial evidence for him to extrapolate one stray entry. At worst, the finding of the AO regarding payment to MCI Inspectors is to be restricted only to AY 14-15 and it cannot be extended to other years. This is without prejudice to our claim that no bribes were paid to MCI inspectors. 289. Therefore, this ground cannot be applied to all years for denying exemption under section 11. This is without prejudice to the contention that the finding of the AO that trust funds have been used for bribing is perverse as it is not based on cogent evidence. Countering the allegation: "Aiding Tax evasion through receipt of bogus 80G donations: 290. It is submitted that the perusal of the entries in the said sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial. The AO has alleged that the appellant has not submitted anything to prove that the donations received are genuine. It is submitted that the appellant has received donations through cheque and it has issued receipts for the same. 292. Further, it was stated that statements whatever relied on by the AO was not confronted to the assessee. Hence, it may not be relied upon. Counter to allegation: "Additional Salary Payments made to staff" 293. The ld. AR submitted that the appellant denies the allegation that it has paid remuneration in cash to enable the faculty to evade tax. The allegation made by the AO is absolutely baseless. The AO has not brought on record any material to prove his statement. In fact, while dealing with the claim of the appellant regarding deduction of expenditure, the AO has sought to rely upon statements of two faculties - Dr. Kishore Kumar and Dr. Nagaraj S. A portion of these statements is extracted at pages 145 and 146 of the assessment order. The faculties, in the statements, have denied receipt of any additional salary as stated in page no. 81 of seized material no. A/DUU/01. The AO sought to rely upon the statements of faculties to deny the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not solely existed for the purpose of carrying out educational activities and books of account have not been rejected. It cannot be said that the activities carried on by the assessee is not genuine. In our opinion, the assessee solely existing for non-profit purpose. Unless the department shows that there was breach of conditions laid down for grant of exemption u/s. 11 of the Act, the benefit of exemption u/s. 11 cannot be denied. The assessee enjoyed registration granted during this period and the assessee also demonstrated that the assessee's predominant objects remain the same i.e., carrying out the charitable activities for the purpose of advancement of education and not to earn profit. Earning surplus income by carrying out educational activities is not a reason to deny exemption u/s. 11 of the Act. The assessee's predominant activity is carrying out educational activities which is charitable in nature. The trust cannot be deprived of the benefit of exemption u/s. 11. Further, as we have discussed in elsewhere in the order there is no concrete evidence for collection of unaccounted capitation fees and it is not possible to deny the exemption u/s 11 of the act. It is also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation) 44,58,41,894 Capital Expenditure 7,29,24,571 Total application of income 51,87,66,465 Balance 6,85,70,097 Less: Exemption u/s 11(1)(a) [15% of gross receipts - Restricted to surplus available] 6,85,70,097 Total income Nil 299. It is submitted that the surplus considered by the AO in the computation of total income in the order dated 30.12.2017 passed under section 153A is also Rs. 6,85,70,097. Therefore, the same is before the claim for depreciation. The AO also added back the capital expenditure claimed as application of income as exemption under section 11 is denied. Therefore, the observation of the AO that the appellant has claimed depreciation is incorrect. 300. Therefore, without prejudice to the main contention that the appellant is entitled to claim exemption u/s. 11 of the Act, it is submitted that the appellant is entitled to claim depreciation as per the provisions of the Act. 301. Without prejudice to the above, it was submitted that the AO has denied exemption under section 11 of the Act. Therefore, the AO is required to grant deduction towards depreciation irrespective of the fact whether d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from UG-MBBS course and PG course for the impugned assessment year AY 2010-11. The relevant computation for AY 2010-11 is given at page 149 [UG-MBBS course] and page 151 [PG course]. He has computed the capitation fee and unaccounted cash generated in respect of UG-MBBS course for AY 2010-11 as under:- Column heading as per the table given at page 149 of the assessment order Column reference Total Seats D 150 No. of seats where capitation fee is collected E 63 (*) Package price (Rs. In lakh) F 35 Regular fee per seat for the course (Rs. In lakh) G 15.41 Unaccounted cash component generated per seat per course (Rs. In lakh) F - G = H 19.59 Total unaccounted cash generated as per seized material (Rs. In lakh) I - Estimation of total unaccounted cash generated (Rs. In lakh) E * H = J 1234 308. It is pertinent to note that the column I which deals with "Total unaccounted cash generated as per seized material" is blank so far as AY 2010-11 is concerned. It means that the learned Assessing Officer has acknowledged that there is no incriminating material to prove that the appellant has received unaccounted fee in cash during the financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also taken an identical view in the assessee's own case in the order dated 29-04-2015 passed in ITA No.3890/Mum/2013 and others relating to AY 2006-07 to 2008-09. We notice that the assessee has given detailed explanations before the Ld CIT(A) and hence the Ld CIT(A) has deleted the addition by placing reliance on the decisions referred supra. Under these set of facts, we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue. Accordingly we uphold the order passed by him on this issue." 310. Moreover in all the other pages of seized material A/DUU/06, there is nothing even remotely suggesting that some cash has been collected. Hence, the reliance on page 151 to estimate the total unaccounted cash generation is uncalled for and it is respectfully submitted that no person reasonably instructed in law can arrive at the conclusion as has been arrived at by the department. 311. At pages 152 and 153 of the assessment order, at para 10.9.2, the AO has discussed the evidences in support of quantification of unaccounted cash receipts for AY 2010-11. The evidences relied upon are as under:- * The AO has extracted three tables under the heading "Evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en similar receipt even during FY 2009-10 in the absence of incriminating material pertaining to FY 2009-10. The appellant relies on the following decisions:- * In Anjaneya Brick Works. v. ACIT (INV.). 2002 (1) TMI 256 - ITAT Bangalore / 74 TTJ 921, the Tribunal held as under: "(iii). The first limb of arguments of the learned authorised representative is that so far as the asst. yr. 1991-92 in the case of M/s. Anjaneya Brick Works is concerned, there is no evidence of suppression of income. We are convinced by the arguments of learned authorised representative to that effect. This is almost settled principle of law that mere existence of evidence to support concealment of income for the next assessment year (i.e. 1992-93 in this case) cannot be made a basis judiciously to estimate the income for the current year or any other assessment year for that matter. On the basis of materials related to asst. yr. 1992-93, we cannot conclude that there existed unaccounted sales and income for the previous year relevant to asst. yr. 1991-92 which is the subject-matter of this appeal. The order of the CIT(A) based on this presumption alone cannot be sustained in the eyes of law. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atlal Velji Sales Ltd. 2016 (4) TMI 336 - Bombay High Court's case the registers evidencing sales were found for the period August 2005 to September 2005. The Revenue sought to extrapolate the sales recorded therein for the entire assessment year. The Tribunal rejected the contention of the Revenue and held as under:- "9. So far as the next submission on behalf of the Revenue viz. of extrapolation of evidence found during search is concerned, this Court in All Cargo Global Logistics Ltd. (supra) had negatived the revenue's submission before it that the assessment under section 153A of the Act is not to be restricted only to the incriminating material found during the course of search but would extend to other material also. Therefore in the facts of present case this issue is covered by the decision of this Court in All Cargo Global Logistics Ltd. (supra) in favour of the respondent-assessee inasmuch as it restricts the assessment to be made only to the incriminating material found during the course of search. The reliance upon the decision of the Supreme Court in H.M. Esufali H.M. Abdulali (supra) is inappropriate. This is so as it was passed under the sales tax law and it p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of assessment relating to very same assessment years for determining the unaccounted income. For this purpose, we place reliance upon the Orders of the Tribunal in the case of DCIT vs. Royal Marwar Tobacco Product (P) Ltd. (2009) 120 TTJ (Ahd.) 387, CIT vs. Anil Bhalla (322 ITR 191) (Del). In this case search and seizure was carried out in the premises of the assessee and the premises of a company of which the assessee was a director. The Assessing Officer made additions under the head of unexplained expenditure under section 69C of the Income-tax Act, 1961." 314. The AO regarding the Evidence of opening balance on 1/4/2010 observed upon examination of seized material relating to payments, that there is an opening cash balance of Rs. 81 lakhs as on 1/4/2010. According to the AO, this means that Rs. 81 lakhs was the closing balance of AY 2010-11 i.e., as on 31/3/2010. If no capitation fee was collected during AY 2010-11, then the closing balance of cash (unaccounted) would be zero instead of Rs. 81 lakhs as is seen from the seized material. The same opening balance is also seen from the submissions of the assessee vide its submissions dated 20/12/2017. 315. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter this objection, the AO sought to rely upon material pertaining to FY 2008-09. This shows that the AO has done the assessment with a prejudiced mind. He has decided to make the addition sans any material which warranted the same. 318. Without prejudice to the above, it is also pertinent to note that the AO relied upon data pertaining to AY 2009-10 though it doesn't fall within the block of 6 years contemplated under section 153A(1). It is submitted that the authorized officer is not permitted to seize the material belonging to a period which doesn't fall or is unlikely to fall within the period of 6 assessment years contemplated by section 153A. As stated earlier, the search can be initiated if the authorizing officer has reason to believe that in consequence of information in his possession any of the eventualities stated in clauses (a) to (c) of section 132(1) exist. Section 153A(1) states that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cash component generated per seat per course" and the column G which deals with "Total unaccounted cash generated as per seized material" are blank so far as AY 2010-11 is concerned. It means that the AO has acknowledged that there is no incriminating material to prove that the appellant has received unaccounted fee in cash during the financial year 2009-10. 322. Without prejudice to the above, it is not known as to how the AO has adopted the no. of seats in respect of which capitation fee is received at 42. The quota of total seats for assessment year 2010-11 is 55, out of which 80% seats are reserved under merit quota. The management quota is only 20% which works out to 11. One fails to understand as to how one can estimate that cash was collected from 42 students. It is axiomatic that the merit students will not pay any cash. The appellant has vide its letter dated 23.12.2017 filed on 26.12.2017 has enclosed the year-wise details of number of students permitted and actual number of seats admitted to the college in respect of UG and PG courses. 323. It is also not known as to how the number of seats in respect of which the capitation fee is collected is arrived at. An asteris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found for AY 2010-11 in respect of both UG-MBBS course as well as PG course. The analysis of the documents and the conclusions arrived at based on such analysis made in the assessment order is not relevant for AY 2010-11 at all. Assessment under section 143(3) of the Act was completed in the case of AY 2010-11 on 12.03.2013. Hence, the assessment for AY 10-11 is unabated. No addition can be made in the absence of incriminating material. Therefore, the entire assessment under section 153A for AY 2010-11 is liable to be quashed in the absence of incriminating material found and seized in respect of the said assessment year. 328. Without prejudice to the above, the appellant has analysed the seized material and arrived at the alleged unaccounted cash generated for AY 2010-11 from UG-MBBS course and PG course. The unaccounted cash generated as per the said analysis is nil. The learned assessing officer has extrapolated that a sum of Rs. 2,742 lakh would have been received which has not been accounted even in the seized material. These submissions are made without prejudice to the main contention that the appellant has not received any capitation fee. 329. The ld. DR relied on the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to the main contention that the appellant is not engaged in any commercial activities and that the appellant is entitled to exemption under section 11, it is submitted that the donation of Rs. 10,00,000 is allowable as deduction under section 37 of the Act. Section 37 of the Act as it stood during the relevant period is as under: "37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explanation.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. (2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from expropriation, coercive process or assertion of hostile title ; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. 336. Alternatively, it is submitted that the appellant is entitled to deduction u/s. 80G in respect of the donations given to the above entities. The donee Vijayalakshmi (R L Jalappa Education Foundation) is recognized under section 80G. 337. The ld. DR relied on the orders of lower authorities. 338. We have heard both the parties and perused the material on this issue. The donations have been given to the registered and approved institution i.e., R.L. Jalappa Foundation which is duly registered u/s. 12A of the Act by way of account payee cheque and the same is to be allowed as an application of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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