GANAPATHI DYAVATH,NIRMAL vs. INCOME TAX OFFICER, WARD-1, NIRMAL

O R D E R PER S.S.GODARA, J.M. :

This assessee’s appeal for AY.2010-11 arises from the CIT(A)-1, Hyderabad’s order dated 28-01-2019 passed in appeal No. 0298 / 17-18 / ITO, Ward-1, Nirmal / CIT(A)-1 / Hyd / 2018-19, involving proceedings u/s.153C of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

2. We notice at the outset that the assessee’s sole substantive grievance raised in the instant appeal challenges correctness of the learned lower authorities’ action adding alleged un-explained expenditure amount of Rs.5 lakhs in the course of assessment famed on 26-12-2017 and upheld in the CIT(A)’s detailed discussion as under:

“5. Ground No.2 to 4 is with regard to addition of Rs.5,00,000/- towards unexplained expenditure. 5.1 During the assessment proceedings, the Assessing Officer observed that: "As per information received from DCIT, Central Circle-2(2), Hyderabad that a search & Seizure operation u/s.132 was conducted in the case of M/s.Arihant Educational Society on 25.07.2013. During the search operation, it was noticed thai the appellant hac! paid Rs.20,00,000/- to M/s.Arihant Educational Society prescribed by government and additional amount of Rs.15,00,000/- for the purpose of admission of his son D.Srujan Samrat. Since it is the material available from search & seizure proceedings, the Assessing Officer issued notices u/s.153C to the appellant. During the year, the assessee paid Rs.10,00,000/- towards tuition fee out of total amount of Rs.35,00,000/-. The assessee explained that he worked as school teacher and the sources for payment of fee are out of salary savings & loan amounts. The Assessing Officer asked the assessee to explain as to why the payment and sources of capitation fee of Rs.5,00,000/- should not be treated as unexplained expenditure. In response, the assessee submitted that he had paid Rs.30,00,000/- but not Rs.35,00,000/-. However, as per documentary supplied by DCIT, Central Circle total fees paid was Rs.35,00,000/- whereas the assessee could explain the sources to the extent of Rs.30,00,000/- only. Hence a show cause was issued to the assessee asking him to explain as to why the payment and capitation fee of Rs.5,00,000/- paid in excess of Rs.30 lakhs shall not be treated as unexplained expenditure. In response, the assessee has explained that no such payment was paid by him and once again reiterated that he paid Rs.30,00,000/- only.

The Assessing Officer relying on the evidences during search and seizure, made addition of Rs. 5,00,000/- as unexplained expenditure. "

5.2 During the course of appeal proceedings, the appellant submits that a) "the total fees was Rs.30,00,000/ - for the entire medical course. Out of which Rs.20,00,000/- was prescribed by Government as fee for entire course and Rs.10,00,000/- was paid as capitation fee. b) The appellant had paid the medical course fee of Rs.30,00,000/- (including capitation fee) in different years of the course period for which the appellant has submitted the cash flow statements for the respective years. c) The ld.AO called for information with respect to payment of fees and sources for the same. In response, the appellant submitted all the information and explanations relating to the payment of fees along with all documentary evidence including cash flow statements. d) The Ld.AO clearly mentioned that he is in receipt of information from DIT that the appellant has paid a medical course fee of Rs.30,00,000/ - as prescribed by Government and cash capitation fee and accordingly called for information. e) In contradictory to the said notice amount of Rs.30,00,000/- the Ld.AO has taken the amount of Rs.35,00,000/ - as course fee and added Rs.5,00,000/ - as unexplained expenditure and completed the assessment based on such dumped and unsigned documents found from the premises of M/s.Arihant Educational Society, without bringing any corroborated material on record. j) The appellant relied in the judgments in the case of Addl.CIT Vs. Miss Lata Mangeshkar reported in 74 ITR 696 (Bam), Hon'ble Delhi high Court in the case of Pr.CIT Vs. Meenakshi Oversees pvt ltd (ITA No.692/2016 dated 26.05.2017) and W.P.(C) No.9659 of 2015 (Rajiv Agarwal Vs. CIT) gated 16.03.2016 and Radhasoami Satsang Vs. CIT 193 ITR 321 (SC).” 5.3 With regard to the above submissions as submitted by the appellant, a remand report was called for from the Assessing Officer on 10.05.2018. Accordingly, the Assessing Officer submitted his remand report on 25.05.2018, which is as under: "Keeping in view the facts of the case and considering the failure on part of the assessee in furnishing the sources for the payment of Rs.15,00,000/- as capitation fee despite the opportunities accorded, the objections raised by the assessee through the written submissions filed before the Appellate Authority in support of the non-payment of fee over and above explained fee of Rs.30,00,000/- may not be considered. "

5.4 The remand report was given to the appellant on 31.07.2018. In response, the appellant submitted written submissions dated 28.01.2019, which is as follows:

"The appellant submitted that the Ld. ITO mentioned that he has initially received information from DCIT, Central Circle-2(2) on 29.08.2016, where in it was mentioned that the assessee has paid Rs.30,00,000/ - and subsequently further information received from same office through Email, wherein the assessee paid Rs.35,00,000/-. The extract of fee details of both the notices received by the Ld.ITO, which is as follows .- Information received through notice dated 11.08.2016 (recd. on 29.08.2016) based on which notice u/s.142(1) dated 06.09.2017 was issued for Rs.30,00,000 :

Student’s Name Prescribed Address and Amount Date of Seized and Father fee paid contact no. paid in payment of material name cash over donation/ca reference and above pitation fee prescribed fee D.Srujan Samrat 20,00,000 #1-2-28/D3/1, 2,00,000 19.07.2012 Page 94 of S/o.D.Ganapathi Vidya Nagar, A/CAIMS/04 Nirmal, Adilabad Ph.9966930588 4,00,000 14.03.2012 Page 95 of A/CAIMS/06 4,00,000 13.03.2012 Page 129 of A/CAIMS/07 Total 10,00,000 Information received through email dated 18.12.2017 at 6.30 PM based on which information called for through notice dated 18.12.2017 :

Name Date of Amount Seized material Prescribed Collection in Total fee payment paid by reference fee paid excess of collected student prescribed fee D.Srujan 19.07.2012 2,00,000 A/CAIMS/04 20,00,000 15,00,000 35,00,000 Samrat page 94 14.03.2012 4,00,000 A/CAIMS/06 Page 95 13.03.2012 4,00,000 A/CAIMS/07 Page 129 It is very clear from the above table that the date wise payment of capitation fee in both the notices received from DCIT, Central Circle2(2) was Rs.10,00,000/- only (2,00,000 + 4,00,000+4,00,000). However, in the second notice in total column titled as "Collection in excess of prescribed fee" it was wrongly mentioned as Rs. 15,00,000/-. The amount mentioned as Rs.15,00,000 in the total column would be a typographical error and therefore requesting to consider the factual information in the above two tables. Further the AO received the subsequent information on 18.12.2017 at 6.13 pm through official email id from DCIT, Central Circle-2(2). He called the AR of the assessee in the late hours (around 7.00 PM) and issued a Notice dated 18.12.2017 for which the AR has acknowledged. Further the Ld. ITO has asked for the explanation for differential amount of Rs. 5,00,000/- which found by him from the wrongly mentioned total amount without considering the date-wise payments (which was Rs.10,00,000/- only.) The AR clearly submitted that the assessee paid only Rs.10,00,000/- as capitation fee. But the Ld.ITO without considering the AR statements and also without verifying the total of the date wise payments, within a short period of late hours on 18.12.2017, recorded order sheet and completed assessment with a wrong addition of Rs. 5,00,000/-. 5.5 With regard to the above submissions of the appellant, once again a remand report was called for from the Assessing Officer on 27.08.2018. In response the Assessing Officer submitted his remand report on 17.09.2018, which is as under: "A search & Seizure operation u/s.132 was conducted in the M/s.Arihant Educational Society on 25,07.2013. It was noticed from the seized material that Sri D.Ganapathi had paid Rs.20,00,000/- as prescribed fees and Rs.15,00,000/- as capitation fees (collection in excess of prescribed fees) for getting admission of his son Sri D. Srujan Samrat in MBBS for the academic year 2009-10 in Chalimeda Ananda Rao Institute of Medical Science (CAIMS). The assessee has paid Rs.20,00,000/- as prescribed fees and Rs.1 0,00,000/ - (as part of capitation fees of Rs.15,00,000). The part of capitation fees of Rs.10,00,000 was paid as under: Student’s Name Father’s Amount Date of Seized material and Father name Name paid under payment of reference capitation donation / fees capitation fee D.Srujan Samrat 2,00,000 19.07.2012 Page 94 of D.Ganapati A/CAIMS/ 04 4,00,000 14.03.2012 Page 95 of A/CAIMS/ 06 4,00,000 13.03.2012 Page 129 of A/CAIMS/ 07 The assessee has supported with documentary evidences for Rs.30,00,000/- (ie., Rs.20,00,000 prescribed fee and Rs.10,00,000/- as capitation fees) as under:

Date Source Head Amount (Rs.) 26.07.2009 Mortgage loan 3,40,000 16.07.2012 Educational loan 8,00,000 30.09.2012 HDFC Gold loan 1,80,000 30.07.2012 HDFC Personal loan 2,50,000 10.07.2013 LIC Policy loan 1,52,229 09.01.2015 PLI withdrawal 1,19,950 Accumulated salary savings 4,00,000 Gift from Father-in-law 2,60,000 Total 30,02,179 As seen from the above, the assessee has not disclosed sources for payment of balance capitation fees of Rs. 5,00,000/- and hence the same was disallowed as unexplained expenditure. As per Annexure-I enclosed to this letter which was part of enclosures received from DCIT, Central Circle-2(2), Hyderabad it was clearly mentioned that the Assessee Sri D. Ganapati had paid prescribed fees of Rs.20,00,000/- and Capitation fees of Rs.15,00,000/- and when the same was put forth before the AR during the assessment proceedings he had orally mentioned that it was a mistake of college authorities and confirmed that the assessee had paid only Rs.30,00,000/- to the college authorities. As per Annexure-II (enclosed to this letter) being one of the enclosures received from DCIT, Central Circle-2 (2), Hyderabad, in the list of students for Batch-2009-1 0, the agreed amount as against Shri D.Srujan Samrat at S.No.17 is Rs.35 and it also shows that the amount paid by the student is Rs.17.5 and the balance to be paid is Rs.1 7.

3.1. Learned departmental representative first of all has filed the Assessing Officer’s satisfaction note u/s.153C based on seized material that the assessee had paid the impugned capitation fee of Rs.5 lakhs. We make it clear that the assessee’s grounds nowhere challenge validity of impugned assessment framed u/s.153C of the Act.

3.3. Coming to merits, we notice that although this assessee draws salary income all along, neither the Assessing Officer nor the CIT(A) have considered his cash in hand in AY.2010-11 so as to give credit thereof before making the impugned addition. Faced with this situation, we deem it appropriate that keeping in mind the assessee’s social, economic status, his salary income drawn in the earlier assessment years and past savings, a lumpsum addition of Rs.2.5 lakhs only would be just and proper with a rider that the same shall not be treated as a precedent in any other case. The assessee gets relief of Rs.2.5 lakhs in other words. Necessary computation to follow as per law.

Order pronounced in the open court on 28th May, 2021