ACIT CENT. CIR 7(1) , MUMBAI vs. DR. D.Y.PATIL EDUCATION SOCIETY, KOLHAPUR

We first take up the appeals preferred by the Revenue. Briefly stated, the facts of the case are that, a search u/s 132 of the Income-tax Act, 1961 (‘the Act’) was conducted against the DYP-Kolhapur Group on 29-07-2016. The AO of the searched person was of the view that several incriminating statements/evidences regarding capitation fees earned by the assessee in lieu of admission of students in Medical College operated by assessee Trust was found and therefore as per the satisfaction note dated 18-09-2018, the relevant documents/accounts were handed over to the AO of the assessee on 07-07-2017. Based on the statements/documents etc, received from the AO of the searched persons, the AO of the assessee Trust recorded his satisfaction note on 18-09-2018, pursuant to which he reopened the assessments for the relevant AYs 2013-14 to 2015-16 by issue of notices u/s 153C of the Act dated 19-09-2018.

Based on the statements recorded and evidences available with him, the AO issued show cause notice u/s 142(1) dated 26-11-2018 wherein the assessee was required to explain as to why addition towards unaccounted capitation fees in cash should not be made in its hands to which the assessee furnished it explanation vide letter dated 05-12-2018 which has been extensively reproduced by the AO at Pages 4 to 9 of the assessment order. The AO however did not find the CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society submissions of the assessee to be acceptable. The AO primarily relied on the statements of Shri Dilip Kashid, Shri Herambh Shelke and Shri Karan Singh Vihol which were recorded in the search action u/s 132 of the Act wherein, according to the AO, they had stated that the assessee received cash from students for admission to medical/dental courses. Before the AO, the assessee had filed notarized retraction affidavits of these persons, which were rejected as after-thought.

The AO further noted that the statements of Shri Dilip Kashid & Shri Herambh Shelke were confronted to Shri Sanjay Patil, trustee of the assessee Trust, in the course of search u/s 132 of the Act. The AO also extracted the relevant portions of his statement recorded u/s 132(4) of the Act wherein Shri Patil had denied these allegations. According to AO, however this denial was unacceptable in view of the fact that the statements of these persons stood corroborated by the cash of Rs.1.05 crores seized from the premises of Shri Sanjay Patil. The AO also took note of document seized and marked as Annexure – 1, Page Nos. 1 & 2 which were found from the residence of Shri Dilip Kashid which revealed that a sum of Rs.1.20 lacs had been refunded to the author of the document which was earlier received for admission of his daughter. According to AO, the reliance placed by the assessee on the statements of the dean, professors, employees of the Trust, in which none of them had stated that the assessee Trust would charge capitation fees for admission of students, were not tenable. The AO instead confronted the assessee with the performance of 10 students. CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society According to AO, these students were non-meritorious as they could not qualify any other exam and therefore the AO assumed that these students would have paid capitation fees to obtain admission in the assessee’s medical/Dental college. Based on these findings, the AO estimated that the assessee would have collected sum of Rs.2 crores in each year by way of capitation fees and therefore added the same by way of income u/s 69A of the Act. The AO accordingly also denied benefit of Section 11/12 of the Act holding that it did not exist for charitable purpose and accordingly assessed it in the status of AOP. Being aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved, the Revenue is now in appeal before us.

Assailing the action of the Ld. CIT(A), the Ld. DR appearing on behalf of the Revenue heavily relied on the findings recorded by the AO. Taking us through the statement of Shri Hemrambh Shelke, which was extracted at Pages 10 & 11 of the assessment order, the Ld. DR showed us that Shri Shelke had admitted on oath that the assessee Trust has received capitation fees for admission of students which was being managed by Shri Dilip Kashid and that any person/student who approached him would be directed to Shri Kashid. Thereafter, the Ld. DR invited our attention to the statement of Shri Dilip Kashid, extracted at Pages 11 & 12 of the assessment order, particularly his answers to Q No. 15 to 20, wherein according to Ld. DR, Shri Kashid had laid bare the modus operandi of collection of capitation fees and CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society had categorically stated that capitation fees of usually Rs.1.5-2 crores is collected each year. The Ld. DR further submitted that, the cash which was found from the premises of Shri Sanjay Patil & document seized and marked as Annexure – 1, Page Nos. 1 & 2, corroborated the version of Shri Kashid. According to Ld. DR, the incriminating statement of Shri Kashid and the aforesaid corroborative evidences was sufficient enough to justify the addition made by the AO. Per contra, the Ld. AR fully supported the order of the Ld. CIT(A).

We have heard both the parties and perused the records. It is noted that, the case of the Revenue is that, the assessee was receiving capitation fees in lieu of admission of students. This premise primarily hinges on the statements of Shri Heramb Shelke, Shri Karan Vihol, Shri Vijay Shinde & Shri Dilip Kashid recorded in the course of search. According to Revenue, these statements stand corroborated by the (a) the cash seized from the premises of Shri Sanjay Patil and (b) document Annexure – 1, Page Nos. 1 & 2 found from the premises of Shri Dilip Kashid. Therefore, in order to adjudicate the issue at hand, it is first relevant to examine the statements of the aforesaid four (4) persons which have been relied upon by the AO.

Let us first examine the statement of Shri Herambh Shelke relied upon by the AO, which is available at Page no’s. 158 to 162 of PB. Perusal of the statement shows that, he is a qualified Engineer B- Tech, Mechanical working as a guest lecturer with D.Y. Patil CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society Education Federation Pune [please note, he is not working with assessee, but with Pune group]. He is regularly assessed to tax. He also stated that he has various businesses and is a partner, proprietor etc in five (5) different entities. It is noted that he is not directly associated with the assessee Trust in any official capacity. From his statement it is revealed that he had leased a restaurant and McDonald’s outlet in D.Y.P City Mall, which is owned by Shri Sanjay Patil, [trustee of the assessee Trust]. Also, he stated that Shri Dilip Kashid was a business partner in his firm M/s Meghsparsh Infra and Services. When questioned about the assessee Trust, he explained that his partner, Shri Dilip Kashid is the Senior Clerk of assessee trust, who according to him, collected cash component for admission in colleges of the group. To the specific question as to the role of Shri Dilip Kashid in the admission process in that group of colleges, his statement is noted to be as under: - “Ans. Students who are willing to pay cash for admission in DY Patil Group of colleges meet Mr. Dilip Kashid. Then parties have discussion with Dilip Kashid about cash amount to be paid for admission for various courses. Then the final cash amount is collected by Mr. Dilip Kashid either directly or through his agents. After that I do not know exactly what Mr. kashid does with the cash.”

It is noted that Shri Shelke had denied being involved in this process or receiving any cash donations, except in one or two CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society instances. Instead, he stated that, if any students approach him for getting admission by paying cash, he directed them to Shri Dilip Kashid. When questioned about those instances at Q No. 17, Shri Shelke is noted to have given a vague and generalised answer without naming on whose behalf or for whose admission did he receive the payment. The only averment made by him was that he received Rs.8 lakhs & Rs. 2 lacs on two different occasions, which amount also he did not pass on to Shri Kashid or the assessee Trust but had deposited in current account in ICICI Bank of his proprietorship entity, M/s. Maharaja Wines. Having perused this statement, we are of the considered view that, apart from levelling general & bald allegations, the statement of Shri Phelke did not contain anything incriminating per-se based on which any prudent person could reasonably infer that the assessee had received capitation fees. It is noted that the Ld. CIT(A) had analyzed the statement of Shri Herambh Shelke and thereafter recorded the following findings: - “8.4.42. It is also evident from the statement of Shri Heramb Shelke that apart from his business income, he is having salary from DY Patil Education society federation Varale, Talegaon, Pune where he works as a guest lecturer. The case of the assessee is that it has no relation with the said institution and that this Institution is not even a part of DY Patil Group of Kolhapur. In the given facts of the case, even if it is believed that Shri Karan Singh Vihol has stated a fact that Shri Heramb Shelke works for DY Patil Institute, that has to be taken as the institution for which Shri Shelke CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society works, which is not DY Patil Medical College. Hence, in absence of any other evidence to corroborate and implicate the assessee as to the same, in my considered view, it cannot be held that the cash referred to by Shri Karan Singh Vihol as having been transferred for Shri Shelke pertain to DY Patil Medical College of Kolhapur.

8.4.43. I have also gone through statement of Shri Heramb Shelke which has been relied upon heavily in the assessment order. However, it is evident from his statement itself that there is nothing on record to establish his association with the assessee Trust or its constituent Medical College. As mentioned previously. Shri Shelke has his own business and he works as a guest lecturer at DY Patil Education Society Federation, Pune, which is not associated with the assessee Trust Shri Shelke has a business establishment in the name of McDonals Restaurant which is in 'DYP City Mall which is owned by Dr. Sanjay D Patil and Shri Shelke pays rent to him There is nothing on record to prove any association of Shri Shelke with Dr Sanjay D. Patil in respect of any proceedings of the assessee Trust or with assessee Trust in any official or other capacity Shri Heramb Shelke is business partner of Shri Dilip Kashid. In his statement dated 27.07.2016, he has stated that Shri Dilip Kashid collects cash for admission in DY Patil Group of colleges for various courses. He further stated that the students, who were willing to pay cash for admission, meet Shri Kashid and that after having discussion as to this they pay cash amount to Shri Dilip Kashid. As to his role in CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society admission he has stated in his reply to Q. No. 15 that when any willing students ready to pay cash approaches me, I direct him to contact Mr. Dilip Kashid As described above. Mr. Dilip Kashid takes the process forward. He further stated that he did not receive or collect cash from anyone. However, in one or two instances he stated to have received cash directly from the party However, he has also stated in response to Q. No. 17 that he did not remember the name of the parties from whom he has stated to have received cash but about 3 months back he received Rs. 8 lakhs from one party and Rs 2 lakhs from other party and the amount was deposited in the bank account of Maharaja Wines current account it is, therefore apparent that Shri Heramb Shelke has not identified any student or parent who has paid any cash to him or through him or who has taken admission in any course in the institutions run by the assessee Trust by paying capitations fees approaching him for the same. The contention of the assessee in this regard is that Shri Shelke is not in any manner related to the assessee Trust and has no role or function in any matter, including admission, in any of the Institutions run by the assessee Trust and therefore he does not have authority to provide any admission to any one or to ensure any admission to anyone. The assessee also claimed that Shri Heramb Shelke in his statement has not taken name of Dr. Sanjay D. Patil or any of the trustees who could be said to be involved in receipt of any capitation fees and therefore, his statement has no evidentiary value. As mentioned previously, I find that there is nothing on record to establish the Involvement of Shri Heramb Shelke with CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society functioning of the institutions run by the assessee Trust. Furthermore, he has simply said that when any one approached him for admission, he directed them to Mr. Dilip Kashid. He could not identify any student or parent who has approached him for admission or who has taken admission through him. There was no documentary evidences found from his premises to substantiate his involvement with the admission in any of the institutions run by the assessee Trust. 8.4.44. I have also given due consideration to the fact that even if the retraction of the statement made by Shri Shelke is not considered, it is evident that the reference of payment to the assessee in the statement of Shri Shelke is very general and non- specific and it is not in respect of any specific entry of any transaction appearing in any seized documents. Not only that his statement is not corroborated by any evidence found during the course of search, but even in his statement there is no clarification as to who had made payments to him, who had approached him for admissions and whether any candidate has actually taken admission through him by paying any capitation fees. It is obvious that he could not have received payments on his own or as per his discretion. But, he has not even identified the trustee on whose instruction such payments were received. Furthermore, the statement has not even been confirmed by any of the trustees of the trust. Rather, Dr. Sanjay D. Patil, the President of the Trust, in his statement given before the DDIT (Inv), had categorically denied to have any knowledge about any such payments. It is also not the case CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society of the Id.AO that this statement was corroborated by any other evidence by way of any enquiry during the course of search or assessment proceedings. As such, I find merit in the submissions of the assessee that his statement of Shri Heramb Shelke could not be held as sufficient to implicate the assessee for receiving any capitation fees for admissions.”

We find ourselves in agreement with the above findings of the Ld. CIT(A) that the statement of Shri Shelke did not contain any tangible incriminating evidence to implicate that the assessee trust had received capitation fees even without considering the retraction made by him.

Next, we take up the statement of Shri Karan Singh Vihol, which is found placed at page no. 163 to 181 of PB. It is noted that Shri Vihol had admitted that, he was an angadia/courier who would collect and disburse cash through hawala across different cities in India. He also stated that, Shri Heramb Shelke ran a liquor business and that he was also working for D Y Patil Institute. The relevant portion of his statement regarding Shri Heramb Shelke is noted to be as follows:- “He is working for D. Y. Patil Institute. He also owns liquor business. He receives money through ‘Hawala’ from Delhi, Ludhiana, Ahmedabad, Surat, Mumbai, Malad, Yamunanagar etc. He also receives cash at other CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society Angadias. I also undertake his local cash collection. He undertakes exchange of cash on large scale and hence is one of our good customers.”

It is noted that the Investigating authorities had questioned him in relation to a Paper/page which was marked as Annexure-1 and attached to his statement [Page 178 of PB]. Perusal of this document shows that, it contained twenty (20) names with corresponding amounts varying from Rs.1000/- to Rs.37,09,780/-. It also contained another chart which showed that that, money has been distributed to thirteen (13) persons which inter alia included the name of Shri Herambh Shelke to whom amount of Rs.57,19,500/- was paid. The Ld. AR brought to our notice that, Shri Shelke had been questioned regarding this noting and that he had stated under oath that Shri Vihol would handle the cash collections of his wine shop at Pune (Maharaja Wines). According to Ld. AR, Shri Vihol’s statement that Shri Herambh Shelke works for D.Y. Patil is correct because undisputedly he is working as guest lecturer for another group D.Y. Patil, Pune (which has nothing to do with assessee group/Kolhapur). And Shri Vihol’s statement that he transacts/collects cash from Shri Herambh Shelke is for his business of Wine Ship at Pune. The Ld. AR pointed out that, there was nothing contained in this statement which neither incriminated Shri Herambh Shelke not the assessee Trust in any manner or suggested that the assessee received capitation fees from the student. To buttress his contention that the statement of Shri Vihol was CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society of no relevance, the Ld. AR also invited our attention to the statement of Shri Sanjay Patil [Pages 125 to 142 of Paper book] which showed that even the Investigating authorities did not confront him with the statement of Shri Vihol at the time of recording of his statement u/s 132(4) of the Act or post search recording of statement in November 2016. We thus find ourselves in agreement with the following analysis made by the Ld. CIT(A) in respect of the statement of Shri Karan Singh Vihol holding that his statement did not have any relevance to the issue at hand. “8.4.41. Coming to the merit of the evidences and statements recorded during the course of search, on perusal of the statement of Shri Karan Singh Vihol, it is evident that he is working in a firm which transfers cash from one place to another for their clients. In other words, the firm is a Hawala Operator. It is evident from his statement that names of various persons have been identified by Shri Karan Singh Vihol as those who have taken their services. Shri Karan Singh Vihol has also identified Shri Heramb Shelke as his client. He has also stated that Shri Shelke is working for DY Patil Institute. However, it is evident that there was no evidences found from the premises of the said Hawala Operator which will have name of DY Patil Medical College or the assessee Trust in respect of any transactions. Even the Annexure-1 of his statement, which although is not a document found and seized during the course of search, has name of Shri Heramb Shelke on it. It is further found that Shri Heramb Shelke in his statement CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society dated 27.07.2016, has clearly stated that Shri Karan Singh Vihol handles cash of his wine shop in Pune. The relevant Q.No. 21 and its answer is reproduced hereunder: Q.No. What are your professional relations/business relations with Shri Karan (Mobile No. 9766314555)? Ans: He handles cash of my wine shop in Pune, and deposits the same in the ICICI Bank, Senapati Bapat Road Branch, Pune.

The next statement relied upon by the Revenue is the statement of Shri Vijay Shinde, which has been placed at Page no. 182 to 193 of PB. It is noted that Shri Shinde is a qualified person holding BE Computer and a MBA degree. He is also a visiting lecturer in Dr. D.Y. Patil Engineering College at Old Pune (not the assessee trust or institution). He is noted to be a director of Soft-pro Consultancy Services Pvt. Ltd. which is engaged in customized software development, website designing e-learning software etc. He is a partner in firm M/s. Plentos Ventures along with Shri Herambh Shelke from which he draws salary of Rs.2.5 lacs. With regard to the documents/books found from his possession, he had categorically averred that it related to M/s Maharaja Wines which is owned by his partner, Shri Shelke. In respect of the cash of Rs. 25 Lakhs found from his possession/locker he is noted to have stated that it represented commission earned for arrangement of admission. The question and answer in this regard is reproduced as under: CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society Page 192 of PB. Q. 20. After operating the locker which is in your name, there was cash amount of Rs. 25 Lakhs found ? Kindly explain the source of the same. Ans- Sir, that money is the total amount which I had received as commission till date for arranging the admission.

The statement as it can be noted is however conscipously silent as to for whose admission, in which college/course etc. After asking the aforesaid question, no other question was asked to elicit answers which could have cleared the air but unfortunately no other searching questions were asked. Therefore, the Ld. AR has pointed out that, he did not name the assessee Trust or the medical college. Also, referring to his background, it was submitted that he had no relation or link or nexus with the assessee Trust, so as to correlate the cash with the assessee Trust. To buttress that Shri Vijay Shinde’s statement had no relevance, the Ld. AR drew our attention to the statement of Shri Sanjay Patil placed at Page 125 to 142 to show that even the investigation authorities did not confront him with the statement of Shri Vijay Shinde recorded during search & post search proceeding. And in this regard, the Ld. AR further brought to our notice the specific finding of the Ld. CIT(A) that, Shri Shinde had admitted and offered the cash of Rs.25 lacs from his possession by way of income from consultancy provided to students for securing admission in CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society different courses. This according to Ld. CIT(A) all the more corraborated the contention of the assessee that the cash of Rs.25 lacs found from the possession of Shri Vijay Shinde did not have any nexus with the assessee Trust. The relevant analysis of the statement of Shri Vijay Shinde as undertaken by the Ld. CIT(A) is noted to be as follows :- “8.4.45. It is further found that Shri Vijay Shinde, whose statement has been referred in assessment order, is only a business partner of Shri Heramb Shelke and in his statement recorded u/s 132(4) of the Act, he has identified himself as business partner of Shri Heramb Shelke and he is also a visiting lecturer in DY Patil Engineering College at Old Pune-Mumbai Highway, which is not an institution run by the assessee Trust As to the documents found from his possession, he has categorically stated in his answer to Q. No. 12 that those are related to Maharaja Wines, which is a business concern of Shri Heramb Shelke and cheque books, account statement, cash deposit slips found therein was pertaining to the same. Further, it is not even the case of the Ld. AO that any of the documents found and seized from the premises of Shri Shinde was pertaining to or having any reference of any transactions relating to the assessee Trust. As such, there was no documents found from his possession as to receipt of any capitation fees by the assessee Trust. Rs. 25 lakhs in cash was found from his locker which was stated to be commission for arrangement of admission, but he has not identified any institutions wherein such admissions were made. The contention of the assessee is that it is not in any CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society manner related to Mr. Vijay Shinde and he has no role or function in any of the institutions run by the assessee Trust. The assessee has also contended that in his statement. Shri Shinde has not even taken name of the assessee Trust or the Medical College run by the assessee and his statement does not in any manner refer anything relating to the assessee Trust. I find that in the statement of Shri Vijay Shinde, there is no reference of the assessee or any institutions run by the assessee Trust. The documents found from his possession are without any dispute relating to Maharaja Wine Shop, which is the personal business of Shri Heramb Shelke. Furthermore, in the assessment order of Mr. Vijay Shinde in AY 2017-18, Rs. 25 lakhs seized from his possession has been accepted as his income from consultancy for providing guidance to students for securing admission in various courses and therefore, there is nothing to link this cash found with any of the admissions in the institutions run by the assessee Trust.”

Having ourselves perused the statement of Shri Shinde and in the absence of any material to indicate that Shri Vijay Shinde had anything to do with the admission in assessee’s Trust or College, we are of the view that the reliance placed by the AO on his statement to justify addition on account of capitation fees in the hands of the appellant was misplaced and erroneous. CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society 15. The last statement relied upon by the Revenue which forms the genesis of the impugned addition of Rs.2 crores was the statement of Shri Dilip Kashid recorded during the search u/s 132 of the Act on 27.07.2016. The Ld. CIT DR showed us that, Shri Kashid in his statement had averred that he was serving as a Head Clerk in the assessee’s Medical College (Kolhapur) for the last twelve (12) years drawing salary of Rs.54,000/- per month. It was brought to our notice that, the Investigating Officer again questioned him about his exact nature of work, and in answering these Question Nos. 14 to 15 (page 149 of PB), he admitted to have received (capitation fee) for admission under the management quota. According to Shri Kashid, some parents contacted him seeking admission for Medical College under the management quota to which he informed them that donation of Rs.25 Lakhs is necessary for admission in MBBS course in cash. And, only if they are ready to pay then he would introduce them to Shri Sanjay Patil. The money received in cash from the parents would be handed over to Shi Sanjay Patil, President of the assessee’s society. Thereafter, he stated that, he would also receive around Rs.1-2 lacs commission per admission and as per his estimate, he collected Rs.1.5 - 2 cr by way of donation in a year, which he would hand over to Shri Sanjay Patil. The Ld. DR also invited our attention to Q No. 33 wherein the Investigating Officer had also confronted Shri Kashid with a document named as Annexure -1, Page Nos. 1 & 2, to which he had explained that it contained noting of cash of Rs.1,20,000/- refunded to Shri Digvijay Singh Yadav, earlier received for admission of his CO. Nos. 60 to 62/Mum/2022 A.Y. 2013-14 to AY. 2015-16 Dr. DY. Patil Education Society daughter in the Medical College. The Ld. DR also brought to our notice that cash of Rs.8,66,975/- was seized from the possession of Shri Kashid who had admitted that it comprised of commission received for securing admission for students. Although later on Shri Kashid had denied this statement and disclosed the cash by way of his agricultural income, but according to Ld. DR, the fact that the Revenue had ultimately assessed the cash by way of his unaccounted commission income lends credence to their version that the assessee Trust was indeed receiving capitation fees for securing admission of students.

The Ld. AR, on the other hand, brought to our notice that Shri Kashid was only a clerk in the college and he did not have any say or authority in the admissions. According to him therefore, this statement should be given any weightage. Moreover, Shri Kashi was doing separate business also (as a partner of Megh Sparsh Infra & Services). The Ld. AR thereafter took us through the statements of the Dean,