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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: S/SHRI C.M. GARG & MANISH BORAD
O R D E R Per Bench This is an appeal filed by the assessee against the order of the CIT(A)-2, Bhopal, dated 3.10.2019 for the assessment year 2006-07.
Although the assessee has raised two vital grounds i.e. initiation of proceedings u/s.147 of the Act and consequently addition of Rs.3,50,000/- without any evidence in the name of the assessee, but he pressed for adjudication of addition of Rs.3,50,000/-.
Facts of the case are that a survey action u/s.133A of the Act was conducted in the premises of Sarvajanik Janakalyan Parmarthik Nyas, Bhopal on 9.8.2005 and some loose papers were impounded. On the basis
P a g e 1 | 8 Assessment Year : 2006-07 of those loose paper, the AO issued notice u/s.148 of the Act on 26.3.2013 for initiation of reassessment proceedings u/s of the Act. The AO also provided the reasons recorded u/s.147 of the Act. During the course of reassessment proceedings, the Assessing Officer noticed that the assessee had made cash payment of Rs.3,50,000/- to People’s College of Medical Science and Research Centre, Bhopal (PCMSRC) for securing admission of his son Shri Appoorva Loya in MBBS course . In reply to show cause notice, the assessee replied that he had not paid any amount in cash for the admission of his son in MBBS course. The AO did not accept the contention of the assessee because the amounts received by the medical college are in coded form and that too in pencil. In the list the name of Shri Apporva Loya appears in sl. No.17, as per which, he has taken admission by giving donation of Rs.3,50,000/- in cash and also by DD No.53550. Since this amount was not disclosed in the return of income, the AO treated the same as payment from undisclosed source and added the same to the income of the assessee.
On appeal also, the assessee denied the cash payment for securing admission in MBBS source of his son. It was submitted that the assessment has been framed on the basis of documents found and impougned from the beiefcase of Shri Ram Vilas Vijayavargiya, which were impounded during the course of TDS survey on 9.8.2005. Since this is not a valid evidence, therefore, cannot be a basis for reopening of assessment and consequently
P a g e 2 | 8 Assessment Year : 2006-07 adding the same to the income of the assessee. Before the CIT(A), the assessee relied on the decision of ITAT Indore in the case of Pradeep Kumar Bansal in and Sujay Sharma in ITA No.819/Ind/2014 to support his case. It was submitted that when no evidence to prove that the assessee has paid the alleged donation for the admission in MBBS course, the addition has been made on pure presumption and surmises, which should be deleted. The submission of the assessee was not found acceptable on the ground that there are corroborative evidence gathered by way of enquiry, which proves that the assessee has paid donation of Rs.,3,50,000/-for the admission of his son in MBBS course. Even if some donors, whose names are appearing in the list impugned during the course of survey, have admitted of giving donations to admit their child. Hence, the ld CIT(A) confirmed the addition made by the AO.
Before us, ld A.R. of the assessee relied on the decision of Indore Bench in the case of Shri Sujay Sharma (supra) u/s.263 of the Act, wherein, on similar issue, the Tribunal has quashed the order of ld CIT. Ld A.R. also relied on the decision of this Bench in the case of Pradeep Kumar Bansal (supra), wherein also, the Tribunal has deleted the addition following the decision of ITAT Chennai in the case of Saveetha Institute of Medical & Technical Sciences vs ACIT in & 204/Mad/2011. Hence, he submitted that the issue is fully covered in favour of the assessee.
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Replying to above, ld Sr DR supported the orders of lower authorities. He submitted that the addition has been made on the basis of materials impounded during the course of survey. Hence, no interference in the order of ld CIT(A) is called for.
We have heard the rival submissions and perused the records of the case, inter alia, the decisions relied by ld A.R. of the assessee. It is an admitted fact that during the course of survey, some loose papers were impounded and on the basis of same, it was gathered that some students have taken admission in MBBS course by giving donation. Out of those students, the name of the assessee’s son is appearing having paying Rs.3,50,000/-. But the issue for consideration before us is, as to whether, the amount written in pencil and impounded from the third person, can be taken as basis for adding the amount to the income of the assessee. It is also noted in the orders of lower authorities that some students have admitted of giving donation for taking admission but in the case of the assessee, he has denied to give any donation for the admission of his son.
Merely because some students/parents have admitted, that cannot be used against the assessee without any plausible materials. I find that this Bench in the case of Pradeep Kumar Bansal (supra) has deleted similar addition following the decision of the ITAT Chennai in the case of Saveetha Institute of Medical & Technical Science (supra), wherein, it has held as under:
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“We have examined the entire record before us. We have also treaded through the statements in question. Almost identical lines of arguments were taken by both sides as were taken before the learned CIT(A). We have cogitated the entire facts, evidence and oral submissions in the light of provisions of the Act and related precedents. We have gone through the entire statement of Dr. B. Muthukumaran, a copy of which is enclosed in the paper book. From this statement, it is evidenced that the portion on which the AO is relying has been recorded after the verification that too on the next day. The search party had added more questions viz. question Nos. 18 and 19. There is a whisper of collection of capitation fees. But nowhere else there is such an admission made by him. The document No. 56 on which heavy reliance has been placed by the AO is nothing but a piece of paper containing details of number of seats allotted to Management Quota and Government Quota. This document cannot be said to be even an incriminating document because this is a declared truth which is also recorded in the books of the trust. The statement recorded after the verification cannot be accepted without doubt. So, we can safely conclude that document No. 56 cannot be treated as incriminating document by any stretch of imagination. Nothing incriminating is scribe on it. Nothing has been mentioned on this piece of paper regarding collection of any capitation fees or even the amount of fees which is legally chargeable. Hence, we cannot give meaning in one way or the other, more specifically, suitable to the Revenue’s interest on the basis of alleged statement, which heavily suffers from contradictions and also stand refuted by the management when these statements were put to them during the course of assessment proceedings. It was categorically denied to have collected any capitation fees. After verification when something is recorded which is contrary to the main body of statement, it cannot be accepted as a voluntary statement. There being no incriminating evidence regarding receipt of capitation fees, particularly when no document was put to Dr. B. Muthukumaran regarding charging of capitation fees, such a statement cannot be made a basis for making such a huge addition. His statement was rather denied by the Managing Trustee/President. Shri T.A. Varadgarajan, Finance Manager also denied the statement of Dr. B. Muthukumaran. In any other case, even one goes by this statement, this would not make any meaningful sense. Dr. B. Muthukumaran has stated that the money had been handed over to one Shri Saravanan, accounts officer, but Shri Saravanan was never enquired by the Department. The statement of Dr. N.M. Veeraiyan, who is the President/Mangement Trustee of the trust, never accepted having receipt of capitation fees or donation and he had rejected and denied the statement of Dr. B. Muthukumaran. Statement of Dr. N.M. Veeraiyan was recorded under s. 131 on 9th Nov., 2007, in which he has stated that whatever was received from the students was reflected in the books of account. This statement confirms the contention of the assessee that some well wishers were giving donations which were duly received and reflected in the books of account. In fact, the statement of Dr. N.M. Veeraiyan was recorded under s. 131 on 9th Nov., 2007 which has also been made a basis for this addition. He was not P a g e 5 | 8 Assessment Year : 2006-07 examined under s. 132(4) of the Act. A statement made under s. 131 cannot be equated with a statement recorded under s. 132(4) of the Act. A statement recorded under s. 132(4) is a valid and relevant piece of evidence but a statement recorded under s. 131 is not so relevant. Nevertheless, even a statement recorded under s. 132(4) can not be made a sole basis for any such addition unless corroborated by seized material. If any admission is made in a statement recorded under s. 132(4), this can be used with reference to any piece of evidence found during the course of search. In this case, as we have stated above, no such piece of evidence or to say any incriminating evidence was either found or seized. What was found was a noting giving break-up of number of students who were admitted under different quotas in various courses. In our well considered view, this addition could not have been made at all in the hands of the assessee-trust on the basis of such evidence. Recording of some questions after verification could be viewed as a involuntary statement, extracted from the deponent. In any case, a possibility of such inference is always there. With regard to such statement, the CBDT has issued instructions vide Circular No. 286/2/2003-IT, wherein it has been directed that search party shall not obtain confessions. So, the admission made under s. 132(4) by the concerned officer cannot be treated even as a valid piece of evidence. There being no incriminating document having been found or seized during search and the statement also being abstruse, the addition in question has no legs to stand on. Had there been a valid statement, even then, solely on the basis thereof, addition could not have been made. This is a well-settled principle of law by now and there are umpteen decisions in support of this view.
We are not convinced with the learned Departmental Representative that the letter dt. 26th Aug., 2003 written by the Director of Medical Education/Chairman, Grievance Committee alleging that the assessee was charging excess fee against the prescribed fee structure would prove the receipt of capitation fees by the assessee particularly when this is a search case and nothing was found during search to support this allegation. The decisions of Hon’ble Supreme Court in the case of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) and Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC), which speak about human probabilities and realities which have to be taken into consideration while dealing with income-tax matters. In fact, this is not such a case. The ratio decidendi of these decisions would not apply in the absence of any direct piece of evidence available on record. The reality of life which may be treated as such in a particular case, may not be reality of life in another case. There is nothing on record to corelate between any such reality of life to which the AO is pointing to. Who prevented the AO to record the statements of the students; or their wards? On simple conjectures and surmises, no addition can be made under the IT Act, 1961. We, therefore, confirm the order of the learned CIT (A) in deleting the addition of Rs. 5,37,00,000.”
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On similar issue also this Bench has quashed order u/s.263 of the Act in the case of Sujay Sharma (supra). Following the precedent, we delete the addition of Rs.3,50,000/- made by the AO and confirmed by the ld CIT(A).
In the result, appeal of the assessee is allowed.
Order pronounced u/r 34(4) of I.T.Rules, 1963 on 29/9/2021.