M/S. SRI LAKSHMI AMMAL EDUCATIONAL TRUST,CHENNAI vs. DCIT, CENTRAL CIRCLE-2(3), CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM: This appeal by the assessee is arising out of the order of the Learned Commissioner of Income Tax (Appeal) Chennai-19, [in short ‘Ld.CIT(A)’], dated 17.12.2025 for the Assessment Year [in short ‘AY’] 2023-24.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 2 :: 2. Before we advert to the grounds taken in the appeal, it would first be relevant to cull out the basic facts of the case. The assessee is a registered charitable trust which was established in the year 1984 with the objective of inter alia administering educational institutions in the fields of engineering, technology, management studies, computer applications, medicine, dentistry and para medical studies, arts & science and school, all of which are under Bharat Institute of Higher Education & Research, a deemed university operating since past two decades. It is noted that, the following institutions are operated and managed by the assessee trust, which are as follows:-

(i) Bharath Polytechnic, (ii) SreeBalaji College of Nursing, (iii) SreeBalaji College of Physiotherapy, (iv) SreeBalaji Dental College and Hospital, (v) SreeBalaji Medical College and Hospital, (vi) Sri Lakshmi Narayana Institute of Medical Sciences, and (vii) Bharath Institute of Science and Technology.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 3 :: and statements were recorded from key persons of the assessee trust. Consequent to the search, the case of the assessee was selected for compulsory scrutiny and notice u/s 143(2) of the Act was issued and served on 23.06.2024. The assessment was completed vide the impugned order dated 30.03.2025 and the summary of the additions/disallowances in Rupees made by the AO which are in dispute in the present appeal are as follows :- Sl. No Issue Amount Addition to gross receipts on a/c of 1 unaccounted fee collection in Shree Balaji 11,80,82,994 Medical College & Hospital Addition to gross receipts on a/c of 2 unaccounted fee collection in Sri Lakshmi 20,37,06,875 Narayana Institute of Medical Sciences Addition to gross receipts on a/c of 3 unaccounted room rent and mess fee collection 5,48,97,101 in Bharath Institute of Science & Technology Addition to gross receipts on a/c of 4 unaccounted hostel fee collection in Bharath 1,65,75,000 Institute of Science & Technology Disallowance by way of bogus expenses incurred in violation of Section 40A(3) of the 5 1,47,69,000 Act by Sri Lakshmi Narayana Institute of Medical Sciences Disallowance by way of expenses not incurred 6 towards the objects of the trust in Shree Balaji 86,45,860 Dental College & Hospital Disallowance of consultancy fees incurred 7 without evidence by Bharath Institute of 7,74,03,339 Science & Technology Disallowance of expenses u/s 40(a)(ia) of the 8 1,35,000 Act Disallowance of payments made to vendors 9 without evidence by Bharath Institute of 10,000 Science & Technology

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 4 :: 4. Aggrieved by the addition(s) made by the AO in the impugned assessment order, the assessee carried the matter in appeal before the Ld. CIT(A). It is seen that the Ld. CIT(A) concurred with the findings and reasoning given by the AO and confirmed the additions impugned by the assessee trust. Apart from the foregoing, the Ld. CIT(A) observed that, while examining the assessment records, seized materials, sworn statements and the explanations furnished by the assessee in the course of assessment, he was of the view that, certain substantial and material aspects relating to transfer of funds by the assessee to group entities had a direct bearing on the determination of the correct taxable income. According to the Ld. CIT(A), these issues emanated from the search proceedings conducted u/s 132 of the Act, which were also examined during the course of assessment proceedings but, no addition(s) was made by the AO. The Ld. CIT(A) observed that, the appellate proceedings were an extension of the assessment proceedings as his powers were co- terminus with that of the AO, and thus, he was competent to reappraise the matter and draw appropriate conclusions and rectify the omissions/errors committed by the AO at the assessment stage. With these observations, the Ld. CIT(A) observed that the assessee had diverted funds of the trust to the tune of Rs. 172,81,32,598/- & Rs. 94,47,70,000/- to its group entities namely, M/s Accord Distilleries & Brewers Pvt. Ltd. and M/s Chrome Leather Co. respectively, who were covered u/s 13 of the Act and therefore the funds paid to these entities were added/disallowed while computing the total income by invoking Section 13(1)(c) read with Section 13(1)(d) of the Act. Being aggrieved

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 5 :: by the action of the Ld. CIT(A), the assessee has preferred the present appeal before us on the following grounds:-

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 6 :: Without prejudice to the above, the following grounds are raised on the merits of the case: Additions made in the Assessment: 7. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the addition of Rs. 11,80,82,994/- by upholding the same as purported unaccounted fee collection in Balaji Medical College and Hospital. (Tax effect-Rs. 5,04,73,395/-) 8. For that the Leamed Commissioner of Income Tax (Appeals) had erred in confirming the addition of Rs. 20,37,06,875/- by upholding the same as purported unaccounted fee collection in Sri Lakshmi Narayana Institute of Medical Sciences. (Tax effect Rs. 8,70,72,467/-) 9. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the addition of Rs.5,48,97,101/- by upholding the same as purported unaccounted room rent and mess fee collection in Bharath Institute of Science and Technology (Tax effect - Rs. 2,34,65,217/-) 10. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the addition of Rs.1,65,75,000/- by upholding the same as purported hostel fee collection in Bharath Institute of Science and Technology (Tax effect - Rs. 70,84,818/-) 11. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the disallowance of Rs 1,47,69,000/- by upholding the same as purported bogus expenses in Sri Lakshmi Narayana Institute of Medical Sciences as well as being in violation of section 40A(3) of the Act. (Tax effect-Rs. 63,12,861/-) 12. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the disallowance of Rs.86.45.860/- by upholding the same as purported expenses not incurred towards objects of the Trust in Shree Balaji Dental College and Hospital. (Tax effect - Rs. 36,95,586/-) 13. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the disallowance of Rs.7,74,03,339/- by upholding the same as consultancy fees without evidence incurred by Bharath Institute of Science and Technology (Tax effect 3,30,85,283/-) Rs. 14. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the disallowance of Rs 1,35,000/- made u/s 40a(ia) of the Act being 30% disallowance of the expenditure incurred for non-deduction of TDS. (Tax effect-Rs. 57,704/-) 15. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the disallowance of Rs. 10,000/-by upholding the same as payment to vendors without evidence made by Bharath Institute of Science and Technology. (Tax effect-Rs. 4,274/-) Enhancement made by CIT(A):

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 7 :: 16. For that the Learned Commissioner of Income Tax (Appeals) had erred in enhancing the taxable income of the Appellant Trust on issues exceeding his jurisdiction u/s 251(1)(a) of the Act, thereby vitiating such enhancement made. 17. For that the Learned Commissioner of Income Tax (Appeals) had erred in making such enhancement without appreciating the fact that the impugned enhancement mentioned under Ground no. 18 below had been subjected to proceedings u/s 144A of the Act and had been dropped after due application of mind on consideration of the submissions made by the appellant before the Joint Commissioner of Income Tax. 18. For that the Learned Commissioner of Income Tax (Appeals) had erred in making an enhancement of Rs. 1,72,81,32,598/- towards land advance paid for Gummidipoondy property to M/s Accord Distilleries and Brewers Pvt. Ltd, holding it as 'diversion of funds' in violation of the provisions of Section 13(1)(c) & 13(1)(d) of the Act and consequently denying the same as application of income for charitable purposes within the meaning of section 11 of the Act. (Tax effect-Rs. 73,86,72,998/-) 19. For that the Learned Commissioner of Income Tax (Appeals) had erred in making an enhancement of Rs. 94,47,70,000/- towards funds transferred to Mis the Chrome Leather Company Limited, holding it as 'diversion of funds in violation of the provisions of Section 13(1)(c) & 13(1)(d) of the Act and consequently denying the same as application of income for charitable purposes within the meaning of section 11 of the Act. (Tax effect Rs. 40,38,32,489/-) 20. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the interest levied u/s 234B of the Act in consequence to the above-mentioned additions. For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to quash the assessment as void-ab-initio/delete the additions/enhancements made and/or provide such other relief as this Hon'ble Tribunal may deem fit.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 8 :: Income-tax, International Taxation, Central Circle 1(1)(1), Delhi who did not possess jurisdiction upon the assessee and that the notice ought to have been issued by the jurisdictional AO i.e. Deputy Commissioner of Income-tax, Central Circle 2(3), Chennai. The assessee has thus claimed that the impugned assessment order stands rendered bad in law due to invalid assumption of jurisdiction u/s 143(2) of the Act. It is seen that the Ld. CIT(A) had dismissed this legal plea of the assessee. Now, the assessee is in appeal before us.

6.1 At the time of hearing, the Ld. AR appearing for the assessee fairly stated that, the impugned ground has been decided against the assessee by the Hon’ble Karnataka High Court in the case of Adarsh Developers vs. DCIT (158 taxmann.com 81) and the Hon’ble Delhi High Court in the case of Ambience Farms (P) Ltd vs. ACIT (174 taxmann.com 496). Having perused these judgments, we see no merit in this legal plea raised by the assessee and thus, confirm the order of the CIT(A) and dismiss this ground of appeal.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 9 :: the addition(s) which are impugned in this appeal. Upon comprehensive reading of the assessment order and the appellate order, it is seen that, the search which was conducted upon the assessee u/s 132 of the Act majorly centered around the alleged unaccounted fees collection, unaccounted room rent collection, unaccounted mess fee collection and unaccounted hostel fee collection by the educational institutions operated and managed by the assessee trust. It is seen that several excel sheets, electronic data and typed computer sheets along with software applications and whatsapp conversations were retrieved from the computers, laptops and digital devices of several persons which, according to the Revenue, contained notings/details of the actual fees charged, fees accounted in the books and the unaccounted fee collections etc. The Revenue is noted to have deciphered the notings found in the seized electronic records on the basis of the depositions recorded under oath in the course of search. The reading of the orders of the lower authorities shows that, the Revenue has primarily stressed on the consistency and specificity of the depositions recorded from the key persons of the assessee trust in relation to the notings found in the seized electronic material to lend credence to the inferences drawn from them, in the assessment order.

8.1 For instance, the Investigating authorities had inter alia impounded computer / laptops which contained several excel sheets comprising of the details of students along with their corresponding fees details etc. It was observed that, some entries were accompanied by letters ‘P’ and ‘M’, which, on the basis of the depositions of key persons, was inferred to be

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 10 :: notings pertaining to cash collections. Likewise, the Investigating authorities had found that the assessee trust was maintaining separate software applications viz., i-sms 2.0 (student management software) at Sri Lakshmi Narayana Institute of Medical Sciences and ‘CAMU’ software application at the hostel premises. The seized electronic data showed that, there were entries tagged as ‘by bank’ or ‘waived’ etc., in i-sms 2.0 software and certain entries tagged as ‘others’ in CAMU application, and all these entries were inferred to represent unaccounted cash collections of the assessee trust. This inference was also premised on the depositions of key persons of the appellant.

8.2 Now, according to the assessee, the electronic records relied upon by the lower authorities suffered from evidentiary deficiencies due to non- compliance with provisions of Section 65A and 65B of the Indian Evidence Act, 1872 and therefore the assessee has prayed the addition(s) made by the AO and sustained by Ld. CIT(A) by relying upon such electronic records deserves to be deleted. It is seen that, this particular issue was raised by the assessee before the Ld. CIT(A) as well, who rejected the same by observing as under:-

“6.3.3 The undersigned has carefully examined the issue under consideration. The core contention of the appellant is that the additions made by the AO are unsustainable on the grounds that they are based on uncorroborated electronic records, unsupported sworn statements, and assumptions, and that the seized electronic data is inadmissible due to alleged non-compliance with section 65B of the Indian Evidence Act and with the CBDT Digital Evidence Investigation Manual. The appellant has also invoked various judicial precedents to claim that the electronic data and statements recorded during search cannot be relied upon in the absence of corroborative evidence.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 11 :: 6.3.4 At the outset, it is pertinent to note that income-tax proceedings are civil in nature and the strict rules of admissibility under the Evidence Act do not apply propriovigore. It is settled law that while the rigour of the Evidence Act is not applicable to income-tax proceedings, the tax authorities may nevertheless rely on the broad principles of evidence, including circumstantial evidence and preponderance of probabilities, to determine the real income. In this regard, the judgment of the Hon’ble Supreme Court in the case of Chuharmal v. CIT (1988) 172 ITR 250 : TaxPub(DT) 1170 (SC)]has clearly laid down that section 110 of the Evidence Act embodies a salutary principle of common law and may be invoked in tax proceedings where the facts justify such inference. Therefore, the appellant’s objection that the electronic records cannot be relied upon solely for want of a certificate u/s 65B of the Evidence Act is misconceived in the context of an incometax assessment. 6.3.5 The assessment in the present case is based on seized electronic devices recovered during a valid search u/s 132 of the Act, including laptops, computers, mobile devices and data extracted from applications. The data was retrieved from original digital devices that were found in physical possession and control of the functionaries of the appellant trust. The AO has recorded in detail the process of extraction, the statements of responsible persons explaining the nature of data, and the reconciliation of the seized material with actual cash collections. The appellant has not disputed the fact of seizure nor has demonstrated that the electronic data does not pertain to it or has been tampered with. When the original devices themselves constitute primary evidence, the requirement of section 65B certification applicable to secondary evidence stands wholly inapplicable, as clarified by the Hon’ble Supreme Court itself in the case of Anvar P.V. v. P.K. Baheer &Ors reported in (2014) 10 SCC 473. and Arjun Pandit rao Khotkar v. Kailash Kushan rao Gorantyal & Ors., Civil Appeal Nos. 20825 – 20826 of 2017, 2407 of 2018 and 3696 of 2018, decided on July 14, 2020, both of which recognize that certification is not required where the original device is produced. The reliance placed by the appellant is therefore misplaced on facts. 6.3.6 Further, the seized electronic data is not the sole basis for the additions. The additions are supported by multiple layers of corroboration, including contemporaneous cash-flow records, internal administrative communications, structured fee-collection registers, statements of responsible officials recorded during search, as well as large-scale discrepancies identified between declared receipts and actual receipts reflected in the seized documents. The appellant has not produced any evidence to rebut these findings nor offered any alternative explanation for the systematic and contemporaneous record

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 12 :: of unaccounted receipts reflected in the seized data. The submissions primarily rest on technical objections rather than explaining the factual inconsistencies brought on record by the AO. ….. 6.3.8 With respect to the claim on non-compliance with the CBDT Digital Evidence Investigation Manual, it is observed that the Manual is guidance in nature and does not confer enforceable rights upon an appellant. Minor procedural deviations do not ipso facto invalidate a search or the evidences collected, particularly when the appellanttrust has not demonstrated any prejudice arising therefrom. The evidentiary value of seized material cannot be diminished merely on account of technical lapses, if any, especially when the material is otherwise cogent, credible, and supported by further inquiries during assessment. 6.3.9 The undersigned is of the view that the AO has marshaled extensive evidence and has analyzed the seized digital records in conjunction with the sworn statements and other documents, and has brought on record a clear, logical, and corroborative chain demonstrating that the appellant trust had indeed received substantial unaccounted receipts that were not recorded in the books of account. The appellant has failed to rebut these findings with any cogent explanation or documentary evidence. The objections raised are largely mechanical and do not dislodge the substantive and corroborated evidence relied upon by the AO. Therefore, the undersigned holds that the grounds raised by the appellant challenging the admissibility and reliability of the seized electronic records and the statements recorded during search do not merit acceptance and therefore, the grounds raised upon this issue is treated as dismissed.” 8.3 The Ld. AR pointed out that, the Ld. CIT(A) did not dispute the contemporaneous fact that the electronic records admitted by the AO was in violation of the mandatory requirement set out in Section 65A and 65B of the Indian Evidence Act, 1872 and the fact that, the Revenue did not comply with the CBDT Digital Evidence Investigation Manual. He thus contended that, the authorship, origin, integrity and the reliability of the electronic records remained un-established and thus the addition(s) made

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 13 :: on this account deserves to be set aside. The Ld. AR relied upon the following decisions, in support of his claim;

Saravana Selvarathinam Retails Pvt Ltd vs. CIT(A) [2024] 160 - taxmann.com 287 (Mad HC)

Anvar P.V. v. P.K. Baheer & Ors. (SC) -

Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal (SC) -

AIOVA Sellers Association vs Amazon seller services P Ltd. [2022] - 136 taxmann.com 72 (CCI)

Ravindra Singh @ Kaku vs State of Punjab (SC) -

Chuharmal vs CIT [1988] 38 Taxman 190 (SC) -

A. Johnkumar v. DCIT (ITA No.3028/CHNY/2019) (ITAT Chennai) -

8.4 The Ld. DR, on the other hand, supported the findings of the Ld. CIT(A). He submitted that, the certificates prescribed in Section 65A & 65B of the Indian Evidence Act, 1872 are required in criminal proceedings and that the income-tax assessment being a civil proceeding, certificate u/s 65B(4) of the Indian Evidence Act is not relevant in the context of the Income-tax Act, 1961. He further reiterated the observations of the ld. CIT(A) that the CBDT Digital Evidence Investigation Manual has only guidance value and its non-compliance would not render the electronic records to be inadmissible evidence.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 14 :: 8.5 We have heard the rival contentions and considered the prevailing jurisprudence on this subject. It is noted that, the entire edifice of the addition(s) made by way of unaccounted tuition fees of BMCH & SLNIMS, room rent & mess fees and hostel fees rests primarily upon the electronic data extracted from the seized devices and the WhatsApp conversations exchanged between the employees of the assessee. According to the assessee, this material, being electronic record within the meaning of Section 2(1)(t) of the Information Technology Act, 2000, could not have been received in evidence and acted upon by the Assessing Officer without compliance with the mandate of Section 65B of the Indian Evidence Act, 1872 (corresponding to Section 63 of the Bharatiya Sakshya Adhiniyam, 2023), and in the absence of such compliance, the addition(s) founded solely upon such material are unsustainable in law.

8.6 Having considered the submissions of the assessee in light of the facts of the present case, on first blush, the submissions of the assessee are not without substance. The income-tax proceedings albeit civil proceedings, leads to fastening of tax liability upon an assessee, and also subsequent civil & criminal consequences. Hence, when any quasi-judicial authority embarks upon the exercise of fastening a tax liability on the basis of material retrieved from electronic devices, he must be conscious that such material is peculiarly susceptible to alteration, transposition and manipulation in a manner that paper records are not. For instance, excel sheets can be edited without trace; chat records can be selectively extracted; images can be doctored. Accordingly, we find force in the Ld. AR’s claim that, the requirement of a certificate under Section 65B, the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 15 :: recording of hash values, and the maintenance of an unbroken chain of custody are not empty rituals, as these safeguards reposes confidence in the integrity of the electronic record placed on record. This assumes significance where the entire assessment rests exclusively on electronic material, and in such a situation, the burden on the Revenue is to demonstrate the wholesomeness of that material. It is observed that, to address this very issue concerning authenticity and reliability of electronic evidence, the CBDT had issued Digital Evidence Investigation Manual, 2014 for all the field officers. The CBDT is found to have consciously laid down a self-contained code governing the collection, imaging, hashing, chain of custody, extraction and reproduction of digital evidence, recognizing therein that Sections 65A and 65B of the Evidence Act govern the integrity of electronic records. In the present case before us, the Revenue was unable to produce any proper extraction report of the data relied upon, in as much as no valid certificate under Section 65B identifying the electronic record and describing the manner of its production, and the chain of custody documentation was furnished. On these given facts, we agree with the Ld. AR to the extent that, the electronic evidence relied upon by the AO was not properly authenticated and thus no addition(s) can be retained by solely relying upon such electronic material.

8.7 However, the first question posed for our adjudication is whether compliance with Section 65B of the Evidence Act is a mandatory pre- condition for receiving electronic records in assessment proceedings. We find that, this issue is no longer res integra. The Hon’ble jurisdictional

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 16 :: Madras High Court in ACIT Vs. Vetrivel Minerals (487 ITR 488), has, in categorical terms, held that Section 65B of the Indian Evidence Act, 1872, as well as Section 63 of the Bharatiya Sakshya Adhiniyam, 2023, are not mandatory to the proceedings before the Assessing Officer. Their Lordships held that, Section 1 of the Evidence Act confines its application to judicial proceedings in or before a court; that income-tax authorities, being quasi-judicial in character, are not bound by the strict and technical rules of evidence; and that the non-furnishing of a certificate under Section 65B cannot be used as a shield to resist the reception of the electronic record, though it remains open to the assessee to challenge the genuineness of the material relied upon by the Department. The relevant observations are noted to be as under:-

“….We may now examine if the statutory requirement set out in the Evidence Act (now BSA) must be fulfilled before the assessing authority would receive the electronic record as evidence in the assessment proceedings. Our answer is in the negative. We hold that Section 65B of the Evidence Act, 1872 as well as Section 63 of Bharatiya Sakshya Adhiniyam, 2023 are inapplicable to the assessment proceedings before the assessing officer/appellate authority/tribunal. 14. In the decision reported in AIR 1967 SC 768 (CIT v. East Coast Commercial Co. Ltd. [1967] 63 ITR 449 (SC)/AIR 1967 SC 768 ), the Hon'ble Supreme Court was concerned with the admissibility of the report of the Income Tax Investigation Commission since certain provisions of the Taxation of Income (Investigation Commission) Act relating to the inquiries to be held were declared to be ultra vires. While holding that the report of the commission had evidentiary value and could be taken into account, the Hon'ble Supreme Court held that the Income Tax authorities are not strictly bound by the rules of evidence. It was however observed that the report must be brought to the notice of the assessee and the assessee must be given an opportunity to make its representation against the report and to tender evidence against the truth of the recitals contained therein. In Amiya Bala Paul v. CIT 130 Taxman 511/262 ITR 407 (SC), it was held that the assessing officer who is the fact finding authority is not bound by strict rules of evidence.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 17 :: In Commr. of Customs v. South India Television (P) Ltd. 2007 taxmann.com 910/214 ELT 3 (SC)/ (2007) 6 SCC 373 , it was held that strict rules of evidence do not apply to adjudication proceedings and they apply strictly to courts' proceedings. Of course, the assessing officer has to examine the probative value of the documents on which reliance is placed by the department. This decision rendered in the context of customs law has been followed in a catena of subsequent decisions. A Five Judges Bench of the Hon'ble Supreme Court in Union of India v. Madras Bar Association [2010] 5 taxmann.com 28/100 SCL 142 (SC) noted the difference between courts and tribunals. While courts are governed by detailed statutory procedural rules, in particular, the code of Civil Procedure and the Evidence Act requiring an elaborate procedure in decision making, tribunals generally regulate their own procedure applying the provisions of CPC only where it is required and without being restricted by the strict rules of the Evidence Act. When tribunals themselves are not bound by the technical provisions of the law of evidence, it is too obvious that quasi judicial authorities cannot also be bound. Section 1 of the Indian Evidence Act, 1872 makes it clear that its provisions apply to all judicial proceedings in or before any court. Section 1 of BSA is also on the same lines. They do not anywhere say that they would apply to quasi judicial proceedings. When the statutory law does not mandate the applicability of Section 65B (corresponding to Section 63 of BSA) and when the Hon'ble Supreme Court has been repeatedly holding that the income tax authorities are not bound by the rules of evidence, the learned single Judge could not have held that Section 65B of the Evidence Act is applicable. This conclusion is patently erroneous. That is why, when the impugned decision was cited in WP No.11630 of 2023 etc batch, His Lordship Mr.Justice C.Saravanan declined to follow the same (vide order dated 18.01.2024). We endorse and uphold the view taken in LKS Gold House (P.) Ltd. v. Dy. CIT [2024] 161 taxmann.com 604 (Madras) / WP No.11630 of 2023. 15. We however clarify that it is open to the assessee to challenge the genuineness of the material relied on by the department. But the non- furnishing of the certificate under Section 65B cannot be used as a shield to resist the reception of the electronic record. This is for the simple reason that the assessment proceedings are not judicial proceedings and the technical rules of the Evidence Act are inapplicable to them. There is yet another reason. The adverse materials have been seized from the electronic systems and instruments maintained by the assessees/their employees. It would be too much to expect them to issue certificates in favour of the department which would use the material against them. 16. We came across the Digital Evidence Investigation Manual 2014 issued by the Central Board of Direct Taxes in which it has been

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 18 :: mentioned that since Section 65A and 65B of the Indian Evidence Act govern the integrity of the electronic record, while handling any digital evidence, the procedure has to be in consonance with the said provisions. We are however of the view that the contents of a manual cannot have any statutory value or force and in any event, they cannot alter the legal position laid down by the Hon'ble Supreme Court. When there is no statutory provision which makes the rules of Evidence Act applicable to the assessment proceedings under the Income Tax Act, they cannot become applicable by virtue of the contents found in the manual issued by the department.” 8.8 The Ld. AR has relied upon the subsequent decision rendered by the Single Judge Bench of the Hon’ble Madras High Court in the case of Saravana Selvarathnam Retails (P.) Ltd. Vs ACIT (supra) which we find, is not of much assistance to the assessee. In this case, though the Hon’ble High Court held that, it is mandatory to follow Digital Evidence Investigation Manual issued by CBDT while conducting search and seizure, but at the same time, their Lordship observed that, where the procedures prescribed in the Manual has not been followed, then the data collected by the Revenue can be relied upon, only if the said data are supported by the corroborative evidences. The Revenue was thus directed to allow the assessee to cross-examine the witnesses, whose oral evidence was being relied upon to corroborate the electronic data collected by the Revenue.

8.9 Considering the above judgment, another Single Judge bench of the Hon’ble Madras High Court in the case of Chandrasekaran Henbagamoorthy Vs ACIT (supra), held that, the non-adherence to the Digital Evidence Manual or Section 65B of the Indian Evidence Act, 1872 will not ipso facto render the addition(s) to be bad in law. The Hon’ble Court held that, when the assessee asserts that the Revenue did

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 19 :: not adhere to the Digital Evidence Investigation Manual or to Section 65B of the Indian Evidence Act, then the onus is on the assessee to point out specific instances of the Assessing Officer having breached the manual or Section 65B. The Hon’ble High Court thus disposed off the writ petition, permitting the assessee to carry the matters in statutory appeal.

8.10 Keeping in view the legal position emerging from the above judgments (supra), we hold that the electronic data retrieved from the seized devices, cannot at the outset, be rendered inadmissible in the assessment proceedings merely for non-compliance with the CBDT Digital Evidence Manual or want of a certificate under Section 65B of the Evidence Act, 1872. Having held so, the challenge of the assessee to the genuineness, authenticity and probative value of the said material stands on a different footing and shall be examined independently on merits, when dealing with the specific grounds raised in this appeal.

8.11 Before parting with this issue, we consider it necessary to make certain observations. While we have held that, the compliance with Section 65B is not a mandatory pre-condition to the reception of electronic records in assessment proceedings, but the distinction between admissibility and probative value must not be lost sight of, by the Revenue. The CBDT is found to have, with considerable foresight, prescribed in its Digital Evidence Investigation Manual, 2014 a detailed protocol for the seizure, forensic imaging, hashing, chain of custody, extraction and reporting of digital evidence. These guidelines, even if administrative in character, represent the best forensic practices, and

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 20 :: their adherence lends assurance that the electronic material ultimately relied upon in the assessment order is the same material, unaltered and untampered, that was found at the time of search. We are living in an era in which artificial intelligence, deep-fakes and synthetic media have made the fabrication and manipulation of digital content viz., documents, images, chats and even voice recordings, alarmingly effortless and increasingly undetectable to the naked eye. In such times, the proof of genuineness and non-tampering of electronic evidence assumes an importance far greater than ever before. Therefore, where an assessment is being founded upon digital material whose origin is demonstrable through recorded hash values, contemporaneous extraction reports and an unbroken chain of custody, it will not only withstand appellate and judicial scrutiny, but will inspire faith of the assessee and the public at large.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 21 :: 9.1 It is seen that, the assessee has vehemently contested the veracity of these depositions and argued that, these depositions were riddled with factual inconsistencies and were rebuttable. The assessee has claimed that, the statements were recorded in a stereotypical manner under coercion and duress by putting leading questions to the persons concerned and their answers were simple acknowledgements to the questions put forth by the Investigating authorities. The Ld. AR showed that, even the seized data/material did not contain any such noting or averment, which would suggest any unaccounted cash dealings, and that, even where the notings were tagged as ‘Bank’ or ‘Others’, the Revenue had assumed it to be cash dealings, on the basis of such unreliable depositions taken from professors, staff etc., who were not even involved with the financial affairs or accounting tasks of the assessee trust. The assessee is found to have attempted to demonstrate before the lower authorities that, there were no unaccounted fee collections and that, the notings found in the seized electronic material was actually recorded in the books of accounts maintained in the tally software which was seized at the time of search and therefore the inferences drawn by the lower authorities on the basis of such unreliable depositions was unjustified. The Ld. AR thus claimed that, these statement(s) had been relied upon baldly by the lower authorities without bringing on record, any corroborative evidence to establish the correctness of the allegations being levelled by such persons.

9.2 Having heard both the parties, we are of the view, that this ground is not required to be dealt with separately, as the issue raised herein is

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 22 :: inter alia embedded and incorporated in the grounds assailing the individual additions made by the AO/Ld. CIT(A) as well. Though the contentions raised by both the parties have been considered, to the extent relevant, but the same shall be specifically dealt qua each of the deposition(s) with while adjudicating the substantive grounds of appeal.

9.3 However, to avoid repetition, we however consider it fit to lay down the guiding legal principles governing the admissibility and reliability of statement(s) recorded u/s 132(4) of the Act in the course of search, which we would apply while deciding the relevant grounds / additions on their merits. For this, we first refer to the extant provisions of Section 132(4) of the Act, which reads as follows:

"(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. Explanation.--For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income -tax Act, 1922 (11 of 1922), or under this Act." 9.4 From a bare reading of the aforesaid provision, it is revealed that, during the course of search proceedings, Section 132(4) of the Act empowers the authorized officer (of search team), to examine on oath any person who is found to be in possession or control of any books of account, documents, money etc; and such a statement made by that

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 23 :: person may thereafter be used in evidence in any proceedings under the Act. Therefore, such a statement recorded on oath of a person found to be in possession or control of any books, document, money, valuable thing during the course of search, is relevant evidence which can be used as evidence in any proceeding under the Act. So, if a statement qualifies as per section 132(4) of the Act, then it can be used as evidence in any proceedings of the Act. So next question is what is evidence? Evidence is a mode or means to prove a fact-in-issue. Statement is an oral testimony of relevant fact; and an admission of a fact- in-issue is an important piece of evidence provided it has been voluntarily given without any inducement, promise, threat or coercion. If it is tainted by any of these physical or mental influences, then the statement loses its probative value and it is not safe to rely solely on the basis of it. Once a statement is recorded of a person who is in possession of any valuable thing or control of books found during search, then, it can be used as evidence in any proceedings under the Act and the presumption would be that it has been given by that person voluntarily. The burden to prove that the statement is not voluntarily obtained, but due to threat, coercion, promise etc., or that it contains incorrect admission or wrong facts, is upon the maker of statement. And such a burden would be discharged, if the maker of the statement is able to create "reasonable doubt" that the admission made in respect of fact-in-issue was false, incorrect or not voluntary or was obtained by threat or coercion or inducement, then the onus shifts on the shoulder of Revenue to prove that statement was correct and taken voluntarily. For that, it is always emphasized that such statement may be

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 24 :: recorded before independent/respectful witnesses. In this context, the Hon’ble Apex Court in the case of Pullengole Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) has held that, although an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was held that, it is open to the assessee who made the admission to show that it is incorrect. The same view has been expressed by the Hon’ble Supreme Court in the case of Sarwan Singh Rattan Singh v. State of Punjab AIR 1957 SC 637 where it was observed that admission is not conclusive as to the truth of the matters stated therein. It is only a piece of evidence, and the weight to be attached to it must depend on the circumstances in which it is made. It is open for the assessee to show it to be erroneous or untrue.

9.5 Hence, the position which emerges is that a statement u/s 132(4) of the Act, by itself cannot be reason enough to justify an addition if the assessee is able to raise a reasonable doubt that it was obtained by threat or coercion or able to prove that the facts admitted by him was purely based on wrong assumption of facts and able to adduce evidence/material to show that, he was wrong on the facts he admitted. The maker of statement can later explain the circumstance which led him to make the admission and bring out the correct facts and rebut the facts stated in the admission and in that way, retract from the admission made by him u/s 132(4) of the Act. The settled position of law on this is that admission legally made by a person u/s 132(4) of the Act is relevant evidence in any proceedings of the Act and, if that person later explain the circumstances which led him to make such a statement that raises 'reasonable doubt'

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 25 :: that the admission was obtained by threat or inducement, or the admission was based on wrong assumption of facts (and able to show/prove that assertion), then it would be unsafe to rely solely on the "retracted admission" without independent corroboration. So, when an admission u/s 132(4) of the Act has been retracted or proven to be wrong, for the aforesaid reasons, then the AO should cross-examine the person again to ascertain the correct facts and conduct proper investigation into the affairs of the assessee and gather corroborative material which would negate such retraction and prove that the facts admitted originally is correct facts and thus retraction can be discarded. Otherwise, an addition made solely on the basis of a statement which has been shown to be based on incorrect facts or has been subsequently retracted, or is not backed by corroborative evidence, may not be sustainable. For this, we may gainfully refer to the Instruction F.No.286/2/2003-IT (Inv. II), dated 10-3-2003 issued by the CBDT to the Assessing Officers:

"Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of search and seizure and survey operations. Such confession, if not based upon credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstances, such confessions during the course of search and seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Department. Similarly, while recording statement during the course of search and seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income . Any action on the contrary shall be viewed adversely.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 26 :: Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations of thereafter while framing the relevant assessment orders." 9.6 This view was again reiterated by the CBDT in their Circular No. F.NO.286/98/2013-IT (INV.II)], dtd 18-12-2014 which reads as follows:

"Instances/complaints of undue influence /coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe /oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT . 9.7 In addition, the Apex Court in the case of Kasmira Singh v. State of Madhya Pradesh AIR 1952 SC 159, has observed that the correct

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 27 :: way to approach a case of confession is to marshal evidence against the accused excluding the confession altogether from consideration. Where the case can be decided independent of confession, then, it is not necessary to take help of confession.

9.8 It is also to be kept in mind that, where the Revenue seeks to rely upon a testimony, which has been refuted by the assessee with retraction or contrary evidences, then it is imperative for the Revenue to afford an opportunity of cross examination to ascertain the true and correct state of affairs. In this regard, we may refer to the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE [2015] 281 CTR 241 wherein it has been held that the failure to give the assessee the opportunity to cross examine witness, whose statements are relied upon, results in breach of principles of Natural Justice and it is a serious flaw which renders the order a nullity. The relevant extracts from the judgment is set out below:-

"According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected." 9.9 We may also gainfully refer to the judgment of the Hon'ble Apex Court in the case of CIT v. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com 64/266 Taxman 461/418 ITR 315 wherein also it was held that, the addition/disallowance made solely on third party statements without subjecting it to further scrutiny and denying the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 28 :: opportunity of cross examination renders the addition bad in law. A similar principle emanates from the decision of the Hon’ble Supreme Court in the case of Kishinchand Chellaram v. CIT (125 ITR 713) that a statement not tested by cross-examination cannot, therefore, form the sole basis of the impugned disallowance

9.10 In light of the above settled legal principles, the Ld. AR, in the present case, has claimed that the original deposition(s) were based on incorrect assumption of facts and the correct & true version was explained before the lower authorities, who had simply rejected the explanation without adducing any contrary evidence or cross-examining the deponents. As already observed by us above, these contentions would be dealt with, while examining the individual additions made by the AO/Ld. CIT(A). With these observations, this ground stands disposed off.

10.1 Ground No. 7 raised by the assessee is against the addition made by the AO to the gross receipts of Rs.11,80,82,994/- by way of unaccounted fee collection by Shree Balaji Medical College & Hospital [in short ‘SBMCH’] operated by the appellant trust.

10.2 The facts as noted are that, in the course of the search conducted upon the appellant trust, several issues were noticed across the institutions run by it, but the significant part of the enquiry centred upon

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 29 :: SBMCH, which was alleged to have collected substantial tuition fees in cash outside the regular books of account. The Investigating authorities had seized both electronic and physical records from the premises of SBMCH. It was observed that, the data of the desktop system of Smt. Kanniammal Ravindran revealed that there were differences between the fees fixed and the final fees paid by the students. It was further observed that alongside the details, there were cryptic notations such as "P" and "M". According to the Investigating authorities, the payments having notations “P” & “M” were not entered in tally records. In her statement recorded under section 132(4) of the Act, Smt. Kanniammal had confirmed that, she had maintained these records on the basis of information received from the Admissions Department and affirmed their authenticity and contemporaneous maintenance, though she denied personal knowledge of the notations “P” & “M”. The relevant portion of her statement is extracted hereunder: - “Q.74. During the course of search in this Administrative office in your office computer, in the paths E:\JAYA\studentsdetails\UG and E:\JAYA\studentsdetails\PG, EXCEL files bearing the below mentioned names are respectively found stored as under: UG MBBS 2018-19 DETAILS, MBBS 2019-20 DETAILS, MBBS 2020- 21DETAILS,MBBS2021-22 DETAIL,MBBS 2022-23 DETAILMBBS 2023-24 PG 2018-19, 2019-20, 2023-24, pg 2019-20,PG 2020-21 Batch, PG 2021- 22 Batch, PG 2022-23 Batch Please go through and explain about the date stored in these files. A.4. The entries are made based on the student admission folders forwarded by the Admission department after the completion of admission process. The EXCEL file contains the personal details of the students such as student name as per 12th mark sheet, parents name, marks scored, category, fees paid by them, etc. We will use this data for online submission to NCM (National Medical Commission) and for

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 30 :: registration with the BIHER University. This process is followed for both UG and PG. Q.5. On going through the date of fee collections captured by you in these EXCEL sheets, it is noted that in some cases there is a difference between the fees fixed and the final fee payments. Further, in certain cases it is noticed that alongside the payment details ‘P’ or ‘M’ is mentioned. Can you state what this denotes? A.5. The source document for making entry of fees fixed and fees collected is the checklist which is forwarded by our admissions department. I will simply enter the data as it is. I have used the ‘P’ and ‘M’ tag as it was mentioned as such in the sheet. Q.6. On comparing the fee payments as noted by you in the EXCEL sheets with the TALLY accounts of the institution Sree Balaji Medical College and Hospital, it is seen that the payments marked as ‘P and ‘M’ are not appearing in the accounts. What is your explanation? A.6. I am not aware about the reasons. I simply make entry as it was recorded in the checklist sent by the admissions department.” (emphasis supplied) 10.3 According to the Revenue, the amounts noted against the notation’s “P” & “M”, actually represented unaccounted fee collections. The AO thereafter turned his attention to certain handwritten loose sheets which were also found and seized from the college premises. These loose sheets were confronted to Smt. Lakshmi, Consultant at SBMCH, who explained in her statement that, these sheets set out the total fees, concessions, pending fees and actual collections, and that the amounts enclosed within rectangular boxes represented cash receipts. For the sake of convenience, the relevant extracts of loose sheets bearing ID marked ANN/YS/SCBH/LS/S-6, Page 36 relating to FY 2022-23 is reproduced hereunder:-

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 31 ::

10.4 The AO further observed that, Shri M. Selvaraj, the Admission in- charge, had also maintained detailed handwritten ledgers and loose sheets capturing fee fixation and collection particulars. One of the sample loose sheets bearing ID Mark ANN/YS/SBCH/LS/S-1, Page 8, as reproduced in the assessment order, is noted to be as under: -

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 32 ::

10.5 The AO noted that, Shri M. Selvaraj had also admitted that entries marked with codes such as "P" denoted cash payments made by students as intimated by the management, and he further explained the colour- coding and annotations appearing on the seized sheets. The relevant questions put to him and his answers are noted to be as follows: -

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 33 :: “Q.11. During the course of the search proceeding in the case of M/s Accord Distillers & Brewers & Other initiated on 5/10/2023 at Sree Balaji Medical College & Hospital, Chromepet, certain loose sheets were seized vide annexures, ANN/YS/SBCH/LS/S-1, ANN/YS/SBCH/LS/S-2, ANN/YS/SBCH/LS/S-3, ANN/YS/SBCH/LS/S-4, ANN/YS/SBCH/LS/S-5, ANN/YS/SBCH/LS/S-6, ANN/YS/SBCH/LS/S-7, and Books and Documents were seized vide annexure – ANN/YS/SBCH/B&D/S- 1, ANN/YS/SBCH/B&D/S-2, ANN/YS/SBCH/B&D/S-3. I am showing you a sample sheet- Page 8 of the loose sheet annexure- ANN/YS/SBCH/LS/S- 1. Please explain the contents of the sheet. ANS. Madam, in the above sheet, the column “Speciality” – denotes the PG course/ Specialization course name “Name”- denotes the name of the student “Fees” – denotes the per year fees fixed by the management/ Shri Elamaran Sir for the specialization course “Fdetails”- denotes the mode in which fees was paid by the student for the relevant year (in this year -2022 for PG course 2021-22 Batch) “Remarks” – denotes the quantum of fees paid on the date mentioned against the fee payment column.” 10.6 It is particularly noted that, when asked as to whether the details of fees collected as found noted in these sheets was recorded in the books of accounts or not, Shri M Selvaraj stated that he had no knowledge about the same. He clearly averred that only the accounts team would be able to explain whether these payments were accounted or not. The relevant portion of his statement, is noted as under: - “Q.12. In continuation to the above question, please provide details on the meaning of the colours – green and red circles found in the “fees” column and “Remarks” column. Also, there is one entry in the column “Fdetails” for the student Dr Shiyam Sundaran P in item -7” P, dated: 21.02.2022”. Please explain the meaning of the same and please explain the meaning of the same and please state whether the entry is accounted or not. Ans: Madam, I make the circles in green and red colours in the sheet as instructed by Husband of Smt Srinisha, Chairperson of Sree Balaji Medical College & Hospital – Shri Elamaran. The entry in the column “Fdetails” for the student Dr Shiyam Sundaran P in item -7 “P, dated: 21.02.2022” means on 21/02/2022, the above mentioned student had paid Rs 23,50,000 in cash (“P” here denotes “Paid”). I do not know if the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 34 :: same is accounted or not. The accounts team would be able to provide the information on the accounting part.” 10.7 The AO however was of the view that, the above deposition of Shri M Selvaraj expressing his inability to provide evidence as to whether cash collections were recorded in the books or not, proved that these fees collections were unaccounted for. The AO further observed that, there were loose sheets found from another premises at Balaji Mahal, Chennai; which contained the list of students from PG batch 2020-21. For the ease of understanding and sake of convenience, a sample loose sheet bearing ID Mark ANN/PV/SBM/LS/S, Page 6, is extracted below:-

10.8 It is noticed that, these sheets per se did not contain any financial data but only comprised of the list of students admitted in PG course for

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 35 :: 2020-21 along with their date of admission. It was however shown to us that, there were notings of small amounts in pencil against the names of several students and when enquired about the same, Shri S Arumugam, who was identified as a trusted person of Shri Elamaran, had explained the same as follows: - “Q.11. Please refer to your answer to Q.No.10 of this sworn statement wherein you have explained the contents of loose sheets Numbered 1 to 6 seized vide Annexure ANN/PV/SBM/LS/S. In the loose sheets numbered 2 to 6 there are certain nothings (numbers) written in pencil against the name of certain students. Please explain the same in detail with an example. (Said loose sheets already reproduced in Q.No. 10 for reference) Ans: Sir, those pencil nothing denote the total fees of a particular student and the fees that has been collected till now. Fees are collected in two modes- cash and RTGS/ Electronic modes. For example, Please refer to page 6, At S. No. 1 is a student named Dr. Vinay Theerthan M from M.D. Anesthesia admitted on 16.04.2020. His fee was fixed at Rs. 35 lakhs which is written between column 1 and column 2. He has paid full fees of Rs. 35 lakhs through RTGS and hence “35” is written after the fourth column. Since I had his data of RTGS Payment made by him, I wrote it. In the case of S.No. 2, the student’s name is Dr. Akash B who was also admitted into the course Anesthesia on 18.04.2020. His fee was fixed at Rs. 35 lakhs which is written between column 1 and column 2. He has paid Rs. 15 lakhs in cash and the same is written just next to his name in column 3 itself. Since I had only the data of cash payment. I didn’t write the RTGS payment for this student. Similarly, for S.No. 26, Student name Dr. Abhinesh, the cash payment received was Rs. 50 lakh out of the fees of Rs. 60 lakhs. As the trusted person of Shri Elamaran, I take care of the cash portion of fees collection from the college students during admission and subsequent years for the same set of students. I collected such cash amounts and hand it over either to Shri Elamaran or Smt Srinisha.” 10.9 Similarly, several other loose sheets were also found, which contained the details of students, their courses, amounts etc., which was explained by him to be the fees collected from these students and handed

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 36 :: over to Smt. Srinisha, Chairperson of the assessee trust. Likewise, it is observed that, there were loose sheets found which contained the notings of several amounts against the names of the students. It was brought to our notice that, the last sheet contained the details of expenses applied out of the fees collected from the students. The relevant explanation given by Shri S Arumugam in relation to these sheets are noted to be as follows: - “Q.19. During the course of search proceedings at Sree Balaji Medical College and Hospital at No. , CLC Works Road, Chromepet, Chennai 6000, certain loose sheets were found and seized vide annexure ANN/YS/SBCH/LS/S-7. From the said loose sheet folder, Loose Sheets numbered 31,39,40 and 41 have been reproduced below: …… Please go through the above loose sheets. Please state whose signature has been found in the above loose sheets and also explain the contents of the above loose sheets. Ans. Sir, the above-mentioned loose sheets were maintained by Shri Selvaraj and these sheets were originally prepared by the AO team and I have verified by them. These are the cash collections done from the students in lieu of their fees payments. The signatures available on the above sheets is mine. In Loose sheet number 31, ‘M’ represents cash given to madam, ‘S’ represents cash given to Sir, ‘A’ represents cash taken by me and ‘CM’ represents the cash utilized for the function that was organized for the Chief Minister when he visited Rela Hospital. The sheet also contains the cash collected from students of UG and PG courses and the application of the said cash.”

10.10 The AO thereafter referred to a WhatsApp conversation between Smt. Lakshmi and Shri S Arumugam, wherein it was stated that, the total cash fee collections up to 02.09.2023 was Rs.1,21,50,000/-. The AO thus observed that, Shri S. Arumugam, was in charge of collecting cash fees, and he would regularly collect cash from students and hand it over to the management personnel, namely Shri Elamaran and Smt. Srinisha. The AO

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 37 :: inferred that the symbols "M", "S", "A" and "CM" denoted the routing or utilisation of such cash collections. According to the AO, the WhatsApp chats recovered from the mobile phone of Shri S Arumugam corroborated the cash collections submitted by him to the management. The AO further found that, when these materials were confronted, Shri N. Elamaran accepted that the Excel and loose sheets represented fee collections, that the codes used therein denoted cash receipts, and that wherever his signature appeared against a student entry, the amount had been collected by him in cash.

10.11 In light of these electronic data, loose sheets and evidences, and the depositions obtained from the various persons, the AO was of the view that, SBMCH was concurrently collecting fees in cash from the students. On the strength of the seized material and these statements, the Investigation team particularly analysed the Excel sheets stored in the path E:\JAYA\studentsdetails\UG and PG viz., the desktop system of Smt. Kannimmal Ravindran, and extracted the fee-collection details for the assessment years 2018-19 to 2023-24. They extrapolated and computed the fee collections as per the excel sheets for FYs 2018-19 to 2022-23. After netting off the fees, which they found recorded in the seized tally records, the Investigating authorities quantified the unaccounted fee collections for FYs 2018-19 to 2022-23 at Rs.333.46 crores. When confronted with this working, the Chairperson of SBMCH, Smt. J. Srinisha, admitted that miscellaneous fees collected in cash were not accounted for in the books of the trust, and thus conceded that the aggregate

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 38 :: unaccounted collections over the relevant years might be around Rs.300 crores, but sought time to reconcile the exact figures.

10.12 As noted above, the exercise undertaken by the Investigating authorities initially yielded a figure of Rs.333.46 crores. Later on, it was pointed out that, the entire exercise suffered from infirmities in as much as proper credit for the fees collected and deposited in the books of accounts had not been allowed. Partially acceding to the submissions of the assessee trust, which was furnished during post search enquiries, the Investigating authorities reduced the alleged unaccounted fee collections to Rs.238.05 crores after allowing credit to the extent of Rs.95.65 crores, for amounts which they found were verifiable recorded in the tally books. Out of the balance quantified unaccounted cash receipts of Rs.238.05 crores, sum to the extent of Rs.11,80,82,994/- was stated to pertain to the UG and PG students of SBMCH for the relevant FY 2022-23. The AO accordingly issued detailed questionnaires and show-cause notice calling upon the assessee to explain the component(s) of his quantification and why the same should not be treated as suppressed fee receipts.

10.13 The assessee is noted to have disputed the reliability of the seized documents. It was contended that notations such as "P" represented pending amounts and not cash payments. It was shown that, none of the persons from whose possession the impugned seized material was seized had admitted to any unaccounted cash fee collections. It was explained that, the Revenue proceeded on the mistaken assumption that every cash fee collection would necessarily mean that they are unaccounted for. The

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 39 :: assessee submitted that, the fees collected in cash were also deposited and recorded in the books of accounts. Referring to the statement of Smt. Kanniammal Ravindran, the assessee pointed out that, she had clearly stated that, this excel sheet was only meant for uploading student data onto the National Medical Commission (NMC) and for registration with the university. She had further confirmed that this excel sheet was not a record of the fees collected and that she had simply entered the data as intimated by the management in as much as she was not aware about the collections and its accounting. The assessee has thus contended that; it was unjustified on the Revenue’s part to rely on the excel sheets maintained by her to quantify the alleged unaccounted fee collections. The assessee explained that these Excel sheets were mere compilations for National Medical Commission uploads and should not be used to reconcile the fees recorded in tally records. The assessee further submitted that, the statements recorded from the employees had either been misinterpreted and some were obtained under pressure. The assessee also furnished several reconciliations and statements seeking to demonstrate that there was no suppression of fees, asserting that many of the entries represented scholarships, closing balances, or amounts received subsequently through banking channels, which we shall analyse elaborately later on.

10.14 The AO is found to have rejected the explanation put forth by the assessee. The AO observed that, the assessee had failed to produce any evidence in support of its claims of scholarships, debtors or subsequent receipts; and that the internal electronic data and the statements of the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 40 :: employees consistently corroborated the existence of a parallel system of cash collection; and that the data in the Excel sheets stood authenticated by the custodian herself i.e. Smt. Kanniammal Ravindran, which was confirmed by multiple employees as well as the Chairperson. The AO accordingly held that, the sum of Rs.11,80,82,994/- appearing in the impugned Excel sheets for AY 2023-24 represented actual cash receipts of tuition fees that had not been recorded in the books of the trust and brought the said amount to tax as undisclosed income for AY 2023-24.

10.15 On appeal, the assessee reiterated its objections and challenged the impugned addition. The Ld. CIT(A), however, on an examination of the assessment order, was of the view that the evidentiary foundation relied upon by the AO rested not on isolated material but on an interrelated body of contemporaneous records and corroborated statements gathered during the search. The Ld. CIT(A) observed that, the Excel files retrieved from the system of Smt. Kanniammal, the handwritten loose sheets and ledgers maintained by Smt. Lakshmi and Shri M. Selvaraj, the depositions of Shri S. Arumugam and the WhatsApp communications recovered from him, and the admissions of Shri N. Elamaran and the Chairperson Smt. J. Srinisha, together formed a layered evidentiary chain in which the electronic data was supported by the handwritten records, and depositions, and the coded notations stood explained by the authors. The Ld. CIT(A) further noted that, the AO had cross-verified the seized electronic entries against the tally records, and thereafter taxed only the net differential after giving credit for amounts already recorded in the books, thereby ruling out any duplication or

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 41 :: inflation, as claimed by the assessee. The Ld. CIT(A) further held that, the dispute raised by the assessee to the reliability of the depositions was untenable as the allegation of coercion was a bare assertion, unsupported by any retraction. Rather, according to him, the mutually corroborative statements of persons at different levels; and the absence of contemporaneous documentary evidence such as fee receipts, concession or scholarship records or bank trails etc. could not displace the inference drawn by the AO from these seized entries. The Ld. CIT(A) held that the appellant’s attempt to portray the Excel sheets as mere compilations for National Medical Commission uploads was unconvincing; and that the absence of any seizure of cash was not fatal, since cash in such institutions is ordinarily applied at once towards expenses. The Ld. CIT(A) accordingly confirmed the addition of Rs.11,80,82,994/- made by the AO, being aggrieved by which, the assessee is in appeal before us.

10.16 Assailing the action of the lower authorities, the Ld. AR submitted that, the entire quantification exercise undertaken by the AO suffered from serious infirmities and fallacies. He pointed out that, the Investigating authorities had initially quantified the alleged suppression at approximately Rs.333.46 crores, which according to them, was also confirmed by the Chairperson of the assessee Trust. He however showed that, the Revenue themselves later on conceded that, the quantification was incorrect and that, they had omitted to adjust the fees which was deposited and credited in the bank account, and was also found recorded in seized tally records to the tune of Rs.95.65 crores. It was thus shown to us that, the disputed figure was reduced from Rs.333.46 crores to

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 42 :: Rs.238.05 crores for FYs 2018-19 to 2022-23. This fact according to the Ld. AR showed that, the Investigating Authorities were acting with an excessive and pre-meditated mindset from the beginning and that the statement(s) obtained from the key persons of the assessee trust was a lip service and mere pretence, divorced from the actual facts.

10.17 The Ld. AR painstakingly took us through the chain of events along with the seized electronic data and the loose sheets in light of the depositions obtained from several person(s) and contended that, the inference drawn by the AO to allege suppression of fee receipts was factually unjustified. It was brought to our notice that, the excel sheet(s) in question (basis which the unaccounted fee receipts has been estimated) was extracted from the desktop system of Smt. Kannimmal Ravindran. The Ld. AR pointed out that the author of these excel sheets had nowhere averred that it contained any unaccounted fee receipts or that, any of the notings tagged as ‘P’ or ‘M’ denoted cash collection. He submitted that the entire case of the Revenue was based on pure assumption and surmise. The Ld. AR showed us that, Smt. Kannimmal Ravindran had clearly stated that he had prepared the excel sheets on the instructions of the management for uploading the student data on the NMC website and that he had no clue about its nature and purpose. The Ld. AR explained that, ‘P’ denoted ‘pending fees’, which the assessee had demonstrated with evidences that, such pending fees had also been subsequently realized and credited in the books of accounts. The Ld. AR thus claimed that the assumption drawn by the Revenue that ‘P’ denoted unaccounted cash collection was unjustified and based on surmises. He

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 43 :: next took us through the statement of Smt. Lakshmi and pointed out that, though she had partially explained the loose sheets to the best of her knowledge, but at the same time, she had clearly stated that she was completely unaware about its accounting and that she had simply handed over the same to Shri Selvaraj. The Ld. AR submitted that, when Shri Selvaraj was confronted with the same, he had stated that he was not involved in the accounts and treasury operations, and thus his statement asserting that the amounts marked in rectangular box could denote cash collection was at best hearsay. Likewise, the Ld. AR also showed us that, the statement obtained from Shri S Arumugam was bald for the reason that, the loose sheets itself were dumb documents, having no evidentiary value. The Ld. AR particularly pointed out that the Revenue themselves did not utilize these loose sheets seized from the possession of Shri Selvaraj, Smt. Lakshmi & Shri S. Arumugam for estimating the alleged fee suppression and thus, reliance placed on their deposition(s) was totally unwarranted. The Ld. AR further argued that the purported admission of Smt. J Srinisha was evidently bald and obtained under duress as she was never confronted with the electronic evidences seized from Smt. Kannimmal Ravindran and only the summary sheet prepared by the Investigating Authorities was shown to her to obtain disclosure from her. The Ld. AR reiterated that, the fact that the Investigating Authorities later on admitted that their own calculation suffered from mistakes and reduced the same by approximately Rs.95 crores showed that, the admission obtained from Smt. J Srinisha was obtained in a hurried and coercive manner.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 44 :: 10.18 The Ld. AR thereafter took us through the contemporaneous books of accounts, which according to him, negated the case sought to be made out by the Revenue of the alleged fee suppression of Rs.11,80,82,994/- for the relevant FY 2022-23. The Ld. AR invited our attention to the reconciliation statements along with the student wise particulars furnished before the lower authorities and pointed out that, out of the alleged fee suppression of Rs.11.80 crores, sum of Rs.6.24 crores was realized from the same students in the subsequent years and the said amount had been credited and offered to tax in the accounts for those respective years. The Ld. AR pointed out that this material fact remained uncontroverted, which according to him, refuted the entire theory of fee suppression made out by the Revenue. The Ld. AR further showed us that, the AO had also conveniently ignored the fact that, the assessee had granted scholarships of Rs.97 lacs, inter alia to the same set of students, which was also recorded in the seized tally data. According to him, the Revenue ought to have allowed the benefit for the same, particularly, when the contemporaneous books of accounts revealed so. The Ld. AR also showed us that, scholarships / free seats to nine (9) students had been granted and took us through the documentary evidences, which was placed before the lower authorities. The Ld. AR claimed that the grant of scholarship / fee waiver to nine (9) students out of the 399 students admitted to the PG and UG courses cannot be alleged as excessive or extraneous or that fees were collected from them outside the books. Taking us through the detailed reconciliation, the Ld. AR submitted that the un-reconciled figure stood at Rs.1,62,68,000/-, which

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 45 :: according to him, represented the fees pending collection from six (6) students and not any unaccounted cash collections. The Ld. AR contended that, the assessee had demonstrated with evidences that the entire exercise carried out by the Revenue suffered from inherent infirmities and fallacies and thus, this remaining sum ought to be deleted as well. The Ld. AR also explained that, the authenticity and reliability of the data extracted from the excel sheet(s) was in doubt due to non-compliance with Section 65A & 65B of the Indian Evidence Act, 1872. He submitted that, it was very much possible that the data was extracted in a hurried manner by the Investigating Authorities at the time of search and therefore, the chances of error / corruption in such unauthenticated data cannot be ruled out. The Ld. AR argued that the Revenue had not carried out any independent enquiry from any of the students to ascertain whether their fees were pending or paid. According to him therefore, in absence of any corroborative evidence, the addition made by way of alleged fee suppression deserves to be deleted.

10.19 Per contra, the Ld. DR appearing for the Revenue supported the order of the lower authorities. He submitted that, the excel sheet(s) retrieved from the computer systems contained student wise particulars of the total fees charged from them and that, the annotations ‘P’ & ‘M’ had been explained by Shri Selvaraj to denote cash collections. He submitted that, though the authors of the seized material did not state that such amounts were unaccounted for, but Shri S Arumugam and particularly, Smt. J Srinisha, Chairperson of the assessee Trust had admitted to fee suppression. The Ld. DR submitted that, none of them

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 46 :: had retracted their statement(s) and therefore, it stood established that the assessee was collecting fees from students in cash. According to him, once this modus operandi stood established, the Revenue had rightly analysed the data from the excel sheet against the seized tally records and thereafter, rightly computed the unaccounted fee collection. He thus urged us not to interfere with the order of the lower authorities.

10.20 We have heard both the parties and perused the material placed before us, in light of the depositions obtained from the key persons of the assessee trust. From the facts on record, it is observed that the impugned addition is mainly premised upon the data extracted from the excel sheets maintained in the desktop system by Smt. Kanniammal Ravindran, Junior Assistant in Dean’s Office. According to the Revenue, certain handwritten and other loose sheets were found from the possession of Smt. Lakshmi, Consultant at SBMCH and Shri M. Selvaraj, the Admission in-charge and it was deciphered from the depositions of these persons that there were code names viz., ‘P’ or ‘M’ or rectangular boxes or colours being used in these sheets, to identify students from whom cash was collected and not accounted in the books of accounts. On the basis of their depositions, the Revenue had collated the student wise admission data available in the excel sheets, estimated the total fees (based on standard fees) which ought to have been charged from all the students admitted during the academic year 2022-23, deducted the amount(s) found credited in tally data and the balance remaining difference was alleged to be fees suppressed, which was collected in cash and not accounted in the books of accounts. Now, the question for our consideration is whether this

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 47 :: quantification exercise carried out by the Revenue had merit or not and whether the impugned addition made on the basis of the seized material (particularly the excel sheets) in light of the depositions was warranted or not.

10.21 We first observe that the decisive seized material, on the basis of which the impugned unaccounted fees has been quantified, is the Excel sheets extracted from the desktop system of Smt. Kanniammal Ravindran. It is seen that, the said sheets contained the name of the candidate, the speciality/course, the standard fee amount and the corresponding payment details. We particularly observe that there is neither explicit mention of any cash receipt nor any noting of cash, on these Excel sheets. Instead, it is observed that the fees were mainly received through banking channels, which are admittedly recorded in the books of account. The controversy revolves around those amounts against which payment details are not mentioned and, instead, the annotations "P" or "M" are written. The Investigating Authorities are found to have enquired about these amounts, to which Smt. Kanniammal Ravindran is found to have explained in her statement recorded under section 132(4) of the Act that, the intent and purpose of these Excel sheets was not to capture the payment details of the students, but to set out the particulars of the candidates for uploading on the NMC website in relation to their registration. We thus observe that the author of these sheets was unable to explain the annotations "P" and "M", as, according to her; she had simply reproduced what she found written in the admission checklist. Hence, when the Excel sheets are considered on a standalone basis along

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 48 :: with the deposition of their author, we find that no presumption arises, either under section 132(4A) or under section 292C of the Act, so as to infer that the amounts written against "P" or "M" denoted unaccounted cash collections.

10.22 The Ld. AR explained that the annotations "P" and "M" could have denoted anything, and could only have been explained by their author. He pointed out that, more often than not, while typing in an Excel sheet, data is not correctly entered, or the payment details are filled in but, due to a subsequent typing error, an annotation comes to appear in place of the payment details. According to him, "P" could well denote "pending", inasmuch as the subsequent fee collections corroborate such an inference; and likewise, that "M" could denote "management", as it was for the management to take a call whether the fees was to be reduced or a scholarship would be awarded or be kept pending for collection, and thus the payment details were not available with Smt. Kanniammal Ravindran. The Ld. AR submitted that the annotations were made with the intent of ensuring that none of the columns were left blank, as otherwise the system would not fetch the line columns at the time of uploading. To corroborate this assertion, the Ld. AR had taken us through the details of fees which were pending from these same students against which “P” / “M” was written, which was realized subsequently or scholarships were awarded by the management (which we have examined in the later paragraphs). The Ld. AR showed us that the summary details of pending fees and fee waivers were also found scribbled in the seized handwritten loose sheets, which according to him, lent logical credence to

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 49 :: the assessee’s explanation that symbol “P” denoted pending. Having considered these contentions in light of the evidences placed before us, we are of the view that it was unsafe to assume that the annotations "P" and "M" only meant "cash collections" sans any independent corroborative evidence. In this context, it is to be borne in mind that the assessee is not required to prove their explanation to the hilt, but only demonstrate that it is a plausible one, and therefore where a notation is susceptible of more than one construction, the Revenue cannot fasten a liability by adopting the construction most adverse to the assessee, simply on the basis of deposition of a person, i.e. Shri Selvaraj, who, as discussed in later paragraphs, was not even aware about the accounting aspects and whose cross examination didn’t materialize. On these facts, we therefore agree with the Ld. AR that the Excel sheets, by themselves, did not per se reveal any unaccounted fee collection, and that the Revenue was unjustified in utilising them to collate un-reconciled differences and to allege the same as suppressed fee collections.

10.23 We note that, to justify the above inference, the AO had sought support from the handwritten loose sheets found from the possession of Smt. Lakshmi, which, according to the Revenue, contained the notings of cash collections. The Ld. AR has contended before us that, even these loose sheets lacked evidentiary value and, rather, contradicted the theory of the Revenue. He showed us from Page 36 of Annexure ANN/YS/SBCH/LS/S-6 that, it purportedly contained rough estimates of the fees relating to the UG course for FY 2022-23. He brought to our notice that the said loose sheet clearly evidenced that several seats had

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 50 :: been given on scholarship, and further, that fees had been waived or discounted by the management for some students, totalling Rs.3.02 crores. According to him, if this loose sheet is taken at its face value, then it corroborates the assertion of the assessee that not all students had paid the standard tuition fees, but that there were indeed scholarships and fee waivers granted to students. He has thus rightly pointed out that the Revenue acted on a mistaken notion in assuming that all the students named in the Excel sheets would have paid the total tuition fees upfront, and in theorising that the amounts not found in the tally data were unaccounted cash collections, failing to appreciate that some students may have paid the fees later on or had been granted scholarships / fee waivers. He further pointed out that the same loose sheet also reflected fees which were pending collection, which supports her case that the annotation "P" found in the Excel sheets could denote "pending amount". He further pointed out that the AO had inferred the figure written in the rectangular box to be a cash collection, though there was no such noting against the said amount. It is observed by us that, the said loose sheet contained notings of the actual fee’s collectible, the fees received through bank and the fees which were pending; but there was no mention or noting any ‘cash’ collection. The AO is noted to have simply presumed the amount written in the rectangular box to denote ‘cash’ collection basis the deposition of Smt. Lakshmi. Hence, there is merit in the contention of the Ld. AR that such a deposition, qua a bald noting on a loose sheet, cannot merely be accepted at its face value in the absence of any independent corroborative evidence. Moreover, we note that, even the Revenue did

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 51 :: not utilise this loose sheet for estimating the fee suppression relating to FY 2022-23. According to this loose sheet, the fees suppressed for FY 2022-23 viz., the amount written in the rectangular box was Rs.4,75,75,000/-, whereas the suppressed fees quantified by the Revenue from the Excel sheets was Rs.11,80,83,000/-. This material contradiction lends credence to the assessee's assertion that the handwritten loose sheet could be rough estimates, scribbling for internal reconciliation purposes, which did not carry any evidentiary value; for if the very document relied upon as corroboration yields a figure less than half of that adopted in the assessment, then either the document is unreliable, or the quantification made by the AO was excessive, and in either event, the addition cannot stand on the footing on which it has been made.

10.24 We now turn our attention to the statement of Shri M. Selvaraj, which has been heavily relied upon by the lower authorities. Upon a careful reading of his statement, the relevant portions of which have been extracted in the preceding paragraphs, it is observed that, though he has explained the notings including “P” & ”M” and admitted that these symbols represented cash collections of fees, he has nowhere admitted that the fees so collected were not accounted for. On the contrary, he is found to have categorically asserted that he doesn’t know whether the fees have been accounted for or not, and that only the accounts team would be able to provide information on the accounting part. Having perused this deposition given under section 132(4) of the Act, we are of the view that, though the AO may have rightly inferred that there was collection of fees in cash, but the AO has wrongly assumed that Shri M.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 52 :: Selvaraj had admitted that the same was not accounted for. This holds significance as collection of fees in cash, by itself, cannot be presumed to be unaccounted, unless such collection is shown to be outside the books, that any addition can follow. The assessee has consistently maintained that the fees collected from students were deposited and duly recorded in its books, and the Revenue has proceeded upon the fallacy of equating a cash receipt with an unaccounted receipt. Thus, the wrong assumption of AO that Shri M. Selvaraj had admitted that collection of fees in cash was not accounted for, basis on which he proceeded to justify the suppression of fees, is accordingly found to be factually perverse. Further, when Shri Selvaraj himself wasn’t aware about the accounting aspects, his assertion regarding the symbols ‘P’ or ‘M’ or other coding etc., isn’t safe to rely as it is.

10.25 We next advert to the loose sheets found from the possession of Shri S. Arumugam and to his deposition thereon, which the lower authorities have treated as a corroborative link in the evidentiary chain. On a perusal of these sheets, we find that they contain no financial data whatsoever; they merely set out the list of students admitted to the PG course along with their dates of admission, upon which certain figures have been noted in pencil. Such sheets, bearing no narration, no head of account and no date of receipt, and carrying nothing to indicate the character of the amounts noted, are in the nature of dumb documents, and it is well settled that no addition can be founded upon a dumb document sans independent corroboration. More significantly, the Revenue itself has not utilised these loose sheets for the purpose of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 53 :: quantifying the alleged suppression for the year under consideration. As noted earlier, the quantification proceeds exclusively from the Excel sheets retrieved from the desktop of Smt. Kanniammal Ravindran. Once the Revenue has itself chosen not to place reliance upon this material for computing the impugned addition, it does not lie in their mouth to invoke the depositions rendered upon that very material as corroboration of an inference drawn from an altogether different document. A deposition explaining a dumb document doesn’t lend to that document any evidentiary value which it inherently lacks, nor can it be transposed so as to authenticate an unrelated record.

10.26 That takes us to the admission attributed to Smt. J. Srinisha, Chairperson of the assessee trust, which has been relied upon which the lower authorities to infer unaccounted fee collections. Having considered the relevant materials, we find this admission to be on an infirm foundation, for more than one reason. Firstly, it is observed that she was never confronted with the electronic data seized from the system of Smt. Kanniammal Ravindran; and it is evident that what was placed before her was only the summary-sheet prepared by the Investigating Authorities, and her purported admission was rendered upon that summary, while she simultaneously sought time to reconcile the exact figures. Secondly, and tellingly, the very quantification upon which the admission was obtained has since been abandoned by the Revenue itself. As noted the Investigating Authorities had initially arrived at a figure of Rs.333.46 crores; upon the assessee later pointing out that credit had not been allowed for fees actually deposited and recorded in the seized tally data,

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 54 :: the Revenue conceded the error and scaled the figure down to Rs.238.05 crores, allowing credit of Rs.95.65 crores. Meaning, a working which the Chairperson is said to have accepted, stood subsequently reduced by approximately Rs.95 crores, speaks for itself. This fact, itself demonstrates that the figure put to her was not the product of any considered verification, and that the admission obtained was, in substance, an admission to an unverified arithmetical exercise rather than to any established fact.

10.27 As held earlier, the decision of the Hon'ble Supreme Court in Pullangode Rubber Produce Co. Ltd.(supra), that an admission, though a relevant piece of evidence, is not conclusive, and that it is always open to the assessee to demonstrate that it does not reflect the correct state of affairs, is found to be relevant in the present context. And the assessee is found to have done so here. The reasoning of the Ld. CIT(A), that the absence of a formal retraction clinches the matter, loses sight of the settled position that an admission rebutted on facts by contemporaneous records requires no ritual retraction in order to lose its probative force. An addition must ultimately rest on what the evidence establishes, not on what a deponent was persuaded to say about a working which the Revenue has itself had partially disowned.

10.28 Now, shorn of the loose sheets, and the depositions, what is required to be examined now, is the methodology adopted by the AO; and it is here that the case of the Revenue is found to be on much weak footing. It is observed by us that, what the AO has done that, he has

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 55 :: taken the standard fee tariff prescribed for each course, applied it to the students named in the Excel sheets, aggregated the resultant figure, set off against it the fees found recorded in the seized tally data, and branded the residual difference as unaccounted cash collection. Such an exercise proceeds upon the foundational presumption that every student admitted must necessarily have paid the full standard fees/tariff, and that any shortfall in the books must necessarily represent a cash receipt suppressed from the books. That assumption is demonstrably erroneous. It takes no account of the scholarships and free seats granted by the institution, no account of the fee waivers and concessions extended by the management, and no account of the fees which were simply pending realisation as at the year end and were collected in the later years. It also does not factor in where any students would have later on rescinded their admission or changed their courses and sought refund of the fees paid by them. The impugned addition made by the AO is found to be an exercise of estimates and assumptions. To presume collection from tariff, then to presume that the presumed collection was made in cash, and then to presume further that the presumed cash was suppressed, is to build a super structure on presumption, no block of which is supported by evidence. An addition of this magnitude cannot rest upon such an accumulation of presumptions. According to us, the fee actually collected from a given student is a question of fact, capable of verification from that student's own ledger account and from the institution's bank records and from the students themselves. This exercise was however never undertaken by the lower authorities.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 56 :: 10.29 The above fundamental infirmity is not only a matter of theory pointed out by the assessee, but it is also borne out by the reconciliation placed on record by the assessee, which the lower authorities were unable to controvert. The assessee has furnished, before the AO, before the Ld. CIT(A) and before us, a detailed reconciliation supported by student-wise particulars, ledger extracts, fee records, scholarship details, bank receipts and the books of account [Paper Book Vol. 1, Pgs. 61 to 942]. The position which emerges is that, there were 251 students admitted in the UG course for FY 2022-23, out of which the alleged difference in fees quantified by the Revenue pertained to 43 students. The assessee is found to have furnished student wise particulars of 33 students, and showed that, the entire fees was collected from them and credited in bank account for the relevant year and/or the subsequent years and accounted in the books of accounts. Some of the instances, brought to our notice at the time of hearing, are as under: -

(i) In relation to student, Shri G H Reddy, the prescribed fee tariff was Rs.25 lacs, out of which the Revenue matched Rs.16.5 lacs from tally data and balance sum of Rs.8.5 lacs was straightaway alleged to be suppressed fees. The assessee, on the other hand, has shown that the balance fees was received in subsequent FY 2023-24 and provided the relevant student ledger, bank receipt etc., which are found to be verifiable. According to us therefore, the allegation of fee suppression was unfounded.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 57 :: (ii) Similarly, in respect of student Nishanth Raj, the entire prescribed fee of Rs.25 lacs was alleged to be suppressed fees, which the assessee showed had been realized subsequently in FY 2023-24 and the same was also supported with evidences, which is found available at Pages 691 to 697 of the Paper Book. This material fact negates the Revenue’s theory of fee suppression.

(iii) Likewise, in case of Smt. Archana S, out of total fees of Rs.25 lacs, Rs.13 lacs was matched by the Revenue with tally data and balance Rs.12 lacs was described as unaccounted fees. The Ld. AR brought to our notice that, sum of Rs.5 lacs and Rs.7 lacs was received from this student in FYs 2023-24 & 2024-25, whose relevant payment details and fee receipts vouchers are found placed at Pages 657 to 667 of the Paper Book, and thus there was no fee suppression as alleged.

10.30 Similarly, we find that, out of the 148 students admitted in the PG course, the case of the Revenue was that the assessee had reported suppressed fees of 19 students. The assessee is found to have provided student wise payment details along with fee receipt vouchers for 10 students, which is also noted to be verifiable from the books of accounts. On these given facts, there is merit in the submission of the Ld. AR that the exercise undertaken by the AO to estimate unaccounted fee collection was fundamentally flawed. The Ld. AR further brought to our notice that, the AO had also omitted to exclude the scholarships / free seats and fee waivers given to some students, which aggregated to Rs.3.94 crores. The

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 58 :: assessee is found to have placed the student wise details along with supporting forms, applications etc. in the paper book as well. It is particularly noted that, this plea cannot be stated to be an afterthought as they are evidenced by documentary material on record and, significantly, stand corroborated by the very loose sheet seized from the possession of Smt. Lakshmi (Page 36 of Annexure ANN/YS/SBCH/LS/S-6), which independently records the grant of scholarship seats and the waiver of fees by the management. It is settled that seized material must be read as a whole, and cannot be accepted in part and rejected in part; the Revenue cannot be permitted to blow hot and cold upon the same document. Hence, when the seized material revealed that there were indeed scholarships and fee waivers granted to students, then it is improper to disbelieve the explanation put forth by the assessee. It is also noted by us that the scholarships and fee waivers were given only to seven (7) students in the UG course viz., Rajesh R, Preethi Jerusha, S Gracelin, Rishi Nithiyan R, Harish J, Siddharth N, Leah Brown and six (6) students in PG course viz., Dr. Srineha A, Dr. Rajarshi Bir, Dr. R Easwar, Dr. Vignesh Raj, Dr. YV Ram, Dr. Ragavi E. It is observed that, the relevant evidences qua these students were furnished by the assessee before the lower authorities, which we find was wrongly discarded. It was particularly brought to our notice that the scholarships given to students, viz. S Gracelin, Rishi Nithiyan R, Harish J, Leah Brown, Dr. Ragavi E, etc. were recorded in the seized tally records itself which was overlooked by the lower authorities. This material contemporaneous fact thus cements the assessee’s case that some students were indeed given scholarships /

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 59 :: fee waivers and thus, the lower authorities were unjustified in holding that the grant of scholarships /fee waivers remained unproven. Overall, therefore, the student wise fee reconciliation furnished by the assessee is tabulated as under: -

Particulars No. of UG Course No. of PG Course No. of Total students students students Total number of students 251 148 399 Students whose fees 43 6,10,93,000 19 5,69,90,000 62 11,80,83,000 alleged to be suppressed Less: Fees shown to have 33 10 43 been collected from same students FY 2023-24 2,61,25,000 85,00,000 3,46,25,000 FY 2024-25 1,53,50,000 17,40,000 1,70,90,000 Further collection post - 1,07,00,000 1,07,00,000 search Less: Scholarships / Fee 7 6 13 Waivers 77,00,000 20,00,000 97,00,000 As per tally data 42,00,000 1,00,00,000 1,42,00,000 Fee waivers 25,00,000 1,30,00,000 1,55,00,000 Further scholarships given Balance remaining un- 3 52,18,000 3 1,10,50,000 6 1,62,68,000 reconciled 10.31 From the above, two features of this reconciliation are of critical significance. Firstly, the free seats and scholarships aggregating to Rs.3.92 crores, which we have elaborately discussed above and found the same to be verifiable. Secondly, the sum of Rs.6.24 crores out of the alleged suppression has been shown as realised from the very same students in the subsequent years through banking channels, credited in

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 60 :: the books in the respective years. This fact demolishes the alleged suppression, for it establishes that these amounts were not cash collected and unaccounted, but fees which remained pending at the year end and were subsequently recovered and duly accounted for. It also appears to support the explanation given by the assessee to the annotation "P" appearing in the Excel sheets, which the assessee has consistently explained before the lower authorities as denoting "pending". There is force in the submission of the assessee that the aforesaid sum couldn’t have been taxed twice, once by way of alleged unaccounted collection of FY 2022-23, and again as the accounted fee income of the year of its actual receipt.

10.32 More importantly, the student-wise fact pattern emerging from the record also puts the matter beyond doubt. In the UG & PG course for the year under consideration, 251 and 148 students were admitted respectively. Out of these, the Revenue's own analysis alleges the payment of fees in cash, said to be unaccounted, in the case of only 62 [43 +19] students. Of these 62 students, the assessee has furnished student-wise reconciliation matching the full payments in the case of 43 students, and has demonstrated that 13 [7 + 6] students were granted fee waivers or scholarships, a proportion which, measured against the strength of 399 [251 + 148] students, can by no stretch be characterised as excessive or extraneous, and which is entirely consonant with the scholarships ordinarily awarded by any educational institution of comparable standing. What therefore remains unmatched is the case of 6 [3 + 3] students alone. Nonetheless, this reconciliation furnished by the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 61 :: assessee matching the details of majority of the students strikes gaping holes into the case sought to be made out by the Revenue. If, as is alleged, the assessee institution had put in place a coordinated and systemic mechanism for collecting fees in cash outside the books, the pattern would necessarily have manifested itself across majority of the students admitted. Instead, the records placed before us demonstrates that the overwhelming majority of the students paid their fees through banking channels, duly recorded in the books, and that the allegation of suppression is not made out qua all but remains for only six (6) of them. There is force in the Ld. AR’s argument such a proposition appears to be improbable and contrary to common logic that, a trust alleged to be running a medical college would set up a parallel system of unaccounted collection in order to suppress the fees of only six students out of three hundred ninety-nine students. On these given facts, the purported modus operandi alleged by the Revenue of a coordinated suppression of fees is found to lack merit and rationale.

10.33 Our above view is also backed by the inaction of the lower authorities. Despite the reconciliation and the supporting documents having been placed before both the authorities below, neither the AO nor the Ld. CIT(A) has pointed out a single specific error, discrepancy or falsity in the reconciliation statements; not one student ledger has been shown to be false; nor any entry in the books has been demonstrated to be untrue. Also, we find that, no independent enquiry whatsoever was carried out with any of the students or their parents, from whom it could have been easily gathered as to what quantum of fees have been paid by

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 62 :: them and in what manner. This independent enquiry could have easily tested the Revenue's hypothesis, but it was never done. Admittedly, the Revenue has also not identified the student wise particulars from whom fee is said to have been collected but not recorded. Rather, the entire exercise is found to be based on arithmetical assumptions and estimates. Such an uncorroborated exercise carried out by the AO, to make addition of such huge magnitude, cannot be countenanced. Having regard to these facts, and the absence of discovery of any unaccounted cash, unexplained asset, undisclosed investment etc. further impairs the Revenue’s theory of coordinated fee collection in cash. According to us, the observation of the Ld. CIT(A) that the absence of seized cash is not fatal, because cash in such institutions is ordinarily applied towards expenses, is itself an assumption heaped upon an assumption; for if the cash had been so applied, then the corresponding unaccounted expenditure or asset ought to have surfaced in the search action, which is evidently absent.

10.34 In light of the above discussions, we agree with the assessee that they had discharged their primary burden by producing the reconciliation, the student-wise particulars and the supporting records, and thus the onus had shifted upon the Revenue either to identify specific instances of unaccounted collection, or to demonstrate defects in the reconciliation furnished, which we find hasn’t been discharged. As is evident from the above observations, the impugned addition rested upon aggregate differences thrown up by a data-analysis exercise, and not upon the identification of any actual unaccounted receipt, and thus the foundational premise of such addition was notional and based on suspicion. It is well

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 63 :: settled that suspicion, howsoever strong, cannot take the place of proof, and that an assessment must be founded upon relevant evidence/material and not upon surmise, conjecture or estimate. The course adopted by the Revenue, of aggregating a standard fee/tariff, deducting the tally figures, and taxing the residue as suppressed fees, while leaving the assessee's detailed reconciliation in respect of the vast majority of the students uncontroverted, is one which we are constrained to deprecate.

10.35 Having said so, the fact remains that, out of the alleged suppression of Rs.11,80,82,994/-, a sum of Rs.1,62,68,000/- hasn’t been reconciled by the assessee. The Ld AR, when confronted, submitted that it was the fees pending collection from few students, but offered to sustaining the addition to put an end to the dispute. We are conscious that this residual amount of Rs.1,62,68,000/- is explained by the assessee as fees pending collection from a handful of students, and that no material has been brought by the Revenue to show that it represents an unaccounted collection. At the same time, we cannot lose sight of the fact that the depositions of certain employees, do raise a degree of suspicion that, the collection of some part of the fees in cash. Having regard to the totality of the facts and circumstances, and considering the plea of assessee, in order to put a quietus to the litigation and to prevent any possible leakage of revenue, we are of the considered view that it would meet the ends of justice, if the addition is sustained to the extent of Rs.1,62,68,000/- by way of un-reconciled difference and the balance is deleted.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 64 :: 10.36 In view of the foregoing, we direct the Assessing Officer to sustain the addition to the extent of Rs.1,62,68,000/- and to delete the balance addition of Rs.10,18,14,994/-. Ground No. 7 raised by the assessee is partly allowed.

“Q.31. On examination of the dell laptop mentioned in the previous question, it has been found that there is a software with icon “i- student” located on desktop. The same is show to you as under: Please explain its functions. Also provide its user id and password. Ans: Sir the “i-student” located on desktop of the laptop is a student management software called “i-sms 2.0”. It is used by accounts

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 65 :: department (Smt. Saranya, Mr. Arun Kumar and me (Mr. A Velmurugan)) for entering fees collection details i.e. through cash. DD and RTGS etc. The user id is 9909. The password is pre-saved in the software which pops-up automatically. I don’t know the password sir. Q.32. The software “i-sms 2.0” after logging in and the pay mode details are as under: Please confirm and explain the pay mode details. Ans: Sir, I confirm that the shown screenshot is the student billing report page of the software “i-sms 2.0”. wherein the details of the students’ fees paid can be seen along with the mode in which they have paid. In the student management software called “i-sms 2.0”. the details of fees collected from students is being entered as per the mode of payment. Each description is explained as under: a) B. Cheque – The payment of fees by student is through Cheque, the payment through this mode is not used by us. b) By Bank – this is the payment received in cash from students towards Tution fees. Hostel fees and Mess fees. All the pay modes with By Bank mode received from students is through cash only. c) Cheque – The payment of fees by student is through Cheque, the payment through this mode is not used by us. d) D.D- this is the payment received from students towards tuition fees. Hostel fees and Mess through Demand Draft. e) DD/ Cheque – The payment of fees by student is through DD/ Cheque the payment through this mode is not used by us. f) DD/ Cheque – The payment of fees by student is through DD/ Cheque, the payment through this mode is not used by us. g) Online – this is the payment received from students towards Tuition fees, Hostel fees and Mess fees through RTGS/NEFT. Only the pay modes By Bank (received in cash), D.D and Online are only being used for entry into this software for the fees collected from students. The fees collected at the accounts section and at the admission cell both are being entered into this software.” 11.1 Having regard to the above deposition, the AO therefore was of the view that, usage of the tab ‘by bank’ was intended to hide cash

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 66 :: collections. On the strength of this seized electronic data and the aforesaid statements, the AO referred to the summary report of the fee- collection entries recorded in i-sms 2.0 for the period FY 2017-18 to FY 2023-24, which aggregated to Rs.127,08,24,238/-, and, after deducting the cash deposits of Rs.7,71,23,422/- made into the Punjab National Bank account maintained for hostel and mess fees, arrived at unaccounted cash receipts of Rs.119,37,00,816/- for the said period. The relevant portion of the statement of Shri Velumurgan, quantifying the amount(s) is noted to be as under:-

“Q.39. In continuation to your answers to the previous questions, the cash collection details extracted from software “i-sms 2.0” before you are consolidated and the total cash collection from students from F.Y.2017-18 till F.Y. 2023-24 is Rs. 1,27,08,24,238. The consolidation made is reproduced as under: FY(a) Total cash collection in Rs. (b) 2017-18 19,33,88,322 2018-19 18,13,79,124 2019-20 30,65,44,766 2020-21 16,47,65,679 2021-22 20,53,37,,852 2022-23 21,70,10,036 2023-24 2,23,98,459 Total 1,27,08,24,238 Please Comment. Ans: Sir, I confirm that the cash collection details are extracted from software “i-sms 2.0” before me and that the total cash collection from students from F.Y.2017-18 till F.Y.2023-24 is Rs.1,27,08,24,238. However, it is to be noted that the above cash collection includes Fees (Tuition fees, Hostel fees & Mess Fees) of the first-year students collected at Admission Cell located in 1st Floor of the College Building by Mr. Vishnu Varadhan and this his team including Ms. Vimala and Fees from the students of the subsequent years is collected by me and my team in the accounts section located at 1st floor of the Hospital Building (inside medical Records Department room). Further the cash collected by Vishnu and his team at admission cell towards Tuition fees, Hostel fees & Mess Fees are not accounted in books of accounts of any

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 67 :: concern/entity. Similarly, the cash collected by me and my team towards tuitions fees from the students is also not accounted in books of accounts of any concern/entity. The cash collected from students other than first year students by me and my team at the accounts section towards hostel and mess fees is deposited in to the Punjab National Bank bearing account no. 29280021011804416. Q.40. During the course of search proceedings u/s. 132 of the Income Tax Act, 1961 at the premises of M/s. Sri Lakshmi Narayana Institute of Medical Sciences, Osudu, Agaram Village, Villianur Commune, Kudapakkam Post, Puducherry – 605502, from the statements recorded from Shri. S Vishnu Varadhan and from your answers to the previous question, it is understood that the cash collected by you and your team towards tuitions fees from students other than 1st year students and the cash collected at admission cell from 1st year students by Mr. Vishnu and his team towards Tuition fees/Hostel fees/Mess fees is not deposited in the bank accounts and is not accounted in books of accounts of any concern and only the cash collected by you and your team towards Hostel & Mess Fees is deposited in the PNB bank account ending with 4416 of M/s. SLIMS. In this regard, the consolidation of total cash collected as extracted from software “i-sms 2.0” and consolidation of total cash deposited in the Punjab National Bank account ending with 4416 is made and the same is reproduced as under:

TOTAL Cash Deposited in PNB FY(a) Total cash collection Account******4416* Unaccounted cash in Rs.(b) account In Rs.(c) in Rs.(d) 2017-18 19,33,88,322 1,71,65,738 19,33,88,322 2018-19 16,13,79,124 2,19,09,282 14,42,13,386 2019-20 30,65,44,766 82,92,340 28,46,35,484 2020-21 16,47,65,675 83,36,001 15,64,73,339 2021-22 20,53,37,852 1,33,03,161 19,70,01,851 2022-23 21,70,10,036 81,16,900 20,37,06,875 2023-24 2,23,98,459 77123422 1,42,81,559 Total 1,27,08,24,238 1,19,37,00,816

Please explain the difference. Ans: Sir, I confirm that the cash collected by me and my team towards tuitions fees collected from students other than 1st year students and the cash collected at admission cell from 1st year student by Mr. Vishnu and his team towards Tuition fees/ Hostel fees/Mess fees is not deposited in the bank accounts and is not accounted in books of accounts of any concern. The cash deposited in the Punjab National Bank account. Punjab National Bank bearing account no.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 68 :: 2928002101804416. Is the cash collected by Mr. A Velmurugan towards hostel fees and mess fees from students other than 1st year students. The difference amount of Rs.1,19,37,00,816 is the unaccounted cash not shown in the books of accounts of any concern. The above cash was handed over to Mr. Achuthan (9962659550/9840401397) or Mr. Senthil (9600146632/6379115480) based in Chennai working at M/s. Bharat Institute of Higher Education & Research (BIHER), Chennai and to other parties by me over regular periods. The Instructions for handing over the cash is given either by Mr. Vishnu or by Mr. Anbu to me. 11.2 The AO is noted to have accordingly quantified the unaccounted fee collection at Rs.20,37,06,875/- for the relevant AY 2023-24 and called upon the assessee to explain the same. The assessee is seen to have disputed the proposed addition. It was contended that, there was no suppression of fees and that the entire fee income, comprising tuition, hostel, mess and miscellaneous charges, had been disclosed in the Income and Expenditure Account year after year and offered to tax. It was further contended that the i-sms 2.0 software was merely a trial or test software, not integrated with finance and not approved by the management for recording fee transactions, whereas Tally alone was the authorised accounting platform, and therefore no financial inference could be drawn from the i-sms data. The assessee further showed on sample basis that the entries tagged “By Bank” included non-cash receipts and, in part, mere receivables. The assessee is found to have furnished a reconciliation statement, evidencing that sum to the extent of Rs.48.53 crore out of the alleged Rs.119.37 crore already stood recorded in Tally and offered to tax. It was also shown that, sums aggregating to Rs.5.66 crore had been received from the same students through banking channels post search and it was duly recorded in the accounts. The assessee is also found to have undertaken a sample analysis of individual

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 69 :: entries to the extent of Rs.3.09 crore found mentioned in the seized electronic data with the tag “By Bank” and showed that such receipts were indeed through RTGS/NEFT/DD/cheque. The assessee also brought on record evidences to show that there were fee waivers, scholarships and free seats awarded to several students, as approved by the Finance Committee and in accordance with the UGC (Institutions Deemed to be Universities) Regulations, 2023, which was also tagged as ‘by bank’ in that software. According to the assessee therefore the assumption drawn by the AO that ‘by Bank’ denoted only unaccounted cash collections was factually perverse. The assessee thus claimed that the theory propounded by the Revenue lacked merit and that there was no unaccounted component whatsoever.

11.3 The AO is found to have rebutted the above explanation by relying upon the sworn statements which were recorded during the search from several functionaries of the institution. The AO observed that Shri A. Velmurugan and Smt. Saranya, of the Accounts Department, had confirmed that the tag “By Bank” was a naming convention deliberately adopted to denote cash receipts, and that cash so recorded was not carried into the Tally books unless deposited into the bank. The AO further referred to the deposition of Shri S. Vishnu Varadhan, Student Welfare Officer, who had conceded that the cash was being collected at the admission cell and the accounts team was neither informed nor was it recorded in the books of accounts. The AO also relied upon the statement of Shri S. Anbu and Shri M. Achuthan who had stated that they would handle cash and periodically hand it over to Shri J. Sundeep Anand. The

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 70 :: AO particularly emphasized on the statement of Shri J. Sundeep Anand, the Managing Trustee, who had accepted to unaccounted cash fee collections and the amount of Rs.20,37,06,875/- was inter alia quantified for AY 2023-24.

11.4 The AO is also found to have further examined the reconciliation statement(s) and evidences furnished by the assessee and have observed that, the assessee was unable to demonstrate that any genuine demand draft or RTGS receipt had been wrongly entered under the “By Bank” category. The AO also refuted the explanation that, the unrecorded receipts represented amounts “yet to be received” in light of the depositions of the staff that entries represented cash receipts. The AO also examined a sample size of student-wise reconciliation furnished by the assessee in light of the seized data contained in the software vis-à-vis the tally data and found it to be unreconcilable. The AO also relied on the statement obtained from Shri Velumurugan wherein he had stated qua some of these students’ reconciliation that, the entries in ‘by bank’ tab represented cash collections from them. The relevant portion of his statement, as noted by the AO, reads as under: -

“Q.34. During the course of search proceeding u/s. 132 of the Income Tax Act, 1961 at the office premises of M/s Sri Lakshmi Narayana Institute of Medical Sciences Osudu, Agaram Village, Villianur Commune, Kudapakkam Post, Puducherry- 605502 an Electronic Device a desktop hard disk drive found and seized in the accounts department vide annexure ANN/SLIMS/VSV/ED/S. From the tally data available in the folder named “Tally Master Data” of the above said device, the ledger copied of the student “SANTHA KUMAR J” are extracted for the F.Y. 2021-22, F.Y. 2022-23 & F.Y. 2023-24 and the printed copies of the same are being shown to you. The same are re produced as under:

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 71 ::

From the above, it is apparent that the student has paid an amount of Rs.47,20,000 as per the collection report of the student and as per the ledger copies extracted from Tally only Rs.7,00,000 has been paid by the student. Please explain the difference. Ans: Sir, I confirm the data extracted from Tally is correct and the data was maintained by me and my team members in the accounts Section. As explained in my previous answers, the cash received from the students in mentioned under the pay mode “By Bank” in the collection report of the student. The cash amount to the tune of Rs.32,60,000 is the amount received in cash. The data recorded in Tally is true is and the amount of Rs.7,00,000 is received through RTGS and the amount to the tune of Rs.1,60,000 is not recorded in the Tally. Further the amount of Rs.6,00,000 received through D.D is received in cash but while entering the data in the software i-sms 2.0, it was mistakenly entered as D.D. As the amount received in cash, the same has been not recorded in Tally.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 72 :: The entries in Tally are made by me and my team only after the amounts get reflected in Bank account and the bank account statement will be perused for making entries in tally.” 11.5 The AO accordingly held that the amounts recorded in the “By Bank” tab of i-sms 2.0 represented actual cash fee collections systematically suppressed from the books, and brought the sum of Rs.20,37,06,875/- relatable to the year under consideration to tax as undisclosed income of the assessee trust.

11.6 On appeal, the assessee reiterated its objections and challenged the impugned addition. The Ld. CIT(A) is found to have essentially supported the findings of the AO. The Ld. CIT(A) was of the view that, the deposition of the Managing Trustee, Shri J. Sundeep Anand, admitting unaccounted cash collections was corroborated by the seized digital evidence, and that the AO's quantification was fair and objective. The Ld. CIT(A) rejected the assessee's reconciliation, holding that the claims of amount(s) being recorded in books, fee waivers and scholarships were unsupported by any contemporaneous evidences and, the assertion that “By Bank” included RTGS or DD receipts was also not verifiable. The Ld. CIT(A) also rejected the plea of coercion or misunderstanding of facts in relation to the depositions relied upon by the AO, as they were not accompanied by any formal retraction. The Ld. CIT(A) accordingly confirmed the addition of Rs.20,37,06,875/- made by the AO for the year under consideration. Being aggrieved, the assessee is now in appeal before us.

11.7 The Ld. AR for the assessee submitted that the impugned addition rests solely upon data extracted from trial software known as i-sms 2.0

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 73 :: and upon statements recorded in the course of the search, unsupported by any independent or corroborative evidence establishing the receipt of unaccounted fee income by the assessee. It was submitted that the entire fee income of SLIMS comprising tuition fees, hostel fees, mess fees and other student-related collections, was accounted for in the regular books of account maintained in Tally and is reflected in the audited financial statements. He explained that i-sms 2.0 was merely trial software operating in test mode, and it was never approved or adopted as the official accounting system of the institution. It was submitted that it was only student management software operated at the college premises and not any billing software. He explained that this software was never intended to capture the statutory books or fee collection details and that the amount(s) entered therein was ancillary to the student management functions performed by the said software. He narrated to us the contours of the functionality of the software and submitted that the person operating this software would simply fill in the fee component(s), whose details were not available with him, in the residuary tab ‘by bank’. He submitted that the statements given by the above-named persons were based on hearsay and lack of knowledge of correct facts. He pointed out that, the fact that portion of the fees was collected in cash is not in dispute as the Revenue had inter alia allowed credit for the cash deposited on account of fees into the bank account. According to him, it was this cash deposit(s), which was handled by these staff, which they had wrongly asserted as unaccounted sum(s). He explained that, where the management would grant fee waiver or scholarships etc., the staff

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 74 :: would capture the same in the tab ‘by bank’ as no other option was available in the software. Likewise where the specific RTGS or DD details were not available with the concerned staff, they would fill the tab ‘by bank’ as otherwise in the tab ‘dd’ or ‘rtgs’, they would have to fill the specific details, which were not available with them. He thus urged us to discard the reliance placed by the Revenue on the data extracted from this software.

11.8 The Ld. AR took us through the comprehensive reconciliation of the actual fee collected from all students with the Revenue’s working based on the i-sms 2.0 data which was placed at pages 944 to 975 of the paper- book along with the details of the actual fees collected and recorded in the books at pages 976 to 987 of Paper Book Volume 2 along with the fee waivers certificates issued by the Finance Committee and approved scholarship application forms which were inter alia placed at pages 988 to 1465 of Paper Book Volume 2. It was thus claimed that, both during the assessment and the appellate proceedings, the assessee had furnished detailed student-wise reconciliations demonstrating that the amount alleged by the Revenue to be unaccounted, stood reconciled. Upon query from the Bench, the Ld. AR for the assessee also placed before us the details of fee collection relating to the sample size of students examined by the AO in the assessment order and argued that there was no discrepancy or falsity, as falsely alleged by the AO. The Ld. AR particularly invited our attention to Page 943 of the paper book to show that the assessee had also brought on record sample entries with the tag ‘by bank’ and their corresponding details of RTGS / DD, to demolish the Revenue’s

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 75 :: case that, ‘by bank’ only denoted cash collections. The Ld. AR contended that, the impugned addition has been sustained on the basis of aggregate differences thrown up by software-generated data and not upon the identification of any particular student from whom fee was allegedly to be collected but unaccounted. According to him therefore, the impugned issue being founded on assumptions; and having regard to the fact that the electronic records were unreliable due to non-compliance with the requirements of sections 65A and 65B of the Indian Evidence Act, 1872, the addition made by the AO deserves to be deleted.

11.9 Per contra, the Ld. DR vehemently supported the order(s) of the lower authorities and does not want us to interfere with their order(s) confirming the impugned addition.

11.10 We have heard the rival submissions, perused the material available on record, the orders of the lower authorities and the paper book filed before us. The question that falls for our consideration is whether the addition of Rs.20,37,06,875/- made for AY 2023-24, on the footing that the entries appearing under the payment mode “by bank” in the software ‘i-sms 2.0’ represented unaccounted cash fee collections of Sri Lakshmi Narayana Institute of Medical Sciences, is sustainable or not. On a careful consideration, we find from the orders of the lower authorities that, the impugned addition rests upon the data extracted from the i-sms 2.0 software, and the tag “by bank” therein being read as denoting cash receipts. This inference is based on the sworn statements of certain functionaries of the institution. Having considered the rival

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 76 :: submissions, we consider it fit to first examine the contents of the ‘i-sms 2.0’ software.

11.11 It is seen from the explanation borne out from the records and the statement given by Shri A Velmurugan, that i-sms 2.0 is student- management software and thus not an accounting or billing software. It was brought to our notice that the function of this software was to create and maintain the college profile of every student and to serve as the digital backbone for the day-to-day administration of the student body viz., the registration of courses and subjects, the dissemination of academic circulars and communications, the tracking of attendance and examinations, and the general interaction between the institution and its students. The fee particulars comes to be captured in the software not for the purpose of maintaining the books of account, but as an administrative pre-condition to the creation of a student’s profile, inasmuch as no profile is generated or activated unless the admission of the student is confirmed, and, in institutional practice, the clearance of fees is ordinarily treated as the evidence of such admission. We note from the statements of various functionaries of the college that, the fees section in the software provides distinct tabs for the recognised modes of payment, namely, demand draft, RTGS, online transfer and cheque, together with a residuary tab styled “by bank”. It is the amounts tagged in this residuary tab ‘by bank’ which is in dispute before us, as according to the Revenue, the functionaries had admitted that this tab actually denoted cash collections, which was not recorded in the books of accounts. The amounts tagged to this tab was quantified originally at Rs.127.08 crores

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 77 :: for FYs 2017-18 to 2023-24, but later on, the Revenue themselves noted that, cash collections to the extent of Rs.7.71 crores had been deposited in the bank account held with PNB by this institute and thus allowed credit for the same and accordingly reduced the alleged unaccounted amount(s) to Rs.119.37 crores. The assessee is found to have refuted this analogy and it was brought to our notice that this residuary tab came to be used by the operating staff in several types of situations, firstly, where the cash was collected from the students, which according to the assessee, was deposited in the bank (as is evident from the deposits in PNB A/c), secondly, where specific particulars of the payment (such as the RTGS or demand draft instrument details) were not available with them, since the dedicated “RTGS” or “DD” tab compulsorily required those very particulars to be filled in; thirdly, where the management simply instructed them to enter a residuary or balance amount, whose break-up was not furnished to them; fourthly, where the amounts were waived by the management or scholarships were awarded, as the software did not have any tabs to capture the same; and fifthly, where the fees remained pending collection but the management had admitted the students and thus to ensure creation of their digital profile for academic purposes. The Ld. AR thus showed us that, the tag “by bank” was in the nature of a catch-all or residuary field and it did not, ipso facto, connote a receipt in cash.

11.12 To corroborate the above assertion, that the residuary tab also captured receipts otherwise than in cash, the assessee placed before us a student-wise sample, aggregating to Rs.3,09,65,500/-, which is placed at page 943 of the paper book, demonstrating that amounts appearing

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 78 :: under “by bank” were in fact received from the very same students through RTGS, NEFT, demand draft and cheque, and stood duly recorded in the seized tally data. The Ld. AR reiterated that these entries had found their way into the residuary tab only because the instrument particulars were not readily available with the staff at the point of entry. Some of the illustrative entries are discussed below:-

i) It is seen that there was an entry of ‘by bank’ in the name of student Rachel Swarna Mary B of Rs.17,50,000/-. The assessee has shown that, the bill date for this entry was 07.08.2018 with bill no. 19000835 and enrolment no. 190133. The assessee is found to have matched this with the banking receipt of Rs.17,50,000/- in respect of the same student for the same date in the seized tally data. Having perused the same, we find this reconciliation to be matching and that, the lower authorities were unjustified in holding that the assertion of the assessee was vague and not specific.

ii) Likewise, the Ld. AR of the assessee showed us another bill entry dated 12.11.2020 with bill no. 21002381 and enrolment no. 210107 which was of the student, Rishi Varthini T K amounting to Rs.21,50,000/-, which was found in the tab ‘by bank’. The assessee is found to have matched this figure with the seized tally data and showed that, the amount was received by RTGS/cheque.

iii) Another instance pointed out by the Ld. AR related to student Sentamil Selvan I having enrolment no. 210114. It is seen that, the bill no. 21002400 dated 10.03.2021 reflected entry of Rs.2,00,000/- under

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 79 :: the tab ‘by bank’, which we find was indeed received through banking channel in as much as the data furnished by the assessee reconciles.

11.13 The assessee is found to have given similar data in another 57 instances and showed that the amount(s) tagged as ‘by bank’ was received through RTGS/cheque/DD/NEFT etc. Having considered this sample set, where the entries “by bank” actually corresponded with the banking receipts of the same students, we find force in the assessee’s explanation that the tag “by bank” was not a euphemism for cash, as was being wrongly assumed by the Revenue. Instead, it corroborates the assertion of the assessee trust, that the staff would enter the details of banking receipts through RTGS/DD/Cheque under the tab ‘by bank’, where the details were not available with them.

11.14 It was further explained, in which we find substance as well, that the software contained no dedicated field to capture scholarships, free seats or fee concessions; consequently, where a student was granted a scholarship or a free seat, the corresponding fee component came to be entered under the residuary “by bank” tab. Likewise, where students sought fee waivers, frequently routed through the student associations, and such requests were pending or came to be granted subsequently, the management would direct the staff to enter the residuary amount under “by bank” so that the profile of the student could be created and the student be permitted to attend classes notwithstanding the pendency of the waiver. The Ld. AR pointed out that, few features of this practice ought to be taken into account which is of significant importance, and had

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 80 :: been wrongly discarded by the lower authorities. First, the knowledge of such waivers, concessions and scholarships ordinarily lay only with the management and the higher functionaries, and not with the day-to-day staff who merely keyed in the figures as instructed and were thus in no position to know the true character of the residuary entries. He thus explained that, due to absence of such knowledge, the lower staff may have assumed that the figures keyed in by them could have been cash, as a matter of gossip and hearsay. Secondly, the Ld. AR rightly explained that the fact of a waiver or scholarship was deliberately kept out of the student-management software, so that a beneficiary student might not feel a sense of inferiority in relation to the fee-paying students, and vice versa. Thirdly, the waivers, concessions and scholarships were supported by contemporaneous evidences, which we find placed at Pages 988 to 1465 of the paper book and considering the overall fee structure of the institute, the quantum of such waiver / scholarship was commensurate to the ordinary practice followed across educational institutions. The Ld. AR has also placed before us the student wise particulars qua these waivers and scholarships, which we find is verifiable. It seen from Page 997 & 998 of the paper book that, the finance committee of the assessee trust in their meeting held on 12.04.2023 had considered the multiple requests received from the students pursuing MBBS course which comprised of 1250 students and taking into consideration their representations and circumstances, they had waived the hostel & mess fees for all students for the FY 2022-23. The fee waiver certificate dated 24.06.2023 was also placed at page 1010 of the paper book along with the annexure of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 81 :: students whose fees were waived at Pages 1011 to 1028 of the paper book. It is seen by us that, there was indeed no tab or option in the software to capture any scholarship or fee waiver and thus this explanation, in a manner, is found to be both natural and probable, that why the waivers and scholarships came to rest under the tag “by bank”. Moreover, according to us, the Revenue was unjustified in rejecting these evidences as an after-thought. Once the assessee had placed on record these evidences and shown that the fees were indeed waived by the management, then if the Revenue still suspected any wrong doing, then the appropriate course was to make independent enquiry from the students whose particulars had been provided by the assessee. This assumed importance as because, there was no other independent or corroborative evidence or any unaccounted cash or asset found in the course of search, which would otherwise suggest that such fees claimed to have been waived had otherwise been collected in cash. However, we find that, no such independent enquiry was carried out by the Revenue. What the AO essentially did is that, he waited for the assessee to exhaust all their evidences, sat back with folded hands and baldly rejected the same. We are unable to countenance such an approach of the AO. The foregoing discussion, in our view, supports the assessee’s case that, it would be unjustified to assume that the tag ‘by bank’ ipso facto denote cash collections.

11.15 The Ld. AR also pointed out that, in many cases, students sought time to clear their dues, and the pending fee was accordingly marked “by bank” so as to enable the creation of their profiles and their attendance in

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 82 :: classes pending payment. He showed us that, the very same students thereafter paid their dues through banking channels in the subsequent years lends strong corroboration to the case that the “by bank” entries represented receivables and pending collections and not amounts already received in cash and suppressed. The assessee is found to have placed a detailed student wise comparison of the amounts reflected in the pay- mode ‘by bank’ with corresponding columns showing their actual fee receipts from the same set of students being reflected in the seized tally data. At the instance of the Bench, the Ld. AR took us through some of the sample instances of this reconciliation. It is observed that, there was a student Balaji S against whom there was an entry tagged as ‘by bank’ in FY 2022-23 of Rs.8,00,000/-, which is seen to have been realised in the same FY 2022-23 and is stated to be recorded in the tally data. The Ld. AR further showed us that, there was a student Deepak L whose bill receipt for FY 2022-23 showed entries of Rs.8,00,000/- in the tab ‘by bank’. The Ld. AR took us through his details and showed that, the said amount was received in two parts, viz., Rs.6,00,000/- in FY 2022-23 and Rs. 2,00,000/- in FY 2023-24, both of which was recorded in the seized tally data. He similarly showed another instance of Smt. Dhaareni S whose entries of Rs.6,50,000/- tagged as ‘by bank’ in FY 2022-23 was received in the same year, though the receipts dates may differ from the bill date. In this context therefore, the finding of the Ld. CIT(A) that the subsequent receipt of fee does not absolve the allegation of suppression, according to us, misses the point. The subsequent banking receipt is not relied upon as a make-good of an earlier cash suppression; instead it is

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 83 :: relied upon as positive proof that no cash was collected at the earlier point of time at all, and that the “by bank” entry was no more than an entry for an outstanding receivable later realised through the banking channel. In our view, where the sum is shown to have flowed through the bank from the same student, the hypothesis of a parallel cash collection of the very same amount becomes self-negating, for it would require the student to have paid twice over, which is logically not possible.

11.16 We further observe that the fundamental fallacy underlying the Revenue’s premise is also exposed by the very samples upon which the AO placed reliance in the assessment order. Upon a query from the Bench, the assessee reconciled those very samples, and we may note a few of them illustratively. The Ld. AR first took us through the example of the student Santha Kumar J, which was illustrated in the statement of Shri S Velumurugan. It was pointed out to us that, the Investigating Authorities had gathered that, the report generated from the i-sms 2.0 software showed collection of Rs.47.20 lakhs whereas the collection as per tally data was only Rs.7 lakhs. To this, Shri S Velumurugan had stated in his deposition that, the said student had indeed paid an amount of Rs.7 lakhs and that further amount of Rs.6 lakhs, stated to have been paid by DD in the software, was actually received in cash and that, the total amount to the tune of Rs.32,60,000/- was received in cash. The Ld. AR on the other hand brought to our notice that, the ledgers of the student, Santha Kumar J extracted in the statement of Shri Velumurugan, clearly showed that, the fees of Rs.22,00,000/- each was credited in each of the FYs 2021-22, 2022-23 and 2023-24 to the individual account of the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 84 :: student. It was therefore pointed out to us that, irrespective of the mode of collection, the entire fees receivable from this student was credited by way of income under the head ‘tuition and other fees’ on accrual basis. The Ld. AR has thus rightly contended that, once the fees have been recorded in the books on mercantile basis, the mode of receipt looses significance. The Ld. AR still showed us that, the payment mode tagged as ‘by bank’ in the bill which was extracted in the statement totalled to Rs.31,00,000/-. It was brought to our notice from the ledgers enclosed in the paper book that, the amount of Rs.31,00,000/- was received through the bank in instalments over FYs 2021-22 to 2024-25 (Rs.2,00,000/- + Rs.5,00,000/- + Rs.22,00,000/- + Rs.2,00,000/-). Similarly, in the case of Innisai Bharathi P, Sri Velumurugan had stated in his deposition that, the pay mode ‘by bank’ reflected sum of Rs.23,60,000/- in the collection report. He himself had clarified that, sum of Rs.7,60,000/- was received through DD and that sum of Rs.14,40,000/- was received in cash. The AO however, was of the view that the entire sum of Rs.22,00,000/- (Rs.7,60,000 + Rs.14,40,000) was received in cash. To this, the Ld. AR brought to our notice again that, the annual fees of Rs.22,00,000/- each was credited to the account of the student on accrual basis and therefore, there was, per se, no suppression of fees. It was further shown that amounts received through banking channels also totalled to Rs.22,00,000/- (Rs.7,60,000/- in FY 2022-23 and Rs.14,40,000/- in FY 2024-25). Thus, in the very cases cited by the AO as instances of discrepancy where the pay mode ‘by bank’ was inferred to mask cash collections, the assessee has traced the “by bank” amount, wholly or

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 85 :: substantially, to receipts through recognised banking channels from the same students. The assessee is also found to have placed the relevant fee receipts along with the banking details i.e. RTGS / DD / Cheque particulars, all of which negates the AO’s observations that the assessee was unable to reconcile their fee payment(s). We thus observe that the sample student analysis undertaken by the AO in the assessment order was prima facie erroneous and divorced of the actual & correct facts. Hence, once the illustrative samples relied upon by the Investigating authorities and the AO themselves collapse, the aggregate extrapolation raised upon them by extracting data from the software cannot survive.

11.17 Also, when we examine the overall reconciliation furnished by the assessee along with the student-wise particulars, which has been placed at Pages 944 to 975 of the Paper book, the position becomes even clearer. The impugned “by bank” figure of Rs.20,37,06,875/- for FY 2022- 23 is shown to comprise of two components. The first, of Rs.4,84,03,660/-, pertains to hostel and mess fees, which we find stood entirely waived by the Finance Committee for the students for FY 2022- 23, and the waiver being documented in the minutes of the Finance Committee and the connected records (at pages 997-998 and 1011-1037 of Paper Book Volume 2). It was precisely because these amounts represented waivers, for which the software provided no dedicated tab, that they came to be parked in the residuary “by bank” field; and an amount that stands waived can, by no logic, be an amount collected in cash. The second component, of Rs.15,53,03,215/-, pertains to tuition fees, of which a sum of Rs.9,14,17,440/- is traced to actual fee receipts

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 86 :: from the same set of students, received through banking channels and reflected in the Tally books, which had appeared under “by bank” only because the RTGS or demand draft particulars had not been captured in the respective tabs; and the residuary balance of Rs.6,38,85,775/- was claimed to be fees receivable from students, of which fees to the extent of about Rs.4.45 crore (approx.) were shown to have been realised from the students through banking channels in the subsequent years. Thus, for the impugned year in question, the greater part of the tuition fees “by bank” figure is shown to have been received through the banking channel, the hostel and mess component was a documented waiver, and the residue was a receivable substantially realised thereafter through the bank. This reconciliation furnished by the assessee, according to us, disproves the theory of the Revenue that “by bank” denoted cash; for if the bulk of the impugned sum was admittedly received through the bank, and the rest either waived or subsequently realised through the bank, the tag “by bank” could not simultaneously be read as a mask for unaccounted cash.

11.18 Turning to the statements relied upon by the Revenue, we find them to be a frail foundation for an addition of this magnitude. At the outset, none of the functionaries, namely, Smt. Saranya, Shri S. Vishnu Varadhan, Shri S. Anbu and Shri M. Achuthan, quantified any figure; their statements are general in nature and, coming from persons who operated or oversaw the software without knowledge of the break-up of the residuary “by bank” entries, are essentially in the nature of hearsay and surmise, not knowing what those residuary amounts represented, they assumed that the amounts must have been collected in cash. Such an

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 87 :: assumption, unaccompanied by the identification of any actual cash receipt from any specific students, cannot sustain an addition. This view of ours is also supported by the answers given by Shri Velumurugan to Question nos. 34 and 36, wherein he himself admitted that, the pay modes were interchangeable used by the accounts team mistakenly in the case of students. He is found to have stated that, sometimes, DD was reflected in the tab ‘by bank’ and vice-versa. Thus, it is observed that the functionaries who operated this software had themselves not fed the data diligently but in a casual manner. This supports the case of the assessee that, the i-sms software was only a student management software and was not meant to be used as an accounting or billing software. Also, the only functionary who quantified any figure was Shri Velumurugan, and even his deposition bears the unmistakable imprint of leading questions; for he first quantified the amount at about Rs.127 crore and, in answer to the very next question, the figure was brought down to about Rs.119 crore after allowing credit for the cash deposits, which demonstrates that the figure was not a matter of his own independent knowledge but a number shaped by the questions put to him. Significantly, the very sample students in whose cases he is said to have admitted the receipt of cash have been shown, as noticed above, to have paid the fees in question through banking channels, which cuts at the root of his deposition. There is therefore force in the Ld. AR’s contention that, his statement appears to proceed upon gossip and a want of knowledge, as wherever the banking, receipt or scholarship particulars of a student were not made available to him, he assumed that the management must have

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 88 :: collected the amount in cash, and it was for that reason that the balance came to be entered under “by bank”. On the given facts before us and the overwhelming evidences placed by the assessee, we are of the view that, the lower authorities ought to have cross examined Shri Velumurugan as his admission was shown to be contrary to the facts placed on record. It is seen that, neither the AO cross-examined him nor was the assessee afforded the opportunity of cross-examination and therefore in light of the legal principles laid down in Paras 9.8 & 9.9 above, we are of the view that it was unsafe to rely on such uncorroborated and untested statement of Shri Velumurugan.

11.19 The Ld. DR had vehemently argued that the chain of depositions did reveal that a part of the fees was received in cash and therefore it would be imprudent to simply discard their testimonies at face value. According to us, this plea does not advance the Revenue’s case. We find that the assessee has not disputed the fact that a portion of the fees was collected in cash; in as much as the Revenue itself allowed credit for the cash of Rs.7,71,23,422/- deposited into the bank account, and it is on that very account that the original alleged figure was reduced from Rs.127,08,24,238/- to Rs.119,37,00,816/-. To that extent, the statement of the staff that they handled cash and remitted it towards Chennai was not untrue; but that cash, of about Rs.7.71 crore, we find, stood deposited into the bank accounts over the years and was duly accounted. The equation drawn by the Revenue, that a collection in cash necessarily connotes unaccounted income, is thus fallacious, for it conflates the mode of receipt with the character of the receipt; cash that is collected and duly

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 89 :: deposited into the bank and brought into the books cannot be characterised as unaccounted.

11.20 We may also observe that the electronic data extracted from i- sms 2.0 was relied upon without compliance with the mandatory requirements of sections 65A and 65B of the Indian Evidence Act, 1872, as we have already canvassed under Ground No. 5 above. Fundamentally, the addition simply rests upon aggregate differences thrown up by the software-generated reports. An addition by way of unaccounted income cannot rest upon such notional and estimated aggregate differences generated by a student-management software that was, on the material before us, was not the accounting software and system of the institution. Moreover, on a cumulative appreciation of the foregoing, we are of the considered view that the theory propounded by the Revenue that the “by bank” entries in i-sms 2.0 uniformly represented unaccounted cash collections is fundamentally flawed and unsupported by any evidence. We find that, the tag “by bank” was demonstrably a residuary field which captured not only cash receipts but also banking receipts whose instrument particulars were not readily available, waivers and scholarships for which no dedicated tab existed, and receivables and pending dues later realised through the cash (deposited in bank) or banking channel. The sample entries and the reconciliation for FY 2022- 23, which has been elaborately discussed earlier, fortifies the assessee’s case, and the statements relied upon by the lower authorities are either general, hearsay, unquantified, or stand disproved by the contemporaneous banking evidence. We accordingly hold that the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 90 :: addition of Rs.20,37,06,875/- is unsustainable and direct the AO to delete the same. This ground is therefore allowed.

12.1 The facts as noted are that, the Investigating authorities had found that, the institution was using a web-based application called “CAMU” (MYCAMU) for capturing student-wise payments received towards tuition fee, hostel fee, room rent and mess charges. This software database was imaged and seized by them. On examination thereof, it was noticed that, several receipts generated through CAMU reflected the mode of receipt as “Others”. According to the Investigating authorities, upon cross- verification with the seized Tally accounting data, it was revealed that, these receipts so tagged as ‘Others’ was not found recorded in the regular books of accounts. The cash collections falling under this tag was generated by way of a summary report for FYs 2018-19 to 2023-24, which aggregated to Rs.21,50,38,594/-. This summary report is noted to have been confronted to Shri K. Velraja, Assistant Professor attached to the Admissions Cell, who deposed that the hostel fee, including room rent, was collected only in cash, while the mess fee was collected both in cash and online, that the receipt bearing the tag “Others” denoted a cash payment received through the MYCAMU interface, and that as per his knowledge, such cash collections were not recorded in the regular books

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 91 :: but were handed over to Dr. M. Achuthan, the admission in-charge, who in turn handed the same to Shri J. Sundeep Anand, the Chairman. When this deposition was confronted, both Shri M. Achuthan and Shri J. Sundeep Anand, in their sworn statements, admitted that, the said sum collected towards room rent and mess fees was not accounted in the books of accounts. Having regard to the report generated from the seized CAMU data in relation to the entries tagged as ‘Others’ and relying on the aforesaid depositions, the AO show-caused the appellant to furnish student-wise particulars, the mode and dates of receipt, and evidence of accounting and offering of the amounts to tax.

12.2 In response, the assessee is found to have claimed that, all these entries tagged as ‘Others’ were forming part of the regular books of accounts. It was contended that, the income of the institution was maintained and offered to tax on an accrual basis year after year and that there was no suppression of fees. The appellant trust further explained that, it maintained the books only in Tally, which alone was the authentic and audited accounting platform, whereas CAMU was merely a learning- management and academic-support system operating in test mode and not approved for financial or accounting use, and as such no reliance could be placed on the data extracted from it. The assessee further submitted that Shri Velraja, being only an Assistant Professor in the Mechanical Engineering Department with no role in the admission or fee- collection process, could not possibly be informed whether these fees so collected had been accounted or not, and therefore his deposition was at best hearsay and deserved to be disregarded. To corroborate their

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 92 :: assertion, the appellant furnished a comparison of the CAMU and Tally data, and showed that amount to the extent of Rs.17.62 crore out of the alleged Rs.21.50 crore had in fact been recorded in the books and reflected in the bank accounts, for which a student-wise reconciliation was also furnished before the AO. The assessee thus contended that the depositions of Shri Achudan and Shri Sundeep Anand had been obtained under pressure without confronting with them with any evidence or material. The appellant further claimed that, these statements though presumed to be true, are rebuttable. The appellant submitted that, these statements alone cannot be the sole basis to justify the addition, particularly when the appellant was able to demonstrate on facts that the amount(s) found in CAMU were recorded in the tally books. The appellant thus argued that, when the impugned sum already stood credited in the books of accounts and had been offered to tax on accrual basis, any further addition by the AO would amount to a double addition of the same income.

12.3 The AO is found to have summarily discarded the explanation put forth by the appellant, particularly the reconciliation statements placed on record. Instead, the AO is found to have shifted the onus onto the appellant for failing to illustrate with evidence, that the cash collections recorded under “Others” in CAMU were carried into Tally records, deposited into bank accounts and offered to tax. According to him, the reconciliation put forth was confined to a random selection of tally receipts without establishing any valid nexus with the “Others” entries. The AO disputed the version narrated by the assessee on the premise that

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 93 :: the entries in the Tally ledger merely bore the generic narration “Cash Deposit at Selaiyur, BIHER Tambaram”, from which it could not be ascertained that the deposit related to the cash collected from students. According to him, when Shri Sundeep Anand, had himself deposed that the same was never accounted for, there was no reason to hold otherwise. The AO accordingly held that the room rent and mess fee collected in cash had remained unaccounted and brought the sum of Rs.5,48,97,101/- relatable to the relevant AY 2023-24 under consideration to tax as undisclosed income of the appellant trust.

12.4 On appeal, the assessee is found to have reiterated its objections and relied upon the reconciliation statements for challenging the impugned addition. The Ld. CIT(A) was of the view that, the data extracted from CAMU software and the sworn statements gathered during the search, revealed that the receipts tagged as “Others” were system- generated at the point of receipt, and that the Investigating authorities had found upon cross-verification that these entries were not available in the seized Tally data. The Ld. CIT(A) thus held that, the assessee’s attempt to discredit the depositions of the key persons, who had stated that the entries tagged as ‘Others’ was unaccounted collections, was a bald assertion unsupported by any retraction or contemporaneous complaint. The Ld. CIT(A) also refuted the assessee’s contention that, the amount to the extent of Rs.17.62 crore stood recorded in Tally and reflected in the bank accounts by holding that the reconciliation was a self-serving compilation resting on generic “Cash Deposit at Selaiyur, BIHER Tambaram” entries without any student-wise, date-wise or receipt-

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 94 :: wise linkage to the CAMU receipts. The Ld. CIT(A) thus confirmed the action of the AO making the impugned addition of Rs.5,48,97,101/-. Being aggrieved by the order(s) of the lower authorities, the assessee is now in appeal before us.

12.5 The Ld. AR for the assessee submitted that, the lower authorities had simply assumed that the summary report extracted from the "CAMU" (MYCAMU) software with the tag ‘Others’ must represent unaccounted fee collections and therefore added the same to the total income, in complete disregard of the contemporaneous books of accounts. The Ld. AR showed that, the hostel fees comprising of room rent & mess fees credited in the stand-alone accounts of Bharath Institute of Higher Education and Research was Rs.9,29,84,218/- which according to him inter alia comprised of cash receipts of Rs.4,43,50,552/-, as evidenced by the cash deposits in the bank account. He further submitted that, the fees pending to be received from the students was Rs.1,05,46,549/-, subject to certain adjustments, was realized in subsequent years. He thus submitted that, the total fees of Rs.5,48,97,101/- [Rs.4,43,50,552 + Rs.1,05,46,549] identified by the AO by the tag ‘others’ though collected in cash, had indeed been recorded in the books of accounts of the assessee. The Ld. AR submitted that the lower authorities had conveniently ignored the student wise collection details and pending fees submitted by the assessee, copy of which was placed before us at Pages 1466 to 1581 of Paper Book Vol 2.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 95 :: 12.6 According to the Ld. AR, the CAMU software is merely a learning- management and academic-support platform, deployed for student administration, attendance, examinations and allied academic functions and, at the relevant time, operating in test mode. He submitted that, it was neither the authorised accounting software of the institution nor was it ever intended to function as a financial ledger; and that the regular books of the assessee are maintained solely in Tally records. He submitted that, the dropdown menu in the software contained tags for RTGS/Bank/UPI etc. and if any of these tags were not applicable, then it would be tagged as ‘Others’. He explained to us that, the tag ‘Others’ not included cash collections but also fees which had been intimated to the students but was pending collection. The Ld. AR explained that, unless the fees were fully tagged in the MYCAMU software, the warden / professor would not be able to provide learning-management and academic-support to the concerned student(s). Hence, where there were cash collections, it would be tagged as ‘Others’, in absence of any other suitable option available in the drop-down menu. Likewise, where any student would seek time to clear the mess dues or where the warden / person-in-charge was not aware whether the fees had been paid or waived by the management, they would tag the same as ‘others’ as there was no option to show the same as ‘receivable’ or ‘due’. The Ld. AR thereafter brought to our notice that, the cash collections from the students was aggregated and deposited at periodic intervals in the bank account. The Ld. AR pointed out that the Revenue proceeded on the wrong assumption of fact that, firstly, the summary report generated from CAMU software is

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 96 :: sacrosanct and, secondly, the cash collections are unaccounted for. He submitted that, the inference so drawn was based solely on the depositions recorded in the course of search, without any iota of independent or corroborative material to establish the actual receipt of any unaccounted room rent or mess fee. He submitted that, Shri K. Velraja, whose deposition was being relied upon, was an Assistant Professor in the Mechanical Engineering Department, and thus he was neither concerned with the fee-collection process nor with the maintenance of accounts. It was for this reason that the professor was operating the CAMU software which was a learning-management and academic-support platform. The Ld. AR thus prayed that the addition should not be sustained on such unreliable deposition obtained by duress. He further assailed the testimonies of Shri Achuthan and Shri Sundeep Anand, being uncorroborated admissions, which stood rebutted by the contemporaneous books; and that the electronic data relied upon suffered from non-compliance with Sections 65A and 65B of the Indian Evidence Act, 1872.

12.7 Per contra, the Ld. CIT, DR supported the orders of the lower authorities and submitted that CAMU was a contemporaneous and reliable record of the actual receipts captured at the point of collection, that on cross-verification the entries tagged as "Others" were not found in the seized Tally data. He submitted that, though there were cash deposits found in the bank account but the narrations contained in the tally records did not reveal its true nature and whether it pertain to such room rent & mess fee collections. He argued that the key persons had admitted

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 97 :: in their sworn statements that these collections remained unaccounted, and therefore he urged us to uphold the order of the lower authorities.

12.8 We have heard both the parties and perused the material available on record. It is observed that, the impugned issue for our consideration rests upon the summary report generated from the CAMU software wherein the amounts tagged as ‘Others’ were suspected to depict receipts by way of cash, which was not recorded in the tally data. The AO corroborated this suspicion by relying upon the depositions of Shri Velraja, Shri Achuthan and Shri Sundeep Anand recorded in the course of search, and he accordingly made the impugned addition of Rs.5,48,97,101/- in the relevant year. According to us, and having considered the gamut of facts on record, the veracity of the impugned addition is first required to be tested on the correctness and evidentiary value of the MYCAMU data, and thereafter, the reliability of the statements, in light of the contemporaneous facts brought on record by the assessee.

12.9 It is observed that the MYCAMU software was used by BIHER as a student management and academic-support application. The said software understandably contained student wise details including the fees paid by them towards tuition fees, course fees, admission fees, hostel fees (including room rent & mess fees). The main purpose of the said software was not to monitor fee collection, and that it was one of the side features of the software. It was brought to our notice that the ‘MYCAMU’ software inter alia contained dropdown menu from which the fees could

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 98 :: be tagged as RTGS / NEFT / IMPS / UPI, DD & Cheque. There was also a residuary tag in the drop-down menu of ‘Others’. The Ld. AR showed us that, there was no option to select ‘cash’ in the MYCAMU software. There is no quarrel before us that, the fee collections described in all other tags were recorded in the tally records and the issue-in-dispute is only the fees which was described as ‘Others’. We observe that, Shri Selvaraj had explained in his deposition recorded u/s 132(4) of the Act that, generally the hostel fees comprising of room rent & mess fees were collected in cash, though mess fees was sometimes paid through bank. The Ld. AR explained that, only because he had stated that the hostel fees was collected in cash did not insinuate that it was unaccounted. He showed us that, the tag ‘Others’ being the residuary option was used to inter alia tag cash collections, but he strenuously contended that, such cash collections were recorded in the books of accounts. It was claimed that, the Revenue had acted on a mistaken assumption that cash collections ipso facto insinuates unaccounted receipts. The Ld. AR showed us that, the cash so collected had indeed been deposited in the bank account and recorded in the books of accounts.

12.10 It is seen by us from the financial statements that, the assessee had credited hostel fees aggregating to Rs.9,29,84,218/- in the Income & Expenditure Account. The said amount is found to inter alia comprise of cash collections deposited in bank account aggregating to Rs.4,43,50,552/-. The assessee is noted to have furnished the relevant bank statements before the lower authorities evidencing the cash deposits as well. The Revenue is noted to have rejected the bank statements on a

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 99 :: flimsy premise that the narrations in bank book i.e. "Cash Deposit at Selaiyur, BIHER Tambaram" was vague and did not suggest any linkage to the "Others" entries. We however are unable to countenance such an approach. The contemporaneous facts placed before us shows that, BIHER had deposited the cash collected in their bank account, which was also credited to their ledger ‘Hostel Fees’ and reflected in the financials for the year ended 31st March 2023. Hence, according to us, the assessee has discharged their onus of substantiating that the cash collection tagged as ‘Others’ in the MYCAMU software was indeed recorded in the books of accounts. Having done so, the burden shifted upon the Revenue to establish, by pointing to specific defects or by independent material, that the receipts were in fact suppressed. On the record before us, the Revenue has neither identified a single student from whom room rent or mess fee is shown to have been collected and not accounted, nor brought forth any material to demonstrate that the impugned collections found their way outside the books. Instead, the addition is found to solely rest on alleged difference thrown up by an software based on an incorrect and incomplete comparison with tally records, which in our view, constitutes a notional and assumptive addition, which cannot be sustained in law.

12.11 The lower authorities is found to have emphasized that, the assessee was unable to provide student wise cash collections and reconcile the same with the cash deposited in the bank account. It is observed that the aforesaid assertion was factually erroneous. The assessee has placed before us the student wise collection details, which is available at Pages 1533 to 1566 of the paper book Vol-II, which was also

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 100 :: filed before the lower authorities. It is observed that the cash collection tagged as ‘others’ inter alia comprised of amounts aggregating to Rs.4,43,50,552/-, which we find, matches with the cash collections credited in the I&E A/c under the head ‘Hostel Fees’. According to us, where an institution pools the daily collections of a campus and deposits the aggregate into its bank account, the resultant book and bank entry would, in the ordinary course, carry a consolidated branch-wise narration rather than a student-wise description; the absence of a granular narration in a consolidated deposit entry is thus a natural incident of the manner of banking and cannot, by itself, be a ground to reject an otherwise verifiable reconciliation. The reconciliation furnished by the assessee is not a bare assertion but a student-wise working running into over a hundred pages, drawn from the MYCAMU data and the Tally records, both of which are contemporaneous material and neither the AO nor the Ld. CIT(A) has been able to point to a single specific entry therein which is shown to be false or erroneous. In such circumstances, the rejection of the reconciliation as a self-serving compilation, without demonstrating any specific defect, cannot be countenanced.

12.12 Overall therefore, we find that, out of the amount(s) tagged as ‘Others’ totalling to Rs.5,48,97,101/-, sum of Rs.4,43,50,552/- is demonstrably traceable to, and stands recorded in, the regular Tally books and the corresponding bank account of the assessee, as borne out by the student-wise reconciliation placed at Pages 1533 to 1566 of Paper Book Volume-2. This material contemporaneous fact is of decisive significance, as it negates the very premise of the AO on which the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 101 :: addition was made that, entries tagged "Others" in MYCAMU software denotes cash collection kept outside the books. According to us, once the assessee has been able to successfully demonstrate that the tag "Others" is not unaccounted cash receipts, and that, it formed part of the books of accounts, the entire basis of quantification made by the AO from the summary report generated from ‘MYCAMU’ software collapses.

12.13 In view of the above, there is force in the Ld. AR’s claim that, even the balance amount of Rs.1,05,46,549/- tagged as ‘Others’ in the software cannot be assumed to be unaccounted, only because it is not traceable to the tally records of FY 2022-23. The explanation given by the assessee that, this tag of ‘Others’ to the remaining amount denotes fees pending collection or where fees were waived does appear to be plausible, on the given contemporaneous facts of the case. It is a common feature in hostel & mess premises that the students seek time from the warden / person-in-charge to clear the dues and that leeway is allowed to them to clear the same in due course, pending which, they are allowed to use the hostel premises. Also, sometimes, portion of their fees is also waived depending upon circumstances of the students. According to us, given the fact that, the tuition fees, admission fees, course fees etc. are undisputed and found to be recorded in the books of accounts and even the impugned hostel fees comprising of room rent & mess fees are majorly collected and accounted for in the books of accounts, the assessee’s claim that, the remaining sum of Rs.1,05,46,549/- represented fees pending collection, which was received and deposited in subsequent year(s) or fees which could have been waived later on, carries merit and

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 102 :: is found to be acceptable, particularly because no other independent evidence was brought on record by the Revenue to show otherwise.

12.14 We now turn our attention to the depositions relied upon by the lower authorities. In respect of the statement of Shri Velraja, we find merit in the plea of the Ld. AR that, being an Assistant Professor in the Mechanical Engineering Department, unconnected with the fee-collection process and with the maintenance of accounts, he was not a person competent to depose as to whether or not the receipts had been carried into the books, and therefore his statement, insofar as it speaks to the accounting treatment, is in the nature of hearsay and is of no evidentiary value. Moreover, once the contemporaneous books of account, as demonstrated above, contradict the admission of non-accounting by Shri Achuthan and Shri Sundeep Anand, their statements cannot be relied upon as it is based on incorrect facts. Hence, in such a situation, whether these two persons later on formally retracted or not is not decisive.

12.15 For the above reasons therefore, we hold that the impugned addition of Rs.5,48,97,101/- is untenable both on facts and in law. We accordingly set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the impugned addition. This ground of appeal raised by the assessee is allowed.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 103 :: under Bharath Institute of Science and Technology / Bharath Medical College and Hospital run by the assessee trust.

13.1 Briefly noted, the Investigating authorities had impounded several loose sheets in the course of the search conducted under section 132 of the Act at the premises of Bharath Institute of Higher Education and Research (BIHER). On examination, these loose sheets were found to contain contemporaneous, date-wise particulars of hostel caution deposits and hostel fee collections received in cash from students, covering the financial years 2020-21 to 2023-24 and including daily receipt details for the period immediately preceding the search, i.e., from 02.08.2023 to 04.10.2023. The seized material also disclosed the prescribed hostel fee structure, indicating that the hostel charges were Rs.1,50,000/- for AC rooms and Rs.75,000/- for non-AC rooms in the earlier years, which stood increased to Rs.2,00,000/- and Rs.1,00,000/- respectively for students admitted during FY 2023-24. According to the Investigating authorities, the cash collections reflected in the loose sheets were not found in the regular books of account maintained by the assessee trust in tally records. The AO observed that, a sworn statement under section 132(4) of the Act was recorded from Shri Lingeswaran K, Admission Officer, who confirmed that the loose sheets represented hostel fee and caution deposit amounts collected in cash from hostel students, that the caution deposits were refundable deposits collected from students availing the hostel facility, and that such cash collections were not communicated to the Accounts Department for entry into Tally but were handed over directly to Shri M. Achudan, Personal Secretary to the Trustee, Shri J.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 104 :: Sundeep Anand. Shri Lingeswaran further furnished a consolidated summary quantifying the unaccounted hostel-related cash collections at Rs.6,69,50,000/- for the various financial years, which fully corresponded with the figures culled from the seized loose sheets. The AO further observed that, when confronted with these details, both Shri M. Achudan and Shri J. Sundeep Anand, Chairman of the Trust, in their depositions had admitted that the sum of Rs.6,69,50,000/- had been received and that, the same remained unaccounted in the books of Bharath Medical College and Hospital. On the strength of the seized loose sheets and the aforesaid statements, the AO quantified the hostel fee and caution deposits collected in cash and kept outside the books at Rs.1,65,75,000/- for the relevant FY 2022-23, and issued a show-cause notice calling upon the assessee to explain the same.

13.2 The assessee is noted to have disputed the above show cause and claimed that the hostel rent, including the caution deposits, collected from the students had been duly recorded in the books and offered to tax, and that the amounts alleged to be unaccounted had in fact been deposited into bank accounts at various instances and recorded in the regular books. The assessee is found to have furnished a reconciliation for the figure in dispute viz., Rs.6,69,50,000/-. The assessee submitted that Shri Lingeswaran, being an Assistant Professor in the EEE Department at BIHER, could not be expected to have complete knowledge of the accounting affairs of the assessee trust, and that the depositions of Shri Lingeswaran, Shri Achudan and Shri Sundeep Anand admitting non- accounting had been obtained under pressure during the search and

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 105 :: ought to be disregarded. The assessee submitted that the unreliability of their statements were proven by contemporaneous evidences which showed that the impugned fees had indeed been accounted and had been offered to tax on accrual basis in the respective years, and thus any addition on this count would amount to a double addition of the very same income. The AO however rejected these submissions of the appellant by observing that the assessee's plea of bank deposit and accrual offer was untenable, in light of the depositions of Shri Achudan and Shri Sundeep Anand who had confirmed that these collections were not accounted for taxation. The AO accordingly held that the hostel fees and caution deposits collected in cash were not accounted for, and brought the sum of Rs.1,65,75,000/- relatable to the year under consideration to tax as undisclosed income of the assessee trust.

13.3 On appeal, the Ld. CIT(A) is found to have heavily relied upon by the findings rendered by the AO for confirming the impugned addition. The Ld. CIT(A) observed that the loose sheets revealed systematic collection of hostel fees by the hostel administration, which as per the depositions of the key persons was not accounted in the tally records. The Ld. CIT(A) observed that the author of these loose sheets i.e. Shri Lingeswaran was unable to explain whether the cash was accounted or not, but the person to whom the cash was handed over had confirmed that it remained unaccounted. According to Ld. CIT(A), as the statements had not been retracted, the addition(s) made on the basis of these statements could not be disturbed. The Ld. CIT(A) is found to have also rejected the reconciliation furnished by the assessee with reference to the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 106 :: seized tally records as a post-facto compilation, which in his view lacked date-wise or student-wise linkage with the entries in the seized loose sheets. Aggrieved by this order of the Ld. CIT(A), the assessee is now in appeal before us.

13.4 At the time of hearing, the Ld. AR for the assessee, assailing the action of the lower authorities, pointed out that, the impugned addition of Rs.1,65,75,000/- rests entirely upon two planks, namely, the loose sheets impounded under Annexure ANN/SNS/BIHER/LS/S-1 and the depositions of Shri Lingeswaran K, Shri M. Achudan and Shri J. Sundeep Anand recorded in the course of search. The Ld. AR took us through the audited financials of the assessee trust and demonstrated that the very hostel receipts alleged to be unaccounted stand recorded in the regular books of account and offered to tax on accrual basis in the relevant year. He submitted that the refundable caution deposits, being repayable to the students, do not partake of the character of income at all and stand disclosed as a liability in the Balance Sheet. According to him, once the contemporaneous books of account establish that the receipts are accounted for, the statements relied upon by the Revenue, which are in any event bald and general, stand negated by the material facts on record, and the addition, if sustained, would result in the very same income being taxed over twice.

13.5 Per contra, the Ld. CIT, DR appearing for the Revenue supported the orders of the lower authorities. He submitted that the loose sheets contained contemporaneous, date-wise particulars of cash collections

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 107 :: which were not found in the Tally records, that the key persons had in their sworn statements admitted that these collections remained unaccounted, and that the said statements having not been retracted, the addition made on their strength ought not to be disturbed.

13.6 We have heard both the parties and perused the material available on record. Upon taking note of the facts as discussed above, the dispute before us relates to the addition of Rs.1,65,75,000/- made in the relevant AY 2022-23 on account of hostel fees and caution deposits allegedly collected in cash and kept outside the books, quantified on the basis of the loose sheets seized under Annexure ANN/SNS/BIHER/LS/S-1 and the depositions of Shri Lingeswaran, Shri Achudan and Shri Sundeep Anand. According to the lower authorities, the cash collections reflected in the loose sheets were not traceable in the Tally records and the said persons had admitted in their statements that these collections were not carried into the books, and it is on this premise, that the impugned sum was brought to tax as undisclosed income of the assessee trust.

13.7 According to us, it is imperative to first examine the contemporaneous facts placed before us. It is observed that the hostel fees for the year under consideration stand credited under the head "Hostel Fees" in Schedule-11 to the Income and Expenditure Account for the year ended 31.03.2023 at Rs.3,19,04,328/-. The Ld. AR has provided the break-up of the ‘hostel fees’ and it is seen that, it inter alia comprises of net sum of Rs.1,62,00,000/- relating to the hostel operated for ‘Bharath Medical College and Hospital’. It is seen that, the hostel housed

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 108 :: 192 students which comprised of 88 boys and 104 girls. The assessee has provided the break-up of these students who were staying at the hostel, and it is observed that, 29 students were occupying the AC premises and remaining 163 students had rented non-AC premises. The assessee is noted to have charged Rs.1,50,000/- and Rs.75,000/- for AC and non-AC premises respectively. The Ld. AR has placed before us the summary working of the fees receivable from these 192 students, as per the tariffs of Rs.1,50,000/- and Rs.75,000/- respectively, which is as follows:-

13.8 From the above, it is seen that the figure of hostel fees receivable from the 192 students, works out to Rs.1,65,75,000/-, as calculated by the AO from the seized material. The Ld. AR has showed us that, the entire fees of Rs.1,65,75,000/- was received from these 192 students and accounted for as income under the head ‘Hostel Fees’ in the Income & Expenditure Account. He further brought to our notice that, few students had exited the hostel before completion of the period and therefore, proportionate sum paid by them by way of advance hostel fees had been refunded, which worked out to Rs.3,75,000/- for the relevant FY 2022-23. It is thus observed that, the assessee had credited sum of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 109 :: Rs.1,62,00,000/- [Rs.1,65,75,000 – Rs.3,75,000] in the Income-tax Expenditure Account in relation to the hostel fees of ‘Bharath Medical College and Hospital’. It is noted that, the assessee had also furnished student wise break-up of the hostel fees before the lower authorities, which is found placed at Pages 1595 to 1602 of the paper book. We note that, the names of the students, as appearing in the books of accounts, and the amounts received/receivable from them recorded in the Income & Expenditure Account, are matching with the names & amounts found mentioned in the seized loose sheets, which has been extensively extracted by the AO at Pages 191 to 197 of the assessment order. We thus observe that these contemporaneous facts negate the case of the lower authorities that the hostel fees collected from the students had not been recorded in the books of accounts. Rather, we find that the very receipts which the lower authorities have alleged to be unaccounted, are, on a perusal of the audited financials, found to have been duly brought into the Income and Expenditure Account and the Balance Sheet of the assessee. These material-contemporaneous facts, according to us, negate the statements relied upon by the Revenue and disproves the very foundation of the impugned addition.

13.9 According to us, the fact that, the tariff at which the hostel fees have been recorded in the seized Tally data and in the audited accounts is one and the same as the fee structure disclosed by the seized loose sheets viz., Rs.1,50,000/- for AC accommodation and Rs.75,000/- for non-AC accommodation for FY 2022-23, is of considerable significance. This commonality of the tariff is decisive. Had the loose sheets

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 110 :: represented a stream of collections distinct from, and additional to, those in the books, one could infer out of books collections. The contemporaneous fact however is that the rate reflected in the loose sheets is identical to the rate at which the receipts stand recorded and deposited in the Tally accounts. This corroborates the plea of the assessee that the two sets of figures do not represent parallel collections, but relate to the very same hostel receipts, which has been accounted for in the regular books of accounts at the identical prescribed tariff.

13.10 This inference is further corroborated by the student-wise particulars furnished by the assessee. It is observed that the assessee has placed on record at Pages 1595 to 1602 of the Paper Book, the details of the hostel occupants, comprising 88 boys and 104 girls, together with the person-wise particulars of the hostel fees and caution deposits collected from each such student, cross-referenced to the corresponding entries in the Tally records and the bank deposits. A perusal of these particulars establishes a correlation between the students in occupation of the boys' and girls' hostels, the fees charged from them at the prescribed tariff, and the receipts accounted for in the books. It is seen that, though the student-wise break-up was furnished by the assessee, the Ld. CIT(A) had conspicuously observed that, no such detail was provided, which we find is factually false. Rather, we find that, the reconciliation furnished by the assessee, has been drawn from the seized Tally data itself, which is contemporaneous material impounded in the very search, and thus the Ld. CIT(A) factually erred in brushing the same aside as a self-serving post-facto compilation.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 111 :: 13.11 Coming to the refundable caution deposits, we in principle agree with the Ld. AR that, a caution deposit collected from a hostel student, being refundable on the student vacating the hostel, is in the nature of a deposit held in trust and does not constitute the income of the assessee at all. It is seen that, the assessee has rightly disclosed the same on the liabilities side of the Balance Sheet as an amount repayable. We thus of the considered view that, under no circumstance could such refundable deposit have been brought to tax as income of the appellant, whether disclosed or otherwise.

13.12 We find that, instead of disproving the above evidences furnished by the assessee, the lower authorities had simply rejected the same by citing testimonies of various persons, who had alleged that, these hostel fees collections had not been recorded in the books of accounts. According to us, on these given facts before us, the reliance on such bald testimonies, which are evidently disproven on facts, was unjustified. We observe that, the key statement, which was relied upon by the Revenue, was the statement of Shri Lingeswaran, from whose possession the impugned loose sheets were impounded. There is force in the plea of the Ld. AR that, Shri Lingeswaran was not a person competent to speak about the accounting treatment of these receipts. It is not in dispute before us that, Shri Lingeswaran was an Assistant Professor in the EEE Department at BIHER, discharging duties connected with admissions. He however was in no manner concerned with the accounts and finance function of the assessee trust. Having regard to his profile, it is not imprudent to infer that, it was not within his knowledge that whether or

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 112 :: not the cash handed over by him was, at the subsequent stage, carried into the Tally records by the Accounts Department. Indeed, the Ld. CIT(A) has himself recorded that Shri Lingeswaran was unable to explain whether the cash was accounted or not, an observation which, according to us, cuts against the Revenue, for it demonstrates that the very author of the loose sheets was not equipped to depose to the accounting of these receipts. In so far as the statements of Shri Achudan and Shri Sundeep Anand are concerned, as held earlier, an admission made under section 132(4), though a relevant and important piece of evidence, is not conclusive and it is always open to the maker, or to the assessee, to demonstrate that the admission was incorrect or does not accord with the true state of facts. Indeed the persons in question, had not formally retracted their statements, but the contemporaneous facts, which we have elaborately discussed in the preceding paragraphs, contradicts their admission. According to us therefore, it is the contemporaneous facts that must prevail, for a bald admission cannot displace the books of account which speak for themselves.

13.13 For the reasons discussed in the preceding paragraphs, we find that, the impugned receipts added by the AO had already been recognised as income on accrual basis and offered to tax in the audited accounts of the assessee, and thus the addition of Rs.1,65,75,000/- again made by the AO by way of unaccounted income, amounted to an impermissible double addition. We therefore set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the impugned addition. This ground of appeal raised by the assessee is allowed.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 113 :: 14. Ground No. 11 raised by the assessee is against the disallowance of expenditure to the extent of Rs.1,47,69,000/- incurred by Sri Lakshmi Narayana Institute of Medical Sciences (SLIMS) by invoking provisions of section 40A(3) of the Act.

14.1 Briefly stated, the Tally data found in the course of search was seized and titled “Tally Master Data”, which inter alia contained numerous entries under the ledger “bank payment vouchers”. It was seen that, there were substantial payments transferred from the institution’s bank accounts to various individuals, who, on verification, were found to be the employees of the appellant trust and not their suppliers or contractors. When confronted with these transfers, Shri Arun Kumar V, Accountant, admitted that the amounts debited from the Indian Overseas Bank and two Punjab National Bank was paid to the personal bank accounts of several employees, from which cash was withdrawn, and that these withdrawals had no genuine expenditure linkage but was a modus followed to move out cash out of the institution.

14.2 Having regard to the above testimony, the AO called upon the assessee, through a notice under section 142(1) and thereafter a show- cause notice, to furnish the identity of the recipients, bank statements, the business purpose and utilisation of the payments, evidence of any works executed, and justification in the light of section 40A(3) of the Act. In response, the assessee contended that, these tally entries were as a matter of fact accounted under the ledger “Construction – Building”, which it supported with ledger extracts and vouchers. The assessee

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 114 :: explained that, the payments were made through bearer cheques handed to the campus in-charge, Shri Achudan, for meeting day-to-day local labour payments and miscellaneous material procurement in remote and rural locations where construction was on-going, and where cash was customarily preferred. The assessee showed that, the persons named in the vouchers, such as “Gopu” and “Ravi”, were the contractors or sub- contractors and not employees; and that payments were made towards the construction activities which were integral to the objects of the trust and were funded out of its educational income. The assessee submitted that the use of bearer cheques was a commercial expedient and therefore the payments cannot be regarded as non-genuine. The assessee argued that, there was no incriminating material found in the course of search which suggested that, these expenses had been fabricated or was not genuine. In respect of the statements relied upon by the AO, the assessee submitted that, they were recorded under duress and that such bald statements alone cannot be the basis to disallow otherwise genuine payments. The AO however was not satisfied with the explanation furnished by the assessee and dismissed the same as generalized assertions. He further observed that, the ledgers carried vague narrations and in absence of any proper contractor bills, work orders etc., the withdrawals cannot be said to have been applied towards the objects of the trust. Having held so, the AO alternatively observed that the cash payments were in any event in excess of the threshold prescribed under section 40A(3) without any exception being made out, and therefore he

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 115 :: ultimately disallowed the payments of Rs.1,47,69,000/- relating AY 2023- 24 u/s 40A(3) of the Act.

14.3 On appeal, the Ld. CIT(A) reiterated the findings of the AO that the seized Tally data revealed that, the funds were paid to the personal accounts of employees. The Ld. CIT(A) rejected the submissions of the assessee holding it to be fanciful theory and an afterthought unsupported by evidences. The details furnished by the assessee and the plea of commercial expediency was also dismissed, in light of the admission of Shri Arun Kumar. The Ld. CIT(A) also negated the contention of absence of incriminating material, by observing that, the seized Tally data itself constituted incriminating material. He ultimately concluded that, even if the explanation of the assessee trust is taken at face value, then also the cash payments through bearer cheques, being in excess of the statutory threshold and unsupported by any exception under Rule 6DD of the Income-tax Rules, 1962, attracted the rigour of section 40A(3) of the Act. The Ld. CIT(A) accordingly sustained the disallowance of Rs.1,47,69,000/-. Aggrieved by the action of Ld. CIT(A), the assessee is now in appeal before us.

14.4 The Ld. AR appearing for the assessee submitted that, the lower authorities had failed to appreciate the correct nature of these payments and had made the disallowance by solely relying on bald deposition obtained during the course of search. The Ld. AR further submitted that, there was no incriminating material or corroborative evidence found in the course of search which would in any manner suggest that the payments

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 116 :: were bogus or fictitious. Rather, the lower authorities were swayed by the issuance of bearer cheques and assumed that the monies were not been spent for charitable purposes. The Ld. AR explained that, the expenditure in question pertained to construction and infrastructure development activities undertaken at Sri Lakshmi Narayana Institute of Medical Sciences, and that all these payments were recorded in the regular books of account under the ledger head "Construction – Building". The Ld. AR took us through the relevant evidences including ledger extracts of the ‘Construction–Building’ A/c, bank payment vouchers, contractor bills, invoices, supply records and supporting vouchers evidencing execution of the construction activities. The appellant thus explained that, the bearer cheques were issued to employees to encash at the local place(s) and thereafter, disburse the payments to the local suppliers / vendors / contractors, who customarily would only accept cash. The Ld. AR showed us that, the names of ‘Shri Gopu’ and ‘Shri Ravi’ referred to by the lower authorities were the contractors engaged in construction activities and not employees of the institution. The Ld. AR argued that none of these contemporaneous evidences, which were placed on record, were shown to be fictitious or inflated. He submitted that, the lower authorities instead of dealing with the facts and the material placed on record, blindly followed the bald depositions ignoring the rebuttable facts placed by the assessee. To further buttress her contention, the Ld. AR showed us that, there was substantial construction and infrastructure development activities carried out actually on the ground and thus when existence of the underlying asset and completion of the construction work are not in dispute, the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 117 :: corresponding payments made towards the same could not possibly have been alleged to be non-existent. According to him, bald statements recorded during search cannot override the contemporaneous books of account, vouchers, invoices etc.

14.5 In so far as invocation of provisions of Section 40A(3) of the Act is concerned, the Ld. AR submitted that, the bearer cheques were issued to Shri Achudan, the Campus In-charge, by way of imprest for onward disbursement of day-to-day labour payments and petty material procurement at a remote construction site where cash was insisted upon by labour and local suppliers, and that the mode of payment cannot, by itself, render otherwise genuine expenditure liable to disallowance. He thus submitted that, when the genuineness of the payments had been proved and the same was made on business contingency, then no disallowance was warranted only because the cash payments exceeded the limit specified in section 40A(3) of the Act.

14.6 Per contra, the Ld. DR appearing for the Revenue vehemently supported the orders of the lower authorities. He placed reliance on the seized Tally data and the admission of the Accountant, and submitted that the payments having been routed through bearer cheques in excess of the statutory threshold and unsupported by any exception under Rule 6DD, the disallowance under section 40A(3) was rightly sustained.

14.7 We have heard the rival submissions and perused the material placed before us. It is observed that, the impugned disallowance was sustained by the Ld. CIT(A) on two footings viz., firstly, the expenditure

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 118 :: itself was not genuine, and that the funds were allegedly routed to the personal accounts of employees; and secondly, the payments were through bearer cheques which attracted the rigour of section 40A(3) of the Act. We first take up the issue as to whether the expenditure in question was actually incurred towards the purposes, as stated by the appellant, or not. It is not in dispute that, the impugned payments were recorded in the regular books of account of the institution under the ledger head "Construction – Building". The assessee has placed before us, the ledger extracts, bank payment vouchers, contractor bills, invoices and supply records, at Paper Book Vol. 3, Pages 1613 to 1962. Upon perusal of the same, it is observed that, these payments were made towards miscellaneous civil jobs, contractors, paint, plaster, electrical fittings etc. For instance, it is seen that, the assessee had engaged a local PWD contractor, Shri D Ravi for undertaking miscellaneous civil jobs at the construction site, for which he had billed sum of Rs.5,14,800/- in aggregate. Similarly, the assessee has furnished bill of quantities issued by the electrical contractor, Senthilkumar which comprised of miscellaneous screws, nuts, sand, charcoal pipes etc. supplied by him, all of which totalled to Rs.3,82,950/-. It is seen that, these expenses inter alia comprised of sundry plaster work and paint jobs done by local vendors etc. We thus observe that, the impugned expenditure in question was supported by invoices, ledgers etc. It is also not in dispute that, these expenses were found recorded in the seized tally records under the head ‘Construction-Building’. According to us therefore, the assessee had

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 119 :: discharged its onus for establishing the incurrence of the expenses in question.

14.8 Significantly, we find that, the Revenue has, at no stage, disputed the fact that substantial construction and infrastructure development was actually carried out by the institution during the relevant period, in as much as the physical existence of the resultant asset is not in doubt. Once the execution of the work and the existence of the corresponding asset are not in dispute, we are in agreement with the assessee that the corresponding expenditure cannot be categorized as bogus in the absence of any specific finding to that effect. It is observed that the above discussed evidences were filed by the appellant both before AO & CIT(A). Reading of the order(s) of the lower authorities shows that, apart from making generalized assertions, neither of them had pointed out any specific defect or infirmity in any single voucher, bill or payment etc. There is nothing brought on record by the Ld. DR as well to show that any of these details were false or fabricated. There is no discussion by the AO on the correctness of the bills & invoices furnished by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the AO to enquire further into the matter which he failed to do. Rather we find that, the AO simply assumed that these cash withdrawals would have been siphoned off by the key persons of the trust. We however agree with the Ld. AR that, this assertion was based solely on an assumption sans any evidence. There is no material whatsoever found in the course of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 120 :: search, which suggested so. We thus find such assertions made by the AO to be unaccounted for and deprecate the same.

14.9 It is further observed that, the AO had sought to dispute the genuineness of the expenses on the premise that there were "vague narrations" in the tally records and therefore the explanation now put forth by the assessee in the course of assessment was nothing but an afterthought. We however are unable to countenance this contention. It is a matter of contemporaneous fact that, the impugned payments were recorded under the ledger ‘Construction-Building’ which was also noted from the seized tally records. The appellant has subsequently produced the relevant vouchers, bank details, invoices etc. to corroborate that the expenses were incurred towards construction of the building. It is thus seen that, there is no new fanciful theory or any new case being made out by the assessee. Instead, the assessee is found to have been simply corroborating what has been recorded in the books of accounts.

14.10 The Ld. CIT(A) is found to have observed that, the seized tally data itself constituted incriminating material against the assessee. We however are unable to comprehend this assertion. Having gone through the tally data, we find that the entries under the head "Construction – Building" was neutral in character and, there was nothing contained therein which would suggest that the expenses were bogus or not consistent with its recording in the books. There is also nothing contained in the tally narrations which would suggest that any of these expenses were inflated or that, the underlying transactions were sham, or that any

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 121 :: part of the funds found its way back to the assessee. Overall therefore, the observations made by the Revenue to doubt the genuineness of the expenses are found to unsupported by any contrary finding on the voluminous documentary evidence on record.

14.11 We find that much emphasis has been laid by the lower authorities upon the statement of Shri Arun Kumar, Accountant, recorded in the course of search, to justify the impugned disallowance. We find this statement alone to be a fragile foundation for a disallowance of this magnitude. It is seen that, the statement by itself stands controverted by the contemporaneous books of account, ledgers, bills and vouchers etc. As held earlier, while an admission is a relevant piece of evidence, it is not conclusive, and it is always open to the maker, or to the assessee, to demonstrate that it does not reflect the correct state of affairs. In the present case, the assessee has done precisely that, as the statement stands rebutted on facts by the contemporaneous books of account, contractor bills, invoices and vouchers, and by the undisputed existence of the constructed asset; evidences which the Revenue has not dislodged. Once an admission is found to have been rebutted by cogent documentary material, we find force in the contention of the Ld. AR that it loses whatever probative force it may otherwise have carried, and cannot by itself form the basis of an addition. According us, it was unjustified on the AO’s part to rely on such a bald admission over such contemporaneous documentary evidences furnished by the appellant. It is also noted that, the assessee had disputed the veracity of the statement of Shri Arun Kumar at all times before the lower authorities and claimed

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 122 :: that the statement, was recorded under duress. We find that both the lower authorities still proceeded to use the statement against the assessee, without affording any opportunity of cross-examination. According to us, such untested statement, more particularly in light of the contemporaneous rebuttable facts and material submitted by the assessee, cannot be made the sole foundation of a disallowance, as held by the Hon'ble Supreme Court in Andaman Timber Industries v. CCE (supra) and as discussed in Paras 9.8 to 9.9 above.

14.12 We observe that, even the AO was not entirely convinced with the theory that the impugned cash expenses were not genuinely incurred and for that reason, he had ultimately disallowed the same by invoking Section 40A(3) of the Act, on the ground that the quantum of individual item of expenses exceeded the prescribed limit. Having considered the facts before us, we are equally unable to uphold this reasoning of the Revenue. The bearer cheques in question were admittedly drawn in favour of the campus In-charge, Shri Achudan, by way of imprest/advance, to enable him to disburse day-to-day labour payments and petty material procurement at the construction site. We agree with the assessee that, the act of drawing of a self/bearer cheque merely to replenish the site imprest did not, by itself, constitute the "expenditure" contemplated by section 40A(3) of the Act. Instead, the expenditure crystallises only when the imprest-holder pays the individual labourers and suppliers. We thus observe that, the impugned payments were disbursed to the own site in-charge/agent, who is in turn required to make cash payments for goods and services on behalf of the assessee.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 123 :: There is force in the case made out by the Ld. AR that the impugned issue falls within the exception carved out by Rule 6DD(k) of the Income-tax Rules, 1962, and is thereby taken out of the sweep of section 40A(3) of the Act.

14.13 We may add that the object of section 40A(3), as explained by the Hon'ble Supreme Court in Attar Singh Gurmukh Singh v. ITO [(1991) 191 ITR 667 (SC)], is to curb evasion through unaccounted and bogus cash dealings, and not to disallow genuine business expenditure; where, as here, the identity of the payees and the genuineness of the payments stand establihed. The Hon’ble Supreme Court also held that consideration of business expediency and other relevant factors are not excluded in examining the applicability of the provisions of section 40A(3) of the Income-tax Act. Genuine and bona fide transactions, as held by the Supreme Court, are not taken out of the sweep of the section, and it is open to the assessee to furnish the circumstances under which the payment in the manner prescribed under section 40A(3) was not practicable or would have caused genuine difficulty to the payee. In the present case, we observe that, the recourse to cash is explained by the business exigencies of a rural construction site. The appellant is a charitable trust, which was constructing educational and medical institutions in remote areas, where the access & usage of banking facilities is not too common, and more particularly in construction activities, the local labourers, contractors and vendors etc. required cash payments on daily basis. Hence, the modus of the appellant involving disbursement of petty cash by way of bearer cheques though the site-in-

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 124 :: charge to incur daily construction costs. We are also conscious of the character of the assessee i.e., a charitable trust engaged in imparting education and providing medical relief, and not a commercial body corporate carrying on business for profit. The impugned expenditure represents application of its income towards its avowed objects, viz., creation of educational and medical infrastructure, and that too at remote and rural locations where such facilities serves a public purpose and the larger societal good. The ground realities of executing construction at such locations, where the labour engaged and the petty local suppliers deal predominantly in cash, and organized banking facilities are not readily accessible, necessitated disbursement of cash through the site in- charge. As noted earlier, the genuineness of the payments have been established, and having regard to the charitable nature of these expenses and the recourse to cash dictated by the exigencies of construction in remote areas, the application of provisions of Section 40A(3) of the Act on these specific facts, is uncalled for.

14.14 At this juncture, we may also refer to the decision of the Rajasthan High Court in the case Smt Harshila Choradia Vs ITO (298 ITR 349). In the decided case the assessee had made payments for purchase of scooters/mopeds in cash which were disallowed by the AO under Section 40A(3). On appeal the High Court held that there was no dispute about the genuineness of the transactions and the payment and identity of the receiver were established. The entire modus operandi was making the prompt payments to dealer out of the cash consideration received from end purchaser and getting delivery of vehicles at the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 125 :: earliest. The Court thus held that, the payment in question was covered by clause (j) of rule 6DD and accordingly the disallowance was deleted in full.

14.15 We may also make useful reference to the decision of the Hon’ble jurisdictional Madras High Court in the case of CIT Vs Chrome Leather Co Ltd. (235 ITR 708). In this case also, the High Court observed that the payment in cash for purchases was necessitated by business exigencies as otherwise it would delay the business operations and therefore held that the case fell outside the purview of Section 40A(3) of the Act. The relevant findings, as noted by us, is as follows:-

“We have considered the rival contentions. The provisions of section 40A(3) of the Income-tax Act along with rule 6DD of the Income-tax Rules deal with the subject of payment made by the assessee in cash and not by cheque or draft for more than the prescribed amount. The constitutional validity of the provisions of section 40A(3) of the Income- tax Act was the subject-matter of consideration before the Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667, and the Supreme Court, after considering the object of the section held that the payment by crossed cheque or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The Supreme Court also held that consideration of business expediency and other relevant factors are not excluded in examining the applicability of the provisions of section 40A(3) of the Income-tax Act. Genuine and bona fide transactions, as held by the Supreme Court, are not taken out of the sweep of the section, and it is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed under section 40A(3) was not practicable or would have caused genuine difficulty to the payee. The Supreme Court also held that it is open to the assessee to identify the person who has received the cash payment. It is relevant to notice that rule 6DD of the Income-tax Rules provides that an assessee can be exempted from payment by crossed cheque or crossed bank draft in the circumstances specified in the rule. The above decision of the Supreme Court makes it clear that the assessee can be exempted

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 126 :: from the requirements of payment by crossed cheque or crossed bank draft where the purchases are made in certain agricultural or horticultural commodity or from a village where there is no banking facility. The Central Board of Direct Taxes has issued certain guidelines giving certain circumstances, and those circumstances are illustrative and not exhaustive and the underlying idea of the circular is that if the identity of the payee is known, it would be possible for the Income-tax Officer to cross-check whether the transaction had in fact taken place. The Tribunal took into account the commercial need in keeping cash and referred to the need for keeping cash for making purchases of raw skins from shandies when the upcountry tanneries insist upon payment of ready cash. It was also found that the cheques were rarely accepted. It is no doubt true that the payee is having a bank account in the same branch in which the assessee is having a bank account. But, working hours of the bank are of limited duration. Though both the payee and payer may have accounts in the same branch of the bank, but it may not be possible to issue a crossed cheque after the banking hours. Further, the criticism of Mr. S.V. Subramaniam is that the assessee could have made payments in advance in anticipation of purchase. It is well establihed that it is not for the Revenue to dictate as to how the assessee should carry on his business. The Appellate Tribunal, after noticing the trade practice and the necessity to keep cash in hand, has found that-there was necessity on the part of the assessee to keep substantial cash in its hands to meet contingencies at the time of purchase. It was also found, taking into account other factors, that there was a trade necessity and issue of crossed cheque would delay the business operation. The Tribunal also found that the issue of crossed cheque is not practicable and having regard to the nature of the transaction and the necessity for expeditious settlement and the nature of the relationship between the payer and payee, it found that the issue of payment by crossed cheque would have caused genuine difficulty to the payee and the identity of the payee is not doubted and there is no reason to doubt the genuineness of the payee in cash payment. The Appellate Tribunal considered all the relevant materials on record and came to the conclusion that there was no justification to disallow the entire payment, merely because cash payments have been made. As regards the other amount of Rs. 6,50,303, the Tribunal examined the materials with reference to item-wise expenditure and found that there was justification for the payments to be made in cash. The Tribunal also found that the identity of the payee was establihed and the genuineness of the payment was establihed beyond doubt, and the requirements of section 40A(3) of the Income-tax Act and rule 6DD of the Income-tax Rules were fully satisfied. The finding recorded by the Appellate Tribunal is a finding arrived at on the facts of the case. The Tribunal has accepted

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 127 :: the materials produced before it in support of its finding that only at the time of purchase, the actual amount would be known and the identity of the party was successfully establihed and the decision of the Tribunal is based entirely on the facts of the case. The Punjab and Haryana High Court in the case of CIT v. Avtar Singh and Sons [1992] 194 ITR 80 held that where the identity of the party to whom payments were made was known and the payments were found to be genuine, the payments could not be disallowed on the ground that the payments were made by cash. The Punjab and Haryana High Court also noticed that where money was urgently required after the banking hours and the receipt of the crossed cheque or banking draft would delay the payment and would cause unnecessary hurdles in the proper conduct of the business, it would be a relevant factor in considering the applicability of the provisions of section 40A(3) of the Income-tax Act and rule 6DD of the Income-tax Rules. The insistence on cash payment by the payee where such payee is identifiable and the payment is genuine and is made on business expediency would be sufficient enough not to make any disallowance because the payment was made in cash. The Allahabad High Court in CIT v. Ram Agya Shyam Narain [1991] 189 ITR 470 held that such a finding of the Tribunal is a finding of fact. The Punjab and Haryana High Court in the case of CIT v. Brij Mohan Singh and Co. [1994] 209 ITR 753, held that-the finding arrived at by the Tribunal on the facts of the case that the provisions of section 40A(3) of the Act were fully satisfied is a finding of fact. We have noticed that the Tribunal has taken note of the relevant factors and found that the payments were duly accounted for in the accounts of the assessee as well as in the accounts of the payee. The Tribunal has taken into account the trading practice and need for keeping cash and found that the identity of the payee was establihed and genuineness of the payee was successfully establihed and issue of cheque would have delayed the transaction. Considering all these materials on record, the Tribunal came to the conclusion that it was not practicable to accept the payment by cheque. We are of the view that the finding arrived at by the Appellate Tribunal is a finding of fact and since the Tribunal has correctly come to the conclusion on the materials available on record, we are of the opinion that no referable question arose out of its order. Since we have held that the payments made by the assessee is not liable to be disallowed while computing the business income, on the facts of the case, it is unnecessary to consider the applicability of rule 6DD(j) of the Rules.” 14.16 For the reasons discussed in the foregoing, we hold that the lower authorities were unjustified both on facts and in law, in holding that, the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 128 :: impugned expenditure was not genuine and at the same time invoked section 40A(3) of the Act. We accordingly direct the Assessing Officer to delete the disallowance of Rs.1,47,69,000/-. This ground is accordingly allowed.

15.1 The facts as noted are that, in the course of the search, certain payment vouchers, ledgers and invoices were found and seized from the premises of Sree Balaji Dental College and Hospital & Pharmacy, Pallikaranai, which were inventorised as Annexure ANN/GV/SBDCH/LS/S- 1 to S-3. The AO noted that, these seized material contained high-value payments recorded as expenditure including payments to entities such as RKT Transport, Ethos Ltd, GR Thangamaligai & Sons, Horology Palladium and Horology Impex, and to certain individuals, aggregating to Rs.86,45,860/-. The AO observed that some of these persons were jewellery and watch establishments and therefore, he formed a view that these payments cannot have any connection with the educational or charitable activities of the institution operated by the assessee trust. For arriving at this conclusion, the AO referred to the statement of Shri R. Suresh, Chief Accountant, who had stated that the decisions for making this payment was taken by the Chairperson, Shri J Srinisha and that the latter in her sworn statement recorded on 07.12.2023 undertook to

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 129 :: furnish supporting evidences in relation to these expenses. According to the AO however, nothing was furnished by Smt. J. Srinisha in the post search enquiries, despite opportunity being provided to her. When confronted with this issue in the course of assessment, the assessee is noted to have explained that Sree Balaji Dental College was a longstanding institution functioning since 1989 and that the impugned expenditure had been genuinely incurred on institutional activities in the nature of awards and prizes, staff and student welfare; and were therefore in pursuance of its educational objects; and that the particulars of such expenditure, supported by bills and vouchers, was also placed before the AO. The AO however rejected this explanation offered by the assessee and disallowed the impugned sum.

15.2 On appeal, the Ld. CIT(A) observed that the seized documents disclosed high-value payments to entities and individuals which could not be inferred to have any nexus with the charitable activities of the institution. The Ld. CIT(A) rejected the assessee’s explanation that, these expenses were incurred towards awards & student welfare, by holding that it was not supported by the person-wise details to whom it was awarded and therefore the requisite nexus with the charitable activities had not been established. The Ld. CIT(A) thus confirmed the action of the AO. Aggrieved by which, the assessee is in appeal before us.

15.3 Assailing the action of lower authorities, the Ld. AR reiterated the submissions advanced before the lower authorities and contended that the impugned disallowance rested on an erroneous assumption that

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 130 :: expenditure incurred towards purchase of jewellery, watches, clothes etc. was not connected with the charitable and educational objects of the assessee trust. The Ld. AR explained that the assessee was inter alia operating Sree Balaji Dental College and Hospital, which has been imparting dental education since 1989. He submitted that it was a common practice in such colleges to give awards, prizes etc. for promoting academic excellence, student development, faculty welfare and the overall functioning of the institution. Taking us through the details of the invoices, vouchers etc., the Ld. AR showed us that, the value of individual jewellery items, or clothes, or watches etc. were small and the nature of items purchased were repetitive, which evidently showed that they were meant for awards and prizes to be given out to students, faculty etc. The Ld. AR submitted that the case of the Revenue was based on surmises instead of any hard evidence to show that any part of the expenditure was incurred for a non-charitable purpose or resulted in personal benefit to any trustee or specified person etc. The Ld. DR, per contra, supported the orders of the authorities below.

15.4 We have heard the rival contentions, perused the material on record and the orders of the authorities below. The facts involved in relation to this issue is narrow in compass. It is observed that, the Investigating authorities had found several ledgers and invoices which reflected payments made towards jewellery, watches and clothes etc. When enquired, Shri R. Suresh, Chief Accountant provided the break-up of these payments and informed that the decision for making these payments were taken by the Chairperson, Smt. J Srinisha. As noted

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 131 :: earlier, Shri J Srinisha had confirmed incurrence of such expenditure and had stated that he would provide the details in due course. From the material placed before us, we find that, the assessee trust had shown that the impugned expenditure was incurred in the regular course of charitable activities and had been debited under the head ‘Awards & Prizes’. It was explained that these items were purchased by the dental college for being conferred upon meritorious students and faculty by way of awards and prizes and therefore, the impugned expenditure of Rs.86,45,860/- represented application of the trust's income towards its charitable and educational objects.

15.5 We observe that the foundation of the impugned disallowance was the inference drawn by the AO and endorsed by Ld. CIT(A) that, because these payments were made towards purchase of jewellery items, watches, suits etc., the payments necessarily would be personal in nature and cannot bear any connection with the educational activities of the institution. In our view, this inference is a non-sequitur. The character of an item of expenditure is determined by its purpose and end-use, and not by the trade or description of the vendor to whom the payment is made. It is a matter of common experience that educational institutions routinely procure medals, trophies, mementoes and prize articles including watches and articles from jewellers, suits pieces for conferment upon meritorious students and faculty by way of awards and prizes, and such procurement is a legitimate and time-honoured institutional activity directly referable to the object of encouraging academic excellence. Similarly, the institutions also organizes tours, excursions etc. for students and faculty for which

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 132 :: they would engage outside service providers. The mere fact that the seller or the service provider happens to be a jeweller or a watch dealer or a transporter does not, without anything more, convert an institutional award or welfare expense into a personal one. It is seen that, the assessee has, in discharge of its onus, placed on record the complete details of this expenditure with the underlying bills, invoices and vouchers establishing its nature and purpose, and demonstrating that the impugned payments fall within the heads of awards and prizes, staff and student welfare, and consultancy, all of which are incidental to, and in furtherance of, the educational objects of the trust. We observe that, though the assessee had furnished all these underlying documents before the lower authorities, they did precious little to examine the same or return any finding that any particular bill or voucher is false, or bring on record any evidence that a particular article was in fact appropriated to the personal use of any identified individual. According to us, once the assessee produced the primary evidence and explained the nature and purpose of the expenditure, the onus shifted to the Revenue to establish that it was, in truth, personal or was diverted for non-charitable ends, which we find has not been done, in the present case. Though the Revenue has alleged these expenses to be personal in nature, but not a single finding identifying any trustee, any person specified under section 13(3) of the Act, or any third party, who is said to have derived personal benefit from the expenditure; nor is there any material to show that any part of it resulted in any benefit of such persons or was applied otherwise than towards the objects of the trust. The Ld. AR has rightly pointed out

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 133 :: that, even the search action did not yield any evidence reflecting diversion or misuse of the impugned items by any specific individuals. We thus agree with the appellant, that the Revenue’s characterization of the expenditure as "personal in nature" rests not on evidence but on assumption drawn from the identity of the vendors. It is a well settled proposition that suspicion, howsoever strong, cannot take the place of proof.

15.6 The Revenue is found to have laid much emphasis on the statements of Shri R. Suresh and Smt J Srinisha to justify the impugned addition. On careful scrutiny of their answers, we find that there was nothing incriminating contained in their statements which would suggest that the impugned payments were of personal nature. It is observed that Shri R Suresh had, in fact, provided the break-up of payments, whose details were found in loose sheets, and it is an admitted fact that all these payments were recorded in the books of accounts. When enquired about the person who took decision for purchasing these items, he had named Smt. J Srinisha. It is however not the Revenue’s case that, Shri Suresh had alleged the payments to be of personal nature or non-charitable. It is seen that, even Smt. J Srinisha, in her deposition, had sought time to furnish evidences in support of the same, which, as noted above, was submitted before the AO in the course of assessment. Hence, when none of these two persons had admitted to any wrong-doing, and the assessee has supported the impugned payments by producing the contemporaneous bills, invoices and vouchers establishing the institutional character of the expenditure, which evidence the Revenue

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 134 :: has not dislodged, we see no rationale for the AO to have relied upon such empty depositions for making the impugned addition.

15.7 Finally, the Ld. CIT(A) has faulted the assessee for not furnishing "person-wise details" of the recipients of the awards and welfare expenditure. While such details may be relevant, their absence cannot, by itself, negate the nexus of the expenditure with the objects of the trust, where the bills and vouchers establish the nature and purpose of the outgo and there is no finding of personal benefit to any specified person. For a long-established dental college functioning since 1989, expenditure on awards and prizes to encourage academic achievement, on the welfare of its students and faculty, and on consultancy for its administration and development, is plainly incidental to and in furtherance of its educational objects, and constitutes a valid application of income under section 11 of the Act. The Ld. CIT(A)’s insistence for an exhaustive recipient-wise list as a condition precedent, in absence of any adverse seized material, was uncalled for. Further, the Ld. AR took us through the sample invoices of M/s Varsidhi placed at Pages 2017 to 2026 of the Paper Book and showed that the items purchased viz., suits were in bulk quantity and were of the same nature, which evidenced that they were meant for a large group of people viz., the students of the dental college. Similarly, he showed that the jewellery invoices which were placed at Pages 1963 to 2016 of Paper book, inter alia comprised of small value jewellery items in the range of few thousands which were meant to be conferred upon meritorious students and faculty members during prize distribution ceremonies. Likewise, he showed us that the watches purchased were also of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 135 :: reasonable values commensurate with customary award values. The Ld. AR further pointed out that, the payments made to RKT Transport were towards the tours and excursions organized for students and faculty. Having regard to the totality of the facts, we are satisfied that the impugned expenditure of Rs.86,45,860/- was applied towards the charitable and educational objects of the trust, and that the disallowance proceeds on assumption unsupported by any cogent material. We accordingly direct the Assessing Officer to delete the disallowance of Rs.86,45,860/-. This ground raised by the assessee is allowed.

16.1 Briefly stated, the facts relating to this issue are that, loose sheets inventorized under Annexure ANN/SNS/BIHER/LS/S-1 were found and seized in the course of search, which contained details of “consultancy fee” payments made between the Academic Years 2018-19 and 2023-24 to various persons and groups. It was alleged that, these payments were not backed by any corresponding bills, invoices or agreements etc. When enquired, Shri K. Velraja, Assistant Professor (Admissions) in his deposition, stated that the consultancy amounts were paid to persons such as “Mr. Reddy” and the “Tamil Nadu Team” at the instructions of the management. The Investigating authority observed that even Shri M. Achuthan, key person of the management was unable to furnish any

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 136 :: supporting bills, GST details or documentary record of services availed etc. It is seen that the consultancy expenditure so recorded in the seized Tally data was quantified at Rs.43,60,97,905/- over FY 2018-19 to FY 2022-23, out of sum of Rs.14,51,68,839/- was relatable to the relevant FY 2022-23.

16.2 The AO, in the course of assessment, required the assessee, to furnish the identity and PAN of the consultants, the nature of services, the agreements, the mode of payment, TDS particulars and confirmation that the receipts had been offered to tax. In response, the assessee furnished details to the extent of Rs.6,77,65,500/- for AY 2023-24, but no evidence was produced in respect of the balance sum of Rs.7,74,03,339/-. The AO therefore show caused the assessee as to why the consultancy expenditure to the extent i.e. Rs.7,74,03,339/- should not be held to be non-genuine for want of evidence. The assessee responded by submitting that, the expenditure in question related to the consultants engaged assisting the students in their admissions, counselling and placement activities, which was an intrinsic academic function falling within the educational objects of the trust. It was explained that these consultants were engaged on a time-bound and seasonal basis and the payments were made through banking channels with deduction of TDS, wherever applicable. Given the dispersed nature of records across more than twenty institutions and five campuses, the assessee explained that it was not practically possible to produce each and every voucher within the limited time allowed. Not convinced with the explanation, the AO is noted to have proceeded to disallow amount to the extent of Rs.7,74,03,339/-.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 137 :: 16.3 On appeal, the assessee is found have furnished the invoices, TDS records and bank details qua the remaining consultancy fees before the Ld. CIT(A), copies of which has been placed before us at Pages 2027 to 2154 of Paper Book before us. It is however observed that, the Ld. CIT(A) refused to entertain the invoices and records filed belatedly at the appellate stage. He observed that, the seized loose sheets, which formed the foundational basis of this disallowance, described the payees only in vague terms such as “Mr. Reddy” and the “Tamil Nadu Team”, without any identification particulars, scope of work or fee structure, and that the sworn admissions of Shri Velraja, Shri Achuthan and Shri Venugopal Arumugam that no agreements, invoices, bills etc. were available, contradicted the evidences being furnished by the assessee at the appellate stage. The Ld. CIT(A) accordingly sustained the disallowance of Rs.7,74,03,339/-, being aggrieved by which, the assessee is in appeal before us.

16.4 The Ld. AR appearing for the assessee submitted that, the Ld. CIT(A) had erred in confirming the impugned disallowance made by the AO without appreciating the nature of the consultancy services availed by the appellant and the documentary evidences furnished before him. He explained that, Bharath Institute of Science and Technology [in short ‘BIST’] was a large educational institution with multiple academic programmes, and therefore it engaged consultants for admission support services, student counselling activities, placement assistance, academic collaborations and other student-related support functions. These consultancy services, according to the Ld. AR, was intrinsically connected

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 138 :: with the educational activities of the institution and incurred in furtherance of the charitable and educational objects of the Trust. He explained that, these persons were not engaged full-time but as consultants because their services were both seasonal and time-bound, particularly during admission cycles and placement seasons etc. The Ld. AR showed that, when the AO had called upon the appellant to furnish supporting evidences in respect of consultancy expenditure aggregating to Rs.14.51 crores, given the time allowed, the appellant had furnished supporting documents in respect of consultancy charges to the extent of Rs.6.77 crores, which were examined and accepted by the AO. He submitted that, the apprehensions expressed by the AO on the balance amount of Rs.7.74 crores emanated from the non-production of supporting records. The Ld. AR explained that the authorities failed to appreciate that though the appellant was a charitable trust but its records were spread across multiple institutions and campuses under the Trust and included substantial manual documentation, and therefore the production of the evidences within a narrow timeframe was practically difficult. He showed us that, during the appellate proceedings, the appellant had collated and furnished complete supporting evidences for the balance consultancy expenditure of Rs.7,74,03,339/- including invoices raised by the consultants, party-wise details, TDS records, bank statements and other supporting documents, copies of which were placed at Paper Book Volume 3 Page Nos. 2027 to 2075 and 2076 to 2154. The Ld. AR argued that these contemporaneous evidences established the nature of services rendered by the respective consultants, while the bank

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 139 :: statements and payment records including TDS deduction, GST charges etc. establihed the genuineness of the expenses and that the payments were made through identifiable banking channels.

16.5 The Ld. AR pointed out that, though these details were furnished in the appellate proceedings, the Ld. CIT(A) had refused to admit the same on bald pretext and in gross violation of Rule 46A of the IT Rules, 1962. He showed us that, though the Ld. CIT(A) refrained from admitting these evidences, but at the same time, he examined the details and observed that the appellant had failed to provide evidence that the services were actually rendered or copies of agreements with these consultants etc. The Ld. AR vehemently argued that these observations of the Ld. CIT(A) were wholly excessive and unwarranted. He showed us that the appellant had furnished similar documentation in support of consultancy expenses to the extent of Rs.6,67,65,500/-, which were examined and allowed by the AO, and in absence of any material which proved otherwise, the Ld. CIT(A) was wrong in assuming that there were no services received in lieu of the remaining consultancy payments of Rs.7,74,03,339/-.

16.6 Per contra, the Ld. DR supported the order of the lower authorities. He submitted that, in case, this Tribunal decided to admit the additional evidences furnished by the assessee, then in fairness of the matters, the impugned issue should be remitted back to the AO.

16.7 We have heard the rival contentions, perused the material available on record including the orders of the lower authorities. The controversy before us lies in a narrow compass. The disallowance of Rs.7,74,03,339/-

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 140 :: has its genesis in a solitary premise, namely, that the consultancy expenditure to that extent stood unsupported by evidence. It is not in dispute that out of the total consultancy expenditure of Rs.14.51 crores in respect of which the assessee was called upon to furnish supporting material, the AO examined and accepted the expenditure of Rs.6,77,65,500/- on being satisfied with the documents produced, and no adverse finding whatsoever was recorded qua that portion. The disallowance is thus confined to the balance, which came to be disallowed not on account of any positive material demonstrating that the payments were bogus, but purely for the want of contemporaneous supporting records within the limited time available during the assessment.

16.8 Before the Ld. CIT(A), we find that, the assessee sought to address this very deficiency by placing on record the invoices raised by the consultants, party-wise particulars, the tax deducted at source, and the bank statements evidencing the flow of payments through identifiable banking channels, which now appear at Pages 2027 to 2154 of the Paper Book. The Ld. CIT(A), however, declined to entertain these additional evidences, taking the view that the evidence was filed belatedly and that it stood contradicted by the vague descriptions of the payees appearing in the seized loose sheets. Hence, the first issue, which requires our consideration is whether the Ld. CIT(A) was justified in refusing to admit the additional evidence. We are, at the outset, unable to countenance the approach adopted by the Ld. CIT(A) in shutting out the evidence at the very threshold.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 141 :: 16.9 Rule 46A of the Income-tax Rules, 1962 has a direct bearing on the controversy, therefore, it is salutary upon us to take cognizance of this rule, which reads as under:-

“46A. (1) The appellant shall not be entitled to produce before the Joint Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :— (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal ; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Joint Commissioner] (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Joint Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity— (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Joint Commissioner] (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 142 :: substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.” 16.10 From reading of this rule, it is discernible that sub-rule (1) contemplates certain conditions which are required to be fulfilled by an assessee before permission to produce additional evidence can be granted to him. Such conditions are specified in clauses (a) to (d). Ordinarily, the Ld. CIT(A) should not refuse admission of additional evidence on technicalities, as it can result in a meritorious matter being thrown out and the cause of justice being defeated. Be that as it may, the assessee is found to have explained reasonable circumstances for failing to furnish complete documentation in support of consultancy services before the AO. It is not the case that the assessee did not furnish a single piece of evidence. Instead, the assessee had furnished evidences which accounted for almost 50% of the consultancy charges, and since the documentation was spread across several campuses, it failed to provide remaining documentation within the limited time allowed by the AO. We thus are of the view that, the assessee was able to demonstrate reasonable cause and the Ld. CIT(A) ought to have admitted the additional evidence in terms of Rule 46A(1) of IT Rules, 1962.

16.11 It is also to be kept in mind that, Rule 46A(4) of the Income-tax Rules, 1962, operates independent of Rule 46(1), which expressly preserves the authority of the Ld. CIT(A) to direct the production of any document or the examination of any witness to enable him to dispose of the appeal or for any other substantial cause. The Hon’ble Bombay High

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 143 :: Court in the case of Smt. Prabhavati S. Shah v. CIT (231 ITR 1) has held that restrictions placed on an appellant by rule 46A to produce additional evidence do not affect powers of the appellate authority under section 250 of the Act. In this case as summons issued to creditors of the assessee from whom the assessee allegedly took loan were returned unserved the Assessing Officer added loan amount to assessee's total income. The appellate authority refused to entertain the additional evidence sought to be produced by the assessee and the High Court, on appeal by the assessee on the upholding of the order of the appellate authority by the Tribunal, held that the appellate authority should have admitted evidence in exercise of power under section 250(5) of the Act. The Ld. CIT(A) thus, can also exercise his discretion for entertaining any evidence even if the case of the assessee does not fall within the exceptions provided in clauses (a) to (d) of sub-rule (1), but where the evidence sought to be produced by the assessee is essential for the just decision of the appeal or for the substantial cause of justice. At this juncture, we may gainfully refer to the decision of the Hon’ble Bombay High Court in the case of CIT Vs Suretech Hospital and Research Centre Limited (293 ITR 53). In that case, the assessee had produced confirmation letters from creditors before the CIT(Appeals). The said evidence was rejected on the ground that under Rule 46A(1), no fresh evidence could be permitted for the first time in appeal. On appeal u/s 260A, the High Court held that Rule 46A(4) states that notwithstanding rule 46A(1), the appellate authority can admit evidence which are necessary for the disposal of appeal on merits.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 144 :: 16.12 The Hon’ble Madhya Pradesh High Court in the case of CIT Vs. Ganibhai Wahabbhai (232 ITR 900) similarly held that, there is no prohibition in taking additional evidence at the appellate stage, the only condition being that the Department should not be prejudiced and should be given reasonable opportunity to rebut the additional evidence.

16.13 Upon application of the above principles to the facts at hand, the infirmity in the action of the Ld. CIT(A) refusing to entertain the additional evidences in the impugned order becomes manifest. It is observed that, the assessee had tendered the invoices, TDS records and banking evidence, qua the disallowance of which they were the antithesis. We find that the material so furnished went to the root of the controversy and was determinative of the outcome. The assessee had also given a plausible and bona fide explanation for the delayed submission. For the foregoing reasons, we hold that the Ld. CIT(A) was not justified in refusing to entertain the additional evidence. Hence, exercising the powers vested in this Tribunal under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, read with Section 254(1) of the Act, and being satisfied that the said evidence goes to the root of the matter and is necessary to enable us to pass a just order and to advance the cause of substantial justice, we admit the additional evidence comprising the invoices, party-wise details, TDS records and bank statements filed by the assessee.

16.14 The Ld. DR had relied upon the findings rendered by the Ld. CIT(A) by relying upon the seized loose sheets and the statements recorded during search, as a ground to reject the evidence. We find the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 145 :: said action to be misdirected. The vague nomenclature employed in the loose sheets and the deponents' inability, at the time of search, to instantly produce agreements or bills, justified the AO’s action of calling for the supporting material in the course of assessment, but it cannot be taken as an estoppel against the assessee to subsequently producing the otherwise contemporaneous material. Moreover, on a prima facie appreciation of the material now on record, we find considerable force in the assessee's case. The invoices raised by the consultants speak to the nature and rendering of the services; the party-wise particulars and the deduction of tax at source substantiate the identity of the recipients; the bank transaction details demonstrate that the payments were made through regular banking channels, and it is seen that, the payees had charged GST on their invoices and the appellant had also deducted appropriate TDS on these payments. These evidences considered cumulatively, does lend credence to the genuineness of the impugned consultancy expenses of Rs.7,74,03,339/-. Significantly, expenditure of the same character to the extent of Rs.6,77,65,500/- has already been accepted by the AO himself, based on similar documentation provided by the assessee. It is not the Revenue’s case before us that, the amounts in question were fictitious or had been ploughed back to the assessee. We thus find sufficient merit in assessee’s claim seeking deletion of the impugned disallowance.

16.15 Having held so, we are equally conscious that the invoices, TDS records and bank statements now admitted by us were never subjected to examination by the AO, and therefore in the interests of justice and

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 146 :: fairness to both the parties, we deem it fit and proper, in the peculiar facts of the case, to restore the issue to the file of the Assessing Officer for the limited purpose of verification of the said evidence. We direct the AO as follows:-

(i) To verify the invoices, party-wise details, the particulars of tax deducted at source and the corresponding bank/banking evidence furnished by the assessee, with reference to the identity of the payees, and the actual flow of payments;

(ii) where, on such verification, the payments are found to be supported and genuine, allow the same, restricting any disallowance strictly to such portion, if any, as may remain unsubstantiated even after affording the said opportunity.

(iii) afford the assessee a reasonable and adequate opportunity of being heard and of producing such further documents, confirmations or particulars as may be called for or as the assessee may wish to rely upon; and

16.16 The assessee, on its part, shall extend full cooperation and shall not seek unnecessary adjournments, failing which the AO shall be at liberty to decide the matter on the basis of the material available on record. This ground raised by the assessee is thus allowed for statistical purposes.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 147 :: 17. Ground No. 15 raised by the assessee is against the disallowance of Rs.10,000/- made by the AO in respect of a payment to a vendor by Bharath Institute of Science and Technology, for want of evidence.

17.1 It is noticed from the orders of the lower authorities that, the Tally data seized under Annexure ANN/SNS/BIHER/ED/S disclosed hostel mess fee and other vendor payments aggregating to Rs.17,88,31,216/- for FY 2019-20 to FY 2022-23, in respect of which no supporting material had been purportedly recovered during the search. The AO, therefore, required the assessee to furnish vendor-wise particulars including name and address, PAN and GST registration, the nature of services, agreements, mode of payment, TDS compliance and the returns of the recipients. While the assessee furnished majority of the details, it failed to furnish evidence in respect of a single payment of Rs.10,000/- made to one vendor, Shri Venkatesan, during AY 2023-24. The AO treated the said payment as unverifiable and non-genuine, and thus disallowed the same. The action of the AO was confirmed by the Ld. CIT(A), aggrieved by which the assessee is in appeal before us.

17.2 Assailing the action of the lower authorities, the Ld. AR contended that, the AO had originally queried the details of the vendor payments of about Rs.8.54 crore for the year, and that exhaustive documentary evidence had been filed during the assessment. The Ld. AR submitted that, the appellant was unable to trace one-single invoice, whose voucher and bank proof had been later on located and filed before the Ld. CIT(A). The Ld. AR argued that when the entire expenditure had been

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 148 :: substantiated and was shown to have been duly vouched and supported by evidences, but for this single item; the action of the lower authorities to disallow this solitary payment for want of proper invoice was highly excessive and unjustified.

17.3 Having considered the rival submissions of both the parties, we find it difficult to countenance a disallowance of a sum as modest as Rs.10,000/- being fastened on the assessee merely for the non- availability of a solitary voucher, and that too in a case where the payment itself stands reflected in, and supported by, the banking channel. It is not without significance that, of vendor payments running into several crores queried for the very same year, the assessee had furnished supporting particulars which came to be examined and accepted. Hence, it seen that, the entire claim stood substantiated but for this single item out of a very large body of duly vouched expenditure. The Ld. AR explained that this item of expenditure was incurred towards ad- hoc services relating to emergency treatment at the college and hospital and that the proper invoice was untraceable. We note that, the assessee was able to provide the bank proof and the voucher issued by the vendor, Venkateshan, copy of which is found placed at Page 2291 of the paper- book. It is seen that this solitary item was not even 0.001% of the total expenses and that the non-availability of one single invoice is indeed attributable to human actions. According to us, to fasten a disallowance on so slender a footing, whilst overlooking the availability of the bank proof establishing the factum of payment, appears to reflect an unduly strict and narrow approach of the lower authorities, wholly

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 149 :: disproportionate to the smallness of the amount and to the otherwise satisfactory state of the assessee's records. We thus do not countenance the action of the lower authorities on this issue and on these given facts and circumstances of this specific case, particularly having regard to the details / evidences furnished by the appellant in respect of the overall expenses and the factum of payment provided qua this item of expense, we direct the AO to delete the impugned disallowance of Rs.10,000/-. This ground is therefore allowed.

18.1 It is seen from the Ld. CIT(A)’s order that upon going through and re-appraising the assessment records, seized material and sworn statements, while adjudicating the issue(s) discussed earlier, he noted that there were certain transfers of funds by M/s. Sri Lakshmi Ammal Educational Trust to group entities. According to him, these transfer of funds to group entities had not been thoroughly examined by the AO and

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 150 :: that, if the AO had done so, then it would have been entailed tax consequences. The Ld. CIT(A) formed a view that this issue involving payment / transfer of funds by the appellant trust to the group entities had a bearing on the correct computation of income for the relevant AY 2023-24. The Ld. CIT(A), accordingly, issued a notice u/s 251(2) of the Act proposing to enhance the assessed income by the aforesaid sums and further calling upon the assessee to show cause why it should not be assessed in the status of an Association of Persons.

18.2 Before proceeding further, the factual substratum on which the proposed enhancement rested may be briefly noticed. As regards ADBPL, it was observed by the Ld. CIT(A) that, the seized books and the Tally data revealed that payments recorded by BIHER as “Land Advance – Gummidipoondi Property” had been paid to ADBPL, whereas the land in question belonged to M/s. Accord Energy Corporation Pvt. Ltd. [in short ‘AECPL’]. The Ld. CIT(A) further observed that, the Tally data of ADBPL reflected amounts aggregating to Rs.174.29 crores received from the institutions run by the appellant trust under the head “Loans and Advances to Group Companies”. He noticed from the depositions of the key persons of ADBPL that, they had stated that no agreement existed for the land acquisition and that the funds had been utilised for the operational requirements of ADBPL. Though the Ld. CIT(A) observed that certain loose sheets projected as Memorandum of Understanding involving the contours of the land acquisition was found, but it bore certain anomalies.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 151 :: 18.3 In so far as the transaction with CLC is concerned, it was observed by the Ld. CIT(A) from the seized Tally data of SBMCH that funds aggregating to about Rs.262 crores had been transferred to CLC and described as land advances; but the money trail indicated the onward application of these funds towards the acquisition of M/s. Panyam Cements and Mineral Industries Limited by CLC. The Ld. CIT(A) also referred to the testimony of Smt. J. Srinisha, Chairperson, who had admitted to such utilisation of funds received from SBMCH.

18.4 Upon receipt of the above enhancement notice, the assessee is noted to have assailed the proposed enhancement, at the threshold, on grounds of jurisdiction. It was contended that the power of enhancement u/s 251(1)(a) of the Act does not extend to an altogether new source of income which had not been the subject-matter of any addition by the AO, and that the very amounts now sought to be enhanced had, during the assessment proceedings, been specifically put to the assessee by the AO through a show cause notice dated 14.03.2025, in response to which the assessee had filed its reply dated 17.03.2025, whereupon the matter had been carried to the Joint Commissioner of Income Tax u/s 144A of the Act, who drew no adverse inference, and that the AO, having thus applied his mind, had consciously refrained from making any addition on this count in the assessment order dated 30.03.2025. On this premise, the assessee urged that the only courses open to the appellate authority, if dissatisfied with the assessment, were to place it before the Principal Commissioner for revision u/s 263, or to have the assessment reopened u/s 147 of the Act, and that the power of enhancement u/s 251 could not

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 152 :: be pressed into service as a substitute for these remedies. In support, the assessee placed reliance, inter alia, on the decisions of the Hon’ble Supreme Court in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC) and CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC), and on Sri Gajalakshmi Ginning Factory Ltd. [1952] 22 ITR 502 (Mad), Hari Mohan Sharma [2019] 110 taxmann.com 119 (Del-Trib) and Ashwin S. Mehta [2024] 169 taxmann.com 359 (Mum-Trib). The assessee thus claimed that the appellate authority cannot travel beyond the record to discover and tax a new source of income. It was further pointed out that, the identical allegations formed the subject-matter of proceedings u/s 12AA(3)/12AB(4) of the Act then pending before the Hon’ble High Court of Madras in W.P. Nos. 32038 and 32042 of 2025, in which interim protection had been granted; that the assessments for the other years relied upon in the enhancement notice were themselves the subject of an order of status quo before the Hon’ble High Court; and that the enhancement notice did not disclose any document, ledger extract or computation specific to AY 2023-24 in support of the proposed sum of Rs.2,67,29,02,598/-, which, according to the assessee, offended the requirement of section 251(2) and the principles of natural justice.

18.5 Without prejudice to the above, the assessee is noted to have contested the proposed enhancement on merits as well. In respect of the transfers to ADBPL, it was submitted that no incriminating material had been found during the search and that the transactions stood transparently recorded in the audited books under the head “Land

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 153 :: Advance – Gummidipoondi Property”. The assessee submitted that that the payments were referable to the trust’s object of establishing a Faculty of Agriculture under BIHER, for which UGC approval had been granted on 01.11.2018 and for which the possession of at least 110 acres of contiguous cultivable land was a statutory requirement under the ICAR norms and the Tamil Nadu Agricultural University Act. The assessee showed that a contiguous parcel of about 188 acres belonging to AECPL had been identified, for which payments aggregating to Rs.247.66 crores had been made to ADBPL at the behest and direction of AECPL, on the strength of a Tripartite MoU dated 15.02.2018. To corroborate the genuineness of the payment, the assessee also furnished the registered Sale Agreement dated 22.03.2025 evidencing that the land had been ultimately acquired as well and also furnished the audited financial statements of AECPL disclosing the amounts as “Advance for Sale of Land”. The assessee thus claimed that no personal benefit have accrued to any trustee so as to attract section 13 of the Act.

18.6 Next, the assessee submitted that the funds transferred to CLC represented genuine, arm’s length lease advance and rental payments for the continued occupation of over 30 acres of prime land on which SBMCH had been operating since 1998. The assessee brought to the notice of the Ld. CIT(A) that under the original arrangement, only a nominal rent had been charged, and the lease had been renegotiated, after over two decades, through an MoU dated 30.12.2019. The assessee demonstrated that the lease advance was finalised at Rs.230 crores and the lease rent was determined at Rs.32 crores, which was subjected to TDS and also

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 154 :: offered to tax by CLC. The assessee also showed that the fair market value of the land occupied by them had been assessed by an independent valuer at Rs.1,670 crores, and therefore, the deposit of Rs.230 crores agreed between the parties was commercially reasonable and within industry norms. The assessee showed that, the lease advance and rentals had been consistently disclosed in the audited financial statements and returns much prior to the date of search. The assessee particularly pointed out that, the lease advance of Rs.230 crores, being disclosed as a “Rent Advance” under Current Assets, had not been claimed as application of income, and thus there was no question of violation / disallowance in terms of Section 13 of the Act. Alternatively, the assessee is also found to have prayed that these issues being new altogether, a remand report be called from the AO to ensure fairness and objective adjudication.

18.7 It is seen that the Ld. CIT(A) was unconvinced with the above submissions of the appellant. The Ld. CIT(A), firstly proceeded to deal with the objections to jurisdiction and rejected the same. The Ld. CIT(A) took the view that the powers u/s 251(1)(a) of the Act are plenary and co-terminus with those of the AO, and that the only recognised limitation being that an altogether new and alien source of income cannot be introduced at the appellate stage. According to Ld. CIT(A), in the present case, the issue of diversion of funds was not a new source but flowed from the same facts and transactions already examined during the assessment, as evidenced by the show cause notice dated 14.03.2025 and the proceedings u/s 144A; that the expression “considered” was not

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 155 :: confined to issues culminating in an addition but embraced the entire enquiry, so that the absence of an addition did not efface the issue from the assessment records. The Ld. CIT(A) further rejected the plea for remand sought under section 250(4) by observing that such powers were discretionary and not mandatory, and that the availability of the remedies u/s 263 or 147 did not curtail the independent appellate power of enhancement. The Ld. CIT(A) further observed that, though the seized material being referred to related to other years but the same was merely contextual and corroborative. He also discarded the pendency of proceedings before the Hon’ble High Court, in the absence of a specific stay for the year under appeal, as a bar to the exercise of appellate jurisdiction of enhancement.

18.8 Proceeding thereafter to adjudicate the two issues on merits, the Ld. CIT(A) sustained the proposed enhancement in respect of both. As regards ADBPL, the Ld. CIT(A) took note of the circumstance that the recipient’s seized Tally data uniformly recorded the receipts as “Loans and Advances to Group Companies”, that the funds had been applied towards the business requirements of ADBPL without any escrow or earmarking, and that the absence of any binding agreement to remit the funds to AECPL, rendered the explanation of the assessee to be unworthy. The Ld. CIT(A) further held that the subsequent registered sale agreement and the audited disclosures were post-facto and therefore was required to be ignored.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 156 :: 18.9 As regards CLC, the Ld. CIT(A) took note of the non-production of the alleged registered lease deed of 1998, the doubtful validity of the unregistered MoU to create rights in immovable property, and the admission of Smt. J. Srinisha that the funds had been utilised for the acquisition of Panyam Cements, to justify the invocation of Section 13 of the Act. The Ld. CIT(A) held that the valuation report furnished by the assessee to justify the lease advance, the deduction of tax at source on lease rent and the accounting disclosure(s), only addressed the ‘form’ and not the ‘substance’ of the transaction. The Ld. CIT(A) accordingly concluded that both these payments / transfers attracted sections 13(1)(c) and 13(1)(d) of the Act. The Ld. CIT(A) thus directed the AO to add the sums of Rs.172,81,32,598/- and Rs.94,47,70,000/- to the returned income for AY 2023-24. Aggrieved by the enhancement so made, the assessee is in appeal before us.

18.10 We have heard both the parties and perused the material placed before us and the appellate order of the Ld. CIT(A). Having regard to the issue(s), we first consider it fit to examine the legal plea raised by the assessee as to whether the Ld. CIT(A) had jurisdiction to make an enhancement on the new issue(s) raised by issue of notice in the course of appellate proceedings, which has been extensively reproduced at Para 6.14.12 of the appellate order. For this, let us first take a look at the relevant provisions of Section 251(1)(a) of the Act, which reads as follows:-

"(a) In an appeal against an order of assessment he may confirm, reduce, enhance or annul the assessment, or he may set aside the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 157 :: assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and after making such further inquiry as may be necessary, and the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;" 18.11 The powers vested in terms of the above provision was examined by the Hon’ble Supreme Court in the case of CIT vs. Rai Bhadur Hardutroy Motilal Chamaria (1967 SCR (3) 508) wherein it was held that, the appellate commissioner does not have jurisdiction to assess a source of income which has not been processed by the AO and which is not disclosed either in the returns filed by the assessee or in the assessment order and is thus not the subject matter of assessment. The relevant findings of the Hon’ble Apex Court is noted to be as follows:-

"The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction, under s. 31(3) of the Act, to assess a source of income which has not been processed by the Income- tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order, and therefore, the Appellate Assistant Commissioner cannot travel beyond the subject- matter of the assessment. In other words, the power of enhancement under s. 31 (3) of the Act is restricted to the subject- matter of assessment or the sources of income which have been considered expressly or by clear implication by the Income-tax Officer from the point of view of the taxability of the assessee. ....... But since the Income-tax Officer has not applied his mind to the question of the taxability or nontaxability of the amount of Rs. 5,85,000, the Appellate Assistant Commissioner had no jurisdiction, in the circumstances of the present case, to enhance the taxable income of the assessee on the basis of this amount of Rs. 5,85,000 or of any portion thereof. As we have already stated. it is not open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income- tax Officer with a view to find out new sources of income and the power of enhancement under s. 31(3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability. In this context "consideration" does not

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 158 :: mean "incidental" or "collateral" examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject- matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the present case it is manifest that the Income-tax Officer has not considered the entry of Rs. 5,85,000 from the point of view of its taxability and therefore the Appellate Assistant Commissioner had no jurisdiction, in an appeal under s. 31 of the Act, to enhance the assessment." (emphasis supplied) 18.12 The Hon’ble Supreme Court in the case of CIT vs. Shapoorji Pallonji Mistry (44 ITR 891) further explained the powers of enhancement of the Ld. CIT(A) and held that there is no doubt that the Ld. CIT(A) can enhance the assessment, but the said powers can be exercised only within the four corners of the sources processed by the AO. It was explained that this power must, at least, fall within the words "enhance the assessment", if they are not to be rendered wholly nugatory. Before the Hon’ble Supreme Court, it was contended by the Revenue that, the word "assessment" here means the ultimate amount which an assessee must pay, regard being had to the charging section and his total income, and therefore words "enhance the assessment" are not confined to the assessment reached through the issues of taxability considered by the AO but also the amounts which ought to have been computed, if the true total income had been found. The Hon’ble Apex Court however negated this view and observed that, there are other provisions like sections 34 and 33B, which enable escaped income from new sources to be brought to tax after following a special procedure. The Hon’ble Supreme Court thus held that, it would not be open to the AAC to

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 159 :: introduce into the assessment new sources, as his power of enhancement is restricted only to income which was the subject-matter of consideration for purposes of assessment by the ITO.

18.13 Useful reference in this context may be made to the decision of the Hon’ble Rajasthan High Court in the case of CIT vs. Associated Garments Makers (64 Taxman 215). In this case, the assessee had filed an appeal against the assessment order disallowing expenses of Rs.79,040/-. The AAC instead of confining himself to the issues raised by the assessee issued the notice for enhancement on the items viz., Rs. 3,24,000 under section 2(22)(e) of the Act, Rs. 97,303 under section 2(24)(iv) and cash credits of Rs. 1,32,000. Following the ratio laid down in the above decisions of Hon’ble Apex Court (supra), the Court held that, it is not open to the AAC to find out new sources of income and the power of enhancement is restricted to the sources of income which have been the subject-matter of ‘consideration’ by the Income-tax Officer from the point of view of taxability and that 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the AO in the process of assessment. It was thus held that, the AAC had acted in excess of jurisdiction ignoring that there were other provisions under the Act which could have been invoked in cases of escaped income or where the new sources could have been considered, but that would not give powers to the AAC to transgress his jurisdiction.

18.14 We also refer to the decision of Hon’ble Delhi High Court in the case of CIT vs. Sardari Lal & Co. (251 ITR 864) wherein it was held

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 160 :: that, “whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 and section 263, if requisite conditions are fulfilled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the first appellate authority…”

18.15 We find the decision of the Hon'ble Delhi High Court in the case of Gurinder Mohan Singh Nindrajog v. CIT (348 ITR 170) to be of relevance in the context of the present case, as it has succinctly dealt with possible situations which may arise in respect of an assessment completed under the Act by an Assessing Officer for which various remedial measures are available under the Act contained in sections 147, 154, 251(1)(a) and 263 of the Act. Relevant paragraph is extracted below:

“14. We have considered the submissions of both the parties. There is no doubt about the fact that while framing the assessment even under section 143(3) of the Act, the Assessing Officer may omit to make certain additions of income or omit to disallow certain claims which are not admissible under the provisions of the Act thereby leading to escapement of income. The Income-Tax Act provides for remedial measures which can be taken under these circumstances. While framing an assessment under section 143(3) of the Act, any of the following situation may occur:- (a) The Assessing Officer may accept the return of income without making any addition or disallowance; or (b) The assessment is framed and the Assessing Officer makes certain addition or disallowance and in making such additions or disallowances, he deals with such item or items of income in the body of order of assessment but he under-assessed such sums; or

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 161 :: (c) He makes no addition in respect of some of the items, though in the course of hearing before him holds a discussion of such items of income (d) Yet, there can be another situation where the Assessing Officer inadvertently omits to tax an amount which ought to have been taxed and in respect of which he does not make any enquiry. (e) Further another situation may arise, where an item or items of income or expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the revenue, or (f) Where an item of income which ought to have been taxed remained untaxed, and there is an escapement of income, as a result of the assessee's failure to disclose fully and truly all material facts necessary for computation of income. To ensure for each of such situations, an income which ought to have been taxed and remained untaxed, the legislature has provided different remedial measures as are contained in sections 251(1)(a), 263, 154 and 147 of the Act. In the category stated in (a), obviously if an income escapes an assessment, the provisions of Section 147 of the Act can be invoked, subject to the condition stated in the proviso of the said section. In the category of cases falling in category (b), section 251(1)(a) provides the CIT(A) could enhance such an assessment qua the under-assessed sum i.e. where the AO had dealt the issue in the assessment and was the subject matter of appeal. In category falling in (c) & (e), the CIT has been empowered to take an appropriate action under section 263 of the Act In category of cases falling under clause (d) and (f), appropriate action under section 147 of the Act can be taken to tax the income which has escaped assessment or had remained to be taxed. There can be situations where an item has been dealt with in the body of the order of assessment and the assessee being aggrieved from the addition or disallowances so made, had preferred an appeal before the CIT(A) against the said addition and disallowance, the said disallowance and addition being the subject matter of appeal before the CIT(A) in such cases, the CIT(A) has been empowered u/s 251(1)(a) of the Act, to enhance such an income where the Assessing Officer had proceeded to make addition or disallowance by dealing with the same in the body of order of assessment by under assessing the same as the same was the subject matter of the appeal as per the grounds of the appeal raised before him. In other words, the CIT(A) has a power of enhancement in respect of such item or items of income which has been dealt with in the body of the order of the assessment, and arose for his consideration as

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 162 :: per the grounds of appeal raised before him, being the subject matter of appeal.” 7.3 Present case of the assessee does not fall in the category (b) listed above so as to apply the provisions of section 251(1)(a) for the purpose of enhancement of income resorted by the ld. CIT(A).” 18.16 Keeping in view the above legal principles in mind, we now advert back to the facts of the present case. It was brought to our notice that, these issue(s) in dispute had been collaterally examined by the AO in the course of assessment for which a notice was issued dated 14.03.2025, copy of which is placed at Pages 42 to 46 of the paper book. It is observed that, the assessee had furnished a comprehensive reply vide letter dated 17.03.2025 addressing both the issue(s), which is found at Pages 47 to 51 of the paper book. It is also noticed that the AO thereafter had only referred the issue concerning the advances given to ADBPL to the JCIT u/s 144A of the Act, who had called for further information vide letter dated 23.03.2025, which was provided by the assessee on 24.03.2025. Having considered the submissions of the assessee, the JCIT did not issue any adverse direction to the AO. We thus observe that, the AO did not draw any inference on either of the two issue(s) from the point of view of taxability in the impugned assessment completed u/s 143(3) of the Act. On these given facts, we observe that, this issue therefore falls within category (c) as observed by the Hon’ble Delhi High Court in the case of Gurinder Mohan Singh Nindrajog v. CIT (supra). There is force in the plea of the Ld. AR that, both the issues relating to ABDPL & CLC did not fall in the category (b) enlisted by the Hon’ble Delhi High Court above, so as to apply the provisions of section 251(1)(a) for the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 163 :: purpose of enhancement of income, as resorted to by the Ld. CIT(A). We are in agreement with the Ld. AR of the assessee that, the correct recourse in the given facts was not Section251(1)(a) and that the effective remedy, if any, was available u/s 263/147 of the Act. As held by the Hon’ble Courts (supra), the Ld. CIT(A) cannot exercise the powers of enhancement when the issues in question could have been otherwise subjected to be special provisions provided in the Act viz., 263/147 of the Act.

18.17 Further, the action of the Ld. CIT(A) on these two issue(s) did result in discovery of new source(s) of income which was not the subject matter of assessment and as noted above, the Ld. CIT(A) does not enjoy such wide powers u/s 251(1)(a) of the Act. The Ld. CIT(A) is also found to have tacitly acknowledged the same but at the same time observed that this issue did emanate from the material impounded in the course of search and that, the appellate proceedings being a continuation of the assessment proceedings, he is obligated to examine all issues having a bearing on the computation of total income. According to us, this finding of the Ld. CIT(A) is contrary to the law propounded by the judicial forums, as discussed above. The Ld. CIT(A) is found to have also erred in observing that, though there was other recourse available in the form of Section 263/147, but inspite of the same, he was vested with the statutory powers u/s 251 of the Act to act independently. We are unable to countenance this view of the Ld. CIT(A) as because the well settled judicial view is that, the Ld. CIT(A) could have exercised the powers of enhancement only on the issues which were the subject matter of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 164 :: assessment and considered from the point of view of taxability from the AO viz., which fell in category (b) enlisted by the Hon’ble Delhi High Court (supra). As noted earlier, the issue(s) involving advances given to CLC and ADBPL did not fall in that category and therefore, the exercise of powers of enhancement u/s 251(1)(a) of the Act, by the Ld. CIT(A) is held to be without jurisdiction.

18.18 Overall therefore, we uphold the legal plea raised by the assessee and find that the Ld. CIT(A) had wrongly assumed the enhancement jurisdiction u/s 251(1)(a) of the Act qua the transactions relating to ADBPL and CLC, and thus, the additions made by the Ld. CIT(A) on these two issues is held to be unsustainable in law.

18.19 We now address the merits of these two addition(s) made by the Ld. CIT(A). We first take up the issue concerning the addition made on account of advances given to ADBPL. As noted earlier, the Ld. CIT(A) was of the view that, the assessee had transferred substantial amounts from the educational institutions operated by the trust to ADBPL during the relevant period. The Ld. CIT(A) had observed that, though the assessee had attempted to portray the payments as advances given for purchase of land at Gummidipondi, but this was a self serving nomenclature and that the substance of the transaction was materially different. The Ld. CIT(A) observed that, ADBPL had not recorded the receipt of these payments as advances received towards acquisition of any immoveable property and instead it was reflected as ‘loans and advances’ to group companies. It was the case of the Ld. CIT(A) that, the land in question actually

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 165 :: belonged to AECPL and that ADBPL had not paid any of these amounts to the said company and had instead diverted the said funds received from the assessee trust for its own business purposes. He also referred to several unsigned MOUs found in MS word files in the electronic devices at the time of search. Referring to the same and the material inconsistencies in the explanation offered by the Senior management personnel of the Accord Group, the Ld. CIT(A) observed that, the funds of the assessee trust had been diverted to assist a related entity covered under Section 13(3) of the Act i.e. ADBPL, to fund their operational expenses and that the amount paid was never meant for acquisition of any land. Based on these observations, the Ld. CIT(A) had denied the assessee’s claim for deduction of such payments by way of application of income and had added it to the total income for the relevant year.

18.20 The Ld. AR, on the other hand, had submitted that the amounts paid to ADBPL did not represent any loan or advance for the benefit of the related parties, but it was intended towards acquisition of 188 acres of contiguous agricultural land situated at Gummidipondi for the establishment of Faculty of Agriculture by Bharath Institute of Higher Education and Research. He pointed out to us that the acquisition of this land was necessitated by the statutory requirement prescribed under the Tamil Nadu Agricultural University framework and the Indian Council of Agricultural Research (ICAR) Norms. It was shown to us that under these regulations, it was mandatory for the assessee trust to make available substantial contiguous agricultural land in order to commence and conduct agricultural degree programmes. The Ld. AR invited our attention

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 166 :: to a specific approval sought from the UGC for commencement of agricultural courses. It is seen that, the proposal submitted by the assessee trust was approved by the UGC Expert Committee vide their letter dated 01.11.2018. The Ld. AR then took us through the applicable norms which was notified by the Agriculture Department of the Tamil Nadu Agricultural University, which stipulated the requirements for starting any agricultural courses. It is seen by us that, Para 2(ii) of the said order mentions the name of the assessee trust and Para 2(iii) provides that, the assessee trust inter alia ought to have possession of 110 acres of agricultural land which should be cultivable and contiguous for obtaining NOC from the State Government and affiliation from the Tamil Nadu Agricultural University.

18.21 In light of the above contemporaneous approvals, guidelines and requirements; the Ld. AR explained that, the assessee had identified the contiguous land parcel of 188 acres owned by AECPL for the above stated purpose. It was brought to our notice that, the assessee trust, in aggregate, had paid sum of Rs.247.66 crores over the years towards acquisition of the agricultural land, whose ledger extracts was placed at Pages 2303 to 2311 of the paper book. Having perused the same, it is seen by us that, the assessee, at all material time, had reflected the payments as ‘Land-Advance’ in their books of accounts, which is commensurate with their above stated purpose of acquiring agricultural land for conducting agricultural courses/programmes in their educational institutions. The Ld. AR, further invited our attention, to the Tripatrite MOU dated 15.12.2018 entered into between AECPL, ADBPL and the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 167 :: assessee in relation to acquisition of the land parcel, which was placed at Pages 2312 to 2322 of the paper book. The relevant clauses of the MOU, as taken note of by us, is as follows:-

“This Memorandum of Understanding is executed at Chennai on this the 15% Day of February 2018. B. ACCORD DISTILLERS AND BREWERS VT LTD, represented by its Accountant,A. Selvakumar, having their Registered Office at No. 29, Tilak Street, T.Nagar, Chennai - 600 017, hereinafter referred to as the SECOND PARTY, B. ACCORD DISTILLERS AND BREWERS PVT LTD, represented by its Accountant,A. Selvakumar, having their Registered Office at No. 29, Tilak Street, T.Nagar, Chennai - 600 017, hereinafter referred to as the SECOND PARTY, C. ACCORD ENERGY CORPORATION INDIA PVT LTD, represented by its Vice President, M. Viswanathan, having their Registered Office at No. 29, Tilak Street, T.Nagar, Chennai - 600 017, hereinafter referred to as the THIRD PARTY WHEREAS, the 3rd Party is the Owner of Punja Agricultural Lands in Sirupuzhalpettai Village Madura Guruvaraja Kandigai Village, Gummidipoondi Taluk, Tiruvallur District, admeasuring an extent of 185.03 Acres. AND WHEREAS the 3rd Party originally purchased the above said Lands to primarily establish a Coal Based Power Plant, but due to various unavoidable reasons the same could not come to fruition. AND WHEREAS the 2nd Party had invested in the 3rd Party Company to anextent of 30% of the total Net Asset Value. AND WHEREAS the 1st Party is a Public Charitable Trust running under its ageis, Bharath University, A Deemed University under Section 3 of the UGC Act and through the said University, various Colleges such as Medical, Dental, Nursing, Physiotherapy, Engineering, Architecture, Business Studies, Law, Arts & Science and Agriculture have been establihed in various years and been running successfully. AND WHEREAS the 1st Party was desirous of purchasing the 185.03 Acres of Land Owned by the 3rd Party for the purpose of the 1st Party, establishing and utilising 110 Acres of Land for its Agricultural College

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 168 :: and the remaining 75 Acres of Land to establish the North Chennai Campus of Bharath University for establishing Colleges in Multi Streams such as Medical, Dental, Engineering, Law, Business Studies and Arts & Science etc. AND WHEREAS the 3rd Party does not have the financial resources to develop and put the Land to use. More over the 2nd Party and 3rd Party are Associate Companies, with the 2nd Party having aided the 3rd Party even during the Purchase of the Schedule Lands. Therefore the 3rd Party had authorised the 2nd Party to effect the Sale of the entire Schedule Lands and do all such deeds, acts and things that may be required, including but limited to receiving monies as Sale Advance into the Account of the 2nd Party. AND WHEREAS all the Parties hereto have expressed their desire and intent to reduce the Terms and Conditions of this Memorandum of Understanding into writing. AND WHEREAS all the Parties hereto have expressed their desire and intent to reduce the Terms and Conditions of this Memorandum of Understanding into writing. NOW THIS MEMORANDUM OF UNDERSTANDING WITNESSETH 1. The 1st Party shall be provided with photocopies of various Sale Deeds through which the said lands have been purchased along with the connected Revenue records for Legal verification and Due Diligence. 2. The 1st Party shall pay after the completion of Due Diligence and upon full satisfaction, pay the Sale Consideration split up over various remittances through their Bankers to the 3rd Party, through the 2nd Party and the 3rd Party also agrees to the above said payment Terms. 3. The 3rd Party shall not under any manner alienate or encumber the above said Lands at Sirupuzhalpettai Village Madura Guruvaraja Kandigai Village, Gummidipoondi Taluk, Tiruvallur District, admeasuring an extent of 185.03 Acres and shall abide by the terms of payment and wait for the 1st party to complete the payment of Sale consideration in full. 4. The 3rd Party agrees to execute and register a Sale Agreement when the 1st party has paid more than 50% of the said Sale consideration Of Rs.370,00,00,000/- (Rupees Three Hundred and Seventy Crores Only 5. The 3rd Party agrees that the Sale Consideration of Rs. 370,00,00,000/-(Rupees Three Hundred and Seventy Crores Only). The 3nd Party also agrees to obtain the Approvals from the concerned

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 169 :: Statutory Authorities such as conversion of the Lands for establishing Educational Institutions and also for approval of building plans for construction of the said Buildings as provided by Bharath University for setting up its North Chennai Campus and the charges therefor are also the sole responsibility of the 3rd Party. 6. Any dispute arising on the breach and violation of the Terms of this Memorandum of Understanding shall be referred to the Courts of Law at Chennai, since the entire payments from the 1** Party to the 2nd & 3rd Party are through the Bankers of the 1st Party at Chennai and further the Registered Offices of the 2nd and 3rd Party are at T. Nagar, Chennai. SCHEDULE OF PROPERTY All that piece and parcel of Punja Agricultural Lands at Sirupuzhalpettai Village Madura Guruvaraja Kandigai Village, Gummidipoondi Taluk, Tiruvallur District, admeasuring an extent of 185.03 Acres, in the following Survey Numbers with their respective extents for each Survey Number.” 18.22 It is observed that, the Ld. CIT(A) had refused to acknowledge the above MOU on the ground that CFO of ABDPL had asserted in his statement recorded at the time of search that there was no tripartite MOU between ABDPL, AECPL and the assessee. To this, the Ld. AR explained that, the CFO of the company had shortly left the organization post the search and that his assertion was based on half-baked facts, without having complete knowledge of the transaction. He further contended that, the evidences submitted by the assessee showed that the land acquisition was ultimately completed and the deed of conveyance was executed wherein the payments made to ABDPL on behalf and under the instructions of AECPL was recorded as payments made towards the acquisition of land and acknowledged by the seller as well. It was also brought to our notice that, AECPL had also consistently reflected the advance for sale of land in their books of accounts. According to the Ld.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 170 :: AR, only because ABDPL inadvertently mentioned incorrect nomenclature in their books of accounts and had later on recorded the amount due to AECPL will not alter the correct fact that, the payments were made to ABDPL at the instructions of AECPL and that it was intended singularly towards acquisition of agricultural land, in pursuance of the objects of the assessee trust. The Ld. AR also took us through the sworn affidavits furnished by Smt. J Srinisha and Shri Sundeep Anand on behalf of the assessee trust and AECPL setting out the correct state of affairs relating to the impugned payments. It is noticed by us that, these affidavits were furnished at the time of assessment as well as the appellate proceedings. The AO is found to have accepted the same, in light of the contemporaneous evidences furnished by the assessee. Also, the Ld. CIT(A) did not controvert the same in his appellate order. Further, upon query from the Bench, the Ld. AR also showed us that, the acquisition and the price paid by the assessee, was in accordance with the prevailing market rates viz., the stamp duty value and therefore the transaction was at arm’s length and not in violation of Section 13(3) of the Act.

18.23 In view of the above narrated facts, we observe that the Ld. CIT(A) had disallowed the payments made by the assessee towards land advances on the ground that ADBPL had recorded the receipts in its books not as an advance towards land but as “loans and advances to group companies”, and that the land belonged to AECPL and ADBPL had not remitted the funds to AECPL but had applied them for its own business. The Ld. CIT(A) had sought to supplement his findings on the ground that that the senior management of the Accord Group, and in particular the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 171 :: CFO of ADBPL, had denied the existence of any tripartite arrangement between the assessee, AECPL and ADBPL, and that certain unsigned draft MOUs found in the search indicated a different arrangement.

18.24 Having considered the contentions put forth by the assessee in light of the findings rendered by the Ld. CIT(A), we find, at the very threshold that, the assessee was able to establish a genuine object related purpose for the payments to ADBPL, in compliance with contemporaneous statutory and regulatory requirements that pre-dated both the transactions and the search. As noted by us earlier, the assessee had decided to establish a Faculty of Agriculture under BIHER, for which they had sought approval of the UGC, which was granted to them by letter dated 01.11.2018 and that, under the norms notified by the Tamil Nadu Agricultural University read with the ICAR framework, the possession of not less than 110 acres of contiguous and cultivable agricultural land was stated to be a mandatory pre-condition for the commencement of agricultural degree programmes and for obtaining the no-objection of the State Government and affiliation of the University. We particularly notice that, the relevant Government order specifically names the assessee trust. In light of these contemporaneous evidences, the assessee’s explanation that, to meet this statutory requirement, they had identified the contiguous parcel of about 188 acres at Gummidipoondi, owned by AECPL, is found to carry merit. It is thus observed that, the purpose of the payment was backed by the educational objects of the trust and it was not any design to benefit a related concern.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 172 :: 18.25 More so, the purpose is found to be also demonstrable from the consistent accounting treatment of the transaction, not only in the books of the assessee but, significantly, in the books of the landowner, AECPL as well. The assessee had admittedly, at all material times, reflected the payments aggregating to Rs.247.66 crores under the head “Land Advance – Gummidipoondi Property”, the ledger extracts whereof are placed at pages 2303 to 2311 of the paper book, and the accounting treatment is found to commensurate with the stated purpose of acquiring agricultural land. It is of equal significance that AECPL, the owner of the land and the ultimate recipient of the consideration, has also disclosed the very amounts paid by the assessee, in its audited financial statements, as “Advance for Sale of Land”, which is found to be verifiable from Pages 2385 to 2400 of the paper book. This corroboration between the audited records of the payer and those of the landowner, in our view, carries considerable weight and deflates the theory of diversion of funds, sought to be made out by the Ld. CIT(A).

18.26 More particularly, the genuineness of transaction in question is further establihed by a chain of executed and registered instruments. The arrangement is found to be governed by the duly executed Tripartite Memorandum of Understanding dated 15.02.2018 entered into between the assessee, ADBPL and AECPL, under which the payments came to be routed to ADBPL at the instance and under the directions of AECPL, towards the acquisition of AECPL’s land. It is seen that, the arrangement did not only remain on paper; but it later on fructified into a registered sale Agreement dated 19.03.2025, registered on 22.03.2025 before the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 173 :: Sub-Registrar, Gummidipoondi, upon payment of substantial stamp duty, wherein the payments made to ADBPL on behalf of, and under the instructions of, AECPL were recorded as consideration towards the acquisition of the land and duly acknowledged by the seller. This material fact thus undermines the premise that, the description ‘land advance’ was a mere self-serving to mask diversion of funds. It is also a matter of fact that the consideration agreed for the acquisition of land was in accordance with the prevailing market rate as reflected in the stamp duty value, and therefore the ultimate culmination of the transaction was also at arm’s length and did not result in any undue or excessive benefit to the transferee, who was a related party as well.

18.27 The Ld. CIT(A) is found to have placed much emphasis on the manner of accounting treatment and utilization of the funds by ADBPL to allege diversion of funds. It is indeed true that, the receipts in question were recorded as “loans and advances to group companies” by ABDPL in its own books. This accounting however, in our view, cannot override the true character of the transaction as borne out by the above discussed consistent records of the assessee and AECPL, which is also backed by the executed tripartite MOU and registered sale agreement. There is force in the Ld. AR’s plea that, it would have been an inadvertent or incorrect classification on the part of ADBPL, which was subsequently corrected by them by recording the amount as due to AECPL. On these given facts, we agree with the assessee that, it would be wholly imprudent to fasten such a huge addition in the hands of the assessee trust solely on the basis of a wrong or loose entry made by a third party in its own books, in as much

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 174 :: as such an act of error will not render a genuine advance towards the acquisition of land into a diversion of the trust’s funds. The Ld. DR had also relied upon the Ld. CIT(A)’s assertion that ADBPL did not remit the funds to AECPL but applied them for its own purposes. In our considered view that, the manner in which ADBPL dealt with the funds inter se AECPL is a matter between those two entities, and does not concern the assessee. Admittedly, the payments were made towards the land under the directions of AECPL, and the seller, AECPL, had also acknowledged the same as consideration in the registered agreement and disclosed it as advance for sale of land in its audited accounts, in that view of the matter, the subsequent utilization of funds which were received by ABDPL at the instructions of AECPL, will not have any decisive bearing qua the genuineness of the transaction in the hands of the assessee.

18.28 Adverting our attention to the statement of the former CFO of ADBPL relied upon the Ld. CIT(A) wherein he had denied the tripartite arrangement, we find the same to be a frail foundation. It has been explained by the assessee that, the said officer had left the organisation shortly after the search and did not possess complete knowledge of the documentary background of the land acquisition, and his statement was being incorrectly sought to link unrelated third-party transactions with the impugned acquisition. Furthermore, we find that, the assessee had placed on record the sworn affidavits of the Trustees, Smt. J. Srinisha and Shri J. Sundeep Anand, at both the assessment and the appellate stages, which according to the Ld. AR, stated the true state of affairs. It is significantly noted that, the AO and the JCIT, upon examining the very same material,

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 175 :: accepted the said sworn affidavits in the light of the contemporaneous evidence furnished by the assessee, and did not find any force in the statement of the CFO. It is further noted that, the Ld. CIT(A) was also unable to controvert these sworn affidavits. Hence, in such circumstances, and having regard to the overwhelming evidences placed on record by the assessee, and given that the statement of the former CFO remained untested without any cross examination, the latter cannot be elevated into a clinching proof of diversion of funds.

18.29 Much ado was also made by the Ld. CIT(A) on certain unsigned draft word files found in the course of the search. The unsigned drafts, were admittedly never executed and never acted upon, and therefore we agree with the assessee trust that they did not possess any legal value, and it cannot supersede the concluded and duly executed Tripartite Memorandum of Understanding dated 15.02.2018. It is by now well settled that the rights and obligations of parties are governed by their concluded and executed agreement, and not by working drafts. Hence, the reliance placed by the Ld. CIT(A) on the draft memorandums to draw adverse inference on the impugned issue, is held to be unjustified.

18.30 Overall, on a cumulative appreciation of the foregoing, we are of the considered view that, the payments made to ADBPL were genuine advances towards the acquisition of agricultural land from AECPL, made in pursuance of a statutory requirement for the establishment of a Faculty of Agriculture, consistently recorded as a land advance in the books of the assessee and as advance for sale of land in the audited accounts of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 176 :: AECPL, governed by an executed tripartite MOU and fructified into a registered sale agreement executed at arm’s length, with no material to indicate any benefit having accrued to a person specified under section 13(3) of the Act. The Ld. CIT(A) was, therefore, not justified in treating the payments as a diversion and in enhancing the income of the assessee on that count. We accordingly direct the deletion of the enhancement of Rs.1,72,81,32,598/- made on account of the payments to ADBPL. The assessee succeeds on this issue.

18.31 The next issue of enhancement for our consideration relates to the disallowance of payments made by the assessee to CLC towards lease advances, by way of application of income, by invoking the rigors of Section 13(1) of the Act. The Ld. CIT(A) had observed that, substantial sum(s) aggregating to Rs.262 crores had been transferred by SBMCH operated and managed by the assessee trust, to CLC, over a span of multiple financial years, out of which Rs.94,47,70,000/- related to the relevant AY 2023-24 in question. It was observed that, the seized tally data of both the assessee trust and CLC also reflected that the amounts paid were recorded by way of lease advances. When enquired about the purpose of these advances, Smt. J Srinisha in her statement recorded u/s 132(4) of the Act had stated that SBMCH was occupying land belonging to CLC and that the transfers were made in pursuance of the lease arrangement with the said company. The Ld. CIT(A) further noted that, during the simultaneous search conducted upon the residential premises of the Vice Chairman of Accord Group, a MOU between the assessee and CLC was found and impounded. However, in the appellate proceedings,

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 177 :: the Ld. CIT(A) unearthed that the original lease deed with CLC was registered in 1998 which comprised of the rights, obligations, lease rents and lease deposits etc. and therefore according to him, there was no purpose or reason for the assessee to pay further lease advances to CLC, over and above what was agreed in the original lease deed of 1998. The Ld. CIT(A) further observed from the money trail that, the payments received from the assessee trust was utilized by CLC for acquiring M/s Panyam Cements & Minerals Industries Limited (in short ‘PCMIL’), which was also confirmed by Smt. J Srinisha in her statement recorded u/s 132(4) of the Act. In light of the aforesaid discussion, the Ld. CIT(A) concluded that, substantial funds had been transferred by the assessee trust to CLC in guise of lease advances, whereas the true nature and purpose of the transaction was to provide benefit to related concern, CLC to fund their acquisition of shares of PCMIL. He thus held, that the assessee was unable to discharge the onus of establishing that the funds paid to CLC constituted permissible application of income in furtherance of the objects of the assessee trust, and thus disallowed the same, for computing the taxable income of AY 2023-24.

18.32 Assailing the action of the Ld. CIT(A), the Ld. AR of the assessee submitted that the impugned disallowance was based on subjective notions and surmises, sans any incriminating material found in the course of search. Narrating the background events, the Ld. AR explained that, CLC owned a property at Chromepet Chennai admeasuring 30 acres, which it had leased to SBMCH in the year 1998 pursuant to a registered lease agreement, copy of which was placed at Pages 2405 to 2415 of the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 178 :: paper book. It was shown to us, that the original lease deed provided a nominal rent of Rs.5000 per month without any requirement of deposit or advance and thereafter, for more than two decades, the assessee trust had been enjoying the said property and operating a large educational campus in a prime urban area without payment of market rent or commercial lease consideration. He thus pointed out to us that, historically, it was the assessee trust who had benefitted from this lease arrangement and not CLC. Had the CLC charged market rent over the last two decades, then the institution would have incurred substantially high costs. It was further explained to us that, only when SBMCH had attained financial stability and given the substantial appreciation in the value of the property, CLC had proposed to revisit the terms of the lease agreement and with mutual consent, both the assessee trust and CLC had entered into a MOU dated 30.12.2019 in terms of which a lease advance of Rs.250 crores was agreed to be paid by the assessee in instalments together with the lease rentals. It is seen that, this MOU was found and seized in the course of search as well, and thus it cannot be alleged to be an after-thought or a document created by the assessee.

18.33 The Ld. AR, at this point, also explained that, the figure of Rs.262 crores cited by the Revenue was merely a provisional balance appearing in the books and did not represent the actual and final agreed lease advance. It was shown that, after mutual discussions and upon finalization, the lease advance was determined at Rs.230 crores and lease rental at Rs.32 crores. It was shown to us that, the lease rental payments was subject to levy of GST and also deduction of tax at source and thus

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 179 :: such a commercial arrangement cannot be alleged to be non-genuine. The Ld. AR also pointed out that the CLC had offered the impugned lease rentals as their taxable income in the return of income filed for AY 2023- 24 and thus claimed that the statutory tax compliances further proved the bonafides of the transaction. Further, in order to substantiate the arm’s length pricing of the lease arrangement in the MOU, the Ld. AR had placed before us the valuation report issued by M/s APGM Engineering Services Pvt Ltd which had determined the fair market value of the land admeasuring 30 acres at Rs.1670 crores, which was enclosed at Pages 2421 to 2436 of the paper book. The Ld. AR explained that, it is well accepted commercial norm that lease deposits ranges between 14% to 15% of the fair market value of the property and therefore the agreed lease advance of Rs.230 crores was commensurate with the ordinary business rates.

18.34 The Ld. AR further submitted that the genuineness of the above transaction was establihed by the fact that the lease advance was consistently reflected under the head ‘Rent Advance’ both by the assessee and CLC in the audited financials from FY 2020-21 and onwards. He pointed out that, even the ledgers of SBMCH extracted by the Ld. CIT(A) in the appellate order contained narrations stating that the amounts received were pursuant to the MOU and by way of lease advance. It was further brought our notice that, even the Chairperson of the assessee trust, Smt. J Srinisha had confirmed this lease arrangement and that there was nothing contained in her statement, which could be said to have suggested alleged diversion of funds by the assessee trust.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 180 :: According to the Ld. AR, the subsequent utilization of funds by CLC for its business purposes had no bearing on the genuineness of the transaction. He explained that, the assessee had rightly paid the impugned sums towards the lease arrangement captured in the MOU dated 30.12.2019 and thereafter what the lessor does with the funds upon its receipt, is of no consequence to the assessee trust. The Ld. AR thus submitted that, the payments made to CLC represented genuine arm’s length commercial transaction and thus the enhancement made by the Ld. CIT(A) by invoking Section 13(1)(c) & 13(1)(d) of the Act was unjustified.

18.35 Importantly, the Ld. AR also brought to our notice that, the lease advances in question was never claimed by way of application of income by the assessee in the relevant AY 2023-24 and therefore the question of making the impugned disallowance did not arise. He invited our attention to the relevant books of accounts of SBMCH, placed at Pages 2437 to 2451 of the paper book and pointed out that the lease advances were reflected by way of a separate line item ‘Lease Advance – CLC’ under the head ‘Sundry Debtors’ (Page 2445 of paper book). It was also observed by us that, the lease rent claimed as deduction in the Income & Expenditure Account was only Rs.15,00,000/-. The Ld. AR, next took us through the computation of income of the assessee trust, and pointed out that, there was no separate deduction claimed by way of application of income in relation to these lease advances. The Ld. AR thus claimed that, when the impugned lease advances itself was never claimed as application of income u/s 11 of the Act, the question of disallowing the same u/s 13(1)(c) or 13(1)(d) did not arise. He thus urged that, viewed

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 181 :: from any perspective, the enhancement of Rs.94,47,70,000/- deserves to be deleted.

18.36 Having gone through the impugned appellate order of the Ld. CIT(A), we observe that, the basis of enhancement of Rs.94,47,70,000/- rested on suspicion and surmises. First of all, the Ld. CIT(A) is found to have acted on an erroneous assumption of fact that the lease advance in question was claimed by the assessee trust as an application of income and thus disallowed the same by invoking section 13(1) of the Act. It is seen that, Section 13(1)(c) and 13(1)(d) provides for withdrawal of the benefit of application in respect of income shown to have been applied for the benefit of a specified person, which we find is not present in the given facts of the case. As rightly pointed out by the Ld. AR above, the lease advances had not been claimed by the assessee as an application of income under section 11 of the Act. Instead, it stands disclosed in the books of SBMCH as a distinct line item, “Lease Advance – CLC”, under the head “Sundry Debtors”, and the only sum claimed as a deduction by way of lease rent in the Income and Expenditure Account was Rs.15,00,000/-. The computation of income of the assessee for AY 2023-24 also does not disclose any no separate deduction, by way of application of income, referable to the lease advance. On these given facts, there is, quite simply, nothing to disallow. We find that, though this significant factual aspect was brought to the notice of the Ld. CIT(A) but he still went ahead to disallow and added back the impugned sum by invoking Sections 13(1)(c) and 13(1)(d) of the Act. Such action of the ld. CIT(A) reeks of arbitrariness and is thus held to be untenable.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 182 :: 18.37 Additionally, it is observed that even the factual background concerning the impugned transaction is not in dispute. It is seen that, CLC owned the property admeasuring over 30 acres at No.7, CLC Works Road, Chromepet, Chennai, which it had leased to SBMCH in the year 1998 under a registered lease deed providing for a nominal rent of Rs.5,000/- per month and no lease advance whatsoever. As rightly pointed out by the Ld. AR that, for over two decades, the assessee institution occupied and operated a large educational and hospital campus upon prime urban land at a nominal rent, which demonstrated that, it was the assessee which stood benefited by the lease arrangement, and not CLC. It is observed that, both the parties, by mutual consent, revisited the terms of the lease and entered into a Memorandum of Understanding dated 30.12.2019 providing for a lease advance, originally contemplated at Rs.250 crores payable in instalments, together with lease rentals. Significantly, this MOU was itself found and seized in the course of the search, and therefore its veracity cannot be doubted at all. The assessee has also reconciled the figure of Rs.262 crores stated by the Revenue, and has shown us that, the lease advance was mutually determined at Rs.230 crores and the annual lease rental at Rs.32 crores.

18.38 It is also noted that, the commercial reasonableness of the arrangement was also independently substantiated by the assessee, by bringing on record the valuation report of an independent registered valuer, M/s. APGM Engineering Services Pvt. Ltd. assessing the fair market value of the 30 acres at about Rs.1,670 crores. There is force in the Ld. AR’s submission that the impugned lease advances constituted

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 183 :: less than 15% of the fair market value of the property, and was commensurate with the ordinary business practices, and thus cannot be characterised as excessive or as intended to confer any undue benefit. We further observe that, the transaction in question was transparently and consistently disclosed in the statutory records of both parties, well before the date of search. The ledgers of SBMCH extracted by the Ld. CIT(A) in the appellate order themselves carried narrations recording that the amounts were paid pursuant to the MOU and by way of lease advance. The bona fides of the arrangement are further borne out by the fact that the lease rentals were subjected to the deduction of tax at source, and were offered to tax by CLC in the income-tax returns filed for AYs 2023- 24 & 2024-25. In view of the facts narrated in the foregoing, we are of the considered view that the payments to CLC by way of lease advances is found to have shown to be genuine, bona fide, arm’s length lease transaction and the Ld. CIT(A) had wrongly classified the same as non- genuine device for diversion of funds.

18.39 The Ld. DR had contended that, the original lease deed of 1998 already provided for the terms of the lease, and therefore was no reason for the assessee trust to pay any further lease advance. As noted earlier, the 1998 deed provided merely for a nominal rent of Rs.5,000/- per month and, admittedly, for no lease advance at all. Given the commercial realities and prevailing business circumstances, we find that there was no contumacious conducted at the end of either of the parties choosing to revisit this antiquated and nominal arrangement after more than two decades, in view of the appreciation in the value of the property and the

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 184 :: changed financial position of the institution operated and managed by the assessee trust. There is nothing uncommon for parties to a lease to renegotiate and revise its terms, to commensurate with market-based rentals, by way a fresh and mutually agreed arrangement. Hence, the existence of an old lease on nominal terms cannot foreclose a subsequent bona fide commercial revision, as already taken note of by us in the preceding paragraphs. Equally, the fact that CLC may have utilised the funds so received towards the acquisition of the shares of PCMIL does not render a genuine lease transaction into a diversion of the funds of the trust. Once the lease advance and rentals were paid to the lessor under a bona fide commercial arrangement, the subsequent deployment of those funds by the lessor was entirely beyond the control of the assessee, which was merely the lessee; as what the lessor chose to do with the funds upon their receipt is of no consequence to the character of the payments in the hands of the assessee, and cannot alter their nature. We further observe that, the statement of Smt. J. Srinisha, Chairperson of the assessee trust also confirmed the existence of the lease arrangement, and contained nothing to suggest any diversion of the trust’s funds. Her acknowledgment to the fact that CLC applied certain funds available with it towards an investment, does not detract from the commercial substance of the assessee’s payments, as alleged by the Ld. CIT(A), nor does it establish any benefit having flowed to a trustee or a person specified under section 13(3) of the Act.

18.40 Overall therefore, we are in agreement with the assessee that, there was no material or evidence or statement gathered in the course of

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 185 :: search which could have raised any doubt on the genuineness of the impugned lease arrangement and the action of the Ld. CIT(A) was based only on his subjective notions and arbitrary interpretations. We find that the payments made by the assessee to CLC represented genuine, arm’s length commercial lease transactions, supported by a registered lease of 1998, a Memorandum of Understanding of 30.12.2019 that was itself seized in the search, an independent valuation report, consistent disclosure in the audited accounts and statutory filings of both parties over several years preceding the search, and due compliance with statutory income-tax obligations, with the corresponding income offered to tax by CLC. There is no material brought on record to establish any benefit having accrued to any trustee or specified person, and, in any event, the lease advance not having been claimed as an application of income, no disallowance under sections 13(1)(c) or 13(1)(d) of the Act could arise in respect thereof. We accordingly direct the deletion of the enhancement of Rs.94,47,70,000/- made on account of the payments to CLC. The assessee succeeds on this issue as well.

18.41 In the result, both the additions made by the Ld. CIT(A) by way of enhancement, namely the sum of Rs.1,72,81,32,598/- on account of the payments to ADBPL and the sum of Rs.94,47,70,000/- on account of the payments to CLC, are held to be unsustainable and are directed to be deleted. The grounds directed against the enhancement are, accordingly, allowed.

ITA No.3877/Chny/2025 & SA No.93/Chny/2026 (AY 2023-24) Sri Lakshmi Ammal Educational Trust :: 186 :: 19. Ground No. 20 relates to levy of interest u/s 234B of the Act. This ground is consequential in nature. The AO is directed to levy interest in accordance with law, while giving effect to this appellate order. This ground is therefore partly allowed for statistical purposes.

Order pronounced on the 09th day of September, 2026, in Chennai. Sd/- Sd/- (एबी टी. वक�) (एस. आर. रघुनाथा) (ABY T. VARKEY) (S.R.RAGHUNATHA) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER चे�नई/Chennai, �दनांक/Dated: 09th September, 2026. YS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF Digitally signed YASHVI by YASHVIR SINGH R SINGH Date: 2026.09.10 16:51:52 -07'00'