DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2.4, CHENNAI vs. VELMOHAN MUTHU VEERAMAHALI MUTHURAMALINGAM, CHENNAI

The order of the CIT (A) is correct and in consonance with law and facts to the extent it grants relief to the Respondent/Cross-objector and the same is liable to be upheld.

The CIT (A) has rightly deleted the addition by appreciating that the material relied upon by the AO has been incorrectly interpreted and does not justify the impugned addition in the hands of the appellant.

The CIT (A) has rightly rejected the AO's reliance on the seized material, as the same does not establish that the appellant had incurred any unexplained expenditure or earned any undisclosed income.

The CIT (A) has rightly deleted the addition; in fact, it was clearly admitted that the impugned addition results in duplication of income already considered in the settlement proceedings, and therefore, no separate addition could survive.

The CIT (A) ought to have held that in the absence of any independent evidence to show that the impugned amounts represent unexplained expenditure of the appellant, the addition u/s 69 of the Act is unsustainable in law.

The CIT (A) has rightly deleted the addition by recognizing that the nature and character of the transactions have been misinterpreted by the AO, and no separate addition can be made merely on presumptions.

Without prejudice to the above, the learned CIT(A) has correctly appreciated that the same set of materials and transactions have already been examined by the Department in connected proceedings, and no further adverse inference could be drawn in the absence of fresh incriminating evidence.

The CIT (A) has rightly held that the impugned addition is based on incorrect appreciation of facts and is liable to be deleted.

Any other ground of Cross Objection that may be taken up at the time of hearing.

The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.

The Ld. CIT (A) erred in observing that incomes offered towards Settlement before the bie IBS can be considered to be source of incomes of the Trustees when the relevant cons of the Act prohibit application of Trust funds to benefit of Trustees and such diversion cancels the benefit of exemption that the Trust enjoys u/s 12 of the Act.

For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the Order of Ld. CIT (Appeals) may he set aside and that of Assessing Officer may be restored

The order of the CIT (A) is correct and in consonance with law and facts to the extent it grants relief to the Respondent/Cross-objector and the same is liable to be upheld.

The CIT (A) has rightly deleted the addition by appreciating that the material relied upon by the AO has been incorrectly interpreted and does not justify the impugned addition in the hands of the appellant.

The CIT (A) has rightly rejected the AO's reliance on the seized material, as the same does not establish that the appellant had incurred any unexplained expenditure or earned any undisclosed income.

The CIT (A) has correctly appreciated that the AO has proceeded on an incorrect assumption by attributing the transactions reflected in the seized material directly to the appellant without establishing any nexus with his personal income.

The CIT (A) has rightly deleted the addition; in fact, it was clearly admitted that the impugned addition results in duplication of income already considered in the settlement proceedings, and therefore, no separate addition could survive.

The CIT (A) ought to have held that in the absence of any independent evidence to show that the impugned amounts represent unexplained expenditure of the appellant, the addition u/s 69 of the Act is unsustainable in law.

The CIT (A) has rightly deleted the addition by recognizing that the nature and character of the transactions have been misinterpreted by the AO, and no separate addition can be made merely on presumptions.

Without prejudice to the above, the learned CIT(A) has correctly appreciated that the same set of materials and transactions have already been examined by the Department in connected proceedings, and no further adverse inference could be drawn in the absence of fresh incriminating evidence.

Any other ground of Cross Objection that may be taken up at the time of hearing.

The Ld. CIT (A) erred giving relief by way of deletion of the impugned addition without tagging incomes with the impugned disclosures in the IBS order.

For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the Order of Ld. CIT (Appeals) may be set aside and that of Assessing Officer may be restored.

The order of the CIT (A) is correct and in consonance with law and facts to the extent it grants relief to the Respondent/Cross-objector and the same is liable to be upheld.

The CIT (A) has rightly deleted the addition by appreciating that the material relied upon by the AO has been incorrectly interpreted and does not justify the impugned addition in the hands of the appellant.

The CIT (A) has rightly rejected the AO's reliance on the seized material, as the same does not establish that the appellant had incurred any unexplained expenditure or earned any undisclosed income.

The CIT (A) has rightly deleted the addition; in fact, it was clearly admitted that the impugned addition results in duplication of income already considered in the settlement proceedings, and therefore, no separate addition could survive.

The CIT (A) ought to have held that in the absence of any independent evidence to show that the impugned amounts represent unexplained expenditure of the appellant, the addition u/s 69 of the Act is unsustainable in law.

The CIT (A) has rightly deleted the addition by recognizing that the nature and character of the transactions have been misinterpreted by the AO, and no separate addition can be made merely on presumptions.

Without prejudice to the above, the learned CIT(A) has correctly appreciated that the same set of materials and transactions have already been examined by the Department in connected proceedings, and no further adverse inference could be drawn in the absence of fresh incriminating evidence.

The CIT (A) has rightly held that the impugned addition is based on incorrect appreciation of facts and is liable to be deleted.

Any other ground of Cross Objection that may be taken up at the time of hearing.

The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.

The Ld. CIT (A) erred in observing that the amounts brought towards settlement before the IBS are by the impugned Trusts and not the present individual assessee without giving any specific findings of fact.

The Ld. CIT (A) erred in observing that incomes offered towards Settlement before the Hon'ble IBS can be considered to be source of incomes of the Trustees when the relevant sections of the Act prohibit application of Trust funds to benefit of Trustees and such diversion cancels the benefit of exemption that the Trust enjoys u/s 12 of the Act.

For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the Order of Ld.CIT (Appeals) may be set aside and that of Assessing Officer may be restored.

The order of the CIT (A) is correct and in consonance with law and facts to the extent it grants relief to the Respondent/Cross-objector and the same is liable to be upheld.

The CIT (A) has rightly deleted the addition by appreciating that the material relied upon by the AO has been incorrectly interpreted and does not justify the impugned addition in the hands of the appellant.

The CIT (A) has rightly rejected the AO's reliance on the seized material, as the same does not establish that the appellant had incurred any unexplained expenditure or earned any undisclosed income.

The CIT (A) has correctly appreciated that the AO has proceeded on an incorrect assumption by attributing the transactions reflected in the seized material directly to the appellant without establishing any nexus with his personal income.

The CIT (A) has rightly deleted the addition; in fact, it was clearly admitted that the impugned addition results in duplication of income already considered in the settlement proceedings, and therefore, no separate addition could survive.

The CIT (A) ought to have held that in the absence of any independent evidence to show that the impugned amounts represent unexplained. Expenditure of the appellant, the addition u/s 69 of the Act is unsustainable in law.

The CIT (A) has rightly deleted the addition by recognizing that the nature and character of the transactions have been misinterpreted by the AO, and no separate addition can be made merely on presumptions.

Without prejudice to the above, the learned CIT(A) has correctly appreciated that the same set of materials and transactions have already been examined by the Department in connected proceedings, and no further adverse inference could be drawn in the absence of fresh incriminating evidence.

Any other ground of Cross Objection that may be taken up at the time of hearing.

The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.

The Ld. CIT (A) erred in observing that incomes offered towards Settlement before the Hon'ble IBS can be considered to be source of incomes of the Trustees when the relevant sections of the Act prohibit application of Trust funds to benefit of Trustees and such diversion cancels the benefit of exemption that the Trust enjoys w/s 12 of the Act.

The Ld. CIT (A) erred giving relief by way of deletion of the impugned addition without tagging incomes with the impugned disclosures in the IBS order.

For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the Order of Ld. CIT (Appeals) may be set aside and that of Assessing Officer may be restored.

The order of the CIT (A) is correct and in consonance with law and facts to the extent it grants relief to the Respondent/Cross-objector and the same is liable to be upheld.

The CIT (A) has rightly deleted the addition by appreciating that the material relied upon by the AO has been incorrectly interpreted and does not justify the impugned addition in the hands of the appellant.

The CIT (A) has rightly rejected the AO's reliance on the seized material, as the same does not establish that the appellant had incurred any unexplained expenditure or earned any undisclosed income.

The CIT (A) has rightly deleted the addition; in fact, it was clearly admitted that the impugned addition results in duplication of income already considered in the settlement proceedings, and therefore, no separate addition could survive.

The CIT (A) ought to have held that in the absence of any independent evidence to show that the impugned amounts represent unexplained expenditure of the appellant, the addition u/s 69 of the Act is unsustainable in law.

The CIT (A) has rightly deleted the addition by recognizing that the nature and character of the transactions have been misinterpreted by the AO, and no separate addition can be made merely on presumptions.

Without prejudice to the above, the learned CIT(A) has correctly appreciated that the same set of materials and transactions have already been examined by the Department in connected proceedings, and no further adverse inference could be drawn in the absence of fresh incriminating evidence.

Any other ground of Cross Objection that may be taken up at the time of hearing.

The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.

The Ld. CIT (A) erred in observing that the amounts brought towards settlement before the IBS are by the impugned Trusts and not the present individual assessee without giving any specific findings of fact.

The Ld. CIT (A) erred in observing that incomes offered towards Settlement before the Hon'ble IBS can be considered to be source of incomes of the Trustees when the relevant sections of the Act prohibit application of Trust funds to benefit of Trustees and such diversion cancels the benefit of exemption that the Trust enjoys ws 12 of the Act.

The Ld.CIT (A) erred in holding that the seized material merely recorded the application of funds and do not establish the fact that the said income was unrecorded in the hands of the assessee rendering the finding perverse, as the seized material clearly established the payment and the onus was on the assessee to prove the nature of such expense, which he failed to do.

For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the Order of Ld.CIT (Appeals) may be set aside and that of Assessing Officer may be restored.

The order of the CIT (A) is correct and in consonance with law and facts to the extent it grants relief to the Respondent/Cross-objector and the same is liable to be upheld.

The CIT (A) has rightly deleted the addition by appreciating that the material relied upon by the AO has been incorrectly interpreted and does not justify the impugned addition in the hands of the appellant.

The CIT (A) has rightly rejected the AO's reliance on the seized material, as the same does not establish that the appellant had incurred any unexplained. Expenditure or earned any undisclosed income.

The CIT (A) has correctly appreciated that the AO has proceeded on an incorrect assumption by attributing the transactions reflected in the seized material directly to the appellant without establishing any nexus with his personal income.

The CIT (A) has rightly deleted the addition; in fact, it was clearly admitted that the impugned addition results in duplication of income already considered in the settlement proceedings, and therefore, no separate addition could survive.

The CIT (A) ought to have held that in the absence of any independent evidence to show that the impugned amounts represent unexplained expenditure of the appellant, the addition u/s 69 of the Act is unsustainable in law.

Without prejudice to the above, the learned CIT(A) has correctly appreciated that the same set of materials and transactions have already been examined by the Department in connected proceedings, and no further adverse inference could be drawn in the absence of fresh incriminating evidence.

The CIT (A) has rightly held that the impugned addition is based on incorrect appreciation of facts and is liable to be deleted.

Any other ground of Cross Objection that may be taken up at the time of hearing.

The brief facts of the case are that there was a search and seizure operations u/s. 132 of the Act on Velammal Group of Institutions on 20.01.2020. The residence of the assessee located at No.21A, Velammal Gardens, T.S. Krishna Nagar, Mogappair, Chennai was also covered as the assessee is the managing trustee of M/s. Velammal (Chennai) Educational Trust (VCET). Based on the action u/s. 132 of the Act, a notice u/s. 153A of the Act was issued to the assessee on 30.11.2020. In response to the same, the assessee filed its ITR on 01.12.2020 declaring total income of at Rs. 1, 13, 73, 610/-. Ultimately, the case of the assessee was assessed u/s. 143(3) r.w.s. 153A of the Act by making additions of Rs. 26.48 lakhs and Rs. 2, 97, 85, 135/- u/s. 69A of the Act.

The assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A), who in turn allowed the appeal of the assessee and the assessment order was set aside to the extent additions were made. Now, the Revenue being aggrieved with this order of the Ld. CIT (A) preferred the present appeal before us. We have gone through the order of the AO, the order of the Ld. CIT (A) and the grounds taken by the Revenue and the assessee (Cross Objections). It is observed that the addition of Rs. 26.48 lakhs were made on account of Postal Fee Collection made by M/s. Velammal Nexus Group from IIT / NEET Coaching students. It was also found from Shri Rajesh’s (Accountant of the Group) statement that Hostel fee is collected only in cash mode and not accounted in either ERP or Tally books of

On this issue of unaccounted hostel fee collection in cash, the assessee submitted his reply on 27.09.2021. But the reply of the assessee was rejected by saying that the proceedings before ITSC are for different assessee and order of ITSC has not been passed. It was further stated that the proceedings before the AO in the assessee’s case are independent in nature, the matter subjudice before the ITSC, the assessee cannot take plea in advance before the AO for any application of income. On this logic contentions of the assessee under consideration were rejected and addition was made based on the facts discussed (supra).

The other addition made was on account of “Undisclosed advance course fee” amounting to Rs. 2, 97, 85,135/-. During the course of search at the office of M/s. Vels Academy, Golden George Nagar, Mogappair East, Chennai, it was found that M/s. Velammal Nexus Group managed by the assessee is involved in the collection of “Advance course fee” from students studying in Class VI to VIII for providing IIT coaching. Further, when enquired about the “Advance course fee”, Shri R. Rajesh vide his sworn statement taken at the same premise has stated that “Advance course fee” collected from students are in the nature of coaching fee. He has further stated that although this fee has been collected from F.Y. 2014-15, this income was accounted from the F.Y. 2019-20 only in the books of accounts of schools and prior to that, this income was not accounted. It is also clear from his deposition that no GST has been paid for this coaching fee collected and during the F.Y. 2019-20, such fee is accounted in the books of accounts of schools as if it was an income arising from charitable activity. Relevant portion of sworn statement is reproduced vide page no. 7 of the assessment order.

In the light of above facts, the issue under consideration has been examined and observed that the appellant, M.V.M. Velmohan, is the Managing Trustee of M/s. Velammal (Chennai) Educational Trust (VCET). The Trust was formed on 06.08.2013 and got registered u/s. 12AA of the Act, vide an order no. CIT (E) No.2 (421)/13-14/Sl. No.347/13.14 of CIT-Exemptions, Chennai. The Trust is assessed to tax under the Jurisdiction of DCIT, Central Circle 2(4) in PAN-AABTV7675F. The Trust own and manage an Engineering College in Madurai and Schools in and aground Chennai & Madurai.

The other Trusts of the group are Velammal Educational Trust (VET) (formed on 22.01.1986, PAN-AAATV2366G), Velammal (Madurai) Educational Trust (VMET) (formed on 19.07.1993, PAN-AAATV6606K) and Veeramakali Memorial Welfare Trust (VMWT) (formed on 21.01.2022, PAN-AAATV3577H). These Trusts are also registered u/s. 12AA of the Act. All the four Trusts are engaged in running educational institutions. Prior to 01.04.2017, the educational institutions were managed by Velammal Educational Trust (VET) and Veeramakali Memorial Welfare Trust (VMWT). In order to have better operational and administrative convenience, the educational institutions under the four Trusts were reorganized w.e.f. 01.04.2017. Presently the four Trusts are managed by the family members of Sri M. V. Muthuramalingam, as under:

Velammal Educational Trust (VET) Sri. M.V.M. Velmurugan (Appellant’s Brother). 3. Velammal (Chennai) Educational Trust Sri. M.V.M. Velmohan (Appellant) (VCET) 4. Veeramakali Memorial Welfare Trust Sri. M.V.M. Sasikumar (Appellant’s Brother). (VMWT)

Though the four Trusts are managed individually by the persons stated above, the other members of the family are also Trustees of the Trusts. The details of the institutions managed by Velammal (Chennai) Educational Trust and its Managing Trustee M.V.M. Velmohan are as under:-

All the four Trusts filed their application before Hon’ble Income Tax Settlement Commission (ITSC), admitting a total income of Rs. 143.23 Crores from various sources. The details of their application and admitted income, before the Hon’ble Income Tax Settlement Commission are as under:

However, the application of Velammal (Chennai) Educational Trust (VCET) filed on 08.03.2021 was rejected by the Hon’ble Interim Board for Settlement vide its order dated 14.08.2023. The Hon’ble IBS in its order dated 14.08.2023 held that:

Aggrieved by the order of the IBS, the Trust filed a Writ Petition before Hon’ble Madras High Court in W.P. No. 27528 of 2023. The Hon’ble Madras High Court in its order DT. 17.11.2023 held that:

Following the said direction of Hon’ble Madras High Court, the Interim Board for Settlement (IBS) had admitted the application of Velammal (Chennai) Educational Trust (VCET) filed on 08.03.2021, and heard the case on 26.09.2024 & 24.10.2024. In view of the directions of the Hon’ble Madras High Court, the application of Velammal (Chennai) Educational Trust (VCET) was settled vide order dated 04.11.2024. Meanwhile, the AO also completed the assessment in the hands of the assessee vide order dated 29.09.2021 as under:

Here, it is pertinent to mention that the figures mentioned assessment year wise (supra) are not under challenge and as observed that the premises searched u/s. 132 of the Act are all belong to the assessee / family members / entities mentioned (supra) and the documents seized and relied upon belonged to the assessee / family members / entities mentioned (supra). Hence, once the figures are not under challenge and the documents relied upon have been duly examined by the Ld. Jurisdictional PCIT, same cannot be relied upon again by the AO against the assessee. As the same will tantamount to double addition i.e. income already disclosed, examined and finally settled under the mechanism provided under Chapter-XIXA of the Act.

The above material placed on record, including copies of disclosure petitions, reconciliation statements, and extracts from the IBS order, clearly demonstrates that the hostel fees, IIT / NEET preparatory programme receipts, ECAYLP collections, and similar Advance Course Fees, forming the basis of the present addition, were comprehensively admitted as undisclosed income of the Trusts during the settlement proceedings. The seized documents relied upon by the AO in the present assessment proceedings, including handwritten fee registers, digital fee ledgers, and collection summaries, were the same set of evidences examined by the IBS. The reconciliation carried out at the settlement stage was supported by employees’ statements, internal accounting records, bank deposits, and institutional ledgers maintained at the administrative offices of the Velammal Group. After detailed verification and correlation of these materials with the seized records, the IBS accepted the disclosure made by the Trusts and determined the income arising from such fee collections as the unaccounted income of the respective Trust entities.

Moreover, the additions made by the AO u/s. 69A of the Act, is a deeming fiction and once the assessee discharged is onus by establishing that the income pertains to the entities mentioned (supra), the additions made by the AO have no legs to stand as the same are factually incorrect, untenable and in contradiction to the findings of the ITSC. Moreover, the UDI offered by the entities mentioned (supra) are chargeable to tax at maximum marginal rate i.e. the highest rate prescribed by the statute hence, the same can never be the prejudicial to the interest of Revenue. In the result, grounds raised by the Revenue for the A.Y. 2015-16 to 2020-21 are dismissed and the order of the Ld. CIT (A) is sustained in view of our observations and findings (supra).

As far as the issue pertaining to purchase of immovable property at Parithipattu is concerned it is observed that the only objection of the AO was that the proceedings before the ITSC pertain to different assessee and no final order had been passed in those proceedings. Here it is pertinent to mention that the assessment order was passed on 29.09.2021 whereas the order of the ITSC was passed on 04.11.2024 and in the hearing before the ITSC this issue was also discussed, examined and accepted by the Ld. PCIT in terms of Rule-9 of ITSC (Proceedings) Rules 1997. Hence, on this issue also addition made by the AO is incorrect in terms of latest position on record.

In the result, the appeals filed by the Revenue as mentioned (supra) are dismissed and the C.O.s filed by the assessee are also dismissed. Order pronounced on the 15th day of July, 2026, in Chennai.