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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain
These appeals by the Revenue are directed against the consolidated order of the CIT(A)-37, Mumbai dated 31.07.2014 for assessment years 2005-06 to 2011-12. These appeals having common issue and having been heard together are being disposed off by way of this combined order.
The facts of the case, briefly, are as under: - 2.1 A search and seizure action under section 132 of the Income Tax Act, 1961 (in short 'the Act') was conducted on 20.11.2010 at the office/ business and residential premises of key officials of L.N. Welingkar Institute of Management (in short ‘Welingkar’), including that of the assessee in the case on hand, who is a Director at 'Welingkar'. 'Welingkar' is one of many institutions run by a Pune based trust, Shikshan Prasarak Mandal (‘SPM’). Subsequently, in response to notices issued under section 153A of the Act, the assessee filed returns of income for assessment years 2005-06 to 2010-11 and for A.Y. 2011-12 in response to notice under section 142(1) of the Act. The assessments for assessment years 2005-06 to 2010-11 were 2 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe completed under section 143(3) r.w.s. 153A of the Act vide orders dated 28.03.2013 and for A.Y. 2011-12 under section 143(3) of the Act vide order dated 28.03.2013 wherein the income of the assessee was determined year-wise as under, inter alia, making the following protective additions on account of capitation fees received for management quota seats for various years: - Addn. On account of cash received for Assessed income S.No. A.Y. donation/ (`) capitation fees (`) 1 2005-06 2,55,09,000 2,92,49,420 2 2006-07 3,54,29,000 3,90,49,780 3 2007-08 3,93,66,000 4,38,58,150 4 2008-09 4,37,40,000 5,54,28,500 5 2009-10 4,86,00,000 5,26,44,700 6 2010-11 5,40,00,000 5,84,80,030 7 2011-12 4,00,00,000 6,43,92,890 2.2 In coming to his decision in making the aforesaid additions in respect of alleged capitation fees received by the assessee on account of management quota seats given to the various candidates, on a protective basis, the Assessing Officer (AO) placed strong reliance on the statements of six persons who held various positions at 'Welingkar' and which were recorded during the search proceedings of 20.11.2010. These six persons, Samir Karkhanis (Head, Marketing & Business Development), Smt. Kalpana Hans (Faculty - Computer (IT) Department), Shri Kanu Doshi (Dean - Finance), Shri Pandurang Pawaskar (Manager - Administration), Shri Prakash V. Bekhare (Peon) and Shri Ravindra Sumbhe (Peon) admitted in their statements that capitation fees/donations in cash was being accepted for admission against management quota seats. When confronted with the statements given by the aforesaid six persons (supra) the assessee pointed out that these six persons had retracted the statements given by them by way of affidavits on 16.12.2010 and that therefore these averments made in the said statements given by the aforesaid six persons cannot be relied on. It was also submitted that these 3 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe persons whose statements were recorded had no role in the admission process in the management quota, which was processed by a Governing Committee headed by Trustee of SPM Trust, Pune and not the assessee. The AO, however, did not accept either the assessee’s averments or retractions of the statements by the six persons, on the ground that they were not able to establish that they were coerced or pressurized into giving the said statements and also that the torn paper found in the premises of Shri Samir Karkhanis was evidence enough to establish that the assessee was accepting capitations fees from students seeking admission to management courses at 'Welingkar' in the management quota seat category. The AO, after concluding that cash had been received in respect of 50% of the institutional level quota seats/management seats for MMS and PGDMS courses at 'Welingkar', held that on an average `20,00,000/- can be considered as capitation/donation in cash per seat/per management seat for financial year 2010-11, progressively reduced this rate by 10% every year for earlier assessment years and worked out the total cash collected in respect of management quota year-wise from `2,55,09,000/- in A.Y. 2005-06 to `6 crores in A.Y. 2011-12 seats as laid out in the table at para 2.1 of this order (supra). Taking into consideration the arguments put forth by the assessee that the decision in respect of management seats is taken by a governing committee of SPM Trust, Pune, the AO concluded that the additions in respect of cash received in respect of management seats was to be made substantively in the case of SPM Trust and only on protective basis in the hands of the assessee. The assessment orders for assessment years 2005-06 to 2011-12 were accordingly completed vide orders dated 28.03.2013, inter alia, by making the aforesaid additions on account of cash received as donation/capitation fees for management quota seats for MMS/PGDM courses at 'Welingkar' as laid out in the table at para 2.1 of this order (supra) in the assessee’s hands on protective basis.
Aggrieved by the orders of assessment dated 28.03.2013 for assessment years 2005-06 to 2011-12, the assessee preferred appeals before the CIT(A)-37, Mumbai. The learned CIT(A), vide the impugned order 4 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe dated 31.07.2014 disposed off the assessee’s appeal allowing the assessee partial relief. After considering the orders of assessment and the arguments put forward by the assessee, the learned CIT(A) observed that since the additions made by the AO are made only on protective basis, tax demands cannot be recovered from the assessee. The learned CIT(A) then held that should the concerned CIT(A) at Pune hold that the income is not to be assessed in the hands of SPM Trust at Pune and that the same additions are to be made and assessed substantively in the hands of the assessee or if at any stage of proceedings, SPM, Pune should challenge this findings, then the AO of the assessee could issue a show cause notice to the assessee and make the protective assessments into substantive assessments after hearing the assessee in the matter. Subject to the above caveat/findings, the learned CIT(A), without going into the arguments of the merits of substantive additions, which he observed were to be dealt with the concerned CIT(A), Pune dealing with the concerned SPM, Pune, held that there was merit in the grounds raised by the assessee that no addition should be made in his hands since the substantive additions made of the same income in the hands of SPM, Pune is not challenged on the technical issue of, in which hands these amounts are to be taxed/ assessed, and the challenge is on merits. In this view of the matter, the learned CIT(A) deleted the additions of capitation fees/donations made on protective basis in the assessee’s hands for assessment years 2005-6 to 20110-12. 4.1 Aggrieved by the aforesaid orders of the CIT(A)-37, Mumbai dated 31.07.2014 for assessment years 2005-06 to 2011-12, the Revenue has preferred these appeals before the Tribunal raising the following identical grounds (the only difference being the amount of addition made on account of capitation fees/donation in each year): - (i) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of capitation fees/donation of `2,55,09,000/- made on protective basis in the hands of the assessee without appreciating the fact that substantive addition made in the hands of M/s. S.P. Mandali 5 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe Trust, Pune, has not been accepted by it and such protective addition was necessary to protect the interest of revenue? 2. The Appellant craves leave to add, to amend and/or to alter any of the grounds of appeal
, if need be.
3. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-37, Mumbai may be set aside and that of the Assessing Officer restored.” 4.2 The learned D.R. for Revenue was heard in support of the grounds raised and placed strong reliance on the findings rendered in the order of assessment by the Assessing Officer. 4.3 Per contra, the learned A.R. for the assessee supported the decision of the learned CIT(A) in the impugned order. The learned A.R. for the assessee contended that the learned CIT(A) has rendered his decision that no addition on account of cash received on account of capitation fees/donation in respect of management quota/seats/ institutional level quota seats should be made in the assessee’s hands even on protective basis decision only after elaborate discussion of the factual matrix of the case at paras 5.1 to 5.7 of the impugned order wherein all the contentions of the AO has been addressed. This findings is only subject to the caveat that in the event the concerned CIT(A) at Pune holds that these additions are not to be assessed in the hands of SPM, Pune but in the hands of the assessee in the case on hand, then the AO of the assessee should issue a show cause notice and make the protective assessments into substantive assessments for the concerned assessment years in the case on hand. The learned A.R. for the assessee contends that by rendering the decision the learned CIT(A) did in the impugned orders for assessment years 2005-06 to 2011-12, the Department can have no grievances as by virtue of the finding rendered, the learned CIT(A) has clearly protected the interests of Revenue in any contrary eventuality as laid down in the caveat, in respect of the issue in which hands the said additions of cash received on capitation fees/donations for management quota seats of MMS/PGDM in 'Welingkar' is to be then made. The learned A.R. submits that in these circumstances, Revenue’s appeals ought to be dismissed.
6 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe 4.4.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record in the context of the legal and factual matrix of the case. In the grounds raised, the Revenue assails the orders of the learned CIT(A) in deleting the additions on account of the cash received on account of donations in respect of management seats in MMS/PGDM in 'Welingkar' for the period relevant to assessment year 2005-06 to 2011-12 in the assessee’s hands on protective basis without appreciating the fact that the substantive additions made in the hands of SPM Trust, Pune is not accepted by them and therefore such protective addition as made by the AO in the orders of assessment ought to be restored to protect the interests of Revenue. 4.4.2 At the outset, it would be appropriate to record here that the learned CIT(A) has, after elaborate deliberations, held that the additions made on account of capitation fees/donation received in respect of management quota seats for MMS/GPDM seats at 'Welingkar' were to be made substantively in the hands of the SPM Trust, Pune and not in the hands of the assessee in the case on hands. No findings has been rendered by the learned CIT(A) on the issue of the merits of the aforesaid additions, i.e. whether the aforesaid additions are called for or not or to what extent they are sustainable, etc. 4.4.3 As per the material on record, it is seen that SPM Trust, Pune which runs several colleges/institutions in Mumbai and Pune is managed by a Managing Council, the members of which are elected every five years and who are collectively responsible for all policy matters, including final matters of admission and admissions under the management quota seats. The Managing Council nominates members to Local Management Committees who monitor the functioning of respective schools, colleges and institutes; whereas, Members of the Admissions Committee, who are also nominated by and out of the members of the Managing Council look after the admission under management quota seats for MMS/PGEM courses, headed by the Chairman of the Local Management Committee.
7 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe 4.4.3 The learned CIT(A) has observed that in the statement of Shri Kanu Doshi, Dean - Finance of 'Welingkar', he has stated that the cash received by the assessee as capitation fees in respect of management quota seats, is sent to Shri Abhay Dhade and Shri Anant Mate, the trustees of SPM Trust, Pune. Similarly, Smt. Kalpana Hans, Faculty Computer (IT) Department, in her statement has deposed that the peons in the assessee’s office are instrumental in collecting the cash received as capitation fees in respect of management quota seats and transporting the same to SPM, Trust at Pune. We find that apart from the assessee explaining the admission process in 'Welingkar' before the authorities below vide letter dated 20.03.2013, the learned CIT(A) has noted that SPM Trust, Pune has filed letter stating that they follow procedure as per norms of the regulatory authorities for admissions, but, however, if any additions are to be made on account of cash receipt of capitation fees/donation for management quota seats in 'Welingkar' they are to be made in the hands of the parent body, i.e. SPM Trust at Pune and not in the hands of the admission committee members or the assessee in the case on hand, either on substantive or protective basis. 4.4.4 In the present search and seizure action under section 132 of the Act conducted on 20.11.2010 at the premises of 'Welingkar' and others like the assessee in the case on hand, searches were also conducted at the premises of Shri Abhay Dadhe, Chairman, SPM Trust and Shri Anant Mate, Vice Chairman, SPM Trust. In his statement recorded on 20.11.2010, Shri Dadhe stated that as Chairman he was not empowered to give admission to any student in his individual capacity and that management quotas are decided by the Management Council only. In his statement recorded on 03.12.2010 Shri Mate has stated that for management quota seats, the Director/Principal receives the list of aspiring/recommended students which is later shown to the office bearers of the Governing Council of which he is a part and then the final decision of allotment of management quota seats is done in consultation with the trustees. As the seized material and findings in the search indicated that the unaccounted income received in respect of capitation fees/donation for 8 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe management quota seats, inter alia, of 'Welingkar', pertains to SPM Trust, Pune, those cases too have been centralized at Pune and the consequent orders of assessment for the assessment years in question were passed by the DCIT, Central Circle - 2(2), Pune on 18.03.2014 in which the same additions, as have been made on a protective basis in case on hand, have been made in the case of SPM Trust, Pune on a substantive basis. 4.4.5 The learned CIT(A) has also called for and perused the grounds of appeal raised by SPM Trust, Pune in their appeals before the CIT(A) at Pune for the relevant assessment years and found that the additions on account of receipts of capitation fees on account of management quota seats in 'Welingkar' have been challenged on the merits of the additions made and not as to in whose hands the said additions should be made. It is also seen from the orders of assessment in the case on hand that in the course of assessment proceedings, SPM Trust, Pune has filed a letter dated 20.03.2013 before the AO stating that additions, if any, can be made only in the hands of SP Mandali, Pune being the parent body of 'Welingkar' and not in the hands of the Admission Committee members and the assessee either substantive or protective. In appellate proceedings before the CIT(A) also we find that this fact has been re-confirmed by a letter of SPM Trust, Pune dated 28.07.2014 and signed by Shri Abhay Dadhe, Chairman, Managing Council of SPM Trust. In this letter it is submitted that in the orders of assessment of SPM Trust, Pune dated 18.03.2014 for assessment years 2005-06 to 2011-12, the same additions as made in the hands of the assessee in the case on hand on a protective basis have been made on substantive basis in the case of SPM, Pune. It is further submitted in the said letter that while SPM has challenged the orders of assessment in appeal objecting to the substantive additions on merits, they have not taken and will not take the stand that the substantive additions made in SPM, Pune should have been made in the hands of the members of the Admission Committee/members of Managing Council/Principal/Institute Heads, etc. 4.4.6 We find that the learned CIT(A) on examination of the composition of the Managing Council of SPM, Pune and the Admission Committee for the 9 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe period relevant to assessment years 2005-06 to 2011-12 found that the name of the assessee in the case on hand does not appear in any of these two lists of Managing Council and Admission Committee members for the said period. It is also a matter of record that neither was any unexplained/ unaccounted cash found in the personal custody of the assessee in the course of search nor were any unexplained assets found in his case. We concur with the observations of the learned CIT(A) that while the assessee may have had a role to play in the admission process in respect of management seats at 'Welingkar' alongwith several other persons, there was no material evidence brought on record by the AO to indicate that the assessee was solely authorized or responsible for finally deciding the admissions for management quota seats and for receiving the cash as capitation fees and donations thereof. 4.4.7 After considering the facts and circumstances of the case, the learned CIT(A) at para 5.7 of his order held as under: - “5.7 ..... The present case before me is a peculiar case in as much as that the same addition has been made for the same assessment years in the case of Uday Salunkhe, the appellant and SPM, Pune, the Trust. The hands in which such income can be assessed is not disputed by any of the two tax payers. The appellate hierarchy is however different in the two cases. The matter will travel to the CIT(A) and then to ITAT at Mumbai in the case of Uday Salunkhe and at Pune in the case of SPM, Pune. It would have been ideal situation if both the cases were assessed at same station so that the assessing officer and the appellate hierarchy would have remained the same. In fact this is exactly what the department tried to do. But SPM, Pune undid the same by filing a Writ Petition at Mumbai High Court against it being assessed at Mumbai and challenging the transfer of its assessment from Pune to Mumbai. I am aware that as per appellant, it is not the case that SPM, Pune is contending that the additions should be made in the case of Uday Salunkhe or any other person and not in its hands. The same income cannot be assessed as income in the hands of two different persons. In my view, since the additions have been merely made on protective basis, tax demands cannot be recovered from the appellant. Thus no real grievance has arisen at this stage. In case the Ld CIT(A) at Pune holds that the income should be assessed not in the hands of SPM, Pune and should be assessed in the hands of Uday Salunkhe; or SPM, Pune raises this ground in their appeal at any stage, then the assessing officer in the case of Uday Salunkhe could issue a show cause notice and can make the 10 to 6194/Mum/2014 Shri Uday Namdeo Salunkhe protective assessment a substantive assessment after meeting the appellant’s arguments. Subject to the above caveat, l find merits in the grounds of appeal of the appellant that no addition should be made in his hands since the substantive addition made of the same income in SPM, Pune is not challenged on the technical issue of hand in which it should be assessed and the challenge is only on merits. In the result, for statistical purposes, the ground of appeal no.1 is allowed.” On a careful appreciation of the facts and circumstances of the case as discussed at paras 4.1 to 4.4.6 of this order, we concur with and uphold the decision of the learned CIT(A) (supra) that no additions on account of cash receipts as capitation fees/donations for management quota seats for MMS/PGDM courses at 'Welingkar' are to be made in the hands of the assessee in the case on hand for assessment years 2005-06 to 2011-12, since the substantive additions of the same income have been made in the hands of SPM, Pune who have challenged these additions on merits and have not so far challenged their assessments in appeal on the technical issue of in whose hands these additions are to be made and incomes are to be assessed. We also reiterate and uphold here the caveat laid down by the learned CIT(A) that in case the learned CIT(A) at Pune holds that the said income should be assessed in the hands of the assessee in the case on hand and not SPM, Pune, then the AO of Shri Uday N. Salunkhe will issue a show cause notice and can make the substantive assessment in this case after considering the assessee’s submissions in this regard. It is accordingly ordered. Consequently, Revenue’s grounds at S. Nos. 1 to 3 for assessment years 2005-06 to 2011-12 are dismissed.