THE DCIT, TRIVANDRUM vs. M/S.SOUTH EAST EDUCATION TRUST, KOLLAM

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ITA 364/COCH/2015Status: DisposedITAT Cochin23 March 2017AY 2011-126 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the audited income and expenditure statement showing the fee refunds was seized during a search, there is a presumption that its contents are true. The Revenue failed to rebut this presumption by proving the refunds were bogus.

What were the facts?

During a search, the Income Tax Department found that an educational trust had refunded fees of Rs. 36,20,079/-. The Assessing Officer disallowed this amount as the trust could not produce details of the refunds. The assessee claimed the refunds were made to students who left the college and were supported by ledger accounts and cheque payments.

What were the issues?

Whether the presumption of truth attached to seized documents under Section 132(4A) can be applied to fee refunds shown in an audited statement, and if the Revenue has successfully rebutted this presumption.

Which sections of the Income-tax Act were involved?

Section 132(4A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

For Appellant: Smt. Divya Ravindran, Adv
For Respondent: Shri Shantham Bose, CIT(DR), Smt. Divya Ravindran, Adv
Hearing: 21/03/2017Pronounced: 23/03/2017

Per ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:

This appeal by the Department is against the order of Ld. CIT(A)-IV, Kochi

dated 26/03/2015 for the assessment year 2011-12.

2.

Though four grounds have been taken by the Revenue, all relate to the

deletion of an addition of Rs.36,20,079/-.

3.

Facts apropos are that assessee, an educational Trust was running an

Engineering College called Hindustan College of Engineering. The Trust started

2 I.T.A. No.364/Coch/2015

functioning on 02/08/2008. The Trust had not obtained registration u/s. 12AA of

the Income Tax Act, 1961 (in short the Act). The Engineering College was

running four streams of engineering, namely, civil, mechanical, electronics &

communication and computer science. There was a search carried out in the

premises of assessee on 01/12/2011. During the said search, audited balance

sheet, income and Expenditure Statement were found and seized. A notice u/s.

153A was issued to the assessee on 25/11/2013. Return was filed pursuant to

such notice by assessee on 25/03/2014 wherein income of Rs.79,99,040/- was

declared. Based on the seized materials, Assessing Officer found that assessee

had during the relevant year, effected refunds of fees Rs.36,20,079/-. As per Ld.

AO, assessee could not produce any details of such fees refunded by it.

Disallowance of Rs.36,20,079/- was made. Apart from this, there were

disallowance u/s.40(a)(ia) of the Act, disallowances of certain other expenditure

and an addition for capitation fees.

4.

Aggrieved, assessee moved an application before Ld. CIT(A).

5.

With regard to the refund of fees which was disallowed by the Assessing

Officer, submission of assessee was that fees collected were refunded to the

students who left college when they obtained admission in some other college.

As per the assessee, collections made from the students were accounted as

income and when refund of such fees were made to the students who left the

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college, it was shown as expenses. Assessee it seems filed certain evidence in

support of these contentions. Assessee also gave details of the amounts of fees

received and refunded. As per the assessee such refunds were based on

Government regulation. Assessee submitted before the Ld. CIT(A) that details

were filed during the course of assessment proceedings before the Assessing

Officer also. Ld. CIT(A), after going through the submissions of the assessee

held that refund of fees of Rs.36,20,079/-was supported by ledger account which

reflected payment of the refunds through cheques issued by the assessee from

its account maintained with SBT, Madathara. According to him, such refunds

were proved by the assessee. He deleted such addition. With regard to

disallowance of expenditure, assessee got partial relief from CIT(A).

5.

Now Revenue is in appeal against the deletion of disallowance of

Rs.36,20,079/- for fee refunds. Ld. DR submitted that refund vouchers were

never produced before the Assessing Officer but were only produced before the

CIT(A). As per Ld. DR, CIT(A) gave relief to the assessee without giving

opportunity to the Assessing Officer to examine the details filed by the assessee.

6.

Per contra, Ld. AR supported the order passed by Ld. CIT(A) and also stated

that all the details were furnished before the Assessing Officer.

4 I.T.A. No.364/Coch/2015

7.

We have heard the rival submissions and perused the orders. It is seen that

the assessment done on the assessee was culmination of a search done on

01/12/2011. It is not disputed that audited balance sheet and income and

expenditure statement of the assessee were seized during such search. It is not

disputed by the Revenue that refund of fees of Rs.36,20,079/- was a part of the

expenditure reflected in the I&E account. At this juncture, it would be apposite

to have a look at section 132(4A) of the Act.

“4A) Where any books of accounts, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed –

(i) that such books of account, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

( ii) that the contents of such books of account and other documents are true; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.”

Once books of account and other documents are seized during the course of

search, contents of such books and documents have to be presumed to be true.

It is not disputed that entry for the refund of fees appeared in the audited

income and expenditure seized during the search. Hence, there is a presumption

which goes in favour of the assessee that the contents of such income and

5 I.T.A. No.364/Coch/2015

expenditure statement filed were true. No doubt, it is a rebutable presumption,

but the Revenue had not proved anything to show that the claim of the refund of

fees was bogus. The books of account were produced before the Assessing

Officer. There is no case for the Revenue that refund of fees to the students was

not reflected in the ledger produced by the assessee. Under such circumstances,

even without considering the details filed by the assessee before the Ld. CIT(A),

the disallowance could not have been done. Such disallowance, in our opinion

was rightly deleted by Ld. CIT(A). We do find any reason to interfere with the

order of the Ld. CIT(A).

8.

In the result, the appeal of the Revenue stands dismissed.

Pronounced in the open court on 23-03-2017.

sd/- sd/- (GEORGE GEORGE K.) ( ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 23rd March, 2017 GJ Copy to: 1. M/s. South East Education Trust, Arippa, Chozhiyakode P.O., Kulathupuzha, Kollam-691 317. 2. The Deputy Commissioner of Income-tax, Central Circle, Trivandrum. 3. The Commissioner of Income-tax(Appeals)-IV, Kochi.

6 I.T.A. No.364/Coch/2015

4.

The Commissioner of Income-tax, Central, Kochi. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin

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