ACIT, Central Circle-1, Hyderabad V. M/s. Prathima Educattional Society, Hyderabad

ITA 1768/HYD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69900 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 12-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: K C DEVADAS
• Keywords: Reopening of assessment; Unexplained expenditure; Depreciation; Transfer pricing; Search and seizure; Loose papers; Charitable institution; International transaction; Earning of tax free income; Corroborative evidences; Block assessment; Cancellation of registration; Reason to believe; Documents seized
• Section: 69C; 143(3); 133A; 12A; 12AA; 131; 148; 132; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1767/HYD/2011 ASSESSMENT YEAR : 2003-04 THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 1, HYDERABAD VS. SRI B. SRINIVASA RAO HYDERABAD PAN : ADAPB 5985C (APPELLANT) (RESPONDENT) ITA NO. 1768/HYD/2011 ASSESSMENT YEAR : 2003-04 THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 1, HYDERABAD VS. M/S. PRATHIMA EDUCATIONAL SOCIETY, HYDERABAD PAN : AAATP3833E (APPELLANT) (RESPONDENT) ITA NO. 720/HYD/2012 ASSESSMENT YEAR : NOT APPLICABLE M/S. PRATHIMA EDUCATIONAL SOCIETY, HYDERABAD PAN : AAATP3833E VS. THE COMMISSIONER OF INCOME-TAX (CENTRAL) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEES BY: SRI K.C. DEVADAS REVENUE BY: SRI P. SOMASEKHAR REDDY DATE OF HEARING: 03.09.2013 DATE OF PRONOUNCEMENT: 08.11.2013 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: IN THIS BUNCH THERE ARE THREE APPEALS. THE FIRST TWO APPEALS IN ITA NOS. 1767 AND 1768/HYD/2011 ARE BY T HE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 2 DEPARTMENT AND ANOTHER APPEAL ITA NO. 720/HYD/2012 IS BY THE ASSESSEE. FIRST WE WILL TAKE UP ASSESSEE'S APPEAL IN ITA NO. 720/HYD/2012. ASSESSEES APPEAL : ITA NO.720/HYD/2012 ASSESSEE : M/S. PRATHIMA EDUCATIONAL SOCIETY, HYDER ABAD 2. EFFECTIVE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS AGAINST CANCELLATION OF THE REGISTRATION UNDER S. 12AA(3) O F THE ACT, BY THE CIT BY THE IMPUGNED ORDER DATED 22.3.2012. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE MAIN OBJE CTS FOR WHICH THE ASSESSEE SOCIETY WAS FORMED ARE AS UNDER- (A) MEDICAL RELIEF TO THE POOR AND GENERAL PUBLIC (B) ADVANCEMENT OF MEDICAL EDUCATION, PARA MEDICAL EDUCATION, EDUCATION OF HEALTH SCIENCES AND RESEARC H AND DEVELOPMENT RELATING THERETO. 4. THE ASSESSEE IS RUNNING A MEDICAL COLLEGE AT KARIMN AGAR AND HAS ALSO ESTABLISHED A 750 BEDDED HOSPITAL AT N ANGANUR VILLAGE OF KARIMNAGAR DISTRICT. 5. THE AO REPORTED THAT THE ASSESSEE-SOCIETY HAS BEEN COLLECTING FEES OVER AND ABOVE THE FEES PRESCRIBED BY GOVERNMENT FROM THE STUDENTS FOR GRANTING ADMISSION UNDER THE MANAGEMENT QUOTA. HE ALSO REFERRED TO THE VARIOUS EVIDENCES RELATING TO COLLECTION OF DONATIONS/CAPITATION FEE THAT WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH FROM THE OFF ICE PREMISES OF THE ASSESSEE SOCIETY. IT WAS ALSO REPORTED THAT THE FEES COLLECTED OVER AND ABOVE THE PRESCRIBED FEE HAS NOT BEEN DULY ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNT OF THE SO CIETY AND THE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 3 SAME HAVE BEEN UTILISED FOR THE BENEFIT OF THE INTE RESTED PERSONS OF THE SOCIETY. THE AO ALSO REPORTED ABOUT UNEXPLA INED EXPENDITURE INCURRED BY THE SOCIETY. IN THIS VIEW OF THE MATTER, THE AO WAS OF THE VIEW THAT DUE TO THE VIOLATIONS O F THE PROVISIONS OF S. 11 AND 13 OF THE ACT, THE ASSESSEE -SOCIETY IS NOT ENTITLED FOR REGISTRATION UNDER S. 12A/12AA OF THE ACT, AND HAS SUGGESTED THAT THE SAME SHOULD BE CANCELLED. CONSI DERING THE PROPOSAL OF THE AO IN THAT BEHALF, THE CIT ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE SOCIETY, PROPOSING CANCELLA TION OF THE REGISTRATION GRANTED EARLIER, BY EXERCISING THE POW ER CONFERRED UNDER S. 12AA(3) OF THE ACT. IN RESPONSE TO THE S HOW-CAUSE NOTICE, THE AR OF THE ASSESSEE-SOCIETY FILED WRITTE N SUBMISSIONS OPPOSING THE PROPOSAL OF THE CIT, ON THE GROUND THA T THERE HAS BEEN NO VIOLATION OF SS. 11, 12 OR 13 OF THE ACT. IT WAS FURTHER SUBMITTED THAT BEFORE A CONCLUSION IS REACHED BY TH E AO, IT WAS NECESSARY TO EXAMINE WHETHER THE ASSESSEE WAS DID N OT EXIST AS PER ITS OBJECTS OR THE ACTIVITIES OF THE TRUST ARE NOT GENUINE. RELIANCE WAS PLACED ON THE DECISIONS OF ORISSA HIGH COURT IN THE CASE OF KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY VS.CIT (336 ITR 389). THE CIT AFTER EXAMINING THE VARIOUS MATE RIAL FOUND AND SEIZED AT THE TIME OF SEARCH AND THE STATEMENTS RECORDED AT THE TIME OF SEARCH, OBSERVED THAT THE CONDUCT OF TH E SOCIETY IS NOT IN ACCORDANCE WITH THE OBJECTS FOR WHICH IT WAS ESTABLISHED. HE NOTED THAT THE ASSESSEE SOCIETY ADMITTED STUDENT S UNDER MANAGEMENT QUOTA IN CONSIDERATION OF AMOUNTS OVER A ND ABOVE THE PRESCRIBED FEES BY THE GOVERNMENT, WHICH CLEARL Y ESTABLISHED THE INTENTION OF THE ASSESSEE TO EARN PROFIT. HE N OTED VARIOUS DISCREPANCIES IN THE ACCOUNTS, THE ANALYSIS OF WHIC H THE CIT NOTED CLEARLY ESTABLISHED THAT THE ASSESSEE SOCIETY HAS DIRECTLY ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 4 OR INDIRECTLY COLLECTED SUBSTANTIALLY AMOUNTS WHICH HAVE NOT BEEN RECORDED IN THE BOOKS AND THERE ARE EXPENSES WHICH HAVE ALSO NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. ALL THESE THINGS, ACCORDINGLY TO THE CIT CLEARLY REVEAL THAT THERE IS NO TRANSPARENCY IN THE FINANCIAL AFFAIRS OF THE SOCIET Y AND TO THAT EXTENT, IT CAN BE SAID THAT THE ACTIVITIES ARE NOT GENUINE AND CANNOT BE SAID FOR A CHARITABLE PURPOSE. THE CIT ULTIMATELY CONCLUDING THAT THE ASSESSEE SOCIETY HAS VIOLATED T HE PROVISIONS OF S. 11 AND 13 OF THE ACT AND HAS NOT CONDUCTED IT SELF IN ACCORDANCE WITH THE OBJECTS FOR WHICH IT WAS ESTABL ISHED AND REGISTRATION GRANTED EARLIER U/S. 12A/12AA OF THE A CT, VIDE ORDER DATED 4.10.2000 WITH EFFECT FROM 1.4.2000, CANCELLE D THE REGISTRATION SO GRANTED EARLIER, VIDE IMPUGNED ORDE R DATED 22.3.2012 PASSED UNDER S. 12AA(3) OF THE ACT. 6. AGGRIEVED BY THE ABOVE ORDER OF THE CIT, ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, REITERATING T HE CONTENTIONS URGED BEFORE THE COMMISSIONER OF INCOME -TAX SUBMITTED THAT THE ASSESSEE HAS NOT COLLECTED ANY C APITATION FEE OR ANY OTHER LEVY BY WHATEVER NAME CALLED, AND THER EFORE, THE CIT WAS NOT JUSTIFIED IN CANCELLING THE REGISTRATIO N GRANTED EARLIER UNDER S. 12A OF THE ACT. HE FURTHER SUBMITTED THA T ALL THE FINDINGS GIVEN IN THE IMPUGNED ORDER WERE SUBJECT M ATTER OF APPELLATE/WRIT PROCEEDINGS, AND THEREFORE, MUCH REL IANCE CANNOT BE PLACED ON THE SAME. HE FURTHER SUBMITTED IN THI S BEHALF THAT THE ORDER RESCINDING THE EXEMPTION GRANTED UNDER S. 10(23C)(VI) OF THE IT ACT WAS STAYED BY THE HONBLE ANDHRA PRA DESH HIGH ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 5 COURT IN WP MP NO. 1026 OF 2012 IN WP NO. 811 OF 20 12 AND, THEREFORE, OUGHT NOT HAVE PASSED AN ORDER UNDER S. 12AA (3) CANCELLING THE REGISTRATION EARLIER GRANTED UNDER S . 12A OF THE ACT. 8. AS FOR THE FIRST REASON PUT FORTH FOR CANCELLATION OF REGISTRATION, VIZ., COLLECTION OF CAPITATION FEE, I T IS SUBMITTED THAT IN THE COURSE OF SEARCH, ONE EXCEL SHEETS WERE FOUN D CONTAINING THE NAMES OF STUDENTS, NAMES OF PARENTS AND THE AMO UNT. IN THE COURSE OF SEARCH AND, THEREAFTER, STATEMENTS OF CHAIRMAN OF THE ASSESSEE TRUST WERE RECORDED ON A NUMBER OF OCC ASIONS, WITH REFERENCE TO THE ENTRIES IN THESE EXCEL SHEETS. IT WAS EXPLAINED THAT CIRCUMSTANCES IN WHICH THE EXCEL SHEETS WERE F OUND WAS NOT ASCERTAINABLE. IT WAS CONTENDED THAT UNCORROBORATE D NOTINGS IN THE EXCEL SHEETS SHOULD NOT BE ACTED UPON TO DERIVE ANY INFERENCE AGAINST THE SOCIETY. IN SUPPORT OF THIS CONTENTION THAT THE SAID EXCEL SHEETS ARE NOT RELIABLE, THE LEARNED COUNSEL FOR THE ASSESSEE PUT FORTH THE FOLLOWING REASONS- (A) THE NOTINGS IN THE EXCEL SHEETS LACKED CORROBORATI ON OF THE NOTINGS ALTHOUGH THE DEPARTMENT ATTEMPTED IN THAT DIRECTION. (B) IN COURSE OF SEARCH AND POST SEARCH INVESTIGATION, IN THE STATEMENTS RECORDED UNDER S. 132(4)/131, CHAIRMAN OF THE ASSESSEE TRUST, SRI SRINIVASA RAO EXPRESSED HIS INABILITY TO EXPLAIN THE CIRCUMSTANCE S IN WHICH THOSE SHEETS WERE FOUND FROM THE PREMISES OF THE ASSESSEE SOCIETY. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 6 (C) DESPITE REPEATED QUESTIONING ON VARIOUS OCCASIONS, THE SAID SRINIVASA RAO DENIED THAT THE ASSESSEE SOCIETY HAS COLLECTED CAPITATION FEE FROM ANY STUDE NT. (D) THE COMPUTER PRINTOUT WAS NOT RECOVERED/RETRIEVED FROM ANY OF THE COMPUTERS MAINTAINED IN THE SOCIETYS OFFICE AT THE TIME OF SEARCH, ALTHOUGH TH E SAME WERE VERIFIED AND THAT TOO WITH THE RECOVERY TOOL WHICH IS A USUAL METHOD ADOPTED BY THE DEPARTMENT AT THE TIME OF SEARCH. (E) IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE SEIZED HARD DISKS WERE OPERATED IN THE OFFICE OF THE AO WI TH THE HELP OF IBM OFFICIAL BUT THERE WAS NO IMPRESSIO N IN THE HARD DISK THAT THE SAME WAS TYPED AND PREPARED IN ANY OF THE COMPUTERS BELONGING TO THE SOCIETY. NO DATA CONFIRMING TO THE NOTINGS IN THE EXCEL SHEETS COULD BE FOUND FROM THE SEIZED COMPUTER HARD DISKS. HE SUBMITTED THAT THE ONLY PURPOSE OF SCANNING THE SEIZED HARD DISK WAS INTENDED FOR RECOVERY OF THE EXCEL SHEETS SO AS TO CORROBORATE THE SAME, AS THE ASSESSEE HAS DENIED TO HAVE GENERATED THE SAME. SINCE IT RESULTED IN A FUTILE EXERCISE, IT WAS CLEARLY ESTABLISHED THAT TH E EXCEL SHEETS WERE NOT PREPARED BY THE ASSESSEE SOCIETY. THE ASSESSMENT ORDER PASSED BY THE AO MAKES NO MENTION OF ANY SEARCH RECOVERY. (F) THE AUTHOR OF THE EXCEL SHEETS COULD NOT BE IDENTIFIED. IN TERMS OF S. 60 OF THE INDIAN EVIDEN CE ACT, COMPUTERIZED INFORMATION IS WITHIN THE REALM O F ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 7 HEARSAY EVIDENCE AND THEREFORE, NOT RELEVANT AT ALL BY ITSELF. IN SUCH CASES EITHER AUTHORITY WHO HAS FED THE INFORMATION MUST BE IDENTIFIED OR HE MUST APPEA R PERSONALLY AND TESTIFY BEFORE THE COURT ABOUT THE SOURCE OF INFORMATION. HENCE, IN THE ABSENCE OF AN Y SUCH CORROBORATION, THE EVIDENCE REMAINED A HEARSAY EVIDENCE, CARRYING NO EVIDENTIARY VALUE, IN THE ABSENCE OF ANY CORROBORATION. (G) AT THE TIME OF SEIZURE, THE EXCEL SHEETS WAS NOT AUTHENTICATED EITHER BY THE ASSESSEE OR BY THE WITNESSES OR BY AN AUTHORIZED OFFICER. THIS IS AN UNSIGNED DOCUMENT AND AS SUCH IT LOSES ITS EVIDENTIARY VALUE FOR WANT OF AUTHENTICATION. IN SUPPORT OF THIS PROPOSITION RELIANCE IS PLACED ON T HE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF SANSKRUTI TOWNSHIP SURAT VS. DEPARTMENT OF INCOME-TAX(ITA NO. 1885/AHD/2006 ORDER DATED 23.9.2011) AND HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. KRISHNA YADAV (2011) 12 TAXMAN.COM.4 (HYD). (H) THERE IS EVIDENCE IN THE SEIZED RECORD THAT THE DEPARTMENT HAS TYPED SOME INFORMATION BY MAKING USE OF ASSESSEES COMPUTER AND MADE PART OF THE PANCHNAMA. THIS FACT WAS POINTED OUT BY THE CHAIRMAN OF THE ASSESSEE, SRI B. SRINIVAS RAO IN TH E COURSE OF HIS STATEMENT RECORDED ON 17.12.2009. THIS ACT ON THE PART OF THE SEARCHED PARTY RAISES A N EYE BROW. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 8 (I) THE DDLT IN COURSE OF POST SEARCH INVESTIGATION MAD E EXTENSIVE ENQUIRIES TO CORROBORATE THE NOTINGS IN T HE EXCEL SHEETS. ONE OF THE STEPS TAKEN BY HIM WAS THAT HE SUMMONED ALL THE PARENTS OF THE STUDENTS UNDER SECTION 131 TO TAKE EVIDENCE. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE MADE REQUESTS TO SUPPLY THE COPIES OF THESE STATEMENTS. REPEATED REQUESTS MADE BY THE ASSESSEE FELL IN DEAF EARS AND SO FAR THESE STATEMENTS HAVE NOT BEEN PROVIDED. ON BEING DIRECTED BY THE AO IN COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE CONTACTED THE OFFICE OF DGLT AND REMINDED ON A NUMBER OF OCCASIONS BUT NO INFORMATION WAS SUPPLIED, DESPITE THE FACT THAT THIS FACT WAS ALSO BROUGHT TO THE NOT ICE OF DGIT. AS A PRINCIPLE, NEITHER THE ASSESSEE CAN SUPPRESS THE BEST EVIDENCE IN HIS POSSESSION NOR TH E DEPARTMENT. IT IS SETTLED PRINCIPLE THAT WHENEVER T HE ASSESSEE DESIRES, HE CAN HAVE ACCESS TO ALL INFORMATION, WHETHER FAVOURABLE OR ADVERSE TO HIM A S LAID DOWN IN SURAJ MALL MOHTA AND CO. V. A.V. VISVANATHU SASTRI [1954] 26 ITR 1, SMC SHARE BROKERS LTD V CIT 109 TTJ 700 DELHI, CIT V. SIMON CARVES LTD. [1976] 105 ITR 212 (SC). IN THIS CASE THE ASSESSEE HAS EVERY REASON TO BELIEVE THAT THE EVIDENCES TENDERED BY THE PARENTS, WHO WERE DEPARTMENTAL WITNESSES, WERE ALL FAVOURABLE TO ASSESSEE AND THEREFORE, THE DEPARTMENT WAS APPREHENSIVE OF PROVIDING THESE STATEMENTS AS THE SAME WOULD GO AGAINST THE DEPARTMENT. THE CONDUCT ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 9 OF THE DEPARTMENT IS NOT FAIR AS THE NOTINGS IN THE EXCEL SHEETS FORMED THE BASIS OF ADDITION AND SUBSEQUENT CANCELLATION. ASSESSEE IS ENCLOSING HEREWITH SOME OF THE SUMMONS ISSUED TO THE PARENTS WHO APPEARED TO GIVE TESTIMONY. (J) EVEN THE AO FAILED TO SUMMON THESE WITNESSES IN COURSE OF ASSESSMENT PROCEEDINGS FOR CORROBORATION WHEN THE ASSESSEE WAS CONSISTENTLY DENYING COLLECTION OF CAPITATION FEES AND BASED HIS ENTIRE CONCLUSION ON THE REPORT OF THE DDIT WHICH WAS BASED ON SUSPICION . THIS SHOWS TOTAL NON APPLICATION OF MIND BY THE ADJUDICATING OFFICER WHEN THE INFORMATION SUPPLIED TO HIM WERE DISPUTED AND NOT CORROBORATED BY THE DDLT. HIS ATTEMPT TO VERIFY THE FACTS FROM TWO WITNESSES NAMELY SRI TIRUPATHI REDDY AND MADHAV REDDY COULD NOT YIELD ANY FURTHER EVIDENCE. (K) IT WAS BROUGHT TO THE NOTICE OF AUTHORITIES THAT NOTINGS IN THE LOOSE SHEET REMAINED UNCORROBORATED TILL END AS THE SAME WAS NOT A SPEAKING DOCUMENT AND NO SUPPORTING EVIDENCE BY WAY OF MONEY RECEIPT AND OTHER EVIDENCES WERE FOUND. IT WAS POINTED OUT THAT THE SAME WAS A DUMB DOCUMENT AND THEREFORE NOT TO FORM THE BASIS OF CANCELLATION OF REGISTRATI ON UNDER SECTION 12AA. WITH REGARD TO EVIDENTIARY VALU E OF NOTINGS THE LOOSE SHEET, THE APPELLANT RELIES ON THE FOLLOWING DECISIONS: ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 10 A) DCIT CENTRAL V C KRISHNA YADAV 2011,12 TAXMAN.COM 4 HYD B) ASST. CIT V. SATYAPAL WASSAN [2007] 295 ITR (AT) 352 (JABALPUR), C) ACIT V DR KAMLA PRASAD SINGH 3 ITR TRIB 533 PATNA, D) CIT VS. KHAZAN SINGH & BROTHERS 2007,304 ITR 243 (P & H,) E) CIT V. GIRISH CHAUDHARY [2007] 163 TAXMAN 608, DELHI F) BANSAL STRIPS (P.) LTD. V. ASSTT. CIT [2006],99 ITD 177 DELHI G) CIT V MAULI KUMAR K. SHAH [2008] 307 ITR 137 (GUJ.) (L) AS REGARDS THE PRESUMPTION UNDER SECTION 132( 4A), IT WAS SUBMITTED THAT A LOOSE SHEET IS NOT A BOOK/DOCUMENT SO AS TO RAISE THE PRESUMPTION. FOR THIS PROPOSITION, RELIANCE WAS PLACED IN THE DECISI ON OF APEX COURT IN THE CASE OF CBI VS. V.C. SHUKLA [1998] 3 SCC 410. FURTHER THE PRESUMPTION IN THIS SECTION IS NOT MANDATORY. THIS CAN SUPPLEMENT BUT CANNOT SUPPLANT EVIDENCE. NOTHING WAS FOUND BY THE DEPARTMENT TO SUPPORT THEIR SUSPICION. (M) THEREFORE, THE EXCEL SHEETS WHICH ARE NOT SPEAKING EITHER BY ITSELF OR IN THE COMPANY OF OTHERS, OR CORROBORATED BY ENQUIRY, CANNOT BE THE BASIS OF ANY INFERENCE THAT CAPITATION FEES WERE COLLECTED AND N OT ENTERED IN THE ACCOUNTS TO CANCEL REGISTRATION . ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 11 9. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO POINTED O UT THAT THE PROCEDURE FOR ADMISSION IS VERY STRICT, TRANSPA RENT AND THE SAME IS SUPERVISED BY NTR HEALTH UNIVERSITY AND OTH ER REGULATORY AUTHORITIES. THE ENTIRE PROCEDURE WAS EX PLAINED TO THE AUTHORITIES IN DETAIL. THIS WAS DONE TO BRING HOME THE FACT THAT AT NO POINT OF TIME ANY IRREGULARITY WAS FOUND. THE PR OCEDURE IS EXPLAINED TO THE AO IN THE COURSE OF ASSESSMENT PRO CEEDINGS, CIT AND DIRECTOR GENERAL OF INCOME TAX. IT IS SUBM ITTED THAT THERE HAS NEVER BEEN ANY ATTEMPT BY REGULATORY BODI ES INCLUDING GOVERNMENT OF ANDHRA PRADESH TO RAISE ANY DOUBT ABO UT THE FUNCTIONING OF THE SOCIETY AND COLLECTION OF CAPITA TION FEES. THE LEARNED COUNSEL ALSO EXPLAINED THAT COLLECTION OF C APITATION FEE CANNOT BE PRESUMED IN THE ABSENCE OF COGENT EVIDENCE PARTICULARLY IN MATTER OF SUCH VITAL IMPORTANCE WHI CH INVOLVES AN EDUCATIONAL INSTITUTION AND FATE OF STUDENTS. IT WA S ALSO SUBMITTED THAT THIS BEING A SERIOUS ALLEGATION, THE SAME DESERVED SERIOUS VERIFICATION BEFORE REACHING ANY C ONCLUSION. THE ENTIRE ASSESSMENT AND THE ORDER OF CIT IS BASED ON SUSPICION, SURMISES AND CONJECTURES. THAT NO QUASI-JUDICIAL O RDER CAN BE BASED ON SUSPICION, IS SUPPORTED BY THE FOLLOWING D ECISIONS OF APEX COURT. ( I ) DHIRAJPAL GIRDHARI LAL V. CIT [1954] 26 ITR 726 (SC ); ( II ) DHAKESHWARI COTTON MILLS LTD. V. CIT [1954] 26 ITR 775 (SC); ( III ) LALCHAND BHAGAT AMBICA RAM V. CIT [1959] 37 ITR 288 (SC); ( IV ) UMACHARAN SHAW & BROS. V. CIT [1959] 37 ITR 271 (SC); 10. AS POINTED OUT ABOVE, ASSESSMENTS HAVE BEEN MADE SUBSTANTIVELY IN TWO HANDS -IN THE HANDS OF THE SOCIETY AND THE CHAIRMAN SRI SRINIVASA RAO. THIS IS BECAUSE OF UNCERTAINTIES IN THE MINDS OF AUTHORITIES ABOUT COLLECTION OF CAPITA TION FEES AND ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 12 ITS BENEFICIARY IN THE ABSENCE OF EVIDENCE. THEREFO RE, THE INFERENCE DERIVED BY CIT FROM THE ASSESSMENT ORDER OF AO CANNOT SUSTAIN THE CANCELLATION. 11. IT WAS POINTED OUT THAT HAD THE ASSESSEE EARNED A F ORTUNE BY COLLECTION OF CAPITATION FEES OF SUCH HUGE AMOUN T AS ALLEGED, THE SAME WOULD HAVE BEEN FOUND IN COURSE OF SEARCH EITHER IN THE CASE OF THE SOCIETY OR ITS TRUSTEES. NO SUCH EV IDENCE WAS FOUND REGARDING APPLICATION. THE CASH FOUND FROM TH E PREMISES OF THE SOCIETY IS RS. 8,09,526. THIS IS AS PER BOOK S. THIS WOULD SHOW THAT THE ASSESSEE SOCIETY HAS NOT COLLECTED AN Y CAPITATION FEES AS ALLEGED FOR THE PURPOSE CANCELLATION OF REG ISTRATION. ASSESSEE SOCIETY RELIES ON THE FOLLOWING DECISIONS: I) DCIT V PRAMUKH BUILDERS 2008 112 ITD 179 AHD TM. II) ACIT V JORAWAR SINGH M RATHOD 2005 94 TTJ 867 III) SRI GANESH TRADING COMPANY VS. CIT(241 TAXMAN 264)- JHARKHAND IV) JYOTICHAND BHAICHAND SARAF & CO. P.LTD. VS.DC IT(139 ITD 10)PUNE 12. WITH REFERENCE TO THE SEIZED DOCUMENT FROM THE PREM ISES OF HOSPITAL AT KARIMNAGAR, BEING ANNEX AA/PES/01,03 ,06,08,13, IT IS SUBMITTED THAT THEY ARE LOOSE SLIPS CONTAININ G IRREGULAR NOTINGS ABOUT A NUMBER OF SMALL EXPENDITURE INCURRE D BY THE SOCIETY IN THE COURSE OF RUNNING THE HOSPITAL AT KA RIMNAGAR. WITH REGARD TO THESE NOTINGS, IT IS SUBMITTED THAT THERE ARE TWO TYPES OF SUCH EXPENDITURE- ONE RELATING TO MISC EXP ENDITURE INCURRED BY THE HOSPITAL FOR THE SOCIETY AND OTHER RELATES TO PAYMENT TO DOCTORS. AS REGARDS THE MISC PAYMENTS, I T IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HAT THE SAME WERE DULY RECORDED IN THE BOOKS, A FACT BROUGHT TO THE NOTICE OF ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 13 THE AO BY GIVING SHEET-WISE DETAILS. HE FURTHER PLE ADED THAT THERE IS NO MENTION IN THE ASSESSMENT ORDER ABOUT A NY INCRIMINATING ASPECT PERTAINING TO THESE PAYMENTS. AS REGARDS THE SECOND TYPE OF PAYMENTS, IT IS SUBMITTED, THE S AME WERE PAID BY THE ACCOUNTANT AS A TEMPORARY ACCOMMODATION TO DOCTORS IN A MOFFUSSIL TOWN, WHENEVER THEY REQUIRED CASH AND THE SAME WERE RECOVERED MOSTLY ON THE DATE OF SALAR Y PAYMENTS OR AT THE EARLIEST. IT WAS EXPLAINED THAT PAYMENT T O DOCTORS ARE IOU(I OWE YOU) PAYMENTS WHICH WERE GIVEN WITHIN THE AVAILABLE CASH BALANCE. IT WAS ALSO EXPLAINED THAT THIS IS A USUAL FEATURE AND HAS NO IMPACT ON THE OVERALL CASH BALANCE AND N O DIVERSION OF FUNDS COULD BE INFERRED FROM THESE NOTINGS. THE STATEMENT OF SRI K. PRAHLADA RAO, ACCOUNTANT WAS RECORDED ON THE DATE OF SEARCH AND SUBSEQUENTLY ON 17.10.2010 BY THE AO IN COURSE OF CROSS EXAMINATION AND RE-EXAMINATION. HE CONFIRMED THE SAME FACT AS EXPLAINED ON THE DATE OF SEARCH. AO NEVER E XTENDED ANY ENQUIRY BEYOND WHAT WAS STATED BY THE ASSESSEE, DID NOT MAKE ANY INDEPENDENT ENQUIRY FROM THE DOCTORS. THEREFORE UTILIZATION OF THE NOTINGS FOR THE PURPOSE OF CANCELLATION OF R EGISTRATION IS NOT CALLED FOR. THERE IS NO CORROBORATION IN THIS R EGARD. THEREFORE, THE SAME CANNOT BE A GROUND OF CANCELLAT ION 12AA. 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED WITH REFERENCE TO THE LETTERS ADDRESSED TO THE SOCIETY B Y SOME PARENTS, THAT TWO/THREE SUCH DOCUMENTS HAVE BEEN SE IZED BY THE DEPARTMENT. DEALING WITH THREE SUCH LETTERS, BEING ONE ADDRESSED BY ONE SRI TIRUPATHI REDDY TO THE SOCIETY , FATHER OF SWECHHA REDDY STUDENT OF MBBS; LETTER BY ONE SRI M ADHAV REDDY TO THE SOCIETY FOR HIS SON, K.SURYA REDDY; AN D PAYMENT ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 14 BY NIKHILA, A STUDENT, IT IS SUBMITTED THAT THE DE PARTMENT WAS NOT JUSTIFIED IN UTILIZING THE EVIDENCE IN THIS BEH ALF AGAINST THE ASSESSEE. AS FOR THE LETTER OF SRI TIRUPATHI REDDY , IT IS SUBMITTED THAT THE SAID WITNESS WAS A SHIFTY WITNESS, AND HEN CE, THE ASSESSEE HAS REQUESTED THE DEPARTMENT TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE THE SA ID WITNESS. HOWEVER, THE SAME WAS NOT DONE BY THE DEPARTMENT. IT IS ACCORDINGLY SUBMITTED THAT IN THE ABSENCE OF CROSS- EXAMINATION, THE STATEMENT OF THE SAID WITNESS CANNOT BE UTILIZE D AGAINST THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, RELIANCE IS PLACED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF KISHAN CHAND CHELLARAM VS. CIT(125 ITR 713)-SC; AND OF THE CALCU TTA HIGH COURT IN THE CASE OF CIT VS. EASTERN COMMERCIAL ENT ERPRISES(210 ITR 103). AS FOR THE LETTER ADDRESSED BY SRI MADHA V REDDY, IT IS SUBMITTED THAT THE SAID PERSON HAS DENIED TO HAVE PAID ANY FEE OVER AND ABOVE THE PRESCRIBED FEES. ALTHOUGH WITH REGARD TO THIS WITNESS, EXAMINATION IN CHIEF, CROSS-EXAMINATION AN D RE- EXAMINATION WERE COMPLETE AND THE EVIDENCE WAS CLOS ED IN FAVOUR OF THE ASSESSEE, THIS WAS UTILIZED AGAINST T HE ASSESSEE SOCIETY, WHICH ACCORDING TO THE LEARNED COUNSEL WAS NOT JUSTIFIED. AS FOR PAYMENT BY NIKHILA, AN MBBS STUDENT, IT IS P LEADED THAT THE ASSESSEE HAS MADE A REQUEST OF THE ASSESSEE TO PROVIDE CORROBORATIVE EVIDENCE BY WAY OF TESTIMONY OF HER F ATHER, WHO WAS ALSO EXAMINED BY THE DDIT, BUT THE SAME WAS NOT PROVIDED TO THE ASSESSEE. WITH REFERENCE TO THE ADMISSION OF THE ASSESSEE UNDER S. 132(4) OF THE ACT, IT IS STATED T HAT THE CIT HAS MADE USE OF THE DECLARATION OF RS. 5 CRORES MADE BY SRINIVASA RAO. FROM THIS DECLARATION, THE DEPARTMENT PRESUME S THAT THIS AMOUNT REPRESENTS COLLECTION OF CAPITATION FEES AN D FAULTED ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 15 SRINIVASA RAO HAVING NOT INCLUDED THE SAID AMOUNT I N THE RETURNS OF THE SOCIETY OR IN HIS INDIVIDUAL RETURNS. TAKIN G US THROUGH THE RELEVANT PORTION OF THE STATEMENT OF SRI SRINIVAS R AO, IT IS SUBMITTED THAT THE SAID DECLARATION WAS MADE IN HIS INDIVIDUAL HAND, HANDS OF HIS ASSOCIATE CONCERNS, BUT NOT IN T HE HANDS OF THE ASSESSEE SOCIETY, WHICH IS A PUBLIC CHARITABLE INSTITUTION. IT IS SUBMITTED THAT THE ASSESSEE SOCIETY IS FOR BENEF IT OF PUBLIC AND NON-INCLUSION OF RS. 5 CRORES AS DECLARED AT THE TI ME OF SEARCH IN THE RETURNS OF THE ENTITIES WILL IN NO WAY THE PREJ UDICE THE CASE OF THE SOCIETY IN THE MATTER OF CANCELLATION OF THE RE GISTRATION, AS NO INCOME WAS ADMITTED IN THE HANDS OF THE SOCIETY. I T IS FURTHER SUBMITTED THAT THE OFFICER TAKING THE EVIDENCE, CON FINED HIMSELF TO BALD DECLARATION, AND DID NOT SEEK FURTHER CLARI FICATION TO FIX THE MATTER TO DECIDE TO WHOM SUCH DECLARED INCOME R ELATES, AND THEREFORE, UNDUE EMPHASIS IS MADE ON THE DISCLOSURE . 14. WITH REGARD TO VIOLATION OF PROVISIONS OF S. 13, WH ICH IS ONE OF THE POINTS FOR CANCELLATION OF REGISTRATION, IT IS SUBMITTED THAT THERE HAS BEEN ALLEGATION THAT SRI SRINIVASA RAO, C HAIRMAN OF THE ASSESSEE SOCIETY ENJOYED THE BENEFIT OF CAPITATION FEE COLLECTED BY THE SOCIETY, THUS VIOLATING THE PROVISIONS OF S. 13. NOT AN IOTA OF EVIDENCE WAS FOUND IN THE COURSE OF SEARCH FOR S UCH VIOLATION AND THERE IS NO MENTION OF ANY INSTANCE OF SUCH VIO LATION IN THE ASSESSMENT ORDER. THE ONLY ACTION OF THE DEPARTM ENT IN THAT DIRECTION IS TO TREAT THE ALLEGED CAPITATION FEES A S INCOME IN BOTH HANDS. FURTHER, IT IS STATED THAT THE DEPARTMENT HA VING FRAMED THE ASSESSMENT SUBSTANTIVELY IN THE HANDS OF THE S OCIETY AND SRINIVASA RAO, SEEMS TO BE UNDECIDED AS TO WHO IS T HE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 16 BENEFICIARY OF THE ALLEGED CAPITATION FEES, AND CON SEQUENTLY NO VIOLATION OF PROVISIONS OF S. 13 BE CONCLUSIVELY IN FERRED. 15. WITHOUT PREJUDICE, IT IS ALSO SUBMITTED THAT MINOR VIOLATIONS/ABERRATIONS RELATING TO THE ACCOUNTS OF THE TRUST BY THE TRUSTEES, IF ANY COULD NOT BE A GROUND TO CANCEL TH E REGISTRATION OF THE TRUST AND THEREFORE, THE ORDER PASSED UNDER S. 12AA(3) OF THE ACT IS WHOLLY UNSUSTAINABLE BOTH IN LAW AND ON FACTS. 16. HE ALSO DISTINGUISHED THE DECISION OF THE TRIBUNAL IN THE CASE OF JOGINPALLI BR EDUCATIONAL SOCIETY 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY R ELYING ON THE ORDER OF THE CIT CANCELLING REGISTRATION UND ER S. 12AA OF THE ACT, SUBMITTED THAT THE ACTIVITIES OF THE ASSES SEE-TRUST ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THEIR OBJE CTS. IT WAS ONLY AFTER CONSIDERING ALL THE MATERIAL /RECORDS AV AILABLE BEFORE HIM, INCLUDING A PROPOSAL RECEIVED FROM THE AO BEFO RE ISSUE OF SHOW-CAUSE NOTICE TO THE ASSESSEE, GIVING OPPORTUNI TY TO EXPLAIN WHY THE REGISTRATION SHOULD NOT BE CANCELLED, AND A FTER SATISFYING HIMSELF ABOUT THE NATURE OF THE ACTIVITIES OF THE A SSESSEE, THE CIT CANCELLED THE REGISTRATION BY PASSING A SPEAKIN G ORDER. AS IS EVIDENT FROM THE SHOW CAUSE NOTICE DATED 22.3.20 12 ISSUED TO THE ASSESSEE, THE CIT MAINLY RELIED ON THE MATERIAL SEIZED DURING THE COURSE OF SEARCH, WHICH SHOWED THAT THE ASSESSE E-SOCIETY HAS BEEN COLLECTING AMOUNTS OVER AND ABOVE THE PRES CRIBED FEE, IN CASH FROM THE STUDENTS ADMITTED UNDER MANAGEMENT QUOTA AND THE AMOUNTS SO COLLECTED ARE NOT BEING ACCOUNTE D FOR IN THE BOOKS OF THE ASSESSEE-SOCIETY. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 17 18. REFERRING TO THE ARGUMENT OF THE ASSESSEE THAT THE IMPUGNED ORDER OF THE CIT IS BASED ON MERE PRESUMPT IONS AND ASSUMPTIONS AND THE DECISION TO CANCEL THE REGISTRA TION WAS BASED ON A PREMATURE DECISION OF THE AO WITHOUT CON CLUDING THE ASSESSMENT PROCEEDINGS IN PROGRESS, IT IS SUBMITT ED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE IS NO SUCH REQUIREMENT IN THE STATUTE AND THE CITS PROCEEDING S FOR CANCELLATION OF REGISTRATION UNDER S. 12A AND THE A SSESSMENT PROCEEDINGS CAN CONTINUE CONCURRENTLY, AND THERE IS NO BAR AS SUCH ON THE POWERS OF THE CIT TO ARRIVE AT AN APPR OPRIATE CONCLUSION AND PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW. 19. HE ALSO SUBMITTED THAT THE SEIZED MATERIAL CLEARLY ESTABLISHED THAT COLLECTION OF MONEY OVER AND ABOVE THE PRESCRIBED FEE BY THE ASSESSEE FOR ADMISSION OF STU DENTS UNDER MANAGEMENT QUOTA, THOUGH THE SAME IS NOT EXPRESSLY ADMITTED BY THE MANAGEMENT. THE EVIDENCE REGARDING THE COLLE CTION OF DONATIONS/CAPITATION FEE ARE AVAILABLE IN THE MATER IAL SEIZED FROM THE OFFICE OF THE ASSESSEE TRUST AT PLOT NOS. 213, ROAD NO. 1, FILM NAGAR, JUBILEE HILLS, HYDERABAD DURING THE COU RSE OF SEARCH ON 10.9.2009. IT IS FURTHER POINTED OUT THAT DURIN G THE COURSE OF SEARCH, WHEN SRI B. SRINIVASA RAO, CHAIRMAN OF ASSE SSEE-SOCIETY WAS CONFRONTED WITH THE SEIZED MATERIAL, WHEN HE CL EARLY STATED THAT THE CONCERNED SEIZED MATERIAL RELATED TO THE S OCIETY AND THEY ARE FOUND IN THE PREMISES. DURING THE COURSE O F SEARCH ON 10.9.2009, WHEN A STATEMENT WAS RECORDED, SRI SRINI VASA RAO EXPLAINED IN DETAIL WITH REGARD TO MANY DOCUMENTS, BUT IN THE CONTEXT OF INCRIMINATING DOCUMENTS PUT TO HIM, HE O NLY STATED ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 18 THAT HE WOULD EXPLAIN THE CONTENTS LATER, SINCE AT THAT POINT OF TIME, HE WAS NOT IN A POSITION TO COMPREHEND WHAT I T IS. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO SUBMIT TED THAT THE STATEMENT OF SRI SRINIVASA RAO WAS AGAIN R ECORDED ON 5.10.2009, AND IN THE COURSE OF THAT STATEMENT ALSO , WHEN CONFRONTED WITH THE SAID INCRIMINATING PAPERS, HE H AS NOT DENIED THE OWNERSHIP OF THE DOCUMENTS OR ANY OF THE STATEM ENTS MADE EARLIER DURING THE COURSE OF SEARCH, BUT STATED ON OATH THAT HE WANTED TO CONSULTANT WITH HIS EMPLOYEES AND EXPLAIN WITHIN A WEEK. 21. IN A STILL SUBSEQUENT STATEMENT RECORDED ON 6.11.20 09, AGAIN, SRI SRINIVASA RAO FAILED TO EXPLAIN THE CONT ENTS OF THE PAPERS, AND WANTED THE COPIES OF THE SEIZED MATERIA L TO BE GIVEN TO HIM TO EXPLAIN THE CONTENTS. IT IS STATED AT THI S JUNCTURE THAT THOUGH THE ASSESSEE IS ENTITLED TO COPIES OF SUCH D OCUMENTS, THAT POINT OF TIME, IT WAS PREMATURE TO GIVE COPIES OF THE SEIZED MATERIAL, AS THAT WOULD HAVE INTERFERE IN THE COURS E OF INVESTIGATION. IN A FURTHER STATEMENT RECORDED ON 17.12.2009 ALSO, THE ASSESSEE DID NOT EXPLAIN THE CONTENTS OF THE MATERIAL, BUT ONLY STATED THAT THEY HAVE NOT COLLECTED ANY CA PITATION FEE. HE ALSO EVADED ALL ALONG TO EXPLAIN THE CONTENTS OF THE INCRIMINATING PAPERS SEIZED DURING THE COURSE OF SE ARCH. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTA TIVE THAT THE ASSESSEE HAS NEVER ACCEPTED THE RECEIPT OR COLLECTI ON OF DONATIONS BY IS TO BE EXAMINED IN THE LIGHT OF THE SEQUENCE OF ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 19 EVENTS EXPLAINED ABOVE. IT IS FURTHER SUBMITTED THAT CONTENTS OF ANY PAPER ARE TO BE CONSIDERED IN THE SAME MANNE R AS A PRUDENT PERSON WOULD UNDERSTAND THEM IN NORMAL CIRC UMSTANCES, AND THE INCRIMINATING MATERIAL SEIZED, BEING PRODUC ED EVEN BEFORE THIS TRIBUNAL, CLEARLY REFLECT THAT THE ASSE SSEE-SOCIETY WAS COLLECTING MONIES OVER AND ABOVE THE PRESCRIBED FEE . IN THE FACE OF SUCH INCRIMINATING DOCUMENTS, THE REGISTRATION U NDER S. 12 OF THE ACT HAS BEEN CORRECTLY CANCELLED BY THE CIT. 23. HE ALSO FURTHER SUBMITTED THAT THE SEIZED MATERIAL, AS FOR EXAMPLE PAGES 53 TO 56 OF ANNEXURE A/PES/13) CONTAI N DETAILS AS TO NAME OF THE STUDENT, FATHERS NAME, TOTAL FEE , CASH/CHEQUE, AMOUNT TO BE RECEIVED, ETC. ALL THE DE TAILS EXCEPT THE AMOUNT WRITTEN IN COLUMN CASH ARE RECORDED BY THE ASSESSEES BOOKS AND VERIFIABLE WITH REFERENCE TO T HE ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HENCE, IT CA NNOT BE SAID, WHEN MOST OF DETAILS IN THESE MATERIALS RELATED TO THE ASSESSEE AND SEIZED FROM THEIR PREMISES, ONE PARTICULAR COLU MN ALONE DOES NOT RELATE TO THE BUSINESS OF THE ASSESSEE. TH E OVERWHELMING EVIDENCE BROUGHT ON RECORD CLEARLY SHO WS THAT THE ASSESSEE HAS BEEN CLEARLY COLLECTING AMOUNTS OVER A ND ABOVE THE PRESCRIBED FEE WHICH HAS BEEN CREDITED IN THE BOOKS OF ACCOUNT. IN SUPPORT OF THIS CONTENTION, THE LEARNED DEPARTME NTAL REPRESENTATIVE HAS PLACED RELIANCE ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF MAHAVEER WOOLLEN MILLS LT D. (245 ITR 297). 24. AS FOR THE POST SEARCH EXAMINATION OF PARENTS OF TH E STUDENTS, IT IS SUBMITTED THAT THE PARENTS WOULD NO T HAVE GIVEN ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 20 ANY STATEMENT AGAINST THE INTERESTS OF THE ASSESSEE , AS IT WOULD BE THE FUTURE OF THEIR CHILDREN WHICH WOULD BE AT S TAKE. THIS FACT HAS ALSO BEEN BROUGHT OUT BY THE DGIT(INV) IN THE O RDER CANCELLING THE APPROVAL UNDER S. 10(23C). IN THIS VIEW OF THE MATTER, IT IS SUBMITTED THAT MUCH WEIGHTAGE CANNOT BE GIVEN TO THE STATEMENTS OF THE PARENTS, CONSIDERING THE OVER WHELMING AND INCRIMINATING DOCUMENTS SEIZED DURING THE SEARC H, AND THE CONSISTENT EVASIVE REPLIES OF THE CHAIRMAN OF THE A SSESSEE-TRUST. FURTHER HE SUBMITTED THAT IN THE MATTER OF CANCELLA TION OF REGISTRATION, THE ONUS IS ON THE DEPARTMENT TO PROV E THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE NOT GENUI NE AND THE ASSESSEE HAS NOT FUNCTION TO ADVANCE ITS OBJECTS FO R WHICH REGISTRATION WAS GRANTED TO THE ASSESSEE. IN REPLY TO DR'S ARGUMENTS, THE AR SUBMITTED THAT THERE IS NO EVIDENCE TO SHOW THAT ANY INTERESTED PERSON HAVE ENJOYED THE BENEFIT OF THE FUNDS OF THE SOCIETY. HE RELIED ON THE FOLLOWING JUDGEMENTS: (I) GURU GOVIND SINGH EDUCATIONAL SOCIETY VS. CIT (2009) (118 ITD (ASR) 207). (II) DIRECTOR OF INCOME-TAX (EXEMPTIONS) VS. SRI BELIMATHA MAHASAMSTHANA SOCIO, CULTURAL AND EDUCATIONAL TRUST (2011) (336 ITR 694) (KARN.) (III) MAHARASHTRA ACADEMY OF ENGINEERING & EDUCATIONAL RESEARCH VS. CIT (133 TTJ 706). 25. FURTHER HE SUBMITTED THAT EVIDENCE COLLECTED BY THE DEPARTMENT IS NOT ENOUGH TO CANCEL THE REGISTRATION GRANTED U/S. 12AA OF THE ACT. FOR THIS PROPOSITION, HE RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF DHIRAJLAL GIRIDHARLAL ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 21 VS. CIT (26 ITR 736) (SC), SHALINI SONI VS. UOI (AI R 1981) 431, 434 (SC). FINALLY HE SUBMITTED THAT THE REGISTRATI ON WAS CANCELLED ON THE BASIS OF IRRELEVANT MATERIAL COLLE CTED DURING THE COURSE OF THE SEARCH AND IT SHOULD BE VACATED. FINDINGS IN RESPECT OF ITA NO. 720/HYD/2012: 26. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE REGISTRATION GRANTED TO TH E ASSESSEE W.E.F. 1.4.2000 U/S. 12AA OF THE INCOME-TAX ACT, 19 61 WAS CANCELLED BY THE CIT VIDE ORDER DATED 22.3.2012. T HE REASONS FOR CANCELLATION OF REGISTRATION ARE THAT THE ASSES SEE HAS VIOLATED THE PROVISIONS OF SECTIONS 11 AND 12 OF THE ACT AND THE ASSESSEE HAS NOT CONDUCTED ITSELF IN ACCORDANCE WITH THE OBJ ECT FOR WHICH IT WAS ESTABLISHED AND REGISTERED U/S. 12A OF THE A CT. THE BASIS FOR SUCH CONCLUSION ARE THE MATERIALS COLLECTED BY THE DEPARTMENT IN THE COURSE OF SEARCH ACTION CONDUCTED U/S. 132 OF THE ACT ON 10.9.2009. THE CIT CONSIDERED THE FOLLO WING INFORMATION TO CANCEL THE REGISTRATION GRANTED TO T HE ASSESSEE U/S. 12A OF THE ACT: SEIZED MATERIAL : (1) ANNEXURE A/PES/17: THIS ANNEXURE CONTAINS TWO LOOSE SHEETS PAGE NOS. 3 AND 4 WHICH SAID TO HAVE CONTAINED DETAILS OF FEES COLLECTED FROM 45 MBBS STUDENTS ADMITTED IN MANAGEMENT QUOTA FOR THE ACADEMIC YEAR 2007-08. THESE PAGES CONTAIN DETAILS LIKE NAME OF THE STUDENT, FATHER'S NAME, TOTAL FEES PER SEAT, FEE RECEIVED IN CASH, FEE RECEIVED THROUGH ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 22 CHEQUE/DD, BALANCE FEE TO BE COLLECTED DURING THE RELEVANT 5 YEARS. FOR EXAMPLE, SL. NO. 1 AT PAGE NO . 4 SHOWS THE DETAILS OF STUDENT BY NAME M. NIKHILA, FATHERS NAME M. RAMGOPAL REDDY. SHE WAS ADMITTED UNDER MANAGEMENT QUOTA FOR A TOTAL CONSIDERATION OF RS. 35 LAKHS, OUT OF WHICH SHE PAID RS. 31 LAKHS AT THE TIME OF ADMISSION IN CASH AND RS. 4 LAKHS IN THE FO RM OF CHEQUES/DDS. (2) ANNEXURE A/PES/13: THIS ANNEXURE CONTAINS PAGE NOS. 53 TO 56. IN THIS ANNEXURE DETAILS OF FEE COL LECTED FROM 14 MBBS STUDENTS UNDER MANAGEMENT QUOTA FOR THE ACADEMIC YEAR 2007-08. IT CONTAINS DETAILS OF 14 STUDENTS NAME, FATHERS NAME, TOTAL AMOUNT. AT SL. NO. 6 IN PAGE NO. 53, SHOWS THE DETAILS OF STUDENT BY N AME ABHITEJA, S/O. ASHOK KUMAR. HE WAS ADMITTED UNDER MANAGEMENT QUOTA FOR AN AMOUNT OF RS. 30 LAKHS AND HE HAS PAID RS. 20 LAKHS AT THE TIME OF ADMISSION A ND RS. 10 LAKHS IS DUE. PAGE NO. 54 OF THIS ANNEXURE SHOWS DETAILS OF SEVEN STUDENTS SUCH AS NAME, FATHE RS NAME, AMOUNT PAID AND AMOUNT DUE. SL. NO. 3 IN TH IS PAGE SHOWS DETAILS OF MS. RESHMA, D/O. SRINIVAS WHO HAS PAID RS. 20 LAKHS PREVIOUSLY AND SUBSEQUENTLY P AID DUE AMOUNT OF RS. 15 LAKHS. TOTAL FEE IS RS. 35 LA KHS UNDER MANAGEMENT QUOTA FOR MBBS COURSE. PAGE NO. 55 OF THIS ANNEXURE SHOWS DETAILS OF 24 MBBS STUDEN TS ADMITTED IN ACADEMIC YEAR 2007-08. SAME DETAILS LIK E NAME, FATHERS NAME, TOTAL FEE, FEE RECEIVED IN CAS H AND FEES RECEIVED BY CHEQUE/DD AND AMOUNT DUE TO BE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 23 RECEIVED IN RELEVANT YEARS. SL. NO. 3 IN THIS PAGE SHOWS NAME OF THE STUDENT, V. SHETHYA RAO, S/O. V. MADANMOHAN RAO WHO WAS GIVEN MANAGEMENT QUOTA SEAT FOR RS. 37 LAKHS AND HE HAS PAID RS. 33 LAKHS IN CASH AND RS. 4 LAKHS BY WAY OF CHEQUE/DD. PAGE NO. 56 IN THIS ANNEXURE CONTAINS DETAILS OF 21 MBBS STUDENTS ADMITTED UNDER MANAGEMENT QUOTA AND DETAIL S OF THEM RELEVANT TO THE ACADEMIC YEAR 2007-11. FOR EXAMPLE SL. NO. 8 IN THIS PAGE SHOWS THE DETAILS OF STUDENT BY NAME SATLA RAJKUMAR S/O. S. CHINNA MALLAIAH. HE WAS ADMITTED UNDER MANAGEMENT QUOTA FOR A CONSIDERATION OF RS. 30 LAKHS AND PAID RS. 15 LAKHS IN CASH AT THE TIME OF ADMISSION AND BALANCE RS. 15 LAKHS PAID IN THE YEAR 2008. (3) ANNEXURE A/PES/16: THIS ANNEXURE CONTAINS PAGE NOS. 31 TO 35, DETAILS OF FEE COLLECTED FROM 34 MBB S STUDENTS UNDER MANAGEMENT QUOTA FOR ACADEMIC YEAR 2009-10 AND SHOWS DETAILS OF STUDENT NAME, TOTAL FE E FOR MANAGEMENT QUOTA SEAT, TOTAL CONSIDERATION (TC) , DATES ON WHICH THESE AMOUNTS PAID, MOBILE PHONE NUMBERS. AS PER THIS ANNEXURE, THE LOWEST FEES COLLECTED FOR MBBS COURSE UNDER MANAGEMENT QUOTA IS RS. 2,00,006 AND THE HIGHEST IS RS. 35 LAKHS. (4) ANNEXURE A/PES/15: IT CONTAINS PAGE NOS. 56 TO 82. HAVING POST DATED CHEQUES AND SMALL SLIPS WITH THE DETAILS OF TOTAL FEE, PAYMENT THEREOF BY CASH AND CHEQUE WITH CHEQUE NOS. AND DATE ISSUED BY THE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 24 PARENTS OF THE STUDENTS WHO ARE ADMITTED INTO MBBS COURSE UNDER MANAGEMENT QUOTA FOR ACADEMIC YEAR 2007-08. (5) ANNEXURE A/PES/15 (PAGE NO. 49): THIS IS A LETTER WRITTEN IN TELUGU IN THE HAND WRITING OF SRI E. TIR UPATHI REDDY, FATHER OF E. SWETHA REDDY WHO WAS ADMITTED F OR MBBS COURSE UNDER MANAGEMENT QUOTA FOR THE ACADEMIC YEAR 2007-08 ADDRESSED TO MANAGING DIRECTO R OF ASSESSEE TRUST. AS PER THIS LETTER SRI E. TIRUP ATHI REDDY ALREADY PAID RS. 12 LAKHS AND HE WOULD PAY ANOTHER RS. 8 LAKHS ON 29.9.2007 AND BALANCE AMOUNT OF RS. 10 LAKHS WOULD BE PAID WITHIN 6 MONTHS. (6) ANNEXURE A/PES/15 (PAGE NO. 43): THIS IS A LETTER DATED 30.9.2006 WRITTEN BY SRI K. MADHAV REDDY IN H IS OWN HANDWRITING AND ADDRESSED TO THE DIRECTOR OF ASSESSEE SOCIETY. AS PER THIS LETTER SRI K. MADHAV REDDY, FATHER OF K. SURYA ADMITTED TO MBBS COURSE UNDER MANAGEMENT QUOTA FOR ACADEMIC YEAR 2006-07 AND AGREED FOR PAYMENT OF RS. 26.75 LAKHS, OUT OF WHICH HE HAS PAID RS. 20 LAKHS ON 30.9.2009. BALAN CE RS. 1.5 LAKHS IS TO BE PAID YEARLY AFTER PAYMENT OF RS. 6.75 LAKHS BY CHEQUE ON 30.9.2009. (7) FURTHER, STATEMENT OF THE MANAGING DIRECTOR OF THE ASSESSEE SOCIETY WAS RECORDED ON 10.9.2009 WHO HAS FAILED TO EXPLAIN THE ABOVE SEIZED MATERIAL AND STA TED THAT HE WILL EXPLAIN THE SAME LATER. IN RESPECT OF A/PES/16, PAGE NOS. 1 TO 35, A/PES/15 (PAGE NOS. 50 ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 25 TO 82), HE SAID THAT HE WILL CLARIFY THE SAME LATER . IN RESPECT OF A/PES/17 (PAGE NOS. 23 TO 24) HE SAID TH AT THE HANDWRITING DOES NOT BELONG TO HIM AND HE SAID THAT HE WILL EXPLAIN IT LATER. IN RESPECT OF PAGE NO. 2 4 OF A/PES/17 WHICH IS A COPY OF CHEQUE RECEIVED FROM SM T. A. ANURADHA FOR REPAYMENT OF LOAN ADVANCED BY SRI B . SRINIVASA RAO. ACCORDING TO THE DEPARTMENT, SRI B. SRINIVASA RAO HAD GIVEN EVASIVE REPLY. HOWEVER, HE ADMITTED TO DISCLOSE INCOME OF RS. 5 CRORES IN HIS HANDS TO COVER UP THE DISCREPANCIES FOUND DURING THE COUR SE OF SEARCH. 27. IN THIS CASE, SRI E. TIRUPATHI REDDY WAS EXAMINED B Y THE DEPARTMENT ON 4.11.2009. HE STATED IN HIS ANSWER T O QUESTION NOS. 7, 8 AND 10 THAT HE HAS NOT PAID ANY EXCESS FE ES. HOWEVER, FINALLY HE SAID THAT THE CONTENTS IN THE L ETTER ARE CORRECT. THE ASSESSEE ASKED FOR CROSS EXAMINATION OF HIM. NO CROSS-EXAMINATION OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE. SRI E. TIRUPATHI REDDY HAS CHANGED HIS STAND. AS H ELD BY THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. EASTERN COMMERCIAL ENTERPRISES (207 ITR 103) (CAL), SRI E. TIRUPATHI R EDDY CANNOT BE CONSIDERED AS A RELIABLE PERSON. HE HAS CHANGED HIS VERSION AND PROVED TO BE SHIFTY PERSON AS A WITNESS. AT ON E STAGE HE HAS CLAIMED THAT HE HAS NOT PAID THE AMOUNT OVER AN D ABOVE THE PRESCRIBED FEES, AS EVIDENCED BY HIS STATEMENT PLAC ED ON RECORD AT PAGE NOS. 147 TO 149 OF PAPER BOOK VOL. I. LATE R HE HAS CHANGED HIS VERSION, BEING SO, LITTLE VALUE CAN BE ATTACHED TO HIS STATEMENT AND HIS CONDUCT NEUTRALISED HIS VALUE AS A WITNESS. A MAN INDULGING IN DOUBLE SPEAKING CANNOT BE SAID BY ANY MEANS A ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 26 TRUTHFUL MAN AT ANY STAGE AND WE CANNOT DECIDE ON W HICH OCCASION HE WAS TRUTHFUL. FURTHER, THE ASSESSEE WA S NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE HIM. THEREFORE, T HE DEPARTMENT CANNOT CONSIDER HIS STATEMENT AS AN EVID ENCE AGAINST THE ASSESSEE. FURTHER THE JUDGEMENT OF SUP REME COURT IN THE CASE OF KISHAN CHAND CHELLARAM VS. CIT (125 ITR 713) ALSO SUPPORTS THE ASSESSEE CASE, WHEREIN HELD THAT EVIDENCE COLLECTED FROM WITNESS CANNOT BE CONSIDERED WITHOUT GIVING OPPORTUNITY OF CROSS-EXAMINATION TO THE ASSESSEE. 28. FURTHER, IN THE CASE OF K. MADHAV REDDY, HE WAS EXA MINED ON 5.12.2009. HE WAS ALSO CROSS-EXAMINED BY THE AS SESSEE. HE HAD DENIED PAYMENT OF EXCESS FEE MORE THAN WHAT IS PRESCRIBED FEES AND SAID THAT HIS SON GOT ADMISSION IN NORMAL COURSE. 29. REGARDING PAYMENT BY MS. NIKITA, THE ASSESSEE ASKED CORROBORATIVE EVIDENCE COLLECTED FROM THEM TOWARDS PAYMENT OF EXCESS FEES FOR MANAGEMENT QUOTA SEAT WHICH WAS NOT PROVIDED TO THE ASSESSEE. FATHER OF MS. NIKITA WHO IS A GOV ERNMENT EMPLOYEE BORROWED MONEY FROM UNION BANK OF INDIA UL C, HYDERABAD BRANCH TO MEET THE PAYMENT OF FEES. THE ASSESSEE EXPLAINED THAT TO MEET THE REQUIREMENT OF LOAN, THE EVIDENCE FOUND DURING THE COURSE OF SEARCH WAS FURNISHED TO THE ASSESSEE BY THEM. IT WAS SUBMITTED BEFORE US THAT IF THE NA RRATION IN EXCEL SHEETS IS CORRECT, THE TOTAL FEE OF RS. 35 LA KHS WAS RECEIVED BY THE ASSESSEE SOCIETY BY CHEQUE AND CASH AT THE T IME OF ADMISSION. THERE WAS NO NEED TO OBTAIN LOAN FROM T HE BANK. BEING SO, THE VERSION OF THE DEPARTMENT THAT CASH O F RS. 30 LAKHS AND CHEQUE OF RS. 5 LAKHS WAS RECEIVED FROM K UM. NIKITA ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 27 FOR ADMISSION TO MBBS COURSE IN THE ACADEMIC YEAR 2 007-08 DOES NOT HOLD MERIT. 30. REGARDING THE DISCLOSURE OF RS. 5 CRORES BY THE CHA IRMAN OF THE TRUST TOWARDS UNDISCLOSED INCOME ON ACCOUNT OF DISCREPANCIES FOUND DURING THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE, IT WAS SUBMITTED THAT THIS DISCLOSURE DOES NOT DISENTITLE THE ASSESSEE FOR EXEMPTION U/S. 11 OF TH E ACT SO AS TO CANCEL REGISTRATION GRANTED TO THE ASSESSEE US. 12A OF THE ACT. THE INCOME WAS OFFERED BY B. SRINIVASA RAO IN HIS I NDIVIDUAL CAPACITY IN ADDITION TO HIS REGULAR INCOME WHICH IS ONE OF THE REASONS GIVEN BY THE CIT FOR CANCELLATION OF REGIST RATION GRANTED TO THE ASSESSEE U/S. 12AA OF THE IT ACT. EVEN IF IT IS ADMITTED THAT SRI B. SRINIVASA RAO HAS OFFERED ADDITIONAL IN COME IN HIS INDIVIDUAL CAPACITY, THEN ALSO THE ASSESSEE CANNOT BE LIABLE FOR CANCELLATION OF REGISTRATION U/S. 12AA ON THE CONCL USION THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTIONS 11 AND 13 OF THE ACT. 31. FURTHER, FROM THE ARGUMENT OF THE ASSESSEES COUNSE L IT IS OBSERVED AS FOLLOWS: A) DEPARTMENT DESPITE ITS ATTEMPT FAILED TO COLLECT AN Y INFORMATION FROM ANY SOURCE CORROBORATING PAYMENT O F CAPITATION FEES EXCEPT RELYING ON UNCORROBORATED ENTRIES IN AN EXCEL SHEET, THE DISCOVERY OF WHICH W AS SERIOUSLY DISPUTED. B) ALL ATTEMPTS FOR CORROBORATION FAILED. ALTHOUGH ALL THE PARENTS WERE SUMMONED, AND THEIR STATEMENTS WERE RECORDED, THE DEPARTMENT HAS SO FAR DECLINED TO GIV E ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 28 COPIES OF THESE STATEMENTS POSSIBLE REASON COULD BE THAT THESE STATEMENTS WERE FAVOURABLE TO SOCIETY. C) THE LETTER SUPPOSED TO HAVE BEEN ADDRESSED FROM TWO PARENTS REMAINED UNCORROBORATED BECAUSE OF THEIR DENIAL, NON-PRODUCTION OF ONE OF THEM (TIRUPATHI REDDY) FOR CROSS EXAMINATION AND ADMISSION BY THE DEPARTMENT BEFORE HIGH COURT THAT STATEMENT OF MADHAV REDDY IS NOT INCRIMINATING. D) THE SOCIETY EXPLAINED THE ROUGH NOTINGS IN LOOSE PAPERS AND THE SAME WERE ACCOUNTED FOR IN THE BOOKS . IT ALSO EXPLAINED PAYMENTS AND RECOVERY OF THE AMOUNTS FROM DOCTORS THROUGH IOU PAYMENTS. THE DEPARTMENT FAILED TO DEMOLISH SOCIETY'S CONTENTION THROUGH CROSS EXAMINATION OF SRI PARAHLADA RAO, ACCOUNTANT, WHO MADE THESE PAYMENTS, ALTHOUGH HE WAS EXAMINED, CROSS EXAMINED AND RE-EXAMINED. NO ENQUIRY HAS BEEN MADE FOR CORROBORATION. E) THE ADMISSION OF RS. 5 CORES SUPPOSED TO HAVE BEEN MADE BY SRINIVAS RAO, CHAIRMAN NEVER PERTAINED TO SOCIETY. FURTHER IT WAS A NON SPECIFIC AND BALD DECLARATION. F) THERE IS NOTHING IN THE ORDER THAT THE SOCIETY HAS DEVIATED FROM THE OBJECTS FOR WHICH THE REGISTRATIO N WAS GRANTED AND NOT APPLIED ITS FUNDS TOWARDS ITS OBJECTS. G) NO EVIDENCE WAS BROUGHT OUT TO SHOW THAT THE AMOUNT OF CAPITATION FEES ALLEGED TO HAVE BEEN COLLECTED W ERE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 29 APPLIED EITHER BY THE SOCIETY OR BY ANY INTERESTED PERSONS. THERE IS NO INSTANCE OF VIOLATION OF THE PROVISIONS OF SECTION 13. H) NO ASSET COMMENSURATE WITH THE ALLEGED ESTIMATED INCOME BY THE AO WAS FOUND. 32. COMING TO THE PROVISIONS OF SECTION 12AA OF THE IT ACT, THE DEPARTMENT CAN CANCEL REGISTRATION GRANTED TO A SOC IETY U/S. 12AA IN THE FOLLOWING CIRCUMSTANCES: (1) THE ACTIVITIES OF THE TRUST ARE NOT GENUINE. (2) THE ACTIVITIES OF THE TRUST ARE NOT CARRIED ON IN ACCORDANCE WITH THE OBJECT OF THE TRUST. 33. IN THE PRESENT CASE THE CIT IS NOT ALLEGING THAT TH E ASSESSEE IS NOT CARRYING ON IMPARTING OF EDUCATION. IT IS ADMITTED FACT THAT THE ASSESSEE HAS BEEN CARRYING O N EDUCATIONAL INSTITUTION IMPARTING MEDICAL EDUCATION AND IT FULF ILLED THE REQUIREMENT OF IMPARTING EDUCATION AND THE QUESTION OF IMPARTING EDUCATION BY THE ASSESSEE HAS NOT BEEN DO UBTED OR CHALLENGED BY THE DEPARTMENT. BEING SO, ON THIS RE ASON, REGISTRATION CANNOT BE CANCELLED. 34. THE NEXT QUESTION IS WHETHER THE TRUST ACTIVITIES A RE CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. TH E CIT HAS RELIED ON THE MATERIALS THAT WERE DISCUSSED IN EARL IER PARAGRAPHS TO DEMONSTRATE THAT THE ACTIVITIES OF THE TRUST ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TR UST. HE EXPRESSLY REFERRED TO THE SEIZED MATERIAL TO HOLD T HAT THE ASSESSEE'S ACTIVITIES CANNOT BE SAID TO BE FOR CHAR ITABLE PURPOSE. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 30 AS WE HAVE DISCUSSED IN EARLIER PARAS REGARDING THE RELIANCE PLACED ON THIS MATERIAL, THESE MATERIALS ARE INDEPE NDENTLY NOT CORROBORATED. COLLECTION OF CAPITATION FEE BY THE ASSESSEE WAS MADE OUT ON THE BASIS OF EXCEL SHEETS FOUND DURING THE COURSE OF SEARCH. THE DEPARTMENT IS NOT CONCLUSIVELY SURE WH ETHER THE ASSESSEE HAS COLLECTED CAPITATION FEE OR NOT SO THA T IT MADE ASSESSMENT IN THE HANDS OF THE CHAIRMAN, SRI B. SRI NIVASA RAO AS WELL AS THE ASSESSEE. THE CASH FOUND DURING THE SE ARCH ACTION AT RS. 8,09,526 WAS TALLIED WITH THE BOOKS OF ACCOUNT. THE DOCUMENT RELATING TO SRI E. TIRUPATHI REDDY CANNOT BE RELIED AS THIS WAS NOT SUBJECT MATTER OF CROSS-EXAMINATION. SIMILARLY, THE EVIDENCE RELATING TO SRI MADHAV REDDY CANNOT BE REL IED UPON SINCE HE DENIED PAYMENT OF ANY FEES MORE THAN WHAT WAS PRESCRIBED. HE SAID THAT HIS SON GOT ADMISSION IN NORMAL COURSE. SIMILARLY, IN THE CASE OF KUM. NIKITA, THE EVIDENCE IS DEMOLISHED BY THE ASSESSEE, THAT THE DETAILS CANNOT BE USED AG AINST THE ASSESSEE AS THE PAPERS SUBMITTED TO THE ASSESSEE BY THE PARENTS OF KUM. NIKITA WERE FOR THE PURPOSE OF FACILITATING THE FINANCIAL ASSISTANCE FROM BANK. BEING SO, THE ACTIVITIES OF THE TRUST CANNOT BE HELD AS NON-GENUINE OR IT CAN BE SAID THAT THE A CTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WI TH THE OBJECT OF THE TRUST OR INSTITUTION. THERE CANNOT BE ANY O THER LEGALLY SUSTAINABLE REASONS FOR CANCELLING OR WITHDRAWING T HE REGISTRATION GRANTED TO THE ASSESSEE ON 4.10.2000 W.E.F. 1.4.200 0. 35. TO COME TO THE ABOVE CONCLUSION, WE PLACE RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF MAHARASHTRA AC ADEMY OF ENGINEERING & EDUCATIONAL RESEARCH VS. CIT (133 TTJ 706) WHEREIN HELD THE TRIBUNAL HELD AS UNDER: ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 31 'HELD : IN THE RECENT PAST SUB-S. (3) WAS INSERTED IN S. 12 AA W.E.F. 1ST NOV., 2004 WHICH GIVES POWER OF CANCELLATION OF REGISTRATION TO THE CIT, IF HE FIND S THAT THE ACTIVITIES ARE NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THESE POWERS ARE CONFERRED WITH A VIEW TO ENSURE THAT IF ONCE A REGISTRATION HAS BEEN GRANTED UNDER S. 12AA, A TRUST OR INSTITUTION MAY NOT TAKE ANY SUCH LIBERT Y OF MISUSE OF THE REGISTRATION OR THE PROVISIONS BY GOI NG HAYWIRE RATHER FURTHERING THE OBJECTS OF THE TRUST OR GENUINELY NOT PURSUING THE ACTIVITIES FOR WHICH IT WAS ESTABLISHED. THE MOST IMPORTANT FEATURE OF S. 12AA IS AS ALSO REFERRED IN THIS APPEAL FOR ADJUDICATION, T HAT THIS SECTION HAS ONLY LAID DOWN THE PROCEDURE OF REGISTRATION AND THIS SECTION NOWHERE SPEAKS THAT WHILE CONSIDERING THE APPLICATION OF REGISTRATION, THE CIT SHALL ALSO LOOK INTO THE PROCEDURE OF EARNING O F INCOME AND SOURCES FROM WHERE RECEIPTS ARE DERIVED. THE POWER OF ENQUIRY, IN RESPECT OF SOURCES OF RECEIPTS AND THE UTILIZATION OF INCOME IS ENTRUSTED IN SEPARATE SECTIONS. THE LANGUAGE THUS USED IN THIS SECTION ONLY CONFINES TO ENQUIRE ABOUT THE ACTIVITI ES OF THE TRUST AND ITS GENUINENESS, WHICH MEANS, IN CONSONANCE WITH THE OBJECTS FOR WHICH CREATED AND THOSE OBJECTS AS ALSO ACTIVITIES SHOULD NOT BE A CAMOUFLAGE BUT PURE, SINCERE, CHARITABLE AND FOR PUBLIC UTILITY AT LARGE. WHAT IS IMPLICIT IS THAT T HE CIT HAS TO SINCERELY EXAMINE THAT THE OBJECTS AS ALSO T HE ACTIVITIES SHOULD NOT BE PRIMA FACIE AGAINST THE BA SIC STRUCTURE FOR WHICH BENEFICIAL LAW IS MADE AND ALSO BE NOT IN CONFLICT WITH THE GENERAL PUBLIC UTILITY. NATURALLY AN INSTITUTION IF ESTABLISHED TO CARRY OU T AN ILLEGAL ACTIVITY OR ACTIVITIES ARE CAUSING ANY TYPE OF NUISANCE NOT IN THE INTEREST OF THE PUBLIC AT LARGE SHOULD DEFINITELY LEAD TO CANCELLATION OF REGISTRAT ION. THE SCHEME OF THE ACT OTHERWISE DO NOT SUBSCRIBE AND ALLOW A TRUST TO TAKE THE BENEFIT OF THE PROVIS IONS OF SS. 11 AND 12 UNLESS ESTABLISH THE PRESCRIBED UTILIZATION OF THE INCOME, EVEN IF, AT ALL THE TRUS T HOLDS THE REGISTRATION IN ITS HANDS. THEREFORE AT T HE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 32 STAGE OF GRANTING REGISTRATION THE CIT IS NOT EXPEC TED TO BOTHER HIMSELF ABOUT THE OTHER PROVISIONS OF THE ACT AND SUPPOSED TO CONFINE HIMSELF TO THE PROCEDUR E OF REGISTRATION AS LAID DOWN THEREIN. (PARAS 11.4 TO 11.6) NOWHERE THE CIT HAS TAKEN ANY OBJECTION TO THE CHARITABLE AND EDUCATIONAL NATURE OF THE INSTITUTIO N. IN FACT, THE OBJECTS OF THE INSTITUTION AS DECLARED IN THE TRUST DEED DOES REFLECT THAT ALL ARE PHILANTHRO PIC OR BENEVOLENT IN NATURE, PRECISELY FOR THE PURPOSE OF IMPARTING EDUCATION. STRANGE ENOUGH THERE IS NO FINDING RECORDED BY THE CIT CONTRARY TO THIS FACT. BE THAT AS IT MAY, THE REAL AND THE ONLY SUBSTANTIAL OBJECTION FOR REFUSAL OF REGISTRATION WAS THAT THE INSTITUTION HAS COLLECTED DONATIONS THUS ADOPTED SOME WRONG MEANS OF COLLECTION OF FEES. BUT WHETHER AT THIS PRELIMINARY STAGE HE HAD THE RIGHT TO DRAW AN ADVERSE INFERENCE SO AS TO REFUSE REGISTRATION OR ALTERNATIVELY CONFINE HIMSELF TO THE ENQUIRY ABOUT THE OBJECTS AND THE ACTIVITIES OF THE TRUST AS PER THE LIMITS OF THE JURISDICTION OF S. 12AA. RATHER THIS IS ALSO NOT THE CASE OF THE CIT THAT THE INSTITUTION I S DOING SOME OTHER ACTIVITY OF EARNING PROFIT OTHER T HAN THE ACTIVITY OF RUNNING EDUCATIONAL INSTITUTIONS. T HE ESTABLISHED FACTUAL POSITION IS THAT THE INSTITUTIO N IS NOT DOING IN ANY OTHER ACTIVITY EXCEPT RUNNING EDUCATIONAL INSTITUTIONS. IN SUCH CIRCUMSTANCES, TH E ACTION OF CANCELLATION OF REGISTRATION CANNOT BE UPHELD. AS FAR AS THE OBJECTIVE OF THE APPELLANT IS CONCERNED THIS IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE WAS NOT IMPARTING EDUCATION. SINCE THE QUESTION ABOUT THE IMPARTING OF EDUCATION HAS NOT BEEN DOUBTED OR CHALLENGED BY THE REVENUE THEREFORE, THE IMPUGNED ORDER PASSED BY THE RESPONDENT IS UNSUSTAINABLE IN LAW. STRANGE ENOUGH THERE IS NOTHING ON RECORD TO PROVE SIGHTLESSLY THA T THE PURPOSE OF IMPARTING OF EDUCATION WAS NOT FULFILLED BY THIS INSTITUTE THUS THE REVENUE DEPARTMENT HAS HOPELESSLY FAILED TO ESTABLISH THAT THERE WAS ANY ILLEGAL ACTIVITY OR INFRINGEMENT OF A NY LAW SO THAT TO DOUBT THE GENUINENESS OF THE ACTIVITIES. IF IT WAS SO THEN IT CAN BE HELD THAT T HE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 33 ALLEGATIONS OF THE REVENUE REMAINED UNSUPPORTED THUS DESERVES DISMISSAL. THE CITS APPROACH FOR DECIDING THE ELIGIBILITY OF REGISTRATION OF A TRUST SHOULD BE DIFFERENT FROM THE ANGLE BY WHICH AN ASSESSMENT OF AN INCOME IS MADE BY THE AO. WHAT PURPOSE DOES IT SERVE TO REVENUE BY CANCELLING A REGISTRATION IF THE ACTIVITIES ARE IN PUBLIC INTERE ST BECAUSE IN CASE OF ANY BREACH OF THE LAWS THE SAME IS SUBJECT TO TAX UNDER SS. 11 AND 12. THESE TWO PROVISIONS AND FEW OTHER PROVISIONS ARE COMPETENT ENOUGH TO TACKLE FIRMLY A DEFAULTER OF PHILANTHROPI C APPLICATION OF INCOME OR FUNDS OF THE TRUST. THE OT HER ADVERSE SIDE OF CANCELLATION IS THAT ON REFUSAL OF REGISTRATION THE ENTIRE RECEIPTS SHALL BE SUBJECT T O ASSESSMENT WITHOUT GRANTING BENEFIT OF S. 11 AND S. 12 TO ASSESS INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME THOUGH THE FACTUAL POSITION COULD BE THAT MAJOR PART MIGHT HAVE BEEN DEVOTED TOWARDS ACHIEVING THE OBJECTS I.E., IMPARTING EDUCATION, AS IN THIS CASE, BUT THE AO SHALL BE AUTOMATICALLY FORBID DEN TO GRANT ADVANTAGE OF EXEMPTION CONSEQUENT UPON THE CANCELLATION AS IS MANDATORY IN STATUTE. THE OUTCOME OF THE DELIBERATION MADE IN DETAIL HEREINABOVE IS THAT PERCURIAN OPINION IS TO DEBAR T HE CIT TO ENTER INTO THE AREA OF INVESTIGATION OF SOUR CE OF INCOME AND ALSO APPLICATION OF INCOME, SO THAT T HE AMOUNT OF CORRECT EXEMPT INCOME BE NOT PREJUDGED. IF THE CIT HAD AN INFORMATION OF SOME WRONGFUL MEANS OF EARNING FEES IN THE FORM OF A DONATION OR THE INFORMATION TELLS ABOUT EXCESSIVE CHARGING OF FEES; THEN THE CIT IN HIS RIGHTS CAN PASS ON THE INFORMATION TO THE CONCERNED OFFICE BEARERS WORKING UNDER THE MAHARASHTRA CAPITATION FEES (PROHIBITION) ACT. THESE AUTHORITIES HAVE ENOUGH POWER TO DEAL WITH SUCH NATURE OF DEFAULT, SIDE BY SIDE THE CIT I S TO LIMIT HIS JURISDICTION WITHIN THE AMBITS OF PROVISI ONS OF THE ACT AND EXPECTED TO GIVE A FINDING ON FACTS THA T EITHER THE OBJECTS ARE NOT FOR GENERAL PUBLIC UTILI TY OR NOT ACHIEVED AS PRESCRIBED UNDER LAW. HOWEVER PRESENTLY THE SITUATION IS THAT THE REVENUE HAS NOT SAID ABOUT ANY IMMORAL ACTIVITY OF THE APPELLANT OR THE COLLECTION OF FEES WAS BY WRONGFUL MEANS. PRIMA FACIE NO CASE WAS MADE OUT BY THE CIT SO AS TO EVEN ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 34 VAGUELY DEMONSTRATE THAT THE ACTIVITIES OF THE APPELLANT WERE NOT GENUINE OR ACTIVITY OF IMPARTING OF EDUCATION, FOR WHICH THE TRUST WAS CREATED, WERE NO T CARRIED OUT. EVEN THE CIT HAS FAILED TO ESTABLISH T HAT ANY PART OF THE INCOME/RECEIPT OF THE TRUST WAS IN ANY MANNER MIS-UTILIZED BY THE TRUSTEES FOR THEIR PERSONAL BENEFIT I.E., NOT IN FULFILMENT OF THE OBJ ECT OF THE TRUST. OTHERWISE ALSO THERE ARE THREE WAYS TO LOOK AT THIS PROBLEM. ONE IS, THAT THE DONATIONS AR E RAISED BUT NOT UTILIZED FOR ACHIEVING THE OBJECTS I .E., TOWARDS IMPARTING EDUCATION; THEN SUCH AN INSTITUTION MUST BEAR THE CONSEQUENCE OF CANCELLATI ON OF REGISTRATION SINCE IPSO FACTO INFRINGED S. 12AA( 3) CONDITION. SECOND ASPECT IS, THAT THOUGH THE DONATIONS RECEIVED ARE MEANT TO FULFIL THE OBJECTS BUT TOGETHER WITH FEES HAVE INFRINGED ANTI CAPITATION PROHIBITION ACT; THAT COMES WITHIN THE CLUTCHES OF THAT ACT BUT DEFINITELY NOT UNDER S. 12AA(3) PROVISIONS. THE THIRD ASPECT IS, THAT THE DONATION PLUS FEES DO NOT EXCEED THE PRESCRIBED LIMIT OF ANTI CAPITATION FEE ACT I.E., FIVE TIMES THE NORMAL FEES ; FURTHER THAT NO EVIDENCE OF MIS-UTILIZATION OTHER T HAN THE PRESCRIBED ACTIVITY THEN NO ACTION CAN BE SUGGESTED UNDER S. 12AA(3). THE ASSESSEES CASE FALLS UNDER THE THIRD CATEGORY. WITH THE RESULT, TOTALITY OF THE CIRCUMSTANCES THUS WARRANTS, IN THE LIGHT OF THE FOREGOING DISCUSSION, NOT TO ENDORSE T HE VIEW OF THE CIT. THE ORDER OF CANCELLATION OF REGISTRATION IS HEREBY REVOKED. AGGARWAL MITRA MANDAL TRUST VS. DIRECTOR OF IT (EXEMPTION) (2007) 109 TTJ (DEL) 128, KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY VS. CIT (2008) 113 TTJ (CTK) 906 : (2008) 1 DTR (CTK) 273 AND HIMACHAL PRADESH ENVIRONMENT PROTECTION & POLLUTION CONTROL BOARD VS . CIT (2009) 125 TTJ (CHD) 98 : (2009) 28 DTR (CHD)(TRIB) 289 RELIED ON.' (PARAS 11.7 & 11.11 TO 11.13) 36. THE KARNATAKA HIGH COURT CONSIDERED SIMILAR ISSUE I N THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTIONS) & ANR. VS. SRI BELIMATHA MAHASAMSTHANA SOCIO CULTURAL AND EDUCATIO NAL TRUST ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 35 (336 ITR 694). IN THIS CASE ASSESSEE THE ASSESSEE, A SOCIAL, CULTURAL AND EDUCATIONAL TRUST, RUNNING EDUCATIONAL INSTITUTIONS AND RUNNING VARIOUS PROFESSIONAL COURSES, FILED ITS RETURN FOR THE ASSESSMENT YEAR 2001-02. THE AO DENIED THE EXEMPTI ON UNDER SECTION 11 OF THE INCOME-TAX ACT, 1961, HOLDING THA T THE SUMS COLLECTED TOWARDS DONATIONS FROM STUDENTS WERE CONT RARY TO THE PROVISIONS OF THE KARNATAKA EDUCATIONAL INSTITUTION S (PROHIBITION OF CAPITATION FEE) ACT, 1984. THE AO ALSO DISALLOW ED A SUM SHOWED AS CORPUS DONATIONS AS THE SOURCE OF SUCH DO NATIONS HAD NOT BEEN PROVED BY THE ASSESSEE AND THE AMOUNT WAS NOT ALLOWED AS DEDUCTION UNDER SECTION 11(1)(D). THE CIT(A) CONFIRMED THE ORDER OF THE AO. THE TRIBUNAL ALLOWE D THE BENEFITS UNDER SECTION 11. ON APPEAL: 36.1 IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE I S AN INSTITUTION WHICH IS RUNNING PROFESSIONAL COURSES, THE AO COULD NOT HAVE PRESUMED THAT THE AMOUNT WHICH WERE RECEIV ED AS DONATIONS WERE ATTRIBUTABLE TO THE ALLOTMENT OF SEA TS IN THE RELEVANT ASSESSMENT YEARS. IN THE ABSENCE OF THERE BEING ANY FOUNDATION FOR SUCH A CONTENTION, THE DONATIONS REC EIVED DURING THE PERIOD WAS NOT IN VIOLATION OF THE KARNATAKA ED UCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1 984, AND THE ASSESSEE HAD NOT ACTED OPPOSED TO PUBLIC POLICY. 37. WE ALSO PLACE RELIANCE ON THE ORDERS OF THE TRIBUNA L BANGALORE BENCH IN THE CASE OF VENKATESH EDUCATION SOCIETY IN ITA NOS. 100 TO 106 OF 2012 AND M.J. BALACHANDER IN ITA NOS. 90 TO 94 OF 2012 DATED 21.12.2012 WHERE IN SIMILAR CIRCUMSTANCES IT WAS HELD THAT M.J. BALACHANDER WAS COLLECTING ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 36 EXTRA TUITION FEES ON HIS OWN WITHOUT ANY AUTHORITY OR CONSENT OF THE SOCIETY AND CONCLUSION OF THE CIT WAS THAT EXTR A TUITION FEES WAS COLLECTED BY M.J. BALACHANDRAN ON HIS OWN AND T HE SOCIETY HAS NOTHING TO DO WITH THE EXTRA TUITION FEES COLLE CTION. BEING SO, THE ASSESSEE CANNOT BE FAULTED AND THE REGISTRATION GRANTED TO THE ASSESSEE SHOULD NOT BE WITHDRAWN SO AS TO DENY THE BENEFIT OF SECTION 11 OF THE ACT. 38. SIMILARLY THE CO-ORDINATE BENCH, CONSISTING OF THE SAME MEMBERS, IN THE CASE OF SREE EDUCATIONAL SOCIETY IN ITA NO. 564 OF 2012 FOR A.Y. 2011-12 VIDE ORDER DATED 31.7.2013 HELD AS UNDER: '16. IN THE PRESENT CASE NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE SOLELY EXISTS FOR PROFIT MOTIVE. THE DEPARTMENT HAS NOT BEEN ABLE TO DISCHARGE ITS ONUS OF SHOWING AS TO HO W THE CONDITIONS FOR GRANT OF REGISTRATION HAVE BEEN BREACHED BY THE ASSESSEE. THE REGISTRATION HAS BEEN GRANTED TO THE SOCIETY FOR MANY YEARS IN THE PAST UNDER THE SAME FACTS AND THERE IS NO CHANGE IN THE FACTS OR IN THE ACTIVITIES OF THE SOCIETY IN THE PR ESENT YEAR. IT HAS ALSO NOT BEEN DEMONSTRATED BY THE DEPARTMENT AS TO HOW THE OBJECT OF THE ASSESSEE HAS TURNED INTO A COMMERCIAL ONE. THE PREDOMINANT OBJECT OF THE ASSESSEE IS AND REMAINS TO CARRY OUT CHARITABLE PURPOSE OF ADVANCEMENT OF EDUCATION AND NOT TO EARN PROFIT. IN FACT NO PROFIT HAS BEEN ESTABLISHED TO HAVE BEEN EARNED BY THE ASSESSEE. THE DIT HAS FAILED TO SPECIFY AS TO HOW PROFIT EARN ING IS THE PREDOMINANT ACTIVITY OF THE ASSESSEE AND THE SOCIETY HAS BEEN PURSUING ITS OBJECT OF IMPARTING EDUCATION TO STUDENTS. THEREFORE, THE ASSESSEE SOCIETY CANNOT BE DEPRIVED OFF OF THE BENEFIT OF REGISTRATION GRANTED BY THE DIT(E) U/S 11 OF THE AC T. BEING SO, IN OUR OPINION, REGISTRATION GRANTED U/S 12AA OF THE ACT CANNOT BE CANCELLED. HOWEVER, THE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 37 AFORESAID FINDINGS GIVEN BY US ARE NOTHING TO DO WI TH THE ALLOWABILITY OF EXEMPTION U/S 11 OF THE ACT. IN CASE ANY DISCREPANCY OR IRREGULARITY WITH REGARD TO THE ALLOWABILITY OF EXEMPTION U/S 11 IS NOTICED BY THE AO, HE CAN MAKE AN INDEPENDENT ENQUIRY/ EXAMINATION AT THE TIME OF ASSESSMENT FOR EACH ASSESSMENT YEAR AND DECIDE IN ACCORDANCE WITH LAW.' 39. IN THE CASE OF OXFORD ACADEMY FOR CAREER DEVELOPMENT V. CHIEF CIT AND OTHERS (315 ITR 382) (ALL), THE ISSUE RELATING TO CANCELLATION OF REGISTRATION GRANTED U/S. 12A OF TH E ACT CAME FOR ADJUDICATION BEFORE THE HONBLE HIGH COURT. IN THA T CASE, THE ASSESSEE WAS GRANTED REGISTRATION U/S. 12A ON 1 ST APRIL, 1999. A SEARCH U/S. 133A WAS CONDUCTED. THE PETITIONER, A REGISTERED SOCIETY, WAS GRANTED REGISTRATION UNDER SECTION 12A ON APRIL I, 1999. A SURVEY UNDER SECTION 133A WAS CONDUCTED AT THE BUSINESS PREMISES ON SEPTEMBER 20, 2002, FROM WHERE DOCUMENTS WERE IMPOUNDED. THE REGISTRATION WAS CANC ELLED FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 ON THE GRO UND THAT THE SURPLUS WAS QUITE HEAVY. IN THE ORDER, THE CIT MENTIONED THAT THE PETITIONER WAS ENGAGED IN COMMERCIAL ACTIV ITIES RATHER THAN CHARITABLE. AS PER THE BALANCE-SHEET, HUGE AMO UNT WERE CHARGED FROM THE STUDENTS. THE PROFIT MARGIN EMBODI ED IN THE CHARGES TAKEN FROM THE STUDENTS WAS HUGE AND IT PRO VED THE PROFIT MOTIVE OF THE PETITIONER. 39.1 THE EXPRESSION 'CHARITABLE PURPOSE' IS DEFINED IN SECTION 2(15) OF THE INCOME-TAX ACT, 1961. IT IS OF INCLUSI VE NATURE AS REVEALED IN THE LANGUAGE. EARLIER THE WORDS 'THE AD VANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' IN THE DEFINITION WERE SUCCEEDED BY THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 38 ACTIVITY FOR PROFIT'. THESE WORDS WERE OMITTED BY T HE FINANCE ACT, 1983, WITH EFFECT FROM APRIL 1, 1984. 39.2 THE ORDER CANCELLING THE REGISTRATION GRANTED TO A TRUST OR INSTITUTION UNDER SECTION 12AA BEING A QUASI-JUDICI AL ORDER DOES NOT FALL WITHIN THE CATEGORY OF ORDERS MENTIONED UN DER SECTION 21 OF THE GENERAL CLAUSES ACT, 1897, WHICH PROVIDES TH AT THE POWER CONFERRED ON AN AUTHORITY TO ISSUE ORDERS INCLUDES THE POWER TO RESCIND SUCH ORDERS, AND THE CIT WOULD NOT HAVE POW ER TO RESCIND THE ORDER PASSED BY THE CIT EARLIER GRANTIN G THE REGISTRATION TO A TRUST OR INSTITUTION. SECTION 12A A(3) WAS INCORPORATED WITH EFFECT FROM OCTOBER I, 2004, TO E MPOWER THE CIT TO CANCEL THE REGISTRATION GRANTED TO A TRUST OR INSTITUTION. THE OBJECT OF THIS PROVISION IS NOT CLARIFICATORY O R EXPLANATORY. SO PRIOR TO THAT DATE, THE AUTHORITIES GRANTING REGIST RATION HAD NO INHERENT POWER TO WITHDRAW OR REVOKE THE REGISTRATI ON ALREADY GRANTED. 39.3 ONCE AN INSTITUTION CAME WITHIN THE PHRASE 'EX ISTS SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PROFIT' NO OTHER CO NDITION LIKE APPLICATION OF INCOME WAS REQUIRED TO BE COMPLIED W ITH. THE MERE EXISTENCE OF PROFIT/SURPLUS DID NOT DISQUALIFY THE INSTITUTION. BREACH OF THE CONDITIONS OF THE TRUST DEED WOULD NO T DISENTITLE THE INSTITUTION FROM GETTING THE BENEFIT WHICH THE INSTITUTION HAD BEEN GRANTED EARLIER BEING A CHARITABLE TRUST. AFTE R REGISTRATION, FURTHER PROBE INTO THE OBJECTS IS NOT PERMISSIBLE. 39.4 ON A WRIT PETITION: HELD, ALLOWING THE PETITI ON, (I) THAT EVEN ASSUMING THAT THE CIT HAS POWER TO RESCIND THE ORDE R OF ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 39 REGISTRATION ON THE GROUND THAT THE REGISTRATION HA D BEEN OBTAINED BY PRACTISING FRAUD OR FORGERY, THERE WAS NOTHING IN THE SHOW-CAUSE NOTICE OR IN THE ORDER CANCELLING REGIST RATION ALLEGING THAT THE PETITIONER HAD OBTAINED THE REGISTRATION B Y PRACTISING FRAUD OR FORGERY. 40. IN THE CASE OF KALINGA INSTITUTE OF INDUSTRIAL TECH NOLOGY VS. CIT AND ANOTHER (336 ITR 389) (ORISSA) IT WAS HELD THAT THE POWER UNDER SECTION 12AA(3) OF THE INCOME-TAX ACT, 1961, IS EXERCISABLE BY THE CIT ONLY ON RECORDING HIS SATISF ACTION OF THE CIRCUMSTANCES THAT MAY WARRANT THE EXERCISE OF SUCH POWER. THE CIT HAS TO RECORD IN THE NOTICE THE BASIS, IF AT AL L FOR THE INITIATION OF SUCH PROCEEDING. A SEARCH AND SEIZURE HAD BEEN C ONDUCTED AGAINST THE PETITIONER-INSTITUTE OIL AUGUST 9, 2005 . WITHOUT WAITING FOR THE CONCLUSION OF THE ASSESSMENT PROCEE DING BASED ON DOCUMENTS SEIZED AND INFORMATION RECOVERED IN TH E COURSE OF SUCH SEARCH AND SEIZURE AN ORDER DATED DECEMBER 15, 2006 WAS PASSED BY THE CIT UNDER SECTION 12AA(3) OF THE ACT DIRECTING CANCELLATION OF THE REGISTRATION OF THE PETITIONER- INSTITUTION. THIS ORDER WAS QUASHED BY THE TRIBUNAL. NOTICE WAS AGAIN ISSUED FOR CANCELLATION OF REGISTRATION. ON A WRIT PETITION CO NTENDING THAT WHILE THERE HAD BEEN A SEARCH AND SEIZURE OPERATION CARRIED OUT AGAINST THE PETITIONER-INSTITUTE ON AUGUST 9, 2005, ASSESSMENT PROCEEDINGS FOLLOWED AND WERE COMPLETED BUT NO ADVE RSE FINDING HAD BEEN RECORDED AGAINST THE PETITIONER-INSTITUTIO N TO FORM ANY FRESH GROUND FOR ISSUE OF NOTICE. HELD THAT THE NO TICE WAS LIABLE TO BE QUASHED. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 40 41. IN THE CASE OF CIT VS. SARVODAYA ILAKKIYA PANNAI (343 ITR 300) (MAD) THE ASSESSEE WAS GRANTED REGISTRATION UN DER SECTION 12A(1)(A) OF THE INCOME-TAX ACT, 1961. WHEN THE RET URNS FILED FOR THE ASSESSMENT YEARS 2008-09 TO 2010-11 WERE SC RUTINISED, IT WAS FOUND THAT THE ASSESSEE WAS ENGAGED IN PURCH ASE AND SALE OF BOOKS. ON THE GROUND THAT THE ACTIVITIES OF THE ASSESSEE COULD NOT BE CONSIDERED TO BE CHARITABLE ACTIVITIES, A SH OW-CAUSE NOTICE WAS ISSUED BY THE CIT UNDER SECTION 12AA(3) AND THE REAFTER, THE CIT REVOKED THE REGISTRATION ON THE GROUND THAT THE ASSESSEE DID NOT DESERVE EXEMPTION UNDER SECTION 11 (1)(A). THE TRIBUNAL FOUND THAT THE ORDER OF THE CIT WAS NOT JUSTIFIED AS THE POWER TO CANCEL COULD BE ONLY TRACED TO SECTION 12AA(3) AND IN THE ABSENCE OF ANY ACTIVITY CARRIED ON BY THE ASSESSEE CONTRARY TO THE OBJECTS, THE REGISTRATION COULD NOT BE REVOKED. 41.1. ON APPEAL: HELD, THAT UNDER SECTION 12AA, THE CIT IS EMPOWERED TO GRANT OR REFUSE THE REGISTRATION AND A FTER GRANTING REGISTRATION, WOULD BE EMPOWERED TO CANCEL IT, BUT ONLY ON THE TWO CONDITIONS LAID DOWN UNDER SECTION 12AA(3). WHE THER THE INCOME DERIVED FROM SUCH TRANSACTION WOULD BE ASSES SED TO TAX AND WHETHER THE TRUST WOULD BE ENTITLED TO EXEMPTIO N UNDER SECTION 11 ARE ENTIRELY THE MATTERS LEFT TO THE AO TO DECIDE. THE TRIBUNAL HAD ALLOWED THE CASE OF THE ASSESSEE WITH THE FINDING THAT NONE OF THE CONDITIONS UNDER SECTION 12AA(3) W ERE VIOLATED AND, THEREFORE, THE SATISFACTION WHICH WAS ARRIVED AT BY THE CIT WAS NOT JUSTIFIED. THEREFORE, THERE WAS NO REASON T O INTERFERE WITH THE ORDER OF THE TRIBUNAL. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 41 42. IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTIONS) V. MOOL CHAND KHAIRATI RAM TRUST (339 ITR 622) (DELHI). IN SUB-SECTION (1) CLAUSE (B) AND SUB-SECTION (3) OF SECTION 12AA OF THE INCOME-TAX ACT, 1961, CANCELLATION OF REGISTRATION WAS PROVIDED WHERE THE REGISTRATION WAS GRANTED UNDER CLAUSE (B) OF SUB- SECTION (1). FURTHER, CANCELLATION UNDER SUB-SECTIO N (3) WAS ALSO PROVIDED WHERE THE REGISTRATION WAS OBTAINED AT ANY TIME UNDER SECTION 12A (WHETHER UNDER CLAUSE (A) OR CLAUSE (AA ) OF SUB- SECTION (1) OF SECTION 12A). BUT THIS POWER OF CANC ELLATION OF REGISTRATION UNDER SECTION 12A CAME TO BE INCORPORA TED BY WAY OF AMENDMENT INTRODUCED BY THE FINANCE ACT, 2010, W ITH EFFECT FROM JUNE 1, 2010. NOW, WITH EFFECT FROM JUNE I, 20 10, THE POWER VESTS TO THE CIT TO CANCEL THE REGISTRATION G RANTED UNDER ANY OF THE CLAUSES OF SUB-SECTION (1) OF SECTION 12 A. 42.1 THE ASSESSEE-TRUST OBTAINED REGISTRATION IN DE CEMBER, 1974. BASED ON THIS, THE ASSESSEE GOT EXEMPTION OF INCOME-TAX IN THE ASSESSMENTS UNDER SECTION 143(3) FOR THE ASS ESSMENT YEARS 1996-97 TO 2005-06. THE DIRECTOR OF INCOME-TA X CANCELLED THE REGISTRATION UNDER SECTION 12AA(3) WITH EFFECT FROM ASSESSMENT YEAR 2002-03 BY HIS ORDER DATED JUNE 30, 2009. THE TRIBUNAL SET ASIDE THE ORDER OF CANCELLATION. ON AP PEAL TO THE HIGH COURT HELD, WHILE DISMISSING THE APPEAL, THAT THE CANCELLATION OF REGISTRATION WAS NOT VALID. 43. CONSIDERING THE ABOVE ARGUMENT OF THE ASSESSEES CO UNSEL, IN OUR OPINION, THE SEIZED MATERIAL IN THE FORM OF EXCEL SHEETS SAID TO BE RECOVERED FROM THE ASSESSEES OFFICE CAN NOT BE CONSIDERED AS SUFFICIENT EVIDENCE SO AS TO DECIDE C OLLECTION OF ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 42 CAPITAL FEES BY THE ASSESSEE AS IT LACKED INDEPENDE NT CORROBORATION. THE DEPARTMENT FAILED TO COLLECT SU FFICIENT EVIDENCE TO SHOW THAT THE ASSESSEE HAS ACTUALLY COL LECTED THE AMOUNT MENTIONED IN THE EXCEL SHEETS AND THE STATEM ENT OF SRI B. SRINIVASA RAO IS ALSO NOT SUPPORTING THE COLLECT ION OF CAPITATION FEES BY THE ASSESSEE. MOREOVER, NO DAT A CONFIRMING THE CONTENTS OF EXCEL SHEETS WERE RECOVERED FROM TH E SEIZED COMPUTER HARD DISK. IN THE ABSENCE OF CORROBORATIV E MATERIAL, THE EXCEL SHEETS RECOVERED FROM THE COMPUTER CANNOT BE CONSIDERED AS A SUFFICIENT EVIDENCE SO AS TO CONFIR M COLLECTION OF CAPITATION FEE. THE SEIZED MATERIAL BEING EXCEL S HEETS WHICH IS AN UNSIGNED DOCUMENT AND NOT BEING IDENTIFIED BY TH E DEPARTMENT REGARDING AUTHOR OF THESE EXCEL SHEETS A ND IT CANNOT BE CONSIDERED AS AN INDEPENDENT EVIDENCE. BEING SO , IT HAS NO EVIDENTIARY VALUE AS HELD BY THE CO-ORDINATE BENCH IN THE CASE OF SMT. K.V. LAKSHMI SAVITRI DEVI VS. ACIT (148 TTJ 51 7) (HYD.) AND IN THE CASE OF CIT VS. KRISHNA YADAV (2011) 12 TAXMANN.COM 4 (HYD). FURTHER, VARIOUS JUDGEMENTS R ELIED ON BY THE ASSESSEES COUNSEL ALSO SUPPORT THE ASSESSEES CASE TO HOLD THAT EXCEL SHEETS ARE DUMB DOCUMENTS AND THEREFORE, DO NOT FORM THE REASON TO CANCEL REGISTRATION GRANTED TO T HE ASSESSEE U/S. 12AA OF THE IT ACT. 44. FURTHER, IN THE CASE OF SRI CHAITANYA EDUCATIONAL COMMITTEE VS. CIT (106 ITD 256) (HYD) IT WAS HELD T HAT AMENDMENT SUB-SECTION (3) IN SECTION 12AA BY THE FI NANCE (NO. 2) ACT, 2004, W.E.F. 1 ST OCTOBER, 2004, THE CIT HAD NO POWER TO CANCEL REGISTRATION U/S. 12A EARLIER GRANTED AND TH E ORDER OF THE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 43 CIT DATED 26 TH JULY, 2004 CANCELLING REGISTRATION GRANTED U/S. 12A ON 14 TH AUGUST, 1992 WAS, THEREFORE, INVALID. 45. THE LEARNED DR PLACED MUCH RELIANCE ON THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF JOGINPALLY BR EDUC ATIONAL SOCIETY IN ITA NO. 585/HYD/2012 AND ORS. DATED 31.8 .2012 WHICH IS NOT APPLICABLE TO THE FACTS OF THE CASE ON THE FOLLOWING REASONS: (1) IN THE CASE DECIDED BY THE TRIBUNAL, THE EMPLOYEES HAVE DEPOSED THAT CAPITATION FEES WERE COLLECTED AN D HANDED OVER TO THE MANAGEMENT ON THE BASIS OF EVIDENCES FOUND. THIS STATEMENT WAS NOT CONTROVERTED. IN THE CASE OF THE ASSESSEE THERE IS NO SUCH ADMISSION BY ANY ONE. (2) IT WAS ADMITTED IN THE STATEMENT RECORDED U/S. 132(4) THAT THE ADDITIONAL FEES WERE COLLECTED AND APPLIED TOWARDS EDUCATION BY THE ASSESSEE BEFORE THE TRIBUNAL. THIS INFLUENCED THE DECISION. THERE IS NO SUCH ADMISSION BY THE PRESENT ASSESSEE. (3) AN APPLICATION WAS MOVED BY JBIT BEFORE THE SETTLEMENT COMMISSION ADMITTING COLLECTION OF CAPITATION FEES WHICH WAS NOT ACCEPTED BY THE COMMISSION. THERE IS NO SUCH ADMISSION BY THE ASSESSEE. (4) THE EVIDENCES WERE SPEAKING IN THE CASE OF THE SOCIETY REGARDING COLLECTION OF CAPITAL FEES WHICH ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 44 PROMPTED THE SOCIETY TO ADMIT THE FACT IN THE STATEMENT U/S. 132(4) AS ALSO IN THE APPLICATION MOVED BEFORE THE SETTLEMENT COMMISSION. THE EVIDENCE AVAILABLE IN THE CASE OF THE ASSESSEE WERE NOT OF SUCH NATURE TO DERIVE ANY ADVERSE INFERENCE AGAINST THE SOCIETY. THE OBSERVATION OF THE CIT AN D AO ARE UNILATERAL WITHOUT ANY CORROBORATION. (5) THE ABOVE EVIDENCES WERE CLINCHING TO SHOW THAT CAPITATION FEES WERE COLLECTED AND, THEREFORE, THE TRIBUNAL SUSTAINED CANCELLATION UNDER SECTION 12AA OF THE ACT. THERE IS NO SUCH EVIDENCE EXCEPT SUSPICIO N IN THE PRESENT CASE BEFORE THE TRIBUNAL. 46. BEING SO, EVEN IF IT IS PRESUMED THAT THERE IS COLL ECTION OF CAPITAL FEES BY THE ASSESSEE IN RELEVANT ASSESSMENT YEAR 2010- 11, IT CANNOT BE SAID BY ANY STRETCH OF IMAGINATION THAT THE ASSESSEE HAS COLLECTED CAPITATION FEES IN EARLIER A SSESSMENT YEARS COMMENCING FROM 2000-01 SO AS TO CANCEL THE R EGISTRATION GRANTED TO THE ASSESSEE U/S. 12AA WITH EFFECT FROM 1.4.2000. 47. CONSIDERING ENTIRE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE OPINION THAT THE EVIDENCE COLLECTED BY T HE REVENUE AUTHORITIES IS NOT SUFFICIENT TO ESTABLISH THE STAN D THAT THE ASSESSEE HAS COLLECTED THE CAPITATION FEE/EXCESS FE E FOR ADMISSION UNDER MANAGEMENT QUOTA SEATS IN ASSESSEE SOCIETY. WE ARE AWARE THAT THE ENTIRE EVIDENCE HAS TO BE APP RECIATED IN A WHOLESOME MANNER AND EVEN WHERE THERE IS DOCUMENTAR Y EVIDENCE THE SAME CAN BE OVERLOOKED IF THERE ARE SU RROUNDING CIRCUMSTANCES TO SHOW THAT THE CLAIM OF THE ASSESSE E IS OPPOSED ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 45 TO THE NORMAL COURSE OF HUMAN THINKING AND CONDUCT AND HUMAN PROBABILITY. EVEN APPLYING THIS PRINCIPLE TO THE P RESENT CASE, WE HAVE DIFFICULTY IN REJECTING THE ASSESSEE'S PLEA AS OPPOSED TO THE NORMAL COURSE OF HUMAN CONDUCT. THE CIRCUMSTANCES SURROUNDING THE CASE ALSO NOT STRONG ENOUGH TO REJE CT THE ASSESSEE'S PLEA. WE HAVE CONSIDERED ALL THE MATERI AL AVAILABLE ON RECORD AND ALSO STATEMENTS OF THE PARTIES CONCER NED AS DISCUSSED IN EARLIER PARAS AND WE ARE OF THE OPINIO N THAT THE DEPARTMENT CANNOT RELY ON THOSE STATEMENTS, MORE SO , WHEN IT WAS NOT CONFRONTED TO THE ASSESSEE FOR CROSS EXAMIN ATION, THE SAME CANNOT BE RELIED UPON. BEING SO, CONSIDERING THE ABOVE PRECEDENTS, IN OUR OPINION, THE ASSESSEE SOCIETY CA NNOT BE DEPRIVED OF THE REGISTRATION GRANTED TO THE ASSESSE E US. 12AA OF THE ACT. ACCORDINGLY, WE VACATE THE ORDER OF THE C IT DATED 22.3.2012. HOWEVER, THE AFORESAID FINDINGS GIVEN B Y US ARE NOTHING TO DO WITH THE ALLOWABILITY OF EXEMPTION U/ S. 11 OF THE ACT. IN CASE OF DISCREPANCY OR IRREGULARITY WITH R EGARD TO ALLOWABILITY OF EXEMPTION U/S. 11 IS NOTICED BY THE AO, HE CAN MAKE INDEPENDENT ENQUIRY OR EXAMINATION AT THE TIME OF ASSESSMENT FOR EACH ASSESSMENT YEAR IN ACCORDANCE W ITH LAW. ACCORDINGLY, THE REGISTRATION GRANTED TO THE ASSESS EE U/S. 12AA OF INCOME-TAX ACT, 1961 IS HEREBY RESTORED BACK. I N THE RESULT, ITA NO. 720/HYD/2012 IS ALLOWED. ITA NO. 1768/HYD/2011 (A.Y. 2003-04) BY REVENUE ASSESSEE : M/S. PRATHIMA EDUCATIONAL SOCIETY ITA NO. 1767/HYD/2011 (A.Y. 2003-04) BY REVENUE ASSESSEE : SRI B. SRINIVASA RAO, HYDERABAD. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 46 48. THE TWO APPEALS FILED BY THE REVENUE, CONCERNING RE LATED ASSESSEES, ARE DIRECTED AGAINST SEPARATE ORDERS OF THE CIT(A)-I, HYDERABAD, DATED 5.8.2011 FOR THE ASSESSMENT YEAR 2 003-04. THE LONE APPEAL BY THE ASSESSEE, M/S. PRATHIMA EDUC ATIONAL SOCIETY, HYDERABAD, IS DIRECTED AGAINST THE ORDER O F THE CIT (CENTRAL), HYDERABAD DATED 22.3.2012, PASSED UNDER S. 12AA(3) OF THE ACT CANCELLING THE REGISTRATION GRANTED IN F AVOUR OF THE ASSESSEE UNDER S. 12A BY THE CIT, UNDER PROCEEDING S DATED 4.10.2011 WITH EFFECT FROM 1.4.2000. SINCE FACTUA L BACK GROUND LEADING TO THE FILING OF THE PRESENT APPEALS IS COM MON, AND THE ISSUES INVOLVED IN THESE APPEALS ARE ALSO INTER-REL ATED, THESE APPEALS ARE BEING DISPOSED OF, WITH THIS COMMON ORD ER FOR THE SAKE OF CONVENIENCE. ITA NO. 1768/HYD/2011 (A.Y. 2003-04) BY REVENUE ASSESSEE : M/S. PRATHIMA EDUCATIONAL SOCIETY 49. FACTS OF THE CASE IN BRIEF, IN RELATION TO THE REVE NUES APPEAL RELATING TO M/S. PRATHIMA EDUCATIONAL SOCIET Y ARE CONCERNED, ARE THAT THE ASSESSEE SOCIETY, WHICH HA S BEEN RUNNING A MEDICAL COLLEGE UNDER THE NAME PRATHIMA I NSTITUTE OF MEDICAL SCIENCES AT KARIMNAGAR, ANDHRA PRADESH, HAV ING STARTED THE SAME IN THE ACADEMIC YEAR 2002-03, FILED RETUR N OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31.1 0.2003, ADMITTING NIL INCOME AFTER CLAIMING EXEMPTION UNDER S. 11 OF RS. 16,74,068. A SEARCH AND SEIZURE OPERATION UNDE R S. 132 WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE, DURING W HICH APPARENTLY, EVIDENCE RELATING TO COLLECTION OF AMOU NTS OVER AND ABOVE THESE PRESCRIBED FEE FROM STUDENTS SEEKING AD MISSION FOR ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 47 MEDICAL COURSES, WERE FOUND, PARTICULARLY IN RESPE CT OF STUDENTS ADMITTED IN THE ACADEMIC YEARS 2006-07, 2007-08 AND PARTLY FOR 2009-2010. CONSEQUENT UPON SEARCH ACTION, ASSESSM ENT WAS REOPENED BY THE AO UNDER S. 147 OF THE ACT FOR THE YEAR UNDER APPEAL, AND IN RESPONSE TO THE NOTICE ISSUED FOR RE OPENING THE ASSESSMENT, THE ASSESSEE FILED A LETTER STATING THA T THE RETURN FILED ON 31.10.2003 MAY BE TREATED AS THE ONE FILED IN COMPLIANCE TO THE NOTICE UNDER S. 18 OF THE ACT. NOTWITHSTANDING THE FACT THAT THE EVIDENCES FOUND A T THE TIME OF SEARCH WERE IN RELATION TO THE AMOUNTS COLLECTED OV ER AND ABOVE PRESCRIBED FEE, FROM STUDENTS ESPECIALLY FOR ACADEM IC YEARS 2006-07, 2007-08 AND PARTLY FOR 2009-10, BASED ON S UCH EVIDENCE, THE AO EXTRAPOLATED THE SAME TO THE ASSE SSMENT YEAR 2003-04 ALSO, APPLYING THE RATIO OF THE DECISION OF THE A.P. HIGH COURT IN THE CASE OF RAJNIK & CO. VS. ACIT(251 ITR 561). THE AO FURTHER OBSERVED THAT IN THE CASE OF AN EDUCATIONAL SOCIETY COLLECTING CAPITATION FEE, SOCIETY WOULD NOT BE ELI GIBLE FOR EXEMPTION UNDER S. 11 AND/OR U/S. 10(23C)(VI) OF TH E ACT. ACCORDINGLY, THE AO TREATED THE EXCESS OF INCOME OV ER EXPENDITURE ADMITTED IN THE RETURN AS INCOME OF THE ASSESSEE, AND ALSO QUANTIFIED THE UNACCOUNTED RECEIPTS FOR TH E FINANCIAL YEAR 2002-03, BASED ON THE EXTRAPOLATION OF THE EVI DENCE FOUND DURING THE ACADEMIC YEARS 2006-07, 2007-08 AND 2009 -10 AT RS. 38,28,000. HE ACCORDINGLY, DETERMINED THE TOTA L INCOME OF THE ASSESSEE AT RS. 7,51,10,275, RAISING A TAX DEMA ND OF RS. 5,36,87,886, VIDE ORDER OF ASSESSMENT DATED 30.11. 2010 PASSED UNDER S. 14(3) READ WITH S. 147 OF THE ACT. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 48 50. AGGRIEVED BY THE ORDER OF RE-ASSESSMENT, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), CONTESTING NOT ONLY THE MERITS OF THE ADDITION OF RS. 38,28,000 MADE ON ACC OUNT OF AMOUNTS COLLECTED OVER AND ABOVE THE PRESCRIBED FEE AND DENIAL OF EXEMPTION TO THE ASSESSEE UNDER S. 11 AND/OR 10( 23C) OF THE ACT, BUT ALSO THE VERY LEGALITY AND VALIDITY OF THE REOPENING OF ASSESSMENT BY THE AO. THE CIT(A) AFTER ELABORATE DISCUSSION OF THE VARIOUS ARGUMENTS OF THE ASSESSEE BEFORE HIM, I N THE LIGHT OF THE RATIO OF THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN DCIT VS. ROYAL MARWAR TOBACCO PRODUCTS (120 TTJ 387); AND PUNE BENCH OF THE TRIBUNAL IN ACIT VS. S.R.J. PEETY STEELS (137 TTJ 627); AND HYDERABAD BENCH B OF THE TRIBUNAL I N THE CASE OF VISHNU AGARWAL VS. ACIT (45 DTR 223), AND HE OBSERV ED THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL IN RELATI ON TO THE ASSESSMENT YEAR 2003-04, I.E., THE YEAR UNDER APPEAL, THE AO IS NOT JUSTIFIED IN EXTRAPOLATION OF THE MATERIAL FOUN D IN THE COURSE OF SEARCH ACTION WHICH IS RELATING TO THE SUBSEQUEN T YEARS, AND ESTIMATING THE UNACCOUNTED RECEIPTS FOR THE YEAR UN DER CONSIDERATION WITHOUT ANY SEIZED MATERIAL AND ALSO WITHOUT CORRELATING THE SAME TO ANY UNDISCLOSED INVESTMENTS SPECIFICALLY MADE BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ADDITION OF RS. 38,28,000 MADE B Y THE AO BY REOPENING THE ASSESSMENT UNDER S. 147 WAS NOT JUS TIFIED. 51. THE CIT(A) ALSO HELD FURTHER THAT SINCE THE VERY RECEIPT OF CAPITATION FEE/AMOUNT OVER AND ABOVE THE PRESCRIBED FEE, IS NOT PROVED, THE QUESTION OF UTILIZATION FOR THE BENEFIT OF ANY OF THE MEMBER OF THE SOCIETY OR ANY OTHER INTERESTED PERSO N ENUMERATED IN S. 13(1)(C) IS CONSEQUENTLY RULED OUT . THEREFORE, ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 49 HE HELD THAT THE AOS STAND THAT THE ASSESSEE HAS V IOLATED THE PROVISIONS OF S. 13(1)(C) DOES NOT STAND ON A SOUND FOOTING. HE NOTED THAT THERE WAS NO SPECIFIC MATERIAL FOR THE YEAR UNDER CONSIDERATION RELATING TO COLLECTION OF CAPITATION FEE OR ANY AMOUNT OVER AND ABOVE THE PRESCRIBED FEE, AND THE A O HAS SIMPLY EXTRAPOLATED THE EVIDENCE AVAILABLE FOR ACAD EMIC YEARS 2006-07, 2007-08 AND 2009-10, THAT TOO TO ARRIVE AT THE ESTIMATED UNDISCLOSED CAPITATION FEE FOR ASSESSMENT YEAR 2003- 04, WHICH ACCORDING TO HIM CANNOT BE CONSIDERED AS COGENT EVIDENCE OR INFORMATION WARRANTING REOPENING OF ASS ESSMENT. 52. THE CIT(A), DEALING WITH THE OBJECTIONS OF THE ASSE SSEE WITH REGARD TO LEGALITY AND VALIDITY OF THE REOPENI NG OF THE ASSESSMENT UNDER S. 147 OF THE ACT, WHILE IN THE F IRST PLACE NOTING THAT IN VIEW OF HIS DECISION IN FAVOUR OF TH E ASSESSEE ON THE MERITS OF THE ADDITION AND DENIAL OF ASSESSEES CLAIM FOR EXEMPTION BY THE AO, THE DECISION ON THE LEGALITY O F REOPENING HAS BECOME ACADEMIC, DECIDED THE ISSUE ALSO IN FAVO UR OF THE ASSESSEE OBSERVING IN PARA 06.0 OF HIS IMPUGNED ORD ER AS FOLLOWS- 06. .HOWEVER, I MAY ADD THAT EVEN ON THE GROUND OF LEGALITY OF REOPENING THE CASE THERE IS FORCE IN THE CONTENTION RAISED BY THE APPELLANT. ESPECIALLY THE APPELLANTS CONTENTION THAT ANY INFORMATION FOR REOPENING MUST BE CONCRETE NOT SPECULATIVE AND IT MUST RELATE TO THE ASSESSMENT YEAR IN QUESTION FOR WHICH ASSESSMENT IS SOUGHT TO BE REOPENED IS NOT WITHOUT BASIS. ADMITTEDLY THERE WAS NO SPECIFIC MATERIAL FOR THE YEAR UNDER CONSIDERATION RELATING TO COLLECTION OF CAPITATION FEE OR ANY AMOUNT OVER AND ABOVE THE PRESCRIBED FEE. THE AO HAS SIMPLY EXTRAPOLATED THE EVIDENCE ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 50 AVAILABLE FOR ACADEMIC YEARS 2006-07, 2007-08 AND 2009-10 THAT TOO TO ARRIVE AT THE ESTIMATED CAPITATION FEE FOR A.Y. 2003-04. THE SAME CANNOT BE CONSIDERED AS COGENT EVIDENCE OR INFORMATION WARRANTING REOPENING OF THE ASSESSMENT. 53. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE I S IN APPEAL BEFORE US. 54. THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY SUPPORTING THE ORDER OF THE AO, SUBMITTED THAT THE EXTRAPOLATION OF THE MATERIAL FOUND AT THE TIME OF SEARCH ACTION UNDER S. 132, CAN BE MADE EVEN FOR THE YEARS NOT COVERED BY THE P ERIOD OF SEARCH. IN SUPPORT OF THIS PROPOSITION, HE RELIED ON THE DECISION OF THE A.P. HIGH COURT IN THE CASE OF RAJNIK & CO. VS. ACIT (251 ITR 561). HE FURTHER SUBMITTED THAT THE ASSESSEE S OCIETY HAS COLLECTED CAPITATION FEES/DONATION AND AS SUCH IT E XISTS FOR PROFIT AND NOT SOLELY FOR CHARITABLE PURPOSE, AND THAT BEI NG SO, IT IS NOT ELIGIBLE FOR EXEMPTION UNDER S. 10(23)(C). SIMILAR LY, ACTIVITY OF THE ASSESSEE TRUST CANNOT THUS REMAIN A CHARITABLE ACTIVITY UNDER S. 2(15)AND AS SUCH IT IS NOT ELIGIBLE FOR EXEMPTIO N UNDER S. 11 OF THE ACT. HE FURTHER SUBMITTED THAT SINCE THE MO NIES COLLECTED OVER AND ABOVE THE PRESCRIBED FEES ARE HANDED OVER TO THE TRUSTEES, IT IS A CLEAR CUT CASE WHERE THE MONIES O F THE ASSESSEE- SOCIETY ARE USED DIRECTLY OR INDIRECTLY FOR THE BEN EFIT OF A PERSON AS PRESCRIBED IN S. 13(1)(C) OF THE ACT. HE ALSO S UBMITTED THAT REOPENING OF ASSESSMENT UNDER S. 147 IS SIMPLY BASE D ON THE EVIDENCE SEIZED AND NOT ON ANY ESTIMATION, AND THE CIT(A) WAS NOT JUSTIFIED IN HOLDING TO THE CONTRARY, WITHOUT P ROPER REASONING. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 51 55. THE LEARNED COUNSEL FOR THE ASSESSEE, REITERATING T HE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES SUBM ITTED THAT THE SATISFACTION EXPECTED OF THE AO FOR REOPENING O F THE ASSESSMENT FOR A PARTICULAR YEAR IS WITH REGARD TO ESCAPEMENT OF INCOME FROM TAX FOR SUCH SPECIFIC YEAR, AND AS SUCH , THE MATERIAL WHICH ENABLES HIM TO ARRIVE AT SUCH A SATISFACTION SHOULD BE SPECIFICALLY IN RELATION TO SUCH SPECIFIC YEAR. BA SED ON THE MATERIAL FOUND AT THE TIME OF SEARCH, WHICH RELATES TO A PARTICULAR YEAR, IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE, ONE CANNOT VENTURE INTO ANY AREA OF SPECULATION WITH REGARD TO OTHER YEARS. THAT BEING SO, THE AO WAS NOT JUSTIFIED IN EXTRAPOL ATING THE MATERIAL FOUND AT THE TIME OF SEARCH FOR OTHER YEAR S, AND ARRIVING AT THE SATISFACTION WITH REGARD TO INCOME ESCAPING FROM TAX, AND CONSEQUENTLY REOPENING THE ASSESSMENT, AND COMPLETING THE RE-ASSESSMENT MAKING ADDITIONS, DENY ING EXEMPTION UNDER S. 11 OF THE ACT. HE STRONGLY SUPP ORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE APPEAL O F THE REVENUE IS DEVOID OF MERITS NOT ONLY ON THE ISSUE O F LEGALITY AND VALIDITY OF THE REOPENING, BUT ALSO ON THE MERITS O F RE- ASSESSMENT MADE, AND CONSEQUENTLY, THE SAME IS LIA BLE TO DISMISSED. 56. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. LET US FIRST CONSIDER THE ISS UE RELATING TO LEGALITY AND VALIDITY OF THE REOPENING OF ASSESSMEN T BY THE AO. IT IS PERTINENT TO NOTE AT THIS STAGE, THE RELEVANT PROVISIONS OF S. 147, WHICH READ AS FOLLOWS- ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 52 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEV E THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISI ONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY B E, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SE CTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEV ANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR TH E RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM TH E END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRS T PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSES S OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVI NG MATTERS WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL , REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX A ND HAS ESCAPED ASSESSMENT. EXPLANATION 1. PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVE RED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT T O DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROV ISO. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 53 EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE I S ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX ; ( B ) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; ( BA ) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REPOR T IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE W AS SO REQUIRED UNDER SECTION 92E; ( C ) WHERE AN ASSESSMENT HAS BEEN MADE, BUT ( I ) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSE D ; OR ( II ) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR ( III ) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESS IVE RELIEF UNDER THIS ACT ; OR ( IV ) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; ( D ) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (IN CLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA. EXPLANATION 3. FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPEC T OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAV E ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 54 NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 148. EXPLANATION 4. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISIONS OF THIS SECTIO N, AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 57. IT IS, NO DOUBT, EVIDENT FROM A CLOSE READING OF TH E ABOVE PROVISIONS OF S. 147 THAT IT IS ONLY SATISFACTION O F THE AO WITH REGARD TO ESCAPEMENT OF INCOME FROM ASSESSMENT TO T AX IN A PARTICULAR YEAR WHICH IS AN ESSENTIAL ELEMENT AND P RE-REQUISITE FOR REOPENING OF THE ASSESSMENT, AND THE BASIS/MATE RIAL WHICH PROMPTED THE AO TO ARRIVE AT SUCH A SATISFACTION IS OF NO RELEVANCE. HOWEVER, THE ACTION OF THE AO TO DERIVE AT SUCH A SATISFACTION FROM THE SPECIFIED MATERIAL/BASIS, HAS TO BE LOGICAL AND SHOULD STAND TO THE TEST OF SCRUTINY. IT IS AN UNDISPUTED FACT THAT THE MATERIAL FOUND AT THE TIME OF SEARCH ACTIO N UNDER S. 132 OF THE ACT ON THE PREMISES OF THE ASSESSEE ON 10.9. 2009, WHICH PROMPTED THE AO IN THE INSTANT CASE TO REOPEN THE A SSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-04. THE S AID SEARCH HAS UNEARTHED MATERIAL WHICH REVEALED COLLECTION OF AMOUNTS BY THE ASSESSEE OVER AND ABOVE THE FEE PRESCRIBED BY T HE GOVERNMENT FOR ADMISSION INTO MEDICAL COURSES PARTI CULARLY IN RESPECT OF STUDENTS ADMITTED IN THE ACADEMIC YEARS 2006-07, 2007-08 AND PARTLY FOR 2009-2010. THE SAID MATERIA L FOUND AT THE TIME OF SEARCH DID NOT REVEAL ANYTHING SPECIFIC ALLY RELATING TO ASSESSMENT YEAR 2003-04, WHICH IS THE YEAR UNDER AP PEAL. IN THAT CIRCUMSTANCES, BASED ON THAT MATERIAL ALONE, T HE AO CANNOT REASONABLY BELIEVE THAT THE ASSESSEE COLLECTED AMOU NTS OVER AND ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 55 ABOVE THE FEE PRESCRIBED BY THE GOVERNMENT EVEN DUR ING THE YEAR UNDER APPEAL. IT IS PERTINENT TO NOTE AT THI S JUNCTURE THAT THE ASSESSEE STARTED ITS COLLEGE IN THE ACADEMIC YE AR 2002-03. SO, THE AO BASED ON THE MATERIAL FOUND AT THE TIME OF SEARCH IN 2009 IN RELATION TO THE ACADEMIC YEARS 2006-07, 200 7-08 AND PARTLY FOR 2009-10, PROCEEDED TO MAKE IMPUTATIONS A LMOST RIGHT FROM THE BEGINNING OF THE COMMENCEMENT OF ACTIVITIE S BY THE ASSESSEE. THE ULTIMATE FACT THAT THE AO IN THE RE-A SSESSMENT PROCEEDINGS MADE ADDITION, ESTIMATING, BASED ON THE MATERIAL FOUND AT THE TIME OF SEARCH FOR OTHER YEARS, THE AM OUNTS THAT THE ASSESSEE MUST HAVE COLLECTED BY WAY OF CAPITATION F OR YEAR UNDER APPEAL, OVER AND ABOVE THE PRESCRIBED FEE. IN TH E ABSENCE OF ANY SPECIFIC AND CONCRETE MATERIAL POSSESSED BY THE ASSESSEE TO SUGGEST COLLECTION OF AMOUNTS OVER AND ABOVE THE PR ESCRIBED FEE, AT THE TIME OF INITIATING PROCEEDINGS UNDER S. 147, THE REOPENING OF ASSESSMENT CANNOT BE HELD TO BE LEGAL OR VALID, AND IT HAS TO BE HELD TO BE JUST BASED ON THE SUSPICION THAT THE ASSESSEE MIGHT HAVE COLLECTED SUCH AMOUNTS EVEN IN THE YEAR UNDER APPEAL. THE ULTIMATE ACTION OF ESTIMATION OF SUCH CAPITATION FEE COLLECTED DURING THE YEAR UNDER APPEAL, BASED ON TH E MATERIAL FOUND AT THE TIME OF SEARCH, WHICH RELATE TO OTHER YEARS, CLEARLY ESTABLISHES THE ABSENCE OF ANY CONCRETE MATERIAL TO INDICATE THE ACTUAL COLLECTION OF CAPITATION FEE BY THE ASSESSEE . IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJNIK AND COMPANY (SUPRA ) RELIED UPON BY THE LEARNED COUNSEL FOR THE AO, CANNOT COME TO THE RESCUE OF THE DEPARTMENT, IN THE ABSENCE OF ANY CLI NCHING EVIDENCE TO SUGGEST COLLECTION OF CAPITATION FEE IN THE YEAR UNDER APPEAL. IN THIS VIEW OF THE MATTER, THE CIT(A), IN OUR CONSIDERED ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 56 OPINION IS JUSTIFIED IN HOLDING THE ISSUE RELATING TO THE LEGALITY AND VALIDITY OF THE REOPENING OF ASSESSMENT UNDER S. 147 IN FAVOUR OF THE ASSESSEE. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND REJECT THE GROUNDS OF THE REVENUE IN THIS BEHALF. 58. THE REVENUE RAISED THE GROUND WITH REGARD TO MERIT THAT THE CIT(A) FAILED TO APPRECIATE THE FACT THAT EXTRA POLATION CAN BE MADE FOR OTHER YEARS ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH RELATING TO SOME OTHER YEAR AS IT IS SUPPORTED BY THE JUDGEMENT OF HON'BLE A.P. HIGH COURT IN THE CASE OF RAJNIK & CO. (SUPRA). THE REVENUE ALSO RAISED THE GROUND THAT THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS EN TITLED FOR EXEMPTION U/S. 10(23C)/11 OF THE IT ACT, THOUGH THE ASSESSEE COLLECTED CAPITATION FEES. 59. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE FIRST OBJECTION OF THE ASSESSEE'S C OUNSEL IS WITH REGARD TO ESTIMATION OF UNACCOUNTED RECEIPT COLLECT ED FROM STUDENTS TOWARDS MANAGEMENT QUOTA FEES. THE LEARNE D AR SUBMITTED THAT THERE IS NO EVIDENCE IN THE FORM OF SEIZED MATERIAL FOR THE AY 2003-04. 60. IT IS AN ADMITTED FACT THAT WHILE ESTIMATING THE AB OVE EXCESS FEES COLLECTION, THE AO BASED HIS CONCLUSION ON THE BASIS OF SEIZED MATERIAL AVAILABLE FOR SUBSEQUENT ASSESSM ENT YEAR. HE RELIED ON THE JUDGEMENT OF JURISDICTIONAL HIGH COUR T IN THE CASE OF RAJNIK & CO. (CITED SUPRA). THE SUPREME COURT IN THE CASE OF ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 57 COMMISSIONER OF SALES TAX, MADHYA PRADESH V. H.M. E SUF ALI H.M. ABDUL ALI (90 ITR 271) (SC) HELD AS UNDER: 'HELD, THAT THE REASSESSMENTS WERE VALID. FROM THE CIRCUMSTANCE THAT THE ASSESSEE HAD DEALINGS OUTSIDE THE ACCOUNTS OF THE VALUE OF RS. 31,171.28 FOR 19 DAYS, IT WAS OPEN TO THE OFFICER TO INFER THAT THE ASSESSEE HAD LARGE- SCALE DEALINGS OUTSIDE THE ACCOUNTS. IN SUCH A SITU ATION, IT WAS NOT POSSIBLE FOR THE OFFICER TO FIND OUT PRECIS ELY THE TURNOVER SUPPRESSED AND HE COULD ONLY MAKE AN ESTIM ATE OF THE SUPPRESSED TURNOVER ON THE BASIS OF THE MATE RIAL BEFORE HIM. SO LONG AS THE ESTIMATE MADE BY HIM WAS NOT ARBITRARY AND HAD A REASONABLE NEXUS WITH THE FACTS DISCOVERED, IT COULD NOT BE QUESTIONED. IT 'WAS WRO NG TO HOLD THAT THE OFFICER MUST HAVE MATERIAL BEFORE HIM TO PROVE THE EXACT TURNOVER SUPPRESSED. IN ESTIMATING ANY ESCAPED TURNOVER, IT IS INEVITABLE THAT THERE IS SOME GUESS-WORK. THE ASSESSING AUTHORITY WHILE MAKING THE BEST JUDGMENT ASSESSMENT, NO DOUBT, SHOU LD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON A RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO GOOD PROO F IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT ANYONE ELSE'S. THE HIGH COURT CANNOT SUBSTITUTE ITS BEST JUDGMENT FOR THAT OF THE ASSESSING AUTHORITY.' 61. AS SEEN FROM THE ABOVE JUDGEMENT, THERE WAS UNREPOR TED SALES DETECTED FOR A PERIOD OF 19 DAYS IN A YEAR. THE AO ESTIMATED THE TURNOVER FOR THE ENTIRE PERIOD OF ONE YEAR ON THE BASIS OF UNREPORTED SALES FOR THE PERIOD OF 19 DAYS IN A YEAR. THE QUESTION THAT AROSE BEFORE THE APEX COURT IS AS TO WHETHER THE AO WAS RIGHT IN DOING SO. IT WAS HELD BY THE A PEX COURT THAT IN A MATTER INVOLVING UNREPORTED SALES, THE AO HAS TO PROCEED ON ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 58 THE BASIS OF ESTIMATION WHICH INVOLVES SOME AMOUNT OF GUESS WORK. THE APEX COURT, ACCORDINGLY, UPHELD THE ORDE R OF THE AO IN ESTIMATING THE TURNOVER ON THE BASIS OF THE UNRE PORTED SALES FOR A SHORT PERIOD. HOWEVER, IN THE PRESENT CASE, WE ARE CONCERNED WITH THE ESTIMATION OF INCOME FOR ASSESME NT YEAR 2003-04, WHERE THERE IS NO SEIZED MATERIAL FOR THI S ASSESSMENT YEAR AND MATERIAL IS AVAILABLE ONLY FOR SUBSEQUENT ASSESSMENT YEARS OTHER THAN THE YEAR UNDER CONSIDERATION. ULT IMATELY, THE SAID JUDGEMENT OF SUPREME COURT MUST BE SEEN IN THE CONTEXT OF THE FACTS OF EACH CASE. IN THE PRESENT CASE, THE A SSESSEE IS A MEDICAL COLLEGE. IT IS HIGHLY IMPROBABLE TO ESTIMA TE COLLECTION OF FEES FOR MANAGEMENT QUOTA SEATS IN THE ASSESSMENT Y EAR UNDER CONSIDERATION ON THE BASIS OF SEIZED MATERIAL AVAIL ABLE FOR SUBSEQUENT ASSESSMENT YEARS. THE ESTIMATION OF INC OME OF THE ASSESSEE IS NOT PROPER AS IT IS NOT BASED ON ANY SE IZED MATERIAL RECOVERED DURING THE SEARCH ACTION RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, MORE SO, THE SEIZED MATER IAL WHICH ITSELF IS NOT CONCLUCIVE EVIDENCE TO RELY THEREON. BEING SO, THE RATIO OF SUPREME COURT JUDGEMENT IN THE CASE OF COM MISSIONER OF SALES TAX, MADHYA PRADESH V. H.M. ESUF ALI H.M. ABDUL ALI (90 ITR 271) (SC) CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. 62. COMING TO THE JUDGEMENT OF JURISDICTIONAL HIGH COUR T IN THE CASE OF RAJNIK & CO. (CITED SUPRA) WHEREIN THE HIGH COURT HELD THAT ESTIMATION OF UNDISCLOSED INCOME IS BASED ON R ELEVANT MATERIAL AND THERE IS ABSOLUTELY NO REASONABLENESS OR ARBITRARINESS WHILE MAKING SUCH ESTIMATION. THOUGH THERE IS NO MATERIAL FOR THE A.YS. 1986-87 TO 1995-96, BUT IT I S AN ADMITTED FACT BY THE PARTNER OF THE ASSESSEE FIRM THAT THE A SSESSEE HAD ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 59 PRACTICED SUPPRESSION OF SALES TURNOVER. TAKING TH E QUANTUM OF BUSINESS THAT WAS CARRIED ON BY THE ASSESSEE FIRM, THE AO ESTIMATED THE SUPPRESSION AT 20% AND ADOPTED THE GR OSS PROFIT RATE THAT WAS RETURNED BY THE ASSESSEE. THE EVIDEN CE OF THE PARTNER CLEARLY SHOWED THAT THE FIRM HAS SUPPRESSED THE TURNOVER EVEN IN THOSE YEARS ALSO. BEING SO, THERE WAS NO C ASE TO THE ASSESSEE TO CONTEND THAT THE ESTIMATION IS NOT BASE D ON ANY MATERIAL. HOWEVER, IN THE PRESENT CASE, ADMITTEDLY , THERE IS NO EVIDENCE FOR COLLECTION OF EXCESS FEES IN THE AY 20 03-04. THERE IS NO ADMISSION BY THE ASSESSEE. BEING SO, THE RAT IO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJ NIK & CO. (CITED SUPRA) ALSO CANNOT BE APPLIED. 63. NOW COMING TO THE LATEST JUDGEMENT OF JURISDICTIONA L HIGH COURT IN THE CASE OF GOPAL LAL BHADRUKA & ORS. VS. DCIT (346 ITR 106) WHEREIN THEIR LORDSHIPS HELD AS UNDER: 'BY VIRTUE OF SECTION 158BI OF THE ACT, THE VARIOUS PROVISIONS OF CHAPTER XIV-B OF THE ACT ARE MADE INAPPLICABLE TO PROCEEDINGS UNDER SECTION 153A/153C OF THE ACT. THE EFFECT OF THIS IS THAT WHILE THE PROVISIONS OF CHAPTER XIV - B OF THE ACT LIMIT THE INQUIRY BY THE ASSESSING OFFICER TO THOSE MATERIALS FOUND DURING THE SEARCH AND SEIZURE OPERATION, NO SUCH LIMITATION IS FOUND IN SO FAR AS SECTION 153A/153C OF THE ACT ARE CONCERNED. THEREFORE, IT FOLLOWS THAT FOR THE PURPOSES OF SECTION 153A/153C OF THE ACT THE ASSESSING OFFICER CAN TAKE INTO CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABL E DURING THE SEARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOSED INCOME OF THE ASSESSEE.' ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 60 64. IN THE ABOVE CASE, THERE WAS COLLECTION OF ON-MONEY WITH REFERENCE TO THE REAL ESTATE DEALT BY THE ASSESSEE FIRM. THE PARTNERS HAD ADMITTED THE ON-MONEY IN THEIR HANDS I N THE RETURN OF INCOME. THE AO REJECTED THEIR PLEA AND ASSESSED THE ON- MONEY RECEIPTS FOR ALL THE PLOTS IN THE FIRM HAND I .E., M/S. AHURA HOLDINGS. ON THE BASIS OF EVIDENCE COLLECTED DURIN G THE COURSE OF SEARCH IT SHOWS 3 PERSONS ADMITTED PAYMENT OF ON -MONEY, 5 PERSONS DENIED THE PAYMENT OF ON-MONEY AND NO EVIDE NCE WITH REGARD TO PAYMENTS OF ON-MONEY FOR REMAINING 24 PLO TS. HOWEVER, THE PARTNERS GOPAL LAL BHADRUKA AND AVADES H BHADRUKA CONFIRMED THE RECEIPT OF ON-MONEY. HOWEVE R, IN THE PRESENT CASE, THERE IS NO ADMISSION BY THE ASSESSEE FOR COLLECTION OF EXCESS FEES FOR MANAGEMENT QUOTA SEAT S FOR THE ASSESSMENT YEAR 2003-04. FURTHER, UNLESS THERE IS EVIDENCE OR MATERIAL INDICATING ANY SUPPRESSION OF COLLECTION O F FEES TOWARDS MANAGEMENT QUOTA SEATS FOR THE ASSESSMENT YEAR 2003 -2004 HAVING BEEN FOUND DURING SEARCH, AND NO ADMISSION F ROM THE ASSESSEE, AO WAS NOT JUSTIFIED IN ESTIMATING THE SA ME ON THE MATERIALS SEIZED RELATING TO SUBSEQUENT ASSESSMENT YEARS INDICATING SUPPRESSION OF COLLECTION OF FEES FOR MA NAGEMENT SEATS, IN ASSUMING SUPPRESSED/UNACCOUNTED RECEIPTS OF FEES FOR THE YEAR UNDER CONSIDERATION. THE CALCULATION OF UN ACCOUNTED INCOME FROM COLLECTION OF FEES FROM MANAGEMENT SEAT S SHOULD BE BASED ON MATERIALS RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND IT SHOULD BE ON SCIENTIFIC BASIS AND CANNOT BE MERELY ON ASSUMPTIONS. CONSIDERING THE FACTS OF THE PRESENT CASE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CI T(A) ON THIS ISSUE. FOR THIS PURPOSE, WE PLACE RELIANCE UPON TH E ORDERS OF THE TRIBUNAL IN THE CASE OF DCIT VS. ROYAL MARWAR TOBAC CO PRODUCT ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 61 (P) LTD. (2009) 120 TTJ (AHD.) 387, CIT VS. ANIL BH ALLA (322 ITR 191) (DEL). IN THIS CASE SEARCH AND SEIZURE WAS CA RRIED OUT IN THE PREMISES OF THE ASSESSEE AND THE PREMISES OF A COMPANY OF WHICH THE ASSESSEE WAS A DIRECTOR. THE AO MADE ADD ITIONS UNDER THE HEAD OF UNEXPLAINED EXPENDITURE UNDER SEC TION 69C OF THE INCOME-TAX ACT, 1961. THE CIT(A) AND THE TRIBU NAL EXAMINED THE ENTIRE EVIDENCE ON RECORD INCLUDING TH E STATEMENTS MADE BY THE ASSESSEE IN THE PROCEEDINGS AS WELL AS BEFORE THE AO AND THEN CAME TO THE CONCLUSION THAT THE ADDITIO NS COULD NOT BE SUSTAINED IN THE ABSENCE OF ANY OTHER CORROBORAT IVE EVIDENCE. THE CIT(A) DELETED THE ADDITIONS AND THIS WAS CONFI RMED BY THE TRIBUNAL. ON APPEAL, IT WAS HELD THAT THERE SHOULD BE INDEPENDENT CORROBORATIVE MATERIAL TO SUPPORT THE A DDITIONS. IN THE CASE OF DR. R.M.L. MEHROTRA VS. ACIT (1999) 68 ITD 288 (ALL.) WHICH HAS BEEN AFFIRMED BY ALLAHABAD HIGH CO URT IN 320 ITR 403 WITH DETAILED REFERENCE TO SUPREME COURT RU LING IN H.M. ESUFALI H.M. ABDULALI'S CASE AND OBSERVED AS FOLLOW S : 'ONE SHOULD NOT FORGET THAT IT IS A SEARCH CASE IN WHICH A SEARCH PARTY IS SUPPOSED AND EXPECTED TO FIND OUT ALL THE INCRIMINATING DOCUMENTS, MATERIAL AS ALSO UNDISCLOSED ASSETS. A SEARCH ASSESSMENT, MUCH LESS A BLOCK ASSESSMENT, THEREFORE, STANDS ON A FOOTING DIFFERENT THAN A NORMAL ASSESSMENT MUCH LESS AN ASSESSMENT BASED ON THE BEST JUDGMENT OF AN A.O. DURING SEARCH, FIRSTLY, NO OTHER DIARY OR OTHER RECORD COMPARABLE TO THE NOTEBOOK MARKED AS 'B-1/23' WERE FOUND BY THE SEARCH PARTY FOR THE REMAINING PERIOD, WHICH NORMALLY COULD HAVE BEEN, WERE IT BEING MAINTAINED AND KEPT. THOUGH SUCH A RECORD COULD HAVE BEEN DESTROYED ALSO FROM TIME TO TIME, BUT IN SUCH A SITUATION ALSO, IF THE ASSESSEES HAD ACTUALLY MADE A FORTUNE OF SIMILAR RECEIPTS IN RESPECT OF THE REMAINING PART OF THE YEAR, THEY ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 62 MUST BE REFLECTED BY CERTAIN ASSETS, MOVABLE OR IMMOVABLE OUGHT TO HAVE BEEN FOUND DURING THE COURSE OF SEARCH. NO SUCH ASSETS, DESPITE THE EXTREME STEP OF SEARCH WHICH AMOUNTS TO A SERIOUS INVASION ON THE RIGHTS OF SUBJECTS AND WHICH IS PERHAPS THE LAST WEAPON IN THE ARSENAL OF THE DEPARTMENT, WERE FOUND, WHICH COULD BE ATTRIBUTED TO ANY SUCH PATENTLY HYPOTHETICAL RECEIPTS. IN VIEW OF THIS THE MULTIPLICATION FORMUL A ADOPTED BY THE A.O. WAS NOT VALID. 65. BEING SO, EXTRAPOLATION OF INCOME CANNOT BE MADE FO R THE ASSESSMENT YEAR IN QUESTION ON THE BASIS OF SEIZED MATERIAL RELATING TO SOME OTHER ASSESSMENT YEARS. 66. RELATING TO EXEMPTION U/S. 11, THIS ISSUE STANDS DE CIDED IN FAVOUR OF THE ASSESSEE IN VIEW OF OUR FINDINGS IN I TA NO. 720/HYD/2012 IN THIS ORDER. REGARDING EXEMPTION U/ S. 10(23C), THE WITHDRAWAL OF THE APPROVAL GRANTED U/S. 10(23C) (VI) OF THE IT ACT IN THE CASE OF THE ASSESSEE WAS WITH EFFECT FRO M AY 2007-08 ONLY VIDE CANCELLATION ORDER DATED 19.12.2011 IN F. NO. DGIT(INV)/HYD/APP & RENEWAL U/S. 10(23C)(VI)/PES/20 11-12. BEING SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. 67. IN THE RESULT, REVENUES APPEAL ITA NO. 1768/HYD/20 11 IS DISMISSED. ITA NO. 1767/HYD/2011 (A.Y. 2003-04) : ASSESSEE : SRI B. SRINIVASA RAO, HYDERABAD 68. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL REA D AS FOLLOWS- ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 63 1. WHETHER THE CIT(A) WAS JUSTIFIED IS NOT APPRECIATIN G THE FACT THAT EXTRAPOLATION CAN BE MADE FOR OTHERS YEARS BASED ON MATERIAL FOUND IN SOME OTHER YEARS, AS HAS BEEN HELD BY THE HONBLE AP HIGH COURT IN THE CASE OF RAJNIK & CO. VS. ACIT(251 ITR 561). 2. WHETHER THE CIT(A) FAILED TO APPRECIATE THE FACT THAT REOPENING THE ASSESSMENT U/S., 147 IS BASED ON THE EVIDENCE SEIZED AND NOT ON ESTIMATION AS HELD BY HIM. 69. FACTS OF THE CASE AND THE MATERIAL BACKGROUND LEADI NG TO THE FILING OF THE APPEAL BY THE DEPARTMENT IN THE C ASE OF THIS ASSESSEE, WHO IS M.D. OF M/S. PRATHIMA EDUCATIONAL SOCIETY, RESPONDENT-ASSESSEE IN ITA NOS. 1768/HYD/2011, ARE ALMOST IDENTICAL. IT IS THE REOPENING OF THE ASSESSMENT I N THE CASE OF THE ASSESSEE, BASED ON THE MATERIAL FOUND AT THE TI ME OF SEARCH ACTION UNDER S. 132 OF THE ACT, WHICH HAS TAKEN PLA CE IN HIS PREMISES ALSO IN 2009, AND THE PROTECTIVE ADDITION OF RS. 38,28,000 MADE IN THE HANDS OF THIS ASSESSEE, CONSI STENT WITH THE SUBSTANTIVE ADDITION MADE IN THE ASSESSMENT OF THE SAID SOCIETY, WHICH HAVE BEEN DECIDED BY THE CIT(A) IN F AVOUR OF THE ASSESSEE, WHICH PROMPTED THE REVENUE TO FILE THE P RESENT APPEAL BEFORE THIS TRIBUNAL. FOR THE DETAILED REAS ONS DISCUSSED IN PARA 9 OF THIS ORDER, IN THE CONTEXT OF REVENUE S APPEAL, ITA NO. 1768/HYD/2011 IN THE CASE OF M/S. PRATHIMA EDUC ATIONAL SOCIETY, WE FIND NO JUSTIFICATION FOR THE REOPENING OF THE ASSESSMENT IN THIS CASE AS WELL. WE ACCORDINGLY UP HOLD THE IMPUGNED ORDER OF THE CIT(A) ON THIS ASPECT, IN THE CASE OF THIS ASSESSEE AS WELL, REJECTING THE GROUNDS OF THE REVE NUE ON THIS ISSUE. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 64 70. THE REVENUE RAISED ONE MORE GROUND THAT THE CIT(A) FAILED TO APPRECIATE THE FACT THAT EXTRAPOLATION CA N BE MADE FOR OTHER YEARS ON THE BASIS OF MATERIAL FOUND DURING T HE COURSE OF SEARCH RELATING TO SOME OTHER YEAR AS IT IS SUPPORT ED BY THE JUDGEMENT OF HON'BLE A.P. HIGH COURT IN THE CASE OF RAJNIK & CO. VS. ACIT (251 ITR 561). 71. IN VIEW OF OUR DECISION ON THE SAME ISSUE IN ITA NO . 1768/HYD/2011 IN THE EARLIER PORTION OF THIS ORDER, THIS GROUND IS DECIDED AGAINST THE REVENUE AND CONFIRM THE ORDER O F THE CIT(A). 72. IN THE RESULT, REVENUES APPEAL ITA NO. 1767/HYD/20 11 IS DISMISSED. 73. TO SUM UP, REVENUE APPEALS IN ITA NOS. 1767 AND 1768/HYD/2011 ARE DISMISSED AND ASSESSEES APPEAL I N ITA NO. 720/HYD/2012 IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 8 TH NOVEMBER, 2013 SD/ - (ASHA VIJAYARAGHAVAN) SD/ - (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, THE 8 TH NOVEMBER, 2013 COPY FORWARDED TO: 1. ASST. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 1, 7 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD - 500 004. 2. SRI B. SRINIVASA RAO, 172/A MLA COLONY, ROAD NO. 12 , BANJARA HILLS, HYDERABAD. 3 . M/S. PRATHIMA EDUCATIONAL SOCIETY, PLOT NO. 213, ROAD NO. ITA NO. 1768/HYD/2011 & ORS. M/S. PRATHIMA EDUCATIONAL SOCIETY,& ANR. ================================ 65 1, FILM N AGAR, HYDERABAD. 4. THE COMMISSIONER OF INCOME - TAX (APPEALS) - I , HYDERABAD 5. THE COMMISSIONER OF INCOME - TAX ( CENTRAL ), HYDERABAD 6 . THE DR - A BENCH , ITAT, HYDERABAD. BVS/TPRAO