ACIT, Trichy V. P.Murugesan, Thanjavur

ITA 2036/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96173 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 20-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P MURUGESAN
• Assessee Lawyers: R VISWANATHAN
• Keywords: Unexplained cash credit; Unexplained investment; Sale consideration of property below Jantri Value; Unexplained expenditure; Gift; Business income; Income from undisclosed sources; Search and seizure; Charitable institution; Principle of natural justice; Source of fund; Cost of acquisition; Valuation report; Validity of assessment; Block assessment; Notional interest; Onus to prove; Capital expenditure
• Section: 69C; 40A(3); 50C; 142(1); 133A; 153A; 234B; 80G; 12A; 12AA; 131; 132; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER . I.T.A. NO. ASSESSMENT YEAR %& APPELLANT '(%& RESPONDENT 2036 & 2037/MDS/2013 2006-07 & 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, TIRUCHIRAPPALLI. SHRI. P. MURUGESAN, NO.35-36, II STREET, NATARAJAPURAM NORTH COLONY, THANJAVUR. [PAN: AGCPM 7443H] 2039, 2040, 2041, 2042, 2043, 2044, 2045/MDS/2013 AND S.P. NOS. 368 TO 373/MDS/2015 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 & 2007-2008 SHRI. P. MURUGESAN, NO.35-36, II STREET, NATARAJAPURAM NORTH COLONY, THANJAVUR. [PAN: AGCPM 7443H] THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, TIRUCHIRAPPALLI 1884, 1885, 1886, 1887, 1888, 1889 & 1890/MDS/2013, S.P.NOS.361 TO 367/2015 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 AND 2007-2008 SRI PONNAIYAH RAMAJAYATHAMMAL EDUCATIONAL AND CHARITABLE TRUST, NO.33 & 34 NATARAJAPURAM SOUTH COLONY, MEDICAL COLLEGE ROAD, THANAJAVUR 613 007. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, TIRUCHIRAPPALLI 462/2011 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, TIRUCHIRAPPALLI SHRI. R. VISWANATHAN, NO.2, SAVERIOR KOIL STREET, VEMBARAPATTY, DINDIGUL (PAN NO.ADLPV 6760G) I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 2 -: 649/2011 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, TIRUCHIRAPPALLI SHRI. P. JANAKAR, NO.4/52,SPENCER COMPOUND, DINDIGUL. (PAN NO. ACLPJ 9339C) APPELLANT FOR SHRI. P. MURUGESAN & SRI PONNAIYAH RAMAJAYATHAMMAL EDUCATIONAL AND CHARITABLE TRUST : DR. ANITHA SUMANTH, ADVOCATE / RESPONDENT BY : MRS. JAYANTHI KRISHNAN, IRS, CIT. APPELLANT BY : MR. K. RAMASAMY, SR. STANDING COUNSEL RESPONDENT FOR R. VISWANATHAN & P. JANAKAR : SHRI. V. SUBBARAYAN, ITP (RETD. DCIT) /DATE OF HEARING : 17.08.2015 /DATE OF PRONOUNCEMENT : 14.10.2015 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER:- ITA NOS. 2036, 2037, 2039 TO 2045/MDS/2013:- P. MURUGESAN THE ITA NOS.2036 & 2037/MDS/2013 ARE FILED BY THE D EPARTMENT AND ITA NOS.2039 TO 2045/MDS/2013 ARE FILED BY THE ASSESSEE. ALL THESE APPEALS ARE DIRECTED AGAINST THE COMMON ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALL I, DATED 08.08.2013. SINCE THE ISSUES IN THESE APPEALS ARE COMMON IN NATURE, I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 3 -: THESE APPEALS ARE CLUBBED, HEARD TOGETHER, AND DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. SHRI. P. MURUGESAN:- ITA NOS.2039 TO 2045/MDS/2013 : (ASSESSEES APPEAL):- FIRST, WE TAKE UP ASSESSEES APPEALS. T HE FIRST COMMON GROUND RAISED IN ASSESSEES APPEAL IS GENERA L IN NATURE, WHICH DOES NOT REQUIRE ANY ADJUDICATION. 3. THE SECOND GROUND RAISED IN ASSESSEES APPEAL IS T HAT THE ORDER PASSED BY THE ASSESSING OFFICER AND CONFIRMED BY TH E COMMISSIONER OF INCOME TAX (APPEALS) SUFFERED FROM VIOLATION OF PRI NCIPLES OF NATURE JUSTICE 4. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE, SHRI P .MURUGESAN IS A CHAIRMAN & MANAGING TRUSTEE OF SRI PONNAIYA RAMAJ AYATHAMMAL EDUCATIONAL & CHARITABLE TRUST (IN SHORT SPRECT), TANJORE. IN HI S INDIVIDUAL STATUS HE HAS ENGAGED IN RUNNING COMPUTER CENTRE, TRAVEL BUSINESS & PROPRIETOR OF M/S. P R & SONS WHICH DEALS WITH HOME APPLIANCES. THERE WAS A SEARCH ACTION IN THE CASE OF SHRI R. NATHAM VISWA NATHAN & HIS GROUP CASES ON 23.08.2006. IN THAT PROCESS SURVEY U/S 133 A WAS CONDUCTED IN THE CASE OF SRI PONNAIYA RAMAJAYATHAMMAL EDUCATIONAL & CHARITAB LE TRUST (IN SHORT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 4 -: SPRECT), TANJORE IN ORDER TO UNEARTH THE LINK BETW EEN THE SAID TRUST AND THE TITAN EDUCATIONAL TRUST [IN SHORT TET]. LATER, ON 0 5/10/06 THERE WAS A SEARCH IN THE RESIDENCE OF THE ASSESSEE AND SURVEY OPERATI ON ON THE EDUCATIONAL INSTITUTIONS RUN BY HIM ON THE SAME DAY IN ORDER TO UNEARTH THE LINK BETWEEN THE ASSESSEE AND THE TET. IN MEANWHILE, SHRI R.NATH AM VISWANATHAN, SHRI P.MURUGESAN, CHAIRMAN OF SPRECT WAS INTERCEPTED AT CHENNAI AIRPORT WHILE CARRYING 1 CRORE WITH HIM ON 25.11.2006. SUBSEQUENTLY, HIS R ESIDENCE WAS ALSO COVERED U/S.132 OF THE I.T. ACT. DURING THE CO URSE OF SEARCH PROCEEDINGS, SEVERAL DOCUMENTS WERE FOUND AND SEIZED BOTH FROM H IS RESIDENCE AND FROM THE OFFICES OF SPRECT. AGGRIEVED, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ALL TH E YEARS CHALLENGING THE VALIDITY OF THE PROCEEDINGS INITIATED U/S.153A OF T HE ACT AND ALSO THE VALIDITY OF THE BEST JUDGEMENT ASSESSMENT DONE U/S.144 OF TH E ACT. THE ASSESSEE ASSAILED VARIOUS ADDITIONS AND DISALLOWANCES MADE B Y ASSESSING OFFICER. THE CIT(A) BY WAY OF A CONSOLIDATED ORDER DATED 22.03.2011 ALLOWED SOME OF THE CLAIMS OF THE ASSESSEE, WHEREA S, CONFIRMED CERTAIN OTHER ADDITIONS MADE BY THE ASSESSING OFFIC ER. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNA L. ON APPEAL BEFORE THE TRIBUNAL THE ASSESSEE RAISED A COMMON GRIEVANCE THAT HE WAS NOT GIVEN PROPER OPPORTUNITY EITHER BY ASSESSING OFFICER OR BY CIT(A) FOR PRESENTING HIS CASE IN SU PPORT OF THE RETURNS. THE TRIBUNAL REMITTED BACK THE ENTIRE ASSESSMENT AND IS SUES TO THE ASSESSING I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 5 -: OFFICER FOR CONSIDERATION DE NOVO. FOLLOWING THE DIRECTIONS OF THE TRIBUNAL, THE ASSESSING OFFICER MADE DE NOVO ASSESSMENT SEPAR ATELY FOR ALL THE ASSESSMENT YEARS. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. NOW THE LD. AUTHORISED REPRES ENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSEE WAS NOT GIVEN FAIR OPPORTUNITY OF HEARING BY THE LOWER AUTHORITIES. WE HAVE GONE THROUGH THE ORDER OF THE LOWER AUTHORITIES. THE ASSESSING OFFICER RE CORDED IN THE ASSESSMENT ORDER THE DATES OF HEARING OF THE CASE A S FOLLOWS:- HEARING POSTED ON APPELLANT APPEARED ON 25.07.2012 SOUGHT ADJOURNMENT FILED LETTER DATED 30.07.2012 04.10.2012 C.A. APPEARED AND SOUGHT ADJOURNMENT 30.10.2012 NONE APPEARED 09.11.2012 APPEARED AND SOUGHT TIME TILL 21.11.2012 21.11.2012 APPEARED AND FILED PART OF THE INFORMATION CALLED FOR AND SOUGHT TWO WEEKS TIME TO FILE DETAILS. 06.12.2012 APPEARED ON 14.12.2012, CASE PARTLY HEARD AND ADJOURNED TO 04.01.2013 31.01.2013 FILED A LETTER SEEKING 10 DAYS TO SUBMIT THE PARTICULARS 05.02.2013, 11.02.2013 AND 06.03.2013 APPEARED AND HEARD I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 6 -: THE DETAILS OF CASE BEING POSTED FOR HEARING BEFORE THE THEN COMMISSIONER OF INCOME TAX (APPEALS) IS SUMMARIZED AS UNDER:- HEARING POSTED ON APPELLANT APPEARED ON 09.03.2010 SOUGHT ADJOURNMENT 12.08.2010 FILED WRITTEN SUBMISSIONS 25.08.2010 SOUGHT ADJOURNMENT 16.09.2010 FILED SUBMISSIONS AND SOUGHT ADJOURNMENT 12.10.2010 AR APPEARED AND PARTLY HEARD 21.12.2010 PARTLY HEARD 08.03.2011 AR APPEARED AND CASE DISCUSSED. FURTHER, THE COMMISSIONER OF INCOME TAX (APPEALS) W HILE PASSING ORDER ON 08.08.2013, HAS ALSO GIVEN PROPER OPPORTUN ITY OF HEARING. 4.1 BEING SO, WE DO NOT FIND ANY MERIT THAT THE ASS ESSEE WAS NOT GIVEN OPPORTUNITY OF HEARING BY THE LOWER AUTHORITI ES. THE LOWER AUTHORITIES HAD GIVEN AMPLE OF OPPORTUNITY OF HEAR ING TO THE ASSESSEE TO PRESENT HIS CASE. BEING SO, IN OUR OPINION THE RE IS NO JUSTIFICATION IN THE PLEA OF THE ASSESSEE THAT THERE IS INADEQUATE O PPORTUNITY OF HEARING TO THE ASSESSEE. HENCE, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 7 -: 5. THE NEXT COMMON GROUND RAISED BY THE ASSESSEE IS THAT THE ASSESSMENT IS VITIATED ON ACCOUNT OF LACK OF JURISD ICTION. 5.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN N OT NOTING THAT THE IMPUGNED ASSESSMENT HAD BEEN PASSED IN THE ABSENCE OF PROPER AND VALID AUTHORIZATION. THE PROCEEDINGS WERE THUS WHOL LY INVALID AND LIABLE TO BE QUASHED AS SUCH. THE ASSESSMENTS ARE BASED ON LY ON SURMISES, PRESUMPTIONS AND ASSUMPTION AND NO INCRIMINATING DO CUMENT WAS FOUND AT THE TIME OF SEARCH, WARRANTING THE PROCEED INGS IN TERMS OF SEC. 153A OF THE ACT. IN THE ABSENCE OF ANY EVIDEN CE FOUND IN THE COURSE OF SEARCH, THE IMPUGNED ASSESSMENT ARE WHOLL Y DEVOID OF JURISDICTION AND LIABLE TO BE CANCELLED. THE COMMIS SIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE NOTED THAT THE SEARCH O N 05.10.2006 HAD NOT RESULTED IN THE SEIZURE OF ANY MATERIAL, ASSET OR BOOKS OF ACCOUNT. THE CASH THAT WAS FOUND AT THE TIME OF SEARCH HAS B EEN PROPERLY EXPLAINED BY THE ASSESSEE. THE AMOUNT OF F1 CRORE F OUND AND SEIZED BY THE DEPARTMENT FROM THE ASSESSEE ON 25.10.2006 A T THE CHENNAI AIRPORT HAS ALSO BEEN PROPERLY EXPLAINED. THE IMPU GNED ASSESSMENT ARE THUS WHOLLY DEVOID OF JURISDICTION AND MERITS A ND LIABLE TO BE QUASHED. THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE RELIED ON THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 8 -: ORDER OF SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT, CENTRAL CIRCLE-44, MUMBAI 137 ITD 257 WHEREIN IT WAS OBSERVED IN ASSESSMENTS THAT ARE ABATED, THE ASSES SING OFFICER RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION C ONFERRED ON HIM U/S.153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EA CH OF THE SIX ASSESSMENT YEARS SEPARATELY . THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEARS 20 01-2002, 2002- 2003 ASSESSMENT WAS PROCESSED U/S.143(1) AND FURT HER FOR THE ASSESSMENT YEAR 2003-2004, ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT AND FOR THE ASSESSMENT YEARS 2004-05 TO 200 7-08 ASSESSMENT WAS PENDING. THUS, HE SUBMITTED THAT FOR THE ASSES SMENT 2003-2004, THE ASSESSMENT WAS ALREADY COMPLETED U/S.143(3) OF THE ACT. BEING SO, THERE IS NO INCREMENTING MATERIAL FOUND DURING THE COURSE OF SEARCH FOR THIS ASSESSMENT YEAR. THE LD. AUTHORIS ED REPRESENTATIVE ALSO RELIED ON THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. (1) CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) L TD, AND (2) ALL CARGO GLOBAL LOGISTICS LTD IN 374 ITR 645 (BOMBAY) WHEREIN IT WAS HELD IF THERE WAS NO INCRIMINATING MATERIAL FO UND DURING THE COURSE OF SEARCH/S.132 OF THE ACT, POWER U/S.153A B EING NOT EXPECTED TO BE EXERCISED ROUTINELY, SHOULD BE EXERCISED IF T HE SEARCH REVEALED ANY INCRIMINATING MATERIAL. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 9 -: 5.2 THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE IS SEIZED MATERIAL FOUND DURING THE COURSE OF SEARC H ACTION U/S. 132 OF THE ACT AND THE SAME WAS USED FOR THE PURPOSE OF FR AMING ASSESSMENT U/S.153A OF THE ACT. THERE IS NO ILLEGALITY IN FR AMING THE ASSESSMENT. HE RELIED ON SEC.153A(B) OF THE ACT. 5.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS SEEN FROM THE FACTS OF THE CASE THERE WAS SEARCH IN THE RESIDENCE OF THE ASSESSEE ON 05.10.2006. FURTHER, T HERE WAS ALSO A SEARCH ON 25.11.2006 AT CHENNAI AIRPORT THAT A SUM OF F1 CRORE WAS SEIZED FROM THE ASSESSEE. CONSEQUENT TO THIS, NOTI CE U/S.153A WAS ISSUED TO THE ASSESSEE ON 16.10.2007. THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEARS 2001-2002 TO 2005-2 006 ON 24.10.2008 AND ON 11.11.2008 FOR THE ASSESSMENT YE AR 2006-2007. BEING SO, WE FIND NO MERIT IN THE ARGUMENT OF THE L D. AUTHORISED REPRESENTATIVE FOR ASSESSEE. THIS GROUND OF THE AP PEALS OF THE ASSESSEE IS REJECTED. 6. COMING TO MERITS IN ITA NO.2039/MDS/2013, IN ASSES SMENT YEAR 2001-2002, THE FIRST GROUND RAISED BY THE ASSESSEE IS WITH TO REGARD I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 10 -: TO ADDITION OF F11,97,000/- AS UNEXPLAINED CREDIT F OR THE ASSESSMENT YEAR 2001-2002. 6.1 THE FACT OF THE CASE ARE THAT DURING THE PREVI OUS YEAR RELEVANT TO THE A.Y.2001-02, THE ASSESSEE HAS SHOW N LOANS FROM THE FOLLOWING PERSONS ON THE LIABILITY SIDE OF THE 'GEN ERAL BALANCE SHEET' FILED ALONG WITH THE RETURN OF INCOME. THEY ARE ALS O SHOWN ON THE RECEIPTS SIDE OF THE 'GENERAL RECEIPTS AND PAYMENTS A/C'. SL.NO NAME OF ALLEGED CREDITOR AMOUNT IN (F) 1 LOAN FROM SWAMY BOMMU 8,00,000 2 NRI LOAN 3,97,000 IN THE RETURN OF INCOME FILED U/S 139 ON 3-8-2001, LOAN FROM SHRI SWAMY BOMMU WAS SHOWN AT F8,00,000/. HOWEVER IN THE RETURN OF INCOME FILED U/S 153A OF THE ACT ON 24-10-2008, THI S LOAN DOES NOT APPEAR ON THE LIABILITY SIDE OR THE BALANCE SHEET. THE ASSESSEE WAS REQUESTED TO EXPLAIN THE DISCREPANCY BY THE ASSESSI NG OFFICER. VIDE REPLY DATED 21-11-2012, THE LD. AUTHORISED REPRESEN TATIVE FOR ASSESSEE STATED THAT THEY DO NOT HAVE THE COPY OF THE RETURN DATED 3.8.2001 AND REQUESTED TO PROVIDE THE SAME. A COPY OF THE RETURN WAS MADE AVAILABLE AND THE ASSESSEE WAS REQUESTED T O EXPLAIN THE DISCREPANCY BY ASSESSING OFFICER. VIDE REPLY DATED 31.1.2013 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED A STATEMENT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 11 -: PREPARED FOR BANK PURPOSES REDUCING THE ASSETS AND LIABILITIES WAS FILED IN THE RETURN U/S 153A. THE LOAN CREDITOR SHR I SWAMY BOMMU F8,00,000/- WAS NOT FOUND IN THE STATEMENT FILED U/ S 153A. THIS IS DUE TO THE ABOVE REASON. THE AR FURTHER STATED THAT F8,00,000/ WAS REPAID ON 23-10-2001 VIDE A CHEQUE NO.824741 AND A COPY OF THE BANK STATEMENT OF SHRI P.MURUGESAN WAS ENCLOSED WIT H THE LETTER BEFORE AO. IN THIS PASS BOOK, THERE IS NO MENTION A S TO WHOM THE CHEQUE IS ISSUED. FURTHER, THE AR COULD NOT PRODUCE THE ORIGINAL PASS BOOK OR A CERTIFIED COPY OF THE BANK PASSBOOK FOR V ERIFICATION BEFORE ASSESSING OFFICER. EVEN AFTER 'AFFORDING FURTHER OP PORTUNITIES THE ASSESSEE BY AO COULD NOT PRODUCE THE CERTIFIED COPY OF THE BANK A/C. NOR THE ORIGINAL PASS BOOK FOR VERIFICATION. THE L OAN FROM SHRI SWAMY BOMMU IS STATED TO BE REPAID ON 23-10-2001. THE ASS ESSEE HAS NOT PRODUCED ANY BOOKS OF ACCOUNTS FOR THE 'GENERAL ACC OUNTS' OTHER THAN THE ACCOUNTS OF THE CONCERN M/S P.R. SONS BEFORE AO. THE ASSESSEE HAS FILED RECEIPTS & PAYMENTS ACCOUNT OF THE GENERAL ACCOUNTS WHICH INCORPORATES THE LOANS TAKEN AND THE REPAYMENTS MADE DURING THE YEAR. IN THE RECEIPTS & PAYMENTS A/C. FILED ALONG WITH THE RETURN FOR ASSESSMENT YEAR 2002-03, THE AB OVE MENTIONED LOAN REPAYMENT TO SHRI SWAMY BOMMU IS NOT SHOWN. T HEREFORE, THE REPAYMENT OF LOAN ON 23-10-2001 CANNOT BE CONSIDERE D TO BE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 12 -: SATISFACTORILY PROVED. IN VIEW OF THE DISCREPANCIES NOTED ABOVE AND THE FACT THAT NO EVIDENCE IS FURNISHED TO SHOW THE LOAN RECEIPT OF F8,00,000/-FROM SHRI SWAMY BOMMU, THE CREDIT OF F8, 00,000/- SHOWN IN THE ORIGINAL BALANCE SHEET FILED WITH THE RETURN OF INCOME DATED 3-8-2001 IS CONSIDERED AS UNEXPLAINED CREDIT BY ASSESSING OFFICER AND WAS BROUGHT TO TAX 68 OF THE IT ACT. THE RECEIPTS AND PAYMENTS ALC IS CREDITED BY LOAN FROM NRI OF F3,97,OOO/- AND IS SHOWN IN THE BALANCE SHEET AS A LIABILITY. THE ASSE SSEE HAS EXPLAINED THAT IT IS FROM SHRI G.DINESH KUMAR. THE AR FILED A PHOTO COPY OF THE ACCOUNT WITH INDIAN OVERSEAS BANK, THANJAVUR BEFORE ASSESSING OFFICER PURPORTED TO BE BELONGING TO SHRI G.DINESH KUMAR WHEREIN THERE ARE DEBITS OF F1,77,OOO/- ON 4TH AUGUST 2000, F70,000/- ON SEPTEMBER 2000 AND F1,50,000/- ON 8TH JANUARY 2001. IN THE PASS BOOK, IT WAS NOT MENTIONED TO WHOM THE CHEQUES ARE ISSUED. NO FURTHER EVIDENCE IS PRODUCED. THE COPY OF THE PASS BOOK PRODUCED IS ONLY A PHOTO COPY AND THE ORIGINAL IS NOT PRODUCED FOR VERIFICATION. THE ASSESSEE WAS REQUESTED TO FURNISH HIS BANK ALC COPY REFLECTING THE CORRESPONDING ENTRIES. THE A.R. VIDE REPLY DT 1 4.12.2012 BEFORE THE ASSESSING OFFICER STATED THAT 'A COPY OF THE BA NK STATEMENT HAS BEEN REQUESTED FROM THE BANK AND HE SHALL FURNISH I T IN THE NEXT HEARING.' HOWEVER NO SUCH BANK ALC STATEMENT WAS FURNISHED. THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 13 -: ASSESSEE HAS NOT PRODUCED ANY CONFIRMATION FROM THE LOAN CREDITOR. ON GIVING OPPORTUNITY ALSO, THE LOAN CREDITOR WAS N OT MADE AVAILABLE FOR VERIFICATION. THE ASSESSEE HAS ALSO NOT FURNISH ED THE DETAILS AS TO THE MODE OF RECEIPT OF THE LOANS, THE BANK ACCOUNT WHERE IT WAS CREDITED. A LETTER WRITTEN TO SHRI DINESH KUMAR AT THE ADDRESS PROVIDED BY THE ASSESSEE TO CONFIRM THE LOAN HAS NO T ELICITED ANY REPLY FROM HIM. THE ASSESSEE HAS AVAILED LOAN FROM SHRI DINESH KUMAR IN OTHER YEARS ALSO AS UNDER: SI.NO . A.Y. AMOUNT OF AMOUNT BALANCE LOAN TAKEN REPAID OUTSTANDING 1 2001-02 3,97,000 0 3,97,000 2 2002-03 2,53,000 0 6,50,000 3 2003-04 14,17,000 0 20,67,000 4 2004-05 1,34,0000 0 22,01,000 5 2007-08 6,91,532 0 28,92,532 NO REPAYMENTS OF THE ABOVE LOANS ARE SHOWN IN ANY O F THE YEARS TILL 31.03.2007. IN THE RECEIPTS AND PAYMENTS ACCOUNT FILED WITH THE RETURNS NO INTEREST PAYMENT ON THIS LOAN IS SHOWN. NO SANE PERSON WILL LEND SUCH HUGE AMOUNT OF MONEY WITHOUT ANY INTEREST . THE ASSESSEE WAS ALSO REMINDED THAT ONUS TO PROVE THE SOURCES OF CREDIT AND THE GENUINITY OF THE TRANSACTION WAS WITH THE ASSESSEE. THE ASSESSEE WAS REMINDED THAT THE TRIBUNAL VIDE ITS ORDER DATED HAD DIRECTED THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 14 -: ASSESSEE TO CO-OPERATE WITH THE DEPARTMENT IN COMPL ETING THE ASSESSMENT. IN SPITE OF ALL THIS, THE ASSESSEE HAS EVEN FAILED TO STATE AS TO HOW THE LOANS ARE RECEIVED, I.E., WHETHER BY CASH OR CHEQUE, IF BY CHEQUE, THE CHEQUE NO. AND THE DETAILS OF THE BA NK WHERE IT IS CREDITED. IN VIEW OF THE ABOVE, THE ABOVE TWO LOANS OF RS.8,OO,OOO/- FROM SHRI SWAMY BOMMU AND RS.3,97,OOO/-FROM SHRI DI NESH KUMAR ARE TREATED AS UNEXPLAINED CREDITS AND BROUGHT TO T AX. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED TH AT ACCORDING TO THE ASSESSING OFFICER THERE WAS FOLLOWING TWO LOAN CREDITORS DURING THIS YEAR A. SWAMY BOMMU F8,00,000/- B. NRI LOAN F3,97,000/- BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), TH E ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WENT WRONG IN MAKING THE ADD ITION WITHOUT ACCEPTING THE COPIES OF BANK ACCOUNT STATEMENTS OF THE ASSESSEE A ND THE CREDITOR. AFTER MIGRATING TO CORE BANKING SOLUTIONS, NO BANKS ARE IN A POSITI ON TO FURNISH PARTICULARS OF THE ACCOUNTS PRIOR TO 2006. HENCE THE QUESTION OF THEIR CERTIFYING THE STATEMENTS IS RULED OUT AND CALLING FOR CERTIFIED COPIES OF THE B ANK ACCOUNTS AND FURTHER DETAILS FROM THE ASSESSEE IS IN TOTAL VIOLATION OF THE PRI NCIPLE OF NATURAL JUSTICE. ACCORDING THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE THE ASSESSING OFFICER WENT WRONG IN MAKING THE ADDITION WITHOUT ACCEPTING THE COPIES OF BANK ACCOUNT STATEMENTS OF THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 15 -: ASSESSEE AND THE CREDITOR AS RELATING TO THE LOAN F ROM SHRI DINESH KUMAR OF F3,97,OOO/-. HOWEVER, THE COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE A SSESSEE IS IN APPEAL BEFORE US. 6.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL AVAILABLE ON RECORD . WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE AU THORISED REPRESENTATIVE OF THE ASSESSEE AS WELL AS THE LD. D EPARTMENTAL REPRESENTATIVE. THE ASSESSING OFFICER HAS MADE AN A DDITION OF F11, 97,000/- ON ACCOUNT OF UNEXPLAINED CREDITS SHOWN IN THE NAME OF MR. SWAMY BOMMU AT F 8,00,000/- AND ANOTHER AMOUNT OF F 3,97,000/- FROM NRL LOAN. THE ASSESSING OFFICER HAS NOTICED A DISCREPANCY IN THE RETURN FILED ULS 139(1) ON 3/8/2001 WHERE A LOAN FROM SHRI. SWAMY BOMMU IS SHOWN AT F 8,00,000/- WHERE AS IN THE RETURN FILED ULS 153A ON 24/10/2008, THIS LOAN DOES NOT APPEAR ON THE LIABILITY SIDE OF THE BALANCE SHEET. WHEN THE ASSESSEE WAS REQUESTED TO E XPLAIN THE DISCREPANCY, THE AUTHORISED REPRESENTATIVE OF THE A SSESSEE HAS STATED THAT THE AMOUNT OF F 8,00,000/- WAS REPAID ON 23/10/2001 VIDE A CHEQUE NO. 824741. HOWEVER ON VERIFYING THE COPY O F BANK STATEMENT OF SHRI. P. MURUGESAN THERE WAS NO MENTION AS TO WH OM THE CHEQUE WAS ISSUED. THE LOAN REPAYMENT HAS NOT BEEN SHOWN A NYWHERE IN HIS BOOKS OF ACCOUNTS AS STATED BY THE ASSESSEE. AS THE ASSESSEE COULD NOT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 16 -: SUBSTANTIATE HIS CLAIM OF RECEIPT OF LOAN AS WELL A S REPAYMENT THE SAME IS TREATED AS UNEXPLAINED CREDIT AND ADDED TO THE I NCOME ULS 68 OF THE IT ACT. SIMILARLY A LOAN FROM NRI OF F 3,97,000/- I S SHOWN AS A LIABILITY IN THE BALANCE SHEET. WHEN THIS ISSUE WAS BROUGHT T O THE NOTICE OF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE BY AUTHOR ITIES WHO PRODUCED A PHOTO COPY OF IOB ACCOUNT THANJAVUR SAID TO BELON G TO SHRI. G. DINESH KUMAR (NRI) WHERE SOME DEBITS WERE FOUND, BU T THERE IS NO MENTION TO WHOM THE CHEQUES WERE ISSUED. THE ORIGIN AL BANK ACCOUNT STATEMENT HAS NOT BEEN FURNISHED BY AUTHORISED REPR ESENTATIVE OF THE ASSESSEE NOR ANY CONFIRMATION LETTER FILED FROM SHR I. G. DINESH KUMAR. NO REPLY HAS BEEN RECEIVED FROM SHRI. G. DINESH KUM AR FOR CONFIRMING THE LOAN AMOUNT. HENCE, THE ADDITION MADE BY COMMIS SIONER OF INCOME TAX (APPEALS) IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 6.4 THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH R EGARD TO CONFIRMING THE ADDITION IN RESPECT OF AGRICULTURAL INCOME TO THE TUNE OF F14,910/-. 6.5 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED F40,353/- AS INCOME FROM AGRICULTURAL LAND. IN SUPP ORT OF THE CLAIM, I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 17 -: THE LD. AUTHORISED REPRESENTATIVE STATED THAT THE A SSESSEE HAS TAKEN AGRICULTURE LANDS BELONGING TO HIS BROTHER SHRI. V ASUDEVAN ON ORAL LEASE. IT WAS STATED THAT CULTIVATION OF GRAMS WER E UNDERTAKEN DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE COULD NOT GIVE DETAILS OF QUANTITY OF THE PRODUCE OBTAINED, NAME OF THE PERSO NS TO WHOM IT WAS SOLD AND BILLS AND VOUCHERS FOR THE SALE OF AGR ICULTURAL PRODUCE WHICH WERE CALLED FOR VIDE NOTICE U/S.142(1) DATED 31.10.2012. UNDER SIMILAR CIRCUMSTANCES FOR THE ASSESSMENT YEAR 2003- 04, THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE ORDER DAT ED 01.09.2009 IN IT NO.128/06-07 HAS DIRECTED TO TREAT F3,66,000/- O UT OF THE AGRICULTURAL INCOME DECLARED OF F9,75,000/- AS INCO ME FROM OTHER SOURCES. THE DISALLOWANCE WORKS OUT TO 37%. THERE FORE, 37% OF THE INCOME RETURNED AS AGRICULTURAL INCOME I.E F14,910/ - WAS CONSIDERED AS INCOME FROM OTHER SOURCES. AGGRIEVED, THE A SSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE AS SESSEE IS IN APPEAL BEFORE US. 6.6 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATER IAL ON RECORD. WHENEVER THE ASSESSEE CLAIM ANY INCOME AS EXEMPT FROM I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 18 -: TAX, IT IS THE DUTY OF THE ASSESSEE TO PLACE NECESS ARY EVIDENCE TO PROVE THE SAME. IN THE PRESENT CASE, THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS CLAIM TO THE EXTENT OF F14,910/- T HOUGH IT WAS CLAIMED AS INCOME FROM AGRICULTURE. HENCE, WE CONF IRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA N O.2039/MDS/2013 IS DISMISSED. SHRI. P. MURUGESAN, ITA NO.2040/MDS/2013 FOR ASSESS MENT YEAR 2002-2003(ASSESSEES APPEAL) 7. IN THIS APPEAL, THE FIRST GROUND RAISED BY THE ASSE SSEE IS WITH REGARD TO CONFIRMATION OF ADDITION OF F10,96,000/- MADE TOWARDS UNEXPLAINED CASH CREDIT. 7.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE, DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03, HAD S HOWN LOANS FROM THE FOLLOWING PERSONS ON THE LIABILITY SIDE OF THE GENERAL BALANCE SHEET FILED ALONGWITH THE RETURN OF INCOME. THEY ARE ALSO SHOWN ON THE RECEIPTS SIDE OF THE GENERAL RECEIPTS AND PAY MENTS ACCOUNT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 19 -: SI . NO. NAME OF ALLEGED CREDITOR AMOUNT (IN ' ) 1 . PLA 2,00,000 2. KRA 4,00,000 3. VASUDEVAN 70,000 4. NRI 2,53,000 TOTAL 9,23,000 IN ADDITION TO THE ABOVE LOANS, IN THE BUSINESS OF M/S.PR & SONS THE FOLLOWING LOANS ARE SHOWN ON THE LIABILITIES SI DE OF THE BALANCE SHEET: SI . NO. NAME OF ALLEGED CREDITOR AMOUNT (IN ' ) R.ELANGOVAN 5,00,000 VASUDEVAN 73,000 TOTAL 5,73,000 VIDE NOTICE U/S 142(1) DATED 30-10-2012, THE ASSESS EE WAS REQUESTED TO GIVE THE DETAILS OF ALL THE ABOVE LOANS ALONG WI TH LEDGER EXTRACTS OF THE ABOVE PERSONS APPEARING IN ASSESSEE'S BOOKS ALO NG WITH COMPLETE ADDRESS AND INCOME TAX ASSESSMENT DETAILS. FURTHER, VIDE NOTICE DATED 11-01-2013, THE ASSESSEE WAS REQUESTED TO FURNISH T HE CONFIRMATIONS FROM THE LOAN CREDITORS ALONG WITH DETAILS OF THE L OAN I.E., AMOUNT OF LOANS, CHEQUE NO., DATE, NAME OF THE BANK AND CONFI RMATION AS TO WHETHER ANY INTEREST ON THE LOAN AND THE REPAYMENT OF THE LOAN. THE ASSESSEE WAS ALSO REQUESTED TO FURNISH DETAILS OF I NTEREST PAID ON THE ABOVE LOANS FOR VARIOUS YEARS TILL DATE. THE ASSESS EE WAS ALSO REMINDED THAT ONUS TO PROVE THE SOURCE OF THE CREDI TS AND THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 20 -: GENUINITY OF THE TRANSACTION WAS WITH THE ASSESSEE. VIDE NOTICE U/S 142(1) DATED 22.2.2013, THE ASSESSEE WAS REQUESTED TO PRODUCE THE LOAN CREDITORS FOR VERIFICATION. THE ASSESSEE HAS O NLY FURNISHED THE ADDRESS OF THE LOAN CREDITORS. EVEN THE PAN NUMBER OF THE LOAN CREDITORS IS NOT FURNISHED BY THE ASSESSEE. THE ASS ESSEE HAS ALSO NOT FURNISHED THE MODE OF AVAILING THE LOAN, DATE OF LO AN AND CHEQUE NUMBER AND BANK DETAILS ETC. THE ASSESSEE HAS ALSO AVOIDED STATING WHETHER ANY INTEREST IS PAID ON THE LOANS AND WHETH ER, THESE LOANS ARE OUTSTANDING OR REPAID AS ON DATE. LETTERS WERE ADDRESSED TO THE LOAN CREDITORS AT THE ADDRESS GIVEN BY THE ASSESSEE . IN CASE OF SHRI K.R.ANNAMALAI WHO HAS BEEN CRYPTICALLY MENTIONED AS KRA. IN THE ASSESSEE'S BALANCE SHEET, THE CONFIRMATION HAS BEEN RECEIVED. THE LOAN IS FROM SMT.A.MANGALAM WHO IS THE WIFE OF K.R. ANNAMALAI. ALTHOUGH SHE HAS CONFIRMED THE LOAN OUTSTANDING OF F4,00,000/- AS ON 31.03.2002, SHE HAS ALSO ENCLOSED A COPY OF ANOTHER LOAN OF F7,00,000/ WHICH WAS OUTSTANDING FROM THE PREVIOUS YEAR BUT IS REPAID BY THE ASSESSEE WITH INTEREST ON 28.06.2001. THIS R EPAYMENT OF F 7,00,000 IS NOT REFLECTED IN THE RECEIPTS AND PAYME NTS ACCOUNT OF THE ASSESSEE. IN CASE OF PLA, I.E., PL.A.CHIDAMBARAM, T HE LOAN CREDITOR HAS CONFIRMED A LOAN OF F2,OO,OOO/ AVAILED ON 14-11 -2002 BY PONNAIAH RAMAJAYAM COLLEGE AND NO LOAN IS MENTIONED FOR THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 21 -: PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2002-03. SHRI VASUDEVAN IS THE BROTHER OF THE ASSESSEE. HE HAS STATED THAT HE HAS PAID F70,000/- IN CASH DURING 2001-02 AND HE HAD MONEY TRANSACTION S WITH PR & SONS FROM THE YEAR IT WAS ESTABLISHED. BUT, HE WAS NOT HAVING ANY DETAILS OF THE SAME. SINCE THE LOAN IS STATED TO BE GIVEN IN CASH AND NO INTEREST PAYMENT IS MADE FOR THE PAST 12 YEARS, THE TRANSACTION CANNOT BE CONSIDERED TO BE GENUINE. THUS, EXCEPT THE LOAN FROM K.R. ANNAMALAI OF F4,OO,OOO/, NONE OF THE ABOVE CREDITS CAN BE CONSIDERED TO BE SATISFACTORILY EXPLAINED BY THE AS SESSEE. THEREFORE, THE ABOVE SAID LOANS AMOUNTING TO F10,96,OOO/ IS TR EATED AS INCOME FROM UNDISCLOSED SOURCES AND BROUGHT TO TAX. AGGRIE VED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). 7.2 ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUB MITTED THAT T HE AO WENT WRONG IN MAKING THE ADDITION WITHOUT ACCEPTING THE C OPIES OF BANK ACCOUNT STATEMENTS OF THE ASSESSEE AND THE CREDITOR. AFTER MIGRATING TO CORE BANKING SOLUTIONS, NO BANKS ARE IN A POSITION TO FURNISH PARTICULARS TO THE ACCO UNTS PRIOR TO 2006. HENCE THE QUESTION OF THEIR CERTIFYIN G THE STATEMENTS IS RULED OUT. HENCE CALLING FOR CERTIFIED COPIES OF THE BANK ACCOUNT S AND FURTHER DETAILS FROM THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 22 -: ASSESSEE IN TOTAL VIOLATION OF THE PRINCIPLE OF NAT URAL JUSTICE. THE AO WENT WRONG IN MAKING THE ADDITION WITHOUT ACCEPTING THE COPIES OF BAN K ACCOUNT STATEMENTS OF THE ASSESSEE AND THE CREDITOR AS RELATING TO THE LOAN FROM SHRI DINESH KUMAR OF F2,53,OOO/-. THE AO WENT WRONG IN MAKING THE ADDITION WITHOUT ACCEPTING THE SUBMISSION OF SHRI VASUDEVAN, BROTHER OF THE ASSESSEE . THE AO WENT WRONG IN MAKING THE ADDITION WITHOUT ACCEPTING THE COPIES OF BAN K ACCOUNT STATEMENTS OF THE ASSESSEE AND THE CREDITOR AS RELATING TO THE LOAN FROM SHRI R.ELANGOVAN OF F5,00,000/- . THE ASSESSEE HAD FILED HIS REGULAR RETURN OF INCOME. ALL THESE LOANS ARE REFLECTED IN THE ORIGINAL RETURNS FILED. NO NEW E VIDENCE OR MATERIAL HAD BEEN FOUND EITHER DURING THE COURSE OF SEARCH OR SURVEY WHICH WOULD INDICATE EVEN PRIMA FACIE THAT THE LOAN IS NOT GENUINE, AND HENCE THE AO COULD NOT HAVE CONSIDERED THESE CREDITS IN THIS ASSESSMENT. HOWEV ER, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASS ESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. THE LOWER AUTHORITIES MADE AN ADDITION OF F 10,96,000/-- ON ACCOUNT OF UNEXPLAINED CASH CREDITS IN THE NAME OF VARIOUS IND IVIDUALS MENTIONED ABOVE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH LEDGER ACCOUNTS OF THE SAID LOAN C REDITORS AND WAS ALSO ASKED TO FURNISH CONFIRMATION LETTERS AS WELL AS DETAILS OF AMOUNT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 23 -: OF LOAN, CHEQUE NUMBER, DATE, AND MODE OF TRANSACTI ON ALONG WITH CHARGING OF INTEREST AND THE REPAYMENT OF LOAN, IF ANY. THE ASSESSEE HAS NOT FURNISHED ANY DETAILS, NO PAN NUMBER OF THE LOAN CREDITORS, DETAILS OF MODE OF RECEIPT OF LOAN AND RATE OF INTE REST. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ONLY ONE PERSON B Y NAME SHRI. K. R. ANNAMALAI RESPONDED BY FURNISHING A CONFIRMATION LETTER. THE AMOUNT OF LOAN OF F 4,00,000/- IS RECEIVED FROM SMT A. MANGALAM WIFE OF SHRI K.R. ANNAMALAI APART FROM F4,00,000/- AMOUN T PENDING AS ON 31/3/2002. SHE HAS ALSO MENTIONED ANOTHER LOAN AMOU NT OF F7,00,000/- WHICH WAS REPAID, BUT NOT REFLECTED IN THE RECEIPT AND PAYMENT ACCOUNTS OF THE ASSESSEE. IN THE CASE OF PLA I.E. P.L.A. CHIDAMBARAM, THE LOAN CREDITOR HAS CONFIRMED A LOAN OF F2,00,000/- AVAILED ON 14/11/2002 BY PONNAIAH RAMAJAYAM COLLEG E AND NO LOAN IS MENTIONED IN THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR UNDER CONSIDERATION. SHRI VASUDEVAN IS THE BROTHER OF THE ASSESSEE WHO HAS STATED THAT HE HAS PAID F70,000/- IN CASH DURING FINANCIAL YEAR 2001-02 AND HE HAD MONEY TRANSACTIONS WITH PR & SONS SINCE THE BEGINNING. SHRI VASUDEVAN HAS NOT FURNISHED ANY OTH ER DETAILS AND LOAN IS STATED TO HAVE BEEN GIVEN IN CASH AND NO IN TEREST HAS BEEN MADE TO THIS PERSON FOR THE LAST 12 YEARS. HENCE TH E LOWER AUTHORITIES HAS NOT CONSIDERED THIS TRANSACTION TO BE GENUINE, EXCEPT IN THE CASE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 24 -: OF K. R.ANAMALAI FOR HAVING CONFIRMED AN AMOUNT OF F 4,00,000/- FROM HIS WIFE'S ACCOUNT, NONE OF THE ABOVE CREDITOR S COULD EXPLAIN THE DETAILS OF LOAN TRANSACTION WITH ANY EVIDENCE. HENC E THE LOAN AMOUNTS AMOUNTING TO F10,96,000/- IS TREATED AS INCOME FROM UNDISCLOSED SOURCES OF THE ASSESSEE AND BROUGHT TO TAX. SINCE T HE ASSESSEE COULD NOT FILE ANY DETAILS WITH CONCRETE EVIDENCE THE GRO UNDS OF APPEAL FILED BY THE ASSESSEE ARE REJECTED CONFIRMING THE ADDITIO N MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ADDITION OF F7,66,000/- MADE TOWARDS UNEXPLAINED EX PENDITURE U/S.69C OF THE ACT. 8.1 THE FACTS OF THE ISSUE ARE THAT IN ORDER TO VE RIFY THE LOAN CREDITOR A LETTER WAS WRITTEN TO SHRI K.R. ANNAMALAI. THE LOAN IS FROM SMT. A.MANGALAM WH O IS THE WIFE OF SHRI. K.R. ANNAMALAI. ALTHOUGH SHE HAS CONFIRMED TH E LOAN OUTSTANDING OF F4,00,000 AS ON 31.03.2002, SHE HAS ALSO ENCLOSE D A COPY OF ANOTHER LOAN OF F7,00,000/ WHICH WAS OUTSTANDING FR OM THE PREVIOUS YEAR BUT WAS REPAID BY THE ASSESSEE WITH INTEREST O N 28.06.2001. THIS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 25 -: REPAYMENT OF F 7,00,000/- WAS NOT REFLECTED IN THE RECEIPTS AND PAYMENTS ACCOUNT OF THE ASSESSEE. IN FACT THE LOAN OUTSTANDING AS ON 31.03.2001 IS NOT SHOWN IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2001. FURTHER THE ASSESSEE HAS PAID INTEREST OF F66,000 ON THE TWO LOANS. THIS INTEREST PAYMENT WAS NOT SHOWN IN T HE ACCOUNTS OF THE ASSESSEE. THE COPY OF THE ACCOUNT EXTRACT RECEIVED FROM SRI. K.R. ANNAMALAI & MRS. A. MANGALAM WERE SENT TO THE ASSESSEE VIDE LET TER DT.22.02.2003 AND ASSESSEE WAS REQUESTED TO EXPLAIN , WHERE EACH OF THE LOANS IS REFLECTED IN HIS ACCOUNTS. THE LD. AUT HORISED REPRESENTATIVE FOR ASSESSEE VIDE LETTER FILED ON 06 .03.2013 MERELY STATED THAT OUTSTANDING BALANCES FOR A.Y. 2001-02, 2002-03 AND 2003- 04 ARE CONFIRMED BY K.R. ANNAMALAI. SINCE THE ASSES SEE HAS NOT OFFERED ANY EXPLANATION REGARDING THE PAYMENT MADE BY THE ASSESSEE TO MRS. A. MANGALAM OF RS.7,OO,000/- ON 28.06.2001 AND THE INTEREST PAID OF F66,000/-, THE REPAYMENT OF LOAN ALONG WITH INTEREST AMOUNTING TO RS.7,66,OOO/- IS CONSIDERED TO BE UNEX PLAINED EXPENDITURE AND BROUGHT TO TAX U/S.69C BY ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOM E TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAIN ST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 26 -: 8.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS NOT SHOWN T HE REPAYMENT OF F 7,00,000/- TO THE WIFE OF SHRI. K. R. ANNAMALAI WHO HAS CONFIR MED THAT AN AMOUNT OF ANOTHER F 7,00,000/- GIVEN TO THE ASSESSEE WHICH HAS BEEN REPAID BY THE ASSESSEE WITH INTEREST ON 28/06/2001. THIS TRANSACTION HAS NO WHERE BEEN REFLECTED ANYWHERE IN THE RECEIPTS AND PAYMENTS ACCOUNT OF THE ASSESSEE. THE TRANSACTION I TSELF HAS NOT BEEN SHOWN AS OUTSTANDING AS ON 31/03/2001 IN THE BALANCE SHEET OF THE ASSESSEE. SIMILARLY THE ASSESSEE HAS PAID INTEREST OF F 66,000/- ON THE ABOVE TWO LOAN AMOUNTS TO SHRI. K. R. ANNAMALAI FAM ILY. THE INTEREST AMOUNT WAS ALSO NOT REFLECTED IN THE ACCOUNTS OF TH E ASSESSEE. WHEN THE ACCOUNT COPY OF SHRI K. R. ANNAMALAI AND SMT A. MANGALAM WERE SENT TO THE ASSESSEE FOR CROSS VERIFICATION, THE A SSESSEE COULD NOT OFFER ANY EXPLANATION REGARDING PAYMENT MADE TO MR S. A. MANGALAM OF F7,00,000/- ON 28.06.2001 AND INTEREST PAID OF F 66,000/-. IN VIEW OF THIS, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). HENCE, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 27 -: 9. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ADDITION OF F3,49,952/- MADE TOWARDS BUSINESS INCOME OF THE ASS ESSEE. 9.1 THE FACTS OF THE ISSUE ARE THAT IN THE CASE OF PR & SONS ALTHOUGH THE BOOKS OF ACCOUNTS WERE PRODUCED, NO SUPPORTING VOUC HERS I.E. THE PURCHASE INVOICES, SALES BILLS, EXPENDITURE VOUCHERS WERE PR ODUCED FOR VERIFICATION. SINCE NONE OF THE EXPNENES COULD BE VERIFIED, EXPEN DITURE OF F3,49,952/- WAS DISALLOWED AND THE INCOME FROM PR & SONS DIVISION W AS CONSIDERED AS NIL AS AGAINST LOS OF F3,49,952/- CLAIMED BY THE ASSESSEE. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BE FORE US. 9.2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS NOT PRODUCED ANY VOUCHERS, PURCHASES, INVOICES, SALE BILLS FOR THE EXPENDITURE MADE FOR VERIFICATIO N. IN THE ABSENCES OF ANY EVIDENCE PRODUCED IN SUPPORT OF THE CLAIM OF THE AS SESSEE, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 28 -: 10. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ADDITION OF F38,850/- MADE TOWARDS AGRICULTURAL INCOME OF THE ASSESSEE. 10.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED F1,05,000/- AS INCOME FROM AGRICULTURAL LANDS. IN SUPPORT OF THE CLAIM, THE LD. AUTHORISED REPRESENTATIVE STATED THAT THE ASSESSEE HAS TAKEN AGRICULTURE LANDS BELONGING TO HIS BROTHER SHRI. V ASUDEVAN ON ORAL LEASE. IT WAS STATED THAT CULTIVATION OF GRAMS WER E UNDERTAKEN DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE COULD NOT GIVE DETAILS OF QUANTITY OF THE PRODUCE OBTAINED, NAME OF THE PERSO NS TO WHOM IT WAS SOLD AND BILLS AND VOUCHERS FOR THE SALE OF AGR ICULTURAL PRODUCE WHICH WERE CALLED FOR VIDE NOTICE U/S.142(1) DATED 31.10.2012. UNDER SIMILAR CIRCUMSTANCES FOR THE ASSESSMENT YEAR 2002- 03, THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE ORDER DAT ED 01.09.2009 IN IT NO.128/06-07 HAS DIRECTED TO TREAT F3,66,000/- O UT OF THE AGRICULTURAL INCOME DECLARED OF F9,75,000/- AS INCO ME FROM OTHER SOURCES. THE DISALLOWANCE WORKS OUT TO 37%. THERE FORE, 37% OF THE INCOME RETURNED AS AGRICULTURAL INCOME I.E F38,850/ - WAS CONSIDERED AS INCOME FROM OTHER SOURCES. AGGRIEVED, THE A SSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 29 -: MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE AS SESSEE IS IN APPEAL BEFORE US. 10.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS DISCUSSED IN THIS ORDER IN PARA 6.6 IN ASSESSMENT YEAR 2001-2002, THIS GROUND OF THE APPEA L OF THE ASSESSEE IS DISMISSED. 11. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ADDITION OF F10,85,000/- MADE TOWARDS CAPITAL ACCOUNT OF P.R & SONS AS UNEXPLAINED CASH CREDIT. 11.1 DURING SCRUTINY OF THE ACCOUNTS OF P.R& SONS DIVISI ON OF THE ASSESSES, IT WAS FOUND THAT THE CAPITAL ACCOUNT IN P.R & SONS AS PER THE BOOKS WAS F39,88,236/-. BUT, AS PER THE BALANCE SHEET IN THE RECTUM, BALANCE IN CAPITAL ACCOUNT IS F 15,00,000 /-. THE CURRENT ACCOUNT AS PER BOOKS OF ACCOUNTS IS A DEBIT BALANCE OF F13,98,221/-. BUT AS PER THE RETURN THERE IS A CREDIT BALANCE THE A.R. VIDE LETTER DT. 11.02.2013 HAS RECONCILED THE DIFFERENCE AS UNDER:- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 30 -: DR. CR. CAPITAL A/C. AS PER PR & SONS BOOKS. 39,88,236/ - CURRENT A/C. AS PER PR & SONS BOOKS 13,98,221 NET CAPITAL BALANCE AS PER BOOKS 25,90,015 LESS A MOUNT TRANSFERRED FROM PURCHASE A/C 15,85,000 CAPITAL BALANCE AS PER BALANCE SHEET 15,05,015 THE A.R. HAS EXPLAINED THAT THE PURCHASES WHICH WER E F1,27,78,485/- AS PER THE BOOKS IT WAS REDUCED TO THE EXTENT OF F15,85,000/- TO F1,16,93,485/-. THE CAPITAL A/C IS ALSO REDUCED TO THE SAME EXTENT. NO REASONS ARE GIVEN FOR EFFECTING THE ABOVE MENTIO NED CHANGES IN THE FINAL ACCOUNTS WITHOUT PASSING IT THROUGH THE BOOKS OF ACCOUNT. SINCE NO BOOKS ARE PRODUCED FOR THE GENERAL A/C. I.E. TRANSACTIONS OTHER THAN THE PR & SONS, THE SOURCES FOR CREDITS TO CAPITAL A/C IN PR & SONS CANNOT BE VERIFIED. FOR THE PURCHASES ALSO NO VOUCH ERS ARE PRODUCED AND THUS CANNOT BE VERIFIED. THEREFORE, THE DIFFERE NCE IN CAPITAL A/C AS PER BOOKS OF PR & SONS AND THAT SHOWN IN BALANCE SH EET AMOUNTING TO F10,85,000 IS CONSIDERED AS UNEXPLAINED CASH CREDIT IN THE BOOKS OF PR & SONS. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSE E IS IN APPEAL BEFORE US. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 31 -: 11.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL. THE ASSESSING OFFICER HAS MADE AN ADDITION OF 10,85,000/- AS UNEXPLAINED CASH CREDIT IN THE BOOKS OF THE ASSESSEE ON THE GROUND THAT CAPITAL ACCOUNT IN THE PR & SONS AS PER THE BOOK A BALANCE AMOUNT IS SHOWN 39,88,236/- BUT WHEREAS AS PER THE BALANCE SHEET FILED WITH THE RET URN OF INCOME BALANCE FOUND IN CAPITAL ACCOUNT IS ONLY 15,00,000/--. THE CURRENT ACCOUNT AS PER BOOKS OF ACCOUNTS IS A DEBIT BALANCE OF 13,98,221/- WHERE AS AS PER THE RETURN THERE IS A CREDIT BALANCE. WHEN THE AUTHORISED REPRESENTATIV E OF THE ASSESSEE WAS ASKED TO RECONCILE THE DIFFERENCE, HE COULD NOT FIL E ANY DETAILS TO THE EXTENT OF 1 5,85,000/-- SHOW AS AMOUNT TRANSFERRED FROM PURCHASE ACCOUNT. N O BOOKS OF ACCOUNTS WERE PRODUCED FOR THE GENERAL ACCOUNT I.E. , TRANSACTIONS OTHER THAN PR & SONS HENCE THE SOURCES FOR CREDITS TO CAPITAL ACCOU NT IN PR & SONS CANNOT BE VERIFIABLE. SINCE THE ASSESSEE HAS NOT P RODUCED PURCHASE BILLS THE ABOVE TRANSACTIONS CANNOT BE VERIFIABLE. THEREFORE, THE LOWER AUTHORITIES HAS TAKEN A CORRECT DECISION IN CONSIDERING THE DIFFERE NTIAL AMOUNT OF 10,85,000/-- BETWEEN THE CAPITAL ACCOUNT AS PER BOOKS OF PR & SONS AND THAT OF AMOUNT MENTIONED IN BALANCE SHEET TREATING THE SAME AS UNE XPLAINED CASH CREDIT IN THE BOOKS OF PR & SONS. THIS GROUND OF THE APPEAL OF TH E ASSESSEE IS REJECTED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA N O.2040/MDS/2013 IS DISMISSED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 32 -: SHRI. P. MURUGESAN :-ITA NO.2041/MDS/2013, ASSESSMENT YEAR 2003-2004 (ASSESSEES APPEAL) 13. IN THIS APPEAL, THE FIRST GROUND RAISED BY THE AS SESSEE IS WITH REGARD TO ADDITION OF F3,66,000/- MADE TOWARDS AGRICULTURA L INCOME OF THE ASSESSEE. 13.1 THE FACTS OF THE CASE ARE THAT THE ASSESSE E HAD CLAIMED F9,75,000/- AS INCOME FROM AGRICULTURAL LAND. THE ASSESSING O FFICER IN THE ASSESSMENT MADE U/S.143(3) DATED 20.03.2006 HAD TREATED F7,32, 000/- OUT OF THE ABOVE AS INCOME FROM OTHER SOURCES. THE COMMISSIONER OF I NCOME TAX (APPEALS) VIDE ORDER DATED 01.09.2009 IN IT NO.128/06-07, HAS DIRECTED TO TREAT F3,66,000/- AS INCOME FROM OTHER SOURCES. ACCORDIN GLY, F6,09,000/- IS ASSESSED AS INCOME FROM AGRICULTURE AND REST OF F3, 66,000/- IS ASSESSED FROM INCOME FROM OTHER SOURCES. AGAINST THIS, T HE ASSESSEE IS IN APPEAL BEFORE US. 13.2 W E HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATER IAL ON RECORD. AS DISCUSSED IN THIS ORDER IN PARA 6.6 I N ASSESSMENT YEAR 2001-2002, THIS GROUND OF THE APPEAL OF THE ASSESSE E IS DISMISSED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 33 -: 14. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH R EGARD TO ADDITION OF F35,420/- MADE U/S.40A(3) OF THE ACT. 14.1 THE FACTS OF THE ISSUE ARE THAT DURING SC RUTINY THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAD MADE EXPENDITURE OF F1,77,000/- IN PR & SONS IN CASH ABOVE F20,000/- ON EACH OCCASION. HEN CE, THE ASSESSING OFFICER MADE AN ADDITION OF F35,420/- U/S.40A(3) OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSE E IS IN APPEAL BEFORE US. 14.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. SINCE THE CASH PAYMENTS ABOVE F20,000/- ATT RACTS THE PROVISIONS OF SECTION 40A(3), THE SAME IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 15. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH RE GARD TO ADDITION OF F1,00,000/- MADE TOWARDS DRAWINGS. 15.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER HAD MADE AN ADDITION OF F2,00,000/-TOWARDS LOW DRAWINGS ON ACCO UNT OF PERSONAL EXPENSES TAKING INTO CONSIDERATION, THE AFFLUENT NATURE OF L IVING STYLE OF THE ASSESSEE. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 34 -: AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, T HE ASSESSEE IS IN APPEAL BEFORE US. 15.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LOWER AUTHORITIES HAD MADE AN ADDITION OF F2,00,000/- ON ACCOUNT OF LOW DRAWINGS AND ALSO KEEPING IN VIEW OF THE LIF ESTYLE OF THE ASSESSEE. KEEPING IN VIEW OF THE LOW DRAWINGS THIS GROUNDS OF APPEAL OF THE ASSESSEE IS REJECTED. 16. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO ADDITION OF F51,27,000/- AS UNEXPLAINED CASH CREDITS. 16.1 THE FACTS OF THE CASE ARE THAT DURING THE PRE VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04, THE ASSESSEE HAD SH OWN LOANS FROM THE FOLLOWING PERSONS ON THE LIABILITY SIDE OF THE GENERAL BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME. THEY ARE AL SO SHOWN ON THE RECEIPTS SIDE OF THE GENERAL RECEIPTS AND PAYMENT S A/C. SL.NO NAME OF ALLEGED CREDITOR AMOUNT 1 R. ELANGOVAN 5,00,000/ - 2 GG 8,00,000/ - 3 STEPHEN 4,00,000/ - 4 DINESH KUMAR 14,17,000/ - I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 35 -: 5 SOUNDARAVALLI & LAKSHMI 10,50,000/ - 6 VASUDEVAN 1,25,000/ - 7 KRA 5,00,000/ - 8 Y. MOHAMED 1,00,000/ - 9 VIJAYAKUMAR 1,00,000/ - 10 DHARMARAJ 50,000/ - 11 JAYAVEL RAJ 5,00,000/ - 12 K. SUBRAMANIAN 85,000/ - TOTAL 56,27,000/ - VIDE NOTICE U/S 142(1) DATED 30-01-2012, THE ASSESS EE WAS REQUESTED BY ASSESSING OFFICER TO GIVE THE DETAILS OF ALL THE ABOVE LOANS ALONG WITH LEDGER EXTRACTS OF THE ABOVE PERSONS APPEARING IN ASSESSEE'S BOOKS ALONG WITH COMPLETE ADDRESS AND INCOME-TAX AS SESSMENT DETAILS, FURTHER, VIDE NOTICE DATED 11-01-2013, THE ASSESSEE WAS REQUESTED TO FURNISH THE CONFIRMATIONS FROM THE LOA N CREDITORS ALONG WITH DETAILS OF THE LOAN I.E., AMOUNT OF LOANS, CHE QUE NO., DATE, NAME OF THE BANK AND CONFIRMATION AS TO WHETHER ANY INTE REST ON THE LOAN AND THE REPAYMENT OF THE LOAN. THE ASSESSEE WAS ALS O FURNISHED DETAILS OF INTEREST PAID ON THE ABOVE LOANS FOR VAR IOUS YEARS TILL DATE; THE ASSESSEE WAS ALSO REMINDED THAT ONUS TO PROVE T HE SOURCE OF THE CREDITS AND THE GENUINENESS OF THE TRANSACTION WIT H THE ASSESSEE. VIDE NOTICE U/S 142(1) DATED 22.2.2013, THE ASSESSEE WAS REQUESTED TO PRODUCE THE LOAN CRED ITORS FOR VERIFICATION. THE ASSESSEE HAS ONLY FURNISHED THE ADDRESS OF THE LOAN CREDITORS. EVEN THE PAN NUMBER OF THE LOAN CREDITOR S IS NOT FURNISHED I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 36 -: BY THE ASSESSEE. THE ASSESSEE HAS ALSO NOT FURNISHE D THE MODE OF AVAILING THE LOAN, DATE OF LOAN AND CHEQUE NUMBER A ND BANK DETAILS ETC. THE ASSESSEE HAS ALSO AVOIDED STATING WHETHER ANY INTEREST IS PAID ON THE LOANS AND WHETHER THESE LOANS ARE OUTSTANDIN G OR REPAID AS ON DATE. LETTERS WERE ADDRESSED TO THE LOAN CREDITORS AT THE ADDRESS GIVEN BY THE ASSESSEE. IN CASE OF SHRI K.R.ANNAMALAI WHO HAS BEEN CRYPTICALLY MENTIONED AS K.R.A. IN THE ASSESSEE'S B ALANCE SHEET, THE CONFIRMATION HAS BEEN RECEIVED. SHRI VASUDEVAN IS T HE BROTHER OF THE ASSESSEE. HE HAS STATED THAT HE HAS PAID F1,25,OOO/ - IN CASH DURING A.Y.2003-04 AND HE HAD MONEY TRANSACTIONS WITH PR & SONS FROM THE YEAR IT WAS ESTABLISHED. BUT, HE WAS NOT HAVING ANY DETAILS OF THE SAME. IN CASE OF SHRI JEYAVALRAJ, HE HAS STATED THA T HE HAS GIVEN AN AMOUNT OF F.5,00,000/-- IN CASH DURING THE MONTH OF FEBRUARY 2003. HE IS NOT ASSESSED TO INCOME-TAX. THE AMOUNT IS NOT YET RECEIVED AS ON DATE AND DOES NOT BEAR ANY INTEREST. SHRI K. DHA RMARAJ HAS STATED THAT HE HAS GIVEN AN INTEREST FREE LOAN OF F50,000/ -- IN CASH IN MARCH'2003 AND THE AMOUNT IS NOT RECEIVED BACK AS O N 4.02.2013. SINCE THE LOAN IS STATED TO BE GIVEN IN CASH AND NO INTEREST PAYMENT IS MADE, THE TRANSACTION CANNOT BE CONSIDERED TO BE GE NUINE. IN CASE OF SHRI G.GOVINDARAJU, HE HAS STATED THAT HE HAS GIVEN A LOAN OF F8,00,000/- IN CASH IN SEPTEMBER 2002 AND RECEIVED BACK THE AMOUNT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 37 -: IN JUNE 2003 IN CASH FOR THE HIGHER EDUCATION OF HI S CHILDREN. THE ASSESSEE HAS AVAILED LOAN FROM SHRI. G. GOVINDARAJU , IN OTHER YEARS ALSO AS UNDER:- SL.NO A.Y AMOUNT LOAN TAKEN AMOUNT REPAID BALANCE OUTSTANDING 1 2003-04 8,00,000 0 8,00,000 2 2004-05 17,50,000 8,00,000 9,50,000 3 2006-07 15,00,000 0 32,50,000 IN THE RECEIPTS AND PAYMENTS A/C FILED WITH THE RET URNS NO INTEREST PAYMENT ON THIS LOAN IS SHOWN. NO SAME PERSON WOULD LENT SUCH HUGE AMOUNT OF MONEY WITHOUT ANY INTEREST. THE ASSESSEE HAS NOT ESTABLISHED THE CREDITWORTHINESS OF THE LOAN CREDIT OR. THEREFORE, THE TRANSACTIONS CANNOT BE CONSIDERED TO BE GENUINE. TH US, EXCEPT FOR LOAN FROM K.R.ANNAMALAI OF F5,OO,OOO/-, NONE OF THE ABOV E CREDITS CAN BE CONSIDERED TO BE SATISFACTORILY EXPLAINED BY THE AS SESSEE. THEREFORE, THE ABOVE SAID LOANS AMOUNTING TO F51,27,OOO/- IS ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CREDITS IN THE BOOKS U/S 68 OF THE ACT BY ASSESSING OFFICER. AGGRI EVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 38 -: ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE A SSESSEE IS IN APPEAL BEFORE US. 16.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAD MADE AN ADDITION TO F56,2 7,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS WHICH THE A SSESSEE COULD NOT PROVE WITH SUBSTANTIAL EVIDENCE DURING THE COURSE O F ASSESSMENT PROCEEDINGS. HOWEVER THE ASSESSEE COULD NOT FURNI SH ANY DETAILS SUCH AS CONFIRMATION LETTERS FROM THE LOAN CREDITOR S, ALONG WITH THE DETAILS OF AMOUNT OF LOAN, CHEQUE NUMBER, DATE, NAM E OF THE BANK, PAN NUMBERS OF THE LOAN CREDITORS APART FROM THE AB OVE THE ASSESSEE COULD NOT FURNISH THE MODE OF AVAILING LOAN AS WELL AS CREDIT WORTHINESS CAPACITY TO LEND AND GENUINENESS OF THE TRANSACTION . ONLY IN THE CASE OF K. R. ANNAMALAI CONFIRMATION LETTER HAS BEEN RE CEIVED WHERE AS IN THE CASE OF SHRI. VASUDEVAN, SHRI. JAYAVELRAJ AND S HRI. DHARMARAJ AS WELL AS SHRI G. GOVINDARAJU COULD NOT PRODUCE ANY D ETAILS OF MUCH EVIDENCE VALUE AND HENCE THE ASSESSING OFFICER HAS ADDED AN AMOUNT OF F1,27,000/- AFTER ACCEPTING AN AMOUNT OF F5,00,000/- AS LOAN RECEIVED FROM K. R. ANNAMALAI. IN THE ABSENCE OF ANY EVIDENCE FILED BEFORE THE LOWER AUTHORITIES FOR THE BALANCE OF F51,27,000/- THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 39 -: LOAN AMOUNTS STATED TO HAVE BEEN TAKEN FROM THE ABO VE INDIVIDUAL IS TREATED AS UNEXPLAINED CASH CREDITS IN THE BOOKS OF THE ASSESSEE U/S.68 OF THE ACT. HENCE, THIS GROUND OF THE APPEAL OF T HE ASSESSEE IS REJECTED. 17. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO ADDITION OF F10,50,000/- MADE ON ACCOUNT SALE OF FLAT AT SHONOY NAGAR, CHENNAI. 17.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE SOLD FLAT BEARING NO.5, II FLOOR SITUATED AT PLOT NO.191/I, TYPE NEW NO.6, II MAIN ROAD, SHENOI NAGAR, CHENNAI MEASURING 970 SQFT WITH 588.6 SQFT UNDIVIDED SHARE OF LAND FOR F10,50,OOO/-. THIS PROPERTY WAS S OLD VIDE DOCUMENT NO.3305/2002 ON 21.9.2002. THE ASSESSEE VIDE LETTER DATED 11-2-2013 CLAIMED THAT THE ASSESSEE WAS ONLY A POWER AGENT OF MS. K.A. SOUNDARAVALLI AND MS K.A.LAKSHMI AND THE ASSESSEE W AS NOT THE OWNER OF THE FLAT. HOWEVER, THE SALE DEED OF THE ABOVE PROPERTY, IT IS CLEARLY MENTIONED THAT THIS PROPER TY WAS EARLIER PURCHASED BY K.A.SOUNDARAVALLI, P.MURUGESAN AND K. A.LAKSHMI UNDER A SALE DEED DATED 12-05-1999 REGISTERED AS DOCUMENT NO.1627 OF 1999 IN SUB REGISTERED OFFICE, ANNA NAGAR. IT IS AL SO MENTIONED THAT THE THREE TOGETHER CONSTRUCTED A FLAT ON THE UNDIVI DED SHARE OF THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 40 -: LAND THROUGH THE BUILDER SRIJEES CONSTRUCTIONS AND SINCE THEN THE THREE PERSONS ARE SAID TO BE IN JOINT POSITION AND ENJOYM ENT OF THE SAID PROPERTY. THEREFORE, THE ASSESSEE'S CONTENTION THAT HE IS NOT THE OWNER OF THE PROPERTY CANNOT BE ACCEPTED THEREFORE, THE V ALUE OF THE FLAT SOLD OF F10,50,000/- IS BROUGHT TO TAX AS SHORT TER M CAPITAL GAINS AS THE DATE OF CONSTRUCTION THE LAND COST INVOLVED ARE NOT VERIFIABLE FROM THE RECORDS AND THE ASSESSEE HAS NOT PROVIDED ANY D ETAILS OF THE SAME. INCIDENTALLY THE ASSESSEE HAS SHOWN MS K.A.SOUNDARA VALLI AND MS K.A.LAKSHMI AS LOAN CREDITORS TO THE TUNE OF F10,50 ,000/- BEING THE SALE VALUE OF THE ABOVE FLAT. AGGRIEVED, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS I N APPEAL BEFORE US. 17.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE MATERIAL. THE ASSESSING OFFICER HAS MADE AN ADDITION OF' 10,50,000/- BEING THE SHORT TERM CAPITAL GAIN AND THE SAME HAS BEEN BROUGHT TO TAX ON ACCOUNT OF SALE VALUE OF THE ABOVE SAID FLAT. THE LOWER AUTHORITIES HAS ELA BORATELY DISCUSSED THIS ISSUE IN THEIR ORDER AND THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE IS HAVING ONLY 1/3 RD SHARE IN THE SALE TRANSACTION IS DEVOID OF ANY TRUT H BECAUSE THE ASSESSEE HAS SHOWN THE OTHER TWO PARTIES SUCH AS MRS. K. A. SOUNDARAVALLI I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 41 -: AND MS K.A.LAKSHMI AS LOAN CREDITORS TO THE TUNE OF 10,50,000/-. THE VERSION OF THE ASSESSEE CANNOT BE BELIEVED. HENC E THE LOWER AUTHORITIES ARE JUSTIFIED IN CALCULATING THE SHORT TERM CAPITAL GAI N AND TAXING THE AMOUNT OF' 10,50,000/- IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSE SSEE IS REJECTED. 18. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO ADDITION OF INCOME OF F7,30,418/- FROM PR & SONS. 18.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESS EE HAS NOT PRODUCED ANY SALE BILLS, PURCHASE & INVOICES OR VOUCHERS FOR BUSINESSES. SIN CE NONE OF THE EXPENSES COULD BE VERIFIED, THE BOOKS R ESULTS OF THIS CONCERN ARE REJECTED. THE NET SALES OF THE CONCERN I S 76,09,354/. THE INCOME IS ESTIMATED AT 5% I.E., AS AGAINST LOSS DECLARED OF 3,49,951/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 18.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL. THE LOWER AUTHORITIES HAVE MADE AN ESTIMATED ADDITION AT 5% ON THE SALES TURNOVER OF THE ASSESSEE CONCERN SHOWN AT F 76,09,354/- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 42 -: AGAINST THE LOSS DECLARED AT F3,49,951/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS NOT PRODUCE D ANY SALE BILLS, PURCHASE INVOICES / VOUCHERS FOR THE BUSINESS. SINC E NO EXPENSES COULD BE VERIFIABLE THE BOOK RESULTS OF THE CONCERN WERE REJECTED AND THE LOWER AUTHORITIES HAS ESTIMATED AN INCOME AT 5% ON THE TURNOVER REPORTED. WE DO NOT FIND ANY INFIRMITY IN THE ORDE RS OF THE LOWER AUTHORITIES. THIS GROUND OF THE APPEAL OF THE ASSE SSEE IS REJECTED. 19. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO ADDITION OF F13,00,558/- AS UNEXPLAINED CAPITAL IN PR & SONS. 19.1 THE FACTS OF THE ISSUE ARE THAT D URING SCRUTINY OF THE ACCOUNTS OF P.R& SONS DIVISION OF THE ASSESSEE, IT WAS FOUND TH AT THE CURRENT ACCOUNT OF THE ASSESSEE AS PER THE BOOKS IS F 14,82,719/-. BUT, AS PER THE RETURN, THE CURRENT ACCOUNT IS F 1,82,161/-. TH E AR WAS ASKED TO EXPLAIN WHY THE DIFFERENCE SHOULD NOT BE BROUGHT TO TAX. THE ASSESSEE VIDE LETTER DATED 11-02-2013 EXPLAINED THAT THE BAL ANCE OF F14,82,719/- IS AS PER THE PRE AUDITED BOOK WHICH M AY BE IGNORED. NO FURTHER EXPLANATION AS TO WHY THE ENTRI ES TAKEN AS CREDITS INTO THE CURRENT ACCOUNT OF THE ASSESSEE WERE LATER REVERSED IN THE AUDITED ACCOUNTS WAS FILED EVEN AFTER GIVING FURTHE R OPPORTUNITIES I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 43 -: THEREFORE, THE DIFFERENCE IN CURRENT ACCOUNT OF THE ASSESSEE TO THE EXTENT OF F13,00,558/- IS TREATED AS UNEXPLAINED CA SH CREDITS U/S 68 AND BROUGHT TO TAX. AGGRIEVED, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). TH E COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 19.2 WE HAVE BOTH THE PARTIES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE LOWER AUTHORITIES HAS MADE AN ADD ITION OF F13,00,558/- AS UNEXPLAINED CASH CREDIT U/S 68 ON N OTICING CURRENT ACCOUNT BALANCE OF THE ASSESSEE AS PER THE BOOKS SH OWN AT F14,82,719/- WHEREAS AS PER THE RETURN OF INCOME FI LED BY THE ASSESSEE THE CURRENT ACCOUNT BALANCE IS SHOWN AT ON LY F1,82,161/- WHEN THE ASSESSEE WAS ASKED TO RECONCILE THE DIFFER ENCE THE ASSESSEE STATED THAT THE DIFFERENCE IS DUE TO PRE AUDIT BOOK BALANCE WHICH WAS WRONGLY MENTIONED AS F14,82,719/-. NO FURTHER EXPLA NATION WAS FILED BY THE ASSESSEE FOR THE ENTRIES REFLECTED IN THE CU RRENT ACCOUNT AND LATER REVERSED IN THE AUDITED ACCOUNTS HENCE WE DO NOT ANY FIND ANY INFIRMITY IN THE DECISION TAKEN BY THE LOWER AUTHORITIES IN TAX ING THE BALANCE AMOUNT OF F13,00,558/- AS UNEXPLAINED CASH CREDIT U/S. 68 I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 44 -: AND BROUGHT TO TAX. ACCORDINGLY, THE GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. THE APPEAL OF THE ASSESSEE IN ITA NO.2041/MDS/2013 FOR THE ASSESSMENT YEAR 2003-2004 IS DISMISSED. SHRI. P. MURUGESAN, ITA NO.2042/MDS/2013, ASSESSMEN T YEAR 2004- 2005 (ASSESSEES APPEAL) 20. THE FIRST GROUND RAISED BY THE ASSESSEE IN THIS APP EAL IS WITH REGARD TO UNEXPLAINED CASH CREDITS TO THE TUNE OF F 22,34,000/-. 20.1 THE FACTS OF THE ISSUE ARE THAT DURING THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05, THE ASSESS EE HAD SHOWN LOANS FROM THE FOLLOWING PERSON ON THE LIABILITY SI DE OF THE GENERAL BALANCE SHEET FILED ALONGWITH THE RETURN OF INCO ME. THEY ARE ALSO SHOWN ON THE RECEIPTS SIDE OF THE GENERAL RECEIPT S AND PAYMENTS A/C. SL.NO NAME OF ALLEGED CREDITOR AMOUNT IN (F) 1 GG 17,50,000/- 2 STEPHEN 3,50,000/- 3 DINESHKUMAR 1,34,000/- 4 KRA 6,00,000/- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 45 -: TOTAL 28,34,000/- VIDE NOTICE U/S.142(1) DATED 30.01.2012, THE ASSESS EE WAS REQUESTED TO GIVE THE DETAILS OF THE ABOVE LOANS WITH LEDGER EXTRACTS OF THE ABOVE PERSONS APPEARING IN ASSESSEE'S BOOKS ALONG WITH COMPLETE ADDRESS AND INCOME-TAX ASSESSMENT DETAILS. FURTHER, VIDE NOTICE DATED 11-01-2013, THE ASSESSEE WAS REQUESTED TO FUR NISH THE CONFIRMATIONS FROM THE LOAN CREDITORS ALONG WITH DETAILS OF THE L OAN I.E., AMOUNT OF LOANS, CHEQUE NO., DATE, NAME OF THE BANK AND CONFIRMATION AS TO WHETHER ANY INTEREST ON THE LOAN AND THE REPAYMENT OF THE LOAN. THE ASSESSEE WAS ALSO FURNISHED DETAILS OF INTEREST PAID ON THE ABOVE LOA NS FOR VARIOUS YEARS TILL DATE. THE ASSESSES WAS ALSO REMINDED THAT ONUS TO PR OVE THE SOURCE OF THE CREDITS AND THE GENUINENESS OF THE TRANSACTION WITH THE ASSESSEE, VIDE NOTICE U/S 142(1) DATED 22.2.2013, THE ASSESSEE WA S REQUESTED TO PRODUCE THE LOAN CREDITORS FOR VERIFICATION. THE ASSESSEE HA S ONLY FURNISHED ADDRESS OF THE LOAN CREDITORS. EVEN THE PAN NUMBER OF THE LO AN CREDITORS IS NOT FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS ALSO NOT FURNISHED THE MODE OF AVAILING THE LOAN, DATE OF LOAN AND CHEQUE NUMBER A ND BANK DETAILS ETC. THE ASSESSEE HAS ALSO AVOIDED STATING WHETHER ANY IN TEREST IS PAID ON THE LOANS AND WHETHER THESE LOANS ARE OUTSTANDING OR R EPAID AS ON DATE. LETTERS WERE ADDRESSED TO THE LOAN CREDITORS AT THE ADDRESS GIVEN BY THE ASSESSEE. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 46 -: ONLY IN CASE OF SHRI K.R.ANNAMALAI WHO HAS BEEN CRI TICALLY MENTIONED AS K.R.A. IN THE ASSESSEE'S BALANCE SHEET, THE CONFIR MATION HAS BEEN RECEIVED. IN CASE OF SHRI G.GOVINDARAJU, HE HAS ST ATED THAT HE HAS GIVEN A LOAN OF .8,00,000/- IN CASH IN SEPTEMBER 2002 AND RECEIVED BACK THE AMOUNT IN JUNE 2003 IN CASH FOR THE HIGHER EDUCATIO N OF HIS CHILDREN. HOWEVER, THE ASSESSEE HAS SHOWN THAT HE HAS RECEIVED FRESH LOAN OF 17,50,000/- THE ASSESSEE HAS AVAILED LOAN FROM SHR I. G. GOVINDARAJU, IN OTHER YEARS ALSO AS UNDER:- SL.NO A.Y AMOUNT LOAN TAKEN AMOUNT REPAID BALANCE OUTSTANDING 1 2003-04 8,00,000 0 8,00,000 2 2004-05 17,50,000 8,00,000 17,50,000 3 2006-07 15,00,000 0 32,50,000 IN HIS LETTER SHRI GOVINDARAJ HAS STATED THAT HE IS A RETIRED PROFESSOR FROM ARTS COLLEGE, THANJAVUR. IT IS HARD TO BELIEVE THAT A RETIRED PENSIONER HAS GIVEN A LOAN OF F32,50,000/- WITHOUT ANY SECURITY AND WITHOUT EXPECTING ANY INTEREST. THUS, 'EXCEPT FOR LOAN FROM K.R.ANNAMALAI OF F6,00,000/-, NONE OF THE ABOVE CRE DITS CAN BE CONSIDERED TO BE SATISFACTORILY EXPLAINED BY THE AS SESSEE. THEREFORE, THE ABOVE SAID LOANS AMOUNTING TO F22,34,000/- IS A DDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CREDITS IN TH E BOOKS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 47 -: U/S 68 OF THE INCOME TAX ACT. AGGRIEVED, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS I N APPEAL BEFORE US. 20.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESS EE SUBMITTED THAT THE ADDITION MADE WITHOUT ACCEPTING THE COPIES OF B ANK ACCOUNT STATEMENTS OF THE ASSESSEE AND THE CREDITOR. AFTER MIGRATING TO CORE BANKING SOLUTIONS, NO BANKS ARE IN A POSITION TO FURNISH PARTICULARS SO THE ACCOUNT S PRIOR TO 2006. HENCE THE QUESTION OF THEIR CERTIFYING THE STATEMENTS IS RULE D OUT. HENCE CALLING FOR CERTIFIED COPIES OF THE BANK ACCOUNTS AND FURTHER DETAILS FRO M THE ASSESSEE IN TOTAL VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE. THE ADDITION M ADE WITHOUT ACCEPTING THE COPIES OF BANK ACCOUNT STATEMENTS OF THE ASSESSEE AND THE CRE DITOR AS RELATING TO THE LOAN FROM SHRI DINESH KUMAR OF F1,34,000/- AND CONFIRMATION FROM THE CREDITORS ABOUT THE SOURCE OF THE MONEY LENT BY SHRI G.GOVINDARAJU AND SHRI STEPHEN. 20.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 20.4 WE HAVE BOTH THE PARTIES AND PERUSED THE MATERIAL A VAILABLE ON RECORD. THE LOWER AUTHORITIES MADE AN ADDITION OF F 28,34,000/- ON I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 48 -: ACCOUNT OF UNEXPLAINED CREDITS U/S. 68 OF THE IT AC T. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION INTRODUCED CRED ITS IN THE NAME OF FOUR PERSONS AMOUNTING TO F 28,34,000/--. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH THE CONFIRMATION LETTERS FROM THE LOAN CREDITORS ALONG WITH THE DETAILS OF AMOUNT OF LOANS, CHEQUE NUMBER, DATE, NAME OF THE B ANK AND WHETHER ANY INTEREST ON THE LOANS PAID AND ALSO ANY REPAYME NT OF LOANS. THE ASSESSEE FAILED TO FURNISH ANY DETAILS PROVING T HE GENUINITY OF THE TRANSACTIONS ALONG WITH THE CREDIT WORTHINESS OF TH E CREDITORS AS WELL AS CAPACITY TO LEND THE LOANS TO THE ASSESSEE. SINCE T HE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE TRANSACTIONS OF T HE LOAN AMOUNTS TAKEN AMOUNTING TO F 22,34,000/-, THE LOWER AUTHORITIES HAS ADDED THE SAME AS UNEXPLAINED CASH CREDITS IN THE BOOKS OF TH E ASSESSEE U/S 68 OF THE IT ACT. ONLY IN THE CASE OF K. R. ANNAMALAI FOR F6,00,000/- CONFIRMATION LETTER HAS BEEN FILED AND THE SAME HAS BEEN ACCEPTED. WHEREAS IN CASE OF THE OTHER LOAN CREDITORS THE ASS ESSEE COULD NOT PROVE WITH A SUBSTANTIAL MATERIAL ON RECORD AND THE ADDITION MADE BY THE LOWER AUTHORITIES TO THE EXTENT OF F 22,34,00 0/- IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECT ED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 49 -: 21. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO ADDITION OF INCOME FROM PR & SONS FOR F4,13,001/-. 21.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSE E HAS CLAIMED A LOSS OF F96,454/- FROM THE PR & SONS AND THE LOSS WAS CLAIMED AGAINST THE INCOME DURING THE YEAR. THE ASSESSEE HAS NOT PRODUC ED ANY SALE BILLS, PURCHASE & INVOICES OR VOUCHERS FOR BUSINESSES. THE NET SALES OF THE CONCERN IS F63,30,945/- AND THE INCOME OF THE CONCE RN IS F63,30,945/. THEREFORE, THE BOOKS RESULTS OF THIS CONCERN WAS RE JECTED AND THE INCOME IS ESTIMATED AT 5% I.E., F3,16,547/- AS AGAI NST INCOME DECLARED LOSS OF F96,454/-. AGGRIEVED, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 21.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE AN ADDITION OF F3,16,547/- AGAINST THE LOSS OF F 96,454/- DECLARED BY THE ASS ESSEE . THE ASSESSEE HAS NOT PRODUCED ANY BILLS OF PURCHASE AN D SALE INVOICES OR VOUCHERS FOR BUSINESS BEFORE THE LOWER AUTHORITIES. THE LOWER AUTHORITIES HAS TAKEN NET SALES OF THE ASSESSEE CON CERNED AT F 63,30,945/-: AND THEN ESTIMATED INCOME' AT 5% AND ARRIVED AT TH E I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 50 -: INCOME OF F3,16,547/-. WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LOWER AUTHORITIES. HENCE, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 22. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO TREATING THE AGRICULTURAL INCOME OF F2,77,500/- AS INCOME FROM OTHER SOURCES. 22.1 THE FACTS OF THE CASE ARE THAT THE T HE ASSESSES HAS CLAIMED 7,50,000/ AS INCOME FROM AGRICULTURAL LANDS. IN SUP PORT OF HIS CLAIM, THE AR STATED THAT THE ASSESSEE HAS TAKEN AGRICULTURE L ANDS BELONGING TO HIS BROTHER SHRI VASUDEVAN ON ORAL LEASE. IT IS STATED THAT CULTIVATION OF GRAMS WERE UNDERTAKEN DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE COULD NOT GIVE DETAILS OF QUANTITY OF THE PRODUCE OBTAINED, N AME OF THE PERSONS TO WHOM IT WAS SOLD AND BILLS AND VOUCHERS FOR THE SALE AGRICULTURAL PRODUCE WHICH WE RE CALLED FOR VIDE NOTICE U/S 1420) DT.3 1-10-2012. UNDER SIMILAR CIRC UMSTANCES FOR A.Y.2003- 04 THE CIT (APPEALS) VIDE ORDER DATED 01-0 9-2009 IN IT NO. 128/06-07 HAS DIRECTED TO TREAT 3,66,000/- OUT OF THE AGRICULTURAL INCOME DECLARED OF 9,75,000/-AS INCOME FROM OTHER SOURCES. THE DISALLOW ANCE WORKS OUT TO 37%. THEREFORE, 37 % OF THE INCOME RET URNED AS AGRICULTURAL I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 51 -: INCOME I.E. .2,77,500/- IS CONSIDERED AS INCOME FROM 'OTHER SOU RCES'. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAIN ST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 22.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. AS DISCUSSED IN ASSESSMENT YEAR 2002-2003 IN PARA NO.6.6 OF THIS ORDER, THIS GROUND OF THE APPEAL OF THE ASSESS EE IS REJECTED. 23. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO TREATING THE DIFFERENCE IN CURRENT ACCOUNT BALANCES OF F32,64,525/- AS UNEXPLAINED CASH CREDIT. 23.1 THE FACTS OF THE CASE ARE THAT DISCREPANCIES WERE NOTICED IN THE CURRENT CAPITAL ACCOUNT OF PR& SONS DIVISION FOR WH ICH BOOKS WERE PRODUCED BEFORE ASSESSING OFFICER. THE BOOKS FOR F .Y.2003-04, THE PREVIOUS YEAR RELEVANT TO A.Y.2004-05 WERE NOT PROD UCED. THE OPENING BALANCE IN CURRENT A/C AS PER THE BOOKS FOR F.Y.2004-05, SHOWS CREDIT OF 45,65,083/-. HOWEVER THE CLOSING BALANCE AS PER THE BALANCE SHEET FOR F.Y.2003-04 WAS SHOWN AS 15,53,300/-. THE A.R. WAS REQUESTED TO I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 52 -: EXPLAIN THE DISCREPANCIES BY ASSESSING OFFICER. THE A.R. VIDE LETTER DT. 11.02.2013 HAS STATED THAT THE BOOKS OF ACCOUNT FOR THE YEAR ARE NOT TRACEABLE AND HENCE THE DIFFERENCE COULD NOT BE REC ONCILED. VIDE NOTICE U/S 142(1) DATED 22-02-2013 THE ASSESSEE WAS ONCE AGAIN REQUESTED TO EXPLAIN THE DIFFERENCES. THE AR VIDE LETTER DATED 6.3.2013 STATED THAT 'THE DIFFERENCE IN THE CURRENT ACCOUNT BALANCE AS ON 31- 03-2004 AND 01-04-2004 COULD NOT BE EXPLAINED SINCE THE BOOKS OF ACCOUNTS RELATING TO THE FINANCIAL YEAR 2003-04 WERE NOT TRACEABLE'. THEREFORE, THE DIF FERENCE IN CURRENT CAPITAL A/C. AS PER BOOKS OF PR & SONS AND THAT SHOWN IN BALANCE SHEET AMOUNTING TO 32,64,525/- IS CONSIDERED AS UNEXPLAINED CASH CRED IT IN THE BOOKS OF PR & SONS AND BROUGHT TO TAX U/S 68 OF THE INCOME TAX ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAIN ST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 23.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THAT THE ASSESSING OFFICER WENT WRONG IN MAKING THE ADDITION WITHOUT ACCEPTING THE SUBMISSION OF THE ASSESSEE THAT THE DIFFERENCE IN T HE CAPITAL ACCOUNT OF THE ASSESSEE IN HIS PROPRIETARY BUSINESS WAS ON ACCOUNT OF THE D RAWINGS TAKEN FROM THE PURCHASE ACCOUNT. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 53 -: 23.3. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 23.4 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE AN ADDITION OF F32,64,52 5/- ON ACCOUNT OF DIFFERENCE IN CURRENT ACCOUNT BALANCES. THE OPENING BALANCE IN CURRENT ACCOUNT AS PER THE BOOKS FOR FINANCIAL YEAR 2004-05 SHOWS A CREDIT OF F45,65,083/-, WHERE AS THE CLOSING BALANCE AS PER THE BALANCE SHEET FOR FINANCIAL YEAR 2003-04 WAS ONLY AT F15,53,300/- . THE ASSESSEE FAILED TO RECONCILE THE DIFFERENCE AND COULD NOT EX PLAIN BY STATING THAT THE RELEVANT PERIOD BOOKS WERE NOT TRACEABLE. HENC E, WE DO NOT HAVE ANY HESITATION TO CONFIRM THE DIFFERENTIAL AMOUNT O F F32,64,525/- AS UNEXPLAINED CASH CREDIT IN THE BOOKS OF THE ASSESSE ES CONCERN I.E., PR AND SONS AND BROUGHT TO TAX U/S. 68 OF THE IT ACT. ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 24. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH RE GARD TO TREATING THE DEPOSITS MADE IN THE BANK ACCOUNT OF S HRI. P. MURUGESAN AT F26,14,000/- AS UNEXPLAINED INVESTMENTS. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 54 -: 24.1 THE FACTS OF THE CASE ARE THAT SHRI P.MURUGESAN HAS MADE SEVERAL DEPOSITS FOR THE F.Y. 03-04 ON VARIOUS DATES. DURIN G THE SEARCH, THE FOLLOWING CREDITS WERE EXPLAINED TO BE OUT OF SPRECT CORPUS DONATION. THE A.R WAS REQUESTED TO EXPLAIN THE CREDITS INTO TH E BANK A/C BY ASSESSING OFFICER. SL.NO DATE BANK AMOUNT 1 14.06.2003 SBI THANJAVUR 3,34,000/- 2 17.06.2003 SBI THANJAVUR 10,00,000/- 3 19.06.2003 IOB CHENNAI 1618 30,000/- 4 23.06.2003 SBI THANJAVUR 12,50,000/- THE AR. EXPLAINED THAT THE CREDITS IN THE BANK A/C. WERE FROM AVAILABLE CASH BALANCES. HOWEVER, THE ASSESSEE NOT MAINTAINED BOOKS OF ACCOUNTS FOR TRANSACTION OTHER THAN THE CONCERNS PR & SONS. THE TRANSACTIONS IN SBI, THANJAVUR AND LOB, CHENNAI ARE NOT REFLECTED IN THE BOOKS OF PR & SONS. THEREFORE, THERE IS NO BASIS FOR THE ASSESSEE TO SAY THAT THESE CREDITS ARE MADE OUT OF AVAILABLE CASH BALANCE. NO CASH FLOW STATEMENT IS ALSO FILED EXPLAINING THE CR EDITS INTO THE BANK A/C . IN VIEW OF THE CONFLICTING EXPLANATION FILED DURING THE SEARCH AND THAT FILED IN THE ASSESSMENT PROCEEDINGS AND THERE BEING NO EVIDENCE FOR EXISTENCE OF CASH BALANCES ON THE DAYS THE CRED ITS WERE MADE, THE WHOLE OF THE CREDITS IN THE BANK A/C. MENTIONED ABOVE ARE ADDED TO I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 55 -: THE TOTAL INCOME AS UNEXPLAINED INVESTMENTS BY ASSE SSING OFFICER. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAIN ST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 24.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE ASSESSING OFFICER MADE AND ADDITION OF 26,14,000/-- ON ACCOUNT OF DEPOSITS MADE INTO THE BANK ACCOUNTS. TH E ASSESSEE HAS MADE SEVERAL DEPOSITS ON VARIOUS DATES IN THE SBI THANJAVUR ACCOUNT AS WELL AS LOB CHENNAI ACCOUNT. WHEN THE ASSESSING OFF ICER HAS CONFRONTED THE ASSESSEE FOR THE TRANSACTIONS IN SBI THANJAVUR AND LOB CHENNAI THAT THEY ARE NOT REFLECTED IN THE BOOKS OF PR AND SONS, THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE HAS NOT SUBMITTED ANY D ETAILS NOR FILED ANY CASH FLOW STATEMENT EXPLAINING THE CREDITS IN THE A BOVE BANK ACCOUNT. AS THERE WERE NO CASH BALANCES ON THE DATES OF CREDITS MADE AS MENTIONED ABOVE THE ENTIRE AMOUNT OF 26,14,000/-, WE TREAT THE DEPOSITS AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. THIS GROUN D OF THE APPEAL OF THE ASSESSEE IS DISMISSED. THE APPEAL OF THE ASSESSEE IN ITA NO.2042/MDS/2013 FOR THE ASSESSMENT YEAR 2004-2005 IS DISMISSED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 56 -: SHRI. P. MURUGESAN, ITA NO2043/MDS/2013, ASSESSMENT YEAR 2005- 2006 (ASSESSEES APPEAL):- 25. THE FIRST GROUND RAISED BY THE ASSESSEE IN THIS APP EAL IS WITH REGARD TO TREATING THE INCOME FROM PR & SONS OF F5 ,15,933/- AS UNEXPLAINED CASH CREDITS. 25.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE H AS NOT PRODUCED ANY SALE BILLS, PURCHASE & INVOICES OR VOUCHERS FOR BUSINESS. THE NET SALES OF THE CONCERN IS F1,12,25,426/-. THEREFORE, THE BOOKS RESULT OF THIS CONCERN ARE REJECTED AND THE INCOME IS ESTIMAT ED AT 5% I.E. F5,61,271/- AS AGAINST INCOME DECLARED AT F45,338/- . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 25.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE INCOME ASSESSED BY THE ASSESSING OFFIC ER FOR THE YEAR UNDER CONSIDERATION AT F 5,15,933/- ON ESTIMATED BA SIS AT 5% ON THE NET SALES OF THE CONCERN REPORTED BY THE ASSESSEE AT F1,12,25,426/-. IN THE ABSENCE OF ANY SALE BILLS, PURCHASE INVOICES AND VOUCHERS IS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 57 -: JUSTIFIED AS AGAINST THE INCOME DECLARED BY THE ASS ESSEE AT F45,338/-. THERE IS NO DEFENCE FROM THE AUTHORISED REPRESENTAT IVE OF THE ASSESSEE EXCEPT STATING SOME VAGUE REASONS WITHOUT FURNISHING ANY EVIDENCE BEFORE THE ASSESSING OFFICER FOR CLAIMING VARIOUS EXPENSES. THEREFORE THE ADDITION MADE BY THE LOWER AUTHORITIE S AT F5,15,933/- IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESS EE IS DISMISSED. 26. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO TREATING F10,15,000/- AS UNEXPLAINED EXPENDITURE ( LOAN REPAYMENT AND INTEREST PAYMENT). 26.1. THE FACTS OF THE CASE ARE THAT FOR VERIFYING THE LOAN CREDITORS, A LETTER WAS ISSUED BY ASSESSING OFFICER TO K.R.ANNA MALAI OF TANJAVUR. THE ASSESSEE HAS AVAILED LOAN FROM K.R.ANNAMALAI AND AL SO FROM HIS WIFE SMT.A.MANGALAM. THE CREDITOR FURNISHED COPIES OF ALL THE LOANS AVAILED BY SRI. MURUGESAN. AS PER THE EXTRACT FILED BY K. R.AN NAMALAI, THE ASSESSEE HAS TAKEN A LOAN OF 10,00,000/- ON 01.11.2004 AND HAS REPAID THE SAME ALONG WITH INTEREST OF 15,000 ON 11.12.2004. HOWEVER, THIS TRANSACTION IS NOT REFLECTED IN THE ASSESSEE'S ACCOUNTS. THIS RECEI PT OF THE LOAN AS WELL AS THE REPAYMENT IS NOT REFLECTED IN THE RECEIPTS AND PAYMENTS ACCOUNT OF T HE ASSESSEE. THE COPY OF THE ACCOUNT EXTRACT RECEIVED F ROM K.R.ANNAMALAI & I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 58 -: MRS. A. MANGALAM WERE SENT TO THE ASSESSEE VIDE LET TER DT.22.02.2003 BY ASSESSING OFFICER AND ASSESSEE WAS REQUESTED TO EX PLAIN WHERE EACH OF THE LOANS IS REFLECTED IN HIS ACCOUNTS. THE A.R. VIDE LE TTER FILED ON 06.03.2013 MERELY STATED THAT OUTSTANDING BALANCES FOR A.Y.200 102, 2002-03 AND 2003-04 ARE CONFIRMED BY K.R.ANNAMA1AI. SINCE THE A SSESSEE HAS NOT OFFERED ANY EXPLANATION REGARDING THE PAYMENT MADE BY THE ASSESSEE TO K.R.ANNAMALAI OF 10,00,000/-ON 11.12.2004 AND THE INTEREST PAID OF 15,000/- ARE CONSIDERED TO BE UNEXPLAINED EXPENDITU RE AND BROUGHT TO TAX U/S. 69C BY ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS I N APPEAL BEFORE US. 26.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS MADE AN ADDITION OF' F10,15,000/- ON ACCOUNT OF REPAYMENT OF LOAN SAID T O HAVE TAKEN FROM SHRI K.R. ANNAMALAI ALONG WITH INTEREST. WHEN THE L OAN CREDITOR WHO FURNISHED COPIES OF THE LEDGER ACCOUNT FOR THE LOAN S GIVEN TO THE ASSESSEE ON 01.11.2004 WHICH HAS BEEN REPAID W ITH INTEREST ON 11.12.2004. IT WAS NOTICED BY THE LOWER AUTHORITIES THAT THIS TRANSACTION OF REPAYMENT IS NOT REFLECTED IN THE AS SESSEE 'S ACCOUNTS. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 59 -: EVEN IN THE RECEIPTS AND PAYMENT ACCOUNT ALSO REFLE CTION OF THIS TRANSACTION HAS NOT BEEN FOUND PLACE. THE ASSESSEE WAS ASKED TO CLARIFY REGARDING THE ABOVE LOAN TRANSACTION BUT TH E SAME HAS NOT BEEN SUBSTANTIATED BY THE ASSESSEE EXCEPT STATING THAT THERE ARE SOME OUTSTANDING BALANCES FOR AY 2001 -02 ONWARDS. THER E WAS NO EXPLANATION FROM THE ASSESSEE REGARDING THE REPAY MENT OF LOAN TO K.R.ANNAMALAI FOR F10 LAKHS ON 11.12.2004 ALONG WIT H INTEREST OF' F 15,000/- AND LOWER AUTHORITIES HAVE RIGHTLY ADDED A N AMOUNT OF F10,15,000/- AS UNEXPLAINED EXPENDITURE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS). HENCE, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECT ED. 27. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO DEPOSITS OF F63,50,000/- MADE IN THE BANK ACCOUNT A S INCOME OF THE ASSESSEE. 27.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE MADE SEVERAL DEPOSITS FOR THE F.Y. 04-05 ON VARIOUS DATES. DURIN G THE SEARCH, THE FOLLOWING CREDITS WERE EXPLAINED TO BE OUT OF SPREC T CORPUS DONATION. THE A.R WAS REQUESTED TO EXPLAIN THE CREDITS IN TO THE BANK ACCOUNT . I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 60 -: SINO DATE BANK AMOUNT 1 02.05.2004 IOB-CHENNAI-27425 2,00,000 2 03.05.2004 LOB CHENNAI-1618 10,00,000 3 11.06.2004 IOB-CHENNAI-27425 11,00,000 4 29.09.2004 IOB-CHENNAI -27425 38,00,000 5 21.10.2004 IOB-CHENNAI-27425 3,50,000 THE A.R. EXPLAINED THAT THE CREDITS IN THE BANK ALC WERE FROM AVAILABLE CASH BALANCES. HOWEVER, THE ASSESSEE NOT MAINTAINED BOOKS OF ACCOUNTS FOR TRANSACTION OTHER THAN THE CONCERNS PR & SONS. THE TRANSACTIONS IN SBI, THANJAVUR AND LOB, CHENNAI ARE NOT REFLECTED IN THE BOOKS OF PR & SONS. THEREFORE, THERE IS NO BASIS FOR THE ASSESSEE TO SAY THAT THESE CREDITS ARE MADE OUT OF AVAILABLE CASH BALANCE. NO CASH FLOW STATEMENT IS ALSO FILED EXPLAINING THE CR EDITS INTO THE BANK ACCOUNT. IN VIEW OF THE CONFLICTING EXPLANATION FILED DURING THE SEARCH AND THAT FILED IN THE ASSESSMENT PROCEEDINGS AND TH ERE BEING NO EVIDENCE FOR EXISTENCE OF CASH BALANCES ON THE DAYS THE CREDITS WERE MADE, THE WHOLE OF THE CREDITS IN THE BANK ACCOUNT AMOUNTING F .63,50,OOO/-- AS MENTIONED ABOVE ARE ADDED TO THE TOTAL INCOME A S UNEXPLAINED INVESTMENTS. AGGRIEVED, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). TH E COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 61 -: AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 27.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WENT WRONG IN MAKING THE ADDITION OF RS.63,50,OOO/- ON ACCOUNT OF SEVERAL DEPOSITS MADE IN BANK ACCOUNTS OF THE ASSESSEE. THE AO FAILED TO UNDERSTAND THAT THE A SSESSEE HAS CASH BALANCES TO MAKE THE DEPOSITS IN THE BANK ACCOUNTS. 27.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 27.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. THE LOWER AUTHORITIES HAD MADE SEVERAL DEPOSITS IN HIS BANK ACCOUNT ON VARIOUS DATES DURING THE YEAR UNDER CONSIDERATION IN IOB AC COUNT, CHENNAI TOTALLING TO F63,50,000/-. THESE TRANSACTIONS ARE NOT REFLECTED IN THE BOOKS OF PR & SONS AND EXPLANATION FILED BY THE ASSESSEE THAT THESE CR EDITS ARE MADE OUT OF AVAILABLE CASH BALANCE. NO CASH FLOW STATEMENT HAD BEEN FILED EXPLAINING THE CREDITS INTO THE BANK ACCOUNT. THE EXPLANATION FILE D BY THE ASSESSEE REGARDING THE AVAILABILITY OF CASH BALANCES IS DEVOID OF ANY MERIT. HENCE, WE CONFIRM THE ADDITION MADE BY THE LOWER AUTHORITIES AT F63,50,00 0/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT IN THE IOB BANK. THIS GROU ND OF THE APPEAL OF THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 62 -: ASSESSEE IS REJECTED. 28. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO UNEXPLAINED INVESTMENT IN PROPERTY AT NILGIRI SOUTH , PERIARNAGAR AT F5,80,800/- AS SHORT TERM CAPITAL GAINS. 28.1 THE FACTS OF THE ISSUE ARE THAT ON 11.02.2013 , THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE WAS PROVIDED WITH A CO PY OF THE DOCUMENT FOR SALE OF 4800 SQFT OF LAND AT NILGIRI S OUTH, PERFARNAGAR, SITE NO 8, TANJAVUR DIST. HE WAS REQUESTED TO EXPL AIN WHERE THE TRANSACTION OF SALE WAS REFLECTED IN HIS ACCOUNTS A ND RETURNS. THE AR VIDE HIS LETTER DATED 6-03- 2013 HAS STATED THAT TH E PURCHASE AND SALE OF ABOVE LAND HAD NOT REFLECTED IN THE BOOKS OF ACC OUNTS. THEREFORE, THE MARKET VALUE OF PROPERTY I.E. F5,80,800/- WAS CONSIDERED AS SHORT TERM CAPITAL GAINS (AS THE COST PRICE IS NOT ASCERT AINABLE FROM THE RECORD) AND BROUGHT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS I N APPEAL BEFORE US. 28.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSES SEE SUBMITTED THAT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 63 -: THE ASSESSING OFFICER ERRED IN NOT TREATING 1/4TH SHARE OF THE PROPERTY IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER ERRED IN NOT CONSIDERING THE COST PRICE OF THE PROPERTY AND THE SHARE OF THE ASSESSEE IN THE PROPERTY WHILE COMPUTING T HE CAPITAL GAINS. 28.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 28.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE AN ADDITION OF F 5,80,800/- ON ACCOUNT OF UNEXPLAINED INVESTMENT OF PROPERTY AT NILGRIS. W HEN THE ASSESSEE WAS CONFRONTED BY THE ASSESSING OFFICER TO EXPLAIN THE TRANSACTION OF PURCHASE AND SALE OF PROPERTY AT NILGRIS, THE AUTHO RISED REPRESENTATIVE OF THE ASSESSEE VIDE HIS LETTER DATED 6.3.2013 HAS ACCEPTED THAT THE PURCHASE AND SALE OF THE ABOVE LAND HAS NOT BEEN RE FLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSING OF FICER HAS WORKED OUT THE SHORT TERM CAPITAL GAIN AT F 5,80,800/-- AND THE SAME WAS BROUGHT TO TAX. SINCE THE AUTHORISED REPRESENTA TIVE OF THE ASSESSEE HAS ACCEPTED THAT THE TRANSACTION HAS NOT BEEN ACCOUNTED, THE DECISION OF THE LOWER AUTHORITIES IN ARRIVING AT A SHORT TERM CAPITAL GAIN AT F5,80,800/- IS HEREBY CONFIRMED. THIS GROU ND OF THE APPEAL OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 64 -: THE ASSESSEE IS REJECTED. 29. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO UNEXPLAINED EXPENDITURE ON STAMP DUTY AND REGISTRAT ION FEES FOR THE PROPERTIES TO THE TUNE OF F11,34,336/-. 29.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS BO UGHT THE FOLLOWING THREE PROPERTIES DURING THE YEAR :- SL.NO NAME OF PROPERTY PRICE STAMP DUTY PAID REGISTRATION FEES PAID TOTAL STAMP DUTY AND REG. FEE 1 GOPALAPURAM 90,00,000 7,20,000 90,160 8,10,160 2 T. NAGAR 17,19,900 1,87,584 4,055 1,91,639 3 TPS NAGAR 9,20,370 1,17,812 14,724 1,32,537 TOTAL 11,34,336 THOUGH THE PURCHASE PRICE OF THE PROPERTIES IS REFL ECTED IN THE BALANCE SHEET OF THE ASSESSEE, THE AMOUNT SPENT ON STAMP DUTY AND REGISTRATION FEES FOR THE PROPERTIES AMOUNTING TO F11,34,336/- IS NOT CAPITALIZED AND SHOWN IN THE BALANCE SHEET. THE ASSESSEE WAS REQUESTED TO EXPLAIN WHERE THE EXPENDITURE HAS BEEN REFLECTED. THE ASSESSEE VIDE LETTER DATED 11-02-2013 HAS STATED TH AT ONLY THE PURCHASE COST HAS BEEN ACCOUNTED IN THE BOOKS AND C OST TOWARDS STAMP DUTY AND REGISTRATION FEES HAVE BEEN OMITTED TO BE ACCOUNTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 65 -: THEREFORE, THE EXPENDITURE OF F11,34,336/- MADE ON THE REGISTRATION AND STAMP DUTY OF THE ABOVE THREE PROPERTIES IS BRO UGHT TO TAX AS UNEXPLAINED EXPENDITURE U/S 69C OF THE IT ACT. A GGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 29.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THE ASSESSEE CANNOT CONTEST T HE ADDITION MADE BY THE LOWER AUTHORITIES FOR UNEXPLAINED EXPENDITUR E U/S.69C OF THE INCOME TAX ACT FOR THE AMOUNT SPENT ON STAMP DUTY A ND REGISTRATION FEE FOR THE PROPERTIES PURCHASED AS THE ASSESSEE HA S NOT DISPUTED THE PURCHASE OF ABOVE PROPERTY. THEN IT IS NATURAL TO INCUR THESE EXPENDITURE AND AS SUCH, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE LOWER AUTHORITIES. HENCE, THIS GROUND OF THE A PPEAL OF THE ASSESSEE IS REJECTED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO .2043/MDS/2013 FOR THE ASSESSMENT YEAR 2005-06 IS DISMISSED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 66 -: SHRI. P. MURUGESAN ITA NO.2044/MDS/2013, ASSESSMENT YEAR 2006- 2007( ASSESSEES APPEAL) 30. THE FIRST GROUND RAISED BY THE ASSESSEE IN THIS APP EAL IS WITH REGARD TO UNEXPLAINED CASH CREDIT TO THE TUNE OF F1 5,00,000/- AS INCOME FROM UNDISCLOSED SOURCE. 30.1 THE FACTS OF THE ISSUE ARE THAT THE DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y.2003-04, THE ASSESSEE HAS SHOWN LOANS FROM THE FOLLOWING PERSONS ON THE LIABILITIES SIDE OF THE 'G ENERAL BALANCE SHEET' FILED ALONG WITH THE RETURN OF INCOME. THEY ARE ALS O SHOWN ON THE RECEIPTS SIDE OF THE 'GENERAL RECEIPTS AND PAYMENTS A/C'. SL.NO NAME OF ALLEGED CREDITOR AMOUNT (IN F) 1 M/S. SRI LAKSHMI CO 10,00,000/- 2 LOAN FROM DR. G GOVINDARAJAN 15,00,000/- TOTAL 25,00,000/- THE ASSESSING OFFICER VIDE NOTICE U/S 142(1) DATED 30-01-2012, THE ASSESSEE WAS REQUESTED TO GIVE THE DETAILS OF ALL T HE ABOVE LOANS ALONG WITH LEDGER EXTRACTS OF THE ABOVE PERSONS APP EARING IN ASSESSEE'S BOOKS ALONG WITH COMPLETE ADDRESS AND IN COME-TAX ASSESSMENT DETAILS. FURTHER, VIDE NOTICE DATED 11-0 1-2013, THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 67 -: ASSESSEE WAS REQUESTED TO THE CONFIRMATIONS FROM TH E LOAN CREDITORS ALONG WITH DETAILS OF THE LOAN I.E., AMOU NT OF LOANS, CHEQUE NO., DATE, NAME OF THE BANK AND CONFIRMATION AS TO WHETHER ANY INTEREST ON THE LOAN AND THE REPAYMENT OF THE LOAN. THE ASSESSEE WAS ALSO FURNISHED DETAILS OF INTEREST PAID ON THE ABOVE LOANS FOR VARIOUS YEARS TILL DATE. THE ASSESS EE WAS ALSO REMINDED THAT ONUS TO PROVE THE SOURCE OF THE CREDI TS AND THE GENUINENITY OF THE TRANSACTION WITH THE ASSESSEE. V IDE NOTICE U/S 142(1) DATED 22.2.2013, THE ASSESSEE WAS REQUESTED TO PRODUCE THE LOAN CREDITORS FOR VERIFICATION. THE ASSESSEE H AS ONLY FURNISHED THE ADDRESS OF THE LOAN CREDITORS. EVEN THE PAN NUM BER OF THE LOAN CREDITORS IS NOT FURNISHED BY THE ASSESSEE. THE ASS ESSES HAS ALSO NOT FURNISHED THE MODE OF AVAILING THE LOAN, DATE O F LOAN AND CHEQUE NUMBER AND BANK DETAILS ETC. THE ASSESSEE HA S ALSO NOT STATED WHETHER ANY INTEREST IS PAID ON THE LOANS AN D WHETHER THESE LOANS ARE OUTSTANDING OR REPAID AS ON DATE. LETTERS WERE ADDRESSED TO THE LOAN CREDITORS AT THE ADDRESS GIVEN BY THE A SSESSEE. IN CASE OF SHRI G.GOVINDARAJU, HE HAS STATED THAT HE HAS GI VEN A LOAN OF F8,00,000/ IN CASH IN SEPTEMBER 2002 AND RECEIVED B ACK THE AMOUNT IN JUNE 2003 IN CASH FOR THE HIGHER EDUCATIO N OF HIS CHILDREN. THE ASSESSEE HAS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 68 -: AVAILED LOAN FROM SHRI G.GOVINDARAJU, IN OTHER YEAR S ALSO AS UNDER:- SL. NO A.Y. AMOUNT OF LOAN TAKEN AMOUNT REPAID BALANCE OUTSTANDING 1 2003 - 04 8,00,000/ - 0 8,00,000/ - 2 2004 - 05 17,50,000/ - 8,00,000/ 9,50,000/ - 3 2006 - 07 15,00,000/ - 0 32,50,000 IN THE RECEIPTS AND PAYMENTS A/C FILED WITH THE RETURNS NO INTEREST PAYMENT ON THIS LOAN IS SHOWN. NO SANE PERSON WILL LEND SUCH HUGE AMOUNT OF MONEY WITHOUT ANY INTEREST. THE ASSESSEE HAS NOT ESTABLISHED THE CREDITWORTHINESS OF THE LOAN CREDIT OR. THEREFORE, THE TRANSACTIONS CANNOT BE CONSIDERED TO BE, GENUINE. I N CASE OF M/S. SRI LAKSHMI CORPORATION, IN RESPONSE TO THIS OFFICE LET TER, THE LOAN CREDITOR HAS CONFIRMED THE LOANS. THUS, FOR THE LOA N FROM SRI.G.GOVINDRAJAN THE ASSESSEE HAS NOT FURNISHED AN Y EVIDENCE TO PROVE THE IDENTITY OF THE CREDITOR, CAPACITY OF THE CREDITOR AND THE GENUENITY OF THE TRANSACTION. THE CREDITS IN THE NA ME SRI.G.GOVINDRAJAN OF F15,00,000 CANNOT BE CONSIDERE D TO BE SATISFACTORILY EXPLAINED BY ASSESSEE. THEREFORE, TH E ABOVE SAID LOAN AMOUNTING TO F15,00,000/-IS TREATED AS INCOME FROM UNDISCLOSED SOURCES AND BROUGHT TO TAX FOR A.Y.2006-07. AGGRIE VED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 69 -: (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 30.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE AN ADDITION OF F15,00,000/- STATED TO BE RECEIVED FROM SHRI G.GOVINDARAJAN. THE ASSESSEE HAS FAILED TO FURNISH THE DETAILS OF THE SAID LOAN CRED ITOR AND HAS NOT ESTABLISHED THE CREDITWORTHINESS CAPACITY TO LEND A ND THE GENUINENESS OF THE TRANSACTION. NO PRUDENT PERSON WILL EXTEND A LOAN WITHOUT CHARGING ANY INTEREST HENCE THE ADDITION MADE BY TH E ASSESSING OFFICER IN THE CASE OF SRI G.GOVINDARAJAN FOR THE L OAN ADVANCED TO THE ASSESSEE TREATING THE SAME AS INCOME FROM UNDISCLO SED SOURCES. THEREFORE, WE CONFIRM THE ADDITION MADE BY THE COMM ISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED . 31. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ADDITION OF INCOME FROM PR & SONS TO THE TUNE OF F9 ,30,081/-. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 70 -: 31.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSE E HAS NOT PRODUCED ANY SALE BILLS, PURCHASE & INVOICES OR VOUCHERS FOR BUSINESSES. THE NET SALES OF THE CONCERN IS F32,54,299/. THEREFORE, THE BOOKS RESULTS OF THIS CONCERN ARE REJECTED AND THE INCOME IS ESTIMAT ED AT 5 % I.E., F1,62,715/- AS AGAINST LOSS OF F7,67,367/-. AGGRIEV ED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 31.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE MATERIAL ON RECORD. THE ASSESSEE HAD CLAIMED A LOSS OF F 7,67 ,367/- FROM PR & SONS AND THE LOSS WAS CLAIMED AGAINST INCOME DURING THE YEAR. AFTER VERIFYING THE SUBMISSIONS MADE BY THE AUTHORISED RE PRESENTATIVE OF THE ASSESSEE IT WAS OBSERVED THAT THE ASSESSEE FAIL ED TO SUBMIT THE BOOKS OF ACCOUNTS AND VOUCHERS FOR THE ABOVE MENTIO NED BUSINESSES. HENCE THE ADDITION MADE BY THE LOWER AUTHORITIES O N ESTIMATED BASIS ON THE NET SALES OF THE CONCERN THAT 5% WHICH WORKS OUT TO F1,62,715/- AFTER IGNORING THE LOSS CLAIMED BY THE ASSESSEE AT F7,67,367/- IS PERFECTLY JUSTIFIED AND HENCE WE CON FIRM THE ADDITION I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 71 -: MADE BY THE LOWER AUTHORITIES AT F9,30,081/-. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 32. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO DEPOSITS MADE IN THE BANK ACCOUNT TO THE TUNE OF F2 1,96,200/- AS UNEXPLAINED INVESTMENTS. 32.1 THE FACTS OF THE ISSUE ARE THAT THE DURING TH E SEARCH, THE FOLLOWING CREDITS WERE EXPLAINED TO BE OUT OF SPRECT CORPUS DONATION. THE A.R WAS REQUESTED TO EXPLAIN THE CREDITS IN THE BANK ACCOUNT. SL.NO DATE BANK AMOUNT 1 25.04.2005 IOB CHENNAI - 27425 1,00,000/ - 2 27.05.2005 IOB CHENNAI - 1618 4,50,000/ - 3 30.11.2005 IOB CHENNAI - 27425 5,50,000/ - 4 06.12.2005 IOB CHENNAI - 27425 10,00,000/ - 5 13.03.2006 SBI - TANJAVUR 50,000/ - 6 22.02.2006 IOB CHENNAI - 27425 46,000/ - 21,96,020/- THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE EXP LAINED THAT THE CREDITS IN THE BANK A/C. WERE FROM AVAILABLE CASH BALANCES. HOWEVER, THE ASSESSEE NOT MAINTAINED BOOKS OF ACCOUNTS FOR T RANSACTION OTHER THAN THE CONCERNS PR & SONS. THE TRANSACTIONS IN SBI, THANJAVUR AND LOB, CHENNAI ARE NOT REFLECTED IN THE BOOKS OF PR & SONS. THEREFORE, I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 72 -: THERE IS NO BASIS FOR THE ASSESSEE TO SAY THAT THESE CREDITS ARE MADE OUT OF AVAILABLE CASH BALANCE. NO CASH FLOW ST ATEMENT IS ALSO FILED EXPLAINING THE CREDITS INTO THE BANK A/C. IN VIEW OF THE CONFLICTING EXPLANATION FILED DURING THE SEARCH AND THAT FILED IN THE ASSESSMENT PROCEEDINGS AND THERE BEING NO EVIDENCE FOR EXISTEN CE OF CASH BALANCES ON THE DAYS THE CREDITS WERE MADE, THE WHOLE OF THE CREDITS IN THE BANK A/C AMOUNTING TO F21,96,200/- AS MENTIONED ABOVE ARE ADDED TO THE TOTAL INCOME AS UNEXPLAINED INVESTMEN TS. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 32.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE OBJECTED TO THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SEVERAL DEPOSITS MADE IN BANK ACCOUNTS OF THE AS SESSES. ACCORDING TO THE LD. AUTHORISED REPRESENTAT IVE FOR ASSESSEE T HE ASSESSING OFFICER FAILED TO UNDERSTAND THAT THE ASSESSEE HAS CASH BALANCES TO MAKE THE DEPOSITS TO THE BANK ACCOUNTS. THE ASSES SING OFFICER FAILED TO UNDERSTAND THAT IF THE ASSESSEE HAD NO CASH TO MAKE THE DEPOSI TS, THE BALANCE SHEET AT THE YEAR END WOULD NOT TALLY. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 73 -: 32.3. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDERS OF THE ASSESSING OFFICER. 32.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE AS WELL A S THE DETAILED REASONING GIVEN BY THE LOWER AUTHORITIES FOR THE AD DITION MADE ON ACCOUNT OF THE UNEXPLAINED CREDITS APPEARING IN THE BANK ACCOUNT MENTIONED SUPRA. EVEN THOUGH THE AUTHORISED REPRESE NTATIVE OF THE ASSESSEE EXPLAINED THAT THE CREDITS IN THE BANK AC COUNT WERE FROM AVAILABLE CASH BALANCES, HE COULD NOT SUBSTANTIATE THE SAME TRANSACTIONS FROM HIS BOOKS OF ACCOUNTS. AS THE TRA NSACTIONS IN SBI, THANJAVUR BRANCH AND IOB, CHENNAI BRANCH ARE NOT RE FLECTED IN THE BOOKS OF PR & SONS, THE AUTHORISED REPRESENTATIVE O F THE ASSESSEE COULD NOT PROVE THAT THESE CREDITS ARE MADE OUT OF AVAILABLE CASH BALANCE. IN THE ABSENCE OF ANY CASH FLOW STATEMENT, THE VERSION OF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE CANNOT BE RELIED UPON, THUS, WE CONFIRM THE ADDITION MADE BY THE LOWER AU THORITIES TO THE EXTENT OF F21,96,200/- TO THE TOTAL INCOME AS UNEXP LAINED INVESTMENTS. THIS GROUND OF THE APPEAL OF THE ASSE SSEE IS REJECTED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO .2044/MDS/2013 IS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 74 -: DISMISSED. SHRI. P. MURUGESAN ITA NO.2045/MDS/2013, ASSESSMENT YEAR 2007- 2008 (ASSESSEES APPEAL):- 33. THE FIRST GROUND RAISED BY THE ASSESSEE IN THIS APP EAL IS WITH REGARD TO TREATMENT OF UNEXPLAINED CASH CREDITS TO THE TUNE OF F21,91,532/-. 33.1 THE FACTS OF THE CASE ARE THAT DURING THE PREV IOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08, THE ASSESSEE HAS SH OWN LOANS FROM THE FOLLOWING PERSONS ON THE LIABILITY SIDE OF THE GENERAL BALANCE SHEET FILED ALONGWITH RETURN OF INCOME:- SL.NO NAME OF ALLEGED CREDITOR AMOUNT (F) 1 SRI LAKSHMI CORPORATION 5,00,000/- 2 MS. SUJATHA 5,00,000/- 3 SHRI. BALAJI 5,00,000/- 4 MS. RAJALAKSHMI 5,00,000/- 5 SHRI. DINESH 6,91,532/- TOTAL 26,91,532/- VIDE NOTICE U/S 142(1) DATED 30-01-2012, THE ASSESS EE WAS REQUESTED TO GIVE THE DETAILS OF ALL THE ABOVE LOANS ALONG WI TH LEDGER EXTRACTS OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 75 -: THE ABOVE PERSONS APPEARING IN ASSESSEE'S BOOKS ALO NG WITH - COMPLETE ADDRESS AND INCOME-TAX ASSESSMENT DETAILS. FURTHER, VIDE NOTICE DATED 11-01-2013, THE ASSESSEE WAS REQUESTED TO FURNISH THE CONFIRMATIONS FROM THE LOAN' CREDITORS ALONG WITH D ETAILS OF THE LOAN I.E., AMOUNT OF LOANS, CHEQUE NO., DATE, NAME OF TH E BANK AND CONFIRMATION AS TO WHETHER ANY INTEREST PAID ON THE LOAN AND THE REPAYMENT OF THE LOAN. THE ASSESSEE ALSO NOT FURNIS HED DETAILS OF INTEREST PAID ON THE ABOVE LOANS FOR VARIOUS YEARS TILL DATE. THE ASSESSES WAS ALSO REMINDED THAT ONUS TO PROVE THE S OURCE OF THE CREDITS AND THE GENUINENESS OF THE TRANSACTION WIT H THE ASSESSEE. VIDE NOTICE U/S 142(1) DATED 22.2.2013, THE ASSESSEE WAS REQUESTED TO. PRODUCE THE LOAN CREDITORS FOR VERIFICATION. THE A SSESSEE HAS ONLY FURNISHED THE ADDRESS OF THE LOAN CREDITORS. EVEN T HE PAN NUMBER OF THE LOAN CREDITORS IS NOT FURNISHED BY THE ASSESSEE . THE ASSESSEE HAS ALSO NOT FURNISHED THE MODE OF AVAILING THE LOAN, D ATE OF LOAN AND CHEQUE NUMBER AND BANK DETAILS ETC. THE ASSESSEE HA S ALSO NOT STATED WHETHER ANY INTEREST IS PAID ON THE LOANS AND WHETH ER THESE LOANS ARE OUTSTANDING OR REPAID AS ON DATE. MS SUJATHA, MS R AJALAKSHMI AND SHRI BALAJI ARE CHILDREN OF SHRI G.GOVINDARAJ. IN R ESPONSE TO THIS OFFICE LETTER SEEKING CONFIRMATION OF THE LOANS SHRI GOVIN DARAJ HAS REPLIED FOR AND ON BEHALF OF ALL THE ABOVE THREE PERSONS THAT H E HAD GIVEN A LOAN I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 76 -: F8,00,000/- IN CASH IN SEPTEMBER 2002 AND RECEIVED BACK THE AMOUNT IN JUNE 2003 IN CASH FOR HIGHER EDUCATION OF HIS CH ILDREN. THE ASSESSEE HAS SHOWN THAT HE HAS AVAILED LOAN FROM SHRI G.GOVI NDARAJU, IN OTHER YEARS ALSO AS UNDER: SL. NO A.Y. AMOUNT OF LOAN TAKEN AMOUNT REPAID BALANCE OUTSTANDING 1 2003 - 04 8,00,000/ - 0 8,00,000/ - 2 2004 - 05 17,50,000/ - 8,00,000/ 17 ,50,000/ - 3 2006 - 07 15,00,000/ - 0 32,50,000 IN THE RECEIPTS AND PAYMENTS A/C FILED WITH THE RET URNS NO INTEREST PAYMENT ON THIS LOAN 'IS SHOWN. NO SANE PERSON WILL LENT SUCH HUGE AMOUNT OF MONEY WITHOUT ANY INTEREST. IN HIS LETTER SHRI GOVINDARAJ HAS STATED THAT HE IS A RETIRED PROFESSOR FROM ARTS COL LEGE, THANJAVUR. IT IS HARD TO BELIEVE THAT A RETIRED PENSIONER HAS GIVEN A LOAN OF F32,50,000/- WITHOUT ANY SECURITY AND WITHOUT EXPEC TING ANY INTEREST. THE ASSESSEE HAS NOT ESTABLISHED CREDITWORTHINESS O F LOAN CREDITOR. THEREFORE, THE TRANSACTIONS CANNOT BE CONSIDERED TO BE GENUINE. IN CASE OF SRI LAKSHMI CORPORATION, IN RESPONSE TO THI S OFFICE LETTER, THE LOAN CREDITOR HAS CONFIRMED THE LOANS. THUS, EXCEP T FOR LOAN FROM SRI LAKSHMI CORPORATION, NONE OF THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 77 -: ABOVE CREDITS CAN BE CONSIDERED TO BE SATISFACTORIL Y EXPLAINED BY THE ASSESSEE. THEREFORE, THE REST OF THE ABOVE SAID LOA NS AMOUNTING TO F21,91,532/- IS ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CREDITS IN THE BOOKS U/S 68 OF THE INCOME-TAX ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 33.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IN HIS RETURN FILED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAS SHOWN LIABI LITY FOR THE LOANS TAKEN FROM THE PERSONS SHOWN AS IN PARA 33.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FI LE THE DETAILS OF LOAN CREDITORS ALONG WITH PARTY LEDGER, COMPLETE AD DRESS AND THEIR INCOME TAX PARTICULARS. SIMILARLY, THE ASSESSING OF FICER HAS ALSO ASKED THE CONFIRMATION LETTERS FROM THE LOAN CRE DITORS ALONG WITH DETAILS OF AMOUNT OF LOAN AND MODE OF RECEIPT/REPAYMENT. THE A UTHORISED REPRESENTATIVE OF THE ASSESSEE HAS FURNISHED ONLY A DDRESS OF THE LOAN CREDITORS AND HAS NOT SUBMITTED ANY DETAILS SUCH AS PAN NO. OF THE LOAN CREDITORS, MODE OF RECEIPT /REPAYMENT OF THE L OAN. ON BEHALF OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 78 -: MRS. SUJATHA, MRS. RAJALAKSHMI AND SHRI BALAJI, THE IR FATHER G. GOVINDARAJ REPLIED THAT THEY HAD GIVEN A LOAN OF F 8 LAKHS IN CASH/IN SEPTEMBER 2002 AND RECEIVED BACK THE AMOUNT IN JUNE 2003 ALSO IN CASH. THE ASSESSEE HAS ALSO SHOWN THAT HE HAS AVAIL ED LOAN FROM SHRI. GOVINDARAJ AS SHOWN IN PARA 33.1. IN THE RECEIPTS A ND PAYMENTS ACCOUNT FILED ALONG WITH RETURNS NO INTEREST PAYME NT ON THE ABOVE LOAN AMOUNT IS PAID OUT OF THE TOTAL AMOUNT OF LOAN RECEIVED FROM GOVINDARAJ FAMILY DURING THE YEAR UNDER CONSIDERATI ON. OUT OF THE TOTAL LOANS ACCEPTED BY THE ASSESSEE DURING THE YEAR THAT F26,91,532/- ONLY ONE CONFIRMATION RECEIVED TO THE EXTENT OF F 5 LAKH S FROM SHRI LAKSHMI CORPORATION CONFIRMING THE AMOUNT OF LOAN. WHEREAS OTHER LOANS RECEIVED FROM THE FAMILY MEMBERS OF SRI G.GOVINDARA J TO THE EXTENT OF F 15 LAKHS IN THE NAME OF 3 FAMILY MEMBERS AS WELL AS FROM SHRI DINESHKUMAR AT F 6,91,532/- THERE IS NO EVIDENCE OR CONFIRMATION FROM THE ABOVE LOAN CREDITORS TO PROVE THE CREDITWO RTHINESS, CAPACITY TO LEND AS WELL AS GENUINENESS OF THE TRANSACTION. SINCE, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE FAILED TO EXPLAIN OR SUBSTANTIATE THE GENUINENESS OF THE TRANSACTION, AN AMOUNT OF F26,91,532/- IS ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT. SINCE THE ASSESSEE DID NOT OFFER ANY EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CRE DITS AND FAILED TO I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 79 -: OFFER AN SATISFACTORY EXPLANATION THE ASSESSING OFF ICER HAD ADDED THE ABOVE SAID AMOUNT WITH THE INCOME OF THE ASSESSEE A S UNEXPLAINED CASH CREDITS. THE SAME VIEW IS SUPPORTED BY THE FO LLOWING JUDGMENTS:- 01. SUNSATHI DAYAL VS. CIT (SC) 214 ITR 801. 02. VASANTHI BAI VS. CIT(BOM) 213 ITR 805 03. SRILEKHA BANERII AND OTHERS VS. CIT (SC) 49 ITR 112 . IT IS TO BE NOTED THAT ANY SUM WAS FOUND CREDITED I N THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE EXPLANATION OFF ERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE IS NOT SATISFA CTORY IN THE OPINION OF THE LOWER AUTHORITIES, THE SAME CAN BE ADDED A S UNEXPLAINED CASH CREDITS IN THE BOOKS U/S.68 OF THE I.T. ACT. HENCE, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 34. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ADDITION OF INCOME FROM PR & SONS TO THE TUNE OF F 13,02,664/-. 34.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS CLAIMED A LOSS OF F11,70,450/- FROM THE PR & SONS AND THE LOSS WAS CLAIMED AGAINST THE INCOME DURING THE YEAR. THE ASSESSEE HAS NOT P RODUCED ANY SALE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 80 -: BILLS, PURCHASE & INVOICES OR VOUCHERS FOR BUSINESSES. THE NET SALES OF THE CONCERN IS F26,44,295/-, THEREFORE, THE BOOKS R ESULTS OF THIS CONCERN ARE REJECTED AND THE INCOME IS ESTIMATED AT 5% I.E., 1,32,214/- AS AGAINST LOSS OF F 11,70,449/-. AGGRIE VED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 34.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IN THIS CASE COULD NOT FURNI SH ANY BILLS PURCHASE INVOICES / VOUCHERS COULD NOT SUBSTANTIATE THE LOSS CLAIMED AT F 11,70,449/-. IN THE ABSENCE OF A DETAILED WORKING O UT FOR ARRIVING AT A LOSS OF F 11,70,449/- OUT OF THE NET SALES TURNOVER OF THE CONCERN I.E., PR & SONS AT F26,44,295/-, THE LOSS ARRIVED AT COULD NOT BE GIVEN CREDIT. IN THE ABSENCE OF PROPER EXPLANATION, THE L OWER AUTHORITIES ARE JUSTIFIED IN DISALLOWING THE CLAIM OF LOSS BY REJEC TING THE BOOK RESULTS AND ALSO ESTIMATING THE INCOME AT 5% AND HENCE THE ADDITION MADE BY THE LOWER AUTHORITIES AT F13,02,6641- IS CONFIRMED . THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 81 -: 35. THE NEXT GROUND RAISED BY THE ASSESSEE IS REGARD TO UNACCOUNTED CASH TO THE TUNE OF F7,65,600/- 35.1 THE FACTS OF THE CASE ARE THAT DURING THE COUR SE OF SEARCH PROCEEDINGS ON 05/10/2006 AT THE RESIDENCE OF SHRI P.MURUGESAN, NO.35 & 36, 2ND STREET, NORTH COLONY, NATARAJAPURAM, TANJOR E, CASH OF F3,14,320/- WAS FOUND & INVENTORISED VIDE ANN/MR/C/F-I. OUT OF THIS CASH, THE ASSESSEE SAID THAT F 1,22,620/- BELONGS TO HIMSELF, F 1,75,000/- BELONGS TO PR GROUP OF INSTITUTIONS AND F16,700/- WAS OF HIS WIFE, SMT.MENAKA. FURTHER, THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE REGARDING CASH BALANCE NOR HE IS MAINTAINI NG BOOKS OF ACCOUNT. IN THE ABSENCE OF PROPER EVIDENCE, F3,14,3 20/ HAS BEEN TREATED AS UNACCOUNTED CASH AND HAS TO BE INCLUDED TO THE TOTAL INCOME OF THE ASSESSEE. AGAIN, ON 26/11/06, DURING THE COURSE OF SEARCH PROCEEDINGS IN THE RESIDENCE OF SHRI P,MURUG ESAN AT THE ABOVE ADDRESS, THE TOTAL CASH OF F4,51,2S0/ WAS FOUND & INVENTORISED VIDE ANN/ SR/C/F- 1, DT.26/11/06. SHRI. MURUGESAN WAS NO T IN A POSITION TO EXPLAIN THE SOURCES WITH PROPER EVIDENCE. THE ASSES SEE IS NOT MAINTAINING CASH BOOK FOR THE PERIOD RELEVANT TO A. Y.2007-08. IN REPLY TO THIS OFFICE NOTICE DATED 31-10-2012, THE ASSESSE E REPLIED THAT THE SOURCE FROM WHICH THIS CASH IS SEIZED IS REFLECTED IN THE BOOKS OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 82 -: SPRECT FOR WHICH AN ACCOUNT COPY IS ENCLOSED. HOWEV ER, NO SUCH ACCOUNT HAS BEEN FURNISHED. THERE IS CONTRADICTION IN THE EXPLANATION MADE DURING THE SEARCH AND THAT IS BEING MADE NOW. FURTHER, THE SEIZURE OF THE CASH WAS MADE FROM THE RESIDENCE AND NO PROOF IS PRODUCED TO SHOW THAT THE SPRECT FUNDS WERE CARRIED TO THE HOUSE. HENCE, THE CASH FOUND OF F7,65,600/-(3,14,320 + 4,5 1,280) HAS BEEN HELD AS UNEXPLAINED MONEY AND IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 35.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. D URING THE COURSE OF SEARCH PROCEEDINGS IN THE RESID ENCE OF SHRI P.MURUGESAN AN AMOUNT OF 4,51,280/- WAS FOUND AND SEIZED ON 26.11.2006. SHRI P.MURUGESAN COULD NOT EXPLAIN THE SOURCE OF TH E CASH. SIMILARLY, AN AMOUNT OF 3,14,3201/- WAS ALSO SEIZED FROM THE SAME RESIDENCE OF SHRI P.MURUGESAN ON 05.10.2006 FOR WHICH ALSO THE ASSESS EE COULD NOT EXPLAIN EXCEPT STATING THAT 1,26,620/- BELONGS TO HIMSELF, AND L,75,000/- BELONG TO PR GROUP OF INSTITUTIONS AND 16,700/- BELONG TO HIS WIFE SMT.MENAKA. NONE OF THE SOURCES OF CASH FOUND IN HIS RESIDENTIAL PRE MISES WAS EXPLAINED WITH I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 83 -: SUBSTANTIAL EVIDENCE AND HENCE BOTH THE CASH AMOUNT S TOTALLING TO 7,65,600/- HAS BEEN SEIZED AND HELD AS UNEXPLAINED INCOME AND ADDED TO THE INCOME OF THE ASSESSEE. EVEN THOUGH THE ASSESSEE REPLIED THAT THE CASH SEIZED IS SOURCED FROM THE BOOKS OF SPRECT BUT NO EVIDENCE OR ACCOUNT COPY HAS BEEN PRODUCED EITHER BEFORE THE ASSESSING OFFICER OR BEF ORE THE COMMISSIONER OF INCOME TAX (APPEALS). IT IS THE FACT THAT THE ASSE SSEE FAILED TO LINK ANY EVIDENTIAL PROOF THAT THE FUNDS BELONGING TO SPRECT HAVE BEEN FOUND PLACED IN HIS RESIDENCE ON TWO DIFFERENT DATES. HENCE, WE DO NOT FIND ANY RATIONAL IN THE ARGUMENT OF THE AUTHORISED REPRESENTATIVE OF TH E ASSESSEE AND THE ADDITION MADE BY THE LOWER AUTHORITIES AT 7,65,600/-- IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 36. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO UNEXPLAINED PAYMENTS MADE FOR PROPERTIES TO THE TUN E OF F82,24,580/- 36.1 THE FACTS OF THE ISSUE ARE THAT THERE WERE LO OSE SHEETS FOUND DURING THE SEARCH ACTION IN BUNDLE MARKED ANN:CRK/ LS-4 PAGE NOS.19, 20,21,22, 23,24, 25,26, 27, 28, 29,30,31. T HESE DOCUMENTS INDICATE PAYMENT OF MONEYS BY SHRI P.MURUGESAN FOR PURCHASE OF PROPERTIES. THE ASSESSEE WAS REQUESTED TO STATE WHE RE THE PAYMENTS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 84 -: MENTIONED THEREIN ARE REFLECTED IN HIS ACCOUNTS. A SUMMARY OF THE TRANSACTIONS ARE GIVEN BELOW: PAGE NO. DESCRIPTION NAME OF THE PERSON MAKING THE RECEIPT PROPERTY INVOLVED AMOUNT 19. LETTER FROM U. BUVANESWARI TO P. MURUGESAN D ATED 7.6.2006 REGARDING THE PROPERTY. 20 RECEIPT DT.13.6.06 U. BUVANESWARI DOOR NO.22, RAINBOW ARCADE, THIYAGARAYA RAOD, CHENNAI. 15,00,000/ - 21 RECEIPT DT.13.6.06 U. BUVANESWARI DOOR NO.22, RAINBOW ARCADE, THIYAGARAYA RAOD, CHENNAI 19,00,000/ - 22 RECEIPT DT.09.6.06 U. BUVANESWARI DOOR NO.22, RAINBOW ARCADE, T.NAG AR, CHENNAI 4,00,000/ - 23/24 COPIES OF DDS 667424, 667421, 667423, DATED 21.4.2006 9,05,580/ - 6,19,000/- 10,00,000/- 25 RECEIPT DT.09.6.06 U. BUVANESWARI DOOR NO.22, RAINBOW ARCADE, THIYAGARAYA RAOD, CHENNAI 11,00,000/ - 26 RECEIPT DT.07.4.06 LANDMARK CONSTRUCTIONS, CHENNAI DOOR NO.22, RAINBOW ARCADE, THIYAGARAYA RAOD, CHENNAI 1,00,000/ - 27 DRAFT AFFIDAVIT IN FAVOUR OF K. BALSUBRAMANIAN 28 RECEIPT DT 27.7.06 K. BALASUBRAMANIAN DOOR NO.147, GREAMS ROAD, CHENNAI 3,00,000/ - 29 RECEIPT DT 27.7.06 DOOR NO.147, GREAMS ROAD, CHENNAI 4,00,000/ - 30 DESCRIPTION OF PROPERTY AT DOOR NO.147, GREAMS ROAD , CHENNAI 31 LETTER BY P. MURUGESAN TO SHRI. K.N. SUBRAMANIAN, D ATED 26.04.2006 OFFER OF PURCHASE OF PROPERTY AT DOOR NO.147, GREAMS ROAD, C HENNAI. TOTAL F82,24,580/ - I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 85 -: THE ASSESSEE WAS ASKED BY ASSESSING OFFICER TO FU RNISH THE DETAILS OF TRANSACTION RELATING TO PROPERTIES AT DOOR NO.22,2 3 AND 23L II FLOOR, RAINBOW ARCADE, THYAGARAYA ROAD, T.NAGAR, CHENNAI. THE AR VIDE LETTER DATED 11-02-2013 BY ASSESSING OFFICER STATED THAT HE HAD NOT MADE ANY TRANSACTIONS FOR THE ABOVE SAID PROPERTY. FURTHER, IT WAS STATED THAT THE ABOVE MENTIONED LOOSE SHEETS DO NOT RELATE TO THE ASSESSES. A LETTER WAS WRITTEN BY ASSESSING OFFICER TO INDIAN OVERSEAS BANK, SANTHOME BRANCH, CHENNAI FROM WHERE THE DDS M ENTIONED IN PAGE NO.22,23 AND 24 WERE STATED TO BE PURCHASED. THE BANK HAS FURNISHED THE COPIES OF THE APPLICATIONS FOR DDS MADE BY K.A.SOUNDARAVAILI AND K.A. LAKSHRMI FOR PURCHASE OF DD NOS.667424 FOR 9,05,580/--, 667421 FOR 6,19,OOO/- AND 667423 FOR 10,OO,OOO/-. IT WAS SEEN FROM THE APPLICATIONS FOR DDS THAT THE APPLICATION FOR THE D DS WERE SIGNED BY SHRI P.MURUGESAN ON BEHALF OF SMT K.A.SOUNDARAVALLI AND SMT.K.A.LAKSHMI. THUS, IT IS CLEAR THAT SHRI P. MUR UGESAN HAS TRANSACTED THE ABOVE PROPERTIES AND IS NOT FURNISHI NG THE CORRECT INFORMATION. SINCE THE NARRATION IN THE ABOVE LOOSE SHEETS CLEARLY INDICATE THAT THE PAYMENT OF THE SUMS WERE MADE BY SHRI P.MURUGESAN. THE WHOLE OF THE AMOUNTS STATED TO BE RECEIVED FROM I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 86 -: SHRI P.MURUGESAN BY U.BUVANESWARI AND K.B.SUBRAMANIAM IN THE ABOVE MENTIONED LOOSE SHEETS IS ADDED TO THE TOTAL INCOME AS UNEXPLAINED INVESTMENT IN THE IMMOVABLE MADE BY SH RI P.MURUGESAN. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 36.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF SEARCH SOME DOCUMENTS WERE FOUND AND INVENTORISED AS ANN. /CRK/LS-4 WHEREIN DOCUMENTS NU MBERED FROM 19 TO 31 AS DEPICTED FOR THE TRANSACTION AMOUNTING TO F82,24,580/- INDICATING THE PAYMENT OF MONEY BY THE ASSESSEE FO R PURCHASE OF PROPERTY FROM VARIOUS PARTIES. NONE OF THESE PROPER TIES HAVE BEEN REFLECTED IN THE ASSESSEES BOOKS OR IN HIS RETURNS OF INCOME FILED. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SIMPL Y STATED THAT THE ABOVE TRANSACTIONS WERE NOT RELATED TO THE ASSESSEE WHICH IS NOT PROVED. ON ANALYSING THE MATERIAL ON RECORD AS WELL AS THE ASSESSING OFFICER'S FINDINGS THAT THE DDS TAKEN FOR PURCHASE OF THE ABOVE MENTIONED PROPERTIES FROM THE LOB, SANTHOM BRANCH, CHENNAI WERE, IN FACT, TRANSACTED BY THE ASSESSEE AND ALSO SIGNED BY THE ASSESSEE ON I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 87 -: BEHALF OF MRS. K.S.SUNDARAVALLI AND SMT.K.A.LAKSHMI FOR PURCHASE OF THE ABOVE PROPERTIES. THE ENTIRE AMOUNT IS STATED T O HAVE BEEN RECEIVED BY MRS.U.BUVANESWARI AND K.V.SUBRAMANIAM F ROM P.MURUGESAN AND THEY ARE NOT REFLECTED ANYWHERE IN HIS ACCOUNTS AND ACCORDINGLY NOT SHOWN IN THE RETURN OF INCOME. SIN CE THE ASSESSEE COULD NOT SUBSTANTIATE THE EVIDENCE FOUND AS MENTIO NED ABOVE, THE ENTIRE AMOUNT OF F82,24,580/- IS TREATED AS UNEXPLA INED INVESTMENT IN THE IMMOVABLE PROPERTIES PURCHASED BY THE ASSESSEE AND THESE ARE NOT DEEMED DOCUMENTS. HENCE, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 37. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO SALE OF LAND & BUILDING AT VOC NAGAR, THANJAVUR TO THE TUNE OF F56,61,673/-. 37.1 THE FACTS OF THE CASE ARE THAT DURING THE ASS ESSMENT YEAR THE ASSESSEE HAS SOLD A PROPERTY IN PATTA NO.4013, AT 6 TH WARD, V.O.C.NAGAR, THANJAVUR TO PONNAIAH RAMAJAYAM PUBLIC SCHOOL. THE SALE DEED WAS REGISTERED FOR F25,05,300/-. HOWEVER, THE MARKET VALUE OF THE LAND FOR STAMP DUTY PURPOSES WAS F.68,89,600 /-. THE ASSESSEE WAS REQUESTED TO STATE WHERE THE SALE OF THE ABOVE PROPERTY WAS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 88 -: REFLECTED IN HIS ACCOUNTS AND RETURNS. THE LD. AUTH ORISED REPRESENTATIVE FOR ASSESSEE VIDE LETTER DATED 11-02 -2013 STATED THAT DUE TO THE SURVEY AND SEARCH IN OCTOBER & NOVEMBER 2006 AND DISLOCATION OF THE PAPERS & DOCUMENTS, THIS TRANSACTION REMAIN TO BE ACCOUNTED AND IT IS ACCOUNTED IN THE ACCOUNTING YEA R 2009-10. THE SALE TRANSACTION HAS TAKEN PLACE ON 1.8.2006 AND IS ASSESSABLE TO CAPITAL GAINS FOR THE ASSESSMENT YEAR 2007-08. FURT HER THE PROVISIONS OF 5OC ARE APPLICABLE AS THE VALUE FOR STAMP DUTY PURPOSES IS MORE THAN THE PRICE FOR WHICH IT IS REGISTERED. THEREFOR E, LONG TERM CAPITAL GAIN IS CALCULATED AS UNDER: SINO. DESCRIPTION AMOUNT 1 SALE CONSIDERATION 6889600 2 COST OF PURCHASE 960575 3 INDEX COST OF PURCHASE 1227927 4 LONG TERM CAPITAL GAINS 5661673 THEREFORE, THE LONG TERM CAPITAL GAINS OF F56,61,67 3/- IS BROUGHT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE CIT(A) CO NFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 89 -: 37.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED TH E MATERIAL ON RECORD. THE ASSESSEE HAS NOT SHOWN THE SALE OF PR OPERTY TO PONNAM RAMAJAYAM PUBLIC SCHOOL WHICH TOOK PLACE ON 01.08.2 006 RELATING TO THE AY UNDER CONSIDERATION. HOWEVER THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE IN HIS EXPLANATION STATED THAT DUE TO SEARCH OPERATIONS THIS TRANSACTION COULD NOT BE ACCOUNTED AND IT IS A CCOUNTED IN THE FINANCIAL YEAR 2009-10 INSTEAD OF THE YEAR UNDER CO NSIDERATION. WHEN THE PROPERTY BELONGS TO THE ASSESSEE IN HIS INDIVID UAL CAPACITY WHICH WAS SOLD TO A CHARITABLE INSTITUTION AND ALSO NOT ACCOUNTED THE TRANSACTION DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE COULD NOT SUBSTANTIATE THE CONCEALMENT OF THIS SALE TRANSACTI ON WHICH IS CLEARLY ESTABLISHES THE DEFAULT ON HIS PART AND HENCE THE L OWER AUTHORITIES ARE JUSTIFIED IN CALCULATING THE CAPITAL GAINS ON ACCOU NT 'OF SALE OF LAND AND BUILDING AT VOC NAGAR, THANJAVUR BY APPLYING THE PR OVISIONS OF SECTION 50C WORKING OUT THE LTCG AT F56,61,673/-.WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECT ED. 38. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO NOTIONAL INCOME ON DEPOSIT FOR RENT FOR F5,00,000/- . I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 90 -: 38.1 THE FACTS OF THE ISSUE ARE THAT THE ASSES SEE HAS RECEIVED F3 CRORES FROM SPRECT AS ADVANCE TOWARDS LENDING OUT O F THE GREAMS ROAD PROPERTY TO IT. THE AMOUNT OF DEPOSIT PAID IS AROUND 50% OF THE PURCHASE PRICE OF THAT PROPERTY. THE DEPOSIT MADE I S INTEREST FREE AND IS ABNORMALLY HIGH WHEN VIEWED FROM THE NORMAL COMM ERCIAL PRACTICE. IN VIEW OF THIS, NOTIONAL INTEREST OF 12% ON THE AB OVE DEPOSIT IS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. SINCE THE DEPOSIT OF F2.5 CRORES ON 27-01-2007, INTEREST IS CALCULATED AT 12% FOR TWO MONTHS WHICH WORKS OUT TO F5 LAKHS. AGGRIEVED, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS I N APPEAL BEFORE US. 38.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. AS FAR AS ESTIMATION OF NOTIONAL INCOME I N THE FORM OF INTEREST ON DEPOSIT CALCULATED BY THE ASSESSING OFFICER AT F 5,00,000/- IS CONCERNED, THE ASSESSEE HAS RECEIVED AN AMOUNT OF F 3 CRORES FROM SPRECT AS ADVANCE TOWARDS LETTING OUT OF THE GREAMS ROAD PROPERTY. THUS THE ASSESSING OFFICER HAS CALCULATED THE NOTIO NAL INTEREST OF 12% ON THE ABOVE DEPOSIT KEEPING IN VIEW OF THE NORMAL BUSINESS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 91 -: EXPEDIENCY. THUS THE INTEREST CALCULATED ON THE DEP OSIT OF F2.5 CRORES ON 27.01.2007 AT 12% FOR 2 MONTHS WHICH WORKS OUT T O F 5 LAKHS IS REASONABLE AND HENCE WE REJECT THE GROUND OF THE AP PEAL OF THE ASSESSEE. 39. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO INTEREST LEVIED U/S.234A, 234B AND 234C OF THE ACT. LEVY OF INTEREST U/S 234A, 234B AND 234C ARE CONSEQUENTIAL AND MANDA TORY AND ACCORDINGLY, THE ASSESSING OFFICER HAS TO COMPUTE T HE SAME . IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO .2045/MDS/2013 IS DISMISSED P. MURUGESAN, ITA NO.2036/MDS/2013, ASSESSMENT YEAR 2006-2007 (REVENUE APPEAL) :- 40. THE FIRST GROUND RAISED BY THE DEPARTMENT IN THIS A PPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF GENERATION OF UNACCOUNTED MO NEY IN THE TRUST, SRI PONNAIAH RAMAJAYATHAMMAL EDUCATIONAL & CHARITAB LE TRUST (SPRECT) AS THE COMMISSIONER OF INCOME TAX (APPEALS ) HAS CONFIRMED SUCH ADDITIONS IN HANDS OF THE TRUST (SPRECT) EVEN THOUGH THE TRUST HAS NOT ACCEPTED THE UNACCOUNTED CAPITATION FEES CO LLECTED AS ITS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 92 -: INCOME AND THE MATTER HAS NOT ATTAINED FINALITY IN THE HANDS OF THE TRUST TO TUNE OF F1,08,59,950/-. 40.1 THE FACTS OF THE ISSUE ARE THAT DURING THE C OURSE OF SURVEY IN THE PREMISES OF THE TRUST AT NO.33 & 34, NATARAJAPURAM SOUTH COLONY, THANJAVUR ON 5.10.2 006, TWO FILE FOLDERS WERE IMPOUNDED WITH FOLLOWING DESCRIPTIONS: (I) ANNEXURE KT/IMP/ LS-7 (2) ANNEXURE KT/IMP/LS-13 IMPOUNDED MATERIAL NO.7 IS A GREEN COLOUR VENKATESH WARA FOLDER CONTAINING LOOSE SHEETS SERIALLY NUMBERED FROM 1 TO 352. THE IMPOUNDED SHEETS ARE NOTHING BUT THE 'DAILY ADMISSI ON REPORTS' IN WHICH THE DETAIL'S OF FEE COLLECTED FROM THE STUDEN TS FOR THE VARIOUS COURSES OFFERED ARE ENTERED. THE DAILY ADMISSION R EPORT CONTAINS SEVERAL COLUMNS SUCH AS THE SERIAL NUMBER, NAME OF THE STUDENT, RECEIPT NUMBER, AMOUNT OF FEE COLLECTED, BALANCE AM OUNT PAYABLE AND FINALLY, THE REMARKS COLUMN. AGAINST THE COLUMN 'AM OUNT/DD', THE AMOUNT OF FEE COLLECTED BOTH IN THE FORM OF DD AND CASH ARE WRITTEN. HOWEVER, WHILE WRITING THE AMOUNT, THE LAST THREE D IGITS ARE OMITTED. FOR EXAMPLE, IN ANNEXURE KT/IMP/LS-7, IN LOOSE SHEE T NO.219 AGAINST SI.NO.1, COLLECTION OF F30,000/ BY WAY OF DD IS WRI TTEN AS' 30/DD'. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 93 -: SIMILARLY, AGAINST SI.NO.9, FEE OF F75,000/ RECEIVE D IN CASH IS SHOWN AS 'F75/-CASH'. IN ALL THE 'DAILY ADMISSION REPORT WHE RE THERE WAS CASH COLLECTION, ON THE REVERSE PAGE OR THE FRONT PAGE I TSELF OF THE DAILY ADMISSION SHEET, 'DENOMINATIONS OF CASH COLLECTION IS ALSO MENTIONED'. THE TOTAL AMOUNT OF FEE COLLECTED FROM THE STUDENTS IN 'CASH' DURING THE FINANCIAL YEARS 2004-2005; 2005-02006 AND 2006- 2007 ARE GIVEN BELOW: FINANCIAL YEAR AMOUNT (T) 2004-05 (18.2.2005 TO 4.3.2005) 3,30,000 (INCLUDED IN CORPUS DONATION) 2005-2006 1,08,89,950 2006-2007 (1.6.2006 TO 29.9.2006) 1,78,14,200 TOTAL 2,90,34,150 VERIFICATION FROM THE WORKING COPY CD CONTAINING BO OKS OF ACCOUNTS MAINTAINED IN THE COMPUTER OF THE TRUST IN TALLY SO FTWARE AND SEIZED SHOWS THAT THE ABOVE RECEIPTS FOR THE PERIOD FINANC IAL YEAR 2004-05 WERE NOT REFLECTED/NOT ENTERED IN THE BOOKS OF ACCO UNTS. MATERIALS IN THESE ANNEXURE KT/IMP/LS-7 AND KT/IMP/LS-13 INDICAT E COLLECTION OF CAPITATION FEES BY THE TRUST. DURING THE COURSE OF SEARCH & SURVEY OPERATIONS, IT WAS FOUND THAT THE ASSESSEE IS MAINT AINING HIS OWN SYSTEM OF ACCOUNTING OF RECEIPTS. IT IS FOUND THAT THE COURSE FEE IS COLLECTED IN THE FORM OF DEMAND DRAFTS AND THE CAPI TATION FEES BY WAY I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 94 -: OF CASH. DAILY ADMISSION REPORTS PREPARED BY SHRI K . DEVASENATHIPATHI, IN-CHARGE OF NEW ADMISSION & COLLECTION OF CASH & DD AND SEIZED MATERIAL VIDE ANNEXURE NO. KT/LMP/LS-7 AND KT/IMP/L S-13 ARE EVIDENCE FOR THE COLLECTION OF CAPITATION FEES IN C ASH. SHRI MURUGESAN HIMSELF ADMITTED THE SAME IN HIS STATEMENT VIDE ANS WER TO Q.NO.26 & 53 ON 25.11.2006 AND Q.NO.2, 3 ON 28.11.2006 AND Q. NO.5 & 6 ON 1.12.2006 THAT THE CORPUS DONATIONS/CAPITATION FEE S IS NOT ENTERED INTO THE REGULAR BOOKS OF ACCOUNTS AS & WHEN THE SAME IS RECEIVED. THESE AMOUNTS ARE KEPT SEPARATELY WITH HI M FOR ENTIRE YEAR AND OUT OF THE SAID FUNDS, HE INCURS THE EXPENDITUR E ON BEHALF OF THE TRUST AND AT THE END OF THE YEAR, A JOURNAL ENTRY W ILL BE PASSED TO THAT EFFECT. THE ASSESSEE HAD STATED THAT AT THE END OF THE YEAR THE BUILDINGS CREATED WILL OCCUPY THE ASSETS SIDE OF TH E BALANCE SHEET AND LEFT OUT CAPITATION FEES IS ACCOUNTED IN THE LIABIL ITY SIDE OF THE BALANCE SHEET. IT WAS CLAIMED THAT HE WILL SUBMIT A SEPARAT E SHEET CONSISTING ALL THE RECEIPT & PAYMENTS OF THE CAPITATION FEES & OTHER DONATION TO THE ACCOUNTS DEPARTMENT FOR MAKING NECESSARY JOURNA L ENTRIES AT THE END OF THE YEAR. APEX COURT IN THE CASE OF MOHINI JAIN (MISS) VLS. STATE OF KARNATAKA AND OTHERS (1992) 2 SCC 666 CONSIDERED THE ISSUE OF CAPITATION FEE COLLECTED BY THE PRIVATE EDUCATIO NAL INSTITUTIONS. IT HELD THAT CAPITATION FEE IS NOTHING BUT A PRICE FOR SELLING EDUCATION. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 95 -: THE CONCEPT OF TEACHING SHOPS IS CONTRARY TO THE CO NSTITUTIONAL SCHEME AND IS WHOLLY ABHORRENT TO THE INDIAN CULTURE AND H ERITAGE. SOME OF THE STATE LEGISLATURES PASSED LEGISLATION PROHIBITI NG THE COLLECTION OF CAPITATION FEE AND ALSO MADE THE SAME AS A PUNISHAB LE OFFENCE. THE SUPREME COURT IN THE EASE OF ISLAMIC ACADEMY OF EDUCATION AND ANOTHER V/S. STATE OF KARNATAKA AND ANR. (2003) 6 SCC 697 DIRECTED ALL THE STATE GOVERNMENTS TO CONSTITUTE A COMMITTEE HEA DED BY A HON'BLE RETIRED HIGH COURT JUDGE FOR PRESCRIBING FEE STRUCT URE FOR PROFESSIONAL COLLEGES. THE APEX COURT FURTHER HELD THAT IF ANY A MOUNT IS CHARGED OTHER THAN THE FEE PRESCRIBED BY THE COMMIT TEE UNDER ANY HEAD OR GUISE THE SAME WOULD AMOUNT TO CAPITATION F EE. THEREFORE, COLLECTION OF MONEY OVER AND ABOVE THE FEE PRESCRIB ED BY THE COMMITTEE WOULD AMOUNT TO COLLECTION OF CAPITATION FEE WHICH IS CONTRARY TO THE CONSTITUTIONAL SCHEME AND PROHIBITE D BY STATE ENACTMENTS. AS THE DECISION OF THE SUPREME COURT IS LAW OF THE LAND, ANY ACT IN CONTRAVENTION TO THE ABOVE WOULD BE AGAI NST PUBLIC POLICY AND NO TRUST DEED CAN AUTHORIZE AN ACT WHICH IS AGA INST CONSTITUTIONAL SCHEME OR AGAINST PUBLIC POLIC Y. THE SEIZED MATERIALS IN THE CASE OF SPRECT READ IN CONJUNCTION WITH THE STA TEMENTS RECORDED FROM THE MANAGING TRUSTEE SHRI.P.MURUGESAN, SHRI K.DEVASENATHIPATHY, INCHARGE OF NEW ADMISSION & COLLECTION OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 96 -: CAPITATION FEES, SHRI R.PRABHAKARAN SAMDASS, ACCOUN TS OFFICER AND INTERNAL AUDITOR OF ' SPRECT ' ESTABLISHES THE FOLL OWING: 40.2 THE MONEY COLLECTED IN CASH AS CAPITATIO N FEE IS HANDED OVER REGULARLY TO THE MANAGING TRUSTEE, SHRI P.MURU GESAN. THE MANAGING TRUSTEE THEN ACCUMULATES THE 'MONEY AND SP ENDS THE SAME FOR ACQUISITION OF ASSETS. THERE ARE NO DOCUMENTS R EGARDING TRANSFER OF MONEY FROM SPRECT TO THE MANAGING TRUSTEE. NO RECEI PTS ARE ISSUED AGAINST CAPITATION FEE COLLECTED IN CASH. DURING TH E COURSE OF SEARCH PROCEEDINGS, DOCUMENTS HAVE BEEN FOUND & SEIZED WHICH STANDS AS CONCRETE EVIDENCE REGARDING COLLECTION OF CAPITATIO N FEE IN CASH AND SUBSEQUENTLY TRANSFER OF THE SAME IN THE FORM OF RE GULAR STATEMENTS PREPARED BY THE COLLEGE AUTHORITIES. THUS, AT ANY G IVEN POINT OF TIME, THE MANAGING TRUSTEE WILL HAVE THE HANDFUL OF MONEY OF THE TRUST FOR EXPENDITURE/ INVESTMENTS. THE ABOVE EVIDENCES GO TO PROVE THAT THE MANAGING TRUSTEE, P.MURUGESAN RECEIVES REGULAR MONE Y COLLECTED AS CAPITATION FEE. ON VERIFICATION OF THE DOCUMENTS FO R THE PERIOD RELEVANT TO AY 2006-07, F1,08,59,950/, HAS BEEN COLLECTED B Y THE TRUST AS CAPITATION FEE AND PASSED ON TO SHRI P.MURUGESAN, T HE MANAGING TRUSTEE OF THE SPRECT. THE ASSESSEE WAS REQUESTED B Y ASSESSING OFFICER TO OFFER HIS COMMENTS AS TO WHY SUCH CAPITA TION FEES COLLECTED I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 97 -: BY HIM SHOULD NOT BE TREATED AS HIS INCOME. THE ASS ESSEE VIDE LETTER DT. 21.11.2012 STATED THAT SPRECT IS MAINTAINING RE GULAR BOOKS OF ACCOUNTS AND THE CORPUS DONATION IS DULY ACCOUNTED FOR. AS DETAILED ANALYSIS MADE IN THE ASSESSMENT OF SPRECT IT IS QUITE CLEAR THAT NO PROPER BOOKS WERE MAINTAINED FOR COLLECTION OF SUCH CAPITATION FEES IN CASH. IT IS SEEN FROM THE DETAILS FILED IN THE RET URNS FOR ASSESSMENT YEARS 2001-02 TO 2007-08 THAT THE ASSESSEE HAS CLAI MED CORPUS DONATIONS AS DETAILED BELOW: ASSESSMENT YEARS CORPUS DONATION ( ) 2001-02 14,62,000 2002-03 81,34,975 2003-04 21,91,000 2004-05 23,21,000 2005-06 21,75,000 2006-07 1,09,00,000 2007-08 2,95,03,750 FROM THE ABOVE TABLE IT WAS VERY CLEAR THAT THE CAP ITATION FEES COLLECTED IN THE PREVIOUS YEARS' RELEVANT TO A.Y. 2 001-02 TO 2005-06 WERE GROSSLY UNDER REPORTED. FOR THE A.Y.S 2006-07 AND 2007-08, THE RETURNS WERE FILED ONLY AFTER THE SEARCH AND THERE IS NO CLAIM OF 'CORPUS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 98 -: DONATIONS' MADE IN THE COMPUTATION OF INCOME U/S 11 OF THE IT ACT, BUT THEY WERE REFLECTED IN THE RECEIPTS AND PAYMENT S ACCOUNTS. BUT MATERIALS SEIZED AT THE TIME OF SEARCH ON 5.10.2006 VIDE ANNEXURE KT/IMP/LS-7 AND ANNEXURE KT/IMP/LS-13(DAILY ADMISSI ON REPORTS) AND OTHER MATERIALS COLLECTED DURING POST SEARCH EN QUIRIES INDICATED COLLECTION OF CAPITATION FEES IN CASH TO THE EXTENT OF F1,08,89,950 FOR 2006-07 AND F3,01,86,771/- FOR A.Y.2007-08. IT IS A LSO VERY EVIDENT THAT THE CAPITATION FEES WERE CORRECTLY REPORTED ON LY BECAUSE OF THE SURVEY AND SEARCH OPERATIONS. THEREFORE, IF THERE I S NO SURVEY AND SERACH OPERATION, SRI. P. MURUGESAN WOULD HAVE CONT INUED TO MISUSE HIS OFFICE AS MANAGING TRUSTEE OF THE TRUST SPRECT AND NOT ONLY COLLLECT ILLEGAL CAPITATION FEES BUT ALSO UNDER REP ORT THE COLLECTION OF CAPITATION FEES AND USE THE SAME FOR HIS PERSONAL PURPOSES. THEREFORE, SUCH ILLEGAL CAPITATION FEES COLLECTED IS TO BE ASS ESSED IN THE HANDS OF SRI. P. MURUQESAN. ON VERIFICATION OF THE DOCUMENTS FOR THE PERIOD RELEVANT TO ASSESSMENT YEAR 2007-08 F3,19,56,172/-, IT IS SEEN THAT MONEY HAS BEEN COLLECTED BY THE TRUST AS CAPITATION FEE VIDE ANN/MR/ B&D/S PAGE 7-16, DATED 11.12.2006. OUT OF THIS TOTA L FEE COLLECTED IN CASH OF F3,01,86,771/- INCLUDES F1,76,940/- DRAWN FROM BANK. HENCE, F3,01,86,771/-HAS BEEN HELD AS CASH RECEIVED ON ACC OUNT OF CAPITATION FEE AND HAD BEEN PASSED ON TO SHRI P.MUR UGESAN, THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 99 -: MANAGING TRUSTEE OF THE SPRECT. HENCE, F3,01,86,771 /- HAS TO. BE TREATED AS UNACCOUNTED CAPITATION FEES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE PERIOD RELEVANT TO A.Y.20 07-08, HENCE, F1,08,59,950/- HAS BEEN TREATED AS. UNEXPLAINED MON EY AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE PERIOD REL EVANT TO AY 2006-07. THIS INCOME IS ASSESSED IN THE HANDS OF THE TRUST S PRECT SUBSTANTIVELY. THEREFORE, IT IS ASSESSED IN THE HAN DS OF THE INDIVIDUAL PROTECTIVELY. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) DELETED THIS ADDITION AS THIS ONLY PR OTECTIVELY MADE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 40.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ADDITION MADE BY THE ASSESSING OFFICER IN THE CASE OF THE ASSESSEE AT F1,08,59,950/- AS UNEXPLAINED MONEY ON ACCOUNT OF CAPITATION FEES COLLECTED BY THE MANAGING TRUSTEE D URING THE YEAR UNDER CONSIDERATION ON PROTECTIVE BASIS IS DELETED AS THE SAME ADDITION IS SUSTAINED IN THE CASE OF THE TRUST ASSESSMENT. T HE ASSESSINGO OFFICER HAS ALSO MADE THE ADDITION IN THE CASE OF SPRECT AS SESSMENT ON ACCOUNT OF CAPITATION FEES COLLECTED AT F1,08,59,9 50/-WHICH WAS UNACCOUNTED AND ADDED AS UNEXPLAINED INCOME ON SUBS TANTIATE BASIS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 100 -: AND HENCE THE OSAME IS CONFIRMED IN THE TRUST ASSES SMENT. THEREFORE THE SAME CANNOT BE AGAIN ASSESSED IN THE HANDS OF T HE ASSESSEE. HENCE, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE DEPART MENT IS DISMISSED. 41. THE SECOND GROUND RAISED BY THE DEPARTMENT IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION ON ACCOUNT OF GIFT OF EDUCATIONAL INSTITUTIONS AT N ATHAM AS HE HAD CONFIRMED SUCH ADDITION IN THE HANDS OF THE TRUST, SRI PONNAIAH RAMAJAYATHAMMAL EDUCATIONAL AND CHARITABLE TRUST (S PRECT), EVEN THOUGH THE TRUST HAS NOT ACCEPTED SUCH ADDITION AND THE MATTER HAS NOT ATTAINED FINALITY IN THE HANDS OF THE TRUST (SP RECT). 41.1 THE FACTS OF THE ISSUE ARE THAT THE SPRECT GIF TED THREE EDUCATIONAL INSTITUTIONS AT NATHAM TO M/S. TITAN EDUCATION TRUST, THIS GIFT WAS CONVEYED THROUGH TWO GIFT DEEDS :- (I) ONE WITH DOC. NO.2023/2005 DATED 28.12.2005. SCHEDULE OF PROPERTIES TRANSFERRED THROUGH THIS GIFT DEED INDIC ATE TRANSFER OF 7 ACRES AND 46 CENTS IN PUNNAKKUDI VILLAGE, NATHARN TALUK, ANOTHER 3.875 HECTORS 9 ACRES AND 57 CENTS AND ANOTHER PAR CEL OF LAND TOTALING I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 101 -: 3 ACRES 34 CENTS.THE TWO. PARCELS OF LANDS ARE SITU ATED IN PUNNAKKUDI VILLAGE, NATHAM TALUK. MARKET VALUE F6,45,750/-. (II) ANOTHER GIFT DEED WITH DOC.NO.78/2006 DATED 19 .01.2006.SHEDULE OF PROPERTIES AS PER THIS GILL DEEDS:- THREE EDUCAT IONAL INSTITUTIONS FUNCTIONING AT ULUPPAKKUDI VILLAGE, NAMELY, A) P.R.COLLEGES OF ARTS AND SCIENCE, B) NATHAM P.R: COLLEGE OF EDUCATION AND C) NATHAM PR. COLLEGE OF TRAINING INSTITUTE. CONSIDERATION FOR THE TRANSFER IS MENTIONED AS . NIL'. HOWEVER THE MARKET VALUE OF THE PROPERTY MENTIONED IN THE DEED WAS F 1,06,00,000/- AND THE VALUE FIXED BY STAMP AUTHORIT Y WAS F1,29,32,524/- AND THE VALUE AS PER THE. VALUATION REPORT BY ARUL M URUGAN DESIGNES, DINDIGUL DATED 12.1.2.006 WAS F1,8 2,00,000/-. THE VALUE OF THE SAID ASSETS MENTIONED IN' RECEIPTS AN D PAYMENTS A/C. FILED SHOW THE ENTRY 'BY ASSETS TRANSFERRED TO TITA N F1,52,52,410.75. VIDE NOTICE U/S.142(1) THE ASSESSEE WAS REQUESTED T O EXPLAIN THE TRANSACTION OF GIFT OF THE ABOVE MENTIONED INSTITUT IONS. THE LD. AR VIDE LETTER DATED 21.11.2012 STATED AS UNDER: WE WISH TO STATE THAT, THE SPREC TRUST GIFTED THREE EDUCATIONAL INSTITUTIONS . AT NATHAM BY WAY OF REGISTERED GIFT DEEDS. IT IS ADMITTED FACT THAT THE TRANSFER WAS BY A CHARITABLE TRUST TO ANOTHER CHARITABLE TRUST. IT IS ALSO AN ADMITTED F ACT THAT THERE IS NO I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 102 -: CONSIDERATION FOR THE TRANSFER. A SETTLEMENT REACHED BETWEEN TWO INDEPENDENT TRUST, BOTH WORKING FOR ADVANCEMENT OF EDUCATION. THE SPREC TRUST HAD NOT SOLD ANY OF THE EDUCATIONAL INS TITUTIONS BUT HAD ONLY, TRANSFERRED BY WAY OF GIFT. TO ANOTHER CH ARITABLE INSTITUTION. THE GIFT DEEDS HAVE ALSO BEEN DULY REG ISTERED WITH THE REGISTRAR OF ASSURANCES. THE ASSESSING OFFICER IN THE CASE OF SPRECT, IN THE SET ASIDE ASSESSMENT COMPLETED ON 31.12.2010 HAS DISCUSSED TH E ISSUE AT. LENGTH AND HAS COME TO THE CONCLUSION THAT THE MANA GING TRUSTEE SHRI P.MURUGESAN WAS NOT AUTHORIZED BY THE TRUST DE ED TO MAKE GIFT OF ITS ASSETS, DID NOT ACT IN A FIDUCIARY CAPACITY AND CAUSED LOSS TO THE TRUST BECAUSE OF GIFTING OF PROPERTY VALUED AT F1.82 CRORES. THE RELEVANT PORTION FROM THE ASSESSMENT ORDER ARE REPRODUCED HERE; 12.2.E) THE MANAGING TRUSTEE, EVEN IF HE HAPPENS TO BE THE FOUNDER TRUSTEE, IN HIS 'FIDUCIARY' CAPACITY OF A 'TRUSTEE' CANNOT FRITTER AWAY THE VALUABLE PROPERTI ES OF THE TRUST FOR NOTHING - THOUGH THE RECIPIENT TRU ST MAY HAVE SIMILAR OBJECTS. THE TRUST SPRECT HAS NOT MADE OUT A CASE FOR ANY BENEFIT DERIVED IN ITS FAVO UR OUT OF THE GIFT. AT THE POINT OF TIME OF GIFTING OF THE TRUST PROPERTIES THE TRUST HAD LIABILITIES I) LOANS OF RS.12.22 CRORES, II) CURRENT LIABILITIES OF RS.1.35 CRORES AND III) ADVANCE RECEIVED FROM TRUSTEES OF RS.2 1 ,87,141/ - AS FOUND FROM THE DETAILS AVAILABLE IN THE BALANCE SHEET AS AT' 31.3. 2006 FILED FOR A.Y. 2006-07. HENCE, THE GIFTING AWAY OF THE THREE EDUCATIONAL INSTITUTIONS AT NATHARN IS DETRIMENTAL TO THE INTERESTS OF THE TRUST. ANY TRUS TEE OF A PUBLIC CHARITABLE TRUST ACTING PRUDENTLY WOULD NOT NORMALLY GIVE AWAY TRUST PROPERTIES FOR NOTHING. NO PALPABLE ADVANTAGE GAINED FOR THE DONOR TRUST HAS BEEN BROUGHT ON RECORD. THE MANAGING TRUSTEE WHO IS PRIVY TO ALL THE FACTS SURROUNDING THE GIFT ALONE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 103 -: CAN REVEAL' THE REAL CAUSE FOR MAKING SUCH GIFT. HE THERE BY CAUSED LOSS TO THE TRUST WHICH IS INJURIOU S TO THE TRUST. ANY TRUST, BEING AN INANIMATE PERSON, CANNOT FUNCTION ON ITS OWN AND HAS TO FUNCTION ONLY THROUGH ITS TRUSTEES. WHEN THERE IS SOME MISCHIEF CARRIED ON BY THE MANAGING TRUSTEE, THE VALUE OF TH E PROPERTY LOST HAS TO BE MADE GOOD TO THE TRUST. 12.4 TAKING INTO ACCOUNT THE TOTALITY OF THE CIRCUMSTANCES NAMELY, A) THE MANAGING TRUSTEE IS NOT AUTHORIZED BY THE TRUST DEED TO MAKE GIFT OF ITS ASSETS B) THE REASONS AS PER THE RESOLUTION PASSED ON 28.12.2005 'DUE TO OPERATIONAL DIFFICULTIES AND ADMINISTRATIVE REASONS' ARE TOO VAGUE' C) THE TRUST SPRECT WAS HAVING A MINOR AS TRUSTEE AT THE TIME OF GIFT ON 28. 12. 2005. D) THERE IS NO OCCASION OR HUMAN PROBABILITY FOR MAKING A GIFT OF F1.82 CRORES WORTH THREE EDUCATIONA L INSTITUTIONS TO TOTALLY A NEW TRUST M/S. TET WHICH CAME INTO EXISTENCE ONLY ON 1-10-2005; M/S TET HAS NO TRACK RECORD OF RUNNING EDUCATIONAL INSTITUTIONS WHEN IT RECEIVED THE GIFT ON 28.12.2005 AND M/S TET HAVING BEEN REGISTERED U/S 12AA AND GRANTED RECOGNITION U/S 80G ONLY ON 18-07-2006, I HOLD THAT I) SPRECT, BY ITS ABOVE ACT HAS NOT APPLIED ITS FUNDS / PROPERTIES FOR THE PURPOSES FOR WHICH IT WAS ESTABLISHED AND HENCE NOT ENTITLED TO THE EXEMPTION U/ S 11 OF THE ACT. 12.5 AS POINTED OUT IN PARA 12. 2 E, THE MANAGING I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 104 -: TRUSTEE OF THE ASSESSEE TRUST 'SPRECT' HAS TO MAKE GOOD THE LOSS INCURRED BY THE TRUST BECAUSE OF GIFT ING OF PROPERTY VALUED AT F 1.82 CRORES. THE TRUST MAY HAVE TO RECOVER THE SAME FROM THE MANAGING TRUSTEE. THIS AMOUNT OF F 1.82 CRORES IS DEEMED AS INCOME OF THE TRUST BECAUSE OF THE IMPERMISSIBLE GI FT TO TET. THE SUM OF F 1.82 CRORES IS DEEMED -AS INCOME OF THE ASSESSEE TRUST (RECOVERABLE FROM THE MANAGING TRUSTEE) AND HENCE THE SAME IS ADDED TO THE TOTAL INCOME FOR THE ASSESSMENT YEAR 2006-07 AND BROUGHT TO TAX. IN VIEW OF THE ABOVE FINDING THE VALUE OF THE PROPE RTIES GIFTED, F 1,82,00,000/- IS ASSESSED IN THE HANDS OF SHRI P.MU RUGESAN AS INCOME FROM OTHER SOURCES. THIS INCOME IS ASSESSED IN THE HANDS OF THE TRUST SPRECT (RECOVERABLE FROM THE MANAGING TRU STEE) SUBSTANTIVELY. THEREFORE, IT IS ASSESSED IN THE HAN DS OF THE INDIVIDUAL PROTECTIVELY . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) DELETED THE ADDITION OF THE ASSESSING OFFICER. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 41.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 41.3 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSEE IS THE CHAIRMAN OF SRI PONNAIAH RAMAJAYAT HAMML EDUCATIONAL I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 105 -: CHARITABLE TRUST (SPRECT). THE SAID TRUST BY TWO DE EDS OF GIFT DULY REGISTERED WITH THE REGISTRAR OF ASSURANCES GIFTED THE FOLLOWING ED UCATIONAL INSTITUTIONS TO TITAN EDUCATIONAL TRUST, ALSO A CHARITABLE TRUST. A)P.R.COLLEGES OF ARTS AND SCIENCE, B) NATHAM P.R: COLLEGE OF EDUCATION AND C)NATHAM PR. COLLEGE OF TRAINING INSTITUTE. THE MARKET VALUE OF THE PROPERTIES ADOPTED BY THE S UB-REGISTRAR FOR QUANTIFYING THE STAMP DUTY WAS F1,82,00,000/-. THE LOWER AUTHORITI ES HAS TREATED THE SAID SUM AS INCOME OF SPRECT ON A PROTECTIVE BASIS; AND ADDED I T AS INCOME IN THE HANDS OF THE ASSESSEE. THE LD. AUTHORISED REPRESENTATIVE FOR AS SESSEE SUBMITED THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER , QUASI JUDICIAL AUTHORITY. ON THIS GROUND ITSELF THE ADDITION IS L IABLE TO BE DELETED. IT WAS AN ADMITTED FACT THAT THE TRANSFER WAS BY SPRECT, A C HARITABLE TRUST. IT WAS ALSO AN ADMITTED FACT THAT THERE IS NO CONSIDERATION BY THE TRANSFER. THAT BEING SO, THERE CAN BE NO INCOME IN THE HANDS OF SPRECT. IN ANY EV ENT, WE ARE AT A LOSS TO UNDERSTAND AS TO HOW IT COULD BE CONSIDERED IN THE HAND OF THE ASSESSEE. NO REASON IS GIVEN BY THE ASSESSING OFFICER FOR HIS ACTION. E VEN GOING BY THE SAID ORDER OF THE ASSESSMENT OF MR. VISWANANTHAN, THE ASSESSING OFFIC ER COULD NOT HAVE MADE THE ADDITION. IN THE SAID ORDER OF ASSESSMENT OF MR. V ISWANANTHAN, HIS ASSESSING OFFICER HAS CONCLUDED THE TRANSACTION. (I) AS A GIFT MADE BY SPRECT (II) THE GIFT HAD BEEN MADE TO MR.V1SWANANTHAN, INDIVIDU AL. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 106 -: (III) IN ACCORDANCE WITH SEC. 56, THE GIFT HAVING BEEN RE CEIVED FROM A 'NON RELATIVE; IT IS TO BE TREATED AS INCOME FROM OTHER SOURCES. THUS, IT WAS SUBMITTED THAT THE FINDINGS OF THE ASSESSING OFFICER IN RESPECT OF MR. VISWANANTHAN, ARE IN NO WAY AGAINST THE CLAIM OF SP RECT OF THE ASSESSEE. IN FACT THE CONCLUSIONS GO TO SUPPORT AND ADVANCE THE CLAIM OF SPRECT. THE ADDITION MADE BY THE AO IS TOTALLY UNSUSTAINABLE IN LAW AND IS THEREFORE LIABLE TO BE DELETED. 41.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CONSIDERED THE REASONS GIVEN FOR THE ADDITIONS MADE IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS MADE AN ADDITION OF F1.82 CRORES IN THE CASE OF THE ASSESSEE EVEN THOU GH ON PROTECTIVE BASIS ON ACCOUNT OF GIFT OF EDUCATIONAL INSTITUTION S AT NATHAM AT F1,82,00,000/-. THE ASSESSING OFFICER HAS ELABORAT ELY DISCUSSED IN HIS ASSESSMENT ORDER WHEREIN IT WAS HELD THAT THE V ALUE OF THE PROPERTIES GIFTED AT F1,82,00,000/ - IS ASSESSED IN THE HANDS OF SHRI. P.MURUGESAN AS INCOME FROM OTHER SOURCES AND ALSO S TATED THAT THIS INCOME IS ASSESSED IN THE HANDS OF THE TRUST SPRECT SUBSTANTIVELY AND ASSESSED THE SAME IN THE HANDS OF THE ASSESSEE PROTECTIVELY. SINCE THE ADDITION IS ONLY ON PROTECTIVE BASIS AND THE SAME ADDITION IS CONFIRMED IN THE CASE OF THE TRUST NO ADDITION OF THE SAME AMOUNT AGAIN IS REQUIRED TO BE ADDED IN THE HANDS OF THE A SSESSEE. THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 107 -: RELIANCE WAS PLACED BY BOTH PARTIES ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF SONIA BHATIA VS. STATE OF UTTA R PRADESH 2 SCC 585 IS NOT RELEVANT TO THE FACTS OF THE PRESENT CAS E. HENCE, WE DELETE F1,82,00,000/- IN THE HANDS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THIS GROUND OF THE APPEAL OF T HE REVENUE IS REJECTED. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 2036/MDS/2013 IS DISMISSED. P. MURUGESAN, ITA NO.2037/MDS/2013, FOR THE ASSESSM ENT YEAR 2007- 2008 (REVENUE :- 42. THE FIRST GROUND RAISED BY THE DEPARTMENT IN THIS A PPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN D ELETING THE ADDITION ON ACCOUNT OF GENERATION OF UNACCOUNTED MO NEY IN THE TRUST, SRI PONNAIAH RAMAJAYATHAMMAL EDUCATIONAL & CHARITAB LE TRUST (SPRECT) AS HE HAD CONFIRMED SUCH ADDITIONS IN HAND S OF THE TRUST (SPRECT) EVEN THOUGH THE TRUST HAS NOT ACCEPTED THE UNACCOUNTED CAPITATION FEES COLLECTED AS ITS INCOME AND THE MA TTER HAS NOT ATTAINED FINALITY IN THE HANDS OF THE TRUST SPRECT. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 108 -: 42.1 THE FACTS OF THE CASE ARE THAT DURING THE C OURSE OF SURVEY IN THE PREMISES OF THE TRUST OFFICE AT NO. 33 & 34, NATARAJAPURAM SOUTH COLONY, THANJAVUR ON 5.10.2 006, TWO FOLDERS WERE IMPOUNDED WITH FOLLOWING DESCRIPT IONS; (1) ANNEXURE KT/IMP/ LS-7 (2) ANNEXURE KT/IMP/ LS-13 IMPOUNDED MATERIAL NO.7 IS A GREEN COLOUR VENKATESH WARA FOLDER CONTAINING LOOSE SHEETS SERIALLY NUMBERED FR OM 1 TO 352. THE IMPOUNDED SHEETS ARE NOTHING BUT THE 'DAILY ADMISSI ON REPORTS' IN WHICH THE DETAILS OF FEE COLLECTED FROM THE STUDENT S FOR THE VARIOUS COURSES OFFERED ARE ENTERED. THE DAILY ADMISSION RE PORT CONTAINS SEVERAL COLUMNS SUCH AS THE SERIAL NUMBER, NAME OF THE STUDENT, RECEIPT NUMBER, AMOUNT OF FEE COLLECTED, BALANCE AM OUNT PAYABLE AND FINALLY, THE REMARKS COLUMN. AGAINST THE COLUMN 'AM OUNT/DD', THE AMOUNT OF FEE COLLECTED BOTH IN THE FORM OF DD AND CASH ARE WRITTEN. HOWEVER, WHILE WRITING THE AMOUNT, THE LAST THREE DIGITS ARE OMITTED., FOR EXAMPLE, IN ANNEXURE KT/IMP/LS-7, IN LOOSE SHEE T NO.219 AGAINST SI.NO.L, COLLECTION OF F30,000/- BY WAY OF DD IS WR ITTEN AS '30/-DD'. SIMILARLY, AGAINST SI.NO.9, FEE OF F75,000/- RECEIV ED IN CASH IS SHOWN AS F75/- CASH'. IN ALL THE 'DAILY ADMISSION REPO RT WHERE THERE WAS CASH COLLECTION, ON THE REVERSE PAGE OR THE FRONT P AGE ITSELF OF THE DAILY I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 109 -: ADMISSION SHEET, 'DENOMINATIONS OF CASH COLLECTION IS ALSO MENTIONED'. THE TOTAL AMOUNT OF FEE COLLECTED FROM THE STUDENTS IN 'CASH' DURING THE FINANCIAL YEARS 2004-2005; 2005-2006 AND 2006-2 007 ARE GIVEN BELOW: FINANCIAL YEAR AMOUNT (T) 2004-05 (18.2.2005 TO 4.3.2005) 3,30,000 (INCLUDED IN CORPUS DONATION) 2005-2006 1,08,89,950 2006-2007 (1.6.2006 TO 29.9.2006) 1,78,14,200 TOTAL 2,90,34,150 VERIFICATION FROM THE WORKING COPY CD CONTAINING BO OKS OF ACCOUNTS MAINTAINED IN THE COMPUTER OF THE TRUST IN TALLY SO FTWARE AND SEIZED SHOWS THAT THE ABOVE RECEIPTS FOR THE PERIOD FINANCIAL YEAR 2004-05 WERE NOT REFLECTED/NOT ENTERED IN THE BOOKS OF ACCOUNTS. MATERIALS IN THESE ANNEXURE KT/IMP/LS-7 AND KT/IMP/ LS-13 INDICATE COLLECTION OF CAPITATION FEES BY THE TRUST. . DURI NG THE COURSE OF SEARCH & SURVEY OPERATIONS, IT WAS FOUND THAT THE ASSESSEE IS MAINTAININGO HIS OWN SYSTEM OF ACCOUNTING OF RECEIPTS. IT IS FOUND T HAT THE COURSE FEE IS COLLECTED IN THE FORM OF DEMAND DRAFTS AND THE CAPI TATION FEES BY WAY OF CASH. DAILY ADMISSION REPORTS PREPARED BY SHRI K . DEVASENATHIPATHI, IN-CHARGE OF NEW ADMISSION & COLLECTION OF CASH & DD AND SEIZED I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 110 -: MATERIAL VIDE ANNEXURE NO. KT/IMP/LS-7 AND KT/IMP/L S-13 ARE EVIDENCE FOR THE COLLECTION OF CAPITATION FEES IN CASH. SHR I MURUGESAN HIMSELF ADMITTED THE SAME IN HIS STATEMENT VIDE ANSWER TO Q.NO. 26 & 53 ON 25.11.2006 AND Q.NO. 2 & 3 ON 28.11.2006 AND Q.NO. 5 & 6 ON 1.12.2006 STATED THAT THE CORPUS DONATIONS/CAPITATION FEES IS NOT ENTERED INT O THE REGULAR 'BOOKS OF ACCOUNTS AS & WHEN THE SAME IS RECEIVED. THESE AMOUNTS ARE KEPT S EPARATELY WITH HIM FOR ENTIRE YEAR AND OUT OF THE SAID FUNDS, HE INCURS THE EXPENDITURE ON BEHALF OF THE TRUST AND AT THE END OF THE YEAR, A J OURNAL ENTRY WILL BE PASSED TO THAT EFFECT. THE ASSESSEE HAD STATED THAT AT THE EN D OF THE YEAR THE BUILDINGS CREATED WILL OCCUPY THE ASSETS SIDE OF THE BALANCE SHEET AND LEFT OUT CAPITATION FEES IS ACCOUNTED IN THE LIABILITY SIDE OF THE BALA NCE SHEET. IT WAS CLAIMED THAT HE WILL SUBMIT A SEPARATE SHEET CONSISTING ALL THE RECEIPT & PAYMENTS OF THE CAPITATION FEES & OTHER DONATION TO THE ACCOUNTS DEPARTMENT FOR MAKIN G NECESSARY JOURNAL ENTRIES AT THE END OF THE YEAR. T HE SUPREME COURT IN THE CASE OF MOHINI JAIN (MISS) VLS. STATE OF KARNATAKA AND OTHE RS (1992) 2 SCC 666 CONSIDERED THE ISSUE OF CAPITATION FEE COLLECTED B Y THE PRIVATE EDUCATIONAL INSTITUTIONS. IT HELD THAT CAPITATION FEE IS NOTHIN G BUT A PRICE FOR SELLING EDUCATION. THE CONCEPT OF TEACHING SHOPS IS CONTRAR Y TO THE CONSTITUTIONAL SCHEME AND IS WHOLLY ABHORRENT TO THE INDIAN CULTUR E AND HERITAGE. SOME OF THE STATE LEGISLATURES PASSED LEGISLATION PROHIBITI NG THE COLLECTION OF CAPITATION FEE AND ALSO MADE THE SAME AS A PUNISHAB LE OFFENCE. THE SUPREME COURT IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION AND ANOTHER V/S. STATE OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 111 -: KARNATAKA AND ANR . (2003) 6 SCC 697 DIRECTED ALL THE STATE GOVERNMENTS TO CONSTITUTE A COMMITTEE HEADED BY A H ON'BLE RETIRED HIGH COURT JUDGE FOR PRESCRIBING FEE STRUCTURE FOR PROFESSIONAL COLLEGES. THE SUPREME COURT FURTHER HELD THAT IF ANY AMOUNT I S CHARGED OTHER THAN THE FEE PRESCRIBED BY THE COMMITTEE UNDER ANY HEAD OR GUISE, THE SAME WOULD AMOUNT TO CAPITATION FEE. THEREFORE, COLLECTION OF MONEY OVER AND ABOVE THE FEE PRESCRIBED BY THE COMMITTEE WOULD AMOUNT TO COLLECTION OF CAPITATION FEE WHICH IS CONTRARY TO THE CONSTITUTIONAL SCHEME AND PROHIBITE D BY STATE ENACTMENTS. AS THE DECISION OF THE SUPREME COURT IS LAW OF THE LAND, ANY ACT IN CONTRAVENTION TO THE ABOVE WOULD BE AGAI NST PUBLIC POLICY AND NO TRUST DEED CAN AUTHORIZE AN ACT WHICH IS AGA INST CONSTITUTIONAL SCHEME OR AGAINST PUBLIC POLICY. THE SEIZED MATERI ALS IN THE CASE OF SPRECT READ IN CONJUNCTION WITH STATEMENTS RECORDED FROM THE MANAGING TRUSTEE SHRI.P.MURUGESAN, SHRI K.DEVASENAT HIPATHY, INCHARGE OF NEW ADMISSION & COLLECTION OF CAPITATION SHRI R. PRABHAKARAN SAMDASS, ACCOUNTS OFFICER AND INTERNAL AUDITOR OF 'SPRECT' ESTABLISHES THE FOLLOWING: 42.2 THE MONEY COLLECTED IN CASH AS CAPITATION FEE IS HANDED OVER REGULARLY TO THE MANAGING TRUSTEE, SHRI P.MURUGESAN . THE MANAGING TRUSTEE THEN ACCUMULATES THE MONEY AND SPENDS THE S AME FOR I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 112 -: ACQUISITION OF ASSETS. THERE ARE NO DOCUMENTS REGAR DING TRANSFER OF MONEY FROM SPRECT TO THE MANAGING TRUSTEE. NO RECEI PTS ARE ISSUED AGAINST CAPITATION FEE COLLECTED IN CASH. DURING TH E COURSE OF SEARCH PROCEEDINGS, DOCUMENTS HAVE BEEN FOUND & SEIZED WHICH STANDS AS CONCRETE EVIDENCE REGARDING COLLECTION OF CAPITATIO N FEE IN CASH AND SUBSEQUENTLY TRANSFER OF THE SAME IN THE FORM OF RE GULAR STATEMENTS PREPARED BY THE COLLEGE AUTHORITIES. THUS, AT ANY G IVEN POINT OF TIME, THE MANAGING TRUSTEE WILL HAVE THE HANDFUL OF MONEY OF THE TRUST FOR EXPENDITURE/INVESTMENTS. THE ABOVE EVIDENCES GO TO PROVE THAT THE MANAGING TRUSTEE, P,MURUGESAN RECEIVES REGULAR MONE Y COLLECTED AS CAPITATION FEE. ON VERIFICATION OF THE DOCUMENTS FO R THE PERIOD RELEVANT TO AY 2006-07, F1,08,59,950/-, HAS BEEN CO LLECTED BY THE TRUST AS CAPITATION FEE AND PASSED ON TO SHRI P.MUR UGESAN, THE MANAGING TRUSTEE OF THE SPRECT. 42.3 THE ASSESSEE WAS REQUESTED TO OFFER HIS COMMENTS AS TO WHY SUCH CAPITATION FEES COLLECTED BY HIM SHOULD NOT BE TREATED AS HIS INCOME. THE ASSESSEE VIDE LETTER DT. 21.11.2012 STA TED THAT SPRECT IS MAINTAINING REGULAR BOOKS OF ACCOUNTS AND THE CORPU S DONATION IS DULY ACCOUNTED FOR. AS DISCUSSED IN THE ABOVE PARA AND T HE DETAILED ANALYSIS MADE IN THE ASSESSMENT OF SPRECT IT IS QU ITE CLEAR THAT NO PROPER BOOKS WERE MAINTAINED FOR COLLECTION OF SUCH CAPITATION FEES IN I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 113 -: CASH. IT WAS SEEN FROM THE DETAILS FILED IN THE RE TURNS FOR ASSESSMENT YEARS 2001-02 TO 2007-08 THAT THE ASSESSEE HAS CLAI MED CORPUS DONATIONS AS DETAILED BELOW:- ASSESSMENT YEA RS CORPUS DONATION (RS.) 2001-02 14,62,000 2002-03 81,34,975 2003-04 21,91,000 2004-05 23,21,000 2005-06 21,75,000 2006-07 1,09,00,000 2007-08 2,95,03,750 FROM THE ABOVE TABLE IT IS VERY CLEAR THAT THE CAPI TATION FEES COLLECTED IN THE PREVIOUS YEARS' RELEVANT TO A.Y. 2001-02 TO 2005-06 WERE GROSSLY UNDER REPORTED. FOR THE A.Y.S 2006-07 AND 2 007-08, THE RETURNS WERE FILED ONLY AFTER THE SEARCH AND THERE IS NO CLAIM OF 'CORPUS DONATIONS' MADE IN THE COMPUTATION OF INCOM E U/S 11 OF THE IT ACT, BUT THEY WERE REFLECTED IN THE RECEIPTS AND PA YMENTS ACCOUNTS. BUT MATERIALS SEIZED AT THE TIME OF SEARCH ON 5.10. 2006 VIDE ANNEXURE KT/IMP/LS-.7 AND ANNEXURE KT/IMP/LS-13(DAILY ADMISS ION REPORTS) AND OTHER MATERIALS COLLECTED DURING POST SEARCH EN QUIRIES INDICATED COLLECTION OF CAPITATION FEES IN CASH TO THE EXTENT OF F1,08,89,950/- FOR 2006-07 AND F3,01,86,771/- FOR A.Y.2007-08. IT WAS ALSO VERY EVIDENT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 114 -: THAT THE CAPITATION FEES WERE CORRECTLY REPORTED ON LY BECAUSE OF THE SURVEY AND SEARCH OPERATIONS. THEREFORE, BUT FOR T HE SURVEY AND SEARCH OPERATION, SRI. P. MURUGESAN WOULD HAVE CONT INUED TO MISUSE HIS OFFICE AS MANAGING TRUSTEE OF THE TRUST SPRECT AND NOT ONLY COLLECT ILLEGAL CAPITATION FEES BUT ALSO UNDER REPO RT THE COLLECTION OF AND USE THE SAME FOR HIS PERSONAL PURPOSES. THEREFORE, SUCH ILLEGAL CAPITATION FEES COLLECTED IS TO BE ASSESSED IN THE HANDS OF SRI. P. MURUGESAN. ON VERIFICATION OF THE DOCUMENTS FOR T HE PERIOD RELEVANT TO ASSESSMENT YEARS 2001-02 TO 2007-2008 HAS BEEN C OLLECTED BY THE TRUST AS CAPITATION FEE (VIDE ANN/MR/B&D/S PAGE 7-1 6 DT.11/12/06) SHOWS THAT OUT OF THIS TOTAL FEE COLLECTED IN CASH OF RS.3,19,56,172/- INCLUDES RS.1,76,940/- DRAWN FROM BANK. HENCE, F3, 01,86,771/- HAS BEEN HELD AS CASH RECEIVED ON ACCOUNT OF CAPITATION FEE AND HAS BEEN PASSED ON TO SHRI P.MURUGESAN, THE MANAGING TRUSTEE OF THE SPRECT. HENCE, F3,01,86,771/- HAS BEEN TREATED AS UNEXPLAI NED MONEY AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE P ERIOD RELEVANT TO A.Y.2007-08. THIS INCOME IS ASSESSED IN THE HANDS O F THE TRUST SPRECT SUBSTANTIVELY. THEREFORE, IT IS ASSESSED IN THE HAN DS OF THE INDIVIDUAL PROTECTIVELY. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) REVERSED THE THE ORDER OF THE ASSESSI NG OFFICER ON THIS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 115 -: ISSUE. AGAINST THIS, THE DEPARTMENT IS IN APPEAL B EFORE US. 42.4 WE HAVE HEARD BOTH THE SIDES AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. AS DISCUSSED IN PARA 40.3 OF THIS ORDER IN ITA NO.2036/MDS/2013, THIS GROUND IS DISMISSED. 43. THE NEXT GROUND RAISED BY THE DEPARTMENT IS THAT TH E COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING THE ADDITION ON ACCOUNT OF CASH SEIZURE OF F1 CRORE AT AIRPORT AS HE HAD CONFIRMED SUCH ADDITIONS IN THE HANDS OF THE TRUST, SRI PONNAIAH RAMJAYATHAMMAL EDUCATIONAL & CHAIRTBLE TRUST EVEN T HOUGH THE TRUST HAS NOT ACCEPTED SUCH ADDITION AND THE MATTER HAS NOT ATTAINED FINALITY IN THE HANDS OF THE TRUST. 43.1 THE FACTS OF THE ISSUE ARE THAT BASED ON THE INFORMATION RECEIVED FROM AIU, NEW DELHI, SHRI. P. MURUGESAN, C HAIRMAN, SPRECT WAS INTERCEPTED AT CHENNAI AIRPORT WHILE ALIGHTING LC 540. F1 CRORE IN CASH HAS BEEN RECOVERED FROM SHRI P.MURUGESAN. SHRI P.MURUGESAN IN HIS SWORN STATEMEN T RECORDED U/S 131 ON 5/111/06 COULD NOT EXPLAIN THE SOURCES FOR T HE SAME. HE GAVE CONTRADICTORY REPLIES IN THE STATEMENT. FINALLY, HE HAS ADMITTED THAT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 116 -: THE CASH AMOUNTING TO F1 CRORE WAS UNACCOUNTED. WHI LE ANSWERING TO Q.NO.77 & 78 SAYS THAT THE ENTIRE CASH IS UNACCOUNTED AND AGR EES TO PAY TAX ON F1 CRORE. IN RESPONSE TO NOTICE U/S 142( 1) DATED 31-10- 2012 SEEKING EXPLANATIONS FOR SOURCES FOR THE CASH OF F1 CRORE FOUND AT AIRPORT ON 5.11.2006, THE AR REPLIED THAT 'THE S OURCE FOR WHICH CASH SEIZED WAS REFLECTED IN THE BOOKS OF SPRECT, F OR WHICH ACCOUNTS COPY IS ENCLOSED'. PURCHASE ADVANCE LEDGER ACCOUNT OF SPRECT IS ENCLOSED. IN THIS ACCOUNT, ON 1.11.2006, A DEBIT EN TRY HAS BEEN MADE TO CORPUS DONATION ACCOUNT, CORPUS DONATION ACCOUNT ED F1,12,30,000/-. THEN ON 28.11.2006, AN AMOUNT OF F 1 CRORE IS CREDITED BY INCOME-TAX DEPOSIT BEING THE AMOUNT SEI ZED BY THE INCOME-TAX DEPARTMENT AT CHENNAI AIRPORT. DURING TH E SEARCH, IT WAS NOTICED THAT THERE WERE NO ACCOUNTS WRITTEN FOR COR PUS DONATION. THE ASSESSING OFFICER IN THE CASE OF SPRECT, IN THE SET ASIDE ASSESSMENT COMPLETED ON 31.12.2010 HAS DISCUSSED THE ISSUE AT LENGTH AND HAS COME TO THE CONCLUSION THAT THE MONEY OF F1 CRORE S EIZED FROM SHRI P.MURUGESAN IS NOT SATISFACTORILY EXPLAINED IN THE HANDS OF THE TRUST SPRECT. HENCE, THE AMOUNT OF F 1 CRORE, SEIZED FR OM THE AIRPORT HAS BEEN TREATED AS UNACCOUNTED INCOME OF SHRI P.MU RUGESAN AND HAS BEEN ADDED TO THE TOTAL INCOME OF ASSESSEE FOR THE PERIOD RELEVANT TO A.Y.2007-08. THIS INCOME IS ASSESSED IN THE HANDS OF THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 117 -: TRUST SPRECT SUBSTANTIVELY. THEREFORE, IT IS ASSESS ED IN THE HANDS OF THE INDIVIDUAL PROTECTIVELY. AGGRIEVED, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE AP PEAL OF THE ASSESSEE . AGAINST THIS, THE DEPARTMENT IS IN APP EAL BEFORE US. 43.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS ADDITION OF F 1,00,00,000/- SEIZED FROM THE ASSESSEE AT CHENNAI AIRPORT IS CONCERNED, THE ASSESSEE IN HIS STATEMENT RECORDED ON 5.11.2006 STATED THAT IT WAS HIS UNACCOUNTED INCOME AND HE WILL PAY TAX THEREON. LAT ER ON, THE ASSESSEE HAS RETRACTED HIS EARLIER STATEMENT ON 27. 11.2006 STATING THAT THE MONEY SEIZED BELONGS TO THE TRUST SPRECT. S INCE THE SAME AMOUNT HAS BEEN ADDED IN THE CASE OF THE TRUST SUBSTANTIVELY AS THE UNACCOUNTED INCOME OF THE TRUS T BASED ON THE STATEMENT GIVEN BY THE ASSESSEE AND THE SAME IS CO NFIRMED IN THE HANDS OF THE TRUST AND TO THAT EXTENT RELIEF IS GIV EN TO THE ASSESSEE. HENCE, THIS GROUND OF THE APPEAL OF THE DEPARTMENT IS REJECTED. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 2037/MDS/2013 IS DISMISSED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 118 -: 43.3 THE ASSESSEE HAS FILED STAY PETITIONS NOS. 368 TO 373/MDS/2015 SEEKING STAY OF OUTSTANDING DISPUTED DEMAND OF TAX. SINCE, WE HAVE DISPOSED OFF ALL THE APPEALS OF THE ASSESSEE H EREIN, THE STAY PETITIONS ARE DISMISSED AS INFRUCTUOUS. SRI PONNAIYAH RAMAJAYATHAMMAL EDUCATIONAL AND CHARI TABLE TRUST. ITA NOS.1884 TO1890/MDS/2013, ASSESSMENT YEARS 2001 -02 TO 2007-08 (ASSESSEE APPEALS). 44. THESE SEVEN APPEALS ARE FILED BY THE ASSESSEE DIREC TED AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALLI, DATED 08.08.2013. SINCE THE ISSUE S IN THESE APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED, HE ARD TOGETHER, AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE 45. THE FIRST GROUND 1(A) AND 1(B) RAISED BY THE ASSES SEE IS GENERAL IN NATURE, WHICH DOES NOT REQUIRE ANY ADJUDICATION . 46. THE SECOND COMMON GROUND RAISED BY THE ASSESSEE IN THESE APPEALS IS THAT THE ORDER PASSED BY THE ASSESSING O FFICER AND I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 119 -: CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEAL S) SUFFERED FROM VIOLATION OF PRINCIPLES OF NATURE JUSTICE. 46.1. THE FACTS OF THE ISSUE ARE THAT THE ASSES SEE TRUST SRI PONNAIAH RAMAJAYATHAMMAL EDUCATIONAL & CHARITABLE TRUST (HE REINAFTER IN SHORT SPRECT), THANJAVUR WAS CREATED THROUGH A TRUST DEED DATED 18.08.1989 (DOCUMENT NO.153/1989 - REGISTERED BEFOR E THE JOINT REGISTRAR-IL, THANJAVUR). THE FOUNDER OF THE TRUST IS SHRI P. MURUGESAN, S/O PONNAIAH, AGED 33 YEARS AT THAT TIME. THE FOUND ER TRUSTEE APPOINTED HIMSELF AS MANAGING TRUSTEE AND ALSO APPO INTED SIX OTHER TRUSTEES. AT THE TIME OF INCEPTION, THE TOTAL NUMBE R OF TRUSTEES ARE SEVEN. THE MAIN OBJECTS OF THE TRUST ARE: 1) TO SP READ HIGHER TECHNICAL, ENGINEERING, MEDICAL AND BUSINESS EDUCAT ION IN THE INDUSTRIALLY BACKWARD TALUKS OR DISTRICTS OF TAMILN ADU, 2) TO CREATE NECESSARY AND ADEQUATE TECHNICAL AND ENGINEERING SK ILL IN THE YOUTHS 01 THE COUNTRY AND 3) TO SERVE THE YOUNGER GENERATI ONS OF THIS COUNTRY BY MEANS OF EDUCATION IN GENERAL OR INDUSTR IAL, TECHNICAL VOCATIONAL, PROFESSIONAL, MANAGEMENT, MEDICINE EITH ER BY WAY OF RESIDENTIAL COURSES OR CORRESPONDENCE COURSES. THE TRUST DEED WAS AMENDED FOUR TIMES, VIZ., 230/1994 DT.12.8.1994, 44 5/1998, DT 9.10.1998, 498/1998 DT.16.11.1998 AND 881/2004 DT. 9.11.2004. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 120 -: THOUGH THE TRUST WAS CREATED ON 18.08.1989, IT FILE D APPLICATION FOR REGISTRATION U/S. 12AA ONLY ON 11.9.1998 AFTER A CONSIDERABLE DELAY O F 8 YEARS. THE COMMISSIONER OF INCOME-TAX, TIRUCHIRAP ALLI GRANTED REGISTRATION U/S 12AA OF THE I.T.ACT IN C.NO.6162-E (133)/98-99/TRY DT. 02.12.1998 W.E.F 11.09.1998. IT WAS ALSO MENTIONED IN THE ORDER THAT REGISTRATION DOES NOT AUTOMATICALLY MEAN THAT ITS I NCOME WILL BE EXEMPT U/S 11 & 12 OF THE ACT, WHICH WILL BE EXAMIN ED INDEPENDENTLY BY THE ASSESSING OFFICER. REGISTRATION GRANTED U/S. 12AA OF THE IT ACT WAS CANCELLED BY THE COMMISSIONER OF INCOME-TAX, CE NTRAL-II, CHENNAI VIDE HIS PROCEEDINGS IN C.NO.2860/I/08-09/C-II DATED 30/03/2009 FOR REASONS DISCUSSED IN THAT ORDER. AGGRIEVED BY THE C ANCELLATION OF REGISTRATION, THE ASSESSEE TRUST FILED AN APPEAL BE FORE THE TRIBUNAL, CHENNAI. THE TRIBUNAL IN ITS ORDER IN ITA NO. 647MD S/09 DT. 10.12.2009 WHILE ALLOWING THE ASSESSEE'S APPEAL, HE LD VIDE PARA 10 AT PAGES 10 AND 11 AS BELOW: IN OUR CONSIDERED OPINION, THE SHOW CAUSE NOTICE IS SUED IN THIS CASE IS NOT A VALID SHOW CAUSE NOTICE AND DESE RVES TO BE QUASHED. EVEN IF VARIOUS IRREGULARITIES WERE FOU ND TO HAVE BEEN COMMITTED BY THE MANAGING TRUSTEE, IT IS THE DUTY OF THE ID. CIT TO GIVE SHOW CAUSE NOTIC E OF SPECIFIC PROPOSED GROUNDS TO THE ASSESSEE-TRUST AND ONLY AFTER CONSIDERING THE EXPLANATION GIVEN BY THE TRUS T HE COULD HAVE COME TO ANY CONCLUSION BASED ON THE FACT S AND LAW IN THOSE CIRCUMSTANCES. BUT IN THIS CASE, T HE SHOW CAUSE NOTICE ITSELF IS VAGUE AND THE ID. CIT HAS NO T EVEN GIVEN PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE . CONSEQUENTLY, WE QUASH THE IMPUGNED SHOW CAUSE NOTICE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 121 -: AS WELL AND RESTORE THE CERTIFICATE GRANTED U/S 12A A OF THE ACT' IT IS TO BE NOTED THAT THIS CASE THE ASSESSING OFFI CER COMPLETED THE ASSESSMENTS FOR ASSESSMENT YEARS 2001-02 TO 2007-08 ON 31.12.2008. AGGRIEVED AGAINST THE ASSESS MENTS MADE BY THE ASSESSING OFFICER THE ASSESSEE FILED APPEALS BE FORE THE THEN COMMISSIONER OF INCOME-TAX (APPEALS), TRICHY. THE C IT(APPEALS) VIDE ORDERS IN ITA NOS.483/08-09 TO 489/08-09 DATED 9.11 .2009 CONFIRMED THE ADDITIONS MADE. THE ASSESSEE TOOK UP THE MATTER BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ITS ORDERS IN ITA NOS.1 832 TO 1838/MDS/2009 FOR ASSESSMENT YEARS 2001-02 TO 2007- 08 DATED 11.2.2010 SET ASIDE THE ORDERS OF THE ASSESSING OFF ICER AND CIT(A), AND REMITTED THE MATTER BACK TO THE ASSESSING OFFIC ER FOR ALL THE YEARS FOR DE NOVO CONSIDERATION, AFTER GIVING OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS RETURNS AND FURNISH ALL DETAILS. THE TR IBUNAL ALSO OBSERVED: 'NEEDLESS TO SAY THAT WHILE FRAMING THE FRESH ASSES SMENTS THE ASSESSING OFFICER WILL CONSIDER ALL THE EXPLANA TIONS FURNISHED BY THE ASSESSEE, AND PROCEED IN ACCORDANC E WITH LAW. THE LEGAL ISSUE OF VALIDITY OF ASSESSMENT IS K EPT OPEN'. AS PER THE DIRECTIONS OF THE TRIBUNAL, CHENNAI, THE ASSESSING OFFICER CONSIDERED ALL THE MATERIALS FILED AND DISCUSSED TH E SAME AT APPROPRIATE PLACES IN THE ASSESSMENT ORDER. AFTER H EARING THE ASSESSEE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 122 -: TRUST, THE ASSESSING OFFICER COMPLETED THE ASSESSME NTS ON 24.12.2010. FOR ALL THE ASSESSMENT YEARS, VIZ., 2001-02 TO 2007 -08 THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME TA X (APPEALS) CHALLENGING THAT PROPER OPPORTUNITY OF HEARING HAS NOT BEEN GIVEN TO ASSESSEE BY THE ASSESSING OFFICER. 46.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OBSER VED THAT THE CASES BEING POSTED FOR HEARING BEFORE THE ASSESSING OFFICER AS UNDER:- NOTICE ISSUED ON HEARING POSTED ON APPELLANT APPEARED ON 26.03.2010 12.4.2010 AR APPEARED 05.05.2010 AR APPEARED 20.05.2010 03.06.2010 SOUGHT ADJOURNMENT 28.05.2010 07.06.2010 AR APPEARED 07.06.2010 21.06.2010 AR APPEARED AND ADJOURNED TO 05.07.2010 09.05.2010 13.08.2010 SOUGHT ADJOURNMENT TO 20.08.2010 08.10.2010 13.10.2010 SOUGHT ADJOURNMENT VIDE LETTER DATED 12.10.2010 13.10.2010 19.10.2010 AR APPEARED AND ADJOURNED TO 28.10.2010 26.10.2010 28.10.2010 AR APPEARED 10.11.2010 15.11.2010 DETAILS FILED. 46.3 ON VERIFYING THE DATES OF HEARING FROM THE ASS ESSMENT ORDERS IT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 123 -: IS AMPLY CLEAR THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT NUMBER OF OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE TRUST AND THE ALLEGATIONS MADE BY THE AUTHORISED REPRESENTATIVE OF THE ASSESS EE ARE NOT TENABLE AND SINCE THE ISSUES ARE COMMONLY DEALT, SEVERAL OP PORTUNITIES OF BEING HEARD HAVE NE ACCORDED TO THE ASSESSEE TRUST AS WE LL AS TO THE MANAGING TRUSTEE WHOSE CASES ARE TAKEN UP SIMULTANE OUSLY AS A GROUP CONCERN. THERE IS NO TRUTH IN THE ALLEGATIONS MADE BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT THE MATERIALS S EIZED DURING THE COURSE OF SEARCH U/S 132 AS WELL AS CONNECTED TO SU CH PROCEEDINGS, A SURVEY WAS ALSO CONDUCTED U/S. 133A IN THE CASE OF THE ASSESSEE TRUST WHEREIN HUGE INCRIMINATING MATERIALS WERE FOUND AN D THE SAME HAS BEEN ANALYSED BY THE ASSESSING OFFICER AND PROPER A SSESSMENTS HAVE BEEN FORMED KEEPING IN VIEW OF THE MATERIALS SEIZED /IMPOUNDED. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED, CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFICER. AGAIN ST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 46.4 WE HAVE HEARD BOTH THE SIDES AND PERUSED TH E MATERIAL ON RECORD. IN THE ASSESSMENT ORDER, THE ASSESSING OFFI CER HAS CLEARLY BROUGHT OUT THE CHRONOLOGY OF EVENTS, TO CONCLUDE T HAT THE ASSESSEE HAS NOT CO-OPERATED IN THE ASSESSMENT PROCEEDINGS. MOREOVER, DURING I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 124 -: THE APPEAL PROCEEDINGS, THE COMMISSIONER OF INCOME TAX (APPEALS) HAD GRANTED ENOUGH OPPORTUNITY TO THE ASSESSEE TO P UT FORTH HIS CASE. THEREFORE THERE IS NO FORCE IN THESE GROUNDS. HENC E, WE REJECT THE GROUND OF THE APPEAL OF THE ASSESSEE. 47. THE THIRD GROUND RAISED BY THE ASSESSEE IS THAT THE ASSESSMENT VITIATED ON ACCOUNT OF LACK OF JURISDICTION U/S.153 A OF THE ACT. 47.1 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE ASS ESSEE COUNSEL IS THAT THERE WAS NO SEARCH IN THE ASSESSEES CASE AN D THERE WAS NO MATERIAL FOUND DURING THE COURSE OF SEARCH U/S.132 OF THE ACT. THE SEARCH TOOK PLACE IN THE CASE OF TITAN EDUCATIONAL TRUST. BEING SO, THE ASSESSMENT WAS TO BE FRAMED U/S.153C OF THE ACT AFT ER RECORDING STATEMENT. ACCORDING TO LD. AUTHORISED REPRESENTAT IVE FOR ASSESSEE BOTH THE CONDITIONS TO FRAME ASSESSMENT EITHER U/S .153A OR 153C IS NOT FULFILLED. SHE RELIED ON THE JUDGMENT IN THE CA SE OF SMT. RAJKUMARI CHANDK VS. DCIT IN T.C.A. NO.2202/06, DATED 29.04. 2015 AND IN THE CASE OF ANJUGA CHIT FUNDS (P) LTD VS. DCIT 113 TTJ 869. HOWEVER, WE FIND THAT THERE WAS SEARCH ON 05.10.2006, AND ON 25.10.2006 AT CHENNAI AIRPORT WHEREIN F1 CRORE WAS SEIZED BY THE DEPARTMENT AND I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 125 -: ALSO SEARCH WAS CONDUCTED ON 26.11.2006. BEING SO, WE ARE IN FULL AGREEMENT WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) WITH REGARDING TO INITIATING PROCEEDINGS U/S.153A OF THE ACT. THIS GROUND OF THE ASSESSEE IS REJECTED. 48. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO REJECTION OF CLAIM OF EXEMPTION U/S.11 OF THE INCOM E TAX ACT. 48.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE REJECTION OF EXEMPTION CLAIMED U/S 11 OF THE ACT. H E OUGHT TO HAVE NOTED THAT ALL CONDITIONS SET OUT FOR THE CLAIM OF EXEMPTION HAVE BEEN SATISFIED BY THE ASSESSEE IN FULL. THE COMMISSIO NER OF INCOME-TAX (APPEALS) ERRED IN CONCLUDING THAT THE ASSESSEE T RUST HAS NOT BEEN MAINTAINING PROPER BOOKS OF ACCOUNTS. IT IS REITERA TED THAT PROPER, FULL AND COMPLETE BOOKS OF ACCOUNTS ARE MAINTAINED BY TH E ASSESSEE AND ALL DETAILS CALLED FOR BY THE LOWER AUTHORITIES DUL Y PRODUCED. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN STATI NG THAT VOLUNTARY CORPUS DONATIONS RECEIVED HAVE NOT BEEN ACCOUNTED F OR BY THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) FURTHER ERRED IN STATING THAT THE ASSESSEE HAS COLLECTED CAPITATIO N FEE WHICH IS WHOLLY I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 126 -: CONTRARY TO FACT. THE CORPUS DONATIONS HAVE BEEN VO LUNTARILY MADE BY STUDENTS AND THIRD PARTIES AND ARE APPLIED IN FULL TOWARDS THE OBJECTS OF THE TRUST. COMPLETE DOCUMENTATION HAS BEEN MAINTAIN ED BY THE ASSESSEE IN REGARD TO THE SAME. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE CONCLUSION OF THE ASSESSING OFFICER THAT THE DONATIONS RECEIVED HAVE NOT BEEN APPLIED B Y THE ASSESSEE FOR THE PURPOSE OF FULFILLMENT OF ITS OBJECTS. THE ASSESSEE DENIES THE STATEMENT OF THE MANAGING TRUSTEES, SHRI R. PRABAKA RAN SAMDOSS AND SHRI K. DEVASENAPATHY TO THE EFFECT THAT THE DONATI ONS RECEIVED ARE NOT ACCOUNTED FOR. THIS IS WHOLLY INCORRECT IN SO F AR AS COMPLETE DOCUMENTATION IS MAINTAINED IN RESPECT OF THE RECEI PT OF DONATIONS AS WELL AS UTILIZATION THEREOF FOR THE PURPOSE OF ITS OBJECTS. THE COMMISSIONER OF INCOME-TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE CONCLUSION OF THE ASSESSING OFFICER THAT THERE HAS BEEN DIVERSION, BY THE MANAGING TRUSTEE OF FUNDS RECEIVED IN THE FORM OF DONATIONS, FOR PERSONAL BENEFIT. IN FACT SUBSTANTIAL MATERIAL HAS BEEN PRODUCED BEFORE THE LOWER AUTHORITIES TO SUBSTANTIATE THE SUBMISSIO NS THAT THE MANAGING TRUSTEE HAS INDEPENDENT SOURCES OF INCOME AND NO TRUST FUNDS HAVE BEEN DIVERTED. THE SUBMISSIONS MADE IN THIS REGARD AND THE VOLUMINOUS DOCUMENTATION PRODUCED HAVE BEEN WHO LLY DISREGARDED BY THE COMMISSIONER OF INCOME- TAX (APP EALS) WHILE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 127 -: CONFIRMING THE ORDER OF ASSESSMENT. THE COMMISSIONE R OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE REJECTION OF CLAI M OF EXEMPTION WITHOUT PASSING A SPEAKING ORDER IN THIS REGARD, BU T MERELY REITERATING THE CONCLUSIONS OF THE ASSESSING OFFICER WITHOUT EV EN DISCUSSING THE SAME IN THE LIGHT OF THE ASSESSEE'S SUBMISSIONS AND MATERIALS PRODUCED. 48.2. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDERS OF THE LOWER AUTHORITIES AND ALSO RELIED ON THE ORDERS OF SHRI DIGAMAR JAIN NAYA MANDIR VS. ACIT, 70 ITD 121 AND VODITHALA EDUC ATION SOCIETY VS. ACIT (EXEMPTIONS) 20 SOT 353. 48.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. WE HAVE GONE THROUGH THE ISSUE REGARDING D ENIAL OF EXEMPTION U/S.11 OF THE I.T. ACT, WHEREIN THE LOWER AUTHORITIES HAS ELABORATELY DISCUSSED IN THEIR ORDERS AND GIVEN REA SONS FOR DENIAL OF EXEMPTION U/S 11 OF THE I.T. ACT AFTER CONSIDERING THE SUBMISSIO NS OF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE, IT IS A FACT THAT THE ASSESSEE TRUST HAS NOT MAINTAINED PROPER BOOKS OF A CCOUNTS AND HAS NOT ACCOUNTED ALL THE DONATIONS TAKEN OVER AND ABOV E THE PRESCRIBED FEE BY THE GOVT. OF TAMILNADU ORDER FOR COLLECTION OF FEE TOWARDS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 128 -: PROFESSIONAL COLLEGES. SIMPLY BECAUSE A PORTION OF CORPUS DONATIONS RECEIVED IS APPLIED IN THE CONSTRUCTION OF BUILDIN G BY THE ASSESSEE TRUST EXEMPTION CLAIMED U/S 11(1)(A), DENIED BY THE ASSESSING OFFICER IS ON VALID GROUNDS AS THE ASSESSEE HAS NOT ACCOU NTED CORPUS DONATIONS RECEIVED AGAINST THE INTENT OF THE LEGISL ATURE. THE RELIANCE PLACED BY THE ASSESSING OFFICER IN THE CASE OF MOHINI JAIN VS STATE OF KAMATAKA AND OTHERS ( 1992) 2 SCC 666 WHEREIN IT WAS HELD THAT CAPITATION FEES IS NOTHING BUT A PRICE FOR SELLING EDUCATION. THE CONCEPT OF TEACHING SHOPS IS CONTRARY TO THE CONSTITUTIONAL SCHEME AND IS WHOLLY ABHORRENT TO THE INDIAN CULTURE AND HERITAGE . SEVERAL STATE LEGISLATURES PASSED LEGISLATION PROHIBITING THE COL LECTION OF CAPITATION FEE AND ALSO MADE THE SAME AS PUNISHABLE OFFENCE. T HE APEX COURT IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION AND ANOTHER VS STATE O F KAMATAKA AND ANOTHER (2003) 6 SCC 697 WHEREIN IT WAS HELD THAT IF ANY AMOUNT IS CHARGED OTHER THAN THE FEE PRESCRIBED BY A COMMITTEE HEADED BY A RETIRED HIGH COURT JUDGE, UNDER ANY H EAD OR GUISE, THE SAME WOULD AMOUNT TO CAPITATION FEE. THEREFORE, COL LECTION OF MONEY OVER AND ABOVE THE FEE PRESCRIBED BY THE COMMITTEE WOULD AMOUNT TO COLLECTION OF CAPITATION FEE. THE CASE LAWS MENTION ED SUPRA ARE WELL FOUNDED TO DENY THE EXEMPTION CLAIMED BY THE ASSESS EE U/S 11 AS THE CHARGING OF DONATION OVER AND ABOVE THE PRESCRIBED FEE IS IN VIOLATION I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 129 -: OF ALL TRUST PROVISIONS UNDER THE ACT. THE ASSESSEE CANNOT INTERPRET THE DEFINITION OF CORPUS DONATIONS TO SUIT HIS COLL ECTION OF DONATIONS UNDER THE GUISE OF IMPARTING EDUCATION. IT IS NOT A CHARITABLE ACTIVITY. IT IS PURELY A BUSINESS ACTIVITY AND THEREFORE THE ASSESSEE OWN DECISION OF CORPUS DONATION FOR CLAIMING EXEMPTION CANNOT BE ACCEPTED U/S 215 OF THE I.T. ACT. NO DONATION ACCEPTED BY T HE RECIPIENT TRUST FROM THE PARENTS OF THE STUDENTS CAN NEVER BE A VOL UNTARY DONATION AND THE ASSESSEE TRUST CANNOT COLLECT ANY DONAT ION ESPECIALLY FROM THE PARENTS OF THE STUDENTS IN THE GUISE OF CORPUS DONATION FOR THE CONSTRUCTION OF BUILDINGS. THE ASSESSEE TRUST HA S NOT ISSUED RECEIPTS TO THE PARENTS MENTIONING THE FULL AMOUNT OF DONATION RECEIVED OVER AND ABOVE THE PRESCRIBED FEE. ANY DON ATION RECEIVED FROM DONORS HAS TO BE A PURPOSE ORIENTED AND THE DO NOR HAS TO SPECIFY THE PURPOSE FOR WHICH DONATION IS GIVEN OR MEANT TO BE EXPENDED. IN THE ABSENCE OF ANY SUCH CONDITIONS ASSESSING OFFICE R CAN ALWAYS DENY THE EXEMPTION CLAIMED U/S. 11. FORMS AND MODES OF INVESTING/ DEPOSITING MONEY (CORPUS DONATIONS) HAVE TO BE SPEC IFIED AS PER THE PROVISION OF SECTION 11(5) OF THE I. T. ACT. APART FROM THE ABOVE, VOLUNTARY CONTRIBUTIONS NOT RECEIVED WITH A SPECIFI C PURPOSE TOWARDS CORPUS OF THE TRUST IS CLEARLY TAXABLE U/S. 12 OF T HE I.T. ACT. SIMILARLY, VALUE OF ANY MEDICAL OR EDUCATIONAL SERVICES RECEI VED BY A PERSON I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 130 -: REFERRED TO IN SECTION 13(3)( A ),(B ),( C) OR (D) FROM A TRUST RUNNING A MEDICAL OR EDUCATIONAL INSTITUTION FREE OF COST OR AT CONCESSIONAL RATE DEEMED AS INCOME OF THE TRUST. SIMILARLY, ENORMOUS DONATIONS RECEIVED BY AN EDUCATIONAL INSTITUTION RUN BY A TRUST HAS TO BE TAXED AT 30% OF THE AMOUNT IN EXCESS OF 5% OF DONATIONS OR F1 LAKH AS PER THE PROVISION OF SECTION 115 BBC. IT IS A WELL SETTLED LAW THAT REGISTRATION ULS 12AA DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO G ET THE INCOME EXCLUDED, IT ONLY ENTITLES THE ASSESSEE TO CLAIM SU CH EXEMPTION WHICH OTHERWISE COULD NOT BE CLAIMED. IN THE INSTANT CASE THE ASSESSEE TRUST COULD NOT PROVE THAT DONORS WERE ABLE TO GIVE DIRECTION BEFORE OR AT THE TIME OF DONATION TO CORPUS FUNDS NOR ASSESSE E WAS MAINTAINING SEPARATE ACCOUNTS FOR THIS PURPOSE, THE ASSESSING O FFICER IS RIGHT IN DENYING THE EXEMPTION CLAIMED U/S 12. SINCE THE ASSESSEE TRUST IS MAINTAINING ITS OWN SYSTEM OF ACCOUNTING RECEIPTS F OR THE SAKE OF ITS OWN CONVENIENCE WITHOUT MAINTAINING PROPER BOOKS OF ACCOUNTS AS WAS FOUND IN THE FORM OF COLLECTION OF CASH AND DD AND THE SEIZED MATERIAL VIDE ANNE NO KT/IMP/LS-7 AND KT/IMP/LS-13 WHICH ARE EVIDENT FOR THE COLLECTION OF CAPITATION FEE IN CASH. THE MANAG ING TRUSTEE P. MURUGESAN HIMSELF ADMITTED THE SAME IN HIS STATEMEN T RECORDED ON 25.11.2006 AND 28.11.2006 AND ALSO ON 01.12.2006 B Y STATING THAT THE CORPUS DONATIONS / CAPITATION FEES IS NOT ENTER ED INTO THE REGULAR I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 131 -: BOOKS OF ACCOUNTS AS AND WHEN THE SAME IS RECEIVED. HE KEPT THE AMOUNTS WITH HIM AND ONLY ENTERS THE BOOKS OF ACCOU NTS WHEN REQUIRED FOR EXPENDITURE SUCH AS CONSTRUCTION WORK I.E., BUILDING ETC, BY PASSING A JOURNAL ENTRY BY BRINGING IN UNACCOUNT ED DONATIONS IN THE BOOKS OF ACCOUNTS ONLY AT THE END OF THE YEAR THE A SSET CREATED IN THE FORM OF BUILDING IS BROUGHT INTO BALANCE SHEET AND LEFT OUT CAPITATION FEES. IF ANY, IS ACCOUNTED ON THE LIABILITY SIDE OF THE BALANCE SHEET. BECAUSE OF ACCOUNTING SYSTEM FOLLOWED BY THE MANAGI NG TRUSTEE THERE IS NO WAY TO DEDUCT HOW MUCH MONEY COLLECTED, UNACC OUNTED IS SPENT TOWARDS CONSTRUCTION OF BUILDING BY THE TRUSTEE. TH E LOWER AUTHORITIES HAVE CLEARLY BROUGHT OUT IN HIS ASSESSMENT ORDER RE GARDING COLLECTION OF DONATIONS WHICH ARE UNACCOUNTED FROM THE STATEME NTS RECORDED FROM THE MANAGING TRUSTEE AS WELL AS R.PRABAKARAN S AMDOSS, ACCOUNTS OFFICER, INTERNAL AUDITOR OF THE ASSESSEE TRUST A ND ALSO FROM SHRI K.DEVASENAPATHY, IN-CHARGE OF NEW ADMISSIONS WHO HA VE CONFIRMED THAT THE DONATIONS ARE RECEIVED AND NOT ACCOUNTED I N THE REGULAR BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS ALSO NOTED ELABORATE REASONS FOR DENYING THE EXEMPTION CLAIMED U/S. 11 OF THE I.T. ACT. KEEPING IN VIEW OF THE SUBSTANTIAL MATERIAL FOUND AGAINST THE ASSESSEE TRUST FOR COLLECTING DONATIONS FROM THE STUDENTS BY MISUSING THE PROVISIONS OF THE TRUST, THE ASSESSING OFFICER HAS CLEARLY ESTABL ISHED THAT THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 132 -: MANAGING TRUSTEE DIVERTING THE CASH RECEIVED IN THE FORM OF DONATIONS FOR HIS PERSONAL BENEFIT AND THEREFORE JUSTIFIED IN DENYING EXEMPTION U/S 11 OF THE I. T. ACT. THEREFORE, WE REJECT THIS GROU ND OF THE APPEAL FILED BY THE ASSESSEE IN CONFIRMING DENIAL OF EXEM PTION U/S. 11 OF I.T. ACT. 49. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO CORPUS DONATION FOR THE ASSESSMENT YEARS 2001-02 TO 2007-2 008. 49.1. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE ADDITION OF AN ARBITRARY PERCENTAGE OF 12% OF GROSS RECEIPTS ESTIMATED BY THE ASSESSING OFFICER AND ADDED AS INCOME. THE C OMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT THE A SSESSEE FOLLOWED AND ESTABLISHED A METHODICAL PATTERN IN TH E ACCOUNTING OF RECEIPTS. THIS METHODOLOGY CAPTURES ALL RECEIPTS AN D EXPENDITURES AND PROJECTS A FULL AND TRUE PICTURE OF THE INCOME AND THE EXPENDITURE OF THE ASSESSEE TRUST. THE COMMISSIONER OF INCOME-TAX (APPEALS) THUS ERRED IN STATING THAT THE MONEY COLLECTED AND SPENT TOWARDS CONSTRUCTION CANNOT BE DETECTED. HIS RESULTANT CONC LUSION THEREFORE, THAT THE ASSESSEE TRUST HAS DIVERTED FUNDS FOR THE PERSONAL USE OF THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 133 -: MANAGING TRUSTEE IS BASED ON ASSUMPTIONS AND AN INC ORRECT UNDERSTANDING OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE ESTIMATION BY THE ASSESSING OFFICER OF 12% OF THE G ROSS RECEIPTS OF CORPUS DONATIONS AND BRING TO TAX THE DIFFERENCE BE TWEEN RECEIPTS AND APPLICATION OF THE CORPUS DONATIONS AS INCOME OF TH E ASSESSEE U/S.2(24) (IIA) OF THE ACT. HE OUGHT TO HAVE NOTED THAT THE ENTIRE DONATIONS ARE TOWARDS CORPUS AND ARE THUS EXEMPT U/ S 11(1) (D) OF THE ACT. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUG HT TO HAVE NOTED THAT THE RATIONALE OF THE JUDGMENT OF THE MADRAS HI GH COURT IN THE CASE OF PADANILAM WELFARE TRUST, CHENNAI VS. DEPARTMENT OF INCOME TAX (324 ITR 44) IS BASED ON THE FACTS OF THAT PARTICUL AR CASE AND CANNOT BE APPLIED IN A WHOLLY DIFFERENT FACTUAL AND LEGAL CONTEXT. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFI RMING THE ESTIMATION OF CORPUS DONATIONS @ 12% OF THE GROSS R ECEIPTS AND THE TREATMENT OF THE SAME AS INCOME U/S 2 (24) (IIA) IN RESPECT OF ASSESSMENT YEARS 2001-02 TO 2007-08. 49.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 134 -: 49.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. DURING THE YEAR I.E., 2001-02, CORPUS DON ATIONS IS SHOWN AT F14,62,000/-. ON VERIFYING THE DETAILS OF DONATION RECEIPTS FILED BY THE ASSESSEE TRUST WOULD SHOW ONLY THE NAME OF THE DONO R, DATE AND AMOUNT ON PRINTED RECEIPTS IN THE NAME OF THE TRUST . THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE STATED THAT THE ABOV E RECEIPT PERTAINS TO VOLUNTARY DONATION. HOWEVER, ON ANALYSING THE AB OVE RECEIPT NO. 137 THAT DONATION IS NOT VOLUNTARY AS CAN BE SEEN F ROM THE RECEIPT ISSUED BY THE TRUST AND ALSO IT DOES NOT CONTAIN FU LL ADDRESS OF THE DONOR. THIS IS THE CASE WITH EVERY RECEIPT FURNISHE D BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE. THERE IS NO SPECIFI C DIRECTION GIVEN BY THE DONORS AS TO HOW THESE DONATIONS ARE TO BE UTIL IZED BY THE TRUST. SIMILARLY FOR AY 2002-03, THE TRUST CLAIMED CORPUS DONATION OF F81,34,975/- AS FOR COMPUTATION OF INCOME FOR THE P URPOSE OF SECTION 11. BUT IN THE RECEIPTS AND PAYMENTS ACCOUNT AND BA LANCE SHEET ONLY A SUM OF F31,09,974/- HAS BEEN SHOWN. THERE IS NO LIS T OF DONORS FOR RECEIPT BOOKS PRODUCED. SIMILARLY FOR AY S 2003-04, 2004-05, 2005-06, THE ASSESSEE TRUS T FURNISHED THE LIST OF DONORS INDICATING NAMES, COURSE, STREAM, YEAR AN D AMOUNT OF DONATION. ON VERIFYING THE ABOVE LIST SHOWS THAT EV ERY DONOR IS A STUDENT ADMITTED IN SOME COURSES OF THE INSTITUTION S RUN BY THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 135 -: ASSESSEE TRUST. ALL THE DONORS ARE ONLY STUDENTS / PARENTS OR RELATIVES OF THE STUDENTS. THERE IS NO OUTSIDE DONO RS WHO CONTRIBUTED TO THE CORPUS DONATION. THE LIST CLEARLY ESTABLISHE S CLOSE NEXUS BETWEEN COLLECTION OF DONATION AND ADMISSIONS OF ST UDENTS THEREBY ESTABLISHING A QUID PRO QUO ARRANGEMENT. THESE DONATIONS ARE FROM STUDENTS AND NOT VOLUNTARY AND T HERE IS NO SPECIFIC DIRECTION FROM THE DONORS FOR THE UTILIZATION OF TH IS ABOVE SAID DONATIONS AND HENCE THE ASSESSING OFFICER HAS TREAT ED THEM AS REVENUE RECEIPTS AND ARE NOT ELIGIBLE FOR BENEFIT U/S 11(1)(D) /12(1) OF THE I. T. ACT. DURING THE COURSE OF SEARCH AND SUR VEY OPERATIONS, THE ASSESSEE TRUST ADOPTED ITS OWN SYSTEM OF ACCOUNTIN G OF RECEIPTS. IT IS OBSERVED THAT THE COURSE FEES IS COLLECTED IN THE F ORM OF DEMAND DRAFTS AND THE CAPITATION FEES BY WAY OF CASH. THIS CAN BE SEEN FROM THE SEIZED MATERIAL VIDE ANNEXURE NO. KT/IMP/LS-7 A ND KT/IMP/LS-13 WHICH ARE EVIDENCE FOR COLLECTION OF CAPITATION FEE S IN CASH. THIS ASPECT HAS BEEN ENDORSED BY THE MANAGING TRUST EE IN HIS STATEMENT RECORDED, WHO STATED THAT THE CORPUS DONA TION / CAPITATION FEES ARE NOT ENTERED INTO THE REGULAR BOOKS OF ACCO UNTS AS AND WHEN THEY ARE RECEIVED. THESE AMOUNTS ARE KEPT WITH HIM FOR THE ENTIRE YEAR AND PASSES A JOURNAL ENTRY AT THE END OF THE YEAR F OR THE AMOUNT SPENT IN ACQUIRING / CONSTRUCTING BUILDINGS ON THE ASSET SIDE OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 136 -: THE BALANCE SHEET. AND IF ANY CAPITATION FEES LEFT ALSO IS ACCOUNTED IN THE LIABILITY SIDE OF THE BALANCE SHEET. BECAUSE OF THIS SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE TRUST, NOBODY C AN DETECT HOW MUCH MONEY COLLECTED AND SPENT TOWARDS CONSTRUCTION OF BUILDING BY THE ASSESSEE TRUST AND HOW MUCH MONEY IS COLLECTED IN THE FORM OF CORPUS DONATION AND SPENT. IN THE ABSEN CE OF PROPER ACCOUNTING SYSTEM THE DETAILS OF DONATION TOWARDS C ORPUS FUND SUBMITTED BY THE ASSESSEE TRUST CANNOT BE RELIED UP ON SINCE THE SAME HAS NOT BEEN PROPERLY ACCOUNTED. THE CORPUS FUND COLLECTION BROUGHT INTO THE BOOKS THROUGH A JOURNAL ENTRY AT THE FAG END OF THE YEAR IS ALSO CONSIDERABLY LESS COMPARED TO THE CAPITATION FEES COLLECTED AS EVIDENCED FROM THE SEIZED / IMPOU NDED MATERIAL. THUS THE TRUST HAS NOT DISCLOSED ACTUAL RCCEIPTS AN D SUCH RECEIPTS ARE DIVERTED FOR THE PERSONAL USE OF THE MANAGING TRUST EE. KEEPING IN VIEW OF THE OBSERVATIONS MADE, THE CORPUS FEES / CA PITATION FEES COLLECTED IN CASH FOR ALL THE YEARS FROM 2001-02 TO 2007-08 HAVE BEEN ESTIMATED BY THE LOWER AUTHORITIES AT 12% OF THE G ROSS RECEIPTS BASED ON THE CORPUS DONATIONS COLLECTED IN CASH ADMITTED FOR THE AY S. 2006- 07 AND 2007-08 AND ACCORDINGLY CASH COMPONENT HAS B EEN WORKED OUT AT 12%. THUS THE DIFFERENCE IN CORPUS DONATIONS HAS BEEN TREATED AS INCOME OF THE TRUST U/S 2(24)(IIA). THE LOWER AUTHORITIES HAS WORKED I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 137 -: OUT THE CORPUS DONATION AT 12% BASED ON THE RATIO W ORKED OUT BY THE MADRAS HIGH COURT DECISION REPORTED IN 324 ITR 44 IN THE CASE OF PADANILAM WELFARE TRUST CHENNAI VS DEPARTMENT OF INCOME TAX. THUS, THE CORPUS DONATIONS CALCULATED BY THE LOWER AUTHOR ITIES ON THE BASIS OF THE ABOVE CITATION FOR TREATING THE SAME AS INCO ME U/S. 2(24)(IIA) FOR ALL THE ASSESSMENT ORDERS I.E, AY 2001-02 TO 2 007-08 ARE HEREBY CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESSE E IS REJECTED 50. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ESTIMATION OF CAPITATION FEES FOR THE ASSESSMENT YE ARS 2001-02 TO 2006-2007. 50.1 THE FACTS OF THE ISSUE ARE THAT FOR THE AY 01 -02 THE ASSESSING OFFICER HAS ESTIMATED CAPITATION FEES AT F 35,24,0961- AS WELL AS FOR OTHER YEARS UPTO 2005-06. FOR COLLECTION OF CAPITAT ION FEES, THE ASSESSEE TRUST HAS NOT KEPT PROPER RECORDS AND THE MANAGING TRUSTEE HAS BEEN INDULGING IN DIVERTING THE CAPITATION FEE COLLECTED FOR HIS OWN BENEFIT. THE CAPITATION FEES COLLECTED HAS NOT BEEN ACCOUNTED AND THE AMOUNT IS KEPT WITH THE MANAGING TRUSTEE. THE ASSES SING OFFICER HAS CALCULATED CORPUS DONATION ESTIMATED AT 12% OF GROS S RECEIPT AND THE CORPUS DONATIONS ADMITTED BY THE ASSESSEE TRUSTEE W ORKED OUT THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 138 -: DIFFERENCE BETWEEN COL. 3 & 4 FOR THE ESTIMATION OF CAPITATION FEE RIGHT FROM 2001-02 TO 2005-06. WHEREAS FOR AY 2006- 07 & 2007-08 THE ASSESSEE CAME OUT WITH A DISCLOSURE OF THE CORPUS D ONATION TO THE EXTENT OF MATERIALS FOUND. FOR THE AY 2006-07 & 07-08 THE CORPUS DONATION COLLECTED IN CASH ROUGHLY WORKS OUT TO 10 % TO 13% OF THE GROSS COLLECTION OF TUITION FEES IN THE FORM OF DD WHICH ARE ACCOUNTED AND ADMITTED. BASED ON THE ABOVE ANALYSIS THE ASSES SING OFFICER HAS WORKED OUT SIMILAR CAPITATION FEE COLLECTED IN THE FORM OF DDS DURING THE PERIOD RELEVANT FOR THE AY 2001-02 TO 2005-06. THUS CORPUS DONATION OF THE TRUST HAS BEEN ESTIMATED AT 12% OF THE TUITION FEES AND OTHER FEES COLLECTED. THUS CAPITATION FEES ESTI MATED FOR ALL THESE YEARS BY THE ASSESSING OFFICER FOLLOWING THE JUDGME NT IN PADANILAM WELFARE TRUST VS INCOME TAX DEPARTMENT (MADRAS HIGH COURT) REPORTED IN 324 ITR 44 AND TREATED THE SAME AS INCOME U/S 2(24)(IIA) A ND REJECTING THE GROUNDS OF APPEAL RAISED BY THE ASSES SEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 50.2. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESS EE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE ESTIMATION OF THE ASSESSING OFFICER OF ALLEGED CAPI TATION FEES IN RESPECT OF ABOVE ASSESSMENT YEARS. THE COMMISSIONER OF INCO ME-TAX I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 139 -: (APPEALS) ERRED IN ALLEGING THAT THE ASSESSEE TRUST HAS NOT KEPT PROPER RECORDS AND THAT THERE IS A DIVERSION OF FUNDS TO THE MANAGING TRUSTEE FROM THE TRUST . 50.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDERS OF THE LOWER AUTHORITIES. 50.4 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED AS DISCUSSED IN PARA 49.3 OF THIS ORDER. 51. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO CAPITAL EXPENDITURE FOR THE ASSESSMENT YEAR 2001-02 TO 2007 -2008. 51.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUB MITTED THAT T HE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CO NFIRMING THE DISALLOWANCE BY THE ASSESSING OFFICER OF CAPITA L EXPENDITURE RELATING TO AY 2001-02 AND 2002-03 OF AN AMOUNT OF F1,56,76,948/-. THE DISALLOWANCE HAS BEEN EFFECTED CONSEQUENT TO TH E DENIAL OF EXEMPTION U/S 11 AS CLAIMED. THE EXEMPTION U/S 11 H AS ITSELF BEEN REJECTED ON THE BASIS OF ASSUMPTIONS, PRESUMPTIONS AND TOTAL I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 140 -: MISAPPLICATION OF MIND. IN FACT THE ASSESSEE HAS PR ODUCED VOLUMINOUS MATERIAL TO SUBSTANTIATE ITS AVERMENT THAT THERE HA S BEEN NO DIVERSION OF FUNDS AND THAT THE PROVISIONS OF SEC. 13 (1) (C) (II) R.W.S. 13 (2) (A),13 (2) (G), 13 (2)(H) AND 13 (3) (A) OF THE ACT ARE WHOLLY INAPPLICABLE. THE REJECTION HAD BEEN CONFIRMED NOTW ITHSTANDING THE SPECIFIC SUBMISSIONS MADE BY THE ASSESSEE AND EVIDE NCE PRODUCED IN THAT REGARD AND IS LIABLE TO BE REVERSED. 51.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 51.3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE LOWER AUTHORITIES HAVE DISALLOWED CAPI TAL EXPENDITURE FOR THE AY 2001-02 & 2002-03 AT F1,56,76,948/- ON THE GROUND THAT THE ASSESSEE TRUST HAS COLLECTED CAPITATION FEES FOR AL L THE YEARS FROM 2001- 02 TO 2007-08 AGAINST THE PROVISIONS OF LAW THEREBY LOSING THE BENEFIT U/S. 11. THE ASSESSEE TRUST DIVERTED THE FUNDS OF THE TR UST TOWARDS DEPOSITS INTO PERSONAL ACCOUNTS OF THE MANAGING TRU STEE SHRI P.MURUGESAN'S INDIVIDUAL BANK ACCOUNTS AND USED THE TRUST FUNDS FOR PROPRIETARY CONCERN OF THE MANAGING TRUSTEE I.E., P R & SONS AND I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 141 -: TRAVEL BUSINESSES. THE EXEMPTION U/S 11 ALSO WAS DENIED TO THE TRUST BY THE REASON OF DIVERSION OF FUNDS U/S 13(L)(C)(II) R.W.S. 13 (2)(A), 13(2)(G), 13(2) (H) AND 13(3)(A) OF THE L.T. ACT. A S PER THE PROVISIONS SECTION 13(2)(H) IF ANY FUNDS OF THE TRUST OR INSTI TUTION ARE INVESTED FOR ANY PERIOD DURING THE PREVIOUS YEAR IN ANY CONCERN IN WHICH ANY PERSON REFERRED TO IN SUB SECTION 3 HAS A SUBSTANTI AL INTEREST INCLUDING THE MANAGING TRUSTEE WHO MANAGES THE AFFAIRS OF THE TRUST. THUS THE LOWER AUTHORITIES HAVE VALIDLY DISALLOWED CAPITAL EXPENDITURE IN ALL THE AY S UNDER CONSIDERATION FOR VIOLATION OF TRUST PRO VISIONS AS WELL AS DIVERSION OF FUNDS AND HENCE WE CONFIRM THE DISALL OWANCE AND THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED . 52. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ADVERTISEMENT EXPENDITURE TO TUNE OF F2,99,697 FOR THE AY 2001-02 AND F2,84,090/- FOR THE AY 2002-03 RESPECTIVELY. 52.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE ORDER OF ASSESSMENT MAKING A DISALLOWANCE OF AN AMO UNT OF F 2,99,697 (AY 2001-02) AND F2,84,090/- (AY 2002-03). THE DISALLOWANCE HAS BEEN EFFECTED BY THE ASSESSING OFF ICER ON THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 142 -: ERRONEOUS BASIS THAT NO BOOKS OF ACCOUNTS HAVE BEEN MADE AVAILABLE IN RESPECT OF THE RELEVANT ASSESSMENT YEARS. THIS I S WHOLLY INCORRECT IN SO FAR AS THE BOOKS HAD BEEN SPECIFICALLY PRODUCED BEFORE THE ASSESSING OFFICER ON 9.4.2010 AND THIS FACT HAD BEE N CONFIRMED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE DIS ALLOWANCE SIMPLY RELYING ON THE ORDER OF ASSESSMENT AND ON THE BASIS THAT THE VOUCHERS HAVE NOT BEEN PRODUCED FOR AUTHENTICATION OF EXPEND ITURE INCURRED. IN FACT NO VOUCHERS WERE SOUGHT FROM THE ASSESSEE AND IF SOUGHT, COULD HAVE BEEN PRODUCED BEFORE THE AUTHORITIES. 52.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 52.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED TH E MATERIAL ON RECORD. THE LOWER AUTHORITIES HAS MADE AN ADDITIO N OF F 2,99,697/- FOR AY 2001-02 AND F2,84,090/- FOR AY 2002-03 FOR NON PRODUCTION OF BOOKS OF ACCOUNTS ALONG WITH VOUCHERS FOR ADVERTISE MENT EXPENDITURE EVEN THOUGH THE AUTHORISED REPRESENTATIVE OF THE AS SESSEE HAS DEFENDED THE EXPENDITURE BY STATING THAT THE BOOKS OF ACCOUNTS HAVE BEEN PRODUCED BEFORE THE ASSESSING OFFICER. SINCE T HE VOUCHERS HAVE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 143 -: NOT BEEN PRODUCED FOR AUTHENTICATION OF ADVERTISEME NT EXPENDITURE THE VERSION OF THE AUTHORISED REPRESENTATIVE OF THE ASS ESSEE ARE REJECTED AND WE CONFIRM THE ADDITION MADE BY THE COMMISSIONE R OF INCOME TAX (APPEALS) FOR BOTH THE ASSESSMENT YEARS 2001-02 AND 2002-03. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 53. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO FUNCTION EXPENDITURE TO THE TUNE OF F1,24,335/- FOR THE ASSESSMENT YEAR 2001-2002. 53.1 THE FACTS OF THE ISSUE ARE THAT CLAIM OF FUNC TION EXPENDITURE WAS DISALLOWED AT F1,24,335/- ON ACCOUNT OF NON PR ODUCTION OF BOOKS OF ACCOUNTS AND SUPPORTIVE EVIDENCE IN THE FORM OF VOUCHERS FOR VERIFICATION OF FUNCTION EXPENDITURE. AGGRIEVED, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (AP PEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 53.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSES SEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN D ISALLOWING A SUM OF F1,24,335/- INCURRED IN RELATION TO VARIOUS FUNC TIONS CARRIED ON AT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 144 -: THE PREMISES OF THE TRUST. THE COMMISSIONER OF IN COME-TAX (APPEALS) ERRED IN CONFIRMING THE ORDER OF ASSESSME NT MAKING A DISALLOWANCE OF AN AMOUNT OF F2,99,697/-(AY 2001-02 ) AND F2,84,090/- (AY 2002-03). THE DISALLOWANCE HAD BEEN EFFECTED BY THE ASSESSING OFFICER ON THE ERRONEOUS BASIS THAT NO BO OKS OF ACCOUNTS HAVE BEEN MADE AVAILABLE IN RESPECT OF THE RELEVANT ASSESSMENT YEARS. THIS WAS WHOLLY INCORRECT IN SO FAR AS THE BOOKS HA D BEEN SPECIFICALLY PRODUCED BEFORE THE ASSESSING OFFICER ON 9.4.2010 A ND THIS FACT HAD BEEN AVERRED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRE D IN CONFIRMING THE DISALLOWANCE SIMPLY RELYING ON THE ORDER OF ASS ESSMENT AND ON THE BASIS THAT THE VOUCHERS HAVE NOT BEEN PRODUCED FOR AUTHENTICATION OF EXPENDITURE INCURRED. IN FACT NO VOUCHERS WERE SOUG HT FROM THE ASSESSEE. 53.3. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 53.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND SUPPORTING VOUCHERS BEFORE THE LOWER AUTHORITIES. IN THE ABSENCE OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 145 -: THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 54. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO LOAN CREDITORS TO THE TUNE OF F50,33,166/- AND F19,00,00 0/- FOR THE ASSESSMENT YEARS 2001-02 AND 2002-2003 RESPECTIVELY . 54.1. THE LD. AUTHORISED REPRESENTATIVE FOR ASSES SEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERR ED IN CONFIRMING THE DISALLOWANCE BY THE ASSESSING AUTHORITY OF LOAN CREDITORS OF AN AMOUNT OF F50,33,166/- (AY 2001-02) AND F19,00,000/- (AY 2002-03) TREATING THE SAME AS NON-GENUINE. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT ALL DETAILS HAVE BEEN PRODUCED TO ESTABLISH GENUINENESS OF THE CREDITORS SUCH AS IDEN TITY, ADDRESS, CAPACITY TO LEND AND GENUINENESS OF THE TRANSACTION S CONFIRMATION LETTERS HAVE BEEN SUBMITTED BEFORE THE LOWER AUTHOR ITIES AND IN THE LIGHT OF SATISFACTION OF ALL APPLICABLE PARAMETERS, THE ADDITIONS MADE IN THIS REGARD ARE LIABLE TO BE REVERSED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 146 -: 54.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 54.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE COULD NOT SUBSTANTIATE BY SUBMITTING DETAILS OF LOA N CREDITORS AND PRODUCE THE PROOF OF LOAN CREDITORS OF F. 50,33,166/- FOR AY 2001-02 AS WELL AS AN AMOUNT OF F 19,00,000/-- FOR AY 2002- 03. THE ASSESSEE TRUST COULD NOT FURNISH THE DETAILS OF IDENTITY OF THE CR EDITOR, CAPACITY OF THE LENDERS AND GENUINENESS OF TRANSACTIONS OF LOAN CRE DITORS. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE IN HER SU BMISSIONS STATED THAT THE CONFIRMATION LETTERS WERE SUBMITTED. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT CONFIRMATION LETTERS AS WELL AS OTHER DETAILS AS MENTIONED ABOVE HAVE BEEN FURNISHED BEFORE THE ASSE SSING OFFICER. THE ASSESSEE HAS FAILED TO PROVE THE SOURCE OF CREDIT AS WELL AS IDENTITY OF THE CREDITORS, CAP ACITY OF CREDITORS TO ADVANCE MONEY AND GENUINENESS OF THE TRANSACTION. S INCE THE ASSESSEE TRUST FAILED TO PROVE DETAILS OF THE LOAN CREDITORS, WE CONFIRM THE ADDITIONS MADE BY THE LOWER AUTHORITIES. THIS G ROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 147 -: 55. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO SPECIAL ALLOWANCE TO THE TUNE OF F3,39,819/- FOR THE ASSESS MENT YEAR 2002- 2003. 55.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE DISALLOWANCE OF A SUM OF F3,39,819/- RELATING TO SPECIAL ALLOWANCE EXTENDED TO TEACHING STAFF. THE VOUCHERS AND ALL SU PPORTING DOCUMENTS IN THIS REGARD WERE NEVER SOUGHT BY THE ASSESSING O FFICER. IN ANY EVENT, THE AUTHORITY OUGHT TO HAVE NOTED THAT THE S PECIAL ALLOWANCE IS AN EXPENDITURE DIRECTLY CONNECTED TO T HE RUNNING OF THE EDUCATIONAL INSTITUTIONS AND IS THUS ALLOWABLE. 55.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 55.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE ASSESSEE TRUST HAS NOT FURNISHED ANY S UPPORTING EVIDENCE CLAIMING AN EXPENDITURE OF F3,39,819/- AS SPECIAL A LLOWANCE WHICH IN TERMS OF THE AUTHORISED REPRESENTATIVE OF THE ASSES SEE PAYMENTS MADE TO TEACHING STAFF WHICH IS A ROUTINE EXPENDITU RE IN AN EDUCATIONAL I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 148 -: INSTITUTION. HOWEVER HE COULD NOT PRODUCE ANY VOUCH ER FOR THE EXPENDITURE FOR SPECIAL ALLOWANCE OVER AND ABOVE TH E SALARY PAID TO THE TEACHING STAFF. SINCE NO EVIDENT IAL VALUE CAN BE ATTRIBUTED TO THE ASSESSEE'S VERSION THE EXPENDITUR E CLAIMED IS DISALLOWED AND HENCE THE SAME IS CONFIRMED. THIS GR OUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 56. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO SINGAPORE TRIP TO THE TUNE OF F1,11,200/- FOR THE A SSESSMENT YEAR 2004-05. 56.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE DISALLOWANCE OF EXPENDITURE INCURRED OF AN AMOUNT O F F.1, 11,200/- RELATING TO A TRIP TO SINGAPORE ON OFFICIAL WORK RE LATED TO THE EDUCATIONAL INSTITUTIONS. THE SAME IS THUS LIABLE T O BE ALLOWED. 56.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 149 -: 56.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS FAR AS SINGAPORE TRIP EXPENSES CLAIMED A T F1,11,200/- THE ASSESSEE HAS NOT PROVIDED ANY DETAILS AND HENCE THE FOREIGN TRIP EXPENSES ARE NOT RELATED TO TRUST ACTIVITIES AND HE NCE THE SAME WAS DISALLOWED BEING THE PERSONAL EXPENDITURE OF MEMBER S OF THE TRUST. HENCE, WE CONFIRM THE ADDITION MADE BY THE LOWER A UTHORITIES. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 57. THE NEXT GROUND IS WITH REGARD TO COLLEGE EXPENSES TO THE TUNE OF F51,500/- FOR THE ASSESSMENT YEAR 2004-05. 57.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN C ONFIRMING THE EXPENDITURE OF A SUM OF F51,500/- RELATING TO THE R EGISTRATION OF LAND. IN SO FAR AS THE EXPENDITURE IN REVENUE IN NATURE B EING RELATED TO PURCHASE OF AN ASSET, CLOSELY CONNECTED TO THE ACTI VITY OF THE TRUST, AND THE FULFILLMENT OF ITS OBJECTS, THE SAME IS ALL OWABLE. 57.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 150 -: 57.3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. AS FAR AS COLLEGE EXPENSES ARE CONCERNE D, THE ASSESSEE TRUST HAS CLAIMED F51,500/- BEING LAND REGISTRATION EXPENSES WHICH IS CAPITAL IN NATURE AND CANNOT BE ALLOWED AS AN EXPEN DITURE. HENCE, THE ADDITION MADE BY LOWER AUTHORITIES IS CONFIRMED . THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 58. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH RE GARD TO GRANT IN AID TO THE TUNE OF F11,70,000/-, F75,000/-, F75, 000/- AND F12,00,000/- FOR THE ASSESSMENT YEARS 2004-05, 200 5-06, 2006-07 AND 2007-2008 RESPECTIVELY. 58.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE DISALLOWANCE OF GRAND IN AID BY THE GOVERNMENT OF T AMIL NADU, MINISTRY OF HUMAN RESOURCES DEVELOPMENT FOR FULFIL MENT OF THE OBJECTS OF THE TRUST. THE DISALLOWANCE OF A SUM OF F11 ,70,000/- (AY 2004-05), F75,000/- (AY 2005-06), F75,000/- (AY 200 6-07) AND F12,00,000/- (AY 2007-08) IS THUS WHOLLY INCORRECT IN LAW AND ON FACTS. THE LD. AR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE SEEN THAT THE GRANT HAD BEE N GIVEN WITH THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 151 -: SPECIFIC PURPOSE OF BEING UTILIZED FOR THE OBJECTS OF THE TRUST AND IS THUS ALLOWABLE. THE COMMISSIONER OF INCOME-TAX (AP PEALS) OUGHT TO HAVE NOTED THAT ALL DETAILS REQUIRED IN CONNECTION WITH THE GRANT-IN-AID HAVE BEEN FURNISHED TO THE LOWER AUTHORITIES. THE D ISALLOWANCE HAS BEEN EFFECTED CONSEQUENT ON THE DENIAL OF EXEMPTION U/S 11 OF THE ACT WHICH IS ITSELF ERRONEOUS IN LAW AND CONTESTED. THE DISALLOWANCE ARE THUS LIABLE TO BE REVERSED AND EXEMPTION U/S 11 GRA NTED. 58.2. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDERS OF THE LOWER AUTHORITIES. 58.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THAT THE GRANTS IN AID GIVEN BY THE GOVERNMENT FOR SELF FINANCING COLLEGES, STATING THAT THIS AMOUNT RECEIVED FROM TH E MINISTRY OF HRD FOR CONSTRUCTION OF WORK BUT THE ASSESSEE HAS FAIL ED TO SUBMIT DETAILS REGARDING THE SAME. MOREOVER, THE RECEIPT OF GRANTS IN AID BECOMES REVENUE IN NATURE SINCE THE TRUST IS NOT EXEMPT U/S 11 AND HENCE ALL THE YEARS FROM 2004-05 TO 07-08 THE RESPECTIVE AMOU NTS MENTIONED AGAINST EACH YEAR ARE DISALLOWED BY THE LOWER AUTHO RITIES ARE CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESS EE IS REJECTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 152 -: 59. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO UNEXPLAINED CASH CREDIT TO THE TUNE OF F18,00,000/- FOR THE ASSESSMENT YEAR 2005-06. 59.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE ACTION OF THE ASSESSING OFFICER BRINGING TO TAX A C REDIT AGGREGATING TO A SUM OF F18,00,000/-. HE OUGHT TO HAVE NOTED THAT TH E DISALLOWANCE WAS ITSELF BASED ON SUSPICIONS AND SURMISES AND IS WHOLLY ERRONEOUS IN LAW. THE AMOUNT HAD BEEN ADVANCED THROUGH NORMAL BA NKING CHANNELS AND ALL PARAMETERS TO ESTABLISH THE GENUINENESS OF THE CREDITS HAVE BEEN FULFILLED SUCH AS NAME, IDENTITY OF THE CREDIT ORS, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THE CREDITS AR E THUS LIABLE TO BE ACCEPTED AS SUCH. THE DISALLOWANCE ARE THUS LIABLE TO BE REVERSED. 59.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 153 -: 59.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IS RELATED TO UNPROVED CASH CRED ITS IN THE BOOKS OF THE ASSESSEE TRUST. THE ASSESSEE COULD NOT FILE A NY CONFIRMATION LETTERS REGARDING CASH CREDITS FOR THEIR GENUINITY. AS THE ASSESSEE FAILED TO PROVE CREDITWORTHINESS AND CAPACITY TO LE ND AS WELL AS GENUINENESS OF THE TRANSACTION. THE CLAIM OF THE AS SESSEE IS REJECTED AND THE ADDITION MADE BY THE LOWER AUTHORITIES AT F 1 8,00,000/- AGAINST UNEXPLAINED CASH CREDIT IS CONFIRMED. THE AUTHORISE D REPRESENTATIVE OF THE ASSESSEE IN THIS REGARD HAS STATED THAT THESE CREDITS HAVE BEEN RECEIVED THROUGH CHEQUES ONLY. HOWEVER, WITHOUT PRO VING THE GENUINENESS OF THE CREDIT, EVEN MERE PROOF OF IDENT ITY OF CREDITOR OR THE TRANSACTION BY CHEQUE IS NOT SUFFICIENT. HENCE THE ADDITION MADE BY THE LOWER AUTHORITIES U/S. 68 FOR UNPROVED CREDITS IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSES SEE IS REJECTED. 60. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO VALUE OF PROPERTIES GIFTED TO OTHER CHARITABLE TRUST FOR THE ASSESSMENT YEAR 2006-2007. 60.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 154 -: ACTION OF THE ASSESSING OFFICER IN TREATING THE VAL UE OF THE PROPERTIES GIFTED VIDE TWO REGISTERED DEEDS OF GIFT, AS INCOME . THE GIFT HAS BEEN MADE SOLELY IN FULFILLMENT OF THE OBJECTS OF THE AS SESSEE TRUST TO ANOTHER CHARITABLE TRUST THAT IS ALSO ENGAGED IN AC TIVITIES OF PROMOTION OF EDUCATION. IT IS THUS ALLOWABLE AS APPLICATION O F INCOME. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND NOT MERELY RELIED UPON THE AVERMENTS IN THE ORDER OF ASSESSMENT INDICATING THA T THERE HAS BEEN NO APPLICATION OF MIND IN ARRIVING AT HIS CONCLUSIO N. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT TH E GIFTS HAVE BEEN ACCEPTED AS BONAFIDE IN THE HANDS OF THE RECIPIENT BY THE INCOME-TAX DEPARTMENT. A CONTRARY POSITION CANNOT THUS BE ADOP TED IN THE CASE OF THE ASSESSEE AND THIS IS WHOLLY CONTRARY TO LAW. T HE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE RELIED IN THE ORDER OF THE TRIBUNAL MUMBAI BENCH,IN THE CASE OF DCIT VS. KDA ENTERPRISES PL. L TD IN ITA NO. 2662/M/2013, DATED 11.03.2015 AND ALSO GIFT TAX ACT . 60.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND ALSO SUBMITTED THAT IN THE AB SENCE OF MATERIAL TO SHOW TO LOVE AND AFFECTION BETWEEN DONOR AND DONEE, THE GIFT CANNOT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 155 -: BE CONSIDERED AS VALID GIFT. HE RELIED ON THE JUDGE MENT OF THE SUPREME COURT IN THE CASE OF SONIA BHATIA VS. STATE OF U.P. 2 SCC 585. 60.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE TRUST GIFTED THREE EDUCATION AL INSTITUTIONS AT NATHAM TO M/S. TET BY WAY OF GIFT DEEDS. THE DETAILS OF PROPERTY TRANSFERRED VIDE GIFT DEED DOCUMENT NO. 2023/2005 DATED 28.12.2005 BY TRANSFERRING LAND MEASURING 7.46 ACRES IN NATHA M TALUK (II) LAND MEASURING 3.875 HECTARES I.E. 9.57 ACRES (III) LAN D MEASURING 3.34 ACRES HAVING MARKET VALUE OF F6,45,7501-, (IV) GIFT DEED VIDE DOCUMENT NO.78/2006 DATED 19.01.2006, 3 EDUCATIONAL INSTITUTIONS FUNCTIONING AT ULUPPAKUDI VILLAGE NAMELY, 1. PR COLLEGE OF ARTS AND SCIENCE 2. NATHAM PR COLLEGE OF EDUCATION 3. NATHAM PR COLLEGE OF TRAINING INSTITUTE THE MARKET VALUE OF THE PROPERTY MENTIONED IN THE G IFT DEED AROUND F 1,06,00,000/- AND THE VALUE FIXED BY STAMP DUTY AUTHORITY WAS F 1 ,29,32,524/-. ALL THE PROPERTIES VALUED BY THE VALUER MLS. ARULMURUGAN DESIGNS, DINDIGUL DATED 12.01.2006 WAS AT F1,82,00,0001-. THE VALUE OF THE SAID ASSETS IN RECEIPTS AND PAYMEN T ACCOUNT FILED SHOW THE ENTRY 'BY ASSETS TRANSFERRED TO TITAN AT F I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 156 -: 1,52,52,410.75'. IN THE ASSESSMENT ORDER THE ASSESS ING OFFICER HELD THAT THE ASSESSEE TRUST BY ACT OF GIFT HAS NOT AP PLIED ITS FUNDS OR PROPERTIES FOR THE PURPOSE FOR WHICH IT WAS ESTABLI SHED AND HENCE NOT ENTITLED TO EXEMPTION U/S. 11 OF THE I. T. ACT. SINCE THE ASSESSEE TRUST THROUGH ITS MANAGING TRUSTEE HAS GIFTED 1.82 CRORES WORTH OF PROPERTIES WHOSE ASSETS WERE CREATED OUT OF THE ACC UMULATED FUNDS OF THE ASSESSEE TRUST, IT WAS OBSERVED THAT THE MANA GING TRUSTEE WAS NOT AUTHORISED BY THE TRUST DEED TO MAKE GIFT OF IT S ASSETS. SIMPLY THE ASSESSEE TRUST ON ACCOUNT OF OPERATIONAL DIFFICUL TIES AND ADMINISTRATIVE REASONS GIFTED PROPERTIES WORTH 1.82 CRORES TO A NEW TRUST WHICH CAME INTO EXISTENCE FROM 1.10.2005 ONW ARDS, WE ARE OF THE OPINION THAT THE LOWER AUTHORITIES ARE JUSTIFI ED IN TREATING THE GIFT AMOUNT OF F1.82 CRORES AS INCOME OF THE ASSESSEE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE TRUST FOR THE YEAR U NDER CONSIDERATION. ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE ASSES SEE IS REJECTED. 61. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO CASH SEIZED AT AIRPORT TO THE TUNE OF F1,00,00,000/- FOR THE ASSESSMENT YEAR 2007-2008. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 157 -: 61.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESS EE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRE D IN CONFIRMING THE ADDITION OF AN AMOUNT OF F.1 ,00,00,000/- AS UNACCOUNTED INCOME OF THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEA LS) OUGHT TO HAVE TAKEN INTO ACCOUNT THE DETAILED EXPLANATION FU RNISHED BY THE ASSESSEE THAT THE AMOUNT OF F 1,00,00,000/- HAD BEEN DULY RECORDED IN THE BOOKS OF ACCOUNTS OF THE TRUST AND HAD BEEN WIT HDRAWN FROM THE TRUST ACCOUNT FOR THE SPECIFIC PURPOSE OF PURCHASE OF GUEST HOUSE IN NEW DELHI. THE AMOUNT HAD BEEN DECLARED TO THE AIRP ORT AUTHORITIES BY THE MANAGING TRUSTEE PRIOR TO TRAVEL. THE DETAIL ED EXPLANATION BY THE MANAGING TRUSTEE IN THIS REGARD HAS BEEN WHOLLY IGNORED BY THE LOWER AUTHORITIES. THE ASSESSING AUTHORITY HAD MADE THE DISALLOWANCE BASED ON ASSUMPTIONS AND WILD IMAGINATION AND THIS HAS BEEN ARBITRARILY CONFIRMED BY THE COMMISSIONER OF INCOME -TAX (APPEALS) WITHOUT APPLICATION OF MIND. 61.2. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDERS OF THE LOWER AUTHORITIES. 61.3 WE HAVE HARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. AN AMOUNT OF F 1 CRORE WAS SEIZED FROM SHRI P.MURUGESAN, I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 158 -: CHAIRMAN AND MANAGING TRUSTEE OF THE ASSESSEE TRU ST AT CHENNAI AIRPORT ON 25.11.2006. THE ASSESSEE IN HIS REPLY T O THE STATEMENT RECORDED U/S. 131 & 132 ON 25.11.2006 COULD NOT EXPLAIN THE SOURC E OF THE CASH SEIZED FROM HIM. THE MANAGING TRUSTEE OF T HE ASSESSEE TRUST NARRATED THE TRANSACTION THAT THE MONEY IS WI THDRAWN FROM THE TRUST ACCOUNT TO PURCHASE A GUEST HOUSE IN NEW DELH I IN EAST PATEL NAGAR, NEW DELHI. SINCE THE TRANSACTION DID NOT TAK E PLACE HE WAS RETURNING BACK WITH THE MONEY. THE MANAGING TRUSTEE HAS NO REPLY FOR THE QUERY THAT THE MONEY HAS BEEN WITHDRAWN FROM NO RTH INDIAN BANKS, IN PLACES LIKE AJMER AND DELHI, HE INITIALLY TOLD THAT THE MONEY IS TAKEN FROM THE TRUST, THANJAVUR. ALL THE BUNDLES OF CASH BEARING BANK SEALS FROM NORTH INDIAN BRANCHES MUCH AGAINST THE V ERSION NARRATED BY THE MANAGING TRUSTEE THAT THIS CASH BELONGS TO T HE ASSESSEE TRUST. NO CREDENCE CAN BE ATTRIBUTED TO THE VERSION OF THE MANAGING TRUSTEE THAT SMALL DENOMINATIONS HAVE BEEN CARRIED FROM THA NJAVUR AND GOT CONVERTED INTO BIGGER DENOMINATIONS ALSO NOT SUPPOR TED BY ANY EVIDENCE. APART FROM THE ABOVE, IT WAS NOT PHYSICALLY POSSIBLE TO TRANSFER SMALL DENOMINATIONS OF MONEY WORTH F1 CROR E FROM THANJAVUR TO DELHI AND BRING BACK. IT HAS BEEN AMPLY PROVED B EYOND DOUBT BY THE DEPARTMENT THAT THE ASSESSEE TRUST IS NOT HAVIN G PROPER ACCOUNTS MAINTAINED SUCH AS REGULAR BOOKS OF ACCOUNTS UNDER I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 159 -: THE HEAD CORPUS FUND ACCOUNT. THE CASH BOOK DOES NO T REFLECT THE RECEIPT OF ANY CASH BY WAY OF DONATIONS FROM THE CO RPUS ACCOUNT. APART FROM REGULAR BOOKS OF ACCOUNTS OF THE ASSESSE E TRUST THE MANAGING TRUSTEE MAINTAINED HIS OWN SEPARATE SHEET AT HIS DISPOSAL FOR ALL THE CAPITATION FEES AND OTHER DONATIONS REC EIVED DURING THE YEAR AND AT THE FAG END OF THE YEAR SOME CONVENIENT AMOU NT IS REPORTED TO ACCOUNTS DEPARTMENT AND THE SAME IS BROUGHT INTO AC COUNTS. ON THE DATE OF SEIZURE OF F1 CRORE CASH FROM THE MANAGING TRUSTEE, THE BOOKS OF ACCOUNTS OF THE TRUST DO NOT REFLECT ANY BEARING S IN TRUST CASH BOOK. THERE ARE NO ENTRIES MADE IN THE CORPUS FUND ACCOUN T AS WELL AS NO SUFFICIENT WITHDRAWALS FROM THE BANK ACCOUNT BELONG ING TO SPRECT IN THANJAVUR DISTRICT. THUS THE MANAGING TRUSTEE MANIP ULATED THE ACCOUNTS AND SUBSEQUENTLY SHOWN AFTER THE AUDIT FO R THE YEAR ENDING 31.03.2007 MADE AN ENTRY AS ON 1.11.2006 THAT CORPU S DONATION ACCOUNT IS SHOWN AT F 1,12,30,000/-. ON 28.11.2006 AMOUNT SHOWN AS CREDIT IS F 1 CRORE BEING THE AMOUNT SEIZED BY IT D EPARTMENT. THE ACCOUNT COPY IS PREPARED AFTER AUDIT OF SPRECT BOOK S IN 2007. IT IS NOT BACKED BY ANY PRIMARY EVIDENCE FOR THE DEBITING OF F1,12,30,000/- ON A SINGLE DAY. HENCE, WE ARE IN AGREEMENT WITH THE ASSESSING OFFICER'S OBSERVATION THAT NO CREDENCE CAN BE GIVEN TO THIS J OURNAL ENTRY WHICH IS PREPARED ONLY AFTER THE SEARCH TO SUIT THE NEEDS OF THE ASSESSEE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 160 -: TRUST TO EXPLAIN AWAY F 1 CRORE SEIZED AT CHENNAI A IRPORT. AS PER THE COPY OF THE CD SEIZED THE CASH BALANCE AVAILABLE AS ON 23.11.2006 IS ONLY F16,456.75. DECLARATION ON MONEY AT DELHI AIR PORT WOULD NOT TANTAMOUNT TO SAY THAT THE MONEY IS ACCOUNTED FOR. THERE WAS NO PROPER REPLY FROM THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT CASH BALANCE OF ALL THE INSTITUTES PUT TOGETHER AS ON 5.10.2006 AND 23.11.2006 ARE AT F 14,09,198.32 AND F14,23,434.82 RESPECTIVELY. WHEN THE CASH BALANCE AS ON 23.11.2006 IS F14,23,43 4.82 HOW COULD THE MANAGING TRUSTEE CARRY ONE CRORE AMOUNT OF CASH SEIZED AT AIRPORT AND HE HAS ACCOUNTED FOR IN THE TRUST SUBSEQUENTLY BY MANIPULATING COMPUTERIZED DISC FIGURES. HOWEVER, THERE WAS NO RE PLY FROM THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE. SINCE TH E AMOUNT IS UNACCOUNTED THE MANAGING TRUSTEE COULD NOT SUBSTANT IATE THE CARRYING OF THE CASH. IT WAS AMPLY CLEAR THAT THE MANAGING T RUSTEE TAKING THE MONEY OF THE TRUST WITHOUT ACCOUNTING THE SAME WHIC H IS A CLEAR VIOLATION OF THE PROVISIONS OF THE TRUST AND ALSO D IVERSION OF THE FUNDS FOR THE BENEFIT OF MANAGING TRUSTEE THEREBY VIOLATI NG THE PROVISIONS U/S 13(1)(C)(II) LEADING TO THE DENIAL OF EXEMPTION U/S 11 OF THE ACT. THEREFORE THE ADDITION MADE BY THE LOWER AUTHORITIE S AT F1 CRORE AS UNACCOUNTED CASH IN TERMS OF THE ASSESSEE TRUST I S CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 161 -: 62. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO MISCELLANEOUS EXPENSES TO THE TUNE OF F91,71,078/- FOR THE ASSESSMENT YEAR 2007-2008. 62.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF A SUM OF F91,71,078/- IN RESPECT OF VARIOUS MISCELLANEOUS EXPENSES INCURRED IN THE RUNNING OF T HE TRUST AND THE FULFILLMENT OF THE TRUST'S OBJECTS. THE COMMISSIONE R OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT COMPLETE DETAILS OF EXPENDITURE INCURRED, INCLUDING LEDGER ACCOUNT AND VOUCHERS, HA VE BEEN PRODUCED BEFORE THE LOWER AUTHORITIES. A SPECIFIC CONFIRMATI ON HAS BEEN FURNISHED BEFORE THE COMMISSIONER OF INCOME-TAX (AP PEALS) IN THIS REGARD WHO MERELY IGNORES THE SAME IN CONFIRMING TH E DISALLOWANCE. 62.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 62.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE AUTHORISED REPRESENTATIVE OF THE ASSESS EE WHO IN THIS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 162 -: GROUNDS OF APPEAL STATED SIMPLY THAT THE LOWER AUT HORITIES ERRED IN DISALLOWING A SUM OF F91,71,078/- OUT OF THE MISCEL LANEOUS EXPENSES CLAIMED. THE ASSESSEE HAS NOT FURNISHED DETAILS OF MISCELLANEOUS EXPENSES DURING THE COURSE OF ASSESSMENT PROCEEDING S. LEDGER ACCOUNT AS WELL AS VOUCHERS FURNISHED BY THE ASSESS EE TRUST IS ONLY TO THE EXTENT OF F 94,432/-. HENCE TH E LOWER AUTHORITIES HAS DISALLOWED AN AMOUNT OF F 91,71,078/- OUT OF THE TOTAL CLAIM OF MISCELLANEOUS EXPENDITURE CLAIMED BY THE APPELLANT AT F 92,55,510/--. SINCE THE LOWER AUTHORITIES HAS ALLOWED TO THE EXTE NT OF VOUCHERS PRODUCED THERE CANNOT BE ANY GRIEVANCE FOR DISALLOW ING THE BALANCE AMOUNT ON ACCOUNT OF NON FURNISHING OF VOUCHERS AS WELL AS LEDGER EXTRACT FROM THE EXPENSES SAID TO HAVE INCURRED BY THE ASSESSEE TRUST. THEREFORE, WE REJECT THIS GROUND OF THE APPEAL OF T HE ASSESSEE AND CONFIRM THE ADDITION MADE BY THE LOWER AUTHORITIES AT F91,71,078/-. 63. THE NEXT GROUND RAISED BY THE ASSESSEE IS WI TH REGARD TO TRAVELLING EXPENSES TO THE TUNE OF F16,01,125/- FOR THE ASSESSMENT YEAR 2007-2008. 63.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 163 -: DISALLOWANCE OF A SUM OF F16,01,125/- OF EXPENDITUR E INCURRED ON TRAVEL IN THE COURSE OF FULFILLMENT OF THE OBJECTS OF THE TRUST. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT COMPLETE DETAILS OF EXPENDITURE INCURRED, INCLUDING LEDGER ACCOUNT AND VOUCHERS, HAVE BEEN PRODUCED BEFORE THE LOWER AUTHO RITIES. A SPECIFIC CONFIRMATION HAS BEEN FURNISHED BEFORE THE COMMISSI ONER OF INCOME- TAX (APPEALS) IN THIS REGARD WHO MERELY IGNORES THE SAME IN CONFIRMING THE DISALLOWANCE. 63.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 63.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE WHO IN THIS GROUND OF APPEAL STATED SIMPLY THAT THE LOWER AUTHO RITIES ERRED IN DISALLOWING A SUM OF F16,01,125/- OUT OF THE TRAVELLING EXPENSES CLAIMED. THE ASSESSEE HAS NOT FURNISHED DETAILS OF TRAVELLING EXPENSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. LEDGER ACCOUNT AS WELL AS VOUCHERS FURNISHED BY THE ASSESSEE TRUST IS ONLY TO THE EXTENT OF F11,03,504.50. HENCE THE LOWER AUTHORITIES HAS DISA LLOWED AN AMOUNT OF F16,01,125/- OUT OF THE TOTAL CLAIM OF TRAVELLIN G EXPENDITURE CLAIMED BY THE ASSESSEE AT F27,04,629/- . SINCE THE LOWER A UTHORITIES HAS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 164 -: ALLOWED TO THE EXTENT OF VOUCHERS PRODUCED THERE CA NNOT BE ANY GRIEVANCE FOR DISALLOWING THE BALANCE AMOUNT ON ACC OUNT OF NON FURNISHING OF VOUCHERS AS WELL AS LEDGER EXTRACT FR OM THE EXPENSES SAID TO HAVE INCURRED BY THE ASSESSEE TRUST. THEREFORE, WE REJECT THIS GROUND OF THE APPEAL OF THE ASSESSEE AND CONFIRM THE ADDITION MADE BY THE LOWER AUTHORITIES ASSESSING OFFICER AT F16,0 1,125/- 64. THE NEXT GROUND RAISED BY THE ASSESSEE IS WI TH REGARD TO INTEREST ON LOAN TO THE TUNE OF F44,04,327/- FOR THE ASSESSM ENT YEAR 2007- 2008. 64.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESS EE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE DISALLOWANCE OF AN AMOUNT OF F44,04,327/- BEING INT EREST PAID TO BANK. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGH T TO HAVE NOTED THAT FULL PARTICULARS AND EXPLANATIONS HAVE B EEN FURNISHED IN THIS REGARD, WHEREAS THE DISALLOWANCE HAS BEEN MADE AND CONFIRMED MERELY ON ASSUMPTIONS AND PRESUMPTIONS. THE COMMISS IONER OF INCOME-TAX (APPEALS) ADOPTED THE ERRONEOUS VIEW THA T THE INTEREST PAID RELATES TO AN ENTITY BY THE NAME AND STYLE O F PRIST AND THUS CANNOT BE CLAIMED BY THE ASSESSEE. THIS IS FACTUALL Y INCORRECT IN SO FAR I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 165 -: AS IT HAS BEEN SPECIFICALLY CONFIRMED THAT THE PAYM ENT OF INTEREST RELATES TO A LOAN AVAILED OF BY THE ASSESSEE. THE D ISALLOWANCE IS THUS LIABLE TO BE REVERSED. THE COMMISSIONER OF INCOME -TAX (APPEALS) ERRED IN CONCLUDING THE TRANSACTION WOULD ATTRACT T HE PROVISIONS OF SEC. 13 (1) (C) (II) R.W.S. 13 (3) (E) OF THE ACT, ON THE ERRONEOUS UNDERSTANDING THAT PRIST, AN ENTITY FALLING WITHIN THE PURVIEW OF SEC. 13 (3) (E) OF THE ACT HAS UTILIZED FUNDS BELONGING TO THE ASSESSEE. ALL AVERMENTS IN THIS REGARD ARE FACTUALLY INCORRECT AN D THE CONSEQUENT CONCLUSION THEREFORE IS WHOLLY BAD IN LAW. 64.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 64.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. AS FAR AS INTEREST DISALLOWED BY THE ASSESSING OFFI CER AT 44,04,327/- IS CONCERNED, THE ASSESSEE TRUST HAS GI VEN 5 CRORES DEPOSIT IN THE NAME OF PRIST BY RAISING A LOAN TO M AKE THE DEPOSIT. THE FUNDS WERE DEPOSITED WITH THE SPRECT BY THE ASS ESSEE TRUST SOURCING FROM ITS OWN TERM LOAN. WHEREIN THE ASSES SEE TRUST HAS AVAILED TERM LOAN OF 5 CRORES AND MADE A DEPOSIT IN THE NAME OF PRIST. AS PRIST IS A SEPARATE ENTITY, THE LOAN COUL D HAVE BEEN TAKEN I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 166 -: ON 25.11.2004 IN THE NAME OF PRIST ITSELF INSTEAD O F MAKING THE ASSESSEE TRUST AS A MEDIUM FOR GETTING THE LOAN. IT WAS OBSERVED FROM THE RETURN FILED BY THE ASSESSEE TRUST FOR THE AY 2 007-08 THAT THE ASSESSEE TRUST CLAIMED BANK CHARGES OF 1,25,57,885/-. NO DETAILS FOR THIS INTEREST PAYMENT WERE FURNISHED. IN ITS REPLY THE ASSESSEE TRUST HAS MENTIONED THAT THE INTEREST ARISING OUT OF DEPO SIT OF 5 CRORES IN THE NAME OF PRIST HAD BEEN OFFERED IN THE HANDS OF SPRECT. THUS IT CAN BE INFERRED THAT THE PAYMENT OF 44,04,327/- IS INCLUDED IN THE BANK CHARGES OF THE SCHEDULE-9 TO INCOME AND EXPEND ITURE STATEMENT. THE INTEREST PAYMENT ON THE LOAN DOES NOT RELATE TO SPRECT BUT IT PERTAINS TO PRIST. HENCE THE LOWER AUTHORITIES DISA LLOWED THE INTEREST PAID ON BEHALF OF PRIST IN THE HANDS OF ASSESSEE TR UST AND ADDED TO THE INCOME IN THE YEAR UNDER CONSIDERATION I.E, FOR AY 2007-08 SINCE THE MANAGING TRUSTEE FOR BOTH TRUSTS BEING THE SAME AND ALL THE TRUSTEES EXCEPT ONE ARE THE SAME FAMILY MEMBERS OF SHRI P .MURUGESAN. EVEN THOUGH PRIST IS A SEPARATE ENTITY WHICH FALLS UNDER SECTION 13(3) (E) OF THE I.T. ACT, AS THE FU NDS OF SPRECT ARE UTILIZED FOR PRIST, THESE TRANSACTIONS IS HIT BY TH E PROVISIONS OF SEC 13(1)(C)(II) R.W.S 13(3)(E) OF THE I.T. ACT THEREBY THE ASSESSEE TRUST LOOSING THE EXEMPTION U/S. 11 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS INTEREST PAID BY THE ASSESSEE T RUST ON THE TERM LOAN TAKEN OUT OF ITS OWN FUNDS AND DEPOSITED IN TH E NAME OF PRIST AT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 167 -: 44,04,327/-, WE HEREBY REJECT THE GROUND OF THE APPEAL OF THE ASSESSEE. 65. THE LAST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO INTEREST ON RENT ADVANCE TO THE TUNE OF F4,60,544/- FOR THE ASSESSMENT YEAR 2007-2008. 65.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF A SUM OF F4,60,544/- BEING INTEREST @ 13.75% ON A SUM OF F2.5 CRORES BEING THE RENTAL ADVANCE PAID BY THE ASSESSEE FOR A PROPERTY RENTED TO THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT IT WAS A GENUINE TRANSACTION AND CHARGING OF INTEREST ON RENT ADVANCE PAID IS NOT PR EVALENT ANYWHERE. 65.2 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 65.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THE ASSESSEE TRUST HAS RAISED A LOAN OF 2.5 CRORES TO PAY A RENT ADVANCE OF 3 CRORES TO THE MANAGING TRUSTEE. HENCE THE LOWER AUTHORITIES HAS DISALLOWED THE INTEREST AT 13.75% W HICH WORKS OUT TO I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 168 -: 4,60,544/- AND ADDED TO THE INCOME OF THE ASSESSEE TRUST AND WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LOWER A UTHORITIES . THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 65.4 IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS.1884 TO 1890/MDS/2013 ARE DISMISSED. 65.5 THE ASSESSEE HAS FILED STAY PETITIONS NOS.361 TO 367/MDS/2015 SEEKING STAY OF OUTSTANDING DISPUTED DEMAND OF TAX. SINCE WE HAVE DISPOSED OFF ALL THE APPEALS OF THE ASSESSEE HEREIN , THE STAY PETITIONS ARE DISMISSED AS INFRUCTUOUS. SHRI. R. VISWANATHAN :- ITA NO.462/MDS/2011, ASSESS MENT YEAR 2006- 2007 (REVENUES APPEAL) 66. THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGA INST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALL I, DATED 16.12.2010 FOR THE ASSESSMENT YEAR 2006-2007. 66.1 THE FACTS OF THE CASE ARE THAT A SEARCH U NDER SEC. 132 OF THE ACT WAS CONDUCTED ON 23-08-2006 AT HIS NATHAM RESID ENCE. THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 169 -: CHENNAI RESIDENCE OF SHRI R VISWANATHAN'S SON SRI V . AMARNATH WAS ALSO COVERED UNDER SEC. 132. PURSUANT TO THE ABOVE SEARCHES, THE ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SEC. 153A AND COMPLETED THE ASSESSMENTS FOR AYS 2001.02 TO 2006-07 AND THE SCRUTINY ASSESSMENT FOR AY 2007-08 (YEAR OF SEARCH) ON 30-12 -2008. THE PRESENT APPEAL IS RELATING TO ASSESSMENT YEAR 2006- 07. 66.2 IN THE ASSESSMENT OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION, THE A.O. HAD COME TO A FINDING THAT THE ASSESSEE IS THE 'BENEFICIAL OWNER' OF THE INCOME / ASSETS OF TITAN EDUCATIONAL TRUST (TET, IN SHORT). ACCORDING TO THE A.O., THE ASSESSE E HAD INVESTED HIS UNACCOUNTED INCOME IN THE TRUST/COLLEGES RUN BY THE TRUST. THE ASSESSEE HAS UTILIZED THE BENEFICIAL PROVISIONS OF THE TAX LAW ON THE TRUSTS AND ACQUIRED THE EDUCATIONAL INSTITUTIONS BE LONG TO OTHER TRUST FOR A CONSIDERATION. THEREFORE, THE TRUST IS A COND UIT TO ACQUIRE THE ASSETS. ' TET WAS CONSTITUTED AS A PUBLIC CHARITABLE TRUST AS PER DEED DATED 1-10-2005 REGISTERED AS DOCUMENT NO. 1609 OF 2005 IN THE OFFICE OF THE SUB REGISTRAR, THIAGARAYA NAGAR, CHEN NAI - 17. SRI P. JANAKAR WAS THE AUTHOR OF THE TRUST AS ALSO THE MAN AGING TRUSTEE. SRI R. MOHAN KUMAR, COIMBATORE IS THE OTHER TRUSTEE. AS PER DEED OF AMENDMENT DATED 03-01-2006 REGISTERED AS DOE. NO. 6 05 OF 2006, I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 170 -: CERTAIN AMENDMENTS RELATING TO 'OBJECTS' WERE CARRI ED OUT. THE 'OBJECTS' OF THE TRUST WERE CHARITABLE IN NATURE, M OSTLY IN THE FIELD OF EDUCATION, MEDICAL SERVICES AND SERVICE TO THE POOR . THE TRUST MADE AN APPLICATION UNDER SEC. 12A(A) AND WAS GRANTED RE GISTRATION UNDER SEC. 12AA(L) OF THE INCOME TAX ACT, 1961 BY THE DIT (EXEMPTIONS), CHENNAI, AS PER ORDERS DATED 18-07-2006. 66.3 THE ISSUE OF GENUINENESS OF THE TITAN EDUCAT IONAL TRUST AND ITS ACTIVITIES IN RUNNING THE NPR GROUP OF EDUCATIONAL INSTITUTIONS AT NATHAM WERE CONSIDERED BY COMMISSIONER OF INCOME TA X (APPEALS) IN THE APPEAL FILED BY THE TRUST. AFTER A DETAILED DIS CUSSION, IT WAS HELD THAT THE TRUST IS GENUINE AND THE FINDINGS OF THE A .O. IN THIS REGARD ARE NOT BASED ON EVIDENCE ON THAT CASE, THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR AY 2006-0 7 ARE EXTRACTED BELOW:- 6.1. BENAMI OWNERSHIP OF ASSETS OF THE TRUST:-- IN THE ASSESSMENT ORDER, THE A.O. HAS GIVEN A FINDING THAT IT IS SHRI R. VISWANATHAN, WHO IS THE PERSON BEHIND THE T RUST AND ALSO ENJOYING THE INCOME OF THE TRUST. IN THIS CONNECTION, THE ASSESSING OFFICER HAD DISCUSSED TH E BASIS ON WHICH HE CAME TO SUCH A CONCLUSION. IN ITS WRITT EN SUBMISSIONS DT. 10-02-2010, THE ASSESSEE HAD STATED ITS DEFENSE AND VEHEMENTLY ARGUED THAT THE CONCLUSION O F THE A.O.. IS WITHOUT ANY BASIS OR RATIONALE AND STA TED ITS CASE ELABORATELY AS UNDER:- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 171 -: 5.1 IN PARA 6.2.1 OF THE ASSESSMENT ORDER, THE ASS ESSING OFFICER OBSERVED THUS: ' .. . IN HIS SWORN STATEMENT WHICH WAS RECORDED FROM SHRI JANAKAR ON 05-10-2006 HAD ADMITTED THAT HE HAD BEEN ASSOCIATED WITH SRI R. VISWANATHAN FOR A LONG TIME AND BOTH OF THEM ARE CL OSE FRIENDS AND HAILS FROM NEAR BY VILLAGES. IN OTHER WORDS, BOTH SRI VISWANATHAN AND SRI JANAKAR ARE CLOSE FRIE NDS BY WAY OF THEIR COMMON PLACE, BLOOD AFFILIATION AND COMMUNITY MORES' (SIC). WE WISH TO STATE THAT EXCEPT FOR THE FACT THAT SRI JANAKAR AND SRI R. VISWANATHAN BELONG TO THE SAME DISTRICT AND MUTUALLY KNOW EACH OTHER; THERE IS NO OTHER PERSONAL OR BUSINESS RELATIONSHIP BETWEEN THEM. WE DO NOT UNDERSTAND WHAT THE LEARNED ASSESSING OFFICER IS TRYING TO INFER WHILE SAYING 'COMMON PLACE, BLOOD AFFILIATION AND COMMUNITY MORES'. THE DICTIONARY MEANING OF THE WORD 'MORES' IS CUSTOMS, USAGES, CONVENTIONS, REGARDED AS ESSENTIAL TO A SOCIAL GROUP. THE LEANED ASSESSING OFFICER IS FACTUALLY INCORRECT THAT THE TWO HAVE 'BLOOD AFFILIATION '. AS A MATTER OF TACT; THEY BELONG TO DIFFERENT HINDU COMMUNITIES. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THEY HAVE MUTUALLY KNOWN EACH OTHER AND THAT THEY BOTH BELONG TO THE SAME PLACE / DISTRICT; IS IT FAIR, CORRECT, PROPER, NOT ILLOGICAL AND ABOVE ALL LEGALLY SUSTAINABLE TO ALLEGE THAT ONE IS THE 'BENA MI' OF THE OTHER? THERE MAY BE THOUSANDS OF SUCH PERSONS KNOWN TO SRI R. VISWANATHAN AND IF SO, IS IT CORRECT FOR THE LEARNED ASSESSING OFFICER TO RAISE SUCH A UNFOUNDED ALLEGATION OR PRESUMPTION? SUFFICE IT TO SAY, YOUR ASSESSEE SUBMITS, THAT THE LEARNED ASSESSING OFFICER IS CERTAINLY NOT CORRECT; PARTICULARLY IN THE CONTEXT OF PROCEEDINGS UNDER THE INCOME TAX ACT 1961. 5.2. IN THE SAME PARAGRAPH, THE LEANED ASSESSING OFFICER HAD OBSERVED AS UNDER: '... . .. THEREFORE, THE CONSTITUTION OF TRUST ITSELF IS NOT GENUINE AS ONE OF THE TRUSTEE IS A NAME LENDER. SRI MOHAN KUMAR NOT ONLY NOT SIGNED THE TRUST DEED BUT ALSO NEVER PARTICIPATED IN ANY OF THE ACTIVITIES OF THE TRUST AND THEREFORE, THE TRUST WAS LEFT WITH SINGLE TRUSTEE. HENCE, THESE EVENTS INDICATE ENOUGH THAT THERE IS A I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 172 -: ULTERIOR MOTIVE BEHIND INITIATION OF THE TRUST ITSELF': WE WISH TO STATE THAT SRI MOH AN KUMAR DID NOT SIGN ANYWHERE IN THE TRUST DEED OR THE AMENDMENT DEED, FOR THE SIMPLE REASON THAT ONLY THE SIGNATURE OF THE AUTHOR/MANAGING TRUSTEE WAS REQUIRED AND NOT THAT OF THE OTHER TRUSTEE UNDER TH E REGISTRATION ACT RULES. THE COMMISSIONER OF INCOME TAX (APPEALS) WISH TO STATE THAT THE INVOLVEMENT O F SRI R. MOHAN KUMAR IN THE AFFAIRS OF OUR TRUST CAN BE EASILY PROVED WITH REFERENCE TO THE RECORDS OF OUR TRUST LIKE MINUTES BOOK, LOAN PAPERS, BANK ACCOUNTS, FORMING NEW INSTITUTIONS, NEW PROPOSALS ETC. AND, THEREFORE, THE LEARNED ASSESSING OFFICER 'S INFEREN CE THAT SRI MOHAN KUMAR IS MERELY A NAME LENDER IS NOT CORRECT IN THIS CONNECTION, THE COMMISSIONER OF INCOME TAX (APPEALS) WISH TO STATE , WITH ALL THE EMPHASIS AT OUR COMMAND, THAT THE LEARNED C1T (A) MAY PLEASE SUMMON SRI MOHAN KUMAR FOR EXAMINATION. THE POSTAL ADDRESS OF SRI R. MOHAN KUMAR IS S/O SRI RANGANATHAN,,C/O. VIJAYA PRABHA OILLS, GANAPATHY P. O. COIMBATORE. 5.3 IN THE ASSESSMENT ORDER; THE LEARNED ASSESSING OFFICER HAS RECORDED A FINDING THAT ''SRI SIVAKUMAR IS THE MANAGER OF THE TRUST AND NOT SRI JANAKAR'. IN THIS CONNECTION, WE WISH TO PLACE THE FACTS FOR THE CONSIDERATION OF THE CIT (A). SRI R. MEGANATHAN IS THE ELDER BROTHER OF SRI R. VISWANATHAN AND SRI M. SIVSKUMSR; S/O SRI MEGANATHAN IS WORKING AS THE ADMINISTRATIVE OFFICER OF THE NPR GROUP OF COLLEGES . WE WISH TO STATE THAT WHEN SRI PONNIAH RAMAJAYATHAMMAL EDUCATION AND CHARITABLE TRUST (SPRECT; IN SHORT) MOOTED THE IDEA OF STARTING EDUCATIONAL INSTITUTIONS AT NATHAM, SRI MEGANATHAN AND SIVAKUMAR WERE IN THE FOREFRONT TO REQUEST THE LAND OWNERS OF THAT AREA TO COME FORWAR D TO TRANSFER / SELL THEIR LANDS TO THE TRUST; BESIDES, THE DUO ALSO CAME FORWARD TO SELL A MAJOR PART OF THEIR OWN FAMILY LANDS - THE LANDS ACQUIRED BY THE TRUST FOR COLLEGE PURPOSES FROM THE DUO IS APPROXIMATELY 10 ACRES, WHICH SHOULD INDICATE THEIR INVOLVEMENT IN STARTING A GOOD VENTURE - A GROUP OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 173 -: EDUCATIONAL INSTITUTIONS AT A REMOTE PLACE LIKE NATHAM. SRI SIVAKUMAR WHO WAS WORKING IN THE POLICE DEPARTMENT, GOVT. OF TAMIL NADU RESIGNED HIS JOB TO JOIN THE SERVICES OF THE COLLEGES. SRI SIVAK UMAR WAS WORKING AS ADM. OFFICER OF THE COLLEGES WHICH WERE PREVIOUSLY RUN BY SPRECT. HE WAS NOT APPOINTED BY OUR TRUST. SRI SIVAKUMAR AND OTHER STA FF OF SPRECT CONTINUE TO WORK FOR THE COLLEGES RUN BY OUR TRUST AFTER THE 'TRANSFER' OF ASSETS BY SPRECT TO OUR TRUST. FROM THE POINT OF VIEW OF THE TRUST, THE VITAL CONSIDERATION IS HIS INVOLVEMENT A ND SENSE OF DEVOTION IN THE MANAGEMENT OF THE COLLEGES THAN HIS QUALIFICATION OR EXPERIENCE. HAVING BEEN ASSIGNED DUTY AS AN ADM. OFFICER OF THE COLLEGES, IT IS BUT NATURAL THAT THE RELATED DOCUMENTS LIKE RC BOOKS FOR THE COLLEGE VEHICLES, BANK CHEQUE BOOKS ETC. WERE IN THE PERSONAL CUSTODY OF SRI SIVAKUMAR AND FOUND AT THE TIME OF SEARCH. THE LEARNED A.O. . IS CERTAINLY NOT LOGICAL OR LEGALLY CORRECT TO DRAW AN INFERENCE THAT IT WAS SRI SIVAKUMAR - AND NOT SRI JANAKAR - WHO WAS MANAGING THE AFFAIRS OF THE TRUST. AS A MATTER OF FACT, SRI SIVAKUMAR WAS ONLY MANAGING THE AFFAIRS OF THE COLLEGES AND NOT THAT O F THE TRUST. 5.4 IN PARA. 6.2.3 OF THE ASSESSMENT ORDER; THE LEARNED A. 0. HAD DISCUSSED THE RELATIONSHIP BETWEEN SRI P. MURUGESAN (MANAGING TRUSTEE OF SPRECT) AND SRI P. JANAKAR - AS CASUAL. PERIPHERAL AND EPHEMERAL WHEN THE CONSTRUCTION OF COLLEGE BUILDINGS FOR SPRECT WAS IN PROGRESS, ITS MANAGING TRUSTEE WAS OF THE VIEW THAT IT WOULD BE RATHER TOO DIFFICULT TO MANAGE AND SUCH A DECISION WAS ON HIS OWN VOLITION. ACCORDINGLY, SRI MURUGESAN CAME FORWARD TO DONATE THE LAND AND BUILDINGS UNDER CONSTRUCTION TO OUR TRUST. THAT WAS IN NOVEMBER; 2005 AND ACCORDINGLY, TO GIVE EFFECT TO THE DESIRE OF TH E DONOR TRUST, A REGISTERED DEED WAS EXECUTED AND REGISTERED WE ALSO WISH TO STATE THAT DURING THE PO ST- SEARCH PERIOD AND DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, WE HAD EXPLAINED TO THE OFFICERS OF THE INCOME TAX DEPARTMENT'S INVESTIGATI ON WING AND THE 1EAMED A. 0. THE WHOLE BACK GROUND OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 174 -: THE EVENTS LEADING TO THE 'GIFT' OF THE ASSETS BY SPRECT TO OUR TRUST. MEN THE GIFT / TRANSFER OF THE ASSETS OF SPRECT TO OUR TRUST IS BY MEANS OF A REGISTERED DEED, WE WISH TO SUBMIT THAT NO MORE PROOF MAY BE REQUIRED TO SAY THAT SPRECT GIFTED / DONATED ITS ASSETS TO OUR TRUST. THE LEARNED A. O. HAS OBSERVED THUS: 'THEREFORE THE TRANSFER OF THE INSTITUTIONS TO TET IS A MAKE BELIEVING AFFAIR AND THE REAL TRANSFER IS TO SRI R. VISWANATHAN FOR A CONSIDERATION.. IT APPEARS FROM THE FACTS OF THE CASE THAT THE UNACCOUNTED INCOME OF SRI R. VISWANATHAN WAS PAID TO MURUGESAN AND ACQUIRED THE SAID COLLEGES WITH THE ASSETS'. WE ONLY WISH TO STATE THAT THE A.O.. IS CERTAINLY NOT CORRECT TO MAKE SUCH CONCLUSIONS WITHOUT LETTING IN NECESSARY EVIDENCES GATHERED AS A RESULT OF THE SEARCH. ASSUMING FOR THE SAKE OF ARGUMENT THAT IT WAS SRI R VISWANATHAN WHO HAD INVESTED IN THE TRUST; CERTAINLY THE INCOME TAX DEPT. AS A RESULT OF THE SEARCH UNDER SEC. 132 OUGHT TO HAVE COME ACROSS ENOUGH PROOF / EVIDENCES IN THIS BEHALF. THE FACT IS THAT THERE WERE NONE. WE WISH TO STATE THAT THE INFERENCES OF THE LEARNED A.O. IN THIS REGARD HAS NO BASIS OR LOGIC O R UNSUSTAINABLE INASMUCH AS THEY ARE NOT EVIDENCE BASED, BUT MERELY WISHFUL. 5.5 IN PARA. 6.2.4, THE LEARNED A.O. HAD OBSERVED THUS: 'THERE WAS A SEARCH CONDUCTED IN THIS GROUP O N 23-08-2006 AND SURVEYS U/S. 133A WAS CONDUCTED ON THE SAME DATE ON BOTH NPR COLLEGE OF INSTITUTIONS A T NATHAM AND SPRECT AT TANJORE. THE VALUE OF CANARA BANK BALANCE ( 6,05,000) AND COMPUTERS 8,31,015/- IN THE TRIAL BALANCE OF NPR COLLEGE AT NATHAM AS ON 31-10-2008. IT IS OTHERWISE IMPOSSIBLE FOR THIS TYPE OF CONVERGENCE / MATCHING OF THE ASSETS AND THEIR VALUE EVEN BEFORE THE LEGAL EXISTENCE OF THE TET EXCEPT FOR THE SECRET UNDERSTANDING BETWEEN P. MURUGESAN AND R. VISWANTHAN. ..THUS, IT IS CLEAR THAT THE INVESTMENT WAS MADE BY R. VISWANATHAN UNDER THE COVER OF P. MURUGESAN. THE FRONT FACE OF SRI R. VISWENSTHAN IN THIS REGARD ARE P. JANAKAR AND M SIVEKUMSR'. THE SIMPLE FACT IS THAT THE VALUE AS APPEARING IN THE BOOKS OF THE DONOR I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 175 -: (SPRECT) ARE THE SAME AS APPEARING IN OUR BOOKS. THE LEANED A. 0. FAILED TO NOTE THAT THEY CANNOT AT ALL BE DIFFERENT. FOR THAT REASON, THE LEARNED A.O. WAS CERTAINLY NOT CORRECT IN RAISING AN INCORRECT PRESUMPTION ABOUT A NON-EXISTENT RELATIONSHIP BETWEEN SRI P. MURUGESAN AND SRI R. VISWANATHAN, FOR THE A.O. HAD NOT LET IN ANY EVIDENCE FOR HIS PRESUMPTION. 5.6. IN PARA . 6.2.5 OF THE ASSESSMENT ORDER; THE LEARNED AO. OBSERVED THAT 'THE TRANSACTIONS ARE NOT POSSIBLE IN NORMAL HUMAN RELATIONS, AGAINST NORMAL PRACTICES AND HUMAN BEHAVIOUR AND ALSO DEFIES HUMAN LOGIC AND IS COLORABLE DEVISE TO ACQUIRE ASSETS. ... THE TRANSACTIONS IN THIS CASE ARE COLORABLE DESTINED TO MALIGN THE BENEFICIAL PROVISIONS OF THE INCOME TAX ACT WITH REGARD TO TRUSTS AND AN ATTEMPT TO FALL THE INTENTION OF THE LEGISLATURE TO ENCOURAGE EDUCATION FOR THE BENEFIT OF THE GENERAL PUBLIC AT LARGE.' (SIC) IT MAY BE OBSERVED THAT THE LEARNED A .O. MAKES CONCLUSIONS, WITHOUT LETTING IN EVIDENCES FOR SUCH INFERENCES. IN 260ITR 433, THE HON 'BLE MADRAS HIGH COURT HELD THAT 'IN A TAXING STATUE, THERE CANNOT BE PRESUMPTION AS TO THE FACTS . IT IS RATHER UNFORTUNATE THAT THE LEARNED AO IS PROCEEDING ON THE BASIS OF PURE PRESUMPTIONS AND NOTHING MORE. YOUR APPELLANT WISHES TO SUBMIT THAT THE ACCEPTED POSITION IN LAW IS THAT IN AN ASSESSME NT MADE PURSUANT TO THE SEARCH CONDUCTED, THE CONCLUSIONS /ADDITIONS ARE TO BE MADE ONLY WITH REFERENCE TO THE MATERIALS FOUND DURING SEARCH - PLEASE SEE 310 ITR 303 (MAD), 315 ITR 204 (RAJ) 256 ITR 76, 298 ITR 98 (RAJ) 296ITR 619 (DEL), ETC. WE WISH TO STATE THAT THE TRUST HAD BEEN FORMED WITH THE OBJECTIVE OF RUNNING EDUCATIONAL INSTITUTIONS AND TO THE BEST OF OUR KNOWLEDGE AND BELIEF; ALL OUR ACTIONS AND ACTIVITIES ARE AIMED AT ACHIEVING SUCH DECLARED OBJECTIVES, AS PER THE RULE S AND LAW CONCERNING OUR ACTIVITIES. WE ONLY PRAY THA T THE LEARNED A. 0. OUGHT TO BE MORE SPECIFIC AND AT THE SAME TIME DISCLOSING THE BASIS OR PROOF OR EVIDENCE S FOR HIS INFERENCES. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 176 -: 5.7. IN PARA. 6.2.6 OF THE ASSESSMENT ORDER; THE LEARNED A.O. HAD OBSERVED THAT 'IT HAS BEEN OBSERVED THAT SRI R. VISWANATHAN WAS VERY KEEN TO START EDUCATIONAL INSTITUTIONS AT NATHAM. . .. . .. GIVEN THE FACTS OF THE CASE, SRI JANAKAR IS NOT THE PERSO N WHO WAS INSTRUMENTAL IN STARTING THE TET BUT SRI R. VISWANATHAN WHO NOT ONLY MADE SRI MURUGESAN OF SPRECT TO START EDUCATIONAL INSTITUTIONS AT NATHAM AND ALSO GOT THE GIFT OF SAME' (SIC). YOUR APPELLAN T ONLY WISHES TO REITERATE THAT WITHOUT LETTING IN EVIDENCES TO SUPPORT HIS INFERENCE, THE ACTION OF T HE LEARNED A. O. IS LEGALLY UNSUSTAINABLE. 5.8. IN PARA. 6.2.7 OF THE ASSESSMENT ORDER; THE LEARNED A. 0. HAD REFERRED TO THE PROVISIONS OF SEC. 56(V) OF THE IT ACT. IT IS PRESUMED THAT THE LEARNE D A.O. IS REFERRING TO SEC. 56(2)(V) WHICH APPLIES T O GIFTS RECEIVED BY AN INDIVIDUAL OR HUF. WE WISH TO STATE THAT THE GIFT OF THE PROPERTY WAS BY SPRECT TO OUR TRUST I.E. FROM ONE TRUST TO ANOTHER TRUST AND, THEREFORE, THE PROVISIONS ARE NOT APPLICABLE TO THE GIFT IN QUESTION. THE LEARNED A.O.S OBSERVATION THAT T HE GIFT WAS TO SRI R. VISWANATHAN IS MERELY A PRESUMPTION RAISED BY THE A. O. AND NOT BASED ON ANY EVIDENCE. 5.9. IN PARA. 12 OF THE ASSESSMENT ORDER, THE LEARNED A.O . HAS FAIRLY CONCEDED THAT THERE IS NO DIRECT EVIDENCE FOR THE PRESUMPTION THAT IT IS MR. R. VISWANATHAN WHO IS THE 'OWNER' OF THE TRUST. THE LEARNED A. 0. HAS TAKEN PAINS TO DISTINGUISH 'EDUCATION VIS--VIS 'CHARITABLE PURPOSE', COMMERCIALIZATION OF EDUCATION IN INDIA, TAKING OVE R OF TRUSTS IN BENAMI NAMES BY SOME INTERESTED PARTIES ETC. ETC. YOUR APPELLANT DOES NOT WANT TO SAY ANYTHING ON THOSE OBSERVATIONS OF THE 1EARNEDED A.O. AS ACCORDING TO US THEY ARE NOT DIRECTLY CONNECTED TO THE ISSUES INVOLVED IN THESE APPEALS. WE CONSIDER THAT IT IS EXTREMELY ESSENTIAL ON THE PART OF THE A.O. TO DISCUSS OUR CASE WITH REFERENCE TO THE FACTS AND MATERIALS GATHERED DURING THE COUR SE OF THE SEARCH AND THERE IS LITTLE OR NO NEED TO STR AGGLE, STRAY AWAY FROM THE MAIN SUBJECT OR TO SCOFF AT US. IN I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 177 -: THIS CONNECTION, WE ARE ONLY REMINDED OF THE OLD ADAGE: 'LET THE COBBLER STICK TO HIS LEST'. HOWEVER, WE ARE KEEN TO ASSEVERATE AND DECLARE SOLEMNLY AS TO THE GENUINE NATURE OF OUR TRUST AND ITS CHARITABLE OBJECTS. 5.10. IN PARA. 6.2.8 OF THE ASSESSMENT ORDER; THE LEARNED A.O HAD DISCUSSED THE 'SUDDEN INCREASE IN ASSETS IN A SPAN OF ABOUT 3-4 MONTHS AND THEIR VALU ES AS PER BOOKS AND VALUATION'. HE HAD OBSERVED THUS: 'HOWEVER; THE ASSETS SHOWN IN THE TET AS PER ITS BALANCE SHEET AS ON 31-3-2006 5,35,58,750/- AND IN OTHER WORDS THE REASON INCREASE OFF 3,48,59,481/- IN THE ASSETS WITHIN A SPAN OF HARDLY 4 MONTHS THIS IS TO BE SEEN FROM THE CONTEXT OF HEAVY PAYMENTS MADE BY THE ASSESSEE TRUST TO THE CONTRACTORS WITHOUT THE ACTUAL WORK DONE BY THE CONTRACTORS. ' (SIC). IN THIS CONNECTION, WE WISH TO STATE THAT THE VALUE OF THE ASSETS RECEIVED BY 'GIFT' FROM SPRECT IS 1,02,00,000/- AS PER THE GIFT / SETTLEMENT DEED WHI CH IS ALSO SHOWN IN OUR BOOKS. THE VALUE OF 1,82,00,000/ -IS AS PER THE VALUATION REPORT OF THE ENGINEER. WE ALSO WISH TO STATE THAT THE LEARNED A.O. HAD SUMMONED SOME OF THE CONTRACTORS AND EXAMINED THEM - RECORDED STATEMENTS FROM THEM - PLEASE SEE PARA. 5.3 OF THE ASSESSMENT ORDER. HAD THERE BEEN ANY VARIATION, THE A. 0. OUGHT TO HAVE DISCUSSED THE SAME. WE HAVE FURNISHED THE RETURNS O F INCOME FOR THE ASSESSMENT YEARS 2006-07 AND 2007- 08 AND WE WILL BE READY TO ANSWER ANY QUESTION WITH REFERENCE TO THE ACCOUNTS SUBMITTED. 5.11. IN PARA. 6.2.9 OF THE ASSESSMENT ORDER; THE LEARNED A.O HAD OBSERVED THAT AS THE ADMINISTRATIVE OFFICE OF THE TRUST IS AT CHENNAI AND 'THEREFORE, T HE TRUST IS REMOTE CONTROLLED AND NOT CONTROLLED BY TH E TRUSTEE AS PER RECORDS. IN THIS CONNECTION, ASSES SEE WISHES TO STATE THAT THOUGH THE ADM. OFFICE OF THE TRUST IS AT CHENNAI, THE CHARITABLE OBJECTS VIZ . THE RUNNING OF THE EDUCATIONAL INSTITUTIONS ARE CAR RIED OUT AT NATHAM. THE TACT THAT THE ADM. OFFICE IS AT CHENNAI MAY NOT BE A GROUND FOR DRAWING ANY ADVERSE INFERENCE. IN THE SAME PARAGRAPH, THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 178 -: LEARNED A. O. . HAD OBSERVED THAT 'I DO NOT HAVE ANY HESITATION IN CONCLUDING THAT THE TRUST IS NOT RUNN ING ACCORDING TO ITS OBJECTS AND THEREFORE THE GIFT RECEIVED BY THE TRUST IS A M AKE BELIEVE AND THE REAL BENEFIT ENJOYED BY SOME BODY ELSE NOT THE TRUST. THEREFORE, THE GIFT RECEIVED OF 1,82,00,000/- IS TAKEN AS TAXABLE INCOME OF THE APPELLANT TRUST TREATING IT AS AN ASSOCIATION OF PERSONS (AOP). IT IS TAXED PROTECTIVELY FOR A. Y. 2006-07 IN ORDER TO PROTECT THE INTERESTS OF REVENU E': THE LEARNED A.O. IS INCORRECT IN DRAWING INFERENCES WITHOUT REVEALING THE BASIS OR DISCUSSING THE EVIDENCES ON THE BASIS OF WHICH SUCH INFERENCES ARE DRAWN. THE HON 'BLE SUPREME COURT IN SURESH BUDHERMAL V. STATE OF MAHARASHTRA AIR 1998 SC 3258 - 3259 HELD THAT '' A PRESUMPTION CAN BE DRAWN ONLY FROM FACTS AND NOT FROM OTHER PRESUMPTIONS - BY A PROCESS OF PROBABLE AND LOGICAL REASONING ': WITHOUT MINCING WORDS AND TO SPEAK PLAINLY, CANDIDLY AND FRANKLY, YOUR APPELLANT HAS ONLY ONE PRAYER TO MAKE BEFORE THE CIT (A). LET THE LEARNED A.O. IN ORDER TO PROVE THAT HE IS ON TH E RIGHT SIDE OF THE DIVIDE, LET IN EVIDENCES IN HIS POSSESSION OR FOUND AS A RESULT OF THE SEARCH THAT SUPPORT THE TYPE OF INFERENCE HE IS DRAWING. LET TH E LEARNED ASSESSING OFFICER WITHOUT SPINNING THE WHEEL OR INDULGING IN CIRCUMLOCUTION REVEAL THE BAS IS THAT FORM THE BASIS FOR HIS CONCLUSIONS. YOUR APPELLANT IS JUST REMINDED OF THE WORDS OF MARTIN LUTHER KING: 'INJUSTICE ANYWHERE IS A THREAT TO JUS TICE EVERYWHERE': 6.2 IN HIS WRITTEN SUBMISSIONS DATED 20-5-2010, THE LD AR MADE THE FOLLOWING SUPPLEMENTAL SUBMISSIONS IN SUPPORT OF THE ABOVE ARGUMENTS. 'WE HAVE ALREADY POINTED OUT THAT THE ID A.O. TAILE D TO DISCUSS THE MATERIALS FOUND / EVIDENCES GATHERED AS A RESULT OF THE SEARCHES FOR HIS PRESUMPTION THA T SRI R. VISWANSTHAN, NATHAM IS THE 'OWNER' OF THE TRUST. IN THIS CONNECTION WE WISH TO PLACE RELIANCE ON THE FOLLOWING CASE LAWS:-- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 179 -: (A) IN CIT V. KISHAN KUMAR 315 ITR 204 (RAJ), THE HON'BLE RAJASTHAN HIGH COURT HELD THAT 'THE COMPUTATION OF INCOME IS TO BE MADE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS IS AVAILABLE WITH THE ASSG. OFFICER AND RELATABLE T O SUCH EVIDENCE': (B) IN CIT V. PRAMOD KUMAR GUPTA 320ITR 408 (DEL) THE HON 'BLE HIGH COURT HELD THAT 'A BLOCK ASSESSMENT CAN ONLY BE MADE ON THE BASIS OF EVIDENCE FOUND DURING SEARCH AND / OR ANY OTHER MATERIAL OR INFORMATION RELATABLE TO SUCH EVIDENCE' : IT HAS ALSO WORTHWHILE TO STATE THAT THE HON 'BLE SUPREME COURT HAS DISMISSED THE SLP FILED BY THE DEPT. AGAINST THIS JUDGEMENT - PLEASE SEE 312 ITR (ST) 6. (C) IN CIT V. R.ML. MEHROTRA 320ITR 403 (ALL), THE HON 'BLE ALLAHABAD HIGH COURT HELD THAT 'A BLOCK ASSESSMENT IN THE CASE OF A SEARCH HAS TO BE CONFINED TO INCOME ATTRIBUTABLE TO THE MATERIAL AND EVIDENCE FOUND THEREIN OR OTHER INFORMATION AVAILABLE WITH THE ASSG. OFFICER RELATING TO SUCH MATERIALS. A BEST JUDGEMENT ASSESSMENT CANNOT BE MADE': (D) IN ANIL KUMAR BHATIA VS. ACIT 1 ITR 9TRIB) 484 (DELHI), THE HON'BLE ITAT, 'B' BENCH, DELHI HELD THAT AS NO MATERIAL WAS FOUND, NO ADDITION COULD BE MADE. (E) IN CIT V. KAMLESH K SHAH, THE HON'BLE GUJARAT HIGH COURT HELD THAT ADDITIONS MADE MERELY ON PRESUMPTIONS WAS NOT SUSTAINABLE AND THE DEPT'S SLP AGAINST THE JUDGEMENT WAS DISMISSED BY THE HON 'BLE SUPREME COURT - PLEASE SEE 312 ITR ST. 331 6.3. THE APPELLANT HAS THUS MADE ITS ELABORATE SUBMISSIONS IN RESPECT OF EACH AND EVERY POINT I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 180 -: RAISED BY THE A.O. AND PLEADED THAT THE A.O 'S CONCLUSION THAT R V IS THE 'OWNER' OF THE TRUST IS WITHOUT ANY EVIDENCE WHATSOEVER. THE APPELLANT WHILE PLACING ITS ARGUMENTS IN ITS FAVOUR HAD ALSO EXTRACTED THE OBSERVATIONS OF THE A.O . THEREFORE, I DEEM IT NOT NECESSARY TO REPEAT THEM. AFTER GOING THROUGH THE ASSESSMENT ORDER AND THE RECORDS, I AM INCLINED TO ACCEPT THE ARGUMENTS OF THE APPELLANT I N THIS REGARD. THE A.O. HAD NOT QUOTED ANY EVIDENCE WHICH SURFACED AS A RESULT OF THE SEARCH. AS ALREAD Y OBSERVED, THE TACT IS THAT THERE WERE NO SEIZURE OF ASSETS OR BOOKS OR DOCUMENTS ETC. IN THE SEARCHES CONDUCTED IN RV'S CASE. THERE IS CONSIDERABLE FORCE IN THE APPELLANT'S ARGUMENT THAT IF IT TRUE THAT R V HAD WORKED TO A PLAN AND HAD INVESTED HIS UNACCOUNTED INCOME RUNNING TO CRORES OF RUPEES THERE OUGHT TO HAVE BEEN ENOUGH EVIDENCE FOR THE SAME WHICH THE OFFICERS WHO SEARCHED THE RESIDENCE OF R V OUGHT TO HAVE COME ACROSS. THERE IS NOT EVEN A SINGLE INSTANCE OF SUCH EVIDENCE OR PROOF WHICH EMERGED AS A RESULT OF THE SEARCH WHICH VINDICATES THE APPELLANTS STAND IN THIS REGARD. IN THE CIRCUMSTANC ES, IT IS LEGALLY NOT CORRECT ON THE PART OF THE A.O TO HARP ON THE THEORY OF 'BENAMI OWNERSHIP OF THE ASSETS OF HE APPELLANT TRUST. IT MAY NOT BE INCORRE CT TO SAY THAT THE A.O. MERELY HAZARDS A GUESS WITHOUT ANY BASIS OR EVIDENCE IN HIS POSSESSION. IT IS WORTHWHILE TO POINT OUT THAT AS PER THE PROVISIONS OF THE BENAMI TRANSACTIONS (PROHIBITION) ACT 1988, THE ONUS IS ON THE PERSON WHO ALLEGES 'BENAMI. THUS, IT IS THE 'RESPONSIBILITY OF THE A. 0. TO ADDUCE CONCRETE EVIDENCE BEFORE COMING TO THE CONCLUSION THAT IT I S RV WHO IS THE 'OWNER' OF THE APPELLANT-TRUST AND TH AT SRI JANAKAR IS A 'BENAMI' OF RV. A BARE READING OF THE ASSESSMENT ORDER CLEARLY REVEALS THAT THE A.O. IS ONLY MAKING REPEATED REFERENCES TO PERIPHERAL ISSUES LIKE RELATIONSHIP BETWEEN RV AND SRI P. JANAKAR, THE ROLE OF THE SECOND TRUSTEE SRI R. MOHA N KUMAR, THE ROLE OF SRI M. SIVAKUMAR IN THE ADMINISTRATION OF THE COLLEGES, THE RELATIONSHIP BETWEEN SRI P. MURUGESAN AND SRI P. JANAKAR AND I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 181 -: THAT OF SRI P. JANAKAR AND RV, HUMAN BEHAVIOUR; INTENTION OF R V TO START EDUCATIONAL INSTITUTIONS AT NATHAM, GIFT OF PROPERTY BY SPRET; LOCATION OF THE ADMINISTRATIVE OFFICE OF THE TRUST ETC . AS RIGHTLY POINTED OUT BY THE APPELLANT, THE A. 0. IS ONLY HARPING ON THE PRESUMPTION OF 'BENEMI OWNERSHIP WITHOUT DISCLOSING THE LEGAL EVIDENCES OR PROOF BAS ED ON WHICH HE LOGICALLY CAME TO SUCH CONCLUSION. I MUST ALSO OBSERVE THAT THE LD AR'S RELIANCE ON SOME OF THE CASE LAWS, AS REPRODUCED IN PARA. 6.2 ABOVE, RENDERED IN THE CONTEXT OF 'BLOCK ASSESSMENT' UNDER CH. XIV-B OF THE ACT MAY NOT BE VALID IN THE CONTEXT OF ASSESSMENT U/S. 153A / 153C. NEVERTHELESS, THE FACT REMAINS THAT THE A.O 'S PRESUMPTION REGARDING THE 'BENAMI OWNERSHIP' OF THE ASSETS OF THE APPELLANT TRUST IS BEREFT OF A NY EVIDENCE OR PROOF FOUND DURING SEARCH OR MATERIALS GATHERED / IN THE POSSESSION OF THE A. 0. IN THE CIRCUMSTANCES, I AM CONSTRAINED TO OBSERVE THAT THE A.O 'S CONCLUSION IN THIS REGARD IS LEGALLY UNSUSTAINABLE. ACCORDINGLY, I HOLD THAT THE APPELLANT- TRUST IS THE OWNER OF THE PROPERTIES OWNED AND ACCOUNTED FOR BY IT IN ITS BOOKS OF ACCOUNTS. ' 66. 4 HAVING MADE A RATHER SERIOUS 'THEORY' OR 'ALLEGATI ON' THAT TET IS MERELY AN OSTENSIBLE OWNER OF ITS ASSETS AND THA T ASSESSEE IS THE 'REAL' OWNER, IT BECOMES THE DUTY OF THE A.O. TO GO DEEP AND MARSHAL EVIDENCES IN THIS REGARD TO DRIVE HOME HIS THEORY O R VIEW POINT. THE FACT OF THE MATTER ARE THAT THERE IS NOT EVEN PROXI MATE EVIDENCE, NOT TO SPEAK OF CONCRETE EVIDENCES, BROUGHT IN BY THE A.O. ON THE CONTRARY, THE A.O. HAD RECORDED A FINDING IN THE ASSESSMENT O RDER THAT 'DIRECT EVIDENCE IS NOT POSSIBLE' AND THUS COMES CLOSE TO C ONFESSING THAT HIS THEORY DOES NOT REFLECT THE REALITY. THAT CLINCHES THE ISSUE IN FAVOUR OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 182 -: THE ASSESSEE. THE A.O. 'S FINDINGS THAT THE ASSESSE E IS THE 'OWNER AND ENJOYING THE FRUITS OF TET' IS WITHOUT ANY EVIDENCE OR PROOF BROUGHT IN BY THE A.O. AND IS UNACCEPTABLE FOR THE PURPOSE OF PROCEEDINGS UNDER THE I. T. ACT, 1961 WHICH ARE QUASI -JUDICIAL IN NA TURE. IN VIEW OF THE FINDINGS GIVEN IN THE CASE OF THE TRUST [TET] THAT THERE IS NO RELATIONSHIP BETWEEN THE ASSESSEE AND TET AND THAT TET IS THE OWNER OF THE PROPERTIES HELD AND ACCOUNTED FOR BY IT IN I TS BOOKS, THE A.O. 'S ACTION TO CONSIDER THE SAME IN THE ASSESSMENTS OF T HE ASSESEE IS LEGALLY NOT CORRECT AND ACCORDINGLY UNSUSTAINABLE. IT WAS NOTICED THAT THE A.O. HAD ASSESSED THE INCOME / INVESTMENT IN TH E ASSETS ETC. OF TITAN EDUCATIONAL TRUST IN THE HANDS OF THE ASSESSE E SUBSTANTIVELY AND IN THE HANDS OF THE TRUST PROTECTIVELY. THE ADDITIO NS SO MADE ARE THE FOLLOWING:- DETAILS OF ADDITION. PARA NO.OF THE ASST. ORDER AMOUNT ( ) (A) TOWARDS TRANSFER OF ASSETS BY SRI PARA. 6.9 1,82, 00,000 RAMAJAYATHAMMAL EDUCATIONAL & CHARITABLE TRUST (SPRECT) TO TITAN EDUCATIONAL TRUST. (B) -DO- -DO- 82,97,676 (C) INVESTMENT IN NPR GROUP OF COLLEGES. PARA 8.0 5,97,00,000 (D) UNACCOUNTED PAYMENTS TO CONTRACTORS BY TET. PARA 9.0 67,80,000 (E) TOWARDS DISALLOWANCE U/S. 40A(3) IN THE PARA. 10.0 9,16,000 TITAN EDUCATIONAL TRUST. (F) TOWARDS UNACCOUNTED FEES COLLECTED BY PARA. 11.0 52,90,000 OF COLLEGES. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 183 -: IN VIEW OF THE FINDINGS GIVEN IN THE CASE OF TITAN EDUCATIONAL TRUST, IT WAS HELD BY THE COMMISSIONER OF INCOME TAX (APPEALS ) THAT THE ASSESSMENT OF THE INCOME / ASSETS OF TET IN THE HAN DS OF THE ASSESSEE ON A 'SUBSTANTIVE BASIS' IS LEGALLY UNSUSTAINABLE. WHILE DISCUSSING THE ADDITION OF ASSETS OF TITAN EDUCATIONAL TRUST, THE A.O. HAD ALSO DISCUSSED THE UNSECURED LOAN AMOUNTS OF F2.85 CROR ES AND CORPUS DONATIONS OF F2,46,99,161/- RELATING TO TITAN EDUCA TIONAL TRUST. IT IS TO BE MENTIONED THAT THE ABOVE ISSUES HAVE BEEN CONSID ERED IN DETAIL IN THE APPELLATE ORDER IN THE CASE OF TITAN EDUCATIONA L TRUST. IN THE LIGHT OF THE FINDINGS ARRIVED AT IN THE CASE OF TITAN EDU CATIONAL TRUST, THE ABOVE ADDITIONS MADE IN THE CASE OF THE ASSESSEE WE RE DELETED BY COMMISSIONER OF INCOME TAX (APPEALS). AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 67 THE FIRST GROUND RAISED BY THE REVENUE IS AS UNDER:- 1.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT 'M/S TITAN EDUCATIONAL TRUST IS THE OWNER OF THE PROPERTIES HE LD AND ACCOUNTED FOR IT IN ITS BOOKS' WITHOUT CONSIDERING THE RATIO OF THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN TH E CASE OF M/S MCDOWELL & CO LTD VS IT0 154 ITR 149(SC) AND THE JUDGEMENT OF THE ITAT 'B' BENCH DELHI IN I.T.A. NOS. 3088 TO 3098 & 3107/DEL/2005 FOR THE ASSESSMENT YEARS 1987-88 TO 93-94 AND 1995-96 TO 19 99- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 184 -: 2000 IN THE CASE OF HERSH W.CHADHA VS DDIT, CIRCLE 1(1) INTERNATIONAL TAXATION NEW DELHI. 1.B THE LEARNED CIT(A) HAS FAILED TO NOTE THAT ORDE R OF THE CIT(A) IN ITA NO. 430/08-09 DATED 02.12.2010 FOR THE ASSESSMENT YEAR 2006-07 IN THE CASE OF MLS TITAN EDUCATIONAL TRUST HAS BEEN DISPUTED AND THAT THE IS SUE HAS NOT BECOME FINAL. 67.1 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD . THIS ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE CA SE OF M/S. TITAN EDUCATIONAL TRUST IN ITA NOS.471 & 472/MDS/20 11 AND ITA NO.221/MDS/2011 VIDE ORDER DATED 16.12.2011 WHEREIN IT WAS HELD AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE HAVE ALSO PERUSED THE DOCUMENTS PLACED BEFORE US . AT THE OUTSET, IT IS NOTICED FROM THE ASSESSMENT OR DER THAT LD. ASSESSING OFFICER IS RELYING UPON THE SEARCH DO NE IN THE CASE OF R.VISWANATHAN AND THE SURVEY CONDUCTED IN THE CASE OF THE ASSESSEE AND NPR GROUP OF COLLEGES FOR THE PURPOSE OF COMPLETING THE ASSESSMENT U/S.153C.PERUSAL OF THE ASSESSMENT ORDER IN THE CAS E OF SHRI R.VISWANTHAN AS ALSO THE SHOW CAUSE NOTICE SHO WS THAT THE ASSESSING OFFICER IS QUESTIONING THE CREAT ION OF THE ASSESSEE TRUST AS ALSO THE GENUINENESS OF ITS TRUSTEES IN THE ASSESSMENT ORDER AND SHOW CAUSE NOT ICE. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OF SHRI R.VISWANATHAN HAS BASICALLY ATTEMPTED TO HOLD THAT THE ASSESSEE TRUST IS UNDER THE CONTROL OF SHR I R.VISWANATHAN AND THAT IT IS HIS MONEY, WHICH HAS BEEN ROUTED THROUGH TO ASSESSEE TRUST . NO WHERE IN THE SHOW CAUSE NOTICE OR IN THE ASSESSMENT ORDER I S THERE ANY WHISPER OF ANY EVIDENCE HAVING BEEN FOUN D IN THE COURSE OF THE SEARCH AGAINST THE ASSESSEE TRUST . A COPY OF THE ORDER SHEET NOTING IN THE CASE OF R.VISWANATHAN, A COPY OF WHICH IS ENCLOSED WITH THI S PART OF THE ORDER, AS ANNEXURE- A DOES NOT SHOW OF ANY I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 185 -: SATISFACTION HAVING BEEN RECORDED FOR THE PURPOSE O F MAKING AN ASSESSMENT IN THE CASE OF THE ASSESSEE TR UST. PERUSAL OF THE PROVISIONS OF SEC.153C SHOWS THAT IT CATEGORICALLY USE THE WORDS WHERE THE ASSESSING O FFICER IS SATISFIED IN .. BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SEC.153A. THESE WORDINGS ARE IDENTICAL TO THE WORDINGS IN SEC.158BD. THE HONBL E SUPREME COURT IN THE CASE OF MANISH MAHESWARI REPORTED IN [2007] 289 ITR 341(SC) HAS CATEGORICALL Y HELD THAT IT IS INCUMBENT TO RECORD SATISFACTION IN THE HANDS OF THE PERSON SEARCHED BEFORE INITIATING THE PROCEEDINGS IN THE HANDS OF THE PERSON AGAINST WHO M INCRIMINATING EVIDENCES HAVE BEEN FOUND. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESWARI (SUPRA) AS NO SATISFACTION HAS BEEN FOUND RECORDED IN THE CASE OF R.VISWANATHAN, THE INITIATI ON OF PROCEEDINGS U/S.153C AND THE CONSEQUENTIAL ASSESSMENT ON THE ASSESSEE WOULD HAVE TO BE HELD TO BE BAD IN LAW AND THE FINDING OF THE LD. C.I.T.(A) ON THIS ISSUE STANDS CONFIRMED. 7. FURTHER READING OF THE ASSESSMENT ORDER IN THE CASE OF ASSESSEE CLEARLY SHOWS THAT SOME ADDITIONS HAVE BEEN MADE ON THE BASIS OF EVIDENCES FOUND IN T HE COURSE OF SURVEY IN THE PREMISES OF NPR GROUP OF COLLEGES AT DINDIGUL. HERE A PERUSAL OF THE PROVIS IONS OF SEC.153C CLEARLY USES THE WORDS SEIZED OR REQUISITIONED. SEIZURE IS NORMALLY DONE BY INVOKIN G PROVISIONS OF THE SEC.132 AND REQUISITION BY INVOKI NG THE PROVISION OF SEC.132A. SURVEY IS UNDER SECTION 133A . WHERE ANY EVIDENCE IS FOUND IN THE COURSE OF SURVEY , THE SAME CAN VALIDLY BE USED FOR MAKING AN ASSESSMENT UNDER THE REGULAR PROVISIONS. WHERE EVIDENCES ARE FOUND IN THE COURSE OF SEARCH OR REQUISITION, THEN SUCH PROVISIONS OF SEC.153A, C ETC. COME INTO PLAY. THE PERUSAL OF THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE CLEARLY SHOWS THAT THERE IS NO EVIDENCE WH ICH HAS BEEN USED BY THE LD. ASSESSING OFFICER FOR MAKI NG THE ASSESSMENT THAT HAS BEEN FOUND IN THE COURSE OF SEARCH. IN FACT IN PARA 6.1 OF THE ASSESSMENT ORDE R, ASSESSEE HAS CATEGORICALLY RAISED THIS ISSUE BEFORE THE ASSESSING OFFICER AND THE LD. ASSESSING OFFICER HEL D THAT ASSESSEE APPEARS TO BE MYOPIC IN VIEWING THE PROVIS IONS OF SEC.153C R.W.S. 153A. LD. AO HAS ALSO MENTIONED THAT INCRIMINATING DOCUMENTS HAVE BEEN SEIZED FROM THE OFFICE OF SPRECT TANJORE, FROM THE RESIDENCE OF THE SO I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 186 -: CALLED MANAGING TRUSTEES SHRI P.JANAKAR AND SIGNED CHEQUE BOOKS AND OTHER VALUABLES FROM THE HOUSE OF SHIVAKUAMR, ADMINISTRATIVE OFFICER OF THE ASSESSEE. HOWEVER, NONE OF THESE INCRIMINATING EVIDENCES FOUN D HAVE BEEN USED AGAINST THE ASSESSEE IN THE ASSESSMENT. FURTHER PERUSAL OF THE GROUND NO.1.B ALSO CLEARLY SHOWS THAT LD. ASSESSING OFFICER IS CLEARLY RELYING ON THE SEARCH IN THE CASE OF MANAGING TRUSTEES MR.P.MURUGESAN AND SURVEY ON THE PREMISES OF PONNAIAH RAMAJEYATHAMMAL EDUCATIONAL AND CHARITABLE TRUST. AGAIN NO SATISFACTION NOR ANY INCRIMINATING EVIDENCES FOUND AGAINST THE ASSESSEE HAS BEEN SHOWN TO HAVE BEEN RECORDED OR USED. JUST BECAUSE SEARCH HAS BEEN CONDUCTED ON A PERSON, EVEN ASSUMING HE HA S ANY CHARGE OR CONTROL OF THE INSTITUTION, IT WOULD NOT MEAN THAT THE INSTITUTION WOULD ALSO BE LIABLE FOR AN AS SESSMENT U/S.153C AS THE WORDS USED U/S.153C USES THE WORDS BELONGS OR BELONG TO A PERSON OTHER THAN A PERSON REFERRED TO SEC.153A. SO UNLESS ANY INCRIMINATING EVIDENCE IS FOUND AND SHOWN TO BE RELATING TO THE P ERSON OTHER THAN THE PERSON SEARCHED, THE PROVISIONS OF SEC.153C CANNOT BE INVOKED ON SUCH OTHER PERSON, WH O IS NOT SEARCHED AND IN WHOSE CASE NO INCRIMINATING EVIDENCE HAS BEEN FOUND OR USED. EVEN ON THIS GROU ND IT IS FOUND THAT THE ASSESSMENT ORDER PASSED U/S.153C IN THE CASE OF THE ASSESSEE IS LIABLE TO BE QUASHED AN D WE DO SO. 8. THE OTHER ASPECT THAT HAS BEEN RAISED WHICH SUPPORTS THE CONTENTION OF THE LD. AR THAT NO SATIS FACTION HAS BEEN RECORDED IS THAT IN THE ASSESSMENT ORDER O F THE ASSESSEE THE ADDITIONS ARE MADE PROTECTIVELY. THE FACT THAT PROTECTIVE ADDITIONS HAVE BEEN MADE SHOWS THAT THE ASSESSING OFFICER HIMSELF WAS NOT SATISFIED IN REGA RD TO THE HAND IN WHICH THE ADDITION IS LIABLE TO BE MADE . MUCH WORSE THE ASSESSING OFFICER WAS SATISFIED THAT THE SUBSTANTIVE ADDITION WAS LIABLE TO BE MADE ONLY IN OTHER HANDS. THIS BY ITSELF QUASHES ANY DOUBT IN REGARD TO THE POSSIBILITY OF RECORDING OF SATISFACTION. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT ASSESSMENT O RDER PASSED BY LD. ASSESSING OFFICER U/S.153C R.W.S. 153 A DT.30.12.08 IN THE CASE OF THE ASSESSEE FOR ASSESSM ENT YEAR 2006-07 IS WITHOUT JURISDICTION AND STANDS QUA SHED. IN THE CIRCUMSTANCES THE FINDING OF THE LD. COMMISS IONER OF INCOME TAX(A) ON THIS ISSUE STANDS UPHELD. AS W E HAVE QUASHED THE ASSESSMENT ORDER ITSELF ON ACCOUNT OF THE JURISDICTIONAL ASPECT, WE HAVE NOT GONE INTO TH E ISSUE ON MERITS OF THE ADDITION. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 187 -: 9. IN REGARD TO THE APPEAL FILED BY THE ASSESSEE, IT WAS SUBMITTED THAT LD. COMMISSIONER OF INCOME TAX(A ) HAD SUSTAINED THE ADDITION TO THE EXTENT OF RS.33,70,000/- ON THE BASIS OF DOCUMENT FOUND IN TH E COURSE OF SURVEY. IT WAS THE SUBMISSION THAT THE DOCUMENT ITSELF DID NOT RELATE TO THE ASSESSMENT YE AR 2006-07 AS THE DATE OF DOCUMENT ITSELF WAS AS ON 08.08.06. IN REPLY LD. DR VEHEMENTLY SUPPORTED TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A). PERUSAL OF THE DOCUMENT, WHICH IS THE IMPOUNDED LOO SE SHEET FOUND IN THE COURSE OF SURVEY CONDUCTED IN TH E PREMISES OF NPR GROUP OF COLLEGES, DINDIGUL ON 23.0 8.06 CLEARLY SHOWS THAT THE DOCUMENT MENTIONS THE DATE AS 08.08.06. OBVIOUSLY, THIS RELATES TO THE ASSESSMENT YEAR 2007-08. NO ADDITION ON THIS COUNT CAN BE MADE AT A LL IN ASSESSMENT YEAR 2006-07. IN ANY CASE, IN REVENUES APPEAL, WE HAVE ALREADY UPHELD THE ACTION OF THE LD . COMMISSIONER OF INCOME TAX (A) AND QUASHED THE ASSESSMENT ORDER. CONSEQUENTLY, THIS ISSUE WOULD BECOME ACADEMIC IN NATURE AS IT IS PART OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07, WHICH WAS MADE BY THE ASSESSING OFFICER AND HAS BEEN QUASHED BY US. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IN ITA NO.471/11 IS DISMISSED AND APPEAL OF ASSESSEE IN ITA NO.221/11 IS ALLOWED . BEING SO, THE FINDINGS OF THE TRIBUNAL IN THE ABOVE ORDER HAS NOT BEEN DISTURBED BY ANY PROCESS OF LAW BY HIGHER FORU M. AS OF NOW, THE FINDINGS HOLD GOOD AND APPLICABLE IN ASSESSEES CASE ALSO. FURTHER, IN THE PRESENT CASE, THERE WAS NO IOTA OF EVIDENCE TO SHOW UNACCOUNTED INVESTMENT BY ASSESSEE IN TITAN EDUCATI ONAL TRUST AND THE CONCLUSION OF THE ASSESSING OFFICER IS BASED ON LY ON PRESUMPTION TO HOLD THAT THE ASSESSEE HAD INVESTED UNACCOUNTED MONEY IN TITAN EDUCATIONAL TRUST. THE TITAN EDUCATIONAL TRUST IS DULY REGISTERED I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 188 -: U/S.12A OF THE ACT AND ASSESSED TO INCOME TAX ACT A ND SEPARATE ASSESSMENT ORDER WAS FRAMED FOR THE ASSESSMENT YEAR 2006-07 BY THE SAME OFFICER I.E. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, TIRUCHIRAPPALLI, WHEREIN HE HAS CONSIDERED THE ASSETS AND LIABILITIES OF THE TRUST WHILE FRAMING A SSESSMENT. BEING SO, THE FINDINGS OF THE ASSESSING OFFICER THAT ASSE SSEE IS A 'BENAMI OWNER OF THE TITAN EDUCATIONAL TRUST CANNOT BE UP HELD. THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS BASE D ON PROPER APPRECIATION OF RECORDS AS SEEN FROM HIS ORDER AT P ARA 6.3. IN SUCH CIRCUMSTANCES, THE TRANSACTION OF THE TITAN EDUCA TIONAL TRUST CANNOT BE DOUBTED AND THE PRINCIPLE LAID DOWN BY SU PREME COURT IN THE CASE OF MCDOWELL & CO LTD (CITED SUPRA) CANNOT BE APPLIED TO THE FACT OF THE PRESENT CASE. ACCORDINGLY, THE GRO UND NOS.1(A) AND 1(B) RAISED BY THE DEPARTMENT ARE REJECTED. 68. THE NEXT GROUND RAISED BY THE DEPARTMENT IS WIT H REGARD TO TRANSFER OF ASSETS BY SRI PONNAIYAH RAMAJAYATHAMMAL EDUCATIONAL AND CHARITABLE TRUST TO M/S. TITAN EDUCATIONAL TR UST AMOUNTING TO F1,82,00,000/-. 68.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER MADE AN I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 189 -: ADDITION OF F1,82,00,000/- IN RESPECT OF UNDISCLOSE D INCOME IN NPR COLLEGE AT NATHAM. IN THIS CASE THE ASSESSING OFFI CER CONSIDERED THE TRANSFER OF ASSET VIDE DEED OF GIFT DATED 28.12.200 5 EXECUTED BY SRI MURUGESAN, MANAGING TRUSTEE OF SRI PONNIAH RAMMAJEY ATHAMMAL EDUCATIONAL AND CHARITABLE TRUST, THANJAVUR TO TITA N EDUCATIONAL TRUST WHEREIN THE MARKET VALUE OF THE LAND AND BUI LDING WAS F1,06,00,000/-. NOT ONLY THE ASSETS AND LIABILITIE S OF THE ABOVE MENTIONED THREE INSTITUTIONS PASSED ON TO THE NEWLY FORMED TITAN TRUST. IT IS TO BE ALSO NOTED THAT HARDLY WITHIN A MATTER OF ONE MONTH FROM THE FORMATION OF THE TITAN TRUST, IT WAS ABLE TO ACQUIRE ASSETS OVER A CRORE AND ALSO THE CONTROL AND MANAGEMENT OF A FLOURISHING INSTITUTION ABSOLUTELY FOR NO CONSIDERATION I.E. W ITHOUT SPENDING EVEN A SINGLE RUPEE. ACCORDING TO THE ASSESSING OFFICER THIS IS NOT A TRANSFER OF EDUCATIONAL INSTITUTIONS FROM ONE TRUST TO ANOTH ER. IT IS A ROUTE DEVISED TO ESTABLISH OWNERSHIP OVER THE SAID EDUCATIONAL INSTI TUTIONS WITH A MOTIVE TO EARN PROFIT. THEREFORE IT IS A GIFT THAT SHOULD BE TREATED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 56(V) OF THE INCOME TAX ACT. ACCORDING TO SAID SECTION ANY SUM EXCEEDING RS. 25,000/- RECEIVED WITHOUT ANY CONSIDE RATION BY AN INDIVIDUAL OR HUF FROM ANY PERSON ON OR AFTER FIRS T DAY OF SEPTEMBER 2004 OTHER THAN FROM THE FOLLOWING PERSONS:- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 190 -: A) FROM ANY RELATIVE; OR B) ON THE OCCASION OF MARRIAGE OF THE INDIVIDUAL; OR C) UNDER THE WILL OR UNDER THE WAY OF INHERITANCE; OR D) IN CONTEMPLATION OF DEATH OF THE PAYER, THE SAID GIFT HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE THE VALUE OF THE INSTITUTIONS WH ICH WERE TRANSFERRED BY SRI PONNAL RAMAJAYATHMAL EDUCATIONAL AND CHARITABLE TRUST TO SHRI. VISWANATHAN IN THE GUISE OF TITAN ED UCATIONAL TRUST IS TAXED IN HIS HANDS AS GIFT TO RELATIVE WITHIN THE MEANING OF SECTION 56(V) OF THE INCOME TAX ACT. SHRI. VISWANATHAN HAS PURCHASED THE NPR COLLEGES FROM SHRI.P.MURUGESAN , CHAIRMAN AND M ANAGING TRUSTEE OF SRI PONNAIAH RAMAJATHMAL EDUCATIONAL AND CHARIT ABLE TRUST FOR A CONSIDERATION. THEREFORE THE SO CALLED TRANSFER OF ASSETS FROM A TRUST TO ANOTHER TRUST WITH SIMILAR OBJECTIVE NEED TO BE DIS COUNTED AND DISBELIEVED AND ACCORDINGLY F1,82,00,000/- (BEING THE VALUE OF ASSETS AS PER VALUATION REPORT) IS ASSESSED IN THE HANDS O F THE ASSESSEE AS UNDISCLOSED INVESTMENT IN NPR COLLEGE AT NATHAM. AG GRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). 68.2 THE COMMISSIONER OF INCOME TAX (APPEALS) O BSERVED THAT THE A.O. HAD ASSESSED THE INCOME / INVESTMENT IN TH E ASSETS ETC. OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 191 -: TITAN EDUCATIONAL TRUST IN THE HANDS OF THE ASSESSE E SUBSTANTIVELY AND IN THE HANDS OF THE TRUST PROTECTIVELY. THE ADDITIO NS SO MADE ARE AS DISCUSSED IN PARA 66.4 OF THIS ORDER. IN VIEW OF THE FINDINGS GIVEN IN THE CASE OF TITAN EDUCATIONAL TRUST, IT IS TO BE HE LD THAT THE ASSESSMENT OF THE INCOME / ASSETS OF TET IN THE HANDS OF THE A SSESSEE ON A 'SUBSTANTIVE BASIS' IS LEGALLY UNSUSTAINABLE. WHILE DISCUSSING THE ADDITION OF ASSETS OF TITAN EDUCATIONAL TRUST, THE A.O. HAD ALSO DISCUSSED THE UNSECURED LOAN AMOUNTS OF F2.85 CROR ES AND CORPUS DONATIONS OF F2,46,99,161/- RELATING TO TITAN EDUCA TIONAL TRUST. IT IS TO BE MENTIONED THAT THE ABOVE ISSUES HAVE BEEN CONSID ERED IN DETAIL IN THE ORDER IN THE CASE OF TITAN EDUCATIONAL TRUST. I N THE LIGHT OF THE FINDINGS ARRIVED AT IN THE CASE OF TITAN EDUCATIONA L TRUST, THE ABOVE ADDITIONS MADE IN THE CASE OF THE ASSESSEE ARE DELE TED. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 68.3 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESS EE SUBMITTED THAT GIFT GIVEN BY ONE TRUST TO ANOTHER IS NOT UNUSUAL. THE ASSESSING OFFICER DOUBTED THE TRANSFER OF PROPERTY ON THE REA SON THAT THE TRUST IS NOT RUNNING ACCORDING TO ITS OBJECTS AND THEREFORE THE GIFT RECEIVED BY THE TRUST IS A MAKE BELIEVED AND THE REAL BENEFIT E NJOYED BY SOMEBODY ELSE NOT THE TRUST. THEREFORE, THE GIFT OF F1,82,0 0,000/- CANNOT BE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 192 -: CONSIDERED AS INCOME OF THE ASSESSEE. ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE THERE IS NO EVIDENCE AS THE ASSESSEE IS BENEFITED BY THE GIFT. BOTH THE TRUST ARE HAVING S EPARATE ENTITY AND ASSESSABLE SEPARATELY. SHE RELIED ON THE ORDER OF THE MUMBAI BENCH IN THE CASE OF DCIT VS. KDA ENTERPRISES PVT. LTD IN ITA NO.2662/M/ 2013, DATED 11.03.2015, WHEREIN IT WAS HELD THAT COMPANIE S, IF AUTHORIZED BY THE MOA AND AOA, ARE COMPETENT TO MAKE AND RECEIVE GIFTS. NATURAL LOVE AND AFFECTION IS A NOT NECESSARY REQUIREMENT F OR A GIFT. THE GIFT IS NEITHER TAXABLE AS INCOME SEC.56 NOR AS CAPITAL GAI N NOR AS INCOME U/S.2(22) (E) OF THE ACT. THREE ELEMENTS ARE ESSENT IAL IN DETERMINING WHETHER OR NOT A GIFT HAS BEEN MADE A) DELIVERY B) DONATIVE INTENT AND C) ACCEPTANCE BY THE DONEE. THE COMPANIES ARE COMP ETENT TO MAKE AND RECEIVE GIFTS AND NATURAL LOVE AND AFFECTION AR E NOT NECESSARY REQUIREMENT. THE ONLY REQUIREMENT FOR COMPANY TO M AKE GIFTS AS PER RESPECTIVE MOA AND AOA, IS TO AUTHORIZE THE COMPANY FOR THE SAME. ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE AS PER THE DECISION OF THE TRIBUNAL THERE IS NO BAR OR RESTRIC TION TO RECEIVE GIFT FROM ONE TRUST TO ANOTHER AND THIS IS NOT PROHIBITE D TRANSACTION. 68.4 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LOWER AUTHORITIES. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 193 -: 68.5 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SINCE WE HAVE ALREADY CONFIRME D THE ADDITION WITH REGARD TO THIS ISSUE IN THE HANDS OF SRI PONNAIYAH RAMAYATHAMMAL EDUCATIONAL AND CHARITABLE TRUST, IN THE ASSESSMEN T YEAR 2006-2007 BY OBSERVING THAT THE GIFT IS IN VIOLATION OF TRUS T OBJECTS AND TREATED IT AS ITS INCOME AND ANY SUCH ADDITION IN THE HANDS OF THIS ASSESSEE WILL LEAD TO DOUBLE ADDITION. AS SUCH, THE DELETION OF ADDITION MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED. ACCORDINGLY, THIS GROUND OF THE REVENUE IS REJECTED. 69. THE NEXT GROUND RAISED BY THE DEPARTMENT IS W ITH REGARD TO TRANSFER OF ASSETS OTHER THAN BUILDING IN RESPECT O F GIFT FROM ONE TRUST TO ANOTHER TO THE TUNE OF F 82,97,656/-. 69.1 THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONFIRMED AS DISCUSSED IN THIS ORDER AT PARA NO.68 .5. THIS GROUND OF THE DEPARTMENT IS REJECTED. 70. THE NEXT GROUND RAISED BY THE DEPARTMENT IS W ITH REGARD TO INVESTMENT IN NPR GROUP OF COLLEGE AMOUNTING TO F5, 97,00,000/-. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 194 -: 70.1 THE FACTS OF THE ISSUE ARE THAT THE DURING T HE COURSE OF SURVEY, PROFIT AND LOSS ACCOUNT, BALANCE SHEET AS ON 31.03. 2006 AND OTHER ANNEXURE OF M/S. TITAN EDUCATIONAL TRUST WERE FOUND . THE BALANCE SHEET IS REPRODUCED AS UNDER;- LIABILITIES AS AT 31.03.2006 ASSETS AS AT 31.03.2006 CAPITAL ACCOUNT 1,52,46,751 1,52,46,751 FIXED ASSETS BUILDINGS 6,000 BUILDINGUNDER CONSTRUCTION LAND 1,31,76,244 LIBRARY BOOKS 2,183 WATER EQUIPMENTS 4,000 4,29,88,427 LOANS (LIABILITY) UNSECURED LOANS APOLLO INST OF CHMFT 2,00,00,000 85,00,000 2,85,00,000 CURRENT ASSETS CLOSING STOCK DEPOSITS(ASSETS) 85,00,000 CASH IN HAND 14,56,000 BANK ACCOUNTS 94,688 1,00,51,053 CURRENT LIABILITIES SUNDRY CREDITORS EXPENSES PAYABLE 98,00,000 12,000 98,12,000 P & L ACCOUNT OPENING BALANCE CURRENT PERIOD 5,19,270 5,19,270 TOTAL 5,35,58,751 5,35,58,751 A REFERENCE HAS BEEN MADE TO THE VALUATION CELL OF THE DEPARTMENT VIDE OFFICE LETTER DATED 06.09.2006. THE VALUATION OFFICER OF VALUATION CELL, MADURAI HAD INSPECTED THE COLLEGE PROPERTIES AT NATHAM ON 07.09.2006 AND MADE PRELIMINARY VALUATION OF THE BU ILDINGS AS UNDER;- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 195 -: (1) COLLEGE MAIN BUILDING 2,50,00,000 POWER ROOM 7,50,000 HOSTEL BUILDING (REAR SIDE) 70,00,000 HOSTEL BUILDING POLYTECHNIC/SHEDS 1,18,00,000 DINING /KITCHEN I, 17,00,000 DINING HALL - II 15,00,000 WORKSHOP BUILDING (AC SHEET ROOF-I) 12,00,000 WORKSHOP BUILDING (AC SHEET ROOF-II) 10,75,000 POLYTECHNIC BUILDING 40,00,000 POLYTECHNIC BUILDING - PHASE I 2,35,00,000 POLYTECHNIC BUILDING - PHASE II (UNDER CONSTRUCTION) 1,01,00,000 COMPOUND WALL IN FRONT OF THE COLLEGE, ENTRANCE ARCH (UNFINISHED) ENTRANCE GATES AND INTERNAL ROADS ETC., 22,00,000 CANTEEN (GI SHEET) ON THE REAR SIDE OF COLLEGE BUILDING 1,00,000 HORTICULTURE WORKS 1,00,000 BORE, PUMP ETC 75,000 TOTAL 9,01,00,000/ - THE VALUATION OFFICER OF THE DEPARTMENT HAS ARRIVED AT F9,01,00,000/- BEING THE COST OF CONSTRUCTION OF THE ASSETS AS MEN TIONED IN THE ABOVE TABLE. WHEREAS AS PER THE BALANCE SHEET, VALUE OF B UILDING SUBMITTED IS F3,04,00,000/- (2,98,00,000/- + 6,00,000/-), SO THE DIFFERENCE IN THE COST OF CONSTRUCTION HAS SHOWN BY THE ASSESSEE IS F 5,97,00,000/- (F9,01,00,000/- - 3,04,00,000/-). THE ASSESSING OF FICER OBSERVED THAT THE ONLY INFERENCE THAT CAN BE DRAWN FROM THIS FACT S IS THAT THE UNACCOUNTED MONEY, HAS BEEN USED BY SHRI. R. VISWAN ATHAN FOR THE CONSTRUCTION OF BUILDINGS. THEREFORE, THE DIFFEREN CE OF F.5,97,00,000/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGR IEVED, THE ASSESSEE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 196 -: PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGAINST TH IS, THE DEPARTMENT IS IN APPEAL BEFORE US. 70.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED TH E MATERIAL ON RECORD. IN THIS CASE, THE ASSESSING OFFICER HAD NOT QUOTED ANY EVIDENCE WHICH SURFACED AS A RESULT OF SEARCH. THERE IS NO MATERIAL SEIZED DURING THE COURSE OF SEARCH ACTION. HAD IT BEEN T HE ASSESSEE INVESTED HIS UNACCOUNTED INCOME, THERE OUGHT TO HAVE BEEN FO UND DURING THE COURSE OF SEARCH ACTION. THERE IS NOT EVEN A SINGLE INSTANCE OF SUCH EVIDENCE OR PROOF WHICH EMERGED AS A RESULT OF THE SEARCH TO SH OW THE ASSESSEE HAS INVESTED THE IMPUGNED AMOUNT. IN THE C IRCUMSTANCES, IT IS LEGALLY NOT CORRECT ON THE PART OF THE A.O TO HARP ON THE THEORY OF 'BENAMI OWNERSHIP OF THE ASSETS OF THE ASSESSEE TR UST. IT MAY NOT BE INCORRECT TO SAY THAT THE A.O. MERELY HAZARDS A GUE SS WITHOUT ANY BASIS OR EVIDENCE IN HIS POSSESSION. IT IS WORTHWHI LE TO POINT OUT THAT AS PER THE PROVISIONS OF THE BENAMI TRANSACTIONS ( PROHIBITION) ACT 1988, THE ONUS IS ON THE PERSON WHO ALLEGES 'BENAMI. THUS, IT I S THE 'RESPONSIBILITY OF THE A.O . TO ADDUCE CONCRETE EVIDENCE BEFORE COMING TO THE CONCLUSION THAT IT IS RV WHO IS THE 'OWNER' OF THE ASSESSEE-TRUST I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 197 -: AND THAT SRI JANAKAR IS A 'BENAMI' OF RV. A BARE RE ADING OF THE ASSESSMENT ORDER CLEARLY REVEALS THAT THE A.O. IS O NLY MAKING REPEATED REFERENCES TO PERIPHERAL ISSUES LIKE RELATIONSHIP B ETWEEN RV AND SRI P. JANAKAR, THE ROLE OF THE SECOND TRUSTEE SRI R. MOHA N KUMAR, THE ROLE OF SRI M. SIVAKUMAR IN THE ADMINISTRATION OF THE CO LLEGES, THE RELATIONSHIP BETWEEN SRI P. MURUGESAN AND SRI P. JA NAKAR AND THAT OF SRI P. JANAKAR AND RV, HUMAN BEHAVIOUR; INTENTION OF R V TO START EDUCATIONAL INSTITUTIONS AT NATHAM, GIFT OF PROPERT Y BY SPRET; LOCATION OF THE ADMINISTRATIVE OFFICE OF THE TRUST ETC. AS R IGHTLY POINTED OUT BY THE ASSESSEE, THE A. 0. IS ONLY HARPING ON THE PRESUMPTION OF 'BENEMI OWNERSHIP WITHOUT DISCLOSING THE LEGAL EVIDENCES OR PROOF BASED ON WHICH HE LOGICALLY CAME TO SUCH CONCLUSION. THE FAC T REMAINS THAT THE A.O 'S PRESUMPTION REGARDING THE 'BENAMI OWNERSHIP' OF THE ASSETS OF THE ASSESSEE TRUST IS BEREFT OF ANY EVIDENCE OR PRO OF FOUND DURING SEARCH OR MATERIALS GATHERED / IN THE POSSESSION OF THE A.O . HENCE, WE ARE OF THE OPINION THAT THE A.O 'S CONCLUSION IN THIS REGARD IS LEGALLY UNSUSTAINABLE. ACCORDINGLY, WE HOLD THAT TH E TRUST IS THE OWNER OF THE PROPERTIES OWNED AND ACCOUNTED FOR BY IT IN ITS BOOKS OF ACCOUNTS. FURTHER, THE A.O. 'S FINDINGS THAT THE ASSESSEE IS THE 'OWN ER AND ENJOYING THE FRUITS OF TET' WITHOUT ANY EVIDEN CE OR PROOF BROUGHT IN BY THE A.O. ARE UNACCEPTABLE FOR THE PURPOSE OF PROCEEDINGS UNDER I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 198 -: THE I. T. ACT, 1961 WHICH ARE QUASI -JUDICIAL IN NA TURE. IN VIEW OF THE FINDINGS GIVEN IN THE CASE OF THE TRUST [TET] THAT THERE IS NO RELATIONSHIP BETWEEN THE ASSESSEE AND TET AND THAT TET IS THE OWNER OF THE PROPERTIES HELD AND ACCOUNTED FOR BY IT IN I TS BOOKS, THE A.O. 'S ACTION TO CONSIDER THE SAME IN THE ASSESSMENTS OF T HE ASSESSEE IS LEGALLY NOT CORRECT AND ACCORDINGLY UNSUSTAINABLE. THIS GROUND OF THE APPEAL OF THE REVENUE IS REJECTED. 71 THE NEXT GROUND RAISED BY THE DEPARTMENT IS WITH REGARD TO UNACCOUNTED PAYMENTS TO CONTRACTOR TO THE TUNE OF F .67,80,000/- 71.2 THE FACTS OF THE ISSUE ARE THAT IT WAS OBSER VED DURING THE COURSE OF SURVEY THAT F55,00,000/- HAD PAID TO M/S. SATHYA HOME, CHENNAI, OUTSIDE THE BOOKS (LOOSE SHEETS VIDE ANNEX URE WVS/S/LS-3 SERIAL NUMBER (72). AGAIN IT WAS FOUND A S PER LOOSE SHEETS THAT F 12,00,000/- HAD ALREADY BEEN PA ID IN THE FORM OF STEEL ADVANCE TO THEM. AS STATED ALREADY PAYMENT S ARE MADE FROM THE UNACCOUNTED INCOME OF THE ASSES SEE AND SAME IS NOT ACCOUNTED IN THE BOOKS ALSO. THE OTHER CORROBORATIV E EVIDENCE IN THIS REGARD IS THE SUDDEN INCREASE IN THE ASSETS. T HE ABSTRACT FOUND IN THAT LOOSE SHEET IS REPRODUCED BELOW. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 199 -: NPR COLLEGE : STAGEWISE PAYMENT DUE AS ON 15.02.200 6. SL.NO. BUILDING TOTAL VALUE OF WORK DONE 1 GENTS HOSTEL 19.62 (65.42) 2 POLYTECHNIC SHEET (17.52-2.12- 15.40)ROOF LEVEL 15.40 (31.50) 3 COLLEGE BUILDING 15.40 (38.00) 4 LADIES HOSTEL 2.89 (28.91) 53.31 163.83 ADD: COST OF STEEL COST : 12.00 (WILL BE ADJUSTED IN 4 INSTALLMENTS ONE INST. ALREADY ADJUSTED) : 65.31 AMOUNT ALREADY RECEIVED. 10.00 24.80 9.00 12.00 ------- 55.80 ------- 9.51 DUE AS ON 20.02.2006. THE SAME LOOSE SHEET COPY WAS ALSO FOUND IN THE COLLE GE PREMISES DURING THE COURSE OF SURVEY ON 23/08/2006. P AYMENTS TO THE TUNE OF F55 LAKHS HAD BEEN MADE OUTSIDE THE BO OKS. THESE ARE UNACCOUNTED PAYMENTS MADE TO THE CONTRACTORS AGAINST THE CONSTRUCTION OF THE COLLEGE BUILDINGS. WHEN JANAKAR I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 200 -: WAS ASKED: TO EXPLAIN THE DETAILS FOUND IN THE SLIP, H E ACCEPTED THAT IT CONTAINS THE DETAILS OF EXPENDITURE OF CONST RUCTION AND HE IS NOT AWARE OF ANY OTHER DETAIL. IN THE LETTER FILE D ON 14/12/2006, JANAKAR CLAIMED THAT ONLY FORTY FIVE LAKHS EIGHTY THOUSAN D WAS PAID IN CASH TO M/S. SATHYA HOME BEFORE EXECUTING AGREEMENT WITH THEM. HE FURTHER .STATED BAS ED ON THE QUOTATIONS, SATHYA HOME ONLY, THE ENTRIES WERE MADE. I T CLEARLY REPRESENTS THE AMOUNT RECEIVED BY M/S. SATHYA HOME IN CASH. THOUGH JANAKAR CLAIMED THAT ONLY F45.80 LAKHS WAS PAI D IN CASH, THE PAYMENT OF RS.55 LAKHS IN CASH TO M/S. SAT HYA HOME IS EVIDENCED BY THE ENTRIES IN THE LOOSE SHEET. FURTHE R AS PER THE ENTRY IN THE LOOSE SHEET, AN AMOUNT OF RUPEES TWELVE LAKHS HAD ALREADY BEEN PAID TO THEM AS STEEL ADVANCE. HENCE, A SUM OF RUPEES 67,80,000/- (55,80,000+12,00,000) HAS BEEN PAID TO SATHYA HOME OUTSIDE THE BOOKS. IT WAS INFERR ED THAT FROM UNDISCLOSED FUNDS OF VISWANATHAN THE ABOVE EXPEN DITURE WAS INCURRED AND THIS HAS TO BE TREATED AS UNACCOUNTED INCOME OF THE ASSESSEE AND IS TO BE BROUGHT TO TAX. ON QUE RY IN THIS REGARD, THE ASSESSEE IN HIS REPLY TO PRE ASSESSMENT N OTICE HAS STATED THAT HE WAS NO WHERE CONNECTED TO THE TRUST AND THEREFORE HE IS NOT AWARE OF THE CONTRACTORS AND PA YMENTS MADE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 201 -: TO THEM. UNDER THE CIRCUMSTANCES, F67,80,000/- IS T O BE ASSESSED IN HANDS OF THE ASSESSEE AS UNACCOUNTED INCOM E AS THE ASSESSEE APPEARS TO BE THE REAL OWNER OF THE N PR GROUP OF COLLEGE. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE BY T HE ASSESSING OFFICER. AGAINST THIS, THE DEPARTMENT IS IN APPEAL BEFORE US. 71.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE COMMISSIONER OF INCOME TAX (APPEALS) DE LETED THE ADDITION ON THE REASON THAT ADDITION WAS CONSIDERED IN THE HANDS OF THE TITAN EDUCATIONAL TRUST AND THERE IS NO QUESTI ON TREATING THE SAME IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. BEING SO, IN OUR OPINION, THE DELETION MADE BY THE COMMISSIONER OF I NCOME TAX (APPEALS) IN PARA 4.5 IS JUSTIFIED. FURTHER, THE A DDITION ON MERITS, THE ADDITION MADE BASED ON LOOSE SHEETS WITHOUT ANY S UBSTANTIVE EVIDENCE CANNOT BE CONSIDERED. ACCORDINGLY, THIS G ROUND OF THE REVENUE IS REJECTED. 72 THE NEXT GROUND RAISED BY THE DEPARTMENT IS WIT H REGARD TO PAYMENTS MADE IN CONTRAVENTION OF SECTION 40A(3) TO THE TUNE OF I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 202 -: F9,16,000/- 72.1. THE FACTS OF THE ISSUE ARE THAT DURING THE CO NSTRUCTION OF THE BUILDINGS FOR THE NPR GROUP OF COLLEGES THE CASH PA YMENT OF F45,87,000/- HAS BEEN MADE TO M/S. SATHYA HOMES AND THEREBY CONTRAVENED THE PROVISIONS OF SECTION 40A(3). THER EFORE, 20% OF THE SAID EXPENDITURE WHICH AMOUNTS TO F9,16,000/- IS A DDED TO THE TOTAL INCOME OF THE ASSESSEE. IT IS TO BE NOTED THAT SIN CE THE ASSESSEE IS A REAL OWNER OF THE COLLEGES, THE SECTION 40A(3) WOUL D DEFINITELY APPLY AND THE ASSESSING OFFICER ADDED A SUM OF F9,16,000/ - AS INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE BY THE ASSE SSING OFFICER. AGAINST THIS, THE DEPARTMENT IS IN APPEAL BEFORE US . 72.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED T HE MATERIAL ON RECORD. SINCE WE HAVE ALREADY OBSERVED IN EARLIER P ARA NO.70.2 OF THIS ORDER THAT INVESTMENTS IN TITAN EDUCATIONAL TRUST C ANNOT BE CONSIDERED IN THE HANDS OF THE ASSESSEE, THE EXPENDITURE INCU RRED IN NPR GROUP OF COLLEGES CANNOT BE CONSIDERED IN THE HANDS OF TH E ASSESSEE. ACCORDINGLY, PROVISIONS OF SECTION 40A(3) OF THE AC T CANNOT BE INVOKED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 203 -: THIS GROUND OF THE REVENUE IS REJECTED. 73 THE NEXT GROUND RAISED BY THE DEPARTMENT IS WI TH REGARD TO UNACCOUNTED FEES COLLECTED BY NPR GROUP OF COLLEGES TO THE TUNE OF F52,90,000/- 73.1 THE FACTS OF THE ISSUE ARE THAT DURING THE CO URSE OF SURVEY IN THE PREMISES OF NPR GROUP OF COLLEGES AT NO. 20, THIRUV ALLUVAR SALAI, DINDIGUL ON 23/08/2006, THE LOOSE SHEETS WERE INVE NTORISED AND IMPOUNDED VIDE ORDER DATED 23/08/2006. IT IS SEEN T HAT TWO TYPES OF FEES WERE COLLECTED. ONE IS THE REGULAR FEES AND TH E OTHER IS CALLED 'FIXING' AS FOUND IN THE SHEET NUMBER 120. AS PER R ECOGNITION RULES OF THE GOVERNMENT, ONLY REGULAR FEES AT THE PRESCRIBED RATES CAN BE COLLECTED FROM THE STUDENTS. 'FIXING' IS THE AMOUNT COLLECTED BY THE ASSESSEE OVER AND ABOVE THE PRESCRIBED FEES AND THI S WAS NOT ACCOUNTED. FIXING IS THUS NOTHING BUT THE CAPITATION FEES CALLED BY DIFFERENT NAME. THE LOOSE ''SHEET NUMBER 120 CONTAI NS THE DETAILS OF AMOUNTS COLLECTED FROM 28 APPLICANTS IN DIFFERENT S TREAMS OF B.ED., TRAINING COURSES SUCH AS SCIENCE, ARTS AND VOCATION AL. THE TOTAL COURSE FEES AMOUNT COLLECTED TILL 08/08/2006 IS F29,36,000 /- AS AGAINST THE 'FIXING' OF F49,90,000/-. TO THIS EFFECT SWORN STATEMENT FROM SRI M. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 204 -: SIVAKUMAR, THE ADMINISTRATIVE OFFICER WAS RECORDED O N 08/12/2006. IN REPLY TO QUESTION NUMBER 1, WHEN HE WAS ASKED TO FILE THE DETAILS OF FEE COLLECTED FROM THE STUDENTS FOR THE VARIOUS COURSES, HE STATED THAT F40,000/-- IS COLLECTED AS YEARLY FEES FROM EVERY STUDENT FOR THE B.ED. COURSE. AS PER THE LOOSE SHEET NUMBER 120, THE NUMBER OF STUDENTS ADMITTED FOR B.ED., IS 2 8. TOTAL NUMBER OF STUDENTS ADMITTED FOR THE B:ED., COURSE IS 40 AND THE ADMITTED FEE RECEIPTS FO R 40 STUDENTS IS F11,20,000/-. SINCE 'FIXING' (CAPITATION FEES) FOR 28 STUDENTS ITSELF IS F44,90,000/-, THE PROPORTIONATE FIXING FO R THE BALANCE 12 STUDENTS WORKS OUT, TO F19,20,000/-. THUS THE TOTAL AM OUNT COLLECTED FROM STUDENTS AS 'FIXING' WORKS OUT TO F64 ,10,000/- . THE ASSESSEE HAD UNDERSTATED THE FEES COLLECTED TO THE TUNE OF F52,90,000/- AND THIS HAS NOT BEEN ACCOUNTED IN THE BO OKS OF THE COLLEGE. THEREFORE, THE ASSESSING OFFICER ADDED A S UM OF F52,90,000/- TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGAINST TH IS, THE DEPARTMENT IS IN APPEAL BEFORE US. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 205 -: 73.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORDS. THE LOOSE SHEETS FOUND DURING THE COURSE OF SURVEY IN THE PREMISES OF NPR GROUP OF COLLEGES AT NO.20, THIRUVA LLUVAR SALAI, DINDIGUL. AS WE HAVE ALREADY HELD THAT TITAN EDUCA TIONAL TRUST IS SEPARATE ENTITY LOOSE SHEETS CANNOT BE CONSIDERED WITHOUT ANY CORROBORATIVE MATERIAL. THE DELETION OF ADDITION MA DE BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED. HENCE, THIS GROUND OF THE REVENUE IS REJECTED. 74 THE NEXT GROUND RAISED BY THE DEPARTMENT IS WITH TO REGARD TO UNACCOUNTED PURCHASE OF MOVABLE PROPERTY TO THE TUN E OF F3,36,700/- 74.1 THE FACTS OF THE ISSUE ARE THAT DURING THE COURSE OF SEARCH ON 23/08/2006, AN INVENTORY OF VALUABLES FOUND IN THE RESIDENCE AT GIRI ROAD WAS MADE. VIDE ANNEXURE: MR/ VALUABLE ARTICLES/N.S. THE DETAILS ARE TABULATED BELOW: I- HALL II- BEDROOM OF VISWANATHAN III BEDROOM OF SHRI. V. ARARNATH KITCHEN BALCONY SONY LCE CTV 51 WINDOW AC - 1 TON SONY TV 29 GODREJ PENTACOOL FRIDGE IFB WASHING MACHINE SPLIT AC 1.5 PANASONIC PC WITH I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 206 -: TON TV 21 SAMSUNG LCD MONITOR CEILING FAN CEILING FAN WINDOW AC 1 TON, CEILING FAN DURING THE SEARCH A BILL DATED 07.02.2006 ISSUED BY M/S. SONY WORLD, T. NAGAR, CHENNAI-17 FOR THE PURCHASE OF SON Y LCD COLOUR T.V VIDE SERIAL NUMBER 43 OF ANNEXURE: MR/LS/S FOR F1,7 2,700/- WAS FOUND AND SEIZED. THE AMOUNT WAS PAID IN CASH. WHEN VISWANATHAN WAS QUESTIONED ABOUT THE SOURCE FOR THE PURCHASE, H E REPLIED THAT ONLY HIS SON COULD ANSWER THAT POINT. HOWEVER IT IS SEEN THAT THERE ARE NO DRAWINGS TO THIS EFFECT IN THE ACCOUNTS OF AMARNATH . THEREFORE THEAMOUNT SPENT FOR THE PURCHASE OF TV SHOULD HAVE COME OUT OF THE UNACCOUNTED INCOME OF SHRI. VISWANTHAN. THE SAME M AY BE BROUGHT TO TAX. IT MAY ALSO BE SEEN THAT THERE ARE NO DRAWINGS OR ENTRIES IN THE ACCOUNTS OF AMARNATH THAT WOULD SHOW THE SOURCE OF FUNDS FOR THE INVESTMENT IN OTHER MOVABLES LISTED IN PARA ABOVE. THE APPROXIMATE VALUE OF THE S AME IS WORKED OUT AS UNDER : SL.NO NAME OF THE ITEM APPROXIMATE VALUE 1 1.5 TON SPLIT AC 30,000/- 2 WINDOW AC 1 TON 22,000/- 3 PANASONIC TC 21 15,000/- 4 SONY TV 29 25,000/- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 207 -: 5 WINDOW AC 1 TON 22,000/- 6 PC WITH SAMSUNG LCD MONITOR 25,000/- 7 GODREJ PENTACOOL FRIDGE 10,000/- 8 IFB WASHING MACHINE 15,000/- THUS THE PURCHASE OF SONY LCD COLOUR TV AND THESE H OUSEHOLD ARTICLES AMOUNTING TO F3,36,700/- (F1,72,700/- + 1,64,000/-) SHOULD HAVE COME OUT OF THE UNDISCLOSED EARNINGS OF SHRI. VISWA NATHAN ACCORDINGLY TAXED IN HIS HANDS. AGGRIEVED, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). TH E COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE B Y THE ASSESSING OFFICER. AGAINST THIS, THE DEPARTMENT IS IN APPEAL BEFORE US. 74.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSING OFFICER LISTE D ITEMS FOUND IN THE RESIDENCE OF THE ASSESSEE AT GIRI ROAD AND MADE AN ESTIMATED VALUE OF F.3,36,700/-. THERE IS NO MATERIAL WITH REGARD TO U NACCOUNTED PURCHASE OF ALL THESE ITEMS MADE BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED IN THIS ISSUE ARE UNDER:- I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESS ING OFFICER AND THE EXPLANATIONS OF THE ASSESSEE. IT I S CLEAR FROM THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ADDITION HAS BEEN MADE PURELY ON THE BASIS OF AN UNSUBSTANTIATED PRESUMPTION THAT THE ASSESSEE USED HIS UNACCOUNTED INCOME FOR THE PURCHASE OF THE ITEMS. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 208 -: MOREOVER, THE ISSUE OF ABOVE INVESTMENT/EXPENDITURE IS BEING CONSIDERED IN THE APPEAL RELATING TO HIS CASE FOR A.Y. 2006-07. IN THE CIRCUMSTANCES, THE PROTECTIVE ASSE SSMENT OF THE SAME IN THE HANDS OF THE APPELLANT IS UNWARR ANTED AND ACCORDINGLY, THE ADDITION IS DELETED. THIS FINDINGS OF THE COMMISSIONER OF INCOME TAX (AP PEALS) WAS NOT CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . BEING SO WE HAVE NO HESITATION IN CONFIRMING THE SAME. THIS GR OUND OF THE REVENUE IS DISMISSED. 75 THE NEXT GROUND RAISED BY THE DEPARTMENT I S WITH REGARD TO UNEXPLAINED MARRIAGE EXPENDITURE TO THE TUNE OF F9, 20,000/-, 75.1. THE FACTS OF THE ISSUE ARE THAT SMT . RANJITHA, THE SECOND DAUGHTER OF SRI. VISWANATHAN GOT MARRIED ON 5 TH SEPTEMBER 2005 AT CHENNAI. THE MARRIAGE WAS CONDUCTED AT KALAIYANAR A RANGAM AND THE RECEPTION WAS HELD AT RAJA MUTHAIH HALL, CHENNAI. D URING THE RECEPTION THERE WAS LIGHT MUSIC PROGRAMME BY THE EMINENT FILM MUSIC DIRECTOR 'DEVA'. IN THE STATEMENT RECORDED FROM SMT. V. SELV ARANI, W/O VISWANATHAN ON 23/08/2006; SHE ADMITTED THAT 50 SOV EREIGNS OF GOLD JEWELLARY WERE GIVEN TO HER DAUGHTER , SRI VISWANATHAN WAS ASKED ABOUT THE DETAILS OF EXPENDITURE INCU RRED FOR THE ABOVE MARRIAGE VIDE QUESTION NUMBER 14,20 & 21. VI SWANATHAN CLAIMED THAT THE EXPENDITURE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 209 -: INCURRED AT KALAIVANAR ARANGAM WAS SHARED BY TWO OT HER MINISTERIAL COLLEAGUES WHOSE CHILDREN ALSO GOT MARRIED ON THE S AME DAY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE H AS SUBMITTED THE SAME REASONS ABOVE BUT FAILED TO GIVE ANY EVIDENCES IN THIS REG ARD. THEREFORE THE ASSESSING OFFICER HAS NO OTHER OPTION EXCEPT TO ESTIMATE THE MARRIAGE EXPENDITURE KEEPING THE SOCIAL STATUS OF THE ASSESSEE AND FACTS AND CIRCUMSTANCES OF THE CASE. THE SAME IS ES TIMATED AS BELOW: SL.NO NARRATION OF EXPENDITURE AMOUNT 1 50 SOVEREIGNS OF JEWELLARY ( 50 X 6400) 3,20,000/- 2 RENT TO RAJA MUTHIAH HALL 1,50,000/- 3 DINNER FOR 1000 GUEST ESTIMATED @ 100 1,00,000/- 4 DRESSES AND SRIDHAN ITEMS 2,00,000/- 5 TRANSPORT AND ACCOMMODATION 50,000/- 6 MUSIC PROGRAMME BY DEVA 1,00,000/- TOTAL 9,20,000/- THE EXPENSES INCURRED IN CONNECTION WITH THE MARRIA GE OF HIS SECOND DAUGHTER ARE NOT REFLECTED IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07. THE WHOLE AMOUNT OF EXPENDITURE INCUR RED FOR THE I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 210 -: MARRIAGE HAS COME OUT OF THE UNACCOUNTED INCOME OF THE ASSESSEE AND ACCORDINGLY F9,20,000/- WAS TAXED IN HIS HANDS OF T HE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE DEPARTMENT IS IN APPEAL BEFORE US. 75.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. IT IS CLEAR THAT THE LOWER AUTHORITIES MER ELY PROCEEDED TO MAKE AN ESTIMATE WITHOUT CONSIDERING THE EXPLANATION OF THE ASSESSEE. THIS IS NOT A CASE WHERE THE INFORMATION WAS GATHERED DU RING THE COURSE OF SEARCH OR AS IF IN A SURVEY UNDER' SEC. 133A(5) AFT ER THE MARRIAGE CELEBRATIONS (EVENT OR FUNCTION) AND THEREAFTER, US ING THAT MATERIAL FOR THE PURPOSE OF ASSESSMENT. THE ASSESSING OFFICER ME RELY HAS MADE ESTIMATES UNDER VARIOUS HEADS AND THE REASONABLENES S OF SUCH ESTIMATES IS OPEN TO QUESTION. FURTHER, IT WAS ALSO NOTICED THAT THERE WAS NOTHING TO INDICATE WHETHER THE LOWER AUTHORITI ES CONSIDERED THE EXPLANATION OFFERED BY THE ASSESSEE. ACCORDING TO S EC. 69C, 'WHERE AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR THE EXPLANA TION, IF ANY, OFFERED BY HIM IS NOT SATISFACTORY, THE AMOUNT COVE RED BY SUCH I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 211 -: EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF THE A SSESSEE FOR SUCH FINANCIAL YEAR'. THUS, THE LAW MANDATES THAT THE LO WER AUTHORITIES SHOULD CONSIDER THE EXPLANATION, IF ANY, OFFERED BY THE ASSESSEE IN THIS REGARD. AS SUCH A PROCEDURE WAS NOT OBSERVED, THE A CTION OF THE ASSESSING OFFICER IN THIS REGARD IS LEGALLY UNSUST AINABLE. IF THE ASSESSING OFFICER ENTERTAINED ANY DOUBT ABOUT THE EXPLANATION OFFERED BY THE ASSESSEE, HE OUGHT TO HAVE MADE ENQUIRIES WI TH THE BRIDEGROOM'S PARENTS TO KNOW IF THE VERSION OF THE ASSESSEE IS CORRECT OR NOT. THERE IS NOTHING TO SHOW THAT THE ASSESSING OFFICER MADE ANY SUCH ATTEMPT OR ENQUIRIES. IN THE CIRCUMSTANCES, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELE TING THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THIS GR OUND OF THE REVENUE IS REJECTED. 76 THE LAST GROUND RAISED BY THE DEPARTMENT IN THI S APPEAL IS WITH REGARD TO UNACCOUNTED INVESTMENT IN MOVABLES TO TH E TUNE OF F9,00,000/-. 76.1 THE FACTS OF THE ISSUE ARE THAT DURING THE CO URSE OF SEARCH IN THE ASSESSEES RESIDENCE AT VEMBARPATTI ON 23.08.2006, THREE CARS WERE FOUND AND SRI KANNAN, SON-IN-LAW OF SRI VISWANATHAN WAS ASKED TO I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 212 -: EXPLAIN THE OWNERSHIP OF THE CARS. IN RESPONSE TO QUESTION NUMBER, 7, 8 AND 9 HE STATED AS UNDER:- 01. AMBASSADOR CAR TN-33 AJ-4444 SAID TO BE OWNED BY RAJENDRAN, MADURAI. 02. QUALIS CAR TN -33AB 6567 SAID TO BE OWNED BY RAJENDRAN, ERODE. 03. MARUTHI ZEN TN-07 AZ 3434 OWNERSHIP NOT KNOWN. SHRI. KANNAN ALSO SAID HOWEVER THE CARS ARE BEING U SED BY VISWANATHAN FAMILY ONLY AND THERE IS NO RELATIONSHI P BETWEEN THE CLAIMED OWNERS AND VISWANATHAN FAMILY. HE FURTHER ASSERTED THAT NO RENT WAS PAID TO THE CLAIMED OWNERS, FOR THE USE OF CARS. SHRI. VISWANATHAN WAS ALSO ASKED TO EXPLAIN ABOUT THE AVA ILABILITY OF THESE CARS IN HIS RESIDENCE AT VEMBARAPTTI VIDE QUESTION NUMBER 12 IN SWORN STATEMENT RECORDED FROM HIM ON 23.08.2006. HE STATE D THAT THERE WAS NO CONNECTION BETWEEN HIM AND THE SAID CAR OWNERS. THE USE OF THE ABOVE VEHICLES BY VISWANATHAN FAMILY, SAID TO BE OW NER BY PERSONS WITH WHOM THEY HAVE NEITHER PERSONAL NOR OFFICIAL CONNECTION, CLEARLY INDICATES THAT THE CARS OWNED BY VISWANATHAN BUT HE LD IN BENAMI NAMES. THE VALUE OF THE CARS WOULD BE AROUND F9,00 ,000/- (AMBASSADOR 3 LAKHS + QUALIS 4 LAKHS + MARTHI Z EN 2 LAKHS) AND THIS INVESTMENT SHOULD HAVE COME FROM THE UNACCOUNT ED EARNINGS OF SHRI. VISWANATHAN. THEREFORE, THE VALUE OF THE MO VABLE ASSETS IS I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 213 -: TAXED IN THE HANDS OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (AP PEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE DEPARTMEN T IS IN APPEAL BEFORE US. 76.2 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORDS. THE ASSESSING OFFICER HAD PROCEEDED SIMPLY ON THE PRESUMPTION THAT THE CARS WERE FOUND PARKED BEFORE THE ASSESSEE S RESIDENCE ON THE DATE OF SEARCH AND FOR THAT REASON, THE ASSESSING OFFICER CONCLUDED THAT THE CARS BELONG TO THE ASSESSEE I.E. THEY REPRESENT UNACCOUNTED INVESTMENT BY THE ASSESSEE OUT OF HIS UNDISCLOSED I NCOMES. AS CLAIMED BY THE ASSESSEE, THE ASSESSING OFFICER COULD HAVE A SCERTAINED THE REGISTERED OWNERS OF THE CARS FROM THE STATE TRANSP ORT DEPARTMENT AND MADE ENQUIRIES WITH THE RESPECTIVE OWNERS. FURT HER, WITHOUT ASCERTAINING THE PREVIOUS YEAR IN WHICH THE CARS WE RE PURCHASED, IT WAS NOT POSSIBLE TO DETERMINE THE YEAR OF ASSESSMENT. W E ARE RATHER CONSTRAINED TO OBSERVE THAT THE ASSESSING OFFICER MADE THE ADDITION WITHOUT PROPER VERIFICATION. ACCORDING TO SEC. 69, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO ASCERTAIN THAT THE UNEXPLAINED INVESTMENTS RELATE TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSM ENT YEAR IN QUESTION I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 214 -: AND THAT THE ASSESSEE'S EXPLANATION ABOUT THE SOURC ES FOR THE INVESTMENTS ARE NOT SATISFACTORY. FURTHER, AS PER C IRCULAR DATED 10.03.2003 ISSUED BY THE CENTRAL BOARD OF DIRECT TA XES, THE EMPHASIS SHOULD BE ON EVIDENCES / MATERIALS GATHERED DURING SEARCH RATHER THAN MERE CONFESSIONS IN THE STATEMENTS RECORDED DURING SEARCH. IN THIS CASE, THE ASSESSEE HAS TOTALLY DENIED HAVING MADE T HE INVESTMENT AND IT WAS NOW THE TURN OF THE ASSESSING OFFICER TO PR OVE THAT THE EXPLANATION OF THE ASSESSEE IS INCORRECT. AS THIS W AS NOT DONE BY THE ASSESSING OFFICER, THE CIT(A) HAD DELETED THE ADDI TION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS). THIS GROUND OF THE APPEAL BY THE REVEN UE IS REJECTED. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IN ITA NO.462/MDS/2011 IS DISMISSED. SHRI. P. JANAKAR, ITA NO. 649/MDS/2011, ASSESSMENT YEAR 2006-07 (REVENUES APPEAL)_ 77. THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRA PALLI, DATED 18.01.2011 FOR THE ASSESSMENT YEAR 2006-2007. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 215 -: 77.1 THE GROUND RAISED BY THE DEPARTMENT IS THAT TH E COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE T OWARDS UNEXPLAINED INVESTMENT IN RESIDENTIAL HOUSE AMOUNTI NG TO F21,61,040/-. 77.2 THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL ENGINEER CUM BUILDER. HE IS THE MANAGING TRUSTEE OF TITAN E DUCATIONAL TRUST WHICH IS RUNNING THE NPR GROUP OF COLLEGES [AN ARTS AND SCIENCE COLLEGE, A POLYTECHNIC COLLEGE AND A TEACHER TRAINI NG COLLEGE] AT NATHAM, DINDIGUL DISTRICT. IN THE CASE OF SRI R. VI SWANATHAN, VEMBARPATTI, NATHAM, DINDIGUL DISTRICT, A SEARCH UN DER SEC. 132 WAS CONDUCTED BY THE INCOME TAX DEPARTMENT ON 23-08-200 6. THE RESIDENCE OF THE ASSESSEE [AT NO. 4/52, SPENCER COM POUND, DINDIGUL TOWN] WAS ALSO SEARCHED UNDER SEC. 132 ON THE SAME DAY. PURSUANT TO THE SEARCH AND SEIZURE ACTION, THE ASSESSING OFFIC ER INITIATED PROCEEDINGS UNDER SEC. 153A IN THE ASSESSEE'S CASE FOR THE ASSESSMENT YEARS 2001-02 TO 2007-08 AND COMPLETED THE ASSESSME NTS ON 30-12- 2008. THE PRESENT APPEAL RELATES TO AY 2006-07. TH E FACTS ARE THAT THE ASSESSEE PURCHASED A RESIDENTIAL HOUSE AT DOOR NO. 50, PLOT NO.8, NEHRUJI NAGAR, DINDIGUL, FOR A CONSIDERA TION OF F19,90,000/- I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 216 -: ON 16-03-2006 AND THAT THE TOTAL COST INCLUDING STA MP DUTY AND REGISTRATION CHARGES CAME TO F 22,71,270/-. THIS WA S DISCLOSED IN THE RETURN FILED ON 11-08-2006 I.E. BEFORE THE DATE OF SEARCH. WHILE DISCUSSING THE ISSUE, THE A.O. OBSERVED THAT THE AS SESSEE HAD INTRODUCED CREDITS TO THE TUNE OF F17,12,500 IN AN ATTEMPT TO EXPLAIN THE SOURCES FOR THE INVESTMENT. THE A.O. HAD ALSO O BSERVED THAT EXCEPT THE LOAN FROM KULANDAIRAJ THE ASSESSEE HAS S UBMITTED CONFIRMATION LETTERS FROM THE ALLEGED CREDITORS. AC CORDING TO THE A.O. CREDITS OF F12,12,500/- (OUT OF F17,12,500/-) WILL HAVE. TO BE TREATED AS UNEXPLAINED CASH CREDITS. THE A.O. HAD ALSO REFE RRED TO THE GIFTS OF F4,37,500/- FROM SRI SUBBIAH (UNCLE) AND F5,00,000/ - FROM SRI S. DHARMARAJ (BROTHER-IN-LAW). THE A.O. DOUBTED THE GE NUINENESS OF THE GIFT TRANSACTIONS. THE A.O. HELD THAT THE VALUE OF THE PROPERTY WAS SHOWN AS LAND PURCHASE FOR F22,71,720/- IN THE BALA NCE SHEET FOR THE YEAR ENDED 31-3-2006. IT IS SEEN FROM THE CAPITAL A CCOUNT OF P. JANAKAR THAT NO AMOUNT WAS DEBITED AGAINST THE PURC HASE OF PROPERTY. THE CLOSING BALANCE OF CAPITAL ACCOUNT OF SRI P. JA NAKAR AS ON 31-3- 2005 WAS F8,13,748/-. EVEN AFTER GIVING CREDIT OF T HE ALLEGED GIFTS OF F9,85,000/- THE AVAILABLE BALANCE INCLUDING THE PRO FIT FOR THE YEAR ENDED 31-3-2006 IS F21,38,670/- EXCLUDING THE EXPE NSES FOR THE YEAR, IS SHORT OF THE SALE CONSIDERATION. AS THE PURCHASE OF PROPERTY AND I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 217 -: LOANS OBTAINED FOR THE SAME IS NOT REFLECTED IN THE CAPITAL ACCOUNT AS WELL AS IN THE BALANCE SHEET, THE ENTIRE INVESTMEN T OFF 21,61,040 (19,90,000 + 1,71,040) SHOULD HAVE COME OUT OF THE UNACCOUNTED EARNINGS OF THE ASSESSEE AND TO BE BROUGHT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGAINST TH IS, THE DEPARTMENT IS IN APPEAL BEFORE US. 77.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. W E ARE OF THE OPINION THAT THE A.O. SHOULD NOT HAVE IGNORED THE FACT THAT PURCHASE OF THE HOUSE AS DISCLOSED IN TH E BALANCE SHEET AS ON 31-3-2006 FILED ALONG WITH THE RETURN OF INCOME FILED ON 11-0 8-2006 I.E BEFORE THE DATE OF SEARCH . AS EXPLAINED BY THE ASSESSEE, THE PURCHASE OF THE HOUSE PROPERTY WAS DULY DISCLOSED I N HIS ACCOUNTS AND THEREFORE, IT WOULD BE FACTUALLY INCORRECT TO COME TO THE CONCLUSION THAT THE SAME REPRESENTS UNDISCLOSED INVESTMENT. IF, ON THE OTHER HAND, THE A. O. ENTERTAINED ANY DOUBT ABOUT THE GENUINENE SS OF THE SOURCES AS DISCLOSED IN THE BALANCE SHEET, HE OUGHT TO HAVE TAKEN STEPS TO VERIFY THE CLAIM OF THE ASSESSEE BY MAKING INDEPEND ENT ENQUIRIES WITH THE CREDITORS AND THE DONORS. AS A MATTER OF FACT, THE ASSESSEE HAD I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 218 -: FURNISHED CONFIRMATION LETTERS FROM THE CREDITORS / DONORS ALONG WITH NECESSARY DOCUMENTARY EVIDENCE LIKE BANK ACCOUNT DE TAILS, THEIR OWN SOURCES OF INCOME ETC. AND THIS FACT IS ACKNOWLEDGE D BY THE A.O. HIMSELF IN THE ASSESSMENT ORDER. THUS, IT BECAME TH E RESPONSIBILITY OF THE A.O. TO VERIFY THE GENUINENESS OF THE CLAIMS MA DE BY THE ASSESSEE. HAVING FAILED TO DO, IT IS INCORRECT FOR THE A.O. T O HOLD THAT THE PROPERTY REPRESENTED UNACCOUNTED INVESTMENT OF THE ASSESSEE. IT NEEDS TO BE MENTIONED THAT THE REQUIREMENT OF SEC. 68 IS THAT W HEN THE ASSESSEE OFFERS AN EXPLANATION REGARDING A CREDIT, IT IS THE RESPONSIBILITY OF THE A.O. TO DISPROVE THE CLAIM BY INDEPENDENT ENQUIRIES TO COME TO THE CONCLUSION THAT THE EXPLANATION OFFERED IS UNSATIS FACTORY. IN THE CIRCUMSTANCES, WE HOLD THAT THERE IS NO WARRANT OR JUSTIFICATION FOR THE ADDITION OF F21,61,040/- AND WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE APPEAL OF THE DEPARTMENT IS REJECTED. IN THE RESULT, (A) THE APPEALS FILED BY THE ASSESSEE SHRI. P. MURUGESA N IN ITA NOS.2039 TO 2045/MDS/2013 AND STAY PETITIONS FILED BY THE ASSESSEE IN S.P.NOS.368 TO 373/MDS/2015 ARE DISMIS SED. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 219 -: (B) THE APPEALS FILED BY THE ASSESSEE SRI PONNAIYAH RAMAJAYATHAMMAL EDUCATIONAL AND CHARITABLE TRUST IN ITA NOS.1884 TO 1890 AND STAY PETITIONS FILED BY THE AS SESSEE IN S.P.NOS.361 TO 367/MDS/2015 ARE DISMISSED. (C) THE APPEALS FILED BY THE DEPARTMENT IN THE CASE OF SHRI. P. MURUGESAN, IN ITA NOS.2036 & 2037/MDS/2013 ARE DISMISSED. (D) THE APPEAL FILED BY THE DEPARTMENT IN THE CASE OF SHRI. R. VISWANATHAN, IN ITA NO.462/MDS/2011 IS DISMISSED. (E) THE APPEAL FILED BY THE DEPARTMENT IN THE CASE OF SHRI.P. JANAKAR IN ITA NO.649/MDS/2011 IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 14TH OF OCTOB ER, 2015, AT CHENNAI. SD/- SD/- ( . ! ) V. DURGA RAO ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:14.10.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF. I.T.A.NOS.2036 & 2037, 2039 TO 2045/MDS/2013, 1884 TO 1890/ 2013, 462/2011 & 649/2011. :- 220 -: