Orissa Computer Academy, Bhubaneswar V. ACIT, Bhubaneswar

ITA 467/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65154 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 28-09-2012
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: P S PANDAK K AGARWAL ARS
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Benefit of exemption; Documents seized
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 467/CTK/2012 / ASSESSMENT YEAR 2006 - 07 ORISSA COMPUTER ACADEMY, PUBASASAN, KAUSALYAGANG, BHYUBANESWAR 751 002 PAN: AAAAO 0070 D - - - VERSUS - ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI P.S.PANDA/K.K.AGARWAL, ARS / FOR THE RESPONDENT: / S MT. PARAMITA TRIPATHY, CIT - DR / DATE OF HEARING: 06.11.2012 / DATE OF PRONOUNCEMENT: 09.11.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUNDS. 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L D. CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE WITHDRAWAL OF BENEFIT CLAIMED U/S. 11 BY THE L D. A.O. WITH A GROUND THAT THE APPELLANT TRUST EXISTS FOR PROFITEERING AND COMMERCIALIZATION OF EDUCATION AND WITH A CONTENTION THAT THE INSTITUTI ON IS NO LONGER TO BE CONSIDERED AS CHARITABLE AS PER PROVISION OF SEC. 2(15) OF THE ACT. 2 . ON THE FACTS AND CIRCUMSTANC E OF THE CASE, THE L D. CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE ORDER OF ID. A.O. WHERE IN HE HAS ESTIMATED THE COLLECTION OF CAPITATIO N FEES AMOUNTING TO 1 ,90,50,000 WHICH IS ILLEGAL AND BAD IN LAW IN CASE OF SEARCH ASSESSMENT. 2. THE BRIEF FACTS AS HAS BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE IS AN INSTITUTION REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 AND ENGAGED IN R UNNING OF DIFFERENT EDUCATIONAL INSTITUTIONS OF ENGINEERING AND MANAGEMENT COURSE. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2006 I.T.A.NO. 467/CTK/2012 2 SHOWING TOTAL INCOME AT NIL SINCE EXEMPTION U/S.11 WAS CLAIMED. A SEARCH & SEIZURE OPERATION WAS CONDUCTED IN THE CASE OF THE APPELLANT SOCIETY U/S.132 OF THE ACT ON DT.9.8.2005. THE APPELLANT SOCIETYS MAIN INCOME HAS BEEN FOUND TO BE FEES, DONATIONS AND CAPITATION FEES. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SUPPRESSED RECEIP TS, COLLECTED EXCESS AMOUNT OF MONEY IN THE NATURE OF CAPITATION FEES IN ADDITION TO THE NORMAL FEES STRUCTURE AND THE BOOKS OF ACCOUNTS HAVE NOT BEEN MAINTAINED PROPERLY. THE REGISTRATION GRANTED BY THE CIT, BHUBANESWAR U/S.12AA TO THE ASSESSEE WAS CANCEL LED VIDE HIS ORDE R DT.8.3.2007. SUBSEQUENTLY, THIS BENCH OF TRIBUNAL RESTORED THE REGISTRATION GRANTED TO THE ASSESSEE SOCIETY A GAINST WHICH THE DEPARTMENT HAS MOVED THE HONBLE HIGH COURT OF ORISSA. THE ASSESSING OFFICER HAS ALSO GIVEN A FINDING THAT THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF SECTION 11 FOR VARIOUS REASONS APART FROM THE FACT THAT THE DEPARTMENT HAS CHALLENGED THE ORDER OF THE ITAT IN RESTORIN G THE BENEFIT OF EXEMPTION U/S. 11 BEFORE THE HONBLE ORISSA HIGH COURT. THE ASSESSING OFFICER DENIED THE BENEFIT OF SECTION 11 FOR NON - MAINTENANCE OF PROPER BOOKS OF ACCOUNTS, FAMILY CONTROL & MANAGEMENT OF THE SOCIETY AND SIPHONING OF THE FUNDS AND COLLE CTION OF CAPITATION FEES. THE AO S FINDINGS ARE THAT THE ASSESSEE SOCIETY WAS NOT MAINTAINING B OOKS OF ACCOUNTS PROPERTY. THE COMPUTERIZED DAY - BOOK AND MANUAL CASH BOOKS DO NOT TALLY AS EVIDENT FROM THE SEIZED MATERIAL IDENTIFIED AS OCA - 3. SEIZED DOCUMENTS IDENTIFIED AS OCA - 6, OCA - 7 AND OCA - 1 ARE NOT COMPLETE IN ALL RESPECT. SEIZED DOCUMENTS BCR - 36, BCR - 37 & BCR - 38 RECORD RECEIPT OF EXCESS ADMISSION FEES WHICH HAVE NOT BE ENTERED IN THE CASH BOOK. DISCREPANCIES WERE ALSO NOTICED BETWEEN SEIZED DOCUMENT SM - 3 AND OCA - 1. THE CONTROL AND MANAGEMENT OF THE ASSESSEE SOCIETY WAS LIMITED TO FAMILY MEMBERS OF THE FOUNDER SRI BHAWANI CHARAN RATH. FUNDS WERE ALSO I.T.A.NO. 467/CTK/2012 3 SIPHONED OF F INCLUDING EXCESS PAYMENT AS HONORARIUM TO THE CHAIRMAN, VICE - CHAIRMAN AND SMT. SARMISTHA RATH, DIRECTOR. SMT. SARMISTHA RATH IS THE WIFE OF THE CHAIRMAN SRI B. C. RATH AND HAS RECEIVED AN A MOUNT OF 6 LAKHS EVEN THOUGH SHE IS A HOUSE WIFE AS ACCEPTED BY HER. THE ASSESSING OFFICER FURTHER FOUND THAT THE ASSESSEE SOCIETY HAS BEEN COLLECTING CAPITATION FEE FROM THE STUDENTS WHO HAVE TAKEN ADMISSION IN THE MANAGEMENT QUOTA SEATS. THIS CAPITATION FEE IS M UCH IN EXCE SS OF THE PRESCRIBED FEE. THE SEIZED DOCUMENTS IDENTIFIED AS BCR - 1, BCR - 17, BCR - 24, BCR - 36, BCR - 37 AND BCR - 38 SHOW THAT THE ASSESSEE SOCIETY HAS RECEIVED EXCESS AMOUNT THAN THE ADMISSION FEE PRESCRIBED AND THE FEE VARIES FROM STREAM TO STEAM AND STUDENT TO STUDENT. THE EXCESS FEES IN THE NATURE OF CAPITATION FEE HAS BEEN FIXED AFTER NEGOTIATION WITH THE CANDIDATES/GUARDIANS AND THE PRICE HAS BEEN CALLED AS AGREEMENT AMOUNT OR RATE FIXED. EVEN FOR THE SAME STREAM OF ENGINEERING COURSE, DIFFERENT STUDENTS HAVE PAID DIFFERENT AMOUNTS. THE AO HAS REFERRED TO BCR - 24 WHICH SHOWS THAT AN AMOUNT OF 50,000 WAS RECEIVED FROM SRI PRASANNA KUMAR SATPATHY ON 21.6.2005 AND FURTHER AMOUNT OF 2 LAKHS FOR PROVISIONAL ADMISSION. BCR - 1 SHOWS THAT SRI S. MISHRA H AS PAID AN AMOUNT OF 3,62,000 ON DIFFERENT DATES BY BOTH CASH AND DD. BCR - 36 RECORDS DETAILED NOTINGS OF PAYMENTS FROM DIFFERENT STUDENTS OF FEES MUCH IN EXCESS OF THE PRESCRIBED FEES WHEREIN IT IS ALSO MENTIONED AS DEAL CLOSED. THE AO REFERS TO BCR38 W HEREIN RATE FIXED IN RESPECT OF SOME STUDENTS FOR AMOUNTS OF 1.5 LAKHS & 2.5 LAKHS HAVE BEEN MENTIONED AND ALSO THE AMOUNTS HAVE BEEN PAID. SIMILAR TYPES OF ENTRIES ALSO APPEAR IN BCR - 36, BCR - 37 & BCR - 38. THE ASSESSING OFFICER HAS ALSO REFERRED TO THE CASE OF ONE STUDENT SRI MANAS RANJAN DAS WHO FILED A PETITION BEFORE THE HONBLE HIGH COURT OF ORISSA AGAINST THE ACTION OF KRUPAJAL ENGINEERING COLLEGE DEMANDING HIGHER FEE THAN PRESCRIBED BY THE GOVERNMENT RESOLUTION I.T.A.NO. 467/CTK/2012 4 DT.17.9.1998. ON THESE BASIS , THE ASS ESSING OFFICER CONCLUDED THAT THE ASSESSEE SOCIETY COLLECTED SUBSTANTIAL AMOUNTS BY WAY OF CAPITATION FEES/DONATION FROM THE STUDENTS WHO HAD TAKEN ADMISSION THROUGH THE MANAGEMENT QUOTA IN DIFFERENT STREAMS. THE ASSESSING OFFICER ESTIMATED THE AVERAGE CAP ITATION FEES COLLECTED AS 1.5 LAKHS PER STUDENT AND CONSIDERING THAT THE MANAGEMENT SEATS NUMBER 185, COMPUTED THE CAPITATION FEE TO BE 2,77,50 ,000 AND ADDED THE SAME TO THE TOTAL INCOME AS UNACCOUNTED INCOME. 3. AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE CASE OF THE ASSESSEE AND ALSO CONSIDERED THE CASE OF THE ASSESSEE DECIDED BY HIS PREDECESSOR CIT(A) FOR THE AYS 2001 - 02, 2002 - 03, 2003 - 04 AND 2004 - 05 WHEN THE BENEFIT OF SECTION 11 WAS GRANTED TO THE ASSESSEE ON CERTAIN CONDITIONS. AFTER PERUSING THE ORDER OF THE ASSESSING OFFICER, THE LEARNED CIT(A) CONSIDERED THAT THE CAPITATION FEES OUGHT TO HAVE BEEN HELD AS CORPUS WHEN THE ADMISSION FEES RECEIVED AS CAPITATION FEES HAD BEEN RENDERED TO BE UTILIZED FOR CONTINUING REGISTRATION U/S.12AA. IN OTHER WORDS, HE NOTED THAT THE OVERWHELMING JUDICIAL VIEW IS THAT ANY AMOUNT CHARGED TO A STUDENT IN EXCESS OF THE PRESCRIBED FEES AND IN CONNECTION WITH THE ADMISSION THROUGH THE MANAGEMENT QUOTA IS IN THE NATURE OF CAPITATION FEES COLLECTED UNDER ANY HEAD OR GUISE. ONCE THE CAPITATION FEE IS RECEIVED, IT VIOLATES AGAINST THE CHARITABLE NATURE OF THE INSTITUTION, ACCORDINGLY, THE INSTITUTION EXISTS FOR PROFITEERING AND COMMERCIALIZATION OF EDUCATION HAS TAKEN PLACE AND NO LONGER THE INSTITUTION IS T O BE CONSIDERED AS CHARITABLE U/ S.2(15) OF THE ACT. IN SUCH A CASE, THE INSTITUTION LOSES ITS CHARITABLE CHARACTER AND BECOMES INELIGIBLE FOR BENEFIT OF SECTION 11. IN THE PRESENT CASE, THE APPELLANT SOCIETY HAS COLLECTED EXCESS FEES OR DONATIONS IN THE NATURE OF CAPITATION FEES. SUCH COLLECTION IS DONE IN I.T.A.NO. 467/CTK/2012 5 A SYSTEMATIC MANNER AS REVEALED BY THE SEIZED DOCUMENTS. IN VIEW OF THE SAME, THE APPELLANT SOCIETY IS NOT ELIGIBLE FOR BENEFIT OF SECTION 11. HOWEVER, HE WAS GRACIOUS T O CONSIDER THE FACTS OF THE ASSESSEES CASE WHEN HE REDUCED THE ESTIMATION OF THE CAPITATION FEES ACCORDING TO THE NUMBER OF STUDENTS AS WERE AVAILABLE IN THE MANAGEMENT QUOTA WHICH MAXIMUM COULD BE EXPLAINED FOR THE FOUR YEARS DEGREE AS THE CASE MAY BE. 4 . THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENT SUBMITTED THAT - I ) THE LD. A.O. WHILE PASSING THE ORDER, TOOK THE FOLLOWING TWO GROUNDS BESIDES OTHER REGULAR GROUND AS TAKEN IN A.Y. 2000 - 01 TO 2004 - 05 TO WITHDRAW THE BENEFIT U/S. 11 OF THE INCOME TAX ACT, 1961. A ) THE APPELLANT SOCIETY HAS RECEIVED MONEY IN EXCESS OF ADMISSION FEES THAT FIXED BY THE INDUSTRIES DEPARTMENT. B ) THE ASSESSEE DID NOT RECORD THOSE EXCESS MONEY IN THE CASH BOOK OF THE RELEVANT FINANCIAL YEAR. II ) THE LD. CIT (A) DURING THE C OURSE OF HEARING FOUND THAT THE APPELLANT CAN NOT BE DENIED THE BENEFIT OF SECTION 11 ON THE GROUND TAKEN BY THE LD. A.O. SINCE THE SAME ARE SIMILAR GROUND TAKEN IN EARLIER YEARS AND DELETED BY HIM. III ) HOWEVER, THE LD. CIT(A) WHILE CONSIDERING THE APPELLANT INELIGIBLE FOR BENEFIT OF SECTION 11, ONLY TOOK THE VIEW THAT THE APPELLANT SOCIETY HAS COLLECTED EXCESS FEES OR DONATIONS IN THE NATURE OF CAPITATION FEES THAN THE APPROVED FEES AS PER NOTIFICATION AS MENTIONED IN PARA 3.4.1, PAGE - 7 OF HIS ORDER. IV ) FOR COM ING TO THE ABOVE CONCLUSION, THE LD. CIT (A) HAS REFERRED TO THE FEE STRUCTURE APPROVED BY THE GOVT. OF ORISSA, INDUSTRIES DEPARTMENT VIDE RESOLUTION DATED 17TH SEPTEMBER1998 WHICH IS REPRODUCED BELOW (AS MENTIONED IN PAGE 13 OF LD. A.O.S ORDER AND PAGE 8 OF LD. CIT (A)S ORDER ) I.T.A.NO. 467/CTK/2012 6 CATEGORY TUITION FEES (PER ANNUM) DEVELOPMENT FEES ( PER ANNUM) CAUTION MONEY ( ONE TIME REFUNDABLE) TOTAL FREE SEAT 4,500 3,000 2,500 10,000 PAYMENT SEAT 32,000 8,000 2,500 42,500 NRI SEAT 5,000$ 1,000$ 2,500$ 8,500 $ IN LIEU OF NRI 60,000 40,000 2,500 1,02,500 V ) A COPY OF THE RESOLUTION PASSED BY GOVT. OF ORISSA IS ENCLOSED IN THE PAPER BOOK AT PAGE NO. 64 & 65 , WH ICH IS ALSO PART OF THE SEIZED DOCUMENTS MARKED AS PAGE NO.104 & 105 OF SEIZED BOOK MARKED AS BCR - 17. VI ) FROM T HE ENCLOSED RESOLUTION, THE HONBLE BENCH MAY KINDLY NOTE THAT THE AFORESAID FEES STRUCTURE FIXED IS PER ANNUM AND COURSE OFFERED IN THE APPELLANT COLLEGES ARE FOR FOUR YEARS. VII ) ACCORDINGLY, IT IS AT THE DISCRETION OF THE COLLEGE TO COLLECT THE FEES ANNUALLY OR CONSOLIDATED FEES FOR THE ENTIRE PERIOD AT THE TIME OF ADMISSION. VIII ) MOSTLY IT IS FOUND THAT THE SEATS AVAILABLE FOR NRI AND IN LIEU OF NRI ARE FILLED UP BY THE MANAGEMENT FOR TAKING ADMISSION OF STUDENTS WHO HAVE SECURED LESSOR MARK AND ACCORDINGLY A HI GHER AMOUNT IS CHARGED BUT WITHIN THE LIMIT FIXED BY THE GOVT. AND TOTAL FEES IS COLLECTED AT THE TIME OF TAKING ADMISSION SINCE THE CHANCES OF THEIR CONTINUING IS ALWAYS DOUBTFUL. IX ) ACCORDINGLY, THE TOTAL FEES OF THE COURSE WERE COLLECTED IN MOST OF THE CAS ES WHERE THE STUDENTS ARE ADMITTED UNDER THE AFORESAID CATEGORIES. X ) THIS IS A COMMON PHENOMENON IN ALL THE PRIVATE COLLEGES AND THE SAME PRACTICE IS FOLLOWED TO AVOID FUTURE LOSSES. XI ) HOWEVER, FROM THE SEIZED RECORD AS REFERRED BY THE LD. A.O. TO TAKE A CONSC IOUS VIEW OF COLLECTION OF EXCESS FEES THAN THE PRESCRIBED FEES THE MAXIMUM FEES COLLECTED FROM A SINGLE STUDENT IS 2.50 LAKHS . XII ) THE LD. A.O. AND LD. CIT (A) HA VE FOCUSED A LOT ON THE PETITION FILED BY ONE MR. MANAS RANJAN DAS WHO CLAIMED THAT EXCESS FEE S HAS I.T.A.NO. 467/CTK/2012 7 BEEN COLLECTED AND A FURTHER DEMAND OF 60,000 SHOULD NOT BE PAID BY HIM. IN FACT HE HAD DEPOSITED 1 , 03,000 FOR TWO YEARS AND THE COURT DISPOSED OF HIS PETITION ALLOWING HIM A TRANSFER AFTER PAYING AN ARREAR FEES OF 45,000 MAKING THE TOTAL FEES FOR TWO YEARS AT 1,48,000. XIII ) WITHOUT VERIFYING BOTH THE LD. A.O. AND LD. CIT (A) TOOK A VIEW THAT THE APPELLANT WAS COLLECTING EXCESS FEES BY MISREPRESENTING THE FEES STRUCTURE PRESCRIBED BY GOVERNMENT OF ODISHA WHICH IS ILLEGAL AND BAD IN LAW. 4.1. AS RE GARDS ESTIMATION OF CAPITATION FEES, THE LEARNED COUNSEL OF THE ASSESSEE PERUSED THE OBSERVATION OF THE ASSESSING OFFICER GIVEN IN PARA 6.2 OF HIS ORDER BASING OF HIS REPLY DT. 24.05.2007, THE NUMBER OF MANAGEMENT QUOTA SEATS IN DIFFERENT DISCIPLINES CO MES TO 185. HENCE, AT THE RATE OF 150,000 PER MANAGEMENT QUOTA SEAR, THE TOTAL RECEIPT ON ACCOUNT OF CAPITATION FEE/ DONATION COMES TO 2,77,50,000 ( 1,50,000 X 185). IN ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE THE AMOUNT OF 2,77,50,000 IS HELD AS UNACCOUNTED INCOME OF THE ASSES SEE AND ADDED . ON APPEAL, THE LEARNED CIT(A) OBSERVED IN HIS ORDER IN PARAGRAPH 7.2 AND 7.2.2 AS UNDER : IN PARA 7.2, PAGE 15 OF THE ORDER - I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE FACTS ON RECORD. THE AO HAS ESTIMATED THE CAPITATIO N FEE ON THE BASIS OF INCRIMINATING DOCUMENTS. AS ELABORATELY DISCUSSED BY THE AO RELYING ON SEIZED DOCUMENTS, THERE IS CLEAR EVIDENCE TO THE EFFECT THAT THE APPELLANT HAS RECEIVED CAPITATION FEE IN RESPECT OF MANAGEMENT QUOTA SEAT FOR A.Y. 2006 - 07. THE A PPELLANT BEFORE THE AO TOOK THE PLEA THAT THE EXCESS PAYMENT RECEIVED FROM THE STUDENTS IN RESPECT OF MANAGEMENT QUOTA IS THE FEES FOR THE TOTAL COURSE. HOWEVER, NO FURTHER DETAILS OR EXPLANATION WAS GIVEN. THE NATURE OF ENTRIES AND THE SEIZED DOCUMENTS DO NOT SUPPORT THE PLEA THAT THE RECEIPTS ARE IN RESPECT OF TOTAL COURSE FEES.. IN PARA 7.2.2, PAGE 17 OF THE ORDER - IN VIEW OF THE ABOVE, THE AO IS COMPETENT TO MAKE AN ESTIMATE OF RECEIPT OF CAPITATION FEES SINCE THE APPELLANT SOCIETY COLLECTS CAPITATION FEES AS A MATTER OF RULE IN RESPECT OF MANAGEMENT QUOTA SEAT. THE AO HAS CONSIDERED AN AVERAGE OF 150,000 FOR EACH MANAGEMENT SEAT WHICH IS REASONABLE UNDER THE CIRCUMSTANCES. HOWEVER, THE NUMBER OF I.T.A.NO. 467/CTK/2012 8 MANAGEMENT SEAT IS ONLY 127 IN VIEW OF THE A PPELLANTS SUBMISSION AND AOS REMAND REPORT DT. 23.03.2012. .. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LD. CIT (A)S CONCLUSION IS ON THE BASIS OF HIS NOTING IN PARA 7.2 OF HIS ORDER WHICH IS ONLY A REPETITION OF HIS VIEWS ON WITHDRAWAL OF BENEFIT U/S 11 AND NO REASONING/ EVIDENCE FOR NON ACCOUNTING OF FEES. HE FURTHER SUBMITTED AS UNDER. I ) TO SUBSTANTIATE THE ABOVE CLAIM THE ASSESSING OFFICER HAS REFERRED TO CERTAIN SEIZED BOOK WHEREIN COLLECTION OF FEES HAS BEEN MENTIONED. II ) IT MAY BE MEN TIONED HERE THAT DURING THE COURSE OF HEARING BOTH BEFORE THE LD. CIT (A) AND BEFORE THE LD. A.O. THE APPELLANT HAD FILED THE LEDGER COPIES OF THE FEES RECEIVED FROM THE STUDENTS FOR THE AFORESAID YEAR WHEREIN THE ALLEGED FEES HAS BEEN DULY RECORDED. COPIE S OF THE SAME ENCLOSED IN THE PAPER BOOK AT PAGE NO. 68 TO 87. III ) THE RECONCILIATION STATEMENT OF THE SEIZED MATERIALS AND BOOKS OF ACCOUNTS ALONG WITH EXPLANATION HAS BEEN ENCLOSED IN THE PAPER BOOK AT PAGE NO. 66 & 67. IV ) ALL THE ENTRIES PERTAINING TO A.Y. 200 6 - 07 ARE NOTED IN THE SEIZED RECORD HAS BEEN DULY REFLECTED IN THE LEDGER COPIES. V ) THE LD. A.O. WHILE PASSING THE ORDER HAS MENTIONED THAT THE APPELLANT WAS COLLECTING EXCESS FEES BEYOND THE PRESCRIBED FEES. IN THIS REGARD THE APPELLANT WOULD LIKE TO MENTIO N BEFORE YOUR HONOUR THAT THE FEES STRUCTURE IS DECIDED BY GOVT. OF ORISSA AND IN CASE IT IS ESTABLISHED THAT EXCESS FEES IS BEING COLLECTED, IT WILL TENTAMOUNT TO CANCELLATION OF LICENSE. VI ) IT IS PERTINENT TO MENTION THAT DURING THE COURSE OF HEARING, THE L D. CIT (A) HAD ASKED FOR THE REMAND REPORT WITH REGARD TO THE VERIFICATION OF UNACCOUNTED FEES AMOUNTING TO 1.02 CRORES. THE APPELLANT HAD PRODUCED THE BOOKS OF ACCOUNTS, WHERE IN THE LD. A.O. HAD VERIFIED THE ENTIRE BOOKS OF ACCOUNTS AND WAS SATISFIED A BOUT THE ACCOUNTING OF THE ALLEGED FEES OF 1.02 CRORES AND ALSO THE CAPITATION FEES WHICH ARE ALLEGED TO BE NOT ACCOUNTED FOR. VII ) DURING THE COURSE OF HEARING BEFORE THE LD. CIT (A), THE APPELLANT HAD SUBMITTED THE DETAILS WITH REGARD TO THE FEES ALLEGED TO BE NOT ACCOUNTED AND SUBMITTED THE RECONCILIATION STATEMENT WHEREIN ALL THE IMPUGNED FEES WERE REFLECTED IN THE BOOKS OF ACCOUNTS. VIII ) FURTHER, IT IS ARGUED THAT IN THE ABSENCE OF ANY INCRIMINATING DOCUMENTS AND WITHOUT REJECTING THE BOOKS OF ACCOUNTS, ESTIMA TION I.T.A.NO. 467/CTK/2012 9 IS ILLEGAL AND BAD IN LAW PARTICULARLY IN THE CASE OF SEARCH ASSESSMENT. IX ) WHILE PASSING THE ORDER, THE LD. CIT (A) GAVE JUSTIFICATION FOR ESTIMATION MADE BY THE LD. A.O. WITH REGARD TO THE CAPITATION FEES AND QUOTED SOME JUDICIAL PRONOUNCEMENTS WHICH A RE NOT RELEVANT IN THE CASE OF THE APPELLANT. X ) THE FOLLOWING CASE LAWS ARE REFERRED BY THE LD. CIT (A) FOR ESTIMATING THE CAPITATION FEES : A ) VED PRAKASH VS. CIT (2004) 265 ITR 642 ( P & H) B ) CIT VS. DR. M.K.E. MEMON (2001) 248 ITR 310 ( BOM.) C ) H. M. ESUF ALI 90 ITR 271 ( SC.) D ) RAJNIK & CO. 251 ITR 561 ( A.P.) E ) OVERSEAS CHINESE CUISINE (INDIA) PVT.LTD. VS. ACIT 218 ITR (AT) 80 (BOM) (TM) F ) KHOPADE KISANRAO MANIKRAO VS. ACIT 74 ITD 25 ( PUNE) (TM) XI ) ALL THE CASE LAWS REFERRED BY THE LD. CIT (A) ARE RELETED TO ESTIMATION OF PROFIT WHICH IS NOT THE CASE OF THE APPELLANT. XII ) IN ALL THE AFORESAID CASES, THE BOOKS OF ACCOUNTS OF THE ASSESSES WERE DISBELIEVED AND EVIDENCES WERE FOUND FOR SUPPRESSION OF PROFITS. XIII ) HOWEVER, IN THE CASE OF THE APPELLANT ALL THE ALLEGED FEES COLLECTED ARE DULY REFLECTED IN THE BOOKS OF ACCOUNTS. XIV ) DURING THE COURSE OF HEARING BOTH BEFORE THE LD. A.O. AND LD. CIT (A) THE ABOVE FACT OF REFLECTING THE ALLEGED FEES IN THE BOOKS OF ACCOUNTS WERE PLACED WHICH WERE NOT SERIOUSLY CONSIDERED. XV ) THE ABOVE ALLEGATION IS SUPPORTED BY THE REMAND REPORT COLLECTED BY THE LD. CIT (A) FROM THE LD. AO DURING THE COURSE OF HEARING. A COPY OF THE REMAND REPORT IS ENCLOSED IN THE PAPER BOOK AT PAGE NO. 88 TO 90. ON THESE BASIS, THE LEARNED COUNSEL OF THE ASSESSEE VEHEMENTLY ARGU ED THAT LD. CIT (A) HAD NO BASIS TO CONFIRM THE VIEWS OF THE LD. A.O. IN ESTIMATING INCOME BY WAY OF CAPITATION FEES WHICH WAS NON - EXISTENT . 5. THE LEARNED DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE. SHE SUBMITTED THAT THE SEARCH MATE RIAL AND THE UNDISCLOSED INCOME HAS BEEN CORRELATED BY THE ASSESSING AUTHORITIES INSOFAR AS THE NAME OF CAPITATION HAS TO BE MADE KNOWN TO THE STUDENTS AT THE TIME OF ADMISSION I.T.A.NO. 467/CTK/2012 10 ONLY. THE ASSESSEES CONTENTION THEREFORE IS TO TAKE ADVANTAGE AT A SITUATION W HEN THE POSSIBLE VIEW TAKE BY IT WOULD BE SUPPORTED BY JUDICIAL PRONOUNCEMENTS. THE ASSESSING OFFICER, THEREFORE, RIGHTLY CONSIDERED THAT IT WAS AN AGREED AMOUNT TO BE RECEIVED BY THE ASSESSEE WHEN THE ASSESSEE DID NOT SHOW THE REMAINING AMOUNT RECEIVABLE BY THE ASSESSEE FROM THOSE STUDENTS LATER. THE HONBLE ORISSA HIGH COURT IN THE CA SE OF ONE OF THE STUDENT WHO HAD AGREED TO PAYMENT OF SUCH FEES WAS ALLOWED PART RELIEF THE STUDENT WHO SOUGHT TRANSFER TO JUSTIFY THAT THE FEES RECOVERED FROM STUDENTS UNDE R AN IMPRESSION OF ADMISSION FEES WHEN IT IS CAPITATION FEES TO BE PAID IN INSTALMENTS. THEREFORE, ON THESE FACTS, SHE FULLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) WHEN THE VIOLATION OF SECTION 11 HAS BEEN ESTABLISHED THAT THE AMOUNTS RECEIVED FROM STUDENTS FROM CAPITATION HAS NOT BEEN UTILIZED FOR THE BENEFIT OF THE STUDENTS ON THE BASIS OF SEARCH MATERIAL BROUGHT ON RECORD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT THE ASSESSING OFFICER HAS PROCEEDED TO COMPUTE INCOME UNDER THE PROVISIONS OF SECTION 143(3) WHEN FOR THE IMPUGNED ASSESSMENT YEAR SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 9.8.2005. IT IS NOT THE CASE OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT HAD TO BE MAINTAINED TO JUSTIFY THE INCRIMINATING DOCUMENTS FOUND AT THE TIME OF SEARCH. IT WAS THE CASE OF THE ASSESSING OFFICER TO CORRELATE THE PROCEDURE OF ADMISSION AND CALLING FOR CAPITATION FEES FROM THE STUDENTS ADMITTED WHEN HE TABULATED A SAMPLE SEIZED MATERIAL TO INDICATE THAT THE STUDENTS WERE MADE TO PAY THE ADMISSION FEES OVER AND OVER AGAIN DURING THE TENURE OF THEIR COURSES. THE LEARNED COUNSEL OF THE ASSESSEE HAS EXPLAINED INSOFAR AS THE EXPANSION FROM THE DETAILS OF FEES SHOWN IN THE SEIZED RECORD HAVE BEEN INCORPORATED IN THE BOOKS OF ACCOUNT I.T.A.NO. 467/CTK/2012 11 STOOD UNVERIFIED BY THE ASSESSING OFFICER WHO , DENYING THE EXPLANATION OFFERED BY THE ASSESSEE AT THE TIME OF ASSESSMENT , CONTINUED TO HOLD A VIEW THAT THE INCOME WHICH WOUL D HAVE BEEN RECEIVED LATER ON SHOULD HAVE BEEN ACCOUNTED FOR IN THE IMPUGNED ASSESSMENT YEAR ITSELF THEREFORE ERRED IN BRINGING TO TAX AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE ON THE BASIS OF SEARCH MATERIAL WHEN THE LEARNED CIT(A) PARTLY REDU CED THE SAME INSOFAR AS A HYPOTHETICAL AMOUNT CANNOT BE RECEIVE D AND THAT TOO FROM HYPOTHETICAL NUMBER OF STUDENTS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS BEEN ABLE TO EXPLAIN TO THE HILT THAT THE ADMISSION FEES WAS FOR ADMISSION ON LY IN ACCORDANCE WITH THE SUPREME COURTS DIRECTION AND NOT BECAUSE TEY WERE TO BE GIVEN A NAME AS CAPITATION FEES. THE ASSESSEE DISCLOSED THE SAME IN THE BOOKS OF ACCOUNT WHICH WAS ACCEPTABLE TO THE ASSESSING OFFICER AS NO EFFORT HAS BEEN MADE ON CORRELAT ING THESE HYPOTHETICAL FIGURES WITH THE FIGURES WHICH WERE ACTUALLY AVAILABLE. IN OTHER WORDS HYPOTHETICAL NUMBER OF STUDENTS HA VE BEEN SUBJECT TO HYPOTHETICAL PAYMENT OF FEES AS CAPITATION WHICH AGAIN IS NOT CAPITATION BUT ADMISSION FEES AS A ONETIME PAYM ENT ALLOWED BY THE INSTITUTE TO BE PAID IN INSTALMENT DURING THE DURATION OF THE COURSE OF STUDENTS. WE RATHER FIND THE DECISION OF HONBLE HIGH COURT IN THE CASE OF ONE OF THE STUDENTS HAVING TAKEN UP THE MATTER BEFORE THEM WHO CHOSE TO DIRECT THE STUDENT TO EITHER SEEK TRANSFER AFTER HAVING COMPLETED TWO YEARS FOR THE DEGREE COURSE AND PART RELIEF WAS GRANTED TO THE STUDENT ACKNOWLEDGING THAT THE ADMISSION FEES WAS ONETIME PAYMENT TO BE PAID BY THE STUDENT ON INSTALMENTS. VIOLATION OF SECTION 11 WAS CONSI DERED BY THE PREDECESSOR CIT(A) WHICH NOTED BY THE PRESENT CIT(A) RATHER CLARIFIES THE ISSUES ABUNDANTLY INSOFAR AS THE DIRECTION BY THE TRIBUNAL TO RESTORE REGISTRATION SO GRANTED U/SD.12A WAS GRANTED FOR THE VERY PURPOSE THAT THE FEES RECEIVED FROM THE S TUDENTS WAS TO BE UTILIZED FOR THE I.T.A.NO. 467/CTK/2012 12 BENEFIT OF THE STUDENTS WHICH BY WAY OF REGULAR ASSESSMENT HAS NOT BEEN DENIED BY THE ASSESSING OFFICER BUT ON THE PREMISE THAT THE HYPOTHETICAL FIGURE OF THE ADMISSION FEES IN THE GARB OF CAPITATION FEES HAS BEEN SIPHONE D OFF BY THE ASSESSEE TO INVITE VIOLATION OF THE PROVISIONS OF SECTION 11. IN OTHER WORDS, THE ASSESSING AUTHORITIES HAVE DONE THIS AS A CONSEQUENCE TO THEIR GENERATION OF HYPOTHECATED INCOME. THEREFORE, WE ARE INCLINED TO HOLD THAT AN OPINION ON A HYPOTHE TICAL FIGURE CANNOT BE IMPOSED UPON THE ASSESSEE UNLESS CORROBORATIVE MATERIAL HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT THE FEES SO RECEIVED BY THE ASSESSEE HAVE BEEN UTILIZED IN VIOLATION TO SECTION 11 WHEN THE REGISTRATION U/S.12A IS CONTINUED. IN THIS VIEW OF THE MATTER, WE ARE INCLINED TO HOLD THAT THE SAID SUM CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE MORE SO BY HOLDING THAT THE PROVISIONS OF SECTION 11 HA VE NOT BEEN VIOLATED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 09.11.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ORISSA COMPUTER ACADEMY, PUBASASAN, KAUSALYAGANG, BHYUBANESWAR 751 002 2 / THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, CIRC LE 1(2), BHUBANESWAR . 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 467/CTK/2012 13 APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 06.11.2012 . 2. DATE ON WHICH TH E TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 07.11.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 09.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..