Sri Srinivasa Educational & Charitable Trust , Bangalore V. Assistant Commissioner of Income Tax Central Circle-2(1), Bangalore

ITA 709/BANG/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2363 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-07-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMOD KU MAR SINGH
• Assessee Lawyers: PRASHANTH G S
• Keywords: Rejection of books of accounts; Unexplained expenditure; Depreciation; Rectification of order; Search and seizure; Document seized; Charitable institution; Principle of natural justice; Additional evidence; Validity of assessment; Benefit of exemption; Retraction; Documents seized; Revenue expenditure; Capital expenditure; Set aside
• Section: 69C; 40A(3); 143(3); 142(1); 153A; 12A; 12AA; 201; 264; 64; 131; 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER SN ITA NO. ASST. YEAR APPELLANT RESPONDENT 1 709/BANG/2018 2010- 11 SRI SRINIVASA EDUCATIONAL & CHARITABLE TRUST, NO.619/G, 2 ND BLOCK,. 36 TH CROSS, RAJAJINAGAR, 2 ND BLOCK, BENGALURU-560 010 THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -2(1) BENGALURU. 2 710/BANG/2018 2011- 12 3 711/BANG/2018 2012- 13 4 712/BANG/2018 2013- 14 5 1142//BANG/2018 2008- 09 THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(1) BENGALURU. SRI SRINIVASA EDUCATIONAL & CHARITABLE TRUST, NO.619/G, 2 ND BLOCK,. 36 TH CROSS, RAJAJINAGAR, 2 ND BLOCK, BENGALURU- 560 010 6 1143/BANG/2018 2009- 10 7 1144/BANG/2018 2010- 11 8 1145/BANG/2018 2011- 12 9 1146/BANG/2018 2012- 13 10 1147/BANG/2018 2013- 14 ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 2 OF 73 11 1148/BANG/2018 2014- 15 12 CO NO. 88 /BANG/2018 (IN ITA NO.1142 /BANG/2018) 2008- 09 SRI SRINIVASA EDUCATIONAL & CHARITABLE TRUST, NO.619/G, 2 ND BLOCK,. 36 TH CROSS, RAJAJINAGAR, 2 ND BLOCK, BENGALURU-560 010 THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -2(1) BENGALURU. 13 CO NO. 89 /BANG/2018 (IN ITA NO.1143 /BANG/2018) 2009- 10 14 CO NO. 90 /BANG/2018 (IN ITA NO.1148 /BANG/2018) 2014- 15 APPELLANT BY : SHRI PRASHANTH G.S, C.A RESPONDENT BY : SHRI PRAMOD KUMAR SINGH, CIT (DR) DATE OF HEARING : 11.06.2019 DATE OF PRONOUNCEMENT : 04.09.2019 O R D E R PER BENCH:- THE ASSESSEE HAS FILED APPEALS FOR ASSESSMENT YEAR S 2010-11 TO 2013-14 AND THE REVENUE HAS FILED APPEALS FOR AS SESSMENT YEARS 2008-09 TO 2014-15. THE ASSESSEE HAS FILED CROSS O BJECTIONS FOR ASSESSMENT YEARS 2008-09, 2009-10 AND 2014-15. ALL THESE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER DATED 17-02-2016 PASSED BY LD CIT(A)-11, BENGALURU. THE GROUNDS URG ED IN THESE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 3 OF 73 APPEALS ARISE OUT OF COMMON SET OF FACTS. HENCE AL L THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER, FOR THE SAKE OF CONVENIENCE 2. AT THE TIME OF HEARING, THE LD A.R DID NOT P RESS THE CROSS OBJECTIONS AND ACCORDINGLY ALL THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. IN ALL THE APPEALS FILED BY THE ASSESSEE, THE GROUNDS NUMBERED AS 7 TO 9(B) REL ATE TO CERTAIN LEGAL ISSUES. AT THE TIME OF HEARING, THE LD A.R D ID NOT PRESS THOSE GROUNDS. ACCORDINGLY, THOSE GROUNDS ARE ALSO DISMI SSED AS NOT PRESSED. THE GROUNDS NUMBERED AS 10 & 11 IN ALL TH E APPEALS OF THE ASSESSEE RELATE TO CHARGING OF INTEREST, WHICH ARE CONSEQUENTIAL IN NATURE. THE GROUND NOS.1, 12 AND 13 ARE GENERAL IN NATURE. THE REMAINING GROUNDS URGED BY THE ASSESSEE RELATE TO THE FOLLOWING ADDITIONS SUSTAINED BY LD CIT(A):- (A) REJECTION OF CLAIM TO EXCLUDE INCOME OFFERED BY THE ASSESSEE IN THE STATEMENT TAKEN U/S 132(4) FOR ASST. YEAR 2010-11 - RS.4,00,00,000/- ASST. YEAR 2011-12 - RS.6,00,00,000/- ASST. YEAR 2012-13 - RS.7,50,00,000/- ASST. YEAR 2013-14 - RS.7,50,00,000/- (B) DIRECTION OF THE LD CIT(A) TO DISALLOW DEPRECI ATION @ 10% OF THE ABOVE SAID AMOUNTS. 3. IN THE APPEALS FILED BY THE REVENUE, THE COMMON ISSUE URGED IN ALL THE YEARS IS - WHETHER THE LD CIT(A) WAS JUS TIFIED INHOLDING THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11 O F THE ACT, THUS REVERSING THE DECISION OF THE ASSESSING OFFICER IN REJECTING THE CLAIM FOR SAID EXEMPTION. FOLLOWING GROUNDS HAVE BEEN URG ED IN ALL THE YEARS IN RESPECT OF ABOVE SAID ISSUE:- ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 4 OF 73 (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN GRANTING BENEFIT OF EXEMPTION U/S 1 1 TO THE ASSESSEE EVEN THOUGH THE TRUST APPLIED ITS INCOME FOR PURPOS ES OTHER THAN THOSE ADMISSIBLE U/S 11(2)(B) READ WITH SECTION 11( 5) BY DIVERTING TO ITS TRUSTEES AND OTHER SPECIFIED PERSONS. (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE CIT(A) ERRED IN GRANTING BENEFIT OF EXEMPTION U/S 1 1 TO THE ASSESSEE EVEN THOUGH THE TRUST UTILIZED ITS INCOME IN CONTRA VENTION OF THE PROVISIONS OF SECTION 13(1)(C) FOR THE BENEFIT OF T HE PERSONS SPECIFIED IN SECTION 13(3) IN SUPPORT OF WHICH THERE ARE CLEA R DOCUMENTARY EVIDENCES AVAILABLE IN THE SEIZED MATERIAL AS ALSO REFERRED TO IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER. (III) WHETHER IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE CIT(A) ERRED IN IGNORING THE NOTING IN THE SEIZED M ATERIAL AND ALSO THE ADMISSION OF PRINCIPAL PERSON U/S 132(4) WHICH CLEARLY ESTABLISHED THE FACT THAT THERE IS NO DOCUMENTARY E VIDENCES WITH THE ASSESSEE TRUST TO CLAIM THAT THE INCOME GENERAT ED IN THE NAME OF COLLECTION OF CAPITATION/DEVELOPMENT FEE HAS BEE N APPLIED FOR ITS OBJECT. (IV) WHETHER IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE CIT(A) IS CORRECT IN GRANTING EXEMPTION U/S 11 EVEN THOUGH ON ONE HAND HE SUSTAINED A TOTAL ADDITION OF RS.25 CRORES FOR VARIOUS YEARS ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE T O PROVE GENUINENESS OF THE EXPENDITURE MADE IN CASH FOR WHI CH ALSO NO EVIDENCES PRODUCED BY THE ASSESSEE TO PROVE THAT TH E SAME WERE INCURRED TOWARDS APPLICATION OF ITS INCOME ON OBJEC TS OF THE TRUST. (V) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) FAILED TO IGNORE THE FACT THAT THE ASSESSEE TRUST, AS EVIDENCED FROM THE SEIZED DOCUMENTS RELATING TO COLLECTION OF CAPITATION/DEVELOPMENT FEES, PAID COMMISSION @ RS.1 ,75,000 TO AN AGENT FOR SOLICITING STUDENTS WHICH IS SURELY NOT A N OBJECT OF THE TRUST AND BY DOING SO, THE ASSESSEE TRUST INDULGED INTO A COMMERCIAL ACTIVITY. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 5 OF 73 (VI) FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING WITH THE PLEA THAT THE ORDERS O F LD CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE REVENUE HAS ALSO RAISED SPECIFIC ISSUES I N CERTAIN YEARS AS DETAILED BELOW:- ASSESSMENT YEAR: 2012-13 :- (A) WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.703.00 LAKHS AND RS.554.50 LAKHS MAD E FOR VIOLATION OF PROVISIONS OF SEC.13(1)(C) OF THE ACT. *** (B) ADDITION OF RS.993.00 LAKHS RELATING TO PAYMENT MA DE FOR NON-SPECIFIED PURPOSES IN CASH TO CONTRACTOR, OTHER RELATED CONCERNS, PROMOTERS ETC. ASSESSMENT YEAR : 2013-14 :- (A) WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.703.00 LAKHS AND RS.554.50 LAKHS MAD E FOR VIOLATION OF PROVISIONS OF SEC.13(1)(C) OF THE ACT. (B) ADDITION OF RS.4333.00 LAKHS RELATING TO PAYMENT M ADE FOR NON-SPECIFIED PURPOSES IN CASH TO CONTRACTOR, O THER RELATED CONCERNS, PROMOTERS ETC. ASSESSMENT YEAR : 2014-15 :- (A) WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.703.00 LAKHS AND RS.554.50 LAKHS MAD E FOR VIOLATION OF PROVISIONS OF SEC.13(1)(C) OF THE ACT. *** (B) ADDITION OF RS.476.00 LAKHS RELATING TO PAYMENT MA DE FOR NON-SPECIFIED PURPOSES IN CASH TO CONTRACTOR, OTHER RELATED CONCERNS, PROMOTERS ETC. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 6 OF 73 *** THESE TWO ADDITIONS OF RS.703.00 LAKHS AND RS.5 54.50 LAKHS HAVE BEEN MADE IN AY 2013-14 ONLY. HOWEVER, THE RE VENUE HAS INADVERTENTLY RAISED THE ABOVE SAID ISSUES IN AY 20 12-13 AND 2014- 15 ALSO. HENCE THE GROUND RELATING TO THE ABOVE SAI D ADDITIONS RAISED IN AY 2012-13 AND 2014-15 HAS BEEN DISMISSED BY LD CIT(A) BY OBSERVING THAT IT DOES NOT ARISE OUT OF ASSESSME NT ORDER. FOR THE VERY SAME REASON, WE DISMISS THE SAID GROUND IN AY 2012-13 AND 2014-15. 5. THE FACTS RELATING TO THE CASE ARE STATED I N BRIEF. THE ASSESSEE HEREIN IS A COMPANY REGISTERED U/S 25 OF THE COMPAN IES ACT. IT IS REGISTERED AS A CHARITABLE INSTITUTION U/S 12A OF T HE INCOME TAX ACT BY DIT (EXEMPTION), BANGALORE VIDE HIS ORDER DATED 01-04-2002 IN FILE NO. DIT(E)/12A/VOL.III/S-1218/W-2/02-03. IT RU NS EDUCATIONAL INSTITUTIONS INCLUDING AN ENGINEERING COLLEGE BY NA ME SAPTHAGIRI COLLEGE OF ENGINEERING AND A MEDICAL COLLEGE BY NAM E SAPTHAGIRI INSTITUTE OF MEDICAL SCIENCE AND RESEARCH CENTRE IN BANGALORE. 6. THE REVENUE CARRIED OUT SEARCH AND SEIZURE O PERATIONS IN THE HANDS OF THE ASSESSEE ON 18-07-2013. CONSEQUENT TH ERETO, THE ASSESSMENTS FOR ASSESSMENT YEARS 2008-09 TO 2013-14 WERE COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT. THE A SSESSMENT OF THE ASSESSMENT YEAR 2014-15, BEING THE YEAR OF SEARCH, WAS COMPLETED U/S 143(3) OF THE ACT. 7. DURING THE COURSE OF SEARCH OPERATIONS, THE SEARCH OFFICIALS NOTICED SEVERAL INSTANCES OF PAYMENTS TO CONTRACTOR S, RELATED ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 7 OF 73 CONCERNS, PROMOTERS ETC., WHICH HAVE BEEN MADE BY W AY OF CASH. ACCORDING TO THE AO, THE SEARCH OFFICIALS HAVE CONS IDERED THESE PAYMENTS AS AMOUNT SPENT FOR NON-SPECIFIED PURPOSES , I.E., NOT TOWARDS ATTAINMENT OF OBJECTS OF TRUST. THE YEAR-W ISE BREAK-UP OF SUCH PAYMENTS HAVE BEEN QUANTIFIED AS UNDER BY THE AO:- ASSESSMENT YEAR AMOUNT 2012-13 9,93,00,000 2013-14 43,33,00,000 2014-15 4,76,00,000 ------------------ 58,02,00,000 ============ THE ASSESSEE WAS ASKED TO CLARIFY THE NATURE AND PU RPOSE OF ABOVE PAYMENTS. THE ASSESSEE SUBMITTED THAT THESE PAYMEN TS HAVE BEEN MADE TOWARDS CONSTRUCTION AND OTHER EXPENSES PERTAI NING TO COLLEGE ONLY. HOWEVER, IN THE STATEMENTS TAKEN U/S 132(4) OF THE ACT, THE CHAIRMAN OF THE ASSESSEE INSTITUTION STATED THAT HE MAY NOT BE ABLE TO PROVE SATISFACTORILY THE UTILISATION OF FUNDS WH ICH HAVE BEEN MADE IN CASH AND ACCORDINGLY ADMITTED THAT AN AMOUN T OF RS.25.00 CRORES MAY BE DISALLOWED FROM THE AMOUNT OF APPLIC ATION OF INCOME IN ASSESSMENT YEARS 2010-11 TO 2013-14 AS D ETAILED BELOW:- ASSESSMENT YEARS AMOUNT 2010-11 4,00,00,000 2011-12 6,00,00,000 2012-13 7,50,00,000 2013-14 7,50,00,000 ---------------- 25,00,00,000 ============ CONSEQUENTLY, THE ASSESSEE AGREED FOR DISALLOWANCE OF ABOVE SAID AMOUNT FROM THE CLAIM OF APPLICATION OF INCOME FO R THE PURPOSES ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 8 OF 73 OF SEC.11(1)(A) OF THE ACT, VIDE ITS LETTER DATED 1 3.09.2013. THE ASSESSEE ALSO FURNISHED TO THE AO A REVISED COMPUTA TION OF TOTAL INCOME ON 14.12.2015EXCLUDING THE ABOVE AMOUNTS FRO M THE CLAIM OF APPLICATION OF INCOMEALONGWITHFOLLOWING EXPLAN ATIONS:- THE TRUST HAS INCURRED CERTAIN EXPENDITURES TOWARD S CONSTRUCTION OF BUILDING AND HAS MADE CASH PAYMENTS TO CONTRACTORS AND OTHER SUPPLIERS. IN THE SEARCH PROCEEDINGS, ON THESE FINDINGS OF THE DEPARTMENT, W E HAVE AGREED FOR THE DISALLOWANCE OF SUM OF RS.25.00 CRORES, OUT OF APPLICATION OF FUNDS OF THE TRUST IN THE CAPITAL AND OTHER RELATED EXPENDITURES. HOWEVER, WE WOULD LIKE TO FURTHER STATE THAT, THE ABOVE APPLICATION OF FUNDS HAVE BEEN ACTUALLY INCURRED TOWARDS CONSTRUCTION OF MEDICAL COLLEGE BUILDING AND THE SAME IS RUN BY THE TRUST AND THE PAYMENT HAS BEEN MADE FOR THE SAME FOR VARIOUS PERSONS. THE TRUST IS MANAGING MEDICAL, ENGINEERING COLLEGES AND HOSPITAL AS PER THE OBJECTS OF THE TRU ST IN THE SAID PREMISES THE ABOVE SAID DISALLOWANCE HAS BEEN ACCEPTED BY THE ASSESSEE, SINCE AT THE TIME OF SEARCH, THEY COU LD NOT PROVIDE ALL THE RELATED EVIDENCES IN CONNECTION WITH THE EXPENDITURE MADE FOR CONSTRUCTION OF THE COLLEGE AND HOSPITAL. WE ONCE AGAIN REITERATE THAT THE ABOVE EXPENDITURES ARE ACTUALLY SPENT BY THE ASSESSEE AND RECORDED THE SAME IN THE BOOKS OF ACCOUNTS OF THE TRUST MAINTAINED IN THE REGULAR COU RSE OF OPERATIONS AND HAS AGREED FOR DISALLOWANCE FOR T HE SAKE OF BUYING PEACE WITH THE DEPARTMENT. WE ALSO STATE THAT, THERE IS NO VIOLATION OF THE OB JECTS OF THE TRUST. HENCE THE QUESTION OF WITHDRAWING THE EXEMPTION U/S.11 OF THE INCOME TAX ACT, 1961 TO THE TRUST DOES NOT ARISE AND REQUEST YOU TO DROP THE PROPOSAL. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 9 OF 73 WITH REGARD TO PROPOSAL FOR DISALLOWANCE OF APPLICA TION OF FUNDS FOR THE EARLIER A.YS. 2008-09 AND 2009-10, SIMILAR TO OUR ACCEPTANCE FOR A.YS.2010-11 TO2013-1 4, WE WOULD LIKE TO STATE THAT, THE TRUST HAS STARTED ITS MEDICAL COLLEGE AND HOSPITAL ONLY FROM THE A.Y 2010 - 11 ONWARDS. EARLIER TO THAT, THE TRUST WAS CARRYING ON THE OBJECT OF PROMOTING EDUCATION BY WAY RUNNING ENGINEERING COLLEGE ONLY. THE TRUST HAS MAINTAINED PROPER BOOKS OF ACCOUNTS IN THE REGULAR COURSE OF I TS OPERATIONS ALONG WITH ALL OTHER COMPLIANCES LIKE GETTING THEIR BOOKS OF ACCOUNTS AUDITED AND FILING OF INCOME TAX RETURNS ON OR BEFORE THE PRESCRIBED DUE DATES AS PER THE PROVISIONS OF INCOME TAX ACT, 1961 . IN LIGHT OF THE ABOVE, THE PROPOSED DISALLOWANCE OF THE CONSTRUCTION EXPENSES FOR EARLIER YEARS ALSO DOES N OT ARISE AND REQUEST YOU TO DROP THE PROPOSAL AND CONCLUDE THE ASSESSMENT. 8. THE AO TOOK THE VIEW THAT THE FINDINGS REACHE D DURING THE COURSE OF SEARCH OPERATIONS AND THE ADMISSION OF TH E ASSESSEE THAT IT WAS NOT IN A POSITION TO PROVE EXPENSES TO THE T UNE OF RS.25.00 CRORES FOR VARIOUS ASSESSMENT YEARS PROVE THAT THE FUNDS RECEIVED BY THE ASSESSEE WERE NOT UTILIZED FOR THE OBJECTS O F THE TRUST, WHICH WAS IN CLEAR VIOLATION OF THE PROVISIONS OF SEC.11 OF THE ACT. ACCORDINGLY THE AO DECIDED TO ADD THE AMOUNT OF RS. 58.02 CRORES AS INCOME OF THE ASSESSEE IN THE FOLLOWING YEARS:- ASSESSMENT YEAR AMOUNT 2012-13 9,93,00,000 2013-14 43,33,00,000 2014-15 4,76,00,000 ------------------ 58,02,00,000 ============ ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 10 OF 73 SINCE THE AO ADDED THE ABOVE SAID AMOUNT OF RS.58.0 2 CRORES TO THE TOTAL INCOME IN THE THREE YEARS CITED ABOVE RES PECTIVELY, THERE WAS NO NECESSITY TO MAKE ADDITION OF RS.25.00 CRORE S VOLUNTARILY OFFERED BY THE ASSESSEE IN AY 2010-11 TO 2013-14, S INCE IT FORMED PART OF THE ABOVE SAID AMOUNT OF RS.58.02 CRORES. IT IS ALSO PERTINENT TO NOTE THAT THE AO MADE THE ABOVE SAID A DDITIONS U/S 69C OF THE ACT AS UNEXPLAINED EXPENDITURE. 9. THE AO NOTICED THAT THE ASSESSEE HAS PAID FOL LOWING AMOUNT AS UNSECURED LOANS TO THE FOLLOWING RELATED PERSONS IN THE YEAR RELEVANT TO AY 2013-14:- SRINIVASA ENTERPRISES - 133 LAKHS SRI G DAYANAND - 570 LAKHS --------- 703 LAKHS ===== THE AO TOOK THE VIEW THAT THE ABOVE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE IN VIOLATION OF SEC.13(1)(C) R.W.S. 13 (3) OF THE ACT. THE AO ALSO NOTICED THAT THE ASSESSEE HAS WITHDRAWN CAS H FROM BANK TO MAKE PAYMENTS TO THE FOLLOWING PERSONS, WHICH WAS C ONSIDERED BY HIM AS VIOLATION OF THE OBJECTS OF THE TRUST:- SRINIVASA ENTERPRISES 248.00 LAKHS SRI G DAYANAND 291.50 LAKHS HOTEL SOLITAIRE 15.00 LAKHS --------- 554.50 LAKHS ======= ACCORDINGLY, THE AO CONSIDERED ABOVE PAYMENTS ALSO AS THE PAYMENTS MADE IN VIOLATION OF SEC.13(1)(C) R.W.S 13 (3) OF THE ACT. ACCORDINGLY, HE ASSESSED BOTH THE AMOUNTS CITED ABO VE, VIZ., RS.703 ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 11 OF 73 LAKHS AND RS.554.50 LAKHS AS INCOME OF THE ASSESSEE IN AY 2013- 14. 10. THE AO NOTICED THAT THE ASSESSEE HAS RECEIVE D DONATIONS UNDER THE NAME OF DEVELOPMENT FEES FROM VARIOUS P ERSONS DURING THE YEARS RELEVANT TO AY 2008-09 TO 2014-15 AND IT WAS OVER AND ABOVE THE FEE PRESCRIBED BY THE GOVERNMENT OF KARNA TAKA. THE AO TOOK THE VIEW THAT THE COLLECTION OF DEVELOPMENT FE ES OVER AND ABOVE THE PRESCRIBED FEE WOULD SHOW THAT THE ASSESSEE IS ENGAGED IN NON- CHARITABLE ACTIVITIES IN THE NAME OF IMPARTING EDUC ATION TO THE SOCIETY AND WOULD HAVE A NEGATIVE EFFECT ON THE CHA RITABLE STATUS OF THE ORGANIZATION. 11. THE AO ALSO REFERRED TO A STATEMENT TAKEN U/ S 131 OF THE ACT FROM A PERSON NAMED SRI K.J.PRAMOD, WHO CLAIMED TO HAVE ACTED AS COUNSELLOR FOR SAPTHAGIRI MEDICAL COLLEGE. IN THE STATEMENT HE HAD SUBMITTED THAT THE ASSESSEE HAS COLLECTED CAPITATIO N OF FEE OF RS.40 LAKHS TO RS.50 LAKHS. THE COLLECTION OF AMOUNTS OV ER AND ABOVE THE PRESCRIBED FEE WAS ADMITTED BY SHRI SHIVARAME GOWDA , ADMINISTRATIVE OFFICER OF THE ASSESSEE. FURTHER, T HE AO WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO FURNISH EVIDEN CES FOR COLLECTION OF DEVELOPMENT FEE, EXCEPT FURNISHING THE NAME AND ADDRESS OF THE PURPORTED DONORS/PERSONS WHO GAVE DEVELOPMENT FEES. HENCE, THE ASSESSING OFFICER TREATED THE SAID DONATION COLLECT IONS AS UNEXPLAINED RECEIPTSTAXABLE UNDER THE ACT. ACCORD INGLY, HE ADDED THE SAME IN ALL THE YEARS TO THE TOTAL INCOME OF TH E ASSESSEE IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. HOW EVER, HE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 12 OF 73 DELETED THE SAID ADDITIONS IN THE RECTIFICATION ORD ER PASSED U/S 154 OF THE ACT ON NOTICING THAT THE ASSESSEE HAS ALREAD Y DISCLOSED THE SAME AS ITS RECEIPTS. 12. SINCE THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS COLLECTED CAPITATION FEEUNDER THE NAME OF DE VELOPMENT FEES OVER AND ABOVE NOTIFIED FEES AND FURTHER, SINCE THE ASSESSEE HAS ENGAGED AGENTS FOR SOLICITING THE STUDENTS FOR ADMI SSION IN ITS INSTITUTIONS, THE AO TOOK THE VIEW THAT THESE ACTIV ITIES ARE NOT CHARITABLE IN NATURE. HE TOOK SUPPORT OF FOLLOWING DECISIONS TO HOLD THAT THE COLLECTION OF CAPITATION FEE IS NOT A CHAR ITABLE ACTIVITY:- A. MISS MOHINI JAIN VS. STATE OF KARNATAKA (1992)( 2 SCC 666) B. ISLAMIC ACADEMY OF EDUCATION VS. STATE OF KARNA TAKA (2003)(6 SCC 697) ACCORDINGLY, HE TOOK THE VIEW THAT THE COLLECTION O F CAPITATION FEE IS AGAINST CONSTITUTIONAL SCHEME AND PROHIBITED BY STA TE ENACTMENT. FURTHER, AS DISCUSSED IN THE EARLIER PARAGRAPHS, TH E AO HAD HELD THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SE C.13(1)(C) R.W.S 13(3) OF THE ACT. ACCORDINGLY, THE AO HELD THAT THE ASSESSEE COULD NOT BE CONSIDERED AS A CHARITABLE INSTITUTION AS PE R THE PROVISIONS OF INCOME TAX ACT. ACCORDINGLY, HE HELD THAT THE ASSES SEE IS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. IN THIS REGARD, HE ALSO TOOK SUPPORT OF THE DECISION RENDERED BY HYDERABAD BENCH OF ITAT IN THE CASE OF VODITHALA EDUCATION SOCIETY VS. ADIT (2008)(20 SOT 353). ACCORDINGLY, THE AO DID NOT ALLOW EXEMPTION U/S 11 OF THE ACT IN ALL THE YEARS UNDER CONSIDERATION. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 13 OF 73 13. BEFORE LD CIT(A), THE ASSESSEE CHALLENGED T HE VALIDITY OF SEARCH, VALIDITY OF ASSESSMENTS DONE U/S 153A OF TH E ACT AND THE VALIDITY OF APPROVAL GRANTED FOR THE ASSESSMENT. T HE LD CIT(A) REJECTED ALL THOSE LEGAL GROUNDS. HOWEVER, THE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THE DENIAL OF EXEMPTION U/S 11 OF THE ACT IS NOT JUSTIFIED. 14. WITH REGARD TO THE ADDITION OF RS.993.00 LA KHS, RS.4333.00 LAKHS AND RS.476 LAKHS MADE IN AY 2012-13 TO 2014-1 5 RESPECTIVELY, WHICH AGGREGATED TO RS.58.02 CRORES, BEING THE PAYMENTS MADE IN CASH AND NOT PROPERLY SUPPORTED BY THE VOUCHERS, THE LD CIT(A) EXPRESSED THE VIEW THAT THE ABOVE SAID PAYMENTS HAVE BEEN MADE IN CONNECTION WITH CONSTRUC TION OF BUILDINGS ONLY. HE ALSO OBSERVED THAT THE AO HAS O NLY CONSIDERED THE STATEMENT GIVEN BY THE MANAGING DIRECTOR DURING SEARCH, WHICH REVOLVED AROUND THE CASH SPENT ON CONSTRUCTION ONLY . THE LD CIT(A) NOTICED THAT THE STATEMENT SO RECORDED DOES NOT SHO W THAT THE MONEY WAS SPENT FOR ANY OTHER PURPOSE OTHER THAN CO NSTRUCTION ACTIVITIES.HE ALSO NOTICED THAT THE AO HAS ALSO NOT BROUGHT ON RECORD ANY MATERIAL IN ORDER TO SHOW THAT THE SAID AMOUNTS HAVE BEEN SPENT FOR ANY OTHER PURPOSE. THE LD CIT(A) AL SO NOTICED THAT THE ABOVE SAID ADDITIONS MADE IN THE THREE YEARS ME NTIONED ABOVE DID NOT TALLY WITH THE ACTUAL EXPENDITURE INCURRED IN CONSTRUCTION OF BUILDINGSIN THE RESPECTIVE YEARS AS HIGHLIGHTED BY HIM AS UNDER:- ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 14 OF 73 ASST. YEAR ADDITIONS MADE SPENT ON BUILDING WORK IN PROGRESS BY AO AS PER BALANCE SHEET 2012-13 9,93,00,000 59,86,33,201 5,18,36,069 2013-14 43,33,00,000 10,43,89,317 8,78,50,636 2014-15 4,76,00,000 18,62,46,418 2,44,75,837 THE LD CIT(A) NOTICED THAT THE AMOUNT SPENT ON BUIL DINGS IN THE YEAR RELEVANT TO AY 2013-14 WAS ONLY RS.1922 LAKHS (10.43 + 8.79), WHEREAS THE AO HAS MADE AN ADDITION OF RS.4333 LAKH S. HENCE THE LD CIT(A) EXPRESSED THE VIEW THAT THE AO SHOULD HAV E IDENTIFIED THE EXPENSES, WHICH WERE INCURRED IN CASH AND FOR WHICH NO VOUCHER WAS PRODUCED. ACCORDINGLY, THE LD CIT(A) OPINED TH AT THE AO COULD NOT HAVE MADE THESE ADDITIONS WITHOUT POINTING OUT THE VIOLATION OF PROVISIONS OF THE ACT IN RESPECT OF ANY PARTICULAR ITEM OF EXPENDITURE. ACCORDINGLY, THE LD CIT(A) DELETED TH E ABOVE SAID ADDITIONS. 15. THE LD CIT(A), ON THE CONTRARY, EXPRESSED T HE VIEW THAT THE VOLUNTARY OFFER OF RS.25.00 CRORES MADE BY THE ASSE SSEE SHOULD BE SUSTAINED. HE EXPRESSED THE VIEW THAT THE STATEMENT WAS MADE VOLUNTARILY BY THE ASSESSEE AND HENCE THERE IS NO R EASON AS TO WHY SUCH A STATEMENT SHOULD NOT BE RELIED UPON BY THE A O. THE LD CIT(A) TOOK SUPPORT OF FOLLOWING DECISION IN THIS R EGARD:- (A) CIT VS. O. ABDUL RAZAK (2013)(350 ITR 071)(KE R) (B) BHAGIRATH AGGARWAL VS. CIT (2013)(351 ITR 014 3)(DEL) ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 15 OF 73 BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT THE A DDITIONS WERE INADVERTENTLY AGREED BY ITS TRUSTEE ON A MISTAKEN N OTION ON BOTH FACTS AND LAW. HOWEVER, THE LD CIT(A) REJECTED THE SAME BY OBSERVING THAT THE ASSESSEE HAS NOT RETRACTED FROM ITS STATEMENT AND BY MAKING SUCH A VOLUNTARY OFFER, THE ASSESSEE HAS ESTOPPED THE AO FROM PROBING THE MATTER FURTHER. ACCORDINGL Y, THE LD CIT(A) SUSTAINED ADDITION TO THE EXTENT OF RS.25.00 CRORES AS PER THE VOLUNTARY OFFER MADE BY THE ASSESSEE IN AGGREGATE, WHICH WAS SPREAD BETWEEN ASSESSMENT YEARS 2010-11 TO 2013-14. 16. THE LD CIT(A) FURTHER EXPRESSED THE VIEW TH AT THE ABOVE SAID ADDITION OF RS.25.00 CRORES REPRESENT EXPENDITURE F OR WHICH NO BILL/VOUCHER WAS PRODUCED, IN WHICH CASE IT MAY ALS O BE PRESUMED THAT THE ABOVE SAID AMOUNTARE IN THE NATURE OF INFL ATED EXPENSES OR AMOUNT WHICH WAS NOT SPENT ON CONSTRUCTION OF BUILD ING AT ALL. ACCORDINGLY, THE LD CIT(A) EXPRESSED THE VIEW THAT THE ASSESSEE SHOULD NOT BE ALLOWED DEPRECIATION ON THE ABOVE SAI D AMOUNT OF RS.25.00 CRORES. ACCORDINGLY, HE DIRECTED THE AO T O DISALLOW DEPRECIATION @ 10% ON THE ABOVE SAID AMOUNT OF RS.2 5.00 CRORES IN VARIOUS YEARS. 17. THE LD CIT(A) ALSO EXPRESSED THE VIEW THAT THE ABOVE SAID AMOUNT OF RS.25.00 CRORES IS LIABLE TO TAXED AS MAX IMUM MARGINAL RATE, SINCE THE SAME IS NOT CONSIDERED AS APPLICATI ON OF INCOME. 18. WITH REGARD TO THE ADDITION OF RS.703.99 LAK HS, THE ASSESSEE FURNISHED EVIDENCES FROM SEIZED RECORDS ITSELF IN O RDER TO SHOW THAT ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 16 OF 73 THE SAID TRANSACTIONS DO NOT BELONG TO IT. THE SEI ZED RECORD SHOWED THAT THESE TRANSACTIONS WERE ENTERED BETWEEN HOTEL SOLITAIRE (A CONCERN BELONGING TO THE TRUSTEES) AND OTHER PERSON S. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD STATED BEFO RE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THESE TRA NSACTIONS REPRESENT REPAYMENT OF LOAN TAKEN BY IT FROM M/S SR INIVASA ENTERPRISES AND SHRI G DAYANAD. SINCE THERE IS CHA NGE IN EXPLANATIONS, THE LD CIT(A) SOUGHT CLARIFICATIONS F ROM THE ASSESSEE. THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAD EARLIE R OFFERED THE EXPLANATIONS WITHOUT EXAMINING THE SEIZED MATERIALS , I.E., IT WAS EXPLAINED ON MISTAKEN NOTION AND ALSO AS A POSSIBLE SCENARIO. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE COULD ASCER TAIN THE ACTUAL NATURE OF TRANSACTIONS AFTER EXAMINING THE SEIZED M ATERIALS. THE LD CIT(A), ACCORDINGLY, TOOK THE VIEW THAT THE EXPLANA TIONS NOW FURNISHED BEFORE HIM ARE PROPER AND ARE ALSO BASED ON SUPPORTING DOCUMENTS. ACCORDINGLY, HE DELETED THE ADDITION OF RS.703.99 LAKHS MADE IN AY 2013-14. 18. WITH REGARD TO THE ADDITION OF RS.554.50 LAK HS, THE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THE A O HAS MADE THIS ADDITION ON SURMISES AND SUSPICION WITHOUT BRINGING ANY SUPPORTING MATERIAL. ACCORDINGLY HE DELETED THIS A DDITION ALSO. 19. AGGRIEVED BY THE ORDERS PASSED BY LD CIT(A) , BOTH THE PARTIES ARE IN APPEAL BEFORE US ON THE ISSUES NARRATED EARL IER. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 17 OF 73 20. THE LD D.R SUBMITTED THAT THE LD CIT(A) WA S NOT JUSTIFIED IN REVERSING THE DECISION OF THE AO AND ALLOWING EXEMP TION U/S 11 OF THE ACT. HE SUBMITTED THAT THE SEARCH ACTION HAS S HOWN THAT THE ASSESSEE HAS NOT APPLIED ITS INCOME FOR THE OBJECTS OF THE TRUST. WHEN THIS FACT WAS CONFRONTED BY THE SEARCH TEAM, T HE ASSESSEE HAS AGREED FOR ADDITION OF RS.25.00 CRORES. FURTHER, T HE AO HAS ALSO NOTICED THAT THE ASSESSEE HAS DIVERTED FUNDS IN VIO LATION OF SEC.13(1)(C) R.W.S. 13(3) OF THE ACT. THE AO HAS A LSO NOTICED THAT THE ASSESSEE HAS COLLECTED CAPITATION FEE UNDER THE NAM E OF DEVELOPMENT FEE, WHICH WAS IN VIOLATION OF CONSTITU TIONAL SCHEME. COLLECTION OF CAPITATION FEE HAS BEEN HELD TO BE NO N-CHARITABLE ACTIVITY. IN VIEW OF THE ABOVE CUMULATIVE FACTS, T HE AO HAS REJECTED THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 OF THE ACT. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE LD CIT(A ) WAS NOT JUSTIFIED IN ALLOWING EXEMPTION U/S 11 OF THE ACT T O THE ASSESSEE. 21. THE LD D.R FURTHER SUBMITTED THAT THE ASSESS ING OFFICER HAS MADE ADDITION OF RS.58.02 CRORES IN AGGREGATE IN AY 2012-13 TO 2014-15, SINCE THE ASSESSEE COULD NOT PROVE THE APP LICATION OF INCOME OF THE ABOVE SAID AMOUNT BEFORE THE SEARCH O FFICIALS AND ALSO BEFORE THE ASSESSING OFFICER. THE PAYMENTS HAVE BE EN MADE BY WAY OF CASH, WHICH IS NOT SUSCEPTIBLE FOR VERIFICATION. FURTHER THE ASSESSEE DID NOT MAINTAIN PROPER VOUCHERS ALSO FOR THE ABOVE SAID PAYMENTS. HENCE THE AO HAS TREATED THE ABOVE SAID AMOUNT AS APPLICATION OF INCOME FOR NON-SPECIFIED PURPOSES AN D ACCORDINGLY ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. HE SUBMITTED THAT THE LD CIT(A) HAS DELETED THE ABOVE SAID ADDIT IONS BY MAKING ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 18 OF 73 GENERAL OBSERVATIONS, I.E., IGNORING THE FINDINGS G IVEN BY SEARCH OFFICIALS AND FINDING FAULT WITH THE ACTION OF THE ASSESSING OFFICER. 22. THE LD D.R FURTHER SUBMITTED THAT THE LD CIT (A) WAS ALSO NOT JUSTIFIED IN DELETING THE ADDITIONS OF RS.703.99 LA KHS AND RS.554.50 LAKHS MADE IN AY 2013-14 FOR VIOLATION OF PROVISION S OF SEC.13(1)(C) OF THE ACT. THE LD D.R SUBMITTED THAT THE LD CIT(A ) HAS DELETED THE ADDITION OF RS.703 LAKHS BY EXAMINING ADDITIONAL EV IDENCES PRODUCED BY THE ASSESSEE, WITHOUT CONFRONTING THEM WITH THE AO. HE SUBMITTED THAT THE SAID ACTION OF THE LD CIT(A) HAS VIOLATED THE PROVISIONS OF RULE 46A OF I.T RULES. HE SUBMITTED THAT THE AO HAS REJECTED THE EVIDENCES FURNISHED BY THE ASSESSEE IN SUPPORT OF THE ADDITION OF RS.554.50 LAKHS TREATING THEM AS SELF-S ERVING DOCUMENTS. 23. ACCORDINGLY, THE LD D.R CONTENDED THAT THE ADDITIONS MADE BY THE AO IN AY 2012-13 TO 2014-15 WITH REGARD TO A DDITION OF RS.58.02 CRORES; ADDITION OF RS.703.99 LAKHS AND RS .554.50 LAKHS MADE IN AY 2013-14 SHOULD BE SUSTAINED BY REVERSING THE DECISION OF LD CIT(A). HE ALSO SUBMITTED THAT THE ASSESSEE SHOULD NOT BE ALLOWED EXEMPTION U/S 11 OF THE ACT. 24. THE LD A.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSING OFFICER HAS ADDED RS.993 LAKHS, RS.4333 LAKHS AND R S.476 LAKHS RESPECTIVELY IN AY 2012-13, 2013-14 AND 2014-15. H OWEVER, THE AO HAS NOT GIVEN THE BASIS FOR ARRIVING AT THE ABOV E SAID AMOUNTS IN THE ASSESSMENT ORDERS. HE SUBMITTED THAT THE ABOVE SAID ADDITIONS ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 19 OF 73 HAVE BEEN MADE ON THE REASONING THAT THE ASSESSEE H AS INCURRED CONSTRUCTION EXPENSES BY WAY OF CASH. HE SUBMITTED THAT THERE IS NO BAR IN INCURRING CONSTRUCTION EXPENSES IN CASH, SINCE THEY ARE CAPITAL EXPENSES AND FURTHER THE PROVISIONS OF SEC. 40A(3) SHALL NOT APPLY TO THE ASSESSEE. HE SUBMITTED THAT THE ASSESS EE HAS ACCOUNTED FOR ALL THE EXPENSES INCLUDING THOSE INCU RRED BY PAYING CASH IN THE BOOKS OF ACCOUNTS. ENTIRE EXPENSES HAV E BEEN INCURRED FOR CONSTRUCTION OF BUILDINGS ONLY FOR MEDICAL COLL EGE. FURTHER, ALL THE EXPENSES ARE DULY SUPPORTED BY VOUCHERS AND THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE BEEN AUDITED. HE SUB MITTED THAT THE AUDITORS HAVE NOT FOUND ANY DEFICIENCY EITHER IN TH E MAINTENANCE OF VOUCHERS OR IN BOOKS OF ACCOUNTS. ACCORDINGLY, HE SUBMITTED THAT THERE IS NO REASON TO HOLD THAT THE EXPENSES INCURR ED BY WAY OF CASH ARE FOR NON-SPECIFIED PURPOSES AND, IN FACT, T HERE IS NO BASIS AVAILABLE WITH THE AO IN ORDER TO HOLD SO. HE SUB MITTED THAT THE TAX AUTHORITIES CANNOT ACCEPT PART OF CONSTRUCTION EXPENSES RECORDED IN THE BOOKS OF ACCOUNTS AS GENUINE AND RE JECT PART THEREOF ON THE REASONING THAT SOME PORTION OF CONSTRUCTION EXPENSES HAVE BEEN INCURRED IN CASH. HE SUBMITTED THAT THE AGGREG ATE AMOUNT OF CONSTRUCTION EXPENSES INCURRED BY THE ASSESSEE DURI NG THE FINANCIAL YEAR RELEVANT TO AY 2013-14 WAS ONLY RS.1921 LAKHS ONLY, WHEREAS THE ASSESSING OFFICER HAS ADDED A SUM OF RS.4333 LA KHS IN THAT YEAR. HE SUBMITTED THAT THE LD CIT(A) HAS RIGHTLY APPRECIATED THE ABOVE SAID FACT AND HAS ALSO NOTICED THAT THE ASSES SING OFFICER HAS NOT FURNISHED THE BASIS FOR ARRIVING AT THE FIGURES OF ABOVE SAID ADDITIONS. THE LD CIT(A) HAS EXPRESSED THE FOLLOWI NG VIEW IN THIS REGARD:- ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 20 OF 73 .THE AO SHOULD HAVE LISTED THE EXPENSES WHERE THE CASH HAS BEEN SPENT AND NO SUPPORTING VOUCHERS ARE PRODU CED. IF THE CASH PAYMENT HAS BEEN MADE ONLY TO SOME SPECIFI ED CONCERNS AND NO BILLS ARE PRODUCED, THE SAME SHOULD HAVE BEEN SPECIFIED. WITHOUT POINTING OUT ANY PARTICULA R VIOLATION IN RESPECT OF ANY PARTICULAR ITEM OF EXPENDITURE, IT I S NOT POSSIBLE TO SUSTAIN THE ADDITION. NO ADDITION CAN BE MADE O N ADHOC BASIS. 25. THE LD A.R FURTHER SUBMITTED THAT THE ASSE SSING OFFICER HAS MADE THE ABOVE SAID ADDITIONS U/S 69C OF THE ACT. HE SUBMITTED THAT THE PROVISIONS OF SEC.69C OF THE ACT RELATE TO EXPENDITURE INCURRED BY AN ASSESSEE, FOR WHICH SOURCE COULD NOT BE EXPLAINED BY HIM TO THE SATISFACTION OF THE AO. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE WAS HAVING SOURCE FOR INC URRING THE EXPENSES IN CASH. HE SUBMITTED THAT THE LD CIT(A) HAS ALSO NOTICED THAT THE ASSESSEE HASSPENT MONEY FOR CONSTRUCTION O F BUILDINGS OUT OF THE FUNDS GENERATED DURING THE COURSE OF CARRYIN G ON OF ITS ACTIVITIES. HE SUBMITTED THAT THERE WAS NO ALLEGAT ION BY THE AO THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCES FOR THE CONSTRUCTION EXPENSES.ACCORDINGLY, HE SUBMITTED THAT THE LD CIT( A) HAS RIGHTLY OBSERVED THAT THERE WAS NO NEED TO INVOKE THE PROVI SIONS OF SEC.69C OF THE ACT. 26. THE LD A.R SUBMITTED THAT THE SEARCH OFFICI ALS TOOK A STATEMENT U/S 132(4) OF THE ACT FROM ONE OF THE TRU STEES, WHEREIN HE HAS AGREED THAT A SUM OF RS.25.00 CRORES MAY BE RED UCED FROM THE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 21 OF 73 AMOUNT OF APPLICATION OF INCOME ON THE REASONING THAT THE ASSESSEE MAY NOT BE IN A POSITION TO FURNISH VOUCHE RS. HOWEVER, THE ASSESSEE HAS CLARIFIED IN ITS LETTER DATED 14-1 2-2015 FURNISHED BEFORE THE AO, THAT THE ASSESSEE HAS OFFERED SO AT THE TIME OF SEARCH, SINCE HE WAS UNDER THE OPINION THATTHE ASSE SSEE COULD NOT FURNISH ALL THE RELATED EVIDENCES IN CONNECTION WIT H THE EXPENDITURE INCURRED FOR CONSTRUCTION OF THE COLLEGE AND HOSPIT AL. IT WAS REITERATED THAT THE EXPENDITURE WAS ACTUALLY SPENT BY THE ASSESSEE AND IT HAS BEEN DULY RECORDED IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE TRUST. IT WAS ALSO CLARIFIED THAT THE ASSE SSEE HAD ACCEPTED FOR THE DISALLOWANCE OF RS.25.00 CRORES FOR THE SAK E OF BUYING PEACE FROM THE DEPARTMENT. ACCORDINGLY, IT WAS CONTENDED THAT THERE WAS NO VIOLATION OF THE OBJECTS OF TRUST AND HENCE THE QUESTION OF WITHDRAWING EXEMPTION U/S 11 OF THE ACT DOES NOT AR ISE. ACCORDINGLY, THE ASSESSEE HAD REQUESTED THE AO TO D ROP THE PROPOSAL. 27. THE LD A.R SUBMITTED THAT THE ASSESSING OFFI CER DID NOT MAKE ADDITION OF RS.25.00 CRORES IN AGGREGATE SURRENDERE D BY THE ASSESSEE IN THE STATEMENT TAKEN U/S 132(4) OF THE A CT IN AY 2010- 11 TO 2013-14. INSTEAD HE HAS ADDED A SUM OF RS.58 .02 CRORES IN AGGREGATE IN AY 2012-13 TO 2014-15. HENCE IT SHOUL D BE CONSTRUED THAT THE AO HAS ACCEPTED THE EXPLANATIONS GIVEN BY THE ASSESSEE IN ITS LETTER DATED 14-12-2015, AT LEAST IN RESPECT OF AY 2010-11 AND 2011-12. THE LD CIT(A) HAS RECORDED A FINDING THAT THE ADDITION OF RS.58.02 CRORES MADE BY THE AO IN AY 2012-13 TO 201 4-15 DOES NOT ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 22 OF 73 HAVE ANY BASIS. HENCE THE VERY BASIS ON WHICH THE AO SOUGHT TO DENY EXEMPTION U/S 11 OF THE ACT TO THE ASSESSEE HA S FAILED. 28. THE LD A.R SUBMITTED THAT THE AO HAS ALSO TA KEN THE VIEW THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SE C.13(1)(C) OF THE ACT IN MAKING PAYMENT OF RS.703.99 LAKHS AND RS.554 .50 LAKHS. ACCORDINGLY, HE HAS ADDED BOTH THE ABOVE SAID AMOUN TS IN AY 2013-14. ACCORDINGLY, HE HAS HELD THAT THESE ADDITI ONS WILL MAKE THE ASSESSEE TO LOSE EXEMPTION U/S 11 OF THE ACT.TH E LD A.R SUBMITTED THAT THE LD CIT(A) HAS ACCEPTED THE FACT THAT THE TRANSACTIONS PERTAINING TO RS.703.99 LAKHS WERE REL ATED TO A GROUP CONCERN AND OUTSIDERS, I.E., THEY DO NOT PERTAIN TO THE ASSESSEE. THE LD A.R FURTHER SUBMITTED THAT THERE IS NO VIOLA TION OF RULE 46A AS ALLEGED BY LD CIT-DR, SINCE THE ASSESSEE DID NOT PRODUCE ANY ADDITIONAL EVIDENCE BEFORE THE AO AND HAS OFFERED E XPLANATIONS ON THE BASIS OF SEIZED MATERIALS ONLY. HE SUBMITTED T HAT THE LD CIT(A) HAS EXAMINED THE SEIZED MATERIALS AND AFTER SUCH EX AMINATION ONLY, THE LD CIT(A) HAS ACCEPTED THE EXPLANATIONS OF THE ASSESSEE. WITH REGARD TO THE ADDITION OF RS.554.50 LAKHS, HE SUBMI TTED THAT THEY REPRESENTED MONEY WITHDRAWN FROM THE BANK BY SOME S TAFF WHO WERE SENT TO BANK. HOWEVER, ALL THE WITHDRAWALS HA VE BEEN DULY ACCOUNTED FOR BY THE ASSESSEE IN THE BOOKS OF ACCOU NTS. HENCE THERE WAS NO VIOLATION OF SEC.13(1)(C) AS ALLEGED B Y THE AO. HE SUBMITTED THAT THE AO COULD NOT CONTROVERT THESE FA CTUAL ASPECTS. IN THE ABSENCE OF ANY MATERIAL TO SUPPORT THE ADDIT ION OF RS.554.50 LAKHS, THE LD CIT(A) HAS DELETED THE SAME. ACCORDI NGLY, THE LD A.R SUBMITTED THAT THERE WAS NO VIOLATION OF THE PROVIS IONS OF ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 23 OF 73 SEC.13(1)(C) AS ALLEGED BY THE AO. HENCE THE VERY BASIS CITED BY THE ASSESSING OFFICER FOR WITHDRAWAL OF EXEMPTION U/S 1 1 ALSO WOULD ALSO FAIL. 29. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICE R HAS ALLEGED THAT THE ASSESSEE HAS COLLECTED CAPITATION FEE UNDE R THE NAME DEVELOPMENT FEE. ACCORDINGLY, HE ADDED THE DEVELOP MENT FEE COLLECTIONS AS INCOME OF THE ASSESSEE. HE HAS ALSO TAKEN THE VIEW THAT SUCH COLLECTIONS WOULD VIOLATE CONSTITUTIONAL PROVISIONS AND HENCE NON-CHARITABLE IN NATURE. THE LD A.R SUBMITT ED THAT THE AO HAS PASSED RECTIFICATION ORDERS U/S 154 OF THE ACT SUBSEQUENTLY AND DELETED THE ADDITIONS OF DEVELOPMENT FEES MADE BY H IM IN ALL THE YEARS. HE SUBMITTED THAT THE ASSESSING OFFICER HAS PLACED HIS RELIANCE ON STATEMENT TAKEN FROM A PERSON WHO CLAIM ED HIMSELF TO BE THE COUNSELLOR OF THE ASSESSEE AND ALSO A STAFF OF THE ASSESSEE. HOWEVER, THE AO DID NOT ALLOW THE ASSESSEE THE OPPO RTUNITY OF CROSS EXAMINING THEM AND HENCE THE ASSESSING OFFICER COUL D NOT HAVE PLACED HIS RELIANCE ON THEIR STATEMENTS. HE SUBMIT TED THAT THE AO HAS ISSUED LETTERS TO 17 DONORS, BUT DID NOT GET PR OPER REPLY. HE SUBMITTED THAT THE AO LEFT HIS INVESTIGATION AT THA T STAGE AND DID NOT LEAD IT TO LOGICAL CONCLUSIONS. HE SUBMITTED T HAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASS ESSEE HAS COLLECTED CAPITATION FEES. HE SUBMITTED THAT THE D EVELOPMENT FEE REPRESENTS VOLUNTARY DONATIONS, WHICH IS PROVED BY THE FACT THAT THE FEE SO COLLECTED FROM PEOPLE VARIES IN AMOUNT FROM PERSON TO PERSON. FURTHER, THERE IS NO ALLEGATION FROM ANY OF THE DON ORS THAT IT REPRESENTS CAPITATION FEE. HE SUBMITTED THAT THE LD CIT(A) HAS ALSO ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 24 OF 73 NOTED THE FACT THAT THE DEVELOPMENT FEE WAS NOT COL LECTED FROM ALL THE STUDENTS. THE LD CIT(A) HAS ALSO GIVEN FINDING THAT THE ASSESSEE HAS ISSUED RECEIPTS FOR COLLECTION OF VOLU NTARY DONATIONS AND HAS ALSO ACCOUNTED FOR THE SAME. HENCE THE LD CIT(A) HAS TAKEN SUPPORT OF THE DECISION RENDERED BY HON'BLE M ADRAS HIGH COURT IN THE CASE OF CIT VS. BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST (2015)(374 ITR 0274) IN ORDER TO HOLD THAT THE VOLUNTARY DONATIONS DO NOT PARTAKE THE CHARACTER OF CAPITATION FEE. HE SUBMITTED THAT THE FACTS AVAILABLE IN THE CASE O F BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST IS IN PARIT Y WITH THE FACTS OF THE ASSESSEE. ACCORDINGLY, HE SUBMITTED THAT TH E FINDING OF THE ASSESSING OFFICER ON ALLEGED COLLECTION OF CAPITATI ON FEE IS BASED ON SURMISES AND CONJECTURES, WITHOUT CONDUCTING ANY EN QUIRY. ACCORDINGLY, THE LD A.R SUBMITTED THAT THIS REASONI NG OF THE AO GIVEN FOR DENYING EXEMPTION U/S 11 ALSO WOULD FAIL. 30. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS BEEN REGISTERED AS CHARITABLE INSTITUTION U/S 12AA OF THE ACT BY LD DIT(E). THE CERTIFICATE OF REGISTRATION GRANTED TO THE ASSESSEE HAS NOT BEEN CANCELLED BY LD DIT(E). HENCE THERE IS NO REASON F OR THE AO TO DENY EXEMPTION U/S 11 OF THE ACT. ACCORDINGLY, THE LD A .R SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT TH E ASSESSEE SHOULD BE GIVEN EXEMPTION U/S 11 OF THE ACT. 31. WITH REGARD TO THE APPEALS FILED BY THE A SSESSEE CHALLENGING THE ADDITION OF RS.25.00 CRORES IN AGGREGATE MADE B Y LD CIT(A) AND ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 25 OF 73 CONSEQUENTIAL DENIAL OF DEPRECIATION THEREON, THE L D A.R SUBMITTED THE FOLLOWING:- (A) THE ASSESSEE HAS AGREED THAT THE AMOUNT OF RS. 25.00 CRORES MAY BE REDUCED FROM THE AMOUNT TAKEN AS APPL ICATION OF INCOME. ACCORDINGLY, HE SUBMITTED THAT THE ABOV E SAID SURRENDER DOES NOT LEAD TO ADDITION OF RS.25.00 CRO RES TO THE TOTAL INCOME OF THE ASSESSEE, BUT RESULTS IN REDUCT ION OF AMOUNT SPENT ON CONSTRUCTION OF BUILDINGS. (B) HE SUBMITTED THAT THE ASSESSEE HAS ACTUALLY SP ENT THE ABOVE SAID AMOUNT OF RS.25.00 CRORES FOR CONSTRUCTI ON OF BUILDING AND THE ASSESSEE HAD AGREED TO SURRENDER O NLY FOR THE REASON THAT IT MAY NOT BE ABLE TO PROVIDE ALL R ELATED EVIDENCES AT THAT POINT OF TIME. HE SUBMITTED THAT THE ASSESSEE HAS SINCE DULY ACCOUNTED FOR ALL THE EXPEN DITURE IN THE BOOKS OF ACCOUNTS, WHICH HAS ALSO BEEN DULY AUDITED.ACCORDINGLY HE SUBMITTED THAT THE BASIS ON WHICH THE AMOUNT OF RS.25.00 CRORES WAS OFFERED BY THE ASSESS EE NO LONGER EXISTS. (C) HE SUBMITTED THAT THE ASSESSING OFFICER DID NO T MAKE ADDITION OF RS.25.00 CRORES IN THE ASSESSMENT ORDER S PASSED BY HIM FOR AY 2010-11 TO 2013-14. IT IS THE LD CIT (A) WHO HAS ADDED THE AMOUNT OF RS.25.00 CRORES IN AGGREGAT E IN THE ABOVE SAID YEARS. HE SUBMITTED THAT THE ADDITION W AS MADE BY LD CIT(A) ONLY FOR THE REASON THAT THE ASSESSEE HAS AGREED FOR THE ADDITION. THE LD A.R SUBMITTED THAT THE AS SESSEE HAD ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 26 OF 73 AGREED FOR REDUCTION OF AMOUNT FROM THE AMOUNT OF APPLICATION OF INCOME AND DID NOT AGREE FOR ADDITIO N TO TOTAL INCOME. (D) THE LDA.R SUBMITTED THAT THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF PULLANGODERUBBER PRODUCE CO . VS. STATE OF KERALA (1973)(91 ITR 18) HAS HELD AS UNDER :- AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE, BUT IT CANNOT BE SAID THAT IT IS CONCLUSI VE. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHO W THAT IT IS INCORRECT. HE SUBMITTED THAT THE ASSESSEE HAS DEMONSTRATED THA T THE SURRENDER OF RS.25.00 CRORES MADE BY THE ASSESSEE I S BASED ON WRONG APPRECIATION OF FACTS AND LAW. FURTHER, T HE ASSESSEE HAS ALSO DEMONSTRATED THAT ALL THE EXPENSES RELATIN G TO CONSTRUCTION OF BUILDINGS HAVE BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND FURTHER THEY ARE ALSO SUPPORT ED BY THE VOUCHERS. (E) THE LD A.R SUBMITTED THAT THE ASSESSEE HAS CLARIFIED BEFORE THE AO, IN ITS LETTER DATED 14.12.2015, THAT THERE IS NO REASON FOR AGREEING FOR SURRENDER OF RS.25.00 CRORE S. THE AO ALSO DID NOT MAKE ADDITION, OUT OF THE ABOVE SAID A MOUNT, IN AY 2010-11 TO 2013-14. HE SUBMITTED THAT IT IS THE LD CIT(A), WHO HAS MADE THE ABOVE SAID ADDITION OF RS. 25.00 CRORES ON THE REASONING THAT THE ASSESSEE HAS AGREE D FOR THE SAME. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 27 OF 73 (F) EVEN IF IT IS TAKEN THAT THE ADDITION OF RS.5 8.02 CRORES MADE BY THE AO (IN AY 2012-13 TO 2014-15) WOULD INC LUDE THE AMOUNT OF RS.25.00 CRORES SURRENDERED BY THE AS SESSEE (IN AY 2010-11 TO 2013-14), YET THE FACT WOULD REM AIN THAT THE AO DID NOT MAKE ANY ADDITION IN AY 2010-11 AND 2011- 12. HENCE THE ADDITION MADE BY THE LD CIT(A) IN T HE ABOVE SAID TWO YEARS WOULD AMOUNT TO ENHANCEMENT OF INCOM E BY THE LD CIT(A), WHICH HE COULD HAVE MADE ONLY AFTER SERVING NOTICE OF ENHANCEMENT UPON THE ASSESSEE. (G) THE EXPLANATIONS GIVEN BY THE ASSESSEE IN ITS LETTER DATED 14-12-2015 WOULD AMOUNT TO RETRACTION. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ADDITION OF RS.25.00 CRORES MADE BY THE LD CIT(A) IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY PRAYED FOR DELETION OF THE SAME. HE SU BMITTED THAT THE DISALLOWANCE OF DEPRECIATION IS CONSEQUENTIAL IN NA TURE AND HENCE LIABLE TO BE DELETED. 32. THE LD D.R, ON THE CONTRARY, SUBMITTED THA T THE ASSESSEE HAD AGREED FOR SURRENDER OF RS.25.00 CRORES IN THE STATEMENT TAKEN U/S 132(4) OF THE ACT. BY MAKING SUCH SURRENDER, T HE ASSESSEE HAS BLOCKED THE REVENUE FROM MAKING FURTHER INVESTIGATI ONS. ACCORDINGLY, HE SUBMITTED THAT THE LD CIT(A) WAS JU STIFIED IN MAKING ADDITION OF RS.25.00 CRORES AS SURRENDERED B Y THE ASSESSEE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 28 OF 73 AND WAS ALSO JUSTIFIED IN DIRECTING DISALLOWANCE OF DEPRECIATION ON SUCH SURRENDER. 33. IN THE REJOINDER, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS PROVED THAT ALL THE EXPENSES PAID BY WAY OF CASH HA VE BEEN INCURRED TOWARDS CONSTRUCTION ONLY AND THIS FACT HA S NOT BEEN DISPROVED BY THE AO. HE FURTHER SUBMITTED THAT THE AO, ON THE CONTRARY, HAS NOT GIVEN ANY BASIS FOR ARRIVING AT T HE FIGURE OF RS.58.02 CRORES ADDED BY HIM IN AY 2012-13 TO 2014- 15. HENCE THE LD CIT(A) HAS HELD THAT THE ADDITION SO MADE BY THE AO WAS ADHOC AND WITHOUT ANY BASIS. 34. AT THIS STAGE, THE BENCH ASKED THE LD D.R T O PROVIDE THE BASIS ON WHICH THE AO HAS ARRIVED AT THE FIGURE OF RS.58.02 CRORES, WHICH WAS ADDED IN AY 2012-13 TO 2014-15. THE LD D .R SUBMITTED THAT THE RELEVANT MATERIALS WERE NOT AVAILABLE WITH HIM AND SOUGHT TWO WEEKS TIME TO FURNISH THE SAME. ACCORDINGLY, THE LD D.R WAS GIVEN TIME UP TO 26-06-2019 TO FURNISH THE BASIS OF ARRIVING AT THE FIGURE OF RS.58.02 CRORES. HOWEVER, TILL DATE, THE REVENUE HAS NOT FURNISHED ANY DETAILS RELATING TO THE SAME. 35. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HEREIN IS A CHARITABLE INSTITUTION REGISTE RED U/S 12AA OF THE ACT. HENCE THE PROVISIONS OF SEC.11 TO 13 SHAL L APPLY TO THE ASSESSEE FOR COMPUTATION OF INCOME. UNDER SECTION 11 OF THE ACT, THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST W HOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES SHALL BE EXEMPT TO THE EXTENT TO ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 29 OF 73 WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN IN DIA AND WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APP LICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOM E SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEE N PERCENT OF THE INCOME FROM SUCH PROPERTY. ACCORDINGLY, THE AMOUNT EXEMPT U/S 11 OF THE ACT IS THE AGGREGATE AMOUNT OF THE AMOUNT APPLIED FOR OBJECTS OF THE TRUST AND THE AMOUNT ACCUMULATED U / S 11(1)(A) NOT EXCEEDING 15% OF INCOME. UNDER THE EXPLANATION GIVE N BELOW SECTION 11(1) OF THE ACT, THE ASSESSEE COULD POSTPO NE THE APPLICATION OF INCOME, IF IT IS NOT ABLE TO APPLY ITS INCOME FO R THE REASONS STATED IN THE ABOVE SAID EXPLANATION. IT IS ALSO PERTINEN T TO NOTE THAT THE PROVISIONS OF SEC.11(2) ENABLES THE ASSESSEE TO ACC UMULATE THE INCOME, IF ASSESSEE IS NOT ABLE TO APPLY 85% OF ITS INCOME OR IS NOT DEEMED TO HAVE BEEN APPLIED. IT CAN BE SEEN THAT E VEN IF THE ASSESSEE IS NOT ABLE TO APPLY 85% OF ITS INCOME FOR CHARITABLE PURPOSES, THE ACT PERMITS THE ASSESSEE TO APPLY THE SHORTFALL IN THE SUBSEQUENT YEARS, IN WHICH CASE, THE AMOUNT SO POSTPONED/ACCUMULATED IS DEEMED TO BE INCOME APPLIE D TO CHARITABLE PURPOSES DURING THE YEAR IN WHICH THE IN COME WAS DERIVED. HENCE, THE OBJECT OF THE PROVISIONS OF SE C.11(1), EXPLANATION GIVEN UNDER SEC.11(1) AND SEC.11(2) IS TO ENABLE THE ASSESSEE TO APPLY ITS INCOME FOR CHARITABLE PURPOSE S ONLY. 36. IN THE INSTANT CASE, THE ASSESSEE WAS SUBJE CTED TO SEARCH OPERATIONS ON 18-07-2013. THE ASSESSEE IS RUNNING AN ENGINEERING COLLEGE AND A MEDICAL COLLEGE, BESIDES OTHER EDUCAT IONAL INSTITUTIONS. THE ASSESSEE HAS STARTED CONSTRUCTIO N OF MEDICAL ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 30 OF 73 COLLEGE DURING THE FINANCIAL YEAR RELEVANT TO AY 20 10-11. DURING THE COURSE OF SEARCH OPERATIONS, IT WAS NOTICED THA T THE ASSESSEE HAS INCURRED EXPENSES IN CASH. THE ASSESSEE HAS AGR EED TO OFFER A SUM OF RS.25.00 CRORES FOR AY 2010-11 TO 2013-14 AS UNEXPLAINED IN THE STATEMENT TAKEN U/S 132(4) OF THE ACT, BY ST ATING THAT THE ASSESSEE WOULD NOT BE ABLE TO PROVE THE APPLICATION OF MONEY WITH PROPER BILLS AND VOUCHERS. THE DETAILS OF AMOUNTS ADMITTED AS UNEXPLAINED AND AGREED FOR EACH OF THE ASSESSMENT Y EAR IS GIVEN BELOW:- ASST. YEAR AMOUNT 2010-11 RS.4.00 CRORES 2011-12 RS.6.00 CRORES 2012-13 RS.7.50 CRORES 2013-14 RS.7.50 CRORES ------------ RS.25.00 CRORES ========= THE ASSESSEE HAS AGREED FOR DISALLOWANCE OF ABOVE S AID AMOUNTS FROM OUT OF APPLICATION OF INCOME FOR THE PURPOSE S OF SEC.11(1)(A) OF THE ACT, MEANING THEREBY, THE ASSESSEE INTENDED THAT THE ABOVE SAID AMOUNTS SHOULD BE REDUCED FROM THE AMOUNT CLAI MED AS APPLIED FOR THE OBJECTS OF THE TRUST, I.E., IT WAS NOT THE INTENTION OF THE ASSESSEE TO OFFER THE ABOVE SAID AMOUNT AS ITS UNDISCLOSED INCOME, WHICH WOULD WARRANT SEPARATE ADDITION. IN FACT, THE QUESTION OF UNDISCLOSED INCOME SHALL NOT ARISE IN T HE FACTS OF THE PRESENT CASE. THE ASSESSEE HAS ALSO FURNISHED REVI SED COMPUTATION OF INCOME ON 14.12.2015 ALONG WITH A DETAILED EXPLA NATION, WHICH WAS EXTRACTED EARLIER BY US. HOWEVER, IT IS PERTIN ENT TO NOTE THAT THE ASSESSING OFFICER DID NOT MAKE ABOVE SAID ADDITIONS IN THE ABOVE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 31 OF 73 SAID YEARS. INSTEAD, HE PROCEEDED TO ADD A SUM OF RS.58.02 CRORES IN AY 2012-13 AS DETAILED BELOW:- ASST. YEAR AMOUNT 2012-13 9.93 CRORES 2013-14 43.33 CRORES 2014-15 4.76 CRORES --------- 58.02 CRORES ======= THE CASE OF AO IS THAT THE ABOVE SAID ADDITION OF R S.58.02 CRORES WOULD INCLUDE THE AMOUNT OF RS.25.00 CRORES OFFERED BY THE ASSESSEE. THE AO ALSO MADE ADDITIONS IN AY 2013-14 TO THE TUNE OF RS.703.99 LAKHS AND RS.554.50 LAKHS FOR ALLEGED VIO LATION OF PROVISIONS OF SEC.13(1)(C) R.W.S 13(3) OF THE ACT. HE HAS FURTHER HELD THAT THE ASSESSEE HAS COLLECTED CAPITATION FEE UNDE R THE NAME DEVELOPMENT FEE OVER AND ABOVE THE FEE PRESCRIBED BY THE GOVERNMENT AND SUCH COLLECTION WAS IN VIOLATION OF CONSTITUTIONAL SCHEME AND HENCE NON-CHARITABLE IN NATURE. ALL THE ABOVE SAID OBSERVATIONS AND ADDITIONS MADE BY THE AO HAS LED H IM TO COME TO THE CONCLUSION THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 11 OF THE ACT.ACCORDINGLY HE HELD THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 11 OF THE ACT. 37. AS OBSERVED EARLIER, THE LD CIT(A) HELD THAT THE ADDITION OF RS.58.02 CRORES WAS NOT JUSTIFIED, BUT MADE THE ADD ITION OF RS.25.00 CRORES SURRENDERED BY THE ASSESSEE. THE L D CIT(A) ALSO HELD THAT THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DE PRECIATION ON THE ABOVE SAID AMOUNT OF RS.25.00 CRORES. THE LD CIT(A ) DELETED THE ADDITIONS MADE U/S 13(1)(C) OF THE ACT. WITH REGAR D TO ALLEGATION OF ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 32 OF 73 COLLECTION OF CAPITATION FEE, THE LD CIT(A) HELD TH AT THE DEVELOPMENT FEE COLLECTED BY THE ASSESSEE REPRESENTS VOLUNTARY DONATION. IN VIEW OF THE DECISION TAKEN BY HIM ON THE ABOVE SAID ISSU ES, THE LD CIT(A) HELD THAT THE ASSESSEE CANNOT BE DENIED EXEMPTION U NDER SECTION 11 OF THE ACT.ACCORDINGLY, THE LD CIT(A) ALLOWED EX EMPTION U/S 11 OF THE ACT TO THE ASSESSEE. 38. WE SHALL FIRST TAKE UP THE APPEALS FILED BY THE REVENUE.BEFORE DECIDING THE ISSUE RELATING TO REJECTION OF EXEMPTI ON CLAIMED BY THE ASSESSEE U/S 11 OF THE ACT, WE ARE OF THE VIEW THAT THE OTHER ISSUES MAY BE DECIDED FIRST, SINCE THE DECISION TAKEN ON T HOSE ISSUES WOULD HELP TO DECIDE THE ABOVE SAID ISSUE. ACCORDI NGLY, WE SHALL FIRST TAKE UP THE ISSUE OF ADDITION OF RS.58.02 CRO RES MADE BY THE AO IN AY 2012-13 TO 2014-15. THE AO HAS INITIALLY OBSERVED AS UNDER IN THE ASSESSMENT ORDER:- DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS U/S 132 OF THE I T ACT 1961 ON 18-07-2013, SEVERAL INSTANCE S OF PAYMENTS MADE FOR NON-SPECIFIED PURPOSES IN CASH TO CONTRACTORS, OTHER RELATED CONCERNS, TO PROMOTERS E TC WERE FOUND. THE YEAR WISE BREAK UP IS AS UNDER: ASST. YEAR AMOUNT 2012-13 9.93 CRORES 2013-14 43.33 CRORES 2014-15 4.76 CRORES --------- 58.02 CRORES ======= ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 33 OF 73 THE ASSESSEE FURNISHED A REPLY DATED 14.12.2015 STA TING THAT IT HAS MAINTAINED PROPER BOOKS AND ALL THE EXPENDITURE HAS BEEN RECORDED IN THE BOOKS AND IT HAS AGREED FOR THE REDUCTION OF RS.25.00 CRORES FROM THE AMOUNT OF APPLICATION OF INCOME TO BUY PEA CE FROM THE DEPARTMENT. HOWEVER, THE AO REJECTED THE CONTENTIO NS OF THE ASSESSEE BY OBSERVING THAT THE FINDINGS DURING THE COURSE OF THE SEARCH OPERATIONS AND THE ADMISSION OF THE ASSESSEE THAT IT WAS NOT IN A POSITION TO PROVE EXPENSES TO THE TUNE OF RS.2 5.00 CRORES FOR VARIOUS ASSESSMENT YEARS WOULD PROVE THAT THE FUNDS RECEIVED WERE NOT UTILIZED FOR THE OBJECTS OF THE TRUST AND THE S AME IS IN CLEAR VIOLATION OF THE PROVISIONS OF SEC. 11 OF THE INCOM E TAX ACT. HE ALSO OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRO VIDE SAID SUPPORTING DOCUMENTARY EVIDENCES EVEN DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. ACCORDINGLY, HE HELD THAT THE ENTIRE AMOUNT OF RS.58.02 CRORES IS TO BE TREATED AS EXPEN DITURE, WHICH WERE NOT INCURRED FOR THE OBJECTS OF THE TRUST AND ALSO REMAINS UNEXPLAINED. ALTERNATIVELY, THE AO HELD THAT THE A BOVE SAID EXPENSES SQUARELY FITS INTO THE PROVISIONS OF SEC.6 9C OF THE ACT, SINCE THE SOURCE FOR THESE EXPENSES REMAINS UNEXPLA INED. ACCORDINGLY, THE AO HAS ASSESSED THE ABOVE SAID AMO UNT OF RS.58.02 CRORES IN AY 2012-13 TO 2014-15 AS STATED ABOVE. 39. THE LD CIT(A) NOTICED THAT THE ASSESSING OF FICER HAS MADE THE ABOVE SAID ADDITION WITHOUT MAKING ANY ENQUIRY. TH E OBSERVATIONS MADE BY LD CIT(A) ARE EXTRACTED BELOW:- 47. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT SHOULD HAVE BEEN CALLED UPON TO PRODUCE A LL ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 34 OF 73 VOUCHERS AND BILLS WHICH WERE INCURRED IN CASH. TH E MAJOR PART OF THE EXPENDITURE STATED TO HAVE BEEN INCURRE D IN CASH APPEARS TO BE FOR THE BUILDINGS. THERE IS NO IN DICATION IN THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER ATT EMPTED TO OBTAIN THE EVIDENCE BY ISSUE OF NOTICE U/S 142(1). THE ASSESSING OFFICER HAS RELIED UPON THE OUTCOME OF SE ARCH PROCEEDINGS ONLY. THE BASIS FOR ARRIVING AT THE FI GURES FOR DISALLOWANCE IS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER. WHEN COMPARED TO THE EXPENDITURE ON ADDITION TO THE BUILDING IN THE BALANCE SHEET OF THE APPELLANT AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, SOME PE CULIAR RESULTS EMERGE. THOUGH THE CAPTION FOR ADDITION IN THE ASSESSMENT ORDER IS PAYMENT FOR NON-SPECIFIED PURP OSES IN CASH TO CONTRACTORS, OTHER RELATED CONCERNS, TO PRO MOTERS ETC., THE ULTIMATE ADDITION APPEARS TO BE ONLY FOR MONEYS SPENT ON BUILDINGS. NO OTHER PARTICULAR EXPENDITUR E HAS BEEN REFERRED TO, NOR HAS THE CONCERNS TO WHOM PAYMENTS ARE MADE HAVE BEEN MENTIONED. QUOTING OF THE STATEMENT RECORDED FROM THE MANAGING DIRECTOR DURING SEARCH DEMONSTRATES THAT THE ASSESSING OFFICER CONCENTRATE D ON CASH SPENT FOR CONSTRUCTION ONLY. NO OTHER PURPOSE FOR WHICH HUGE CASH HAS BEEN SPENT HAS BEEN MENTIONED IN THE ASSES SMENT ORDER. THEREFORE, THE ADDITION MADE IN THE ASSESSME NT ORDER AND THE ADDITION TO BUILDING IS COMPARED BELOW:- ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 35 OF 73 ASST. YEAR ADDITIONS MADE SPENT ON BUILDING WORK IN PROGRESS BY AO AS PER BALANCE SHEET 2012-13 9,93,00,000 59,86,33,201 5,18,36,069 2013-14 43,33,00,000 10,43,89,317 8,78,50,636 2014-15 4,76,00,000 18,62,46,418 2,44,75,837 48. FOR THE ASSESSMENT YEAR 2013-14, WHEN THE ADD ITION WAS ONLY RS.10,43,89,317 AND INCLUDING WORK IN PROG RESS, IT WAS RS.19,22,39,947, THE ASSESSING OFFICER HAS ADDE D A SUM OF RS.43,33,00,000 WHICH IS MORE THAN TWICE THE AMO UNT CLAIMED AS EXPENDITURE TOWARDS BUILDING. THE ASSES SING OFFICER SHOULD HAVE LISTED THE EXPENSES WHERE THE C ASH HAS BEEN SPENT AND NO SUPPORTING VOUCHERS ARE PRODUCED. IF THE CASH PAYMENT HAS BEEN MADE ONLY TO SOME SPECIFIED C ONCERNS AND NO BILLS ARE PRODUCED, THE SAME SHOULD HAVE BEE N SPECIFIED. WITHOUT POINTING OUT ANY PARTICULAR VIO LATION IN RESPECT OF ANY PARTICULAR ITEM OF EXPENDITURE, IT I S NOT POSSIBLE TO SUSTAIN THE ADDITION. NO ADDITION CAN B E MADE ON ADHOC BASIS. 40. WE HAVE NOTICED EARLIER THAT, UNDER THE PRO VISIONS OF SEC.11 OF THE ACT, THE INCOME DERIVED FROM PROPERTY HELD U NDER THE TRUST IS EXEMPT TO THE EXTENT OF THE AMOUNT APPLIED FOR SUCH PURPOSES. FURTHER THE ASSESSEE IS ALSO ENTITLED TO ACCUMULATE 15% OF THE INCOME U/S 11(1)(A) OF THE ACT. THE EXPLANATION GIV EN UNDER SEC.11 ALLOWS POSTPONEMENT OF APPLICATION OF INCOME AND TH E PROVISIONS OF SEC.11(2) PROVIDE METHODOLOGY FOR ACCUMULATING INCO ME, IF THE SAME ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 36 OF 73 COULD NOT APPLIED DURING THE YEAR IN WHICH THE INCO ME WAS DERIVED. THE PROVISIONS OF SEC. 13 PROVIDES FOR COMPLIANCE O F CERTAIN CONDITIONS AND VIOLATION OF THE SAME WOULD RESULT I N FORFEITURE OF EXEMPTION GRANTED U/S 11 OF THE ACT. THUS, IT CAN BE NOTIED THAT THE METHOD OF COMPUTATION OF TOTAL INCOME OF A CHAR ITABLE TRUST IS DIFFERENT FROM THE METHOD OF COMPUTATION TOTAL INCO ME OF A BUSINESS CONCERN. IT IS PERTINENT TO NOTE THAT, FOR THE PUR POSE OF DETERMINING THE QUANTUM OF INCOME APPLIED FOR OBJECTS OF THE TR UST, NO DISTINCTION SHALL BE MADE BETWEEN CAPITAL EXPENDITU RE AND REVENUE EXPENDITURE, I.E., EVEN CAPITAL EXPENDITURE IS ALSO TREATED AS APPLICATION OF INCOME. IN THE CASE OF A BUSINESS C ONCERN, THE ASSESSEE WOULD NOT BE ENTITLED FOR DEDUCTION OF CAP ITAL EXPENDITURE. OF COURSE, DEPRECIATION IS ALLOWED THEREON AT PRESC RIBED RATES. THE FOCUS IN RESPECT OF A CHARITABLE TRUST IS THAT IT S HOULD APPLY ITS INCOME FOR CHARITABLE PURPOSES ONLY. ONLY IN CASE OF VIOLATION OF PROVISIONS OF SEC.13, THEN THE CHARITABLE TRUST SHA LL BE LIABLE TO LOSE EXEMPTION U/S 11 OF THE ACT AND WOULD BE LIABLE TO PAY TAX ON ITS TOTAL INCOME AS COMPUTED U/S 11 TO 13 OF THE ACT. 41. IN THE INSTANT CASE, THERE IS NO DISPUTE TH AT THE ASSESSEE WAS CONSTRUCTING BUILDINGS FOR ITS MEDICAL COLLEGE DURI NG THE YEARS RELEVANT TO AY 2010-11 ONWARDS. WE HAVE NOTICED TH AT THE AMOUNT SPENT ON CONSTRUCTION IS TREATED AS APPLICATION OF INCOME FOR THE OBJECTS OF THE TRUST AND HENCE WOULD QUALIFY FOR EX EMPTION U/S 11 OF THE ACT. WE HAVE NOTICED THAT THE ASSESSEE HAS SP ENT ITS INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST ON CONST RUCTION OF BUILDINGS AND ACCORDINGLY CLAIMED THE SAME AS APPLI CATION OF ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 37 OF 73 INCOME. THE CASE OF THE ASSESSING OFFICER IS THAT, DURING THE COURSE OF SEARCH PROCEEDINGS, SEVERAL INSTANCES OF PAYMENT S MADE IN CASH TO CONTRACTORS, OTHER RELATED CONCERNS, TO PROMOTER S ETC., WERE FOUND. THE AO HAS TAKEN THE VIEW THAT THE CASH PAY MENTS SO MADE REPRESENT INCOME APPLIED FOR NON-SPECIFIED PURPOSES .ACCORDINGLY HE HAS PROCEEDED TO ADD RS.58.02 CRORES TO THE TOTAL I NCOME IN AY 2012-13 TO 2014-15.HOWEVER, AS OBSERVED BY LD CIT(A ), THE ASSESSING OFFICER HAS NOT LISTED OUT THE DETAILS OF SUCH PAYMENTS, WHICH WERE GIVEN FOR NON-SPECIFIED PURPOSES. EVEN THOUGH, THE ASSESSING OFFICER HAS STATED THAT THE PAYMENTS HAVE BEEN MADE TO CONTRACTORS, OTHER RELATED CONCERNS, TO PROMOTERS E TC., THE LD CIT(A) HAS CONCLUDED THAT THE IMPUGNED AMOUNT OF RS.58.02 CRORES WAS SPENT ON THE CONSTRUCTION ACTIVITY ONLY. 42. THERE SHOULD NOT BE ANY DOUBT THAT THE PA YMENTS MADE TO CONTRACTORS FOR CONSTRUCTION ACTIVITY CANNOT BE CON SIDERED AS PAYMENT MADE TOWARDSNON-SPECIFIED PURPOSES. EVEN THOUGH IT IS STATED THAT THE PAYMENTS HAVE BEEN MADE IN CASH, TH ERE IS NO BAR FOR THE TRUSTS, AS IN THE CASE OF SEC.40A(3), TO MA KE PAYMENTS IN CASH FOR THE YEARS UNDER CONSIDERATION.THE PROVISIO NS OF SEC.40A(3) AND 40A(3A) OF THE ACT HAVE BEEN MADE APPLICABLE TO CHARITABLE TRUSTS ONLY WITH EFFECT FROM 01.04.2019 BY THE FINA NCE ACT, 2018. ACCORDINGLY, MERELY FOR THE REASON THAT THE PAYMENT S HAVE BEEN MADE TO CONTRACTORS IN CASH, WE ARE OF THE VIEW THA T THE CLAIM OF APPLICATION OF INCOME CANNOT BE DENIED. WE NOTICE THAT THE LD CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS SPENT MON EY FOR CONSTRUCTION OF BUILDINGS. HE ALSO NOTICED THAT THE ASSESSING OFFICER ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 38 OF 73 HAS NOT ATTEMPTED TO MAKE ENQUIRIES AND OBTAIN EVID ENCES BY ISSUING NOTICE U/S 142(1) OF THE ACT. HE HAS ALSO OBSERVED THAT THE AO SEEMS TO HAVE RELIED UPON THE OUTCOME OF THE SEA RCH PROCEEDINGS. THE LD CIT(A) HAS ALSO OBSERVED THAT THE ADDITION MADE IN AY 2013-14 IS MORE THAN OR DISPROPORTIONATE TO THE ACTUAL AMOUNT SPENT FOR CONSTRUCTION DURING THAT YEAR. HE ALSO OBSERVED THAT THE ASSESSING OFFICER HAS NOT SPECIFIED THE BA SIS ON WHICH THE ADDITION OF RS.9.93 CRORES, RS.43.33 CRORES AND RS. 4.76 CRORES RESPECTIVELY FOR AY 2012-13 TO 2014-15 WAS QUANTIFI ED. 43. THE AO HAS ALSO STATED THAT THE ASSESSEE C OULD NOT PRODUCE THE BILLS, VOUCHERS ETC., IN SUPPORT OF THE EXPENDI TURE INCURRED. HOWEVER, THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ON THE CONTRARY, IT IS TH E SUBMISSION OF THE ASSESSEE THAT ALL THE EXPENSES INCURRED ON CONS TRUCTION HAVE BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. IT WAS FURTHER STATED THAT THE BOOKS OF ACCOUNTS HAVE BEEN DULY AU DITED AND THE AUDITORS HAVE NOT FOUND ANY DEFICIENCY IN THE MAINT ENANCE OF ACCOUNTS AND VOUCHERS. WE NOTICE THAT THE ASSESSEE HAS MADE ABOVE SAID SUBMISSIONS BEFORE THE AO, BUT THE AO CO ULD NOT CONTROVERT THE SAME BY BRINGING ANY MATERIAL ON REC ORD. 44. DURING THE COURSE OF HEARING, THE LD A.R S UBMITTED THAT IT IS NOT DISCERNIBLE AS TO HOW THE AO HAS QUANTIFIED THE AMOUNT OF RS.9.93 CRORES, RS.43.33 CRORES AND RS.4.76 CRORES. THE LD CIT(A) HAS ALSO OBSERVED SO. HENCE THE REVENUE WAS ASKED TO FURNISH THE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 39 OF 73 DETAILS AS TO HOW THE ABOVE SAID AMOUNTS WERE ARRIV ED. AS NOTICED EARLIER, THE REVENUE COULD NOT FURNISH THE DETAILS. 45. HENCE, WE ARE OF THE VIEW THAT THE LD CIT( A) WAS JUSTIFIED IN HOLDING THAT THE ADDITION OF RS.9.93 CRORES, RS.43. 33 CRORES AND RS.4.76 CRORES MADE IN AY 2012-13 TO 2014-15 RESPEC TIVELY IS WITHOUT ANY BASIS AND WITHOUT POINTING ANY PARTICUL AR VIOLATION IN RESPECT OF ANY PARTICULAR ITEM OF EXPENDITURE. WE HAVE ALSO NOTICED THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOO KS OF ACCOUNTS. THE SUBMISSION OF THE ASSESSEE IS THAT ITS BOOKS OF ACCOUNTS HAVE BEEN AUDITED AND THE AUDITORS HAVE NOT FOUND OUT AN Y DEFICIENCY IN THE MAINTENANCE OF BOOKS OF ACCOUNTS OR VOUCHERS. IN OUR VIEW, THERE IS MERIT IN THE ABOVE SAID SUBMISSIONS AND HE NCE THE AO WAS NOT JUSTIFIED IN IGNORING THE BOOKS OF ACCOUNTS. A NOTHER IMPORTANT POINT WE NOTICE IS THAT THE ASSESSING OFFICER HAS A CCEPTED THE FACT OF APPLICATION OF INCOME TOWARDS CONSTRUCTION OF BUILD ING, BUT CHOSE TO REJECT ONLY A PORTION OF EXPENSES INCURRED ON CONST RUCTION ON THE REASONING THAT THE SAME HAS BEEN INCURRED BY WAY OF CASH. AS OBSERVED BY US EARLIER, THE FACTUM OF INCURRING EXP ENSES BY WAY OF CASH ALONE CANNOT BE A GROUND TO HOLD THAT THOSE EX PENSES ARE RELATED TO NON-SPECIFIED PURPOSES. THE AO SHOULD H AVE BROUGHT ANY OTHER MATERIAL ON RECORD TO SHOW THAT THE EXPENSES INCURRED IN CASH FOR CONSTRUCTION ACTIVITIES WERE NOT ACTUALLY INCUR RED FOR THAT PURPOSES, BUT FOR SOME OTHER PURPOSES. ACCORDINGLY , THE AO WAS NOT JUSTIFIED IN ACCEPTING THE CONSTRUCTION EXPENSE S IN PART AND REJECTING THE BALANCE AMOUNT. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 40 OF 73 46. WE HAVE NOTICED EARLIER THAT THE METHOD OF COMPUTING INCOME FOR A CHARITABLE TRUST U/S 11 TO 13 OF THE ACT IS D IFFERENT FROM THE METHOD ADOPTED FOR A BUSINESS CONCERN U/S 28 OF THE ACT. IN THE INSTANT CASES, THERE IS NO DISPUTE WITH REGARD TO T HE INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST. WE NOTICED EA RLIER THAT THE ABOVE SAID INCOME IS EXEMPT U/S 11 OF THE ACT TO TH E EXTENT THE SAME IS APPLIED FOR THE OBJECTS OF THE TRUST AND TO THE EXTENT IT IS ACCUMULATED U/S 11(1)(A) OF THE ACT NOT EXCEEDING 1 5%. IF SUCH APPLICATION FALLS SHORT, THEN THERE ARE PROVISIONS WHICH WOULD ENABLE THE ASSESSEE TO POSTPONE THE APPLICATION AND TO ACCUMULATE INCOME. IT IS RELEVANT HERE TO EXTRACT THE PROVISI ONS OF SEC.11(2) OF THE ACT:- 11(2) WHERE EIGHTY FIVE PERCENT OF THE INCOME REF ERRED TO IN CLAUSE (A) OR SUB-SECTION (1) READ WITH THE EXPLANA TION TO THAT SUB-SECTION IS NOT APPLIED, OR IT IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN IND IA DURING THE PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART, EITHER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT B E INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE FOLLOWING CO NDITIONS ARE COMPLIED WITH, NAMELY:- EVEN IF THE VIEW OF THE AO, THAT THE MONEY SPENT IN CASH IS TO BE CONSIDERED AS AMOUNT SPENT FOR NON-SPECIFIED PURPOS ES, IS ACCEPTED AS CORRECT FOR A MOMENT, THEN THE CASE OF THE ASSES SING OFFICER HAS TO BE CONSIDERED AS INCOME NOT DEEMED TO HAVE BEEN APPLIED FOR CHARITABLE PURPOSES. IN THAT CASE, IT IS REQUIRED TO APPLY THE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 41 OF 73 PROVISIONS OF EXPLANATION GIVEN UNDER SEC. 11(1) AN D SEC.11(2) OF THE ACT WHILE DETERMINING THE TOTAL INCOME OF THE A SSESSEE, I.E., THE ASSESSEE SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO A VAIL THE BENEFITS GIVEN IN THE EXPLANATION UNDER SEC.11(1) A ND SEC.11(2), SINCE IT IS THE AO WHO HAS HELD THAT THE PAYMENTS M ADE IN CASH SHOULD BE CONSIDERED AS PAYMENT FOR NON-SPECIFIED PURPOSES.IT IS ALSO PERTINENT TO NOTE THAT THE PROVISIONS OF SEC. 13 OF THE ACT ARE NOT APPLICABLE TO THE ALLEGED APPLICATION FOR NON-S PECIFIED PURPOSES. ACCORDINGLY, WE ARE OF THE VIEW THAT TH E AO WAS NOT JUSTIFIED IN ASSESSING THE INCOME SO CONSIDERED AS SPENT FOR NON- SPECIFIED PURPOSES, AS IT IS AGAINST THE SCHEME OF TAXATION OF CHARITABLE TRUSTS. 47. IN THE INSTANT CASE, THE AO HAS ADDED THE IM PUGNED AMOUNT OF RS.58.02 CRORES, AS IF IT WERE UNDISCLOSED INCOM E OF THE ASSESSEE, WHICH IS NOT LEGALLY CORRECT.IN OUR VIEW, THE AMOUN T SO APPLIED FOR PURPOSES OTHER THAN THE OBJECTS OF THE TRUST SHALL NOT REPRESENT UNDISCLOSED INCOME OF THE ASSESSEE, SINCE THERE I S DIFFERENCE BETWEEN RECEIPT OF INCOME AND APPLICATION OF INC OME. THE FORMER IS GENERATION OF RECEIPTS AND THE LATER IS S PENDING OF THOSE RECEIPTS. IN ANY CASE, WE HAVE HELD THAT THERE IS NO BASIS FOR MAKING THE ADDITION OF RS.58.02 CRORES IN AY 2012-1 3 TO 2014-15. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN CANCELLING THE ABOVE SAID ADDITION MADE BY THE AO I N AY 2012-13 TO 2014-15 AND ACCORDINGLY, WE UPHOLD THE SAME. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 42 OF 73 48. THE NEXT ISSUE URGED BY THE REVENUE RELATE S TO THE ADDITION OF RS.703.99 LAKHS AND RS.550.50 LAKHS MADE IN AY 2 013-14. THE FACTS RELATING TO THE ADDITION OF RS.703.99 LAKHS A RE THAT THE AO NOTICED FROM THE SEIZED RECORDS THAT THE ASSESSEE H AS GIVEN UNSECURED LOANS TO THE FOLLOWING PERSONS, WHO ARE P ERSONS SPECIFIED IN SEC. 13(3) OF THE ACT. SRINIVASA ENTERPRISES - 133 LAKHS SRI G DAYANAND - 570 LAKHS -------- 703 LAKHS ===== UNDER THE PROVISIONS OF SEC.13(1)(C) OF THE ACT, IF ANY PART OF INCOME OF THE CHARITABLE TRUST ENURES OR USED OR APPLIED F OR THE BENEFIT OF THE PERSONS SPECIFIED IN SEC.13(3) OF THE ACT, THEN THE PROVISIONS OF SEC.11 SHALL NOT APPLY TO SUCH INCOME. THE AO NOTI CED THAT BOTH THE ABOVE SAID PERSONS FALL UNDER THE CATEGORY OF R ELATED PERSONS SPECIFIED IN SEC. 13(3) OF THE ACT. SINCE THE ASSE SSEE HAS PAID THE ABOVE SAID AMOUNTS TO THEM, THE AO TOOK THE VIEW TH AT THE PROVISIONS OF SEC.13(1)(C) SHALL APPLY. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT THE ABOVE SAID PAYMENTS REPRESENT REPAYMENT OF LOAN TAKEN BY THE ASSESSEE FROM THE AB OVE SAID PERSONS. THE ASSESSEE FURNISHED LEDGER ACCOUNT COP IES. THE AO DID NOT ACCEPT THE EXPLANATIONS GIVEN BY THE ASSESS EE AND ACCORDINGLY ASSESSED THE AMOUNT OF RS.703 LAKHS AS INCOME OF THE ASSESSEE. 49. BEFORE LD CIT(A), THE ASSESSEE ADMITTED THA T THE EXPLANATIONS GIVEN BY IT BEFORE THE AO WAS WRONG. THE ASSESSEE SUBMITTED THAT THE TRANSACTIONS REPRESENT TRANSACTIONS BETWEEN M/S HOTEL ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 43 OF 73 SOLITAIRE, A GROUP CONCERN, AND THE ABOVE SAID PERS ONS. IT WAS SUBMITTED THAT THE ASSESSEE WAS NOT AWARE OF THE CO NTENTS IN THE SEIZED MATERIAL WHILE GIVING EXPLANATIONS BEFORE TH E AO AND IT COULD ASCERTAIN ACTUAL NATURE OF TRANSACTIONS ONLY AFTER EXAMINATION OF SEIZED MATERIAL. THE LD CIT(A) WAS CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEEAND ACCORDINGLY DELETED THE ADDITION OF RS.703 LAKHS. 50. WE HEARD THE PARTIES ON THIS ISSUE AND PE RUSED THE RECORD. THE LD D.R CONTENDED THAT THE LD CIT(A) HAS VIOLATE D THE PROVISIONS OF RULE 46A BY ADMITTING ADDITIONAL EVIDENCES. HOW EVER, THE LD A.R SUBMITTED THE ASSESSEE HAS ASCERTAINED THE CORRECT NATURE OF CONTENTS OF SEIZED MATERIALS ONLY SUBSEQUENTLY AND ACCORDINGLY, IT COULD OFFER PROPER EXPLANATIONS BEFORE THE LD CIT(A ), I.E, THE TRANSACTIONS RECORDED IN THE SEIZED MATERIAL REPRES ENT TRANSACTIONS ENTERED BETWEEN M/S HOTEL SOLITAIRE AND ABOVE SAID PERSONS. WE ALSO NOTICE THAT THE ASSESSEE HAS PRODUCED BANK STA TEMENT OF HOTEL SOLITAIRE TO SHOW THAT THE TRANSACTIONS RECORDED IN THE SEIZED MATERIAL MATCHES WITH THE TRANSACTIONS ENTERED IN T HE BANK STATEMENT. HENCE THE PURPOSE OF PRODUCING BANK STA TEMENT WAS ONLY TO SHOW THAT THE SEIZED MATERIALS DO NOT BELON G TO THE ASSESSEE. 51. WE NOTICE THAT THE LD CIT(A) HAS GIVEN A CLEAR FINDING THAT THE TRANSACTIONS RECORDED IN THE SEIZED MATERIALS D O NOT BELONG TO THE ASSESSEE. HOWEVER, SINCE THE BANK STATEMENTS WE RE NOT AVAILABLE BEFORE THE AO, FOR THE LIMITED PURPOSE OF EXAMINING THE BANK STATEMENT WE ARE RESTORING THIS ISSUE TO THE F ILE OF ASSESSING ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 44 OF 73 OFFICER. HOWEVER, IN PRINCIPLE, WE AGREE WITH THE VIEW TAKEN BY LD CIT(A) ON THIS ISSUE. 52. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.554.50 LAKHS MADE BY THE AO U/S 13(1)(C) OF THE ACT. THE AO NOTI CED THAT THE CASH WITHDRAWN FROM BANKS WERE GIVEN TO FOLLOWING P ERSONS:- SRINIVASA ENTERPRISES 2,48,00,500 SHRI G DAYANAND 2,91,50,000 HOTEL SOLITAIRE 15,00,000 ----------------- 5,54,50,500 =========== THE ASSESSEE EXPLAINED THAT THE CASH HAS BEEN WITHD RAWN BY IT AND THE SAME HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS O F ACCOUNTS. IT WAS EXPLAINED THAT NO PAYMENT HAS BEEN MADE TO ABOV E SAID PARTIES, BUT THEY MIGHT HAVE SPENT MONEY ON BEHALF OF THE ASSESSEE TRUST. THE AO, HOWEVER, REJECTED THE ABOVE SAID EX PLANATIONS OF THE ASSESSEE AND HELD THAT THE BOOKS OF ACCOUNTS PRODUC ED BY THE ASSESSEE IS AN AFTERTHOUGHT. ACCORDINGLY HE ASSESSE D THE ABOVE SAID AMOUNT OF RS.554.50 LAKHS AS INCOME OF THE ASSESSEE ON THE REASONING THAT THESE PAYMENTS HAVE VIOLATED THE PRO VISIONS OF SEC.13(1)(C) OF THE ACT. 53. BEFORE LD CIT(A), THE ASSESSEE EXPLAINED THAT THE ASSESSING OFFICER HAS MADE THE ADDITIONS ON THE BASIS OF SEIZ ED MATERIALS WITHOUT CORROBORATING THE SAME WITH OTHER EVIDENCES . THE ASSESSEE PLACED ITS RELIANCE ON THE DECISION RENDERED BY ITA T, MUMBAI IN THE CASE OF HUSEINA DAWOODI VS. ITO (47 ITR (TRIB) 735) AND ALSO ON THE DECISION RENDERED BY AHMEDABAD BENCH OF TRIBUNAL IN THE CASE OF ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 45 OF 73 ITO VS. DR. RADHAKRISHNAN RAMJIVANBHOOTRA (ITA NO.3202/AHD/2008 DATED 27-04-2012). IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ON MERE ALLEGATIONS, SURMISES AND CONJECTURES. FURTHER IT WAS SUBMITTED THAT THE AO HAS NOT GIVEN DETAILS SUCH AS, THE DATE S ON WHICH THE ASSESSEE HAD WITHDRAWN CASH FROM BANK; WHEN IT WAS GIVEN TO THE ABOVE SAID PERSONS AND THE PURPOSE FOR WHICH THE PA YMENTS WERE MADE. IT WAS SUBMITTED THAT, WITHOUT THE ABOVE SAI D DETAILS, IT CANNOT BE PROVED THAT THERE WAS VIOLATION OF PROVIS IONS OF SEC.13(1)(C) OF THE ACT. 54. THE LD CIT(A) DELETED THIS ADDITION WITH TH E FOLLOWING OBSERVATIONS:- 70. I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION. THE DISCUSSION IN THE ASSESSME NT ORDER LEAVES MUCH TO BE DESIRED. EXCEPT THE NAMES AND AM OUNTS AND THE ALLEGATION THAT CASH WITHDRAWALS HAVE BEEN MADE, NO OTHER PARTICULARS ARE AVAILABLE. THERE IS NO REFER ENCE TO ANY SEIZED MATERIAL. THE BANK FROM WHICH CASH WITHDRAW AL WAS MADE, THE DATE OF WITHDRAWAL AND WHEN THE AMOUNT WA S PAID TO THE PARTIES ARE ALL MISSING. WHETHER THE CASH W ITHDRAWAL WAS MADE ON A SINGLE DAY OR IS IT THE AGGREGATE OF THE AMOUNTS WITHDRAWN IN A WEEK, A MONTH OR A YEAR HAS ALSO NOT BEEN SPECIFIED. TO CAP IT ALL, THE ASSESSING O FFICER HAS MADE THE ADDITION WITH THE CAPTION PAYMENTS MADE T O RELATED PERSONS. BUT IN THE DISCUSSION PART, THER E IS NO MENTION ABOUT THE PURPOSE OF ALLEGED PAYMENTS. WIT HOUT ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 46 OF 73 SUCH BASIC DETAILS, THE ASSESSING OFFICER COULD NOT HAVE PUT ACROSS TO THE APPELLANT, WHETHER THE SAME HAVE BEEN ENTERED IN THE BOOKS OF ACCOUNT, MUCH LESS QUESTION THE VIO LATION OF THE PROVISIONS OF SEC.13(1)(C) AND 13(3) OF THE ACT . THE WITHDRAWAL OF CASH FROM THE BANK IS NOT UNUSUAL FEA TURE, THAT TOO FOR AN INSTITUTION OF THE SIZE OF THE APPELLANT . IT IS FOR THE ASSESSING OFFICER TO FIRST FIND OUT THE LINK BETWEE N THE CASH WITHDRAWAL AND THE POSSIBLE PURPOSE FOR WHICH THE S AME HAS BEEN UTILIZED WHICH HAS ENURED TO THE BENEFIT OF SP ECIFIED PERSONS OF THE APPELLANT. THE APPELLANT CANNOT BE ASKED TO ANSWER A BLAND QUESTION. WITHOUT DOING ANY SUCH EX ERCISE, THE ASSESSING OFFICER CANNOT JUMP TO THE CONCLUSION THAT THE APPELLANT HAS FAILED TO EXPLAIN THE TRANSACTIONS. STRANGELY, THE ASSESSING OFFICER WANTS THE APPELLANT TO SUBSTA NTIATE THE CLAIM THAT CASH WITHDRAWALS ARE MADE TO MEET REGULA R EXPENDITURE OF CAPITAL AND REVENUE NATURE, WITH DOC UMENTARY EVIDENCE. THAT WAY THE CASH BOOK ITSELF IS THE DOC UMENTARY EVIDENCE, AS IT WILL CONTAIN ENTRIES RELATING TO TH E WITHDRAWAL OF CASH AND THE PURPOSE FOR WHICH IT IS SPENT, OR R E-DEPOSITING OF CASH ALSO INTO THE BANK. HAVING SAID THAT NO DO CUMENTARY EVIDENCE HAS BEEN PRODUCED, THE ASSESSING OFFICER I N THE VERY NEXT SENTENCE MENTIONS: THE PRESENT CLAIMS MADE BY SUBMITTING COPIES OF ACCOUNTS IS CLEARLY AN AFTERTHOUGHT AND A SELF-SERV ING DOCUMENT CREATED TO TAKE SHELTER REGARDING THE CLAI M. HENCE IT DOES NOT, IN ANY WAY, SUPPORT THE CLAIM OF THE ASSESSEE. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 47 OF 73 IN THESE CIRCUMSTANCES, IT IS BUT NATURAL FOR THE A PPELLANT TO DISPARAGE THE COMMENTS OF THE ASSESSING OFFICER. T HEREFORE, I HAVE NO HESITATION TO DELETE THE ADDITION OF RS.5,5 4,50,500/- FROM THE COMPUTATION OF INCOME UNDER THE HEAD PAYM ENT TO RELATED PERSONS. 55. WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. AS RIGHTLY OBSERVED BY THE LD CIT(A), THE ASSESSING OFFICER HAS MENTIONED SOME AMOUNT AGAINST THE THREE PERSONS STA TED ABOVE, BUT DID NOT FURNISH THE DATE WISE DETAILS OF PAYMEN TS ALLEGED TO HAVE BEEN MADE TO THE ABOVE SAID PERSON. WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE BOOKS OF ACCOUNT TO SHOW THAT THE WITHDRAWALS MADE FROM THE BANK HAVE BEEN DULY ACCOU NTED FOR IN THE BOOKS OF ACCOUNTS AND NO PAYMENT HAS BEEN MADE TO THE ABOVE SAID PERSONS AS ALLEGED BY THE AO. WE NOTICE THAT THE AO HAS OBSERVED THAT THE SAME IS A SELF-SERVING DOCUMENT. HOWEVER, THE BOOKS OF ACCOUNTS, BEING THE BOOK OF ORIGINAL ENTRI ES, SHOULD HAVE BEEN EXAMINED BY THE ASSESSING OFFICER. WE NOTICE THAT THE AO HAS NOT SHOWN THAT THE ENTIRE BOOKS OF ACCOUNTS IS NOT RELIABLE. ON THE CONTRARY, THE AO HAS PLACED HIS RELIANCE ON THE VER Y SAME BOOKS OF ACCOUNTS FOR DETERMINING THE TOTAL INCOME OF THE AS SESSEE BY CONSIDERING THE RECEIPTS AND EXPENSES. FURTHER, T HE AO HAS NOT FURNISHED THE BREAK-UP DETAILS OF THE PAYMENTS ALLE GED TO HAVE BEEN MADE TO THE THREE PERSONS MENTIONED ABOVE. THE AO SHOULD HAVE FURNISHED THE BREAK-UP DETAILS AND HE HIMSELF COULD HAVE COMPARED THE SAID DETAILS OF CASH WITHDRAWALS WITH THE BOOKS OF ACCOUNTS IN ORDER TO ASCERTAIN AS TO WHETHER THE IMPUGNED WITHD RAWALS WERE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 48 OF 73 ACTUALLY GIVEN TO THE ABOVE SAID PERSONS OR NOT. T HE AO COULD HAVE ALSO ASKED EXPLANATIONS FROM THE ASSESSEE BY FURNIS HING THE BREAK- UP DETAILS. THE AO HAS NOT CARRIED OUT ANY OF THE ABOVE SAID STEPS. ON THE CONTRARY, IT IS THE SUBMISSION OF THE ASSESS EE THAT ALL CASH WITHDRAWALS MADE FROM THE BANK HAVE BEEN DULY ACCOU NTED FOR IN THE BOOKS OF ACCOUNTS AND NO PAYMENT, AS ALLEGED BY THE AO, HAS BEEN MADE TO THE ABOVE SAID THREE PERSONS DURING TH E YEAR RELEVANT TO AY 2013-14. ACCORDING TO THE ASSESSEE, IT HAS F URNISHED THE ABOVE SAID EXPLANATIONS ON THE BASIS OF BOOKS OF AC COUNTS. HENCE WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTE NTION OF THE ASSESSEE THAT THE AO HAS MADE THE IMPUGNED ADDITION ON SURMISES AND CONJECTURES.ACCORDINGLY, WE ARE OF THE VIEW LD CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 56. THE NEXT ISSUE RELATES TO THE REJECTION OF EXE MPTION CLAIMED BY THE ASSESSEE U/S 11 OF THE ACT. THE AO HELD SO BY CONSIDERING THE DISALLOWANCES MADE BY HIM, WHICH WERE DISCUSSED ABO VE, AND ALSO BY HOLDING THAT THE ASSESSEE HAS COLLECTED CAPITATI ON FEE UNDER THE GARB OF DEVELOPMENT FEE. EVEN THOUGH THE AO ADDED THE DEVELOPMENT FEES COLLECTED BY THE ASSESSEE TO THE T OTAL INCOME, IT WAS STATED THAT THE AO HAS RECTIFIED THE SAME BY HI S RECTIFICATION ORDER PASSED U/S 154 OF THE ACT ON NOTICING THAT TH E ASSESSEE ITSELF HAS OFFERED THE DEVELOPMENT FEE COLLECTIONS AS ITS INCOME. THE QUESTION THAT REMAINS IS WHETHER THE DEVELOPMENT FE ES COLLECTED BY THE ASSESSEE WOULD PARTAKE THE CHARACTER OF CAPITAT ION FEE? ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 49 OF 73 57. WE NOTICE THAT THE LD CIT(A) HAS DEALT WITH THIS ISSUE AS UNDER:- 25. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF T HE ASSESSING OFFICER AND ALSO GONE THROUGH THE WRITTEN SUBMISSIO N MADE BY THE APPELLANT. IT IS AN UNDISPUTED FACT THAT THE APPELLANT IS RUNNING EDUCATIONAL INSTITUTIONS LIKE MEDICAL COLLE GE AND ENGINEERING COLLEGE. PROVIDING OF EDUCATION IS UND OUBTEDLY A CHARITABLE PURPOSE. IT IS NOT THE CASE OF THE ASSE SSING OFFICER THAT THE APPELLANT HAS CARRIED ON ANY BUSINESS ACTI VITY. THE ENTIRE ISSUE HINGES ON THE COLLECTION OF FEES OVER AND ABOVE WHAT IS PRESCRIBED BY THE GOVERNMENT. WHILE THE AS SESSING OFFICER HAS TERMED IT AS CAPITATION FEE, THE APPELL ANT HAS CALLED THE SAME AS VOLUNTARY DONATION. IRRESPECTIV E OF THE NOMENCLATURE, THE ASSESSING OFFICER HAS NOT ESTABLI SHED THAT THE MONIES SO COLLECTED WERE SPENT OUTSIDE THE BOOK S OF ACCOUNT. THE ASSESSING OFFICER HAS NOT DISPUTED TH E CLAIM OF THE APPELLANT THAT STUDENTS FROM WHOM DEVELOPMENT F EES HAVE BEEN COLLECTED HAVE BEEN ISSUED RECEIPTS AND A CCOUNTED FOR IN THE BOOKS OF ACCOUNT MAINTAINED. THE ALLEGA TION OF VARIATION OF FEE COLLECTED FROM VARIOUS STUDENTS CA NNOT BE FAULTED, AS IN ITS VERY NATURE THE STUDENTS ARE ADM ITTED UNDER MANAGEMENT QUOTA, WHICH USE DISCRETION DEPENDING UP ON AFFORDABILITY, DEMAND AND OTHER FACTORS. THE APPEL LANT IS CLAIMED TO HAVE NOT COLLECTED ANY DEVELOPMENT FEE A T ALL FROM SOME STUDENTS, WHICH FACT HAS NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER. THE VOLUNTARY CONTRIBUTION OR D EVELOPMENT ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 50 OF 73 FEES HAS BEEN ACCOUNTED FOR AS REVENUE RECEIPTS AND APPLIED FOR ONLY EDUCATIONAL PURPOSES. 26. THE ASSESSING OFFICER DID MAKE AN ATTEMPT TO CALL FOR INFORMATION FROM STUDENTS BY ADDRESSING IN ABOUT 17 CASES, SOME OF WHICH HAVE BEEN SERVED. THE REPLIES RECEIVE D, IF NOT SATISFACTORY OR ARE ADVERSE TO THE APPELLANT, SHOUL D BE PUT ACROSS TO THE APPELLANT TO REBUT THE SAME, AS OTHER WISE THE CONCLUSION WOULD BE ONE-SIDED. THE ASSESSING OFFIC ER HAS HIMSELF AFTER BEING SATISFIED ABOUT THE ACCOUNTING OF DEVELOPMENT FEES AND BRINGING INTO THE BOOKS OF ACC OUNT DELETED THE ADDITION MADE IN THE ASSESSMENT IN HIS RECTIFICATION ORDER PASSED LATER, WHICH WILL BE ADV ERTED TO IN THE SUBSEQUENT PART OF THIS ORDER. WITH REGARD TO SIPHONING OFF OF FUNDS IN VIOLATION OF SECTION 13, THE SAME H AS BEEN DEALT WITH IN THE LATTER PART OF THIS ORDER. THERE IS NO DOUBT THERE IS A PROHIBITION CONTAINED IN KARNATAKA EDUCA TIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEES) ACT, 1984 TO COLLECT CAPITATION FEES BY EDUCATIONAL INSTITUTIONS AND THE AUTHORITIES HAVE BEEN EMPOWERED TO INSPECT, ENQUIRE AND INVESTIGATE AS TO WHETHER AN INSTITUTION IS COLLECT ING CAPITATION FEE IN CONTRAVENTION OF THE PROVISIONS O F THE SAID ACT. BUT THE POWER OF INSPECTION ETC., IS VESTED W ITH GOVERNMENT OF KARNATAKA. THE INCOME TAX ACT DOES N OT REFER TO THE SOURCE OF INCOME, BUT PRESCRIBES THE MANNER IN WHICH INCOME HAS TO BE APPLIED TO MEET THE OBJECTS OF THE TRUST. THE BENEFIT OF SECTION 11 OF THE ACT CAN BE REJECTE D ONLY WHEN ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 51 OF 73 THE INCOME OF THE TRUST IS APPLIED FOR THE PURPOSE OTHER THAN THE OBJECTS OF THE TRUST. THE BENEFIT OF SECTION 1 1 OF THE I T ACT, IN SO FAR AS THE INCOME DERIVED FROM PROPERTY HELD AS A TRUST, IS GIVEN ON A STIPULATION THAT THE INCOME SH ALL BE APPLIED FOR THE PURPOSES OF OBJECTS OF THE TRUST AN D IF 85% OF THE INCOME IS APPLIED FOR THE PURPOSES OF OBJECTS O F THE TRUST, WHICH INCLUDES BOTH REVENUE AND CAPITAL EXPENDITURE , THE ENTIRE INCOME IS EXEMPT FROM THE TAX AND IF APPLICA TION OF THE INCOME IS SHORT OF 85% OF THE TOTAL INCOME, SUCH SH ORTAGE OF APPLICATION CAN BE ACCUMULATED FOR APPLICATION OVER A PERIOD OF FIVE SUBSEQUENT YEARS. THE ASSESSING OFFICER HA S NOT ESTABLISHED THAT THE ACTIVITIES OF THE APPELLANT AR E NOT GENUINE OR THAT THE ACTIVITIES OF THE APPELLANT HAVE NOT BE EN CARRIED ON IN ACCORDANCE WITH THE OBJECTS FOR WHICH REGISTRATI ON WAS GRANTED. 27. THE ASSESSING OFFICER HAS ALLUDED TO CERTAIN SEIZED MATERIALS TO HOLD THAT THE CAPITATION FEE HAS BEEN COLLECTED. WITH REGARD TO SEIZED MATERIAL A/SSECT/9, 10 AND 11 , THEY ARE THE RECEIPTS ISSUED BY THE APPELLANT FOR VOLUNT ARY CONTRIBUTION AND CERTAIN PARTICULARS ARE AVAILABLE. THE SEIZED DOCUMENT BEARING NO.A/SSECT/19 AND 20 ARE UNSIGNED LOOSE SHEETS OF PAPER AND THERE IS NO CORROBORATIVE EVIDENCE. SIMILARLY SEIZED DOCUMENT MARKED AS A/SSECT/25 DOES NOT CONCLUSIVELY ESTABLISH THE CULPABILITY OF THE APPEL LANT. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 52 OF 73 28. THE ASSESSING OFFICER DURING THE COURSE OF HIS ASSESSMENT ORDER HAS MENTIONED ABOUT THE STATEMENT RECORDED FROM ONE SHRI K.J.PRAMOD WHO ALLEGED ABOUT THE COLLECTION OF CAPITATION FEE AS PER THE DIRECTION O F SRI BALAJI, SON OF SRI G.DAYANAND AND THE COLLECTION MADE BY ON E SRI KRISHNAPPA. HE HAS ALSO REFERRED TO THE STATEMENT RECORDED FROM ONE SHRI SHIVARAME GOWDA. THE STATEMENT RECOR DED AT THE TIME OF SEARCH CANNOT BE THE BASIS FOR DRAWING CONCLUSIONS. THERE HAS TO BE CORROBORATIVE EVIDENC E. IN ALL FAIRNESS, THE ASSESSING OFFICER SHOULD HAVE ALLOWED OPPORTUNITY TO THE APPELLANT TO CROSS-EXAMINE ALL T HE PERSONS FROM WHOM STATEMENTS HAVE BEEN RECORDED IN THE INTE REST OF PRINCIPLES OF NATURAL JUSTICE. 29. AS REGARDS, THE CASE LAWS QUOTED BY THE ASSES SING OFFICER, VIZ., MISS MOHINI JAIN VS. STATE OF KARNAT AKA (1992)(2 SCC 666), IT DEALT WITH CAPITATION FEE AND ITS MALA DIES. THE APPELLANT HAS JUSTIFIED HIS COLLECTIONS AS VOLUNTAR Y DONATIONS. AS REGARDS THE CASE OF ISLAMIC ACADEMY OF EDUCATION VS. STATE OF KARNATAKA (2003) 6 SCC 697, THE STATE OF KARNATA KA HAS FIXED CERTAIN PERCENTAGE OF SEATS TO BE FILLED ON M ERITS, AND A SMALL PERCENTAGE HAS BEEN LEFT TO BE FILLED UP BY M ANAGEMENT QUOTA. THE MANAGEMENT HAS TO HAVE SOME DISCRETION IN ORDER TO PROVIDE INFRASTRUCTURE, LABORATORY, HOSPIT AL, FACULTY ETC., TO RUN THE INSTITUTIONS TO THE REQUISITE STAN DARD. THE ASSESSING OFFICER HAS FURTHER REFERRED TO THE DECIS ION OF ITAT HYDERABAD IN THE CASE OF VODITHALA EDUCATION SOCIET Y VS. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 53 OF 73 ADIT (2008)(20 SOT 353), WHEREIN THE ITAT HAS REFER RED TO THE DECISION OF THE MADRAS HIGH COURT IN THE CASE O F T.DEVASAHAYA NADAR VS. CIT (51 ITR 20). THE APPELL ANT HAS BROUGHT OUT IN ITS WRITTEN SUBMISSIONS A PLETHORA O F CASE LAWS TO MEET THE POINTS RAISED BY THE ASSESSING OFFICER. THE VERY SAME MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST (2015) 374 ITR 0274 (MAD) HAS HELD THA T SO LONG AS THERE IS NO INVOLUNTARY NATURE OF COLLECTIO N, EXEMPTION TO THE TRUST CANNOT BE DENIED. THE OBSERVATION OF THE MADRAS HIGH COURT IS EXTRACTED BELOW: 7.7 IN OUR CONSIDERED OPINION, BASED ON THE LOOSE SHEE TS AND CASH SEIZED, WHICH HAVE BEEN HELD AS IRRELEVANT TO THE PRESENT ISSUE, IT CANNOT BE HELD THAT FOR ALL THE A SSESSMENT YEARS THE ASSESSEE RECEIVED CAPITATION FEE FOR ADMI SSION OF STUDENTS IN THE MANAGEMENT QUOTA. THIS IS A PERVERS E INFERENCE. WITHOUT CONDUCTING ANY ENQUIRY IN THIS R EGARD TO MAKE ALLEGATION IS UNSUSTAINABLE. THE INFORMATIO N OBTAINED FROM THE PUBLIC INFORMATION OFFICER TO A Q UERY RAISED UNDER THE RIGHT TO INFORMATION ACT TO THE EF FECT THAT 'THERE IS NO ANY COMPLAINT RECEIVED FROM ANY STUDENT/PARENT REGARDING CAPITATION FEE CHARGED BY THE ABOVE INSTITUTIONS SO FAR' ALSO TILTS THE BALANCE I N FAVOUR OF THE ASSESSEE. IT DISPROVES THE DEPARTMENT'S ALLEGAT ION OF INVOLUNTARY COLLECTION OF AMOUNTS. THAT APART, THE ORDER PASSED UNDER SECTION 264 OF THE ACT FOR THE ASSESSM ENT YEARS 1998-1999 TO 2001-2002 CLEARLY STATES THAT TH E DONATION RECEIVED FROM STUDENTS OR THE PARENTS IS N OT COMPULSORY IN NATURE AND, THEREFORE, THE SAME IS NO T CAPITATION FEE. THERE IS NO MATERIAL TO CONTROVERT THIS FACT ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 54 OF 73 WHICH IS TO THE KNOWLEDGE OF THE DEPARTMENT. NO ENDEAVOUR IS MADE TO SUSTAIN THE ALLEGATION OF INVO LUNTARY DONATION. IN ANY EVENT, AS RIGHTLY HELD BY THE TRIB UNAL, IT IS NOT RELEVANT IN THE PRESENT CASE AS THE ALLEGATI ON IS VIOLATION OF SECTION 13 R/W SECTION 11 OF THE ACT. 7.8 WE FIND THAT FACTUALLY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL HAVE COME TO THE CONCLUSION THAT THE DONATIONS RECEIVED DO NOT PARTA KE THE CHARACTER OF CAPITATION FEE. THERE IS NO ELEMENT OF INVOLUNTARY NATURE OF DONATION. A SPECIFIC FINDING IS GIVEN THAT NO INVESTIGATION HAS BEEN DONE TO SHOW THAT AN Y PARENT OR STUDENT HAS COMPLAINED ABOUT THE NATURE O F DONATION. THE DEPARTMENT HAS FAILED TO DISPEL THE F INDING OF FACT. 7.9 IN ANY EVENT, THE LEARNED STANDING COUNSEL FOR THE DEPARTMENT PLEADS THAT SINCE THE ASSESSEE HAD NOT SUBMITTED THE LIST OF STUDENTS, THE ASSESSING OFFIC ER HAD TO MAKE AN ESTIMATE ADOPTING HIS OWN METHODOLOGY. THIS WE CANNOT ACCEPT FOR THE SIMPLE REASON THAT THE SHOW C AUSE NOTICE PROCEEDS ON THE BASIS THAT THE ASSESSEE HAS TO SUBMIT THE LIST OF DONORS ALONE. A REPLY WAS SUBMIT TED BY THE ASSESSEE AND IN PARAGRAPH 6(III), THE ASSESSING OFFICER STATES THAT ALL THE STATEMENTS TALLIED. HOWEVER, TH E ASSESSING OFFICER COMES TO A DIFFERENT CONCLUSION T HAT CONTRIBUTION IS NOT VOLUNTARY, AND IT IS RELATABLE TO ADMISSION OF STUDENTS. WE FIND THIS FINDING OF THE ASSESSING OFFICER, AS HAS BEEN RIGHTLY HELD BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUN AL, IS NOT SUPPORTED BY DOCUMENTS, BUT ON THE BASIS OF ASSESSING OFFICER'S INFERENCE. IT CANNOT BE NOW STA TED THAT SOMETHING WAS NOT FURNISHED, NEVERTHELESS, HE TALLI ED ALL THE MATERIALS AND CAME TO THE CONCLUSION AS STATED ABOVE. IF THE ASSESSING OFFICER HAS TALLIED THE FIGURES TH EN THE ASSESSEES CASE OF ACTUAL CONTRIBUTION TO TRUST HAS TO BE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 55 OF 73 ACCEPTED. IT HAS BEEN SHOWN IN THE RETURN OF INCOME . A BALD STATEMENT IN PARAGRAPH (7) OF THE ASSESSMENT O RDER THAT THE ASSESSEE IS NOT CARRYING ON CHARITABLE ACT IVITIES FOR THE PURPOSE OF SECTION 13 READ WITH SECTION 11 OF T HE ACT APPEARS TO BE THE MAINSTAY OF THE DEPARTMENT'S CASE . 7.10 IN EFFECT, IT IS CLEAR THAT THE AUTHORITY HAS CONF USED HIMSELF WITH THE ADMISSION OF STUDENTS IN MANAGEMEN T QUOTA WITH THE CARRYING ON ACTIVITIES OF THE TRUST. THE DISTINCTION IS OBVIOUS THAT IF THE DEPARTMENT WANTE D TO MAKE OUT A CASE OF VIOLATION OF SECTION 13 OF THE A CT BY THE TRUST, IT CANNOT BE BASED ON THE PERCEPTION OF THE ASSESSING OFFICER THAT DONATIONS TO THE TRUST ARE N OT VOLUNTARY. WE HASTEN TO ADD THAT THERE IS NO MATERI AL TO SUPPORT THE PLEA THAT THE DONATIONS ARE NOT VOLUNTA RY. 7.11 HAVING INVOKED SECTION 13, THE MAINSTAY OF THE CAS E OF THE DEPARTMENT SHOULD BE BASED ON THE ACTIVITIES OF THE TRUST TO PLEAD THAT THE SAME ARE NOT IN CONSONANCE WITH SECTION 13 OF THE ACT AND, THEREFORE, EXEMPTION UND ER SECTION 11 OF THE ACT SHOULD BE DENIED, WHICH WE FI ND IS ABYSMALLY SILENT IN THE SHOW CAUSE NOTICE AND THE ASSESSMENT ORDER. 7.12 WE DO NOT FIND ANY REASON TO COME TO A DIFFERENT CONCLUSION ON FACTS, AS HAS BEEN ADDRESSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS THE TRIBUNAL ON THESE TWO ISSUES RELATING TO SEIZURE OF CASH AND LOOSE SHEETS. APPARENTLY, THERE IS NO DISPUTE O N THAT FACT. ALL THAT THE DEPARTMENT IS TRYING TO SHOW IS THAT THERE IS SOMETHING IMPROPER IN THE MANNER IN WHICH THE DONATIONS ARE HANDLED. BOTH THESE FACTORS CLEARLY E STABLISH THAT THE ALLEGATIONS HAVE NOTHING TO DO WITH THE TR UST AND ITS ACTIVITIES IN RELATION TO THE CHARITABLE OBJECT S. 7.13 THERE APPEARS TO BE NO SECOND OPINION ON THIS FINDING BECAUSE THE SCOPE OF SECTIONS 11, 12 AND 13 , AS WE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 56 OF 73 FIND IS IN RELATION TO APPLICATION OF INCOME AND TH E UTILIZATION THEREON FOR CHARITABLE PURPOSE, AS DEFI NED UNDER SECTION 2(15) OF THE ACT, WHICH READS AS UNDER: 'SECTION 2(15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY.' . 7.15 WE FIND THAT THE DEPARTMENT HAS NOT MADE OUT A CAS E OF COLLECTION OF CAPITATION FEE UNDER THE GUISE OF DONATION AND IT HAS NOT ESTABLISHED A CASE OF INVOLUNTARY NA TURE OF DONATIONS. THEREFORE, THE QUESTIONS OF LAW (I) AND (II) ARE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 30. AS REGARDS THE OTHER GROUND OF THE ASSESSING OFFICER ABOUT THE VIOLATION OF 13(1)(C), I AGREE WITH THE P LEA OF APPELLANT THAT THE ENTIRE INCOME CANNOT BE DENIED T HE EXEMPTION U/S 11. THE DENIAL COULD ONLY TO THE EXT ENT OF INCOME THAT WAS VIOLATIVE. EVEN THE CIRCULAR OF TH E CBDT IN CIRCULAR NO.387 DATED 6.7.1984 STIPULATES THE SAME PROPOSITION. 31. THEREFORE, THE DENIAL OF EXEMPTION UNDER SECT ION 11 OF THE ENTIRE INCOME IS NOT SUSTAINABLE. 58. WE HEARD THE PARTIES ON THIS ISSUE AND PER USED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS TAKEN THE VIEW THAT THE DEVELOPMENT FEES COLLECTED BY THE ASSESSEE IS IN TH E NATURE OF ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 57 OF 73 CAPITATION FEE, SINCE IT IS OVER AND ABOVE THE FEES PRESCRIBED BY THE GOVERNMENT. HOWEVER, THE SUBMISSION OF THE ASSESSE E IS THAT THE DEVELOPMENT FEE SO COLLECTED REPRESENTS VOLUNTARY D ONATION GIVEN BY THE DONORS. THE LD CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS NOT RECEIVED DEVELOPMENT FEE FROM ALL THE STUDENTS AND FURTHER THE QUANTUM OF DONATION VARIES FROM ONE PERSON TO ANOTH ER. IN THE INSTANT CASE, THE AO HAS NOT BROUGHT ON RECORD ANY CREDIBLE MATERIAL TO PROVE THAT THE DONATIONS WERE NOT VOLUN TARY. THE AO HAD PLACED HIS RELIANCE ON THE STATEMENT GIVEN BY T WO PERSONS NAMED SHRI K J PRAMOD AND SRI SHIVARAME GOWDA. HOWE VER, THE AO HAS NOT ALLOWED THE OPPORTUNITY OF CROSS EXAMINI NG THEM. FURTHER THE STATEMENTS SO GIVEN BY THEM IS CONTRARY TO THE BOOKS OF ACCOUNTS, I.E., NO EVIDENCE WAS FOUND TO SHOW THAT THE ASSESSEE HAS COLLECTED MONEY OUTSIDE THE BOOKS OF ACCOUNTS. IT IS STATED THAT ALL THE AMOUNTS COLLECTED BY THE ASSESSEE HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. HENCE THE AO COULD NOT HAV E PLACED HIS RELIANCE ON THE STATEMENTS SO GIVEN BY THEM. THE L D CIT(A) HAS OBSERVED THAT THE PROHIBITION TO COLLECT CAPITATION FEE HAS BEEN IMPLEMENTED BY THE GOVERNMENT OF KARNATAKA UNDER KA RNATAKA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEES) ACT, 1984. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD THAT ANY ACTION HAS BEEN TAKEN UPON THE ASSESSEE UNDER THE ABOVE ACT. ALL THESE FACTS WOULD SHOW THAT IT IS THE AO, WHO HAS TAKEN THE VIE W THAT THE DEVELOPMENT FEE COLLECTED BY THE ASSESSEE IS IN THE NATURE OF CAPITATION FEE AND SAID VIEW CAN ONLY BE HELD TO BE AN INFERENCE DRAWN BY THE AO ON THE BASIS OF SURMISES AND CONJEC TURES. THE LD CIT(A) HAS ALSO TAKEN SUPPORT OF THE DECISION RENDE RED BY HON'BLE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 58 OF 73 MADRAS HIGH COURT IN THE CASE OF BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST (SUPRA), WHEREIN UNDER IDENTICAL SET O F FACTS, THE HON'BLE HIGH COURT HELD THAT THERE IS NO MATERIAL T O SHOW THAT THE DONATIONS WERE NOT VOLUNTARY. WE ARE OF THE VIEW TH AT THE DECISION RENDERED BY HON'BLE MADRAS HIGH COURT IN THE CASE O F BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST (SUPRA) SHA LL APPLY TO THE FACTS OF THE PRESENT CASE. 59. WE HAVE NOTICED EARLIER THAT THE AO REJECTE D THE CLAIM OF EXEMPTION U/S 11 OF THE ACT ON THE REASONING THAT (A) THE ASSESSEE HAS SPENT MONEY IN CASH FOR NON-SP ECIFIED PURPOSES. (B) THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SE C.13(1)(C) OF THE ACT. (C) THE ASSESSEE HAS COLLECTED CAPITATION FEE. THE LD CIT(A) HAD DELETED ADDITIONS MADE BY THE AO AND ALSO HELD THAT THE DEVELOPMENT FEES COLLECTED BY THE ASSESSEE CANNOT BE CONSIDERED AS CAPITATION FEE. IN THE FOREGOING PAR AGRAPHS, WE HAVE UPHELD THE VIEW TAKEN BY THE LD CIT(A) ON ALL THE A BOVE SAID ISSUES. HENCE, THE VERY FOUNDATION, BASED ON WHICH THE AO H AD DENIED EXEMPTION U/S 11 OF THE ACT TO THE ASSESSEE, HAS BE EN REVERSED, WE HAVE NO HESITATION IN UPHOLDING THE VIEW OF LD CIT( A) IN HOLDING THAT THE ASSESSEE CANNOT BE DENIED EXEMPTION U/S 11 OF THE ACT. 60. WE SHALL NOW TAKE UP THE APPEALS FILED BY TH E ASSESSEE FOR ASSESSMENT YEARS 2010-11 TO 2013-14, WHEREIN THE AS SESSEE IS CHALLENGING THE ADDITION OF RS.25.00 CRORES IN AGGR EGATE WAS ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 59 OF 73 DIRECTED TO BE ADDED BY LD CIT(A) AND ALSO CONSEQUE NT DISALLOWANCE OF DEPRECIATION THEREON. 61. THE FACTS RELATING TO THIS ISSUE ARE THAT DU RING THE COURSE OF SEARCH PROCEEDINGS, A STATEMENT U/S 132(4) OF THE A CT WAS RECORDED FROM THE CHAIRMAN OF ASSESSEE INSTITUTION NAMED SHR I G DAYANAND ON 13-09-2013. IN RESPONSE TO QUESTION NO.6, SHRI G DAYANAND HAS STATED AS UNDER:- IN MY SUBMISSION EARLIER, I HAD ADMITTED RS.4.99 C RORE ON ACCOUNT OF CASH DEPOSITS IN BANK ACCOUNT OF MY PROPRIETORSHIP CONCERN, INVESTMENT IN JEWELLERY AND WATCHES I WISH TO CONFIRM THE SAME. FURTHER, I WISH TO ADMIT UNDISCLOSED INCOME ON ACCOUNT OF INVESTMENTS IN WAT CHES AS DISCLOSED ABOVE IN REPLY TO Q3. ALSO ON THE BASIS OF ISSUES DISCUSSED PERTAINING TO THE TRUST, I WISH TO ADMIT THAT I MAY NOT BE ABLE TO PROVE SATISFACTORILY THE UTILIZA TION OF FUNDS WHICH HAVE BEEN MADE IN CASH. OVER ALL, I WI SH TO ADMIT AN AMOUNT OF RS.25 CRORES BEING DISALLOWANCE OF EXPENSES AND AMOUNTS MADE FOR CONSTRUCTION IN THE HANDS OF THE TRUST FOR THE DIFFERENT ASSESSMENT YEA RS ON THE BASIS OF CASH WITHDRAWALS MADE AND OTHER CASH EXPENSES CONSEQUENT TO THE ADMISSION SO MADE, THE ASSESSEE F URNISHED A LETTER DATED 14-12-2015 ALONG WITH A REVISED COMPUT ATION OF INCOME FOR ASSESSMENT YEARS 2010-11 TO 2013-14 REDUCING FO LLOWING AMOUNTS FROM APPLICATION OF INCOME. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 60 OF 73 ASST. YEAR AMOUNT 2010-11 RS.4.00 CRORES 2011-12 RS.6.00 CRORES 2012-13 RS.7.50 CRORES 2013-14 RS.7.50 CRORES ------------ RS.25.00 CRORES ========= IN THE LETTER, THE ASSESSEE HAS, INTER ALIA, STATED AS UNDER:- THE ABOVE SAID DISALLOWANCE HAS BEEN ACCEPTED BY THE ASSESSEE, SINCE AT THE TIME OF SEARCH, THEY COU LD NOT PROVIDE ALL THE RELATED EVIDENCES IN CONNECTION WITH THE EXPENDITURE MADE FOR CONSTRUCTION OF THE COLLEGE AND HOSPITAL. WE ONCE AGAIN REITERATE THAT THE ABOVE EXPENDITURES ARE ACTUALLY SPENT BY THE ASSESSEE AND RECORDED THE SAME IN THE BOOKS OF ACCOUNTS OF THE TRUST MAINTAINED IN THE REGULAR COU RSE OF OPERATIONS AND HAS AGREED FOR DISALLOWANCE FOR T HE SAKE OF BUYING PEACE WITH THE DEPARTMENT. 62. IT IS PERTINENT TO NOTE THAT THE ASSESSING O FFICER DID NOT MAKE DISALLOWANCE AS OFFERED BY THE ASSESSEE IN AY 2010- 11 TO 2013-14. INSTEAD, THE AO HAS ADDED RS.9.93 CRORES, RS.43.33 CRORES AND RS.4.76 CRORES RESPECTIVELY IN AY 2012-13 TO 2014-1 5, WHICH AGGREGATED TO RS.58.02 CRORES. HENCE, IN APPEARS T HAT THE AO WAS OF THE VIEW THAT THE ADDITION SO MADE BY HIM INCLUD ED THE AMOUNT OF RS.25.00 CRORES OFFERED BY THE ASSESSEE IN AY 20 10-11 TO 2013- 14. 63. IN THE APPEAL FILED BEFORE LD CIT(A), THE FIRST APPELLATE AUTHORITY DELETED THE ADDITION OF RS.9.93 CRORES, R S.43.33 CRORES AND RS.4.76 CRORES RESPECTIVELY IN AY 2012-13 TO 20 14-15. HAVING ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 61 OF 73 DELETED THE ABOVE SAID ADDITIONS, THE LD CIT(A) TOO K THE VIEW THAT THE STATEMENT RECORDED FROM THE CHAIRMAN OF THE ASS ESSEE INSTITUTION DURING THE COURSE OF SEARCH PROCEEDINGS COULD NOT BE OVERLOOKED. ACCORDINGLY, THE LD CIT(A) HELD THAT T HE ADMISSION MADE VOLUNTARILY IN THE STATEMENT TAKEN U/S 132(4) OF THE ACT EXPRESSING INABILITY TO PRODUCE VOUCHERS AND BILLS FOR RS.25.00 CRORES SPREAD OVER FOUR YEARS CANNOT BE IGNORED. H E ALSO EXPRESSED THE VIEW THAT THE ASSESSEE HAD SUFFICIENT TIME BETW EEN THE DATE OF SEARCH AND COMPLETION OF ASSESSMENT TO PRODUCE ALL VOUCHERS AND BILLS TO THE SATISFACTION OF THE AO, BUT DID NOT CO MPLY WITH IT. 64. BEFORE LD CIT(A), THE ASSESSEE PLEADED THAT THE ADMISSION OF RS.25.00 CRORES WAS MADE BY THE CHAIRMAN ON MISTAKE N NOTION ON BOTH FACT AND LAW. HOWEVER, LD CIT(A) NOTICED THAT THERE WAS LONG GAP BETWEEN THE DATE OF DECLARATION AND THE DATE OF SUBMISSION OF REVISED COMPUTATION OF STATEMENT BEFORE THE AO. HE ALSO NOTICED THAT THE ASSESSEE HAS ALSO NOT RETRACTED THE STATEM ENT SO GIVEN. HE ALSO TOOK THE VIEW THAT THE ASSESSEE HAS ESTOPPED T HE AO FROM MAKING FURTHER INVESTIGATION BY MAKING SUCH ADMISSI ON. ACCORDINGLY, HE HELD THAT THE ADDITION OF RS.25.00 CRORES IN AGGREGATE AS ADMITTED BY THE ASSESSEE FOR AY 2010-1 1 TO 2013-14 SHOULD BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE IN THE ABOVE SAID YEARS. ACCORDINGLY, HE DIRECTED THE AO TO MAK E ADDITION TO THE EXTENT OF RS.25.00 CRORES IN AGGREGATE IN AY 2010-1 1 TO 2013-14. 65. SINCE THE ABOVE SAID AMOUNT OF RS.25.00 CROR ES RELATED TO CONSTRUCTION OF BUILDINGS, THE LD CIT(A) ALSO HELD THAT DEPRECIATION ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 62 OF 73 IS NOT ADMISSIBLE ON THE ABOVE SAID ADDITION. ACCO RDINGLY, HE DIRECTED THE AO TO ADD 10% OF THE ADDITION AGREED T OWARDS BUILDING FOR VARIOUS YEARS TOWARDS DEPRECIATION DISALLOWANCE . HE ALSO DIRECTED THE AO TO LEVY TAX AT MAXIMUM MARGINAL RAT E ON THE ADDITION OF RS.25.00 CRORES AND DISALLOWANCE OF DEP RECIATION. 66. IT IS THE CASE OF THE ASSESSEE THAT ITS CH AIRMAN ADMITTED THAT HE MAY NOT BE ABLE TO PROVE THE UTILIZATION OF FUND S SPENT IN CASH AND HE AGREED THAT A SUM OF RS.25.00 CRORES MAY BE EXCLUDED FROM THE AMOUNT OF APPLICATION OF INCOME, I.E., IT IS NO UNDISCLOSED INCOME WARRANTING A SEPARATE ADDITION. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS MAINTAINED ITS ACCOUNTS PROPERLY A ND ALL THE AMOUNT SPENT ON CONSTRUCTION OF BUILDING, WHETHER I NCURRED IN CASH OR BY WAY OF CHEQUE, HAVE BEEN DULY ACCOUNTED FOR I N THE BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE CHAIRMAN HAD AGREE D TO SURRENDER THE IMPUGNED AMOUNT OF RS.25.00 CRORES ON LY ON AN APPREHENSION THAT HE MAY NOT BE ABLE TO PROVE THE U TILIZATION. THE LD A.R SUBMITTED THAT THE BOOKS OF ACCOUNTS, HOWEVE R, DEPICTS ACTUAL UTILIZATION AND HENCE THE APPREHENSION OF TH E CHAIRMAN NO LONGER EXISTS. THE LD A.R PLACED HIS RELIANCE ON T HE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF PU LLANGODE RUBBER PRODUCT CO. (SUPREME COURT) AND SUBMITTED TH AT THE ADMISSION MADE IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT CANNOT BE HELD TO BE CONCLUSIVE, THOUGH IT IS AN IM PORTANCE PIECE OF EVIDENCE. IT WAS FURTHER HELD THAT IT IS OPEN TO T HE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT. A CCORDINGLY, THE LD A.R SUBMITTED THAT THE BOOKS OF ACCOUNTS MAINTAI NED BY THE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 63 OF 73 ASSESSEE, WHICH HAVE ALSO BEEN AUDITED, WOULD SHOW THAT THE ADMISSION MADE BY THE CHAIRMAN IS INCORRECT. 67. WE FIND FORCE IN THE CONTENTIONS OF LD A.R. WE HAVE NOTICED EARLIER THAT, AS PER THE PROVISIONS OF SEC.11 OF TH E ACT, THE METHODOLOGY ADOPTED FOR COMPUTING TOTAL INCOME OF C HARITABLE INSTITUTION IS DIFFERENT FROM THAT ADOPTED FOR A BU SINESS CONCERN. BOTH CAPITAL EXPENSES AND REVENUE EXPENSES INCURRED TOWARDS ATTAINMENT OF OBJECTS OF THE TRUST OR INSTITUTION A RE TREATED AS APPLICATION OF INCOME AND DEDUCTED FROM THE INCOM E DERIVED FROM THE PROPERTY. WE HAVE ALSO NOTICED THAT THE PROVI SIONS OF SEC.40A(3) AND 40A(3A), WHICH PROHIBITS BUSINESS CO NCERNS TO INCUR EXPENSES BY WAY OF CASH OVER AND ABOVE A PRESCRIBED AMOUNT, DO NOT APPLY TO THE ASSESSEE DURING THE YEARS UNDER CO NSIDERATION. HENCE, MERELY BECAUSE THE ASSESSEE HAD INCURRED EXP ENSES BY WAY OF CASH, SHOULD NOT BE A GROUND FOR DISBELIEVING TH E EXPENSES INCURRED BY THE ASSESSEE TOWARDS CONSTRUCTION OF BU ILDINGS. 68. IT IS THE SUBMISSION OF THE ASSESSEE THAT A LL THE EXPENSES INCURRED BY IT IN CASH TOWARDS CONSTRUCTION OF BUIL DINGS HAVE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNTS. ALL OF THE M ARE SUPPORTED BY VOUCHERS AND BILLS ALSO. THE BOOKS OF ACCOUNTS HAVE BEEN AUDITED AND THE AUDITORS HAVE NOT FOUND ANY DEFICIE NCY IN THE MAINTENANCE OF BOOKS AND VOUCHERS. HENCE, WHILE FI LING REVISED COMPUTATION OF INCOME ON 14.12.2015 BEFORE THE ASSE SSING OFFICER, THE ASSESSEE HAS STATED THAT THE EXPENSES WERE ACTU ALLY SPENT AND RECORDED IN THE BOOKS OF ACCOUNTS AND THE CHAIRMAN HAS AGREED FOR ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 64 OF 73 DISALLOWANCE FOR THE SAKE OF BUYING PEACE WITH THE DEPARTMENT. HOWEVER, IN THE ASSESSMENT ORDER, THE ASSESSING OFF ICER HAS OBSERVED AS UNDER WHILE REJECTING THE SUBMISSION OF THE ASSESSEE:- 3.6 THE EXPLANATION OF THE ASSESSEE AND ITS SUBM ISSIONS ARE TAKEN COGNIZANCE OF ALONG WITH THE EVIDENCES FOUND AND SEIZED DURING THE COURSE OF THE SEARCH OPERATIONS C ONDUCTED. THE EXPLANATION OF THE ASSESSEE THAT THE SAID EXPEN DITURES WERE ACTUALLY SPENT BY THE ASSESSEE AND RECORDED TH E SAME IN THE BOOKS OF ACCOUNTS OF THE TRUST MAINTAINED IN TH E REGULAR COURSE OF OPERATIONS AND THAT IT HAS AGREED FOR DIS ALLOWANCE FOR THE SAKE OF BUYING PEACE WITH THE DEPARTMENT IS NOT PLAUSIBLE, WITHOUT ANY BASIS AND HENCE IS NOT ACCEP TABLE. THE FINDINGS DURING THE COURSE OF SEARCH OPERATIONS AND THE ADMISSION OF THE ASSESSEE COMPANY THAT IT WAS NOT I N A POSITION TO PROVE EXPENSES TO THE TUNE OF RS.25,00, 00,000/- FOR VARIOUS ASSESSMENT YEARS PROVES THAT THE FUNDS RECEIVED WERE NOT UTILIZED FOR THE OBJECTS OF THE TRUST, IN CLEAR VIOLATION OF THE PROVISIONS OF SEC.11 OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO PROVIDE THE SAID SUPPORTING DOCUMENTARY EVIDENCES EVEN DURING THE CO URSE OF THE ASSESSMENT PROCEEDINGS. 69. WE NOTICED THAT THE AO HAS OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED SUPPORTING DOCUMENTARY EVIDENCES EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS.THE LD CIT(A), WHI LE ADJUDICATING THE ISSUE RELATING TO THE ADDITION OF RS.58.02 CROR ES, HAS OBSERVED IN PARAGRAPH 47 OF HIS ORDER, THAT THERE IS NO INDI CATION IN THE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 65 OF 73 ASSESSMENT ORDER THAT THE ASSESSING OFFICER ATTEMPT ED TO OBTAIN THE EVIDENCE BY ISSUE OF NOTICE U/S 142(1) OF THE ACT. HE HAS FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS RELIED UPON THE OUTCOME OF THE SEARCH PROCEEDINGS ONLY. THIS OBSERVATION OF T HE LD CIT(A) WOULD SHOW THAT THE AO HAS CHOSEN TO RELY UPON THE REPORT OF SEARCH OFFICIALS ONLY DURING THE COURSE OF ASSESSME NT PROCEEDINGS. HENCE, IN OUR VIEW, NO CREDENCE COULD BE GIVEN TO T HE OBSERVATION OF THE AO THAT THE ASSESSEE DID NOT PRODUCE DOCUMENTAR Y EVIDENCES SUPPORTING EXPENDITURE. ON THE CONTRARY, THE ASSES SEE HAS FURNISHED BOOKS OF ACCOUNTS AND ALSO SUBMITTED THAT ALL THE EXPENSES HAVE BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS, WHICH HAVE ALSO BEEN AUDITED. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNTS. ON THE CONTRARY, THE AO HAS RELIED UPON THE BOOKS OF ACCOU NTS TO ASCERTAIN THE RECEIPTS AND OTHER EXPENSES. IT IS WELL SETTLE D PROPOSITION THAT THE AO SHOULD REJECT THE BOOKS OF ACCOUNTS, WHEN HE PREFERS TO MAKE ADDITION ON THE BASIS OF ENTRIES RECORDED IN T HE BOOKS OF ACCOUNTS. 70. WE HAVE NOTICED EARLIER THAT THE LD CIT(A) HAS DELETED THE ADDITION OF RS.58.02 CRORES AND HIS DECISION RENDER ED ON THIS ISSUE WAS EXTRACTED EARLIER. HOWEVER, HE HAS CONFIRMED T HE ADDITION TO THE EXTENT OF RS.25.00 CRORES ONLY FOR THE REASON T HAT THE ASSESSEE HAS ADMITTED THE SAME IN THE STATEMENT TAKEN U/S 13 2(4) OF THE ACT AND FURTHER THE ASSESSEE HAS NOT RETRACTED THE SAME . THE QUESTION THAT NEEDS TO BE ADDRESSED IS WHETHER THE ADDITION COULD BE MADE ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 66 OF 73 MERELY ON THE BASIS OF ADMISSION MADE BY THE ASSESS EE IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT? 71. BEFORE US, THE LD A.R PLACED HIS RELIANCE ON THE DECISION RENDERED BY HON'BLE SUPREME COURTIN THE CASE OF PUL LANGODE RUBBER PRODUCT CO. (SUPRA), WHEREIN IT WAS HELD THA T THE ADMISSION MAY BE AN IMPORTANT PIECE OF EVIDENCE, BUT THE SAME IS NOT CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT WAS INCORRECT. WE MAY ALSO REFER TO T HE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS. V. MR.P FIRM (1965) 56 ITR 67, WHEREIN IT WAS HELD THAT THE PRI NCIPLE OF ESTOPPELS WILL NOT AGAINST THE INCOME TAX ACT. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW: 'THE CONTENTION IS THAT THE ASSESSEES HAVING OPTED TO ACCEPT THE SCHEME, DERIVED BENEFIT THERE-UNDER, AND AGREED TO HAVE THEIR DISCHARGED DEBTS EXCLUDED FROM THE ASSETS SID E IN THE BALANCE-SHEET SUBJECT TO THE CONDITION THAT SUBSEQU ENT RECOVERIES BY THEM WOULD BE TAXABLE INCOME, THEY AR E NOW PRECLUDED, ON THE PRINCIPLE OF 'APPROBATE AND REPRO BATE', FROM PLEADING THAT THE INCOME THEY DERIVED SUBSEQUE NTLY BY REALIZATION OF THE REVIVED DEBTS IS NOT TAXABLE INC OME. THE DOCTRINE OF 'APPROBATE AND REPROBATE' IS ONLY A SPE CIES OF ESTOPPEL; IT APPLIES ONLY TO THE CONDUCT OF PARTIES . AS IN THE CASE OF ESTOPPEL, IT CANNOT OPERATE AGAINST THE PRO VISIONS OF A STATUTE. IF A PARTICULAR INCOME IS NOT TAXABLE UNDE R THE INCOME-TAX ACT , IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OR ANY OTHER EQUITABLE DOCTRINE. EQUITY IS OUT OF PLACE IN TAX LAW; A PARTICULAR INCOME IS EITHER ELI GIBLE TO TAX ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 67 OF 73 UNDER THE TAXING STATUTE OR IT IS NOT. IF IT IS NOT , THE INCOME- TAX OFFICER HAS NO POWER TO IMPOSE TAX ON THE SAID INCOME.' HENCE, MERE ADMISSION OF ADDITIONAL INCOME WOULD NO T AUTOMATICALLY ENTITLE THE ASSESSING OFFICER TO ASSE SS THE SAME, IF THE ASSESSEE DISPUTES THE SAME SUBSEQUENTLY WITH CORROB ORATIVE EVIDENCES. 72. THE HON'BLE BOMBAY HIGH COURT HAS DEALT WITH TH IS ISSUE IN CASE OF BALMUKUND ACHARYA (310 ITR 310), WHEREIN IT WAS HELD AS UNDER:- '31. HAVING SAID SO, WE MUST OBSERVE THAT THE APEX COURT AND THE VARIOUS HIGH COURTS HAVE RULED THAT THE AUTHORI TIES UNDER THE ACT ARE UNDER AN OBLIGATION TO ACT IN ACCORDANC E WITH LAW. TAX CAN BE COLLECTED ONLY AS PROVIDED UNDER THE ACT . IF ANY ASSESSEE, UNDER A MISTAKE, MISCONCEPTIONS OR ON NOT BEING PROPERLY INSTRUCTED IS OVER ASSESSED, THE AUTHORITI ES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAXES DUE ARE COLLECTED (SEE S.R. KOSTI V. CIT [2005] 276 ITR 165 (GUJ.), CPA YOOSUF V. ITO [1970] 77 ITR 237 (KER.), CIT V. BHARAT GENERAL REINSURANCE CO. LTD . [1971] 81 ITR 303 ( DELHI), CIT V. ARCHANA R. DHANWATEY [1982] 136 ITR 355 (BOM.). 32. IF PARTICULAR LEVY IS NOT PERMITTED UNDER THE A CT, TAX CANNOT BE LEVIED APPLYING THE DOCTRINE OF ESTOPPEL. (SEE DY. CST V. SREENI PRINTERS [1987] 67 SCC 279. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 68 OF 73 33. THIS COURT IN THE CASE OF NIRMALA L. MEHTA V. A. BALASUBRAMANIAM, CIT [2004] 269 ITR 1 HAS HELD THAT THERE CANNOT BE ANY ESTOPPEL AGAINST THE STATUTE. ARTICLE 265 OF THE CONSTITUTION OF INDIA IN UNMISTAKABLE TERMS PROVIDE S THAT NO TAX SHALL BE LEVIED OR COLLECTED EXCEPT BY AUTHORIT Y OF LAW. ACQUIESCENCE CANNOT TAKE AWAY FROM A PARTY THE RELI EF THAT HE IS ENTITLED TO WHERE THE TAX IS LEVIED OR COLLECTED WITHOUT AUTHORITY OF LAW. IN THE CASE ON HAND, IT WAS OBLIG ATORY ON THE PART OF THE ASSESSING OFFICER TO APPLY HIS MIND TO THE FACTS DISCLOSED IN THE RETURN AND ASSESS THE ASSESSEE KEE PING IN MIND THE LAW HOLDING THE FIELD.' 73. THE HON'BLE CALCUTTA HIGH COURT IN CASE OF CIT V. BHASKAR MITTER (73 TAXMANN 437) HAS HELD AS UNDER: '8. THE CONTROVERSY RAISED IN THE SECOND QUESTION I S AS TO WHETHER THE ANNUAL LETTING VALUE OF THE PROPERTY DE TERMINED BY THE TRIBUNAL COULD BE A FIGURE LOWER THAN THAT R ETURNED BY THE ASSESSEE. THE PRINCIPLES FOR DETERMINING THE AN NUAL LETTING VALUE UNDER SECTION 23 ARE NOW WELL-SETTLED AND IF THE VALUE RETURNED IS NOT IN ACCORDANCE WITH SUCH PRINC IPLES, IT IS OPEN TO THE ASSESSEE TO CONTEND THAT THE VALUE AS M AY BE DETERMINED UPON CORRECT APPLICATION OF THE LAW SHOU LD FORM THE BASIS OF ASSESSMENT. THE REVENUE AUTHORITIES, I N OUR VIEW, CANNOT BE HEARD TO SAY THAT MERELY BECAUSE THE ASSE SSEE HAS RETURNED A FIGURE WHICH IS HIGHER THAN THE ANNUAL V ALUE DETERMINED IN ACCORDANCE WITH THE CORRECT LEGAL PRI NCIPLES, SUCH HIGHER AMOUNT AND NOT THE CORRECT AMOUNT SHOUL D BE LAWFULLY ASSESSED. AN ASSESSEE IS LIABLE TO PAY TAX ONLY UPON SUCH INCOME AS CAN BE IN LAW INCLUDED IN HIS TOTAL INCOME AND WHICH CAN BE LAWFULLY ASSESSED UNDER THE ACT. T HE LAW EMPOWERS THE ITO TO ASSESS THE INCOME OF AN ASSESSE E ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 69 OF 73 ACCORDING TO LAW AND DETERMINE THE TAX PAYABLE THER EON. IN DOING SO HE CANNOT ASSESS AN ASSESSEE ON AN AMOUNT, WHICH IS NOT TAXABLE IN LAW, EVEN IF THE SAME IS SHOWN BY AN ASSESSEE. THERE IS NO ESTOPPEL BY CONDUCT AGAINST L AW NOR IS THERE ANY WAIVER OF THE LEGAL RIGHT AS MUCH AS THE LEGAL LIABILITY TO BE ASSESSED OTHERWISE THAN ACCORDING T O THE MANDATE OF THE LAW (SIC). IT IS ALWAYS OPEN TO AN A SSESSEE TO TAKE THE PLEA THAT THE FIGURE, THOUGH SHOWN IN HIS RETURN OF TOTAL INCOME, IS NOT TAXABLE IN LAW. THE TRIBUNAL, THEREFORE, IN OUR VIEW DID NOT COMMIT ANY ERROR IN DIRECTING TO F IX THE CORRECT ANNUAL LETTING VALUE OF THE PREMISES IN QUE STION, IN ACCORDANCE WITH THE PROVISIONS OF SECTION 23 OF THE SAID ACT WITH REFERENCE TO THE MUNICIPAL VALUATION, ALTHOUGH SUCH SUM WAS LOWER THAN THE FIGURE SHOWN BY THE ASSESSEE IN HIS RETURNS OF TOTAL INCOME.' 74. IN THE INSTANT CASES, THE CHAIRMAN HAS AGREE D THAT AN AMOUNT OF RS.25.00 CRORES MAY BE DISALLOWED FROM TH E EXPENSES INCURRED ON CONSTRUCTION FOR THE DIFFERENT ASSESSME NT YEARS, I.E., OUT OF APPLICATION OF INCOME. THE REASON CITED F OR SUCH ADMISSION IS THAT THE ASSESSEE MAY NOT BE ABLE TO PROVE SATIS FACTORILY THE UTILIZATION OF FUNDS WHICH HAVE BEEN MADE IN CASH. 75. WE HAVE EARLIER NOTICED THAT THE EXPENSES IN CURRED ON CONSTRUCTION OF BUILDINGS IS TREATED AS APPLICATION OF INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST. EVEN THOUGH TH E ASSESSEE HAS ADMITTED THAT THE ABOVE SAID AMOUNT OF RS.25.00 CRO RES MAY BE REDUCED FROM THE AMOUNT OF APPLICATION OF INCOME, YET NEITHER THE ASSESSEE NOR THE ASSESSING OFFICER COULD BRING OUT ANY MATERIAL TO ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 70 OF 73 SHOW THE PURPOSE FOR WHICH THE AMOUNT WAS SPENT AND ALSO FAILED TO SHOW THAT THE SAID PURPOSE WAS NOT RELATING TO T HE OBJECTS OF THE TRUST. ON THE CONTRARY, THE ASSESSEE HAS STATED IN ITS LETTER DATED 14.12.2015 FILED BEFORE THE AO THAT THE EXPENDITURE WAS ACTUALLY SPENT AND RECORDED IN THE BOOKS OF ACCOUNTS AND FUR THER STATED THAT THE ASSESSEE HAS AGREED FOR DISALLOWANCE FOR THE SA KE OF BUYING PEACE WITH THE DEPARTMENT. WHEN THE ASSESSEE HAS R ECORDED THE EXPENSES IN ITS BOOKS OF ACCOUNTS AND WHEN THOSE EX PENSES WERE SPENT ON CONSTRUCTION OF BUILDINGS, IN OUR VIEW, TH ERE IS NO SCOPE FOR PRESUMING THAT THE SAID EXPENSES WERE NOT SPENT FOR ATTAINING OBJECTS OF THE TRUST. IF THAT WAS REAL POSITION, T HEN IT IS THE DUTY OF THE ASSESSING OFFICER TO GIVE A FINDING WITH CORROB ORATIVE EVIDENCES THAT THE AMOUNT CLAIMED TO HAVE BEEN SPENT FOR CONS TRUCTION OF BUILDINGS WERE NOT ACTUALLY SPENT FOR THAT PURPOSE, BUT DIVERTED FOR SOME OTHER PURPOSE. THE ASSESSING OFFICER HAS NOT DONE SO. IN FACT, FOR THE ABOVE SAID REASONS ONLY, THE LD CIT(A) HAS DELETED THE ADDITION OF RS.58.02 CRORES MADE BY THE ASSESSING O FFICER, WHICH INCLUDED THE ABOVE SAID AMOUNT OF RS.25.00 CRORES A LSO. HENCE, THE LD CIT(A), AFTER DELETING THE ADDITION OF RS.58.02 CRORES, WAS NOT JUSTIFIED IN SUSTAINING ADDITION TO THE EXTENT OF R S.25.00 CRORES SIMPLY FOR THE REASON THAT THE ASSESSEE HAS ACCEPTE D THE SAME IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. WE H AVE NOTICED THAT THE ASSESSEE HAS SUBMITTED BEFORE THE LD CIT(A) THA T THE SAID ADMISSION WAS GIVEN ON WRONG NOTION ON FACT AND LAW . BEFORE THE AO ALSO, THE ASSESSEE HAS SUBMITTED THAT ALL THE EX PENSES HAVE BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS ESTABLISHED T HAT THE ADMISSION ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 71 OF 73 MADE BY IT WAS INCORRECT. IN ANY CASE, THE ADMISSI ON WAS NOT RELATED TO UNDISCLOSED INCOME, WHICH WOULD WARRANT ANY ADDITION, BUT IT WAS ONLY A PLEA TO REDUCE THE AMOUNT FROM TH E QUANTUM OF APPLICATION OF INCOME, WHICH IN THE PRESENT CASE WA S CONSTRUCTION EXPENSES INCURRED ON BUILDINGS. THE FACT OF CONSTR UCTION OF BUILDINGS BY THE ASSESSEE HAS BEEN ACCEPTED BY THE TAX AUTHORITIES, IN WHICH CASE, THEY ARE NOT JUSTIFIED IN ACCEPTING PART OF EXPENSES AND REJECTING PART THEREOF ONLY FOR THE REASON THAT THE SAME HAS BEEN INCURRED IN CASH. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION TO THE EXTENT OF RS.25.00 CRORES MERELY ON THE REASON THAT THE ASSES SEE HAS ACCEPTED THE SAME. WE HAVE NOTICED THAT THE ASSESS EE HAS ESTABLISHED THAT THE ADMISSION SO MADE BY IT IS INCORRECT.ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION OF RS.25.00 CRORES IN AGGREGATE MADE IN AY 2010-11 TO 2013-14. 76. WE NOTICE THAT WHEN THE LD CIT(A) HAS SUSTAIN ED THE ADDITION TO THE EXTENT OF RS.25.00 CRORES, HE TOOK THE VIEW THAT THE SAME MAY ALSO REPRESENT INFLATION OF CONSTRUCTION EXPENSES A ND HENCE DEPRECIATION CLAIMED THEREON SHOULD BE DISALLOWED. ACCORDINGLY HE HAS DIRECTED THE AO TO DISALLOW DEPRECIATION ON THE ABOVE SAID AMOUNT OF RS.25.00 CRORES. THE ABOVE SAID INFERENC E DRAWN BY LD CIT(A) IS MISPLACED, SINCE IT IS NOT THE CASE OF AS SESSING OFFICER AT ALL. THE AO HAS TAKEN THE VIEW THAT THE AMOUNT OF RS.58.02 CRORES WAS NOT SPENT FOR THE OBJECTS OF THE TRUST. HENCE THE QUESTION WAS ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 72 OF 73 NOT RELATED TO INFLATION OF EXPENSES, BUT RELATED T O WHETHER THE EXPENSES WERE INCURRED FOR THE OBJECTS OF THE TRUST OR NOT. 77. WE HAVE DELETED THE ADDITION OF RS.25.00 CRORES SUSTAINED BY LD CIT(A) IN THE PREVIOUS PARAGRAPHS. HENCE, TH E DISALLOWANCE OF DEPRECIATION, BEING CONSEQUENTIAL IN NATURE, WOU LD NOT SURVIVE ON ITS OWN. ACCORDINGLY, WE SET ASIDE THE ORDER PASSE D BY LD CIT(A) ON THIS ISSUE. 78. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE AND ALL THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSE D. ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4TH SEPTEMBER,2019. SD/ SD/- (N.V VASUDEVAN) VICE PRESIDENT (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 4 TH SEPTEMBER, 2019. /VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NOS.709 TO 712 /BANG/2018 ITA NOS.1142 TO 1148 /BANG/2018 CO NOS.88 TO 89 /BANG/2018 PAGE 73 OF 73 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..