DCIT, CHENNAI V. Jaisakthi Educational Trust, CHENNAI

ITSSA 15/CHNY/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2529 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 08-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Block assessment
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , !.#$#%,' !( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IT (SS) A NO.14/MDS/2015 BLOCK ASSESSMENT PERIOD FROM 01.04.1999 TO 13.01.20 00 SHRI P.CHINNADURAI, S/O. PARASURAMAN, NO.23, RAILWAY COLONY 2 ND STREET, NELSON MANICKAM ROAD, AMINJIKARAI, CHENNAI 600 029. PAN : AABPC6070D V. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I(3), CHENNAI 600 034. (*+/ APPELLANT) (-.*+/ RESPONDENT) IT (SS) A NO.15/MDS/2015 BLOCK ASSESSMENT PERIOD FROM 01.04.1989 TO 12.08.19 99 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I(3), 46, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. V. M/S.JAISAKTHI EDUCATIONAL TRUST, NO.23, RAILWAY COLONY, II STREET, NELSON MANICKAM ROAD, CHENNAI 600 029. PAN : AAATJ0281A (*+/ APPELLANT) (-.*+/ RESPONDENT) ASSESSEES BY : MS. S.JAYASHREE, C.A. DEPARTMENT BY : MR.SHIVA SRINIVAS, JCIT 7 89' / DATE OF HEARING : 04.08.2016 :;< 89' / DATE OF PRONOUNCEMENT : 07.10.2016 2 I.T.(SS).A. NOS.14 & 15/MDS/2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE AND REVENUE ARE DIRECTE D AGAINST THE ORDER OF CIT(A) -18, CHENNAI DATED 08.06.2015 AND P ERTAINS TO BLOCK PERIOD 01.04.1989 TO 13.01.2000 AND 01.04.1989 TO 12.08.19 99 RESPECTIVELY. 2. SHRI SHIVA SRINIVAS, THE LEARNED DEPARTMENT REPR ESENTATIVE SUBMITTED THAT THERE WAS A SEARCH IN THE PREMISES OF THE MANA GING TRUSTEE OF THE ASESSEE SHRI P.CHINNADURAI ON 13.01.2000. DURING THE COURSE OF SEARCH OPERATION, SEVERAL INCRIMINATING MATERIAL WERE FOUND. THEREFOR E, A PROCEEDING WAS INITIATED AGAINST THE TRUST IN IT(SS)A NO.15/2015 UNDER SECTI ON 158BD OF THE ACT. PROCEEDINGS UNDER SECTION 153C WAS AGAINST SHRI P.C HINNADURAI AGAINST IT(SS)A NO.14/MDS/2015. IN THE COURSE OF THE ASSESS MENT PROCEEDING, THE ASSESSING OFFICER MADE AN ADDITION IN THE HANDS OF SHRI CHINNADURAI, THE ASSESSEE IN IT(SS)A NO.14/MDS/2015 ON SUBSTANTIVE B ASIS. HOWEVER, A PROTECTIVE ASSESSMENT ALSO WAS MADE IN THE HANDS OF M/S.JAISAKTHI EDUCATIONAL TRUST IN IT(SS)A NO.15/MDS/2015. 3. ON APPEAL BY THE ASSESSEE BEFORE CIT(A), THE ORD ER OF THE ASSESSING OFFICER WAS CONFIRMED IN THE CASE OF SHRI P.CHINNAD URAI. CONSEQUENTLY, A PROTECTIVE ASSESSMENT MADE IN THE HANDS OF M/S.JAIS AKTHI EDUCATIONAL TRUST WAS VACATED. ACCORDING TO THE LEARNED DEPARTMENT RE PRESENTATIVE, THE REVENUE HAS FILED THE APPEAL AGAINST ORDER OF THE CIT(A) AP PREHENDING THAT IN CASE, THE 3 I.T.(SS).A. NOS.14 & 15/MDS/2015 ADDITION MADE IN THE HANDS OF SHRI P.CHINNADURAI IS TO BE DELETED THEN IT HAS TO BE ADDED AS INCOME IN THE IN THE HANDS OF M/S.JAISA KTHI EDUCATIONAL TRUST. 4. COMING TO THE MERIT OF THE APPEAL, THE LEARNED D EPARTMENT REPRESENTATIVE SUBMITTED THAT DURING THE COURSE OF SEARCH OPERATIONS SEVERAL INCRIMINATING MATERIALS WERE FOUND. THE FIRST ISSUE ARISES FOR CONSIDERATION IS ADDITION OF RS.1,54,25,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE. ACCORDING TO THE LEARNED REPRESENTATIVE, THE ASSESS ING OFFICER MADE AN ADDITION OF RS.1,69,27,000/- AS UNDISCLOSED INCOME. HOWEVER, THE CIT(A) FOUND THAT AN ADVANCE SAID TO BE REFUNDED BY SHRI BHOOPAL AN HAS TO BE ASSESSED ONLY IN THE HANDS OF SHRI P.CHINNADURAI TO THE EXTE NT OF RS.1,54,50,000/-. THE CIT(A) FOUND THAT THE ACCOUNTS WAS WRITTEN OFF SUBS EQUENT TO THE SEARCH. THEREFORE, THE CLAIM OF THE ASSESSEE THAT SHRI BHOO PALAN REFUNDED THE ADVANCE GIVEN BY THE TRUST IS AN AFTERTHOUGHT. THEREFORE, I T WAS RIGHTLY REJECTED BY THE CIT(A). MOREOVER, FOR PURCHASING THE LAND SHRI P.CH INNADURAI TOOK A LOAN OF RS.3 CRORES IN HIS INDIVIDUAL CAPACITY FROM UCO BAN K. WHEN SHRI P. CHINNADURAI TOOK LOAN AND MADE ADVANCE FOR PURCHASE OF LAND, THE REFUND MADE BY SAID SHRI BHOOPALAN HAS TO BE TAKEN ONLY IN THE HANDS OF P.CHINNADURAI AND NOT IN THE HANDS OF THE TRUST. TH EREFORE, THE CIT(A) HAS RIGHTLY FOUND THAT THE SUBSTANTIVE ASSESSMENT HAS T O BE MADE IN THE HANDS OF SHRI P.CHINNADURAI. 5. REFERRING TO THE UNAUTHORIZED COLLECTION OF DONA TION TO THE EXTENT OF RS.41,15,400/- FROM THE STUDENTS, THE LEARNED DEPAR TMENT REPRESENTATIVE SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE ANY M ATERIAL EVIDENCE TO 4 I.T.(SS).A. NOS.14 & 15/MDS/2015 SUGGEST THAT THE COLLECTION OF DONATION WAS NOT FRO M THE STUDENTS. SINCE, SHRI P.CHINNADURAI COLLECTED THE MONEY ACCORDING TO THE LEARNED REPRESENTATIVE, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION. REFERRIN G TO THE ADDITION OF RS.16,56,000/, THE LEARNED DEPARTMENT REPRESENTATIV E SUBMITTED THAT THE ASSESSEE CLAIMED THAT THE ABOVE SAID RS.16,56,000/- WAS PAID TO SHRI BHOOPALAN. THOUGH THE ASSESSEE CLAIMED BEFORE THE C IT(A) THAT THE ABOVE SAID AMOUNT WAS INITIALLY ADVANCED OUT OF THE BORRO WED FUNDS, THE AMOUNT WAS BORROWED ONLY BY SHRI P.CHINNADURAI AND NOT BY THE TRUST. THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSE SSING OFFICER. 6. ON THE CONTRARY, MS.S.JAYASHREE, THE LEARNED REP RESENTATIVE FOR THE ASSESSEE SUBMITTED THAT SHRI P.CHINNADURAI, THE ASS ESSEE IN IT(SS)A NO.14/MDS/2015 IS THE MANAGING TRUSTEE OF M/S.JAISA KTHI EDUCATIONAL TRUST, THE ASSESSEE IN IT(SS)A NO.15/MDS/2015. ADMITTEDLY, THERE WAS SEARCH OPERATION IN THE PREMISES OF SHRI P.CHINNADURAI ON 12.08.1999 AND ON 13.01.2000. THE ASSESSING OFFICER INITIATED ASSESSM ENT PROCEEDINGS AGAINST SHRI P.CHINNADURAI UNDER SECTION 158BC. SIMULTANEOU SLY, THE ASSESSMENT PROCEEDINGS ALSO WAS INITIATED AGAINST M/S.JAISAKTH I EDUCATIONAL TRUST UNDER SECTION 158BD OF THE ACT. ACCORDING TO THE LEARNED REPRESENTATIVE, THE ASSESSEE TRUST NAMELY M/S.JAISAKTHI EDUCATIONAL TRU ST WAS ESTABLISHED FOR MANAGING SEVERAL EDUCATIONAL INSTITUTIONS. DURING T HE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED REFUND OF ADVANCE GIVEN T O SHRI BHOOPALAN FOR PURCHASING LAND. ACCORDING TO THE LEARNED REPRESENT ATIVE, THE ASSESSEE INTENDED TO PURCHASE LAND AT VARADHARAJAPURAM FOR E STABLISHING A NEW ENGINEERING COLLEGE. THE ASSESSEE BORROWED RS.3 CRO RES FROM UCO BANK. THE 5 I.T.(SS).A. NOS.14 & 15/MDS/2015 ASSESSEE HAS ALSO PAID A SUM OF RS.3,29,54,500/- AS ADVANCE TO SHRI BHOOPALAN. SINCE THERE WAS A DIFFICULTY IN PROCURIN G THE LAND TO THE EXTENT OF 50 ACRES, THE ASSESSEE WAS ULTIMATELY MANAGED TO PURCH ASE 25 ACRES OF LAND AT THE RATE OF RS.6,00,000/- PER ACRE. THE ASSESSEE HA S PAID A TOTAL CONSIDERATION OF RS.1,50,50,000/-. A SUM OF RS.52,20,050/- WAS PA ID IN CHEQUE. THE BALANCE AMOUNT OF RS.97,79,950/- WAS IN FACT PAID BY CASH. ACCORDING TO THE LEARNED DEPARTMENT REPRESENTATIVE, THE BALANCE AMOUNT WAS U SED FOR CONSTRUCTION OF COLLEGE BUILDING. REFERRING TO THE SWORN STATEMENT RECORDED FROM SHRI P.CHINNADURAI ON 12.08.1999 UNDER SECTION 132(4) OF THE ACT, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT SHRI P.CHINNADURAI EXPLAINED BEFORE THE REVENUE AUTHORITIES THAT THE LAND WAS PU RCHASED BY M/S.JAISAKTHI EDUCATIONAL TRUST FOR THE PURPOSE OF STARTING AN EN GINEERING COLLEGE AT VARADHARAJAPURAM. THE FACT THAT A SUM OF RS.1,54,25 ,000/- WAS REFUNDED BY SHRI BHOOPALAN IS NOT A DISPUTE. THE CIT(A) REJECTE D THE CLAIM OF THE ASSESSEE ONLY ON THE GROUND THAT THE ACCOUNT WAS WRITTEN SUB SEQUENT TO THE DATE OF SEARCH. 7. ACCORDING TO THE LEARNED REPRESENTATIVE, WHEN TH E FACT THAT THE REFUND WAS MADE BY SHRI BHOOPALAN IS NOT A DISPUTE MERELY BECAUSE THE BOOKS OF ACCOUNTS WERE WRITTEN SUBSEQUENT TO THE DATE OF SEA RCH CANNOT BE A REASON FOR REJECTING THE CLAIM OF THE ASSESSEE. THE MANAGING T RUSTEE TOOK A LOAN ON BEHALF OF THE TRUST. THEREFORE, THE ADDITION MADE BY THE A SSESSING OFFICER WHICH WAS CONFIRMED BY CIT(A) HAS TO BE DELETED. 6 I.T.(SS).A. NOS.14 & 15/MDS/2015 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE MANA GING TRUSTEE OF M/S.JAISAKTHI EDUCATIONAL TRUST FILED AN APPEAL AGAINST THE ORDER OF CIT(A) CONTENDING THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE W ITH REGARD TO THE REFUND MADE BY SHRI BHOOPALAN. THE FACT THAT M/S.JAISAKTHI EDUCATIONAL TRUST HAS ESTABLISHED SEVERAL EDUCATION INSTITUTIONS IS NOT A DISPUTE. DURING THE YEAR UNDER CONSIDERATION, SHRI P.CHINNADURAI BORROWED LO AN OF RS.3 CRORES. SHRI P.CHINNADURAI CLAIMED THAT ADVANCES WERE MADE TO SH RI BHOOPALAN FOR PURCHASING THE LAND AT VARADHARAJAPURAM FOR THE PUR POSE OF ESTABLISHING ENGINEERING COLLEGE. SHRI P.CHINNADURAI HAS ALSO CL AIMED THAT A SUM OF RS.1,54,25,000/- WAS REFUNDED BY SHRI BHOOPALAN. 9. FROM THE MATERIAL AVAILABLE ON RECORD, IT APPEAR S THAT THE ADMINISTRATIVE COMMISSIONER EXAMINED THIS ISSUE IN EXERCISE OF HIS POWER UNDER SECTION 263 OF THE INCOME TAX ACT AND FOUND T HAT THE ASSESSEE HAS NOT RECONCILED BOOKS OF ACCOUNTS WITH REGARD TO PAYMENT S YET TO BE MADE FOR PURCHASE OF LAND. SHRI P.CHINNADURAI HIMSELF ADMITT ED BEFORE THE REVENUE AUTHORITIES THAT INITIALLY AN AMOUNT OF RS.3 CRORES WAS PAID TO LAND OWNERS FOR PURCHASING 25 ACRES OF LAND AT VARADHARAJAPURAM. TH E RATE PER ACRE WAS RS.17.75 LAKHS. THE SAID SHRI P.CHINNADURAI FURTHER CLARIFIED THAT HE RECEIVED BACK A SUM OF RS.1.5 CRORES BY CASH. THE ORDER OF T HE ADMINISTRATIVE COMMISSIONER WAS CHALLENGED BEFORE THIS TRIBUNAL. T HIS TRIBUNAL BY AN ORDER DATED 24.07.2009, CONFIRMED THE ORDER OF THE ADMINI STRATIVE COMMISSIONER. THEREFORE, THERE WAS A CONFUSION WHETHER THE ADVANC E WAS PAID TO SHRI BHOOPALAN OR TO THE LAND OWNERS DIRECTLY. IN THE SW ORN STATEMENT, SHRI 7 I.T.(SS).A. NOS.14 & 15/MDS/2015 P.CHINNADURAI CLAIMS THAT THE ADVANCE OF RS.3 CRORE S WAS PAID TO 25 LAND OWNERS FOR PURCHASING THE LAND. THE REFUND WAS SAID TO BE RECEIVED FROM SHRI BHOOPALAN. 10. IN VIEW OF THE ABOVE FACTUAL SITUATION, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER IN TH E LIGHT OF THE MATERIAL AVAILABLE ON RECORD AND FIND OUT WHETHER THE ADVANC E WAS MADE TO SHRI BHOOPALAN OR TO THE LAND OWNERS DIRECTLY. IF THE RE FUND WAS SAID TO BE RECEIVED FROM SHRI BHOOPALAN, IT IS ALSO TO BE EXAMINED THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE SAID BHOOPALAN. SINCE THESE ASPECT S WERE NOT EXAMINED EITHER BY THE CIT(A) OR ASSESSING OFFICER, THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE EXAMINED. ACCOR DINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF AD DITION OF RS.1,54,25,000/- IS REMITTED BACK TO THE FILE OF THE AO. 11. THE NEXT ISSUE ARISES FOR CONSIDERATION IS ADDI TION OF RS.41,15,400/-. THIS AMOUNT APPEARS TO BE COLLECTED FROM THE STUDEN TS FOR ADMISSION OF MBA/MCA. THE INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH OPERATION WHICH WAS EXTRACTED BY THE ASSESSING OFFI CER AT PARA.9 OF THE ASSESSMENT ORDER IN THE CASE OF M/S.JAISAKTHI EDUCA TIONAL TRUST SHOWS THE RECEIPT WAS CAPITATION FEE FOR ADMISSION OF STUDENT S. IF THE CAPITATION FEES WAS RECEIVED FOR ADMISSION OF THE STUDENTS, IT HAS TO B E ASSESSED ONLY IN THE HANDS OF THE TRUST AND IT IS NOT KNOWN WHY THE WAS ADDED IN THE HANDS OF MANAGING TRUSTEE SHRI P.CHINNADURAI IN HIS INDIVIDUAL CAPACI TY. THE CIT(A) FOUND THAT OUT 8 I.T.(SS).A. NOS.14 & 15/MDS/2015 OF RS.41,15,400/- A SUM OF RS.38,31,600/- WAS UTILI ZED FOR REPAYMENT OF THE LOAN. IF SHRI P.CHINNADURAI UTILIZED THE MONEY COLL ECTED FROM THE STUDENTS FOR REPAYMENT OF LOAN BORROWED IN HIS INDIVIDUAL NAME, THEN, CERTAINLY, IT IS A DIVERSION OF THE TRUST FUND FOR NON EDUCATIONAL ACT IVITY. THEREFORE, IT HAS TO BE ASCERTAINED, THE PURPOSE FOR WHICH LOAN WAS BORROWE D AND WHETHER REPAYMENT BY SHRI P.CHINNADURAI IS FOR EDUCATIONAL ACTIVITY O R NOT? THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN ORDER TO ASCERTAIN THE R EAL FACTS, THE MATTER NEEDS TO BE REEXAMINED BY THE ASSESSING OFFICER. ACCORDINGL Y, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF ADDITION OF RS.41,15,400/- IS REMITTED BACK TO THE FILE OF THE AO. 12. COMING TO THE ADDITION OF RS.15,56,000/-, THE A SSESSEE CLAIMS THAT THIS AMOUNT WAS PAID TO SHRI BHOOPALAN FOR CONSTRUCTION OF ROAD. THE CIT(A) FOUND THAT THE COST ROAD IS COROLLARY TO THE FIRST ISSUE. SINCE THE FIRST ISSUE WAS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER, THE ISSU E OF DISALLOWANCE OF RS.15,56,000/- IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ISSUE OF ADDITION OF RS.15,56,000/- IS REMITTED BACK TO THE FILE OF THE AO FOR RE- CONSIDERATION. 13. THE CIT(A) DELETED THE PROTECTIVE ASSESSMENT I N THE HAND OF M/S.JAISAKTHI EDUCATIONAL TRUST ONLY ON THE GROUND THAT THE SUBSTANTIVE ASSESSMENT ADDITION MADE ONLY IN THE HANDS OF SHRI P.CHINNADURAI WAS CONFIRMED. SINCE THIS TRIBUNAL FOUND THAT THE FACTS NEEDS TO BE REEXAMINED, THE AO ALSO NEEDS TO RE-EXAMINE THE ISSUE IN RELATION T O M/S.JAISAKTHI EDUCATIONAL 9 I.T.(SS).A. NOS.14 & 15/MDS/2015 TRUST. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORI TIES IN THE CASE OF BOTH THE ASSESSEES ARE SET ASIDE AND THE ENTIRE ISSUE IS REM ITTED BACK TO THE FILE OF THE AO. THE AO SHALL RE-EXAMINE THE MATTER AFRESH IN TH E LIGHT OF THE MATERIALS THAT MAY BE FILED BY THE ASSESSEE AND BRING ON RECORD TH E ENTIRE FACTS WITH REGARD TO ADVANCE MADE TO PURCHASE OF LAND AND THE SO CALLED REFUND OF THE AMOUNT, THE CLASSIFICATION OF CAPITATION FEES FOR ADMISSION OF STUDENTS, PURPOSE FOR WHICH LOAN WAS BORROWED AND ITS REPAYMENT AND DECIDE THE MATTER AFRESH IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESEE. 14. IN THE RESULT, BOTH THE APPEAL OF THE ASSESSEE AND REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 07 TH OCTOBER, 2016 AT CHENNAI. SD/- SD/- ( !.#$#%) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, > /DATED, THE 07 TH OCTOBER, 2016. SP. 8 -9?@ A@<9 /COPY TO: 1. *+ /APPELLANT 2. -.*+ /RESPONDENT 3. 7 B9 () /CIT(A) 4. 7 B9 /CIT, 5. @C -9 /DR 6. D% E /GF.