Retraction of statement given in search u/s132(4). Mere admission of additional income would not automatically entitle the assessing officer to assess the same, if the assessee disputes the same subsequently with corroborative evidences. IT-CASES-202-2020

admin November 16, 2019

Retraction of statement given u/s132(4).
It has been held in various cases and now again confirmed on dated 4 September, 2019 by
Income Tax Appellate Tribunal – Bangalore
Sri Srinivasa Educational & … vs Assistant Commissioner Of Income … on
Held that

Mere admission of additional income would not automatically entitle the assessing officer to assess the same, if the assessee disputes the same subsequently with corroborative evidences.
Various decisions are available on this issue which includes following:-

The Hon’ble Bombay High Court – 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 authorities under the Act are under an obligation to act in accordance 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 authorities 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.).
If particular levy is not permitted under the Act, 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
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 provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field.”
The Hon’ble Calcutta High court in case of CIT V. Bhaskar Mitter (73 Taxmann 437) has held that the controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should 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.
In the same above case it was further held that there is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law.

Full decision is as under:-

Income Tax Appellate Tribunal – Bangalore
Sri Srinivasa Educational & … vs Assistant Commissioner Of Income … on 4 September, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
“A”BENCH : BANGALORE

BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND
SHRI B.R BASKARAN, ACCOUNTANT MEMBER

SN ITA No. Asst. Appellant Respondent
Year
1 709/Bang/2018 2010- Sri Srinivasa The Asst.
11 Educational & Commissioner
Charitable Trust, of Income-tax,
No.619/G, 2ndBlock,. Central Circle
36th Cross, -2(1)
Rajajinagar, 2nd Block, Bengaluru.
Bengaluru-560 010

2 710/Bang/2018 2011- ” ”
12
3 711/Bang/2018 2012- ” ”
13
4 712/Bang/2018 2013- ” ”
14
5 1142//Bang/2018 2008- The Dy. Sri Srinivasa
09 Commissioner of Educational &
Income-tax, Charitable
Central Circle-2(1) Trust,
Bengaluru. No.619/G,
2ndBlock,. 36th
Cross,
Rajajinagar,
2nd 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 2008- Sri Srinivasa The Dy.
/Bang/2018 09 Educational & Commissioner
(In ITA No.1142 Charitable Trust, of Income-tax,
/Bang/2018) No.619/G, 2ndBlock,. Central Circle
36th Cross, -2(1)
Rajajinagar, 2nd Block, Bengaluru.
Bengaluru-560 010

13 CO No. 89 2009- ” ”
/Bang/2018 10
(In ITA No.1143
/Bang/2018)
14 CO No. 90 2014- ” ”
/Bang/2018 15
(In ITA No.1148
/Bang/2018)

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

ORDER
PER BENCH:-

The assessee has filed appeals for assessment years 2010-11 to 2013-14 and the revenue has filed appeals for assessment years 2008-09 to 2014-15. The assessee has filed Cross Objections 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 urged in these ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 appeals arise out of common set of facts. Hence all these appeals were heard together and are being disposed of by this common order, for the sake of convenience

2. At the time of hearing, the Ld A.R did not press 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) relate to certain legal issues. At the time of hearing, the Ld A.R did not press those grounds. Accordingly, those grounds are also dismissed as Not pressed. The Grounds numbered as 10 & 11 in all the 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 depreciation @ 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 justified inholding that the assessee is entitled to exemption u/s 11 of the Act, thus reversing the decision of the assessing officer in rejecting the claim for said exemption. Following grounds have been urged 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
(i) Whether in the facts and circumstances of the case, the CIT(A) erred in granting benefit of exemption u/s 11 to the assessee even though the trust applied its income for purposes 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 the case, the CIT(A) erred in granting benefit of exemption u/s 11 to the assessee even though the trust utilized its income in contravention of the provisions of section 13(1)(c) for the benefit of the persons specified in section 13(3) in support of which there are clear 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 the case, the CIT(A) erred in ignoring the noting in the seized material and also the admission of Principal Person u/s 132(4) which clearly established the fact that there is no documentary evidences with the assessee trust to claim that the income generated in the name of collection of capitation/development fee has been applied for its object.

(iv) Whether in the facts and circumstances of the 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 to prove genuineness of the expenditure made in cash for which also no evidences produced by the assessee to prove that the same were incurred towards application of its income on objects 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 an 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
(vi) For these and such other grounds that may be urged at the time of hearing with the plea that the orders of Ld CIT(A) may be set aside and that of the assessing officer may be restored.”

4. The revenue has also raised specific issues in 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 made for violation of provisions of sec.13(1)(c) of the Act.***
(b) Addition of Rs.993.00 lakhs relating to payment made 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 made for violation of provisions of sec.13(1)(c) of the Act.
(b) Addition of Rs.4333.00 lakhs relating to payment made for non-specified purposes in cash to contractor, other 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 made for violation of provisions of sec.13(1)(c) of the Act.***
(b) Addition of Rs.476.00 lakhs relating to payment made 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 *** These two additions of Rs.703.00 lakhs and Rs.554.50 lakhs have been made in AY 2013-14 only. However, the revenue has inadvertently raised the above said issues in AY 2012-13 and 2014-
15 also. Hence the ground relating to the above said 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 assessment 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 in brief. The assessee herein is a company registered u/s 25 of the Companies Act. It is registered as a Charitable institution u/s 12A of the 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 runs educational institutions including an Engineering College by name Sapthagiri College of Engineering and a medical college by name Sapthagiri Institute of Medical Science and Research Centre in Bangalore.

6. The revenue carried out search and seizure operations in the hands of the assessee on 18-07-2013. Consequent thereto, the assessments for assessment years 2008-09 to 2013-14 were completed u/s 143(3) r.w.s. 153A of the Act. The assessment 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 contractors, related ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 concerns, promoters etc., which have been made by way of cash. According to the AO, the search officials have considered these payments as amount spent for non-specified purposes, i.e., not towards attainment of objects of trust. The year-wise 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 purpose of above payments. The assessee submitted that these payments have been made towards construction and other expenses pertaining 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 which have been made in cash and accordingly admitted that an amount of Rs.25.00 crores may be disallowed from the amount of “application of income” in assessment years 2010-11 to 2013-14 as detailed 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” for the purposes ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 of sec.11(1)(a) of the Act, vide its letter dated 13.09.2013. The assessee also furnished to the AO a revised computation of total income on 14.12.2015excluding the above amounts from the claim of “application of income”alongwithfollowing explanations:-

“The Trust has incurred certain expenditures towards construction of building and has made cash payments to contractors and other suppliers. In the search proceedings, on these findings of the department, we 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 Trust In the said premises The above said disallowance has been accepted by the assessee, since at the time of search, they could 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 course of operations and has agreed for disallowance for the sake of buying peace with the department.
We also state that, there is no violation of the objects 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 With regard to proposal for disallowance of application of funds for the earlier A.Ys. 2008-09 and 2009-10, similar to our acceptance for A.Ys.2010-11 to2013-14, 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 its 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 not arise and request you to drop the proposal and conclude the Assessment.”
8. The AO took the view that the findings reached during the course of search operations and the admission of the assessee that it was not in a position to prove expenses to the tune of Rs.25.00 crores for various assessment years prove that the funds received by the assessee were not utilized for the objects of 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

Since the AO added the above said amount of Rs.58.02 crores to the total income in the three years cited above respectively, there was no necessity to make addition of Rs.25.00 crores voluntarily offered by the assessee in AY 2010-11 to 2013-14, since 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 additions u/s 69C of the Act as unexplained expenditure.

9. The AO noticed that the assessee has paid following 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 cash from bank to make payments to the following persons, which was considered 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 above, viz., Rs.703 ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 lakhs and Rs.554.50 lakhs as income of the assessee in AY 2013-

14.

10. The AO noticed that the assessee has received donations under the name of “Development Fees” from various persons during the years relevant to AY 2008-09 to 2014-15 and it was over and above the fee prescribed by the Government of Karnataka. The AO took the view that the collection of development fees over and above the prescribed fee would show that the assessee is engaged in non- charitable activities in the name of imparting education to the Society and would have a negative effect on the charitable 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 capitation of fee of Rs.40 lakhs to Rs.50 lakhs. The collection of amounts over and above the prescribed fee was admitted by Shri Shivarame Gowda, Administrative Officer of the assessee. Further, the AO was of the view that the assessee has failed to furnish evidences 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 collections as “unexplained receipts”taxable under the Act. Accordingly, he added the same in all the years to the total income of the assessee in the assessment order passed u/s 143(3) of the Act. However, he ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 deleted the said additions in the rectification order passed u/s 154 of the Act on noticing that the assessee has already disclosed the same as its receipts.

12. Since the assessing officer was of the view that the assessee has collected “capitation fee”under the name of “development fees” over and above notified fees and further, since the assessee has engaged agents for soliciting the students for admission in its institutions, the AO took the view that these activities are not charitable in nature. He took support of following decisions to hold that the collection of capitation fee is not a charitable activity:-

a. Miss Mohini Jain vs. State of Karnataka (1992)(2 SCC 666) b. Islamic Academy of Education vs. State of Karnataka (2003)(6 SCC 697) Accordingly, he took the view that the collection of capitation fee is against constitutional scheme and prohibited by State enactment.
Further, as discussed in the earlier paragraphs, the AO had held that the assessee has violated the provisions of sec.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 per the provisions of Income tax Act. Accordingly, he held that the assessee 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
13. Before Ld CIT(A), the assessee challenged the validity of search, validity of assessments done u/s 153A of the Act and the validity of approval granted for the assessment. The 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 lakhs, Rs.4333.00 lakhs and Rs.476 lakhs made in AY 2012-13 to 2014-15 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 construction of buildings only. He also observed that the AO has only 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 show that the money was spent for any other purpose other than construction 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) also noticed that the above said additions made in the three years mentioned above did not tally with the actual expenditure incurred in construction of buildingsin the respective years as highlighted by him as under:-

(a) CIT vs. O. Abdul Razak (2013)(350 ITR 071)(Ker)
(b) Bhagirath Aggarwal vs. CIT (2013)(351 ITR 0143)(Del) ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 Before Ld CIT(A), the assessee contended that the additions were inadvertently agreed by its trustee on a mistaken notion 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. Accordingly, 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 that the above said addition of Rs.25.00 crores represent expenditure for which no bill/voucher was produced, in which case it may also be presumed that the above said amountare in the nature of inflated expenses or amount which was not spent on construction of building at all. Accordingly, the Ld CIT(A) expressed the view that the assessee should not be allowed depreciation on the above said amount of Rs.25.00 crores. Accordingly, he directed the AO to disallow depreciation @ 10% on the above said amount of Rs.25.00 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 maximum marginal rate, since the same is not considered as application of income.

18. With regard to the addition of Rs.703.99 lakhs, the assessee furnished evidences from seized records itself in order to show that ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 the said transactions do not belong to it. The seized record showed that these transactions were entered between Hotel Solitaire (a concern belonging to the trustees) and other persons. It is pertinent to note that the assessee had stated before the AO during the course of assessment proceedings that these transactions represent repayment of loan taken by it from M/s Srinivasa Enterprises and Shri G Dayanad. Since there is change in explanations, the Ld CIT(A) sought clarifications from the assessee. The assessee explained that the assessee had earlier 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 ascertain the actual nature of transactions after examining the seized materials. The Ld CIT(A), accordingly, took the view that the explanations 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 lakhs, the Ld CIT(A) accepted the contentions of the assessee that the AO has made this addition on surmises and suspicion without bringing any supporting material. Accordingly he deleted this addition also.

19. Aggrieved by the orders passed by Ld CIT(A), both the parties are in appeal before us on the issues narrated earlier.

ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018
20. The Ld D.R submitted that the Ld CIT(A) was not justified in reversing the decision of the AO and allowing exemption u/s 11 of the Act. He submitted that the search action has shown that the assessee has not applied its income for the objects of the trust. When this fact was confronted by the search team, the assessee has agreed for addition of Rs.25.00 crores. Further, the AO has also noticed that the assessee has diverted funds in violation of sec.13(1)(c) r.w.s. 13(3) of the Act. The AO has also noticed that the assessee has collected capitation fee under the name of Development Fee, which was in violation of constitutional scheme. Collection of capitation fee has been held to be non-charitable activity. In view of the above cumulative facts, the 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 to the assessee.

21. The Ld D.R further submitted that the assessing 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 application of income of the above said amount before the search officials and also before the assessing officer. The payments have been 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 and accordingly added the same to the total income of the assessee. He submitted that the Ld CIT(A) has deleted the above said additions by making ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 general observations, i.e., ignoring the findings given 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 lakhs and Rs.554.50 lakhs made in AY 2013-14 for violation of provisions 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 evidences 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-serving 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 addition 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 Rs.476 lakhs respectively in AY 2012-13, 2013-14 and 2014-15. However, the AO has not given the basis for arriving at the above 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 have been made on the reasoning that the assessee has 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 assessee has accounted for all the expenses including those incurred by paying cash in the books of accounts. Entire expenses have been incurred for construction of buildings only for medical college. Further, all the expenses are duly supported by vouchers and the books of accounts of the assessee have been audited. He submitted that the auditors have not found any deficiency either in the maintenance of vouchers or in books of accounts. Accordingly, he submitted that there is no reason to hold that the expenses incurred by way of cash are for non-specified purposes and, in fact, there is no basis available with the AO in order to hold so. He submitted that the tax authorities cannot accept part of construction expenses recorded in the books of accounts as genuine and reject part thereof on the reasoning that some portion of construction expenses have been incurred in cash. He submitted that the aggregate amount of construction expenses incurred by the assessee during 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 lakhs in that year. He submitted that the Ld CIT(A) has rightly appreciated the above said fact and has also noticed that the assessing officer has not furnished the basis for arriving at the figures of above said additions. The Ld CIT(A) has expressed the following 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 “….The AO should have listed the expenses where the cash has been spent and no supporting vouchers are produced. If the cash payment has been made only to some specified concerns and no bills are produced, the same should have been specified. Without pointing out any particular violation in respect of any particular item of expenditure, it is not possible to sustain the addition. No addition can be made on adhoc basis.”
25. The Ld A.R further submitted that the assessing 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 incurring the expenses in cash. He submitted that the Ld CIT(A) has also noticed that the assessee hasspent money for construction of buildings out of the funds generated during the course of carrying on of its activities. He submitted that there was no allegation 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 provisions of sec.69C of the Act.

26. The Ld A.R submitted that the search officials took a statement u/s 132(4) of the Act from one of the trustees, wherein he has agreed that a sum of Rs.25.00 crores may be reduced from the ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 amount of “application of income” on the reasoning that the assessee may not be in a position to furnish vouchers. However, the assessee has clarified in its letter dated 14-12-2015 furnished before the AO, that the assessee has offered so at the time of search, since he was under the opinion thatthe assessee could not furnish all the related evidences in connection with the expenditure incurred for construction of the college and hospital. It was reiterated that the expenditure was actually spent by the assessee and it has been duly recorded in the books of accounts of the assessee trust. It was also clarified that the assessee had accepted for the disallowance of Rs.25.00 crores for the sake 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 arise. Accordingly, the assessee had requested the AO to drop the proposal.

27. The Ld A.R submitted that the assessing officer did not make addition of Rs.25.00 crores in aggregate surrendered by the assessee in the statement taken u/s 132(4) of the Act 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 should 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 2014-15 does not ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 have any basis. Hence the very basis on which the AO sought to deny exemption u/s 11 of the Act to the assessee has failed.

28. The Ld A.R submitted that the AO has also taken the view that the assessee has violated the provisions of sec.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 amounts in AY 2013-14. Accordingly, he has held that these additions will make the assessee to lose exemption u/s 11 of the Act.The Ld A.R submitted that the Ld CIT(A) has accepted the fact that the transactions pertaining to Rs.703.99 lakhs were related 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 violation of Rule 46A as alleged by Ld CIT-DR, since the assessee did not produce any additional evidence before the AO and has offered explanations on the basis of seized materials only. He submitted that the Ld CIT(A) has examined the seized materials and after such examination only, the Ld CIT(A) has accepted the explanations of the assessee. With regard to the addition of Rs.554.50 lakhs, he submitted that they represented money withdrawn from the bank by some staff who were sent to bank. However, all the withdrawals have been duly accounted for by the assessee in the books of accounts. Hence there was no violation of sec.13(1)(c) as alleged by the AO. He submitted that the AO could not controvert these factual aspects. In the absence of any material to support the addition of Rs.554.50 lakhs, the Ld CIT(A) has deleted the same. Accordingly, the Ld A.R submitted that there was no violation of the provisions of ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 sec.13(1)(c) as alleged by the AO. Hence the very basis cited by the assessing officer for withdrawal of exemption u/s 11 also would also fail.

29. The Ld A.R submitted that the assessing officer has alleged that the assessee has collected Capitation fee under the name Development fee. Accordingly, he added the Development 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 submitted that the AO has passed rectification orders u/s 154 of the Act subsequently and deleted the additions of Development fees made by him in all the years. He submitted that the assessing officer has placed his reliance on statement taken from a person who claimed himself to be the counsellor of the assessee and also a staff of the assessee. However, the AO did not allow the assessee the opportunity of cross examining them and hence the assessing officer could not have placed his reliance on their statements. He submitted that the AO has issued letters to 17 donors, but did not get proper reply. He submitted that the AO left his investigation at that stage and did not lead it to logical conclusions. He submitted that the AO has not brought any material on record to show that the assessee has collected capitation fees. He submitted that the development 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 donors 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 noted the fact that the development fee was not collected from all the students. The Ld CIT(A) has also given finding that the assessee has issued receipts for collection of voluntary donations and has also accounted for the same. Hence the Ld CIT(A) has taken support of the decision rendered by Hon’ble Madras 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 of Balaji Educational and Charitable Public Trust is in parity with the facts of the assessee. Accordingly, he submitted that the finding of the assessing officer on alleged collection of Capitation fee is based on surmises and conjectures, without conducting any enquiry. Accordingly, the Ld A.R submitted that this reasoning 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 for 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 the assessee should be given exemption u/s 11 of the Act.

31. With regard to the appeals filed by the assessee challenging the addition of Rs.25.00 crores in aggregate made by 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 consequential denial of depreciation thereon, the Ld 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 application of income. Accordingly, he submitted that the above said surrender does not lead to addition of Rs.25.00 crores to the total income of the assessee, but results in reduction of amount spent on construction of buildings.
(b) He submitted that the assessee has actually spent the above said amount of Rs.25.00 crores for construction of building and the assessee had agreed to surrender only for the reason that it may not be able to provide all related evidences at that point of time. He submitted that the assessee has since duly accounted for all the expenditure 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 assessee no longer exists.
(c) He submitted that the assessing officer did not make addition of Rs.25.00 crores in the assessment orders 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 aggregate in the above said years. He submitted that the addition was made by Ld CIT(A) only for the reason that the assessee has agreed for the addition. The Ld A.R submitted that the assessee had ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 agreed for reduction of amount from the amount of application of income and did not agree for addition 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 conclusive. It is open to the person who made the admission to show that it is incorrect.”
He submitted that the assessee has demonstrated that the surrender of Rs.25.00 crores made by the assessee is based on wrong appreciation of facts and law. Further, the assessee has also demonstrated that all the expenses relating to construction of buildings have been duly accounted for in the books of accounts and further they are also supported 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 crores. The AO also did not make addition, out of the above said amount, 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 agreed for the same.

ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018
(f) Even if it is taken that the addition of Rs.58.02 crores made by the AO (in AY 2012-13 to 2014-15) would include the amount of Rs.25.00 crores surrendered by the assessee (in AY 2010-11 to 2013-14), yet the fact would remain 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 the above said two years would amount to enhancement of income 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 submitted that the disallowance of depreciation is consequential in nature and hence liable to be deleted.

32. The Ld D.R, on the contrary, submitted that 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, the assessee has blocked the revenue from making further investigations. Accordingly, he submitted that the Ld CIT(A) was justified in making addition of Rs.25.00 crores as surrendered by the assessee ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 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 have been incurred towards construction only and this fact has not been disproved by the AO. He further submitted that the AO, on the contrary, has not given any basis for arriving at the 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 to 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 registered u/s 12AA of the Act. Hence the provisions of sec.11 to 13 shall apply to the assessee for computation of income. Under section 11 of the Act, the income derived from property held under trust wholly 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 which such income is applied to such purposes in India and where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen 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 given below section 11(1) of the Act, the assessee could postpone the application of income, if it is not able to apply its income for the reasons stated in the above said Explanation. It is also pertinent to note that the provisions of sec.11(2) enables the assessee to accumulate 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 even 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 applied to charitable purposes during the year in which the income was derived. Hence, the object of the provisions of sec.11(1), Explanation given under sec.11(1) and sec.11(2) is to enable the assessee to apply its income for charitable purposes only.

36. In the instant case, the assessee was subjected to search operations on 18-07-2013. The assessee is running an Engineering College and a Medical college, besides other educational institutions. The assessee has started construction of medical ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 college during the financial year relevant to AY 2010-11. During the course of search operations, it was noticed that the assessee has incurred expenses in cash. The assessee has agreed 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 stating 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 year 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 said amounts from out of “Application of income” for the purposes of sec.11(1)(a) of the Act, meaning thereby, the assessee intended that the above said amounts should be reduced from the amount claimed 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 the facts of the present case. The assessee has also furnished revised computation of income on 14.12.2015 along with a detailed explanation, which was extracted earlier by us. However, it is pertinent 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 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 Rs.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 violation 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 under 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 him 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 addition of Rs.25.00 crores surrendered by the assessee. The Ld CIT(A) also held that the assessee would not be eligible for depreciation 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 regard to allegation of ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 collection of Capitation fee, the Ld CIT(A) held that the development fee collected by the assessee represents voluntary donation. In view of the decision taken by him on the above said issues, the Ld CIT(A) held that the assessee cannot be denied exemption under section 11 of the Act.Accordingly, the Ld CIT(A) allowed exemption 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 exemption 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 those issues would help to decide the above said issue. Accordingly, we shall first take up the issue of addition of Rs.58.02 crores 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 instances of payments made for non-specified purposes in cash to contractors, other related concerns, to promoters etc 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

The assessee furnished a reply dated 14.12.2015 stating 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 peace from the department. However, the AO rejected the contentions 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.25.00 crores for various assessment years would prove that the funds received were not utilized for the objects of the trust and the same is in clear violation of the provisions of sec. 11 of the Income tax Act. He also observed that the assessee has not been able to provide said supporting documentary evidences even during the course of assessment proceedings. Accordingly, he held that the entire amount of Rs.58.02 crores is to be treated as expenditure, which were not incurred for the objects of the Trust and also remains unexplained. Alternatively, the AO held that the above said expenses squarely fits into the provisions of sec.69C of the Act, since the source for these expenses remains unexplained.
Accordingly, the AO has assessed the above said amount of Rs.58.02 crores in AY 2012-13 to 2014-15 as stated above.

39. The Ld CIT(A) noticed that the assessing officer has made the above said addition without making any enquiry. The 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 all ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 vouchers and bills which were incurred in cash. The major part of the expenditure stated to have been incurred in cash appears to be for the “Buildings”. There is no indication in the assessment order that the Assessing officer attempted to obtain the evidence by issue of notice u/s 142(1). The assessing officer has relied upon the outcome of search proceedings only. The basis for arriving at the figures 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 peculiar results emerge. Though the caption for addition in the assessment order is “Payment for non-specified purposes in cash to contractors, other related concerns, to promoters etc.”, the ultimate addition appears to be only for moneys spent on buildings. No other particular expenditure 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 concentrated on cash spent for construction only. No other purpose for which huge cash has been spent has been mentioned in the assessment order. Therefore, the addition made in the assessment 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 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 addition was only Rs.10,43,89,317 and including work in progress, it was Rs.19,22,39,947, the Assessing officer has added a sum of Rs.43,33,00,000 which is more than twice the amount claimed as expenditure towards building. The assessing officer should have listed the expenses where the cash has been spent and no supporting vouchers are produced. If the cash payment has been made only to some specified concerns and no bills are produced, the same should have been specified. Without pointing out any particular violation in respect of any particular item of expenditure, it is not possible to sustain the addition. No addition can be made on adhoc basis.”
40. We have noticed earlier that, under the provisions of sec.11 of the Act, the income derived from property held under 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 given under sec.11 allows postponement of application of income and the provisions of sec.11(2) provide methodology for accumulating income, if the same ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 could not applied during the year in which the income was derived. The provisions of sec. 13 provides for compliance of certain conditions and violation of the same would result in 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 Charitable Trust is different from the method of computation total income of a business concern. It is pertinent to note that, for the purpose of determining the quantum of income applied for objects of the trust, no distinction shall be made between Capital expenditure and Revenue expenditure, i.e., even capital expenditure is also treated as application of income. In the case of a business concern, the assessee would not be entitled for deduction of capital expenditure. Of course, depreciation is allowed thereon at prescribed rates. The focus in respect of a charitable trust is that it should apply its income for charitable purposes only. Only in case of violation of provisions of sec.13, then the charitable trust shall 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 that the assessee was constructing buildings for its medical college during the years relevant to AY 2010-11 onwards. We have noticed that the amount spent on construction is treated as application of income for the objects of the trust and hence would qualify for exemption u/s 11 of the Act. We have noticed that the assessee has spent its income derived from property held under the trust on construction of buildings and accordingly claimed the same as application of ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 income. The case of the assessing officer is that, during the course of search proceedings, several instances of payments made in cash to contractors, other related concerns, to promoters etc., were found. The AO has taken the view that the cash payments so made represent income applied for non-specified purposes.Accordingly he has proceeded to add Rs.58.02 crores to the total income 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 etc., 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 payments made to contractors for construction activity cannot be considered as payment made towards”non-specified purposes”. Even though it is stated that the payments have been made in cash, there is no bar for the trusts, as in the case of sec.40A(3), to make payments in cash for the years under consideration.The provisions 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 Finance Act, 2018. Accordingly, merely for the reason that the payments have been made to contractors in cash, we are of the view that the claim of application of income cannot be denied. We notice that the Ld CIT(A) has observed that the assessee has spent money 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 has not attempted to make enquiries and obtain evidences 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 search 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 basis 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 quantified.

43. The AO has also stated that the assessee could not produce the bills, vouchers etc., in support of the expenditure incurred. However, the assessing officer has not rejected the books of accounts of the assessee. On the contrary, it is the submission of the assessee that all the expenses incurred on construction have been duly accounted for in the books of accounts. It was further stated that the books of accounts have been duly audited and the auditors have not found any deficiency in the maintenance of accounts and vouchers. We notice that the assessee has made above said submissions before the AO, but the AO could not controvert the same by bringing any material on record.

44. During the course of hearing, the Ld A.R submitted 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 details as to how the above said amounts were arrived. 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 respectively is without any basis and without pointing any particular violation in respect of any particular item of expenditure. We have also noticed that the assessing officer has not rejected the books of accounts. The submission of the assessee is that its books of accounts have been audited and the auditors have not found out any deficiency in the maintenance of books of accounts or vouchers. In our view, there is merit in the above said submissions and hence the AO was not justified in ignoring the books of accounts. Another important point we notice is that the assessing officer has accepted the fact of application of income towards construction of building, but chose to reject only a portion of expenses incurred on construction on the reasoning that the same has been incurred by way of cash. As observed by us earlier, the factum of incurring expenses by way of cash alone cannot be a ground to hold that those expenses are related to non-specified purposes. The AO should have brought any other material on record to show that the expenses incurred in cash for construction activities were not actually incurred for that purposes, but for some other purposes. Accordingly, the AO was not justified in accepting the construction expenses 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
46. We have noticed earlier that the method of computing income for a Charitable trust u/s 11 to 13 of the Act is different 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 the “income derived from property held under the trust”. We noticed earlier that the above said income is exempt u/s 11 of the Act to the 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 15%. 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 provisions of sec.11(2) of the Act:-

“11(2) Where eighty five percent of the income referred to in clause (a) or sub-section (1) read with the Explanation to that sub-section is not applied, or it is not deemed to have been applied, to charitable or religious purposes in India 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 be included in the total income of the previous year of the person in receipt of the income, provided the following conditions 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 purposes, is accepted as correct for a moment, then the case of the assessing 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 provisions of Explanation given under sec. 11(1) and sec.11(2) of the Act while determining the total income of the assessee, i.e., the assessee should have been given an opportunity to avail the benefits given in the Explanation under sec.11(1) and sec.11(2), since it is the AO who has held that the payments made 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-specified purposes”. Accordingly, we are of the view that the 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 impugned amount of Rs.58.02 crores, as if it were undisclosed income of the assessee, which is not legally correct.In our view, the amount so applied for purposes other than the objects of the trust shall not represent “undisclosed income” of the assessee, since there is difference between “receipt of income” and “application of income”. The former is generation of receipts and the later is spending 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 2012-13 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 in 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
48. The next issue urged by the revenue relates to the addition of Rs.703.99 lakhs and Rs.550.50 lakhs made in AY 2013-14. The facts relating to the addition of Rs.703.99 lakhs are that the AO noticed from the seized records that the assessee has given unsecured loans to the following persons, who are persons 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 for 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 noticed that both the above said persons fall under the category of related persons specified in sec. 13(3) of the Act. Since the assessee has paid the above said amounts to them, the AO took the view that 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 above said persons. The assessee furnished ledger account copies. The AO did not accept the explanations given by the assessee and accordingly assessed the amount of Rs.703 lakhs as income of the assessee.

49. Before Ld CIT(A), the assessee admitted that 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 Solitaire, a group concern, and the above said persons. It was submitted that the assessee was not aware of the contents in the seized material while giving explanations before the 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 perused the record. The Ld D.R contended that the Ld CIT(A) has violated the provisions of Rule 46A by admitting additional evidences. However, 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 represent transactions entered between M/s Hotel Solitaire and above said persons. We also notice that the assessee has produced bank statement of Hotel Solitaire to show that the transactions recorded in the seized material matches with the transactions entered in the bank statement. Hence the purpose of producing bank statement was only to show that the seized materials do not belong to the assessee.

51. We notice that the Ld CIT(A) has given a clear finding that the transactions recorded in the seized materials do not belong to the assessee. However, since the bank statements were not available before the AO, for the limited purpose of examining the bank statement we are restoring this issue to the file of Assessing ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 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 noticed that the cash withdrawn from banks were given to following persons:-

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 withdrawn by it and the same has been duly accounted for in the books of accounts. It was explained that no payment has been made to above said parties, but they might have spent money on behalf of the assessee trust. The AO, however, rejected the above said explanations of the assessee and held that the books of accounts produced by the assessee is an afterthought. Accordingly he assessed the above said amount of Rs.554.50 lakhs as income of the assessee on the reasoning that these payments have violated the provisions 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 seized materials without corroborating the same with other evidences. The assessee placed its reliance on the decision rendered by ITAT, 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 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 dates on which the assessee had withdrawn cash from bank; when it was given to the above said persons and the purpose for which the payments were made. It was submitted that, without the above said details, it cannot be proved that there was violation of provisions of sec.13(1)(c) of the Act.

54. The Ld CIT(A) deleted this addition with the following observations:-

“70. I have carefully perused the assessment order and the written submission. The discussion in the assessment order leaves much to be desired. Except the names and amounts and the allegation that cash withdrawals have been made, no other particulars are available. There is no reference to any seized material. The bank from which cash withdrawal was made, the date of withdrawal and when the amount was paid to the parties are all missing. Whether the cash withdrawal 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 Officer has made the addition with the caption “Payments made to related persons”. But in the discussion part, there is no mention about the purpose of alleged payments. Without ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 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 violation of the provisions of sec.13(1)(c) and 13(3) of the Act. The withdrawal of cash from the bank is not unusual feature, that too for an institution of the size of the appellant. It is for the Assessing Officer to first find out the link between the cash withdrawal and the possible purpose for which the same has been utilized which has enured to the benefit of specified persons of the appellant. The appellant cannot be asked to answer a bland question. Without doing any such exercise, 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 substantiate the claim that cash withdrawals are made to meet regular expenditure of capital and revenue nature, with documentary evidence. That way the cash book itself is the documentary evidence, as it will contain entries relating to the withdrawal of cash and the purpose for which it is spent, or re-depositing of cash also into the bank. Having said that no documentary evidence has been produced, the Assessing Officer in the very next sentence mentions:
“The present claims made by submitting copies of accounts is clearly an afterthought and a self-serving document created to take shelter regarding the claim. 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 In these circumstances, it is but natural for the appellant to disparage the comments of the Assessing Officer. Therefore, I have no hesitation to delete the addition of Rs.5,54,50,500/- from the computation of income under the head “Payment to related persons”.
55. We heard the parties on this issue and perused the record.
As rightly observed by the Ld CIT(A), the assessing officer has mentioned some amount against the three persons stated above, but did not furnish the date wise details of payments 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 accounted 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 entries, 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 very same books of accounts for determining the total income of the assessee by considering the receipts and expenses. Further, the AO has not furnished the break-up details of the payments alleged 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 withdrawals were ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 actually given to the above said persons or not. The AO could have also asked explanations from the assessee by furnishing 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 assessee that all cash withdrawals made from the bank have been duly accounted for in the books of accounts and no payment, as alleged by the AO, has been made to the above said three persons during the year relevant to AY 2013-14. According to the assessee, it has furnished the above said explanations on the basis of books of accounts. Hence we are of the view that there is merit in the contention 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 exemption claimed by the assessee u/s 11 of the Act. The AO held so by considering the disallowances made by him, which were discussed above, and also by holding that the assessee has collected Capitation fee under the garb of Development fee. Even though the AO added the development fees collected by the assessee to the total income, it was stated that the AO has rectified the same by his rectification order passed u/s 154 of the Act on noticing that the assessee itself has offered the development fee collections as its income. The question that remains is whether the development fees collected by the assessee would partake the character of capitation fee?

ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018
57. We notice that the Ld CIT(A) has dealt with this issue as under:-

“25. I have carefully considered the findings of the Assessing Officer and also gone through the written submission made by the appellant. It is an undisputed fact that the appellant is running educational institutions like Medical College and Engineering College. Providing of education is undoubtedly a charitable purpose. It is not the case of the Assessing officer that the appellant has carried on any business activity. The entire issue hinges on the collection of fees over and above what is prescribed by the Government. While the Assessing officer has termed it as capitation fee, the appellant has called the same as voluntary donation. Irrespective of the nomenclature, the Assessing Officer has not established that the monies so collected were spent outside the books of account. The Assessing officer has not disputed the claim of the appellant that students from whom development fees have been collected have been issued receipts and accounted for in the books of account maintained. The allegation of variation of fee collected from various students cannot be faulted, as in its very nature the students are admitted under Management Quota, which use discretion depending upon affordability, demand and other factors. The appellant is claimed to have not collected any development fee at all from some students, which fact has not been controverted by the Assessing Officer. The voluntary contribution or development ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 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 received, if not satisfactory or are adverse to the appellant, should be put across to the appellant to rebut the same, as otherwise the conclusion would be one-sided. The Assessing officer has himself after being satisfied about the accounting of Development fees and bringing into the books of account deleted the addition made in the assessment in his rectification order passed later, which will be adverted to in the subsequent part of this order. With regard to siphoning off of funds in violation of Section 13, the same has been dealt with in the latter part of this order. There is no doubt there is a prohibition contained in Karnataka Educational 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 collecting capitation fee in contravention of the provisions of the said Act. But the power of inspection etc., is vested with Government of Karnataka. The Income tax Act does not 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 rejected only when ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 the income of the Trust is applied for the purpose other than the objects of the Trust. The benefit of Section 11 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 shall be applied for the purposes of objects of the Trust and if 85% of the income is applied for the purposes of objects of the Trust, which includes both revenue and capital expenditure, the entire income is exempt from the tax and if application of the income is short of 85% of the total income, such shortage of application can be accumulated for application over a period of five subsequent years. The Assessing Officer has not established that the activities of the appellant are not genuine or that the activities of the appellant have not been carried on in accordance with the objects for which registration 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 voluntary 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 appellant.

ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018
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 of Sri Balaji, son of Sri G.Dayanand and the collection made by one Sri Krishnappa. He has also referred to the statement recorded from one Shri Shivarame Gowda. The statement recorded at the time of search cannot be the basis for drawing conclusions. There has to be corroborative evidence. In all fairness, the Assessing Officer should have allowed opportunity to the appellant to cross-examine all the persons from whom statements have been recorded in the interest of principles of natural justice.

29. As regards, the case laws quoted by the Assessing Officer, viz., Miss Mohini Jain vs. State of Karnataka (1992)(2 SCC 666), it dealt with capitation fee and its maladies. The appellant has justified his collections as voluntary donations. As regards the case of Islamic Academy of Education vs. State of Karnataka (2003) 6 SCC 697, the State of Karnataka has fixed certain percentage of seats to be filled on merits, and a small percentage has been left to be filled up by Management Quota. The Management has to have some discretion in order to provide infrastructure, laboratory, hospital, faculty etc., to run the institutions to the requisite standard. The Assessing Officer has further referred to the decision of ITAT Hyderabad in the case of Vodithala Education Society vs. ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 ADIT (2008)(20 SOT 353), wherein the ITAT has referred to the decision of the Madras High Court in the case of T.Devasahaya Nadar vs. CIT (51 ITR 20). The appellant has brought out in its written submissions a plethora of 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 that so long as there is no involuntary nature of collection, 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 sheets and cash seized, which have been held as irrelevant to the present issue, it cannot be held that for all the assessment years the assessee received capitation fee for admission of students in the management quota. This is a perverse inference. Without conducting any enquiry in this regard to make allegation is unsustainable. The information obtained from the Public Information Officer to a query raised under the Right to Information Act to the effect 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 in favour of the assessee. It disproves the department’s allegation of involuntary collection of amounts. That apart, the order passed under Section 264 of the Act for the assessment years 1998-1999 to 2001-2002 clearly states that the donation received from students or the parents is not compulsory in nature and, therefore, the same is not 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 which is to the knowledge of the department. No endeavour is made to sustain the allegation of involuntary donation. In any event, as rightly held by the Tribunal, it is not relevant in the present case as the allegation 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 partake 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 any parent or student has complained about the nature of donation. The department has failed to dispel the finding 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 Officer had to make an estimate adopting his own methodology. This we cannot accept for the simple reason that the show cause notice proceeds on the basis that the assessee has to submit the list of donors alone. A reply was submitted by the assessee and in paragraph 6(iii), the Assessing Officer states that all the statements tallied. However, the assessing officer comes to a different conclusion that 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 Tribunal, is not supported by documents, but on the basis of Assessing Officer’s inference. It cannot be now stated that something was not furnished, nevertheless, he tallied all the materials and came to the conclusion as stated above. If the Assessing Officer has tallied the figures then 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 accepted. It has been shown in the return of income. A bald statement in paragraph (7) of the assessment order that the assessee is not carrying on charitable activities for the purpose of Section 13 read with Section 11 of the Act appears to be the mainstay of the department’s case. 7.10 In effect, it is clear that the authority has confused himself with the admission of students in management quota with the carrying on activities of the trust. The distinction is obvious that if the department wanted to make out a case of violation of Section 13 of the Act by the trust, it cannot be based on the perception of the Assessing Officer that donations to the trust are not voluntary. We hasten to add that there is no material to support the plea that the donations are not voluntary. 7.11 Having invoked Section 13, the mainstay of the case 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 under Section 11 of the Act should be denied, which we find 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 on 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 establish that the allegations have nothing to do with the trust and its activities in relation to the charitable objects. 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 find is in relation to application of income and the utilization thereon for charitable purpose, as defined 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 case of collection of capitation fee under the guise of donation and it has not established a case of involuntary nature 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 plea of appellant that the entire income cannot be denied the exemption u/s 11. The denial could only to the extent of income that was violative. Even the Circular of the CBDT in Circular No.387 dated 6.7.1984 stipulates the same proposition.

31. Therefore, the denial of exemption under section 11 of the entire income is not sustainable.

58. We heard the parties on this issue and perused the record. We notice that the assessing officer has taken the view that the development fees collected by the assessee is in the nature of ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 Capitation fee, since it is over and above the fees prescribed by the Government. However, the submission of the assessee is that the development fee so collected represents voluntary donation 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 another. In the instant case, the AO has not brought on record any credible material to prove that the donations were not voluntary. The AO had placed his reliance on the statement given by two persons named Shri K J Pramod and Sri Shivarame Gowda. However, the AO has not allowed the opportunity of cross examining 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 have placed his reliance on the statements so given by them. The Ld CIT(A) has observed that the prohibition to collect capitation fee has been implemented by the Government of Karnataka under Karnataka 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 view 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 conjectures. The Ld CIT(A) has also taken support of the decision rendered by Hon’ble ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 Madras High Court in the case of Balaji Educational and Charitable Public Trust (supra), wherein under identical set of facts, the Hon’ble High Court held that there is no material to show that the donations were not voluntary. We are of the view that the decision rendered by Hon’ble Madras High Court in the case of Balaji Educational and Charitable Public Trust (supra) shall apply to the facts of the present case.

59. We have noticed earlier that the AO rejected the claim of exemption u/s 11 of the Act on the reasoning that

(a) the assessee has spent money in cash for non-specified purposes.

(b) the assessee has violated the provisions of sec.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 paragraphs, we have upheld the view taken by the Ld CIT(A) on all the above said issues. Hence, the very foundation, based on which the AO had denied exemption u/s 11 of the Act to the assessee, has been 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 the assessee for assessment years 2010-11 to 2013-14, wherein the assessee is challenging the addition of Rs.25.00 crores in aggregate was ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 directed to be added by Ld CIT(A) and also consequent disallowance of depreciation thereon.

61. The facts relating to this issue are that during the course of search proceedings, a statement u/s 132(4) of the Act was recorded from the Chairman of assessee institution named Shri 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 crore 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 watches 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 utilization of funds which have been made in cash. Over all, I wish 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 years on the basis of cash withdrawals made and other cash expenses……”
Consequent to the admission so made, the assessee furnished a letter dated 14-12-2015 along with a revised computation of income for assessment years 2010-11 to 2013-14 reducing following 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

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 could 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 course of operations and has agreed for disallowance for the sake of buying peace with the department.”
62. It is pertinent to note that the assessing officer 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 2014-15, which aggregated to Rs.58.02 crores. Hence, in appears that the AO was of the view that the addition so made by him included the amount of Rs.25.00 crores offered by the assessee in AY 2010-11 to 2013-

14.

63. In the appeal filed before Ld CIT(A), the first appellate authority deleted the addition of Rs.9.93 crores, Rs.43.33 crores and Rs.4.76 crores respectively in AY 2012-13 to 2014-15. Having ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 deleted the above said additions, the Ld CIT(A) took the view that the statement recorded from the Chairman of the assessee institution during the course of search proceedings could not be overlooked. Accordingly, the Ld CIT(A) held that the 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. He also expressed the view that the assessee had sufficient time between the date of search and completion of assessment to produce all vouchers and bills to the satisfaction of the AO, but did not comply with it.

64. Before Ld CIT(A), the assessee pleaded that the admission of Rs.25.00 crores was made by the Chairman on mistaken 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 statement so given. He also took the view that the assessee has estopped the AO from making further investigation by making such admission. Accordingly, he held that the addition of Rs.25.00 crores in aggregate as admitted by the assessee for AY 2010-11 to 2013-14 should be added to the total income of the assessee in the above said years. Accordingly, he directed the AO to make addition to the extent of Rs.25.00 crores in aggregate in AY 2010-11 to 2013-14.

65. Since the above said amount of Rs.25.00 crores 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 is not admissible on the above said addition. Accordingly, he directed the AO to add 10% of the addition agreed towards building for various years towards depreciation disallowance. He also directed the AO to levy tax at maximum marginal rate on the addition of Rs.25.00 crores and disallowance of depreciation.

66. It is the case of the assessee that its Chairman admitted that he may not be able to prove the utilization of funds 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 and all the amount spent on construction of building, whether incurred in cash or by way of cheque, have been duly accounted for in the books of accounts. He submitted that the Chairman had agreed to surrender the impugned amount of Rs.25.00 crores only on an apprehension that he may not be able to prove the utilization. The Ld A.R submitted that the books of accounts, however, depicts actual utilization and hence the apprehension of the Chairman no longer exists. The Ld A.R placed his reliance on the decision rendered by Hon’ble Supreme Court in the case of Pullangode Rubber Product Co. (Supreme Court) and submitted that the admission made in the statement recorded u/s 132(4) of the Act cannot be held to be conclusive, though it is an importance piece of evidence. It was further held that it is open to the person who made the admission to show that it is incorrect. Accordingly, the Ld A.R submitted that the books of accounts maintained by the ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 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 the Act, the methodology adopted for computing total income of charitable institution is different from that adopted for a business concern. Both capital expenses and revenue expenses incurred towards attainment of objects of the trust or institution are treated as “application of income” and deducted from the income derived from the property. We have also noticed that the provisions of sec.40A(3) and 40A(3A), which prohibits business concerns to incur expenses by way of cash over and above a prescribed amount, do not apply to the assessee during the years under consideration. Hence, merely because the assessee had incurred expenses by way of cash, should not be a ground for disbelieving the expenses incurred by the assessee towards construction of buildings.

68. It is the submission of the assessee that all the expenses incurred by it in cash towards construction of buildings have been duly recorded in the books of accounts. All of them are supported by vouchers and bills also. The books of accounts have been audited and the auditors have not found any deficiency in the maintenance of books and vouchers. Hence, while filing revised computation of income on 14.12.2015 before the assessing officer, the assessee has stated that the expenses were actually 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 disallowance for the sake of buying peace with the department. However, in the assessment order, the assessing officer has observed as under while rejecting the submission of the assessee:-

“3.6 The explanation of the assessee and its submissions are taken cognizance of along with the evidences found and seized during the course of the search operations conducted. The explanation of the assessee that the said expenditures were actually spent by the assessee and recorded the same in the books of accounts of the trust maintained in the regular course of operations and that it has agreed for disallowance for the sake of buying peace with the department is not plausible, without any basis and hence is not acceptable. The findings during the course of search operations and the admission of the assessee company that it was not in 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 course 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), while adjudicating the issue relating to the addition of Rs.58.02 crores, has observed in paragraph 47 of his order, that there is no indication in the ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 assessment order that the Assessing Officer attempted 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 the Ld CIT(A) would show that the AO has chosen to rely upon the report of search officials only during the course of assessment proceedings. Hence, in our view, no credence could be given to the observation of the AO that the assessee did not produce documentary evidences supporting expenditure. On the contrary, the assessee 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 accounts. On the contrary, the AO has relied upon the books of accounts to ascertain the receipts and other expenses. It is well settled proposition that the AO should reject the books of accounts, when he prefers to make addition on the basis of entries recorded in the 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 rendered on this issue was extracted earlier. However, he has confirmed the addition to the extent of Rs.25.00 crores only for the reason that the assessee has admitted the same in the statement taken u/s 132(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 merely on the basis of admission made by the assessee 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 Pullangode Rubber Product Co. (supra), wherein it was held that 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 the 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 principle 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 side in the balance-sheet subject to the condition that subsequent recoveries by them would be taxable income, they are now precluded, on the principle of “approbate and reprobate”, from pleading that the income they derived subsequently by realization of the revived debts is not taxable income. The doctrine of “approbate and reprobate” is only a species of estoppel; it applies only to the conduct of parties. As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under 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 eligible to tax ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 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 not automatically entitle the assessing officer to assess the same, if the assessee disputes the same subsequently with corroborative evidences.

72. The Hon’ble Bombay High Court has dealt with this 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 authorities under the Act are under an obligation to act in accordance 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 authorities 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 Act, 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
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 provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping 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 is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should 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. The law empowers the ITO to assess the income of an assessee ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 according to law and determine the tax payable thereon. 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 law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee 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 fix the correct annual letting value of the premises in question, 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 agreed that an amount of Rs.25.00 crores may be disallowed from the expenses incurred on construction for the different assessment years, i.e., out of “application of income”. The reason cited for such admission is that the assessee may not be able to prove satisfactorily the utilization of funds which have been made in cash.

75. We have earlier noticed that the expenses incurred on construction of buildings is treated as application of income derived from property held under the trust. Even though the assessee has admitted that the above said amount of Rs.25.00 crores 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 show the purpose for which the amount was spent and also failed to show that the said purpose was not relating to the 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 further stated that the assessee has agreed for disallowance for the sake of buying peace with the department. When the assessee has recorded the expenses in its books of accounts and when those expenses were spent on construction of buildings, in our view, there is no scope for presuming that the said expenses were not spent for attaining objects of the trust. If that was real position, then it is the duty of the assessing officer to give a finding with corroborative evidences that the amount claimed to have been spent for construction 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 officer, which included the above said amount of Rs.25.00 crores also. Hence, the Ld CIT(A), after deleting the addition of Rs.58.02 crores, was not justified in sustaining addition to the extent of Rs.25.00 crores simply for the reason that the assessee has accepted the same in the statement recorded u/s 132(4) of the Act. We have noticed that the assessee has submitted before the Ld CIT(A) that the said admission was given on wrong notion on fact and law. Before the AO also, the assessee has submitted that all the expenses have been duly accounted for in the books of accounts. Accordingly, we are of the view that the assessee has established that the admission ITA Nos.709 to 712 /Bang/2018 ITA Nos.1142 to 1148 /Bang/2018 CO Nos.88 to 89 /Bang/2018 made by it was incorrect. In any case, the admission was not related to Undisclosed income, which would warrant any addition, but it was only a plea to reduce the amount from the quantum of application of income, which in the present case was construction expenses incurred on buildings. The fact of construction 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 assessee has accepted the same. We have noticed that the assessee 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 sustained the addition to the extent of Rs.25.00 crores, he took the view that the same may also represent inflation of construction expenses and 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 inference drawn by Ld CIT(A) is misplaced, since it is not the case of assessing 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 not related to inflation of expenses, but related to 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, the disallowance of depreciation, being consequential in nature, would not survive on its own. Accordingly, we set aside the order passed 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 dismissed. All the appeals of the assessee are allowed.

Order pronounced in the Open Court on 4th September,2019.

Sd/ Sd/-

(N.V Vasudevan) (B.R Baskaran)
Vice President Accountant Member

Bangalore,
Dated, 4th September, 2019.

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