Krishna D. Pawar Vs ITO (ITAT Mumbai)
ITAT Mumbai held that addition towards unexplained expenditure u/s 69C of the Income Tax Act simply on the basis of scribbling note without any other oral/ documentary evidences is unwarranted and unsustainable.
Facts- During the course of assessment, AO noted that assessee has made payment of Rs. 95 Lakhs to Singhad Technical Education Society (STES) for the admission of his daughter. Accordingly, AO issued show cause notice asking as to why Rs. 95 Lakhs paid as capitation fees to STES for admission of his daughter should not be added to his total income as unexplained expenditure u/s. 69C of the Act.
Not satisfied with the reply, AO confirmed the addition of Rs. 95 Lakhs u/s. 69C. CIT(A) upheld the addition. Accordingly, being aggrieved, the present appeal is filed.
Conclusion- Only on the basis of the scribbling note without any other oral/documentary evidence to support the allegation of capitation fees it is quite unsafe to fasten addition. So in the facts and circumstances discussed supra, we are of the opinion that addition is not warranted. And therefore the impugned addition of Rs 95 Lakhs is deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Mumbai dated 29.11.2021 for assessment year 2014-15.
2. Even though, the assessee has raised five (5) grounds of appeal, the main grievance of the assessee is against the action of the Ld. CIT(A) to have confirmed the action of the AO making an addition of Rs.95 Lakhs as unexplained expenditure u/s 69C of the Income Tax Act, 1961 (hereinafter “the Act”).
3. Brief facts are that the assessee is a doctor by profession and had filed his return of income for AY. 2014-15 on 24.07.2014 declaring total income of Rs.64,68,380/-. Later, the case of the assessee was selected for limited scrutiny under CASS. Thereafter, the case of the assessee’s jurisdiction was transferred to ITO, Ward-16(3)(4), Mumbai, pursuant to the order of the PCIT-16, Mumbai u/s 120(5) of the Act. The AO notes that the assessee has income in addition to his profession as doctor (salary), income from house property, income from business/profession, capital gains and income from other sources. The AO notes that he received an information from the DCIT, Central Circle-2(2), Pune regarding payment of Capitation fee/Donation of Rs.95,00,000/- by the assessee to Singhad Technical Education Society (STES) for admission of his daughter Smt. Dr. Sai Shrikrishna Pawar (hereinafter “Dr. Sai”) for securing admission for the course of Post-Graduation (PG) in Dermatology for academic year 2013-14. The AO asked the assessee to explain the source of the same. However, the assessee denied making any payment of Capitation Fees for securing admission for Dr. Sai for MD. Dermatology. Thereafter, the AO again issued show cause notice on the strength of the information received from the DCIT, Central Circle-2(2), Pune as to why Rs.95,00,000/-paid as capitation fees to STES for admission of his daughter should not be added to his total income as unexplained expenditure u/s 69C of the Act. And the assessee denied the allegation and replied that he has paid only a sum of Rs.5,50,000/- as tuition fees to STES and that also through cheque drawn from HDFC Bank account and asserted that no other payment was made to STES. And also brought to the notice of the AO that the bank account details of assessee would reveal that there was no major withdrawal in those years from where assessee could have made such a huge payment of capitation fees as alleged by the AO. But according to the AO as per information found [during the course of search and seizure action in the case of STES and Shri Maruti N. Navale Group of cases on 06.08.2013], certain incriminating documents regarding donation/capitation fees was seized from Dr. Arvind V. Bhore (Dean of Smt. Kashibai Navale, Medical College and General Hospital, Pune) which reveals that STES received unaccounted Capitation fees amounting to Rs.95,00,000/- from the assessee for admission of his daughter for the course of MD. Dermatology for academic year 2013-14. Therefore, the AO rejected the assertion of the assessee that he has not made any payment of capitation fees for securing admission of his daughter. Thereafter, the AO referred to the handwritten noting at page no. 45 which according to him reveal that STES received unaccounted capitation fees/donation of Rs.95,00,000/- from assessee for admission of his daughter for the course of MD Dermatology. And also drew support for his action from the contents of the appraisal report of the STES wherein it was mentioned that Dr. Sai had secured admission for MD. Dermatology for academic year 2012-13 by making payment of Rs.95,00,000/-. Thus, according to the AO, the assessee has paid the capitation fees of Rs.95,00,000/- and made an addition of Rs.95,00,000/- u/s 69C of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the action of the AO by relying on the decision of the Hon’ble Supreme Court in the case of Sushil Bansal Vs. PCIT (2020) 115 taxmann.com 226 (SC) and relevant portion of the impugned order of Ld. CIT(A) is reproduced as under: –
“5.2 During the course of appellate proceedings, Ld. AO was in possession of information received from Dy. CIT, Central Circle 2(2), Pune that the assessee made capitation fee/Donation of Rs. 95,00,000/- to Singhad Technical Education Society for admission of his daughter for course of MD, Dermatology for academic year 2013-14.
5.3 I have carefully considered the facts of the case as well as submissions filed by the appellant. The matter under consideration is the capitation fee/donation of Rs. 95,00,000/- to Singhad Technical Education Society for admission of his daughter for course of MD, Dermatology for academic year. 2013-14. As per matter on record, Ld. AO was in possession of information received from Dy. CIT, Central Circle 2(2), Pune regarding payment of capitation fees. During the Search and Seizure Education Society incriminating documents were during assessment proceedings in Central Circle 2(2), Pune handwritten notings seized from Dr, Arvind V. Bhore (Dean of Smt Kashibai) reveals that Singhad Technical Education Society has received capitation fees of Rs. 95,00,000/-. from Dr. Shrikrishna D. Pawar for admission of his daughter for the course of MD. Dermatology for Academic Year 2013-14.
However, the counsel for the Appellant denied for payment any capitation fees and pressed that account and bank details of the applicant may be checked as no a been made. But the arguments of the counsel are not tenable at all. it is a fact that capitation fees is paid in cash normally. ‘Handwritten notings are evidence of payment, and they have been seized from the Dean of the college. There is a definite reaction in the payment of capitation fees and the evidence seized, where the name of the appellant is clearly mentioned. The hard evidence seized, where the name of the appellant is clearly mentioned. The hard evidenced so gathered in a search and seizure operation cannot be summarily dismissed by the appellant by a ‘simple denial’. No other evidence has been furnished by the appellant to prove that the admission was granted to his son for a mere Rs.5,50,000/- paid through cheque. The only defense taken by the appellant is that no addition can be made on the basis of the evidence gathered from a 3rd party. However, this ‘third party’ has a definite relation with the appellant, in as much, he the dean of the college to which appellant’s daughter has been admitted. The evidence of the payment of capitation fees would be most likely in possession of the Dean. Hence the Dean has to be taken as a related party of the appellant.
Further according to Ld. CIT(A), since the facts of this case is similar to that of Sushil Bansal (supra), he confirmed the action of AO.
4. Aggrieved by the aforesaid action of the Ld. CIT(A), the assessee is before us.
5. We have heard both the parties and perused the records. We note that the assessee is a doctor by profession and his daughter (Dr. Sai) after having completed MBBS Degree from Government Medical College and General Hospital at Akola had secured admission in MD. Dermatology at Smt. Kashibai Navale Medical College and General Hospital, Pune in the academic year 2013-14. And as per the statement recorded of her by the DCIT, Central Circle 2(2), Pune on 07.10.2015, she has revealed that she got 65% while passing the MBBS and has paid tuition fees approximately of Rs.5.5 Lakhs for academic year 2013-14 and another Rs.5.5 Lakhs for academic year 2014-15. The medical college where Dr. Sai was pursuing her MD Dermatology was under the management of the Singhad Technical Education Society (STES) which was subjected to search action on 06.08.2013 (AY. 2013-14). And during the search, they had gone through the records of the students who had secured admission for Post-Graduation course and came across the mark-sheet, pass-port copy etc of Dr. Sai (daughter of the assessee) from which certain handwritten noting was found as under at page no. 53 and page no. 43 as under: –
