Padmashree Dr. D.Y. Patil University Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that documents seized from employees cannot be considered as having any evidentiary value and cannot be considered to have trustworthiness, since no other corroborative material was brought on record to support the veracity of the same. Hence, documents seized from employees cannot be relied upon for denying exemption u/s 11.
Facts- The assessee is a charitable trust. It, inter alia, runs a Medical college, Dental college, physiotheraphy, Biotechnology and Nursing colleges at Nerul, Navi Mumbai. Shri Vijay D Patil and Smt. Shivani Patil are the main trustees. Shri Vijay D Patil is the President/Chancellor. Smt. Shivani Patil is the spouse of Shri Vijay D Patil.
The revenue carried out search and seizure operations in the hands of the assessee u/s 132 of the Act. The case of the revenue is that the assessee has collected Capitation fees though various employees for giving admission to students in various courses conducted by it. Such collection of capitation fees has not been accounted in the books and further, it was in violation of the clauses of the Trust deed and also Maharashtra Educational Institutions (Prohibition of Capitation fee) Act.
Accordingly, the AO held that the assessee cannot be considered to be carrying on any charitable activity and accordingly denied exemption u/s 11 of the Act in all the years under consideration. The documents seized from the employees also revealed various types of payments made outside the books of account. Accordingly, he took the view that the books of accounts of the assessee are not reliable and accordingly, rejected them. Consequent to the denial of exemption u/s 11 of the Act, the AO computed income under normal provisions of the Act and also levied tax u/s 115BBE of the Act. Accordingly, various types of exemptions claimed by the assessee in terms of sec. 11 of the Act were also denied by the AO
Conclusion- Held that documents seized from employees cannot be considered as having any evidentiary value and cannot be considered to have trustworthiness, since no other corroborative material was brought on record to support the veracity of the same. None of the material would show that the assessee trust was collecting capitation fees. Hence, the AO could not have placed reliance on the materials seized from the employees to draw conclusion that the assessee was collecting capitation fees.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee has filed appeals for AY 2013-14 to 2017-18. The revenue has filed appeals for AY 2014-15, 2016-17 and 2017-18. All of them are directed against the common order dated 15-12-2022 passed by Ld CIT(A)-49, Mumbai. Since most of the grounds urged by the assessee are common in nature and since they arise out of common set of facts, all these appeals were heard together and are being disposed of by this common order, for the sake of convenience.
2. The facts relating to the case are set out in brief. The assessee is a charitable trust. It has been granted registration u/s 12A of the Act by DIT (Exemptions), Mumbai, vide Registration No.40651 dated 21.03.2007 w.e.f 01-04-2006. It is also approved u/s 80G of the Act. The assessee, inter alia, runs a Medical college, Dental college, physiotheraphy, Biotechnology and Nursing colleges at Nerul, Navi Mumbai. Shri Vijay D Patil and Smt. Shivani Patil are the main trustees. Shri Vijay D Patil is the President/Chancellor. Smt. Shivani Patil is the spouse of Shri Vijay D Patil.
3. The revenue carried out search and seizure operations in the hands of the assessee on 27-07-2016 u/s 132 of the Act. It was concluded on 01-082016. Consequent thereto, the assessments of AY 2013-14 to 2016-17 were completed u/s 153A r.w.s 143(3) of the Act. The assessment of AY 2017-18, being the year of search was completed u/s 143(3) of the Act. The case of the revenue is that the assessee has collected Capitation fees though various employees for giving admission to students in various courses conducted by it. Such collection of capitation fees has not been accounted in the books and further, it was in violation of the clauses of the Trust deed and also Maharashtra Educational Institutions (Prohibition of Capitation fee) Act. Accordingly, the AO held that the assessee cannot be considered to be carrying on any charitable activity and accordingly denied exemption u/s 11 of the Act in all the years under consideration. The documents seized from the employees also revealed various types of payments made outside the books of account. Accordingly, he took the view that the books of accounts of the assessee are not reliable and accordingly, rejected them. The assessee contended before the AO that it has not collected any capitation fees as alleged by him. However, the AO did not accept the same and accordingly assessed the capitation fees computed from the material seized from various employees from their residences as income of the assessee. Consequent to the denial of exemption u/s 11 of the Act, the AO computed income under normal provisions of the Act and also levied tax u/s 115BBE of the Act. Accordingly, various types of exemptions claimed by the assessee in terms of sec. 11 of the Act were also denied by the AO, i.e., the AO
(a) rejected claim of exemption u/s 11(1)(d) of the Act in respect of development fees and other corpus donations;
(b) rejected claim of Capital expenditure as application of income,
(c) rejected claim for set off of carry forward amount of deficit as application,
(d) rejected depreciation on opening balance of assets etc.
In some of the years, the AO made certain other additions also out of which some were added on substantive basis and others were added on protective basis also. We shall deal with all of them in the ensuing paragraphs.
4. In the appellate proceedings before Ld CIT(A) also, the assessee contended that it has not collected capitation fees as alleged by the AO. It submitted that the employees might have done so without the knowledge and authority of the trustees. However, the Ld CIT(A) also did not accept the contentions of the assessee and accordingly confirmed additions relating to Capitation fees. Consequent thereto, he held that the protective additions made by AO are not required. Accordingly, he deleted additions made on protective basis and also granted partial relief in respect of certain additions. The Ld CIT(A) also confirmed the denial of exemption u/s 11 of the Act and consequential additions. The assessee had also raised certain legal contentions before Ld CIT(A). All of them were rejected by Ld CIT(A). The assessee is in appeal challenging the additions confirmed by the first appellate authority. The revenue is in appeal challenging the decision of Ld CIT(A) in deleting the protective additions in some of the years.
5. We notice that all the issues revolve around the question as to whether the assessee has collected Capitation fees or not?. All the additions made by the AO were consequent to his view that the assessee has collected capitation fees. While the assessee denies collection of any capitation fee, the case of the AO is that the various evidences coupled with the Statements recorded from key employees prove that the assessee has collected capitation fees from students for giving admissions to them. Hence, we are of the view that we should first adjudicate above question. In our view, the decision rendered to the above said question will determine the sustainability of most of other additions made by the AO.
6. It is pertinent to note that the search officials did not unearth any material from the assessee which revealed collection of capitation fees. All the materials were seized from the residences of employees only. We notice that the assessing officer has relied upon the statements given by employees of the assessee and also upon documents evidencing collection of capitation fees seized from them. The names of those employees are given below:-
(a) Shri Pratap Patil
(b) Shri Tukaram Patil
(c) Shri D D Kolte
(d) Shri Unmesh Khanvilkar
(e) Shri Sunil Gaikwad
We shall examine the details of documents found from each of them and also statement taken from each of them.
7. We shall first deal with the case of Shri Pratap Patil. This person is an accountant in D Y Patil Medical College. The search officials seized one pen drive and a diary from his residence, which contained the details of capitation fees collected in cash. The AO has relied upon those documents and also the answers given by Shri Pratap Patil to various questions posed to him in the statement taken u/s 132(4) of the Act. The gist of observations made by the AO is given below:-
(a) Three blank cheques were found at his residence and Shri Pratap Patil replied that these blank cheques were collected from students from whom a portion of cash is yet to be received. It was further submitted that the cheques will be returned after receipt of cash.
(b) He submitted that the capital fees/donations are not accounted in the books of accounts.
(c) He also explained the process of collection of capitation fees as under in answer to Q no.15:-
“Sir, the students/parents approach the admission cell department which in front of the Presidents’ Office in Dr D Y Patil University Building. The Students/parents first meet the receptionist who directs the parents/students to people sitting in the administration cell department. There are four people who sit in the administration cell department namely Tukaram Patil, Dr Unmesh Khanvilkar, D D Kolte and myself. We are told in advance about the rates (payment per seat) of seat in different courses by Mr Vijay Patil (President, D Y Patil University, Nerul) and Mrs. Shivani Patil. These rates are told to us verbally on weekly basis. Once the student agrees to pay the donation/capitation in cash we ask for Xerox of the Basic Documents like college leaving certificate and mark-sheet. The names of students and the capitation fee that they are willing to pay are discussed with Mr. Vijay Patil (President, D Y Patil University, Nerul) and Ms Shivani Patil. The capitation fee is collected once Mr Vijay Patil (President, D Y Patil University, Nerul) and Shivani Patil approve the names discussed. After the approval the cash is collected and if there is any balance remaining to be paid blank cheques are taken as a surety for future payment and same is returned/destroyed once cash is received finally. Further there are certain brokers who meet the management directly. After approval from Mr Vijay Patil (President, D Y Patil University, Nerul) and Mrs Shivani Patil names are finalized and list is sent to University Registrar for enrollment. My role in whole process is of taking basic details of students interested in paying capitation fees and getting the same approved from Mr Vijay Patil (President, D Y Patil University, Nerul) and Mrs Shivani Patil and sequent collection of cash. Further I spent/disburse the cash as per direction of Sh Vijay Patil. (President, D Y Patil University, Nerul)”
(d) He admitted that the brown diary titled “Royal Diary – JAYPEE” belongs to him and entries therein were made by him. He admitted that the entries represented cash collected by him and expenditure met by him as per the directions of Shri Vijay Patil.
(e) The amounts were written in codes/symbols and Shri Pratap Patil deciphered the same. He explained that all the receipts and payments were entered as per the instructions received from Shri Vijay Patil.
(f) The data found in the Pen drive was explained by Shri Pratap Patil. He admitted that the entries made in “kilo meter” refer to cash received from the students over and above the normal fees charged. It was explained that “1 Km” refers to One Lakh rupees.
(g) He admitted that cash received outside books less refund given is Rs.5.85 crores in 2016-17 as per pages no.2, 3 & 4 of Annexure-1. He also stated that Rs.10 lakhs paid to towards Gynecology inspection. He also admitted that a sum of Rs.4.89 crores was collected from medical stream students as per page nos. 9 & 10 of Annexure-1.
(h) He also explained the details of other collections and payments noted in the pen drive in various years. It was noticed by the AO that cheque receipts noted in an Excel file has been duly accounted in the books of the assessee trust. However, payments noted down in another excel file has also not been accounted for in the books of assessee trust. Hence, the AO has expressed the view that both these files have to be read in totality, meaning thereby, it has to be taken that the payments mentioned in another file should also be considered to be true. With regard to certain details, he admitted that he received names only from Ms. Shivani Patil and did not collect any cash as capitation fees.
(i) Based on the details found in the pen drive and diary, the assessing officer collated the amount of capitation fees year wise as under and added the same in the hands of the assessee in the respective assessment years:-
