Case Law Details

Case Name : Ananda Social & Education Trust Vs ACIT (ITAT Bangalore)
Appeal Number : ITA Nos. 2542-2548(B)/2017)
Date of Judgement/Order : 29/05/2020
Related Assessment Year : 2008-09 to 2014-15
Courts : All ITAT (7309) ITAT Bangalore (416)

Ananda Social & Education Trust Vs ACIT (ITAT Bangalore)

The issue under consideration is whether Addition relating to suppression of fee receipts of Management/ NRI quota and Post graduate seats are justified in law?

The assessee is a charitable trust established for educational purposes in the year 1980. It has set up a medical college by name Dr B.R. Ambedkar Medical College and Hospital offering both under graduate and post graduate courses. It also runs a Dental college and nursing college. The issues under consideration are related to Medical college only. A search was conducted on the premises of the assessee, following which the assessing officer, however, completed the assessments rejecting the claim of exemption u/s 11 of the Act and also making additions towards suppression of fees.

ITAT states that, in the instant case, the AO’s case is that the assessee has suppressed the fees received by it for giving admission under management/NRI quota. The AO did not accept the explanations of the assessee in this regard. However, he did not bring any material on record to show that the assessee, indeed, collected fees over and above that were accounted for in the books of account. The assessing officer did not reveal/discuss the result of enquiry conducted by him by issuing notices u/s 133(6) of the Act. Hence the assessee has contended that the assessing officer did not receive any adverse reply from the students. Even though the AO has observed that huge cash was seized during the course of search, yet it was shown by the assessee that all those cash are accounted for in the books of accounts.

Hence ITAT are unable to sustain the view taken by Ld AO on this issue. Accordingly, they set aside the order and direct the AO to delete the addition made towards suppression of fee on MBBS Management Quota and Post graduate seats.

FULL TEXT OF THE ITAT JUDGEMENT

These cross appeals are directed against the orders passed by Ld CIT(A)-1 1, Bangalore and they relate to the assessment years 2008-09 to 2014-15. Since the issues urged in these appeals are identical in nature, these appeals were heard together and are being disposed of by this common order, for the sake of convenience.

ASSESSMENT YEAR 2009- 10

2. We shall first take up the appeals relating to AY 2009-10 as lead cases, since the decision taken in these appeals can be conveniently applied to other years also. The issues urged by the assessee in this year relate to the following additions:-

(a) Addition relating to suppression of fee receipts of Management/ NRI quota.

(b) Addition relating to suppression of fee receipts of Post graduate seats.

3. The revenue is aggrieved by the decision of Ld CIT(A) in granting relief in respect of addition relating to COMED-K seats.

4. The facts relating to the case are set out in brief. The assessee is a charitable trust established for educational purposes in the year 1980. It has set up a medical college by name Dr B.R. Ambedkar Medical College and Hospital offering both under graduate and post graduate courses. It also runs a Dental college and nursing college. The issues under consideration are related to Medical college only. The assessee trust is being managed by a body of trustees. The chairman of the trust keeps changing and during the year relevant to AY 2009-10 and 20 14-15, Sri. P L Nanjundaswamy was the Chairman.

5. The revenue carried out search and seizure operations on 18-07-20 13 in the hands of the assessee. At that point of time Shri P L Nanjundaswamy was the Chairman. The search operations also covered the residential premises of its Chairman and some of the trustees, certain other connected institutions also. The documents seized from the trust premises, medical college and the residence of Chairman Sri P L Nanjundaswamy were used by the assessing officer for making the additions in all the years under consideration.

6. Consequent to the search operations conducted on 18-07-20 13, the assessments of the assessment years 2008-09 to 20 13-14 were re-opened u/s 153A of the Act. The assessee filed returns of income for the above said years and also for AY 20 14-15 claiming exemption u/s 11 of the Act. The assessing officer, however, completed the assessments rejecting the claim of exemption u/s 11 of the Act and also making additions towards suppression of fees. The claim of exemption u/s 11 was rejected, since the application filed by the assessee seeking registration u/s 12A of the Act had been rejected and the matter was in appeal proceedings. The appeals filed by the assessee before ld CIT(A) were partly allowed and hence both the parties are in appeal before us challenging the decision taken by Ld CIT(A) against each of them.

7. In AY 2009-10, the assessing officer made following additions relating to suppression of fees:-

(a) Addition of Rs. 1.85 crores relating to fee charged for MBBS seats under Management/NRI quota

(b) Addition of Rs.5.22 crores relating to fee charged for MBBS seats under COMED-K cancellation seats.

(c) Addition of Rs. 1.75 crores relating to fee charged for PG Courses.

8. The back-ground of these additions are discussed in brief. The first two additions mentioned above related to admission for MBBS seats. The medical college of the assessee has been sanctioned 100 seats in MBBS course. The admission to these seats are made as under:-

(a) 40 seats are filled in through Common Entrance Test (CET) conducted by the Government of Karnataka. (Government Quota)

(b) 40 seats are filled in through Common test conducted by the Body or Association of Private Professional Colleges called “COMED-K”. (COMED-K quota)

(c) 20 seats are filled in by the Management themselves, which is called “Management/NRI quota”. (Management Quota).

The Government quota seats and filled on the basis of rank scored in the CET examination as per the process undertaken by the Government. The fee prescribed by the Government is charged for these seats. There is no controversy on the seats filled under CET quota.

9. The “COMED-K entrance test” is conducted by the body or association of Professional colleges on the basis of an agreement entered between the Government and the Association. The admission is based on the rank scored by the students in this entrance test and the fees under this category shall be higher than the Government quota seats and the said fees is also determined under the agreement entered between the Government and Association. Further, in terms of the agreement, if any of the seats falling under COMED-K quota remain unfilled after completion two rounds of COMED-K counselling process, those seats shall be handed over to the respective colleges and the management may fill them at their discretion, but the fees to be charged for these seats should not exceed the fees agreed upon through the Agreement entered between the Government and

10. The management/NRI quota seats are filled by the respective colleges and they exercise their own discretion in allotment and charging of fees. The fee charged under this quota shall be higher.

11. The first addition made by the assessing officer related to Management/NRI quota for MBBS seats. During the course of search operations conducted at the residence of the Chairman Shri P L Nanjundaswamy, certain incriminating documents identified as “A- 1/PLN/3” were seized. The pages numbered as 84-105 and 106-111 in the above said bundle were considered by the assessing officer. The former documents disclosed the details of amounts collected from the students for admission into MBBS management quota seats and the latter documents disclosed the actual amount accounted for. The assessing officer has scanned pages 84 to 86 in the assessment order for AY 2009-10 at pages 6 and 7. These documents disclosed the details of amount agreed to be paid by the students, amount received through Bank and amount received by way of cash. These documents contained one more column “Remarks”, wherein it was mentioned either as “Agreement” or “No dues”. The AO also called for the details of students admitted in the year relevant to AY 2009- 10 and fees collected from them. He noticed that the name of students matched with the names mentioned in the seized documents. In respect of some of the students, the manner of collection of fees, the amount collected also matched. Hence, the assessing officer came to the conclusion that the contents of seized documents are true and represent actual facts. He further noticed that, in some cases, the cash portion of fee has not been accounted for. The AO also noticed that the search officials have seized certain documents titled as “Visitors slips” pertaining to the FY 2013-14. In these slips also, agreed amount for admissions have been mentioned in a corner like “Rs.20.00 lakhs + fees”; “Rs.47.00 lakhs + fees” or “agreed for Rs. 15.00 lakhs” etc. Accordingly, the AO came to the conclusion that the assessee is collecting money over and above the regular fees from the students at the time of admission.

12. The AO also referred to the answers given by the Chairman Shri P L Nanjundaswamy to the questions posed to him in the statement taken from him. The AO has first referred to the following question and answer from the statement taken on 17-10-20 13 u/s 131 of the Act: –

Q-7 :- I am showing you seized document A-1/PLN/3 page No.84 to 86 and 92. It is seen from these documents that whatever amount has been received in cash from the candidates has not been accounted for the year 2008-09 which was collected by you. Thus not only have you collected capitation fee but also appropriated the same for personal benefit. Please state whether you have accounted for it and where.

Ans.: Amounts have been partly remitted into the bank.”

Since, the chairman stated that the amounts have been partly remitted into the bank, the AO concluded that entire money collected by way of cash at the time of admission is not being account for in the books of account of the trust. The AO also referred to question no.9 and 12 and answers given thereto in the statement taken on 18-07-20 13 u/s 132(4) of the Act, which read as under:-

Q.9 What is the amount that you are taking for medical seats under management quota and NRI quota?

Ans.: The amount in NRI quota is $ 1,50,000 which includes the admission fee, tuition fee, additional college fee and the development fee. The amount under management quota is not fixed. It varies from 30 – 55 lacs. The discretionary power to decide the amount vests with the Chairman.”

Q. 12 The loose sheets marked 33 to 38 found during the course of search today at the bedroom of Sri P L Nanjundaswamy and placed at folder marked A-ALN/3 dated 18-07-2013 are the visitors slips of Dr. B. R.Ambedkar Medical College, Kadugondanahalli, Bangalore. Please explain the contents of these loose sheets.

Ans.: This amount mentioned on the loose sheets is towards package for medical seats under NRI quota and are recorded for enquiry purposes. The amounts mentioned in the slips are discussed with prospective students and are not full and final.”

13. The AO also referred to a diary maintained by the P.A of the Chairman named Mr.Manjunatha, wherein fees pertaining to admissions pertaining to the financial year 20 13-14 was found noted. The said diary is marked as “A-1/BRAMC/2”. The amounts mentioned in the diary did not match with the amount accounted for in the books of accounts. Accordingly, the AO concluded that the assessee-trust is not accounting for the amounts collected by way of cash. When these aspects were confronted with the assessee, it disowned the documents seized from the residence of the Chairman Shri P L Nanjundaswamy and also the diary maintained by Mr. Manjunatha. It was submitted that the Chairman has the authority to determine the fees for management quota and the amount received from the candidates as determined by the Chairman have been fully accounted for. It also stated that the action shall be taken if the chairman has collected money outside the books. The AO, however, expressed as under:-

“…. the siphoning of funds does not mean that income has not accrued to the trust. If the trust finds any breach of trust by the Trustees, then it is for the trust to deal with the trustees as per the Trust Deed/Indian Trust Act, 1882. The role of the Department is only to tax the income accrued.”

During the course of assessment proceedings, the assessee also referred the issue to JCIT seeking a direction u/s 144A of the Act, but the same was rejected by the JCIT. Accordingly, the AO concluded that the amounts collected by way of cash, which is alleged to have been not accounted for in the books of accounts, is liable to taxed in the hands of the assessee-trust. The AO also referred to the decisions rendered by Hon’ble Supreme Court in the case of Miss Mohini Jain vs. State of Karnataka (1992)(2 SCC 666) and Islamic Academy of Education vs. State of Karnataka (2003)(6 SCC 697) and observed that the Hon’ble Supreme Court has taken strong exception to collection of Capitation fee.

14. The aggregate amount of fees shown as “agreed” in the seized document for the year relevant to AY 2009-10 was Rs.5,73,87,500/-. The average amount per student under the management/NRI quota worked out to Rs.28,69,375/- (Rs.5,73,87,500/- divided by 20). The amount accounted in the books of account was seen at Rs.3,53,08,650/-, which was later revised to Rs.3,88,58,650/-. The difference between the amount agreed and the amount accounted for in the books of accounts worked out to 1,85,28,850/-. The assessing officer added the same to the total income of the assessee in AY 2009-10.

15. The Ld CIT(A) confirmed this addition and the reasoning given by him in this regard are summarized below:-

(a) It is evident from document No.A/PLN/3 that the appellant has not accounted for entire agreed amount. In case, it was intended to take into account the entire amount, there was no need to collect any amount in cash.

(b) The appellant cannot disown the document as it was recovered from the Chairman of the relevant period. The presumption u/s 132(4A)/292C can be taken even when the documents are in control or possession of the person searched.

(c) The names found in the list are the names of students, who sought admission to the Medical college.

(d) The visitors’ slips A/PLN/2 also give indication of the amounts are being negotiated. Though it pertains to assessment year 2014-15, yet it indicates how the parents or students meet the chairman and in what way the price for a seat is quoted.

(e) When the documents speak for themselves, Sri P L Nanjundaswamy should have disproved what the apparent is not real.

(f) The documents seized, the statement recorded and huge cash seized combined together gives rise to a reasonable belief that the admission fee charged is not fully accounted in the books of account.

There is no transparency in the admission process. The assessee has failed to rebut the presumption.

(g) The corroborative evidences, wherever possible, have been gathered. There cannot be conclusive proof in respect of such cases, as all the actions will be covered up and the evidences will be destroyed after the event. The circumstantial evidences gathered by the Investigation wing and the facts marshalled by the Assessing Officer are enough to draw a reasonable conclusion that there is suppression of receipts.

16. The assessee is aggrieved by the decision rendered by Ld CIT(A) on this issue. The Ld A.R submitted that the assessing officer has placed his reliance on the documents seized from the residence of the then Chairman Shri P L Nanjundaswamy. Those documents do not bear signature of anyone and they are dumb documents, which could not have relied upon by the AO. She submitted that the assessee is also not aware of the existence of such kind of documents. She submitted that the dumb documents have held to be not a valid piece of evidence in the following cases: –

(a) ACIT vs. Layer Exports (P) Ltd (88 com620)(Mum)

(b) CIT vs. S.M. Aggarwal (162 Taxman 3) (Delhi)

(c) CIT vs. Girish Chaudhary (163 Taxman 608)(Delhi)

She further submitted that the Chairman P L Nanjundaswamy has only stated that the fees for the seats allotted under management quota/NRI quota are negotiated. Hence whatever amount finally agreed upon has been duly accounted for by the assessee. The AO has also placed his reliance on the visitors’ slips pertaining to AY 2014-15 for making addition in other years. She submitted that the AO has only drawn adverse inferences without bringing any material to support his inferences. Further the impugned seized documents have been recovered from the residence of the Chairman and from an employee. She contended that the assessee cannot be presumed to be the owner of those documents, when they have not been taken from the control of the assessee. In any case, the AO could not have made impugned additions without bringing corroborative evidences. In support of this proposition, she relied upon the decision rendered by Mumbai bench of ITAT in the case of ACIT vs. Ms. Katrina Rosemary Turcotte (87 taxmann.com 116) (Mum).

17. The Ld A.R further submitted that the AO has not conducted any enquiry from any of the students or their parents to support his inferences or to prove that the amounts mentioned in the seized documents were received by the assessee. The Chairman has categorically stated in his statement that the assessee has not collected any capitation fee. No complaint has been received from any of the student to the effect that the assessee was collecting fee over and above that accounted in the books of Hence the AO could not have drawn adverse inferences and the Ld CIT(A) was not justified in confirming the addition. In support of these contentions, the Ld A.R placed her reliance on the decision rendered by Hon’ble Madras High Court in the case of CIT vs. Balaji Educational & Charitable Public Trust (2015) (56 taxmann.com182) (Mad.). Accordingly the Ld A.R contended that the above said addition should be deleted.

18. The Ld D.R, on the contrary, placed strong reliance on the decision rendered by Ld CIT(A) on this issue. The Ld D.R submitted that the documents recovered during the course of search reveal that the assessee has been collecting money over and above that recorded in the books of The documents recovered from the residence of Chairman disclosed the actual collections made by the assessee for giving seats under Management quota for MBBS seats. The fact that the assessee is collecting amount outside the books is further corroborated by the visitors’ slips and diary maintained by the P.A to the Chairman. Hence the Ld CIT(A), on noticing that the AO has reached logical conclusion, has confirmed the addition made by the AO.

19. We heard rival contentions and perused the record. We notice that the very foundation for making this addition in AY 2009-10 is the document seized from the residence of the Chairman Shri P L Nanjundaswamy. The contention of the assessee is that it is not aware of existence of any such document and accordingly it has disowned the same. It was also contended that the said document is a dumb document. We notice that the said document was not made available to the assessee by the assessing officer, but its contents were made known to it. According to the assessee, the Chairman of the Medical college of a particular year would determine the fees payable for management/NRI quota by each candidate and the final amount fixed after negotiation would be reported by him to the assessee. The fees finally agreed upon will be collected by the assessee and the same was duly accounted for. Accordingly, it was submitted that it is not aware of any collections beyond what was accounted for. It was further submitted that the fee determined would not be uniform and it will differ from student to student. It was also submitted that the Chairman might have mentioned particular amount initially, but would have agreed for lower amount for various reasons, i.e., the amount noted in the documents may at the enquiry stage. The explanations given by the assessee before Ld CIT(A) in this regard are extracted below, for the sake of convenience: –

“Without prejudice, the Appellant submits that the fee structure for management quota seats is fixed at the discretion of the management and differs each year and from candidate to candidate, depending on the availability and demand for the seats. There are various other factors also that are taken into account in admitting a candidate under the management quota like affordability, recommendations from VIPs etc. The appellant submits that during the year under question, the medical college was de-recognised by the Medical Council of India, which had a huge impact on the admission process and the demand for seats in the college. Consequently, even assuming that the document at A1/PLN/3 indicated the fee payable to the Appellant the same cannot be taken as final since many candidates would not have paid the amounts reflected therein due to the above circumstances.”

Thus, it is the contention of the assessee that the contents of the above said document cannot be considered to be true and correct.

20. We notice that the AO has placed his reliance on the statement given by Shri P L Nanjundaswamy on different occasions. The AO has first referred to the answer given by him to question no.7 posed to him in the statement taken on 17-10-20 13 u/s 131 of the Act.

Q-7 :- I am showing you seized document A-1/PLN/3 page No.84 to 86 and 92. It is seen from these documents that whatever amount has been received in cash from the candidates has not been accounted for the year 2008-09 which was collected by you. Thus not only have you collected capitation fee but also appropriated the same for personal benefit. Please state whether you have accounted for it and where.

Ans.: Amounts have been partly remitted into the bank.”

The AO has interpreted from the answer given that the entire amount collected by way of cash has not been accounted for. The assessee, while disputing the interpretation given by the AO, has given following explanations before Ld CIT(A):-

“ Further, at para 14.17 of the assessment order, the AO relies on the sworn statement of Mr. P L Nanjundaswamy recorded under Section 131 of the Act where, to a question posed as to whether the amounts reflected in seized material A1/PLN/3 were accounted for, he states that the amount were partly remitted to the bank. The AO in the very next sentence concludes that the entire money which was received at the time of admission was not accounted for in the books of account of the Appellant. The Appellant submits that such a conclusion is wholly misplaced. The appellant submits that the AO has not taken note of the fact that Mr. P L Nanjundaswamy states that some amount has in fact been remitted to the bank and has been duly accounted for. In any event, the AO has not made available copies of the sworn statement of Mr P L Nanjundaswamy dated 17.10.2013 as requested vide its letter dated 15.03.2016 and the Appellant has not been afforded an opportunity to cross-examine the said Mr P L Nanundaswamy.”

We notice that the Chairman has not given any categorical statement that any amount was appropriated by him for personal benefit or part of collections have not been accounted for. He has only stated that amounts have been partly remitted into bank. Accordingly, we are of the view, the answer given by the Chairman, Shri P L Nanjundaswamy cannot be considered to convey the meaning, as interpreted by the AO.

21. The AO has also referred to question no. 9 & 12 posed to Shri P L Nanjundaswamy in the statement taken u/s 132(4) of the Act. In the answer to question no.9, Shri P L Nanjundaswamy has mentioned about the fees quoted for NRI seats and question no.12, he has stated that the amount mentioned in the loose sheets is towards package for medical seats and is not full and final. Since there was difference between the amount mentioned in the seized document and that accounted for in the books of accounts, the AO has presumed that the difference might have been siphoned of by the Chairman. Hence the AO has observed that the income has accrued to the assessee-trust and hence the siphoning of the funds would not affect the accrual. It is pertinent to note that it is nobody’s case that the difference amount, if any, has been defalcated by anyone. On the contrary, it is the explanation of the assessee that the amount actually collected has been accounted for in the books of accounts. At this stage, it is pertinent to refer to question no.11 and answer given thereto in the statement taken u/s 132(4) of the Act.

Q.No. 11:- Please state whether you are collecting capitation fees for admission to medical seats in your college?

Ans. : – We are not collecting any capitation fee for admission to medical seats in the college.

We notice that the assessing officer did not consider the above said question and answer. Before the Ld CIT(A), the assessee has also referred to the letter dated 29-01-2016 written by Mr. P.L. Nanjundaswamy to the assessee clarifying his answers given to the revenue. In the said letter, he has stated as under:

“II Question No.2 in page no. 2 & 3:

The accounted amount in the books of account is the final amount received at the end of the negotiations with the candidates opting for admission under our institution. Normally, the payments towards admission of the candidates are received in installments over a period of time. The agreed amount was finally brought down for various reasons.

In the year 2008-09, our college was derecognized by the Medical Council of India (MCI), when the students became aware of it, they were apprehensive and some wanted to cancel the admission or reduction in the agreed amount. They were assured of getting the recognition issue solved, but unfortunately, we failed to get the recognition. Subsequently, they declined to make the balance of the agreed amount in view of the college de-recognition by MCI. There were also other reason like recommendations from important persons, inability on the part of the candidates to comply and to settle on the agreed amount decided in the initial part of the negotiation, and hence the amount of Rs.3,53,08,650/- has been accounted.”

We notice that Shri P L Nanjundaswamy has clarified as to why there is difference in the amounts mentioned in the seized documents and the amount actually accounted for. We notice that the assessing officer has ignored this letter also.

22. The assessing officer has also referred to a diary maintained by the P.A to the Chairman and certain Visitors slips, wherein also the total amount of fee for a particular course has been mentioned. Though both the above said documents pertained to the year relevant to AY 2014-15, the AO took support of them to buttress his view that the assessee has been suppressing the fee receipts by accounting for lower amount than that was actually collected. The assessee gave following explanations in this regard before Ld CIT(A):-

“Without prejudice and in any event, it cannot be said conclusively that the amounts mentioned in visitors slips were in fact received, much less by the Appellant. As stated above, these visitors slips are only indicative of people making enquiries on admissions and the amounts mentioned therein are if at all, only on the basis of enquiries and are not final. Therefore, the AO could not have relied upon these visitors slips to make any additions since they do not show that any income, over and above the amounts accounted for in the books of account, was in fact, received by the Appellant. In answer to question 12 in the sworn statement of Mr. P L Nanjundaswamy (extracted at page 21 of the Assessment order), he has stated that “this amount mentioned in loose sheets is towards package for medical seats under NRI quota and are recorded for enquiry purposes. The amounts mentioned in the slips are discussed with prospective students and are not full and final.” This shows that even assuming that the figures mentioned in the visitors slips indicate the fee payable, the same were only at the negotiation stage and not final. In the absence of any corroborative evidence to show that the alleged fee referred to in the slips were, in fact, received by the Appellant, the addition made by the AO is without any legs to stand and thus ought to be set aside. What is more, the said visitors slips pertain to FY 20 13-14 and the reliance placed by the AO on such material is only on the basis of assumptions and presumptions which ought to be set aside.

The observation of the AO that huge cash was found and seized from the various search premises and therefore hefty amounts have been charged for admission to MBBS courses is also without any basis since the cash seized had also been duly accounted for as stated in the paragraphs below. In any event, mere seizure of cash cannot lead to a conclusion that amounts over and above the accounted income was received by the Appellant.”

The assessee has clarified that the amounts mentioned in the visitors slips are only indicative figures and do not refer to actual amounts collected. During the course of arguments, the Ld A.R also pointed out that not all, but only some students whose name was found in the Visitors slips have taken admission. This fact would support the submission of the assessee that the Visitors slips are filled in at the time of enquiry and do not represent actual amount collected.

23. Another important point brought out by the assessee in the explanations submitted before Ld CIT(A) relate to the Cash seized during the course of search. In the assessment order, the AO has mentioned that substantial cash and jewellery was found and seized from the residence of trustees during the course of search. It is pertinent to note that the assessing officer has not made any addition towards unaccounted cash in any of the years. In the explanations furnished before ld CIT(A), which are extracted above, the assessee has also made it clear that the cash found during the course of search represented book balance only, i.e., they are accounted item and not in the nature of unaccounted cash. This important aspect, in fact, support the submissions of the assessee. Had the assessee collected cash outside the books of account or suppressed actual receipts, then the search officials should have stumbled upon unaccounted cash, which is not the case here.

24. The assessing officer has also observed that the assessee has accounted only fees received through banking channels and has suppressed all cash receipts. The following observations made by Ld CIT(A) shows that the above said view of the AO was not correct:-

“18 The AR drew my attention to the statement at page 13 & 14 and pointed out that there are receipts by way of DD, cash receipts also in respect of candidates (except two candidates) and it is incorrect to state that cash portion has not been accounted for. He further stated that there are only cash receipts in respect of following candidates, but the entire amount has been accounted for:

a. Ramya B Sriram Rs.21,78,550
b. U K Pooja Rs.20,00,000
c. T. Gautham Rs.20,50,000
d. P. Matangi Rs.28,00,000
e. Sebkhatija Rs.15,41,050
f. Avinash R Rs.25,41,050
g. Bhavya S Rs.15,41,050
h. Sajjad Masoominezhad Rs.29,00,000
i. Mithija D Kadulngattil Rs.15,41,050
Total Rs.1,90,92,750

As per the assessing officer, the aggregate amount of collections for MBBS management quota seats was Rs.5.47 crores. Though the AO as initially stated that the assessee has accounted for only Rs.3.53 crores, later he accepted that the assessee has accounted for Rs.3.88 crores. Accordingly he has made the addition of difference between Rs.5.47 crores and Rs.3.88 crores. One of the observations of the AO was that the assessee has accounted for only those fee receipts, which have been received through banking channels. On the contrary, the assessee has shown that it has accounted for fees collected by way of cash also and the has not been proved to be incorrect. Hence, it supports the case of the assessee that it has received fees from students both by way of cash and also through banking channels. Further, fees received in cash have also been accounted for in the books of accounts.

25. The next important issue is the reliability of the documents seized from the residence of the Chairman, Shri P L Nanjundaswamy. The AO has fully relied upon those documents and accordingly concluded that the assessee has collected fees as mentioned in those documents. The AO has also taken support of certain Visitors slips and diary maintained by the P.A to the Chairman to vindicate that the assessee has been collecting fees over and above that accounted for in the books of accounts. The visitors’ slips and the diary maintained to P.A were related to the financial year relevant to AY 2014-15. It is not the case that the assessee has accepted the entries made in those documents. The assessee has given explanations with regard to those documents also stating that they are at negotiation stage. In respect of visitors’ slips, the Ld A.R pointed out that all the students mentioned in those visitors’ slips have not takenadmission, meaning thereby, it vindicates the explanations of the assessee that the amount mentioned therein are at initial negotiation stage. With regard to the diary maintained by the P.A of the Chairman, the assessee has stated that it is not aware as to why such a diary was maintained by him. No opportunity has been provided to the assessee to cross examine the P.A to the Chairman. In any case, the entries made in the diary are not related to the year under consideration.

26. We also notice that it is not clear as to whether the assessing officer did make any enquiry with any of the students or their parents in order to find out the actual amounts paid by them for getting admission. Such kind of enquiry would have brought out the actual facts. However, we notice that the assessing officer seems to have issued notices u/s 133(6) of the Act to some of the students. However, he has not discussed anything in the assessment order about the results of the notices so issued. It was stated before Ld CIT(A) that the assessee has sought the information in this regard by filing an application under RTI Act, but it was denied. Accordingly, it was submitted that there is violation of Principles of Natural justice in not providing information about results of the notices issued and accordingly it was contended that the whole assessment order is liable to be quashed. It was also submitted that the presumption should be that the information obtained by the AO was in favour of the assessee only. The Ld CIT(A) has rejected the above said contentions with the following observations: –

“68. I am not in agreement with the proposition of the appellant. I have discussed in detail about the reliefs that the appellant is entitled to under each head. Just because the information obtained was not shared with the appellant does not mean that the whole order is bad in law, on the principles of natural justice. The assessing office can part with the information collected only if there is something adverse to the interests of the appellant. The adverse materials collected behind the back of the appellant have to be brought to its notice. The assessing officer has not used the confirmation letters to draw any adverse inference. Therefore, I do not see any force in the arguments of the appellant in this regard. As regards RTI application, providing of information or otherwise is a statutory act and the denial of information can be dealt with by the appellate authority under the Right to Information Act. The appellate authority under the Income tax Act, cannot deliberate or decide about the justification or otherwise of denial of information. I, therefor, decline to interfere in this respect.

We notice that the assessee has contended that the presumption to be entertained in such kind of situation is that the students have only confirmed the payments which have been duly accounted for by the assessee, i.e., no adverse report was given by any of the students. We notice that the Ld CIT(A) has also accepted the above said contentions of the assessee. In the highlighted portion in the decision rendered by the Ld CIT(A), we notice that the first appellate authority has expressed the view that the question of parting with the information collected behind the back of the assessee would arise only, if there is something adverse to the interests of the assessee, meaning thereby, there is possibility that the AO did not receive any adverse information. Hence, we find merit in the submissions of the assessee that the presumption should be that the students have confirmed that the fees accounted for by the assessee only have been paid by them. In effect, there was no adverse material to corroborate the view taken by the AO that the assessee has collected any amount over and above that has been accounted for.

27. The Ld A.R relied upon various case laws in support of her arguments. We prefer to discuss some of them here. In the case of Balaji Educational & Charitable Public Trust (supra), the Hon’ble Madras High Court has, inter alia, observed as under:-

“7.5 As rightly held by the Tribunal, if the Assessing Officer had any doubt about the receipt of capitation fee or the explanation given, he should have conducted enquiry either with the students or with their parents or with any other person interested in the activities carried on by the assessee trust. But, without doing so, the Assessing Officer estimated the collection of contributions on the basis of the number of seats available under management quota multiplied by the amount of contribution attributable to individual seats. Any determination for purpose of tax cannot be based on hypothetical facts or conjectures or surmises. The inference drawn by the Original Authority is based on probability.

7.6 With regard to the seizure of cash of over Rs.44 lakhs from the residence of Chairman of Assessee Trust, it is not in dispute that the said sum has been assessed in the hands of the Chairman for the assessment year 2008-2009 and the same was received from the petrol pump business, the turnover of which is more than Rs.30 crores. Moreover, the Assessing Officer has accepted the disclosure of the seized cash as the income of the individual and, therefore, in our considered opinion, it cannot be said that assessee trust had accepted contributions by way of capitation fee. The said issue cannot be used both ways. The assessment of the undisclosed income at the hand of the individual ends the issue there. It has no relevance to the affairs of the Trust and there is no material to hold so.

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 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.”

28. In the case before Hon’ble Madras High Court the question, inter alia, was collection of Capitation Fees from students who were admitted in the management quota by the assessee running educational institutions. The Hon’ble Madras High Court noticed that the assessing officer has not conducted any enquiry with students or parents or others. The cash seized during the course of search was accepted as not belonging to the assessee. The assessee’s claim that the donations were received voluntarily from the students was not disproved. There was no complaint received from any student/parent regarding capitation fee charged by the institution. In the above said case also, the assessing officer had estimated the capitation fee received from the students under the management quota for various years. The Hon’ble Madras High Court held to be a perverse inference.

29. In the instant case, the AO’s case is that the assessee has suppressed the fees received by it for giving admission under management/NRI quota. The AO did not accept the explanations of the assessee in this regard. However, he did not bring any material on record to show that the assessee, indeed, collected fees over and above that were accounted for in the books of account. The assessing officer did not reveal/discuss the result of enquiry conducted by him by issuing notices u/s 133(6) of the Act. Hence the assessee has contended that the assessing officer did not receive any adverse reply from the students. Even though the AO has observed that huge cash was seized during the course of search, yet it was shown by the assessee that all those cash are accounted for in the books of accounts.

30. We have noticed that the Ld CIT(A) has agreed with the inferences drawn by the AO. The discussions made in the preceding paragraph would also show that the assessing officer has only drawn certain inferences on surmises and conjectures. Hence we are unable to sustain the view taken by Ld CIT(A) on this issue. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of 1,85,28,850/- made in AY 2009-10 towards suppression of fee on MBBS Management Quota.

31. The next issue urged by the assessee relates to the addition towards suppression of fees under P.G admission. The facts relating to this issue are stated in brief. During the course of search, the revenue seized certain documents in the form of a “Diary” maintained by a person named Shri Manjunath, PA to Chairman of Trust. The said diary is numbered by the search officials as “A-1/BRAMC/2”. In the diary, certain amounts were mentioned against PG seats. However, the actual amount accounted for did not match with the entries made in the diary. The entries made in the diary pertained to FY 2013-14 relevant to AY 2014-15. The AO noticed that the amounts mentioned against the candidates named Dr. N.S. Rajitha, Dr. Mary Sowmya and Dr. Sunil Patil were Rs. 1.10 crores, Rs. 1.20 crores and Rs. 1.35 crores respectively. However, amounts accounted for in the books of accounts were found to be Rs.60.04 lakhs, Rs.58.91 lakhs and Rs.65.00 lakhs respectively. The search team also found certain documents titled as “Agreement”, “Endorsement” pertaining to FY 2008-09 relating to AY 2009- 10. In those documents also, certain amounts were noted as agreed amounts. The AO has noticed that the amounts mentioned amounts of Rs.63.00 lakhs, Rs.25.00 lakhs and Rs.65.00 lakhs respectively against the name of Dr. Khoiram Sunderjit, Dr. Taseer Basha and Dr. Premlatha respectively. However, the amounts accounted for were found to be Rs.40.00 lakhs, Rs.4.50 lakhs and Rs.40.00 lakhs respectively. The AO noticed that only a part of fees is being accounted for. The same worked out at 54% in the case of Dr. N.S. Rajitha and 49% in the case of Dr. Mary Sowmya. Accordingly, the AO took the view that the assessee should be accounting only part of fees in respect of all P.G seats. Accordingly the AO issued show cause notice to the assessee asking as to why the suppressed fees should not be estimated on the basis of above said percentage of fees accounted by the assessee.

32. The assessee pointed out that the noting made by the P.A to the Chairman in the diary pertained to AY 20 14-15 and further it was incomplete. It was pointed out that in three cases, the course name was not mentioned and in two cases, the names of the candidate were not mentioned. It was further pointed out that in the year relevant to Assessment Year 2009-10, only 7 PG seats were available under Management Quota. It was also submitted that the AO could not entertain presumption in AY 2009-10, on the basis of incomplete documents pertaining to another year. It was also submitted that, out of seven seats, five PG seats were not recognized in AY 2009-10 and admission was made under Permitted Category subject to recognition by Medical Council of India. The assessee also submitted that the admission fee would differ from Course to Course. Accordingly it was contended that the AO was not justified in estimating the suppression of fees. The assessee also moved a petition u/s 144A of the Act before the JCIT, but the same was rejected.

33. The AO did not accept the contentions of the assessee. He observed that three candidates noted in the Diary have, in fact, taken admission in FY 2013-14. He also took the view that the extrapolation is permitted in the Income tax proceedings on the basis of available materials. In this regard, he placed reliance on the decision rendered in the following cases:-

(a) CST vs. H.M. Eusufali, H.M. Abdulali (1973)(90 ITR 271)(SC)

(b) Gopal lal Bhadruka vs. DCIT (346 ITR 106)(AP)

(c) Sunny Jacob Jewellers and Wedding Centres (48 Taxmann.com 347) (Kerala)

The AO also observed that there was material available for AY 2009-10 and AY 2014-15, which disclosed that the assessee is suppressing fee receipts. The assessee has also been suppressing fee collections made for giving admission under Management Quota seats of MBBS. The AO referred to the documents in the form of agreement etc., pertaining to three candidates, viz., Dr. Khoram Sunderjit, Dr. Taseer Basha and Dr. Premalatha pertaining to AY 2009-10 and observed that these documents show that the assessee has not accounted for entire fee receipts. The assessee has allotted seven seats under management quota during the year relevant to AY 2009-10. The suppressed fees in respect of these three candidates, cited above, worked out to Rs.68.50 lakhs. With regard to remaining four seats, the AO estimated the suppression of fees at Rs. 107.45 lakhs by back working the fees that would have collected by the assessee. Accordingly, the assessing officer made an addition of Rs. 1,75,95,081/- towards suppression of fees in respect of PG seats allotted under management quota.

34. The Ld CIT(A) confirmed this addition on identical reasoning given by him while confirming the addition relating to suppression of fee for MBBS

35. We heard the parties on this issue. We notice that the AO has made this addition on the basis of certain documents pertaining to the AY 2009- 10 and 2014-15. In respect of documents relating to the assessment year 2009-10, some amount has been noted in the said document and the same has been considered as correct or true amount by the assessing officer.

36. The assessee has offered following explanations before Ld CIT(A) on this issue, which is extracted by the Ld CIT(A) in his order:-

“The Appellant admitted 7 candidates to various PG Courses, 5 of which had not been recognized by the Medical Council of India at that point of time. The admissions were made only under permitted category subject to recognition by the Medical Council of India at a future date which was uncertain. The courses therefore fetched lesser fees. The Appellant submits that the fee differs from course to course depending on whether the degree is pre-clinical, clinical, para-clinical or a diploma course. There is no uniform fee that can be fixed for any particular course as the same depends upon several factors. The Appellant accounted for all its receipts in its books of account.

The addition under this head to the extent of Rs. 1,75,95,081/- was made on the basis of two documents that were seized from the premises of Dr. B.R. Ambedkar Medical College. One such document was a handwritten diary maintained by Mr. Manjunath, Personal Assistant to the Chairman of the trust Mr P L Nanjundaswamy (A1/BRAMC/2). The AO relied on the notings of amounts against certain names in the diary to conclude that the Appellant had received amounts over and above what was accounted for in its books of accounts. The Appellant submits that firstly, the diary does not belong to the Appellant but belongs to the PA of Mr P.L. Nanjundaswamy and therefore the entries made therein are not relatable to the Appellant. Secondly, even going by the notings in the said diary, there is no indication that figures mentioned were with respect to fees payable by the candidates. Neither is there any indication that such amounts were in fact received by the Appellant. Therefore, no addition can be made in the absence of any other evidence to show that amounts over and above what was accounted for by the Appellant was received by it. Thirdly, the candidates mentioned in the said diary took admission only in the academic year 20 13-14 and therefore in the absence of any evidence for the assessment year in question no addition can be made to the income of the Appellant.

In any event, the AO ought to have examined the said Mr Manjunatha, to whom the diary belonged and ought to have given an opportunity to the Appellant to cross examine him.

The other set of documents relied upon by the AO is the seized material annexed as DBRAMCH/A/ 1. The said documents are endorsements where the Medical College had stated that seats had been reserved in the names of the candidates mentioned therein subject to payment of the balance fees. Beyond this the endorsements do not state anything. The AO relied on certain hand written notings on the said endorsements to conclude in case of the three students whose endorsements had been seized, the amount received vis-à-vis the accounted amounts was under:

Sl.No . Name of the Candidate Course Received Amount Accounted Amount Unaccount-ed Amount
1. Dr. Khoiram Sunderjit MS OBG 63,00,000 40,00,000 23,00,000
2. Dr. Taseer
Basha S
DCH 25,00,000 4,50,000 20,50,000
3. Dr. Premalatha MD Peadiatr ics 65,00,000 40,00,000 25,00,000
TOTAL 1,53,00,000 84,50,000 68,50,000

The Appellant submits that the notings in seized material DBRAMCH/A/ 1 cannot be relied upon since some of them are signed or even if signed, do not bear the seal of the Appellant. Consequently there is no conclusive evidence that the amounts mentioned therein were in fact received by the Appellant. Without prejudice and in any event, Mr P L Nanjundaswamy, in his letter dated 29-01-2016 addressed to the Appellant stated as under:-

III) Question No.3, Page No.2

For the same reason of derecognition of our college by MCI, some candidates wanted to either cancel the seat or reduction in the agreed amount. Hence, after the failure of getting MCI recognition, they declined to pay the balance of the agreed amount and hence, for the candidate under SL No.1 i.e., Sunderjit, it was brought down to Rs.40 lakhs, after negotiation.

Similarly, due to the above reason, an amount of Rs.4.5 lakhs has been collected for the Diploma candidate under Sl No.2 i.e. Basha and an amount of Rs.40 lakhs have been collected from candidate under Sl No.3 i.e. Dr. Premlatha.

Therefore, even if one were to go by the above seized material, what can be said to have been received is not what is noted in the documents.

The AO has made the addition on the basis of the seized material showing the alleged receipts for PG seats for financial year 20 13-14 and has applied it proportionately to each post graduate seat for financial year 2008-09 (at para 16.19 of the assessment order) which is wholly misconceived. The Appellant submits that the said figures have no relevance as regards actual receipts during financial year 2008-09 and in the absence of any seized material for financial year 2008-09 to support the conclusion that there was in fact unaccounted income, the addition made by the AO cannot be sustained. The Appellant submits that the addition on the basis of extrapolation, estimation and imaginary events are unsustainable.

Moreover, the AO, without rejecting the books of accounts of the Appellant, ought not to have made additions to the income of the Appellant on the basis of extrapolations. He ought to have appreciated that the Chairman of the Appellant changes year on year and the seized material pertained to only those years during which Mr. P L Nanjundaswamy was the Chairman. Consequently, the assumption that there is undisclosed income for all six assessment years is unsustainable.”

37. We notice that the ld CIT(A) has upheld the addition made by the AO by confirming the inferences drawn by the assessing officer from the seized materials. The question that arises is whether the said documents could be relied upon by the assessing officer? The assessee has admitted 7 students under management quota of P G seats. The above said documents were related to 3 students only. The AO has estimated the suppression of fees in respect of remaining four students. With regard to the three students also, the assessee has given explanations as to why the originally negotiated amounts could not be collected. It is pertinent to note that the assessing officer did not conduct any independent enquiry either with the students or their parents or with any other person related to those students in order to find out the truth. He also not brought any material on record to show that the explanations given by the assessee were not correct. Hence, we are of the view that the assessing officer should not have drawn presumptions without conducting proper enquiry. The assessee has stated that the fee is not fixed uniformly for management quota seats and the same is finalized by the chairman on case to case basis. It is also undisputed fact that the revenue did not unearth any material with regard to the remaining four seats. Under these set of facts, it may not be correct on the part of the AO to presume that the assessee would have collected more fees in respect of remaining four seats. Though the AO has taken support of the diary relating to AY 2014-15 to entertain presumption that the assessee has been suppressing the fees, in our considered view, it may not be right to presume that the circumstances prevailing in one year existed in other years also. In any case, the assessee was not given opportunity to examine Mr. Manjunatha, who had maintained the diary. Accordingly, we are of the view that the ld CIT(A) was not justified in confirming this addition. In our view, the decision rendered by Hon’ble Madras High Court in the case of Balaji Educational & Charitable Public Trust (supra) would apply to this addition also. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in AY 2009-10 and direct the AO to delete the addition of Rs.1,75,95,081/- relating to PG seats.

38. We shall take up the appeal of revenue filed for AY 2009-10, wherein the revenue is assailing the decision of Ld CIT(A) in deleting the addition relating to suppression of fees of COMED-K candidates. We have noticed earlier that 40% of the MBBS seats are filled up on the basis of common entrance test conducted by the association or body of professional colleges.

The fee to be charged for the candidates admitted under this process is determined as per the agreement entered between the State Government and the Association. However, if the seats under this category lies vacant after two rounds of counselling process, those vacant seats will be handed over to the management, which can fill up them, subject to the condition that the fee charged for these seats should be the same as determined as per the agreement entered between the State Government and the Association.

39. During the year relevant to AY 2009-10, 40 seats fell under the category of COMED-K. The AO noticed that the assessee has filled up one seat through the exam and the remaining 39 seats were filled up by the management, since they fell vacant. The AO took the view that the assessee would have charged the same fees as applicable to the Management quota seats. We noticed earlier, the AO has worked out average fee per seat at 28,69,375/-. Accordingly, he proposed to apply the above said rate to all the 39 seats and make addition for the difference.

40. Before the AO, the assessee submitted that it has collected fees as per the agreement entered by the association with the State Government for COMED-K seats. It further submitted that the college was denied recognition by the Medical Council of India during this year and hence the students did not prefer this college. However, the AO rejected the explanations of the assessee. He referred to certain documents pertaining to AY 2014-15, which are in the form of letter issued by the college to prospective candidates, wherein it was stated that the request for seats will be considered when the cancellation seats are available in the college. It was further stated that the rates will be as applicable for management quota seats. The AO noticed that such kinds of letters were issued to three candidates viz., Kum. Shivani Sudesh, Kum. Riya Mukherjee and Mr. Ankush Agarwal. These letters also contained noting of fees like 25 lakhs, 35 lakhs. The AO noticed that two candidates have taken admission.

However, the assessee has accounted only fees applicable for COMED-K seats for these two candidates, viz., Shivani and Ankush.

41. The AO also observed that the assessee has not given proper explanations as to why the candidates selected under COMED-K exam did not take admission. He also took the view that the copies of letters issued to the prospective candidates support his view that the COMED-K seats are also allotted at the rates applicable to management quota seats. Accordingly, the AO estimated the fees that would have been collected by the assessee for 39 seats @ Rs.28,69,375/- per seat. After deducting the actual fees accounted for by the assessee for these 39 seats, the AO added a sum of Rs.5,22,04,425/- towards suppression of fees under COMED-K

42. The Ld CIT(A) deleted this addition and hence the revenue has filed this appeal. The ld D.R supported the order of the assessing officer. He submitted that the copies of letters issued to the prospective candidates and the noting made therein would show that the assessee has been collecting fees as applicable to management quota seats. On the contrary, the Ld A.R placed her reliance on the decision taken by Ld CIT(A) on this issue.

43. We heard the parties on this issue and perused the record. Before Ld CIT(A), the assessee has offered following explanations with regard to the seized documents in the form of letters issued to the prospective candidates:-

“ The said letters extracted in the assessment order have been allegedly issued to 1) Kum. Shivani Sudesh; 2) Kum. Riya Mukerjee; 3) Mr. Ankush Agarwal; 4) Mr. Bolla Kamal Chaitanya. Of the said four candidates, only two i.e. Kum. Shivani Sudesh and Mr. Ankush Agarwal took admission. The Appellant submits that the practice is that the candidates booked seats under the management quota before the results of CET and COMED-K are announced as at that point of time, they may not be confident of securing seats on merit basis. As stated above, the admissions under the management category is as per the discretion of the management and the only requirement is that they should have obtained 50% of marks in the qualifying exam and an NRI sponsorship. In all other category seats, admissions are governed by the CET and COMED-K rules. The above four letters have been issued to the students as early as in June 2013 much before the admissions under the COMED-K quota had even begun. When they approached the management for seats, some of the seats had already been committed to other candidates. What above letters indicate is that on cancellation of seats reserved under the management category, seats would become available for the college to admit these candidates by charging management fees. This is because once the results in the CET and COMED-K are announced, some candidates who may have secured good ranking would not opt for the management seats but may instead secure seats in a different category. The letters do not indicate that the seats will be provided to these candidates as per management fees on cancellation of COMED-K seats. The letters do not state anything to the effect that the cancelled COMED-K seats would be provided to the candidates at management fees. The AO seems to have proceeded on the predetermined basis that the expression ‘cancellation seats’ would in all events referred to the unfilled COMED-K seats which is not correct.

In any event, all the documents pertain to the financial year 2013-14 and cannot be used to estimate the income for any past year when there is no incriminating material for that past year.

Without prejudice, the notings on the letters to the effect ’25 + fee’ or ’35 + fee’ do not indicate that the Appellant has, in fact, received any of those amounts, assuming that 25 indicates Rs.25,00,000/-. As submitted above, the letters were issued prior to the CET and COMED-K counselling and thus were only at enquiry stages, if at all. Further, the very fact that only 2 students out of the 4 students whose letters were seized were admitted into the college stands testimony to the fact that the letters cannot be relied upon at all to make any addition.

It is submitted that even the two students who were admitted viz., Kum Shivani Sudesh and Mr Ankush Agarwal did not get admitted under the management category but were admitted under the COMED-K category against cancelled seats and the fee paid by them is Rs.3,57,500/- annually. In fact, all students who were admitted to COMED-K unfilled seats were only admitted for the prescribed fee under the consensual agreement entered between the Government and Association. There is no evidence that the Appellant has charged over and above the fee accounted for in its books and the said letters at A-1/PLN/ 15 do not in any way provide proof that fee over and above COMED-K category fee was received by the Appellant. To the contrary, the students securing admission to the 40 seats under this category during the academic year 2008-09 have given letters indicating that the fee paid by them is Rs.3.25 lakhs only, which has been completely ignored by the AO. A true copy of Appellant’s letter dated 08-02-2016 filled with the AO together the confirmation letters is annexed herewith as ANNEXURE-C.

In any event the extrapolation of figures adopted for a given assessment year to a past assessment year without any basis and without there being any evidence that COMED-K seats were filled as per management quota fee during the assessment year 2009-10, is wholly arbitrary and therefore the application of Rs.28,69,375/- as the fee for 39 unfilled seats and making addition of Rs.5,22,04,425/- is without any basis.

The AO also observes that the Appellant has not given any reason for candidates not reporting to the college for admission under COMED-K. The AO has clearly lost sight of the fact that seats did not filled under COMED-K category because the MCI had withdrawn the recognition granted to the college.”

44. The Ld A.R also submitted before Ld CIT(A) that there is a monitoring agency/committee constituted by the Government to ensure implementation of fee structure consensually agreed between the Association and the Government. If the college indulge in over charging of fees, it may lead to complaints by candidates. It was also submitted that the assessee has submitted the list of candidates admitted under this category along with rank cards. The assessee also submitted that it has submitted confirmation letters obtained from the candidates.

45. The Ld CIT(A) has discussed about the contentions of the assessee as under:-

“ Even when such a detailed reply was available, it is surprising that the Assessing Officer has made the addition on purely conjectures and surmises. As far as A-1/PLN/ 15 is concerned, the learned A.R pointed out that the letters are addressed to candidates by Sri P L Nanjundaswamy and they do not indicate that the COMED-K seats were filled up applying the management quota fee. The candidates, approach the management before the results of CET and COMED-K at which point of time, the fee may have been quoted. Ultimately, the candidates may not turn up or the candidate would have been admitted under CET quota. It is not possible on the basis of stray letters found in the residential premises, to draw general conclusion that the drop out seats is charged as is charged for Management seats. Significantly, he pointed out that the letters bear the date on second week of June, 2013 and the admission process has not started. The letters pertain to the assessment year 2014-15 and on the basis of those letters, it cannot be retrospectively concluded that the appellant has charged as per fee for Management quota. Even the two candidates who were ultimately admitted under cancelled COMED-K seats were charged as per consensual agreement only. In any event, the learned A.R submitted that extrapolation of figures on the basis of a document of AY 2014-15 cannot be accepted. There is no material to suggest that fee has been charged as per Management quota for the year under consideration.”

46. We have noticed earlier that the AO had taken support of certain case laws. With regard to the decision rendered by Hon’ble Supreme Court in the case of H M Eusufali (supra), the assessee submitted that the said case was related to the best judgement assessment under Sales Tax Act and it was rendered on the basis of facts prevailing in that case. It was submitted that the assessee therein had admitted sales outside the books of accounts. Accordingly it was submitted that the said case law is not applicable to the assessee. In the case of Gopal das Bhaddruka (346 ITR 106), one of the assessees had admitted receipt of on-money, which is not the case here. In the case of Sunny Jaccob Jewellers (48 taxmann.com347), the suppression of sales was evident from the Sales summary sheet when compared with actual sales recorded. The employees admitted that the sales bills were not issued on all sales. Further, the revenue officials purchased certain gold ornaments in the pre-search enquiry and no bill was issued. Accordingly it was submitted that there were overwhelming evidences in the above said case. Accordingly, it was submitted that the above said case laws are not applicable to the facts of the present case. It was submitted that the AO did not gather any evidence to prove the receipt of unaccounted money. Further, no trustee has accepted that there was suppression of fees. On the contrary, the assessee placed its reliance on the following case laws:-

(a) CIT vs. Balaji Educational and charitable public Trust (374 ITR

(b) CIT vs. B.Nagendra Baliga (363 ITR 410)

(C) CIT vs. Standard Tea Processing Co Ltd (215 Taxman 659)(Guj).

47. The Ld CIT(A) was convinced with the contentions of the assessee and accordingly deleted the addition with the following observations:-

“46. I have carefully considered the findings of the Assessing Officer and also carefully perused the submissions made by the appellant in writing and also his oral arguments. It is no doubt true that the COMED-K seats remain unfilled after two rounds of counselling. Some of the candidates who became eligible for COMED-K admission would have been absorbed under CET quota and, therefore, would not turn up. Those who appear for COMED-K also would have appeared for various other Examinations like GRE, JEE, GATE etc., depending upon the avenues open to them. The candidates who intended to choose medical course may change their mind and choose Engineering Course. There are lot of alternatives to the candidates. Therefore, nothing much can be read in respect of cancellation sears under COMED-K. It is not possible to draw adverse inference against the Medical Colleges in general and the appellant in particular about the vacancies arising in the COMED-K category. The assessing officer’s mention about dummy meritorious candidates appearing for examination and the Management encashing the surrendered seat etc., are far fetched. The learned AR pointed out that the Assessing Officer has been given the COMED-K rank cards and confirmation letters of the candidates. When such rank cards have not been disputed, there can be no dummy candidates admitted. When there is no concrete evidence about the malpractice, if any, no adverse inference should be drawn. It was open to the Assessing Officer to cross-verify the confirmation letters produced, which she has not chosen to do.

47. In respect of admission to COMED-K admission, the AO adopted the figures based on the seized material pertaining to the management quota seats, though there was a consensual agreement entered into between the Private Colleges and Government of Karnataka which bars charging fee over and above the fee fixed as per the said Agreement. Hence, the figures adopted to arrive the unaccounted fee on admission under COMED-K category by the AO on par with that of management quota seats are wholly unfounded.

48. Based on the materials of some other years for which no evidences are available, no purpose will serve in adopting the fees for the year under consideration. In other words, extrapolation of figures has to be downplayed. Suffice to mention that the Assessing Officer was not justified in estimating the figures on the basis of seized material which did not pertain to any of the year under consideration. The Assessing Officer appears to have not examined carefully the reply filed by the appellant on 1.2.2016, though it is extracted in the assessment order. The consensual agreement cannot be wished away, as it is an agreement regulated by the Government of Karnataka, Medical Council of India and Rajiv Gandhi University of Health Sciences. The AO admitted that the appellant submitted rank cards in support of admission under COMED-K category, but failed to understand the binding nature of the Consensual Agreement on the management. If the management admitted the students under management category, submitting the rank cards does not arise. The assessing officer has not chosen to examine any of the candidates though the appellant had filed confirmation letters. Sri P L Nanjundaswamy is answerable to the papers seized from his As far as appellant is concerned, it has made an attempt by corresponding with Sri P L Nanjundaswamy, who only stated that all the collections have been deposited into the Bank. My observation in the earlier part of this order about auditing of books by a qualified Chartered Accountant and non-rejection of book results, all go to support the case of the appellant. The claim of expenditure – the disproportionate or inadequacy – has not been doubted by the Assessing Officer. In short there is no material to fall back upon for the year under consideration.

49. Regarding the case laws quoted by the Assessing Officer, they have all been distinguished with valid reasons in the earlier The case laws in support of the appellant quoted above have relevance to the facts and circumstances of the case. The observations are not repeated for the sake of brevity.

50. I, therefore, hold that there was no justification for the Assessing Officer to make any addition under the head “COMED-K” drop out seats for the year under consideration. Hence the addition of Rs.5,22,04,425/- is delet”

48. We notice that the Ld CIT(A) has analysed the facts surrounding this issue properly. There is no dispute that the assessee has to admit the students under the COMED-K category out of the rank list published for the entrance exam conducted for this category. It is not the case of the AO that any students outside the rank list has been admitted under this category. There is no dispute that the fee structure under this category is lower than the fees applicable for management quota. In this kind of situation, if any student has qualified under entrance examination conducted for COMED-K category and admission is also made out of the rank list of that examination, then no one will agree to pay higher fees than that prescribed for COMED-K category. If anybody agrees to pay, the same would be against human probabilities. If the assessee had demanded higher fees, then the concerned student had right to lodge a complaint with the State Government, as it violative of the consensual agreement entered between the Association and Government. The AO has not shown that any such complaint was received against the assessee by the State Government or Association.

49. We notice that the assessee has explained that the letters issued to the prospective students, which were seized by the revenue, pertained to management quota seats. The revenue has seized letters issued to four students, out of which only two students have joined under COMED-K The assessee has furnished confirmation letters obtained from those two students confirming that they have paid only prescribed fees. We notice that the AO did not disprove the contents of the confirmation letters. In any case, those letters pertained to AY 2014-15 and not to the assessment year 2009-10, which is under consideration.

50. We also notice that the AO has not conducted any enquiry with any of the students or their parents or any other person to support the inference drawn by him that the fees applicable to management quota seats were collected from the students admitted under cancelled seats of COMED-K The assessing officer has observed that the management of the college is creating vacancy under COMED-K seats through dubious ways and the ld CIT(A) has observed that the said observation is far fetched and is not supported by any material. The Ld CIT(A) has also observed that the lapse, if any, in the said procedure has to be dealt with by the concerned authorities. What the revenue should be concerned is whether the fees collected from the students have been duly accounted for or not. The detailed discussions made by the Ld CIT(A) would show that the assessee has answered all the queries raised by the AO in this regard and none of the said explanations have been proved to be wrong by the assessing officer. We also notice that the various case laws relied upon by the AO has been rightly distinguished before the Ld CIT(A). On the contrary, the decision rendered by Hon’ble Madras High Court in the case of Balaji Educational and Charitable Public Trust (supra) would support the contentions of the assessee, since the AO has drawn certain adverse inferences on the basis of certain materials pertaining to other years disregarding the explanations and materials furnished by the assessee. Hence we do not find any infirmity in the decision taken by Ld CIT(A) on this issue and accordingly confirm the deletion.

ASSESSMENT YEARS 2008-09, 2010-11 TO 2013- 14:-

51. We shall now take up the appeals filed by both the parties for AY 2008-09, 2010-11 to 20 13-14. The AO had made additions on identical reasoning in all these years and the Ld CIT(A) has disposed of the appeals of the above said years by a common order dated 13-09-20 17.

52. The first addition contested by the assessee relates to the suppression of fees collected in admission under management quota MBBS We have noticed earlier that the revenue has carried out search and seizure operations in the hands of the assessee and the revenue has seized certain incriminating documents from the residence of Chairman Shri P.L.Nanjundaswamy titled as “A-1/PLN/3”. The said documents depicted the fee collection details of students admitted under management quota of MBBS seats for the year relevant to AY 2009-10. It was noticed that the gross amount of fee collected was shown at Rs.5.73 crores, while the assessee had accounted for Rs.3.88 crores. Hence the AO had made addition of Rs. 1.85 crores in AY 2009-10 towards suppression of fees.

53. The AO took the view that the assessee would have followed same pattern of suppression of fees in other years also. Accordingly he proposed to compute the suppressed amount of fees by applying the ratio found in AY 2009-10, i.e., a sum of Rs.1.85 crores was found as unaccounted against the accounted fee amount of Rs.3.88 crores. When this proposal was communicated to the assessee, following explanations were offered by the assessee in AY 2008-09:-

“We categorically state that during the assessment year 2008-09, an amount of Rs.4,89,85,217/- has been received from students of undergraduate (MBBS) course, under Management Quota, which has been duly accounted for. There is no amount which has been received over and above this amount accounted for. Therefore, there is no cause for making any addition, on the basis of presumptions. You have not pointed out any incriminating material seized by you alluding about the unaccounted receipt. In the absence of any other incriminating material seized, there is no reason why the accounted receipts should not be accepted. We vehemently object to your proposal to make any addition on this count. This proposal is against the principle of natural justice.

It is also pertinent to note that Sri P L Nanjundaswamy was not the Chairman of the Medical College for the assessment year 2008-09. Therefore, any material seized in the premises of Sri P L Nanjundaswamy, cannot be applied for this year. We also make it clear that Sri H S Mahadev Prasad was the Chairman of the Medical College at the relevant point of time, and he has not been interrogated at the time of search. No person has vouchsafed the receipt of monies over and above the amount accounted for. We have already filed confirmation letter obtained from the students regarding total amounts paid by them. Any proposal to make addition over and above the accounted receipts shall be illegal and contrary to the facts available on record.”

54. The AO was, however, not convinced with the explanations of the assessee. The AO placed reliance on the order passed by him for AY 2009- 10 and held that hefty amounts have been charged for the admission to MBBS course under the Management/NRI category and all of it has not been brought to books of account. Accordingly, applying the ratio of “unaccounted amount” to the “accounted amount” determined in AY 2009-10, the AO computed unaccounted amount of all these years. For example, the assessee had accounted Rs.4,92,35,217/- in the year relevant to AY 2008-09. The assessing officer computed the unaccounted income for assessment year 2008-09 as under:-

4,92,35,217 x (1,85,28,850/3,88,58,650) = Rs.2,34,76,676/-. Accordingly, the AO added the amounts so computed in each of assessment years, viz., 2008-09, 2010-11 to 2013-14.

55. The Ld CIT(A) also confirmed the additions in all these years by following his decision rendered for AY 2009-10.

56. We heard the parties on this issue and perused the record. In the earlier paragraphs, we have dealt with the addition made under this head in AY 2009-10. We have deleted the addition in AY 2009-10 for detailed reasoning given in the earlier paragraphs. In all these years, the assessing officer has followed the decision taken by him in AY 2009-10 for making the Since the similar addition made in assessment year 2009-10 has been deleted by us, the very basis for making addition in these years shall not survive and hence the additions made in all these years are liable to be deleted. In addition to the above, we notice that the assessee has furnished confirmation letters obtained from the students to prove that it has not collected any fee over and above the amount accounted for by it. We notice that the assessing officer has not disproved those confirmation letters nor did he conduct any independent enquiry from any of the students or parents or others. Secondly, Shri P L Nanjudaswamy was not the Chairman in all these years. We have noticed that the Chairman post is held by different person on rotation basis and fee for management quota seats are determined by the Chairman of the year. We notice that the revenue has not seized any such document either from the college or from the residences of the concerned Chairman pertaining to these years. The incriminating documents have been seized only from the residence of Shri P L Nanjundaswamy, who was holding the post of Chairman in the years relevant to AY 2009-10 and 20 14-15.

57. The above discussions would show that the revenue did not unearth any incriminating material pertaining to the years relevant to AY 2008-09, 2010-11 to 2013-14. We have noticed that the fees for management quota seats are determined on case to case basis. Hence, unless there is any concrete material to show that the assessee has collected any amount outside the books of accounts, in our view, it is not justified to presume that the assessee would have collected fees outside the books of accounts. In fact, the assessee has disproved the said presumption by furnishing confirmation letters obtained from the students. Under these set of facts, we are of the view that the assessing officer has made the addition in all these year under surmises and conjectures and hence Ld CIT(A) was not justified in confirming the addition relating to suppression of fees under Management quota MBBS seats. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in all the above said years and direct the AO to delete the addition in all the above said years.

58. The next addition contested by the assessee in AY 2008-09, 2010-11 to 20 13-14 relates to suppression of fees of PG seats. We have noticed earlier that the search officials unearthed certain documents in the form of letters titled as Agreement, endorsement, no-due certificates pertaining to AY 2014-15 given for admission into PG seats. Based on the amounts noted down in those documents and the actual amount accounted for by the assessee, the AO had estimated the fees that would have been collected for PG seats of other students and accordingly made addition in AY 2009- Following the same methodology, the assessing officer estimated the fees that would have been collected by the assessee in the years relevant to AY 2008-09, 2010-11 to 20 13-14. The AO added the difference between the amount so estimated and the amount accounted for by the assessee in all these years. The Ld CIT(A) also confirmed the same.

59. While dealing with identical addition made in AY 2009-10, we have held that the said addition made on estimated basis is not sustainable for the detailed reasons discussed in the earlier paragraphs. It is an admitted fact that the revenue did not unearth any incriminating material pertaining to the years relevant to AY 2008-09, 2010-11 to 20 13-14. We have noticed that the fees for management quota seats are determined on case to case Hence, unless there is any concrete material to show that the assessee has collected any amount outside the books of accounts, in our view, it is not justified to presume that the assessee would have collected fees. In fact, the assessee has disproved the said presumption by furnishing confirmation letters obtained from the students. Under these set of facts, we are of the view that the assessing officer has made the addition in all these year under surmises and conjectures and hence Ld CIT(A) was not justified in confirming the addition relating to suppression of fees under Management quota PG seats. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in all the above said years and direct the AO to delete the addition in all the above said years.

60. We shall now take up the appeals filed by the revenue for AY 2008- 09, 2010-11 to 20 13-14. The only issue urged by the revenue in all these years relate to the addition made by the AO towards suppression of fees under COMED-K category, which has been deleted by the Ld CIT(A).

61. We have dealt with an identical issue in AY 2009-10 in the earlier paragraphs. We have noticed that the assessing officer has placed reliance on certain letters issued by the assessee to some students stating that their request shall be considered on availability of cancellation seats. In those letters, it was also mentioned that the fee shall be charged as applicable to management quota seats. The AO presumed that the assessee has collected fees applicable to Management quota seats from the students admitted under COMED-K cancelled seats. Accordingly he made the addition, computing the suppression of fees by adopting fee applicable to management quota seats. The Ld CIT(A) has deleted this addition in AY 2009-10. Following the same, he deleted identical additions made in these years also.

62. We have heard the parties on this issue and perused the record. For detailed reasons discussed in AY 2009-10, we have upheld the order of Ld CIT(A) on this issue in deleting the addition made by the assessing officer. We have noticed that the assessee has given proper explanation to show that presumption drawn by the AO in respect of those letters, which were pertaining to AY 2014-15, was not correct on the facts and circumstances of the case. Further the assessee has also disproved the presumption by submitting confirmation letters obtained from students admitted under COMED-K category along with rank sheets of the Entrance examination We also noticed that the assessing officer did not make any enquiry from any of the students or parents or others to prove that the explanations and evidences furnished by the assessee were wrong. The facts and circumstances relating to this addition are identical in all these years also. Accordingly, we do not find any reason to take a different view in this matter and accordingly confirm the order passed by Ld CIT(A) on this issue in all the above said years.

ASSESSMENT YEAR 2014-15:-

63. We shall now take up the appeals filed by both the parties for AY 2014-15. In this year also, the assessing officer has made three types of additions made in other years. The Ld CIT(A) deleted the addition relating of Suppression of fees collected for COMED-K seats and confirmed other two types of addition.

64. The first addition contested by the assessee relates to the suppression of fees collected for MBBS management quota fees. During the course of search proceedings, the revenue seized a note book/diary maintained by Shri Manjunatha P.A to the Chairman Shri P L Nanjundaswamy. The said diary is titled as “A-1/BRAMC/2”. There were noting of fees details relating to various students, such as Name of candidate, Course, Advance paid, Amount agreed and remarks. The agreed amount was different from candidate to candidate and it ranged from Rs.43.00 lakhs to 77.00 lakhs. The list contained details of 18 candidates. However, name of the candidates or agreed amount was missing in some cases. Based on the available noting, the AO concluded that the average amount of fees collected for MBBS management quota seats is Rs.74,32,327/-. The AO computed aggregate amount of fees collected for 20 seats at Rs. 14.86 crores and deducted the amount of Rs.8.95 crores accounted for by the assessee and accordingly held that the difference of Rs.5.9 1 crores represent suppressed amount of fees. Accordingly the AO proposed to make the addition of above said amount.

65. The assessee, inter alia, replied as under:-

“ Whereas, out of 16 names and 2 unknown names appearing in the table given in the show cause notice, only 4 of them took admission and 12 did not take admission. We are surprised to know how the above seized material become basis to arrive average per seat Rs.7432322/-. In the absence of clear findings from the show cause notice, we are unable to submit our reply.”

The AO noticed that there was some confusion about the number of students who have taken admission out of the list collated from the diary. Sometimes, it is mentioned as 4, sometimes 5 and sometimes 6. The assessee had also replied as under in its reply dated 17.2.2016:-

“In respect of the note book annexed as “A-1/BRAMC/2” alleged to have maintained by Sri Manjunath, PA to Sri P L Nanundaswamy and its contents are denied as false as the PA is not authorized to keep/maintain any book, as the same was done by the accounts department. As stated by Mr P L Nanjundaswamy that he had not inform his PA about the admissions or amounts collected or collectible from the students. Why Mr. Manjunath maintained the above book is not known. The alleged note book doesn’t belong to the Trust.

Without prejudice to the above, we submit that the notings in the alleged note book are false on the following grounds:-

1.  ..

2. In respect of MBBS, details appearing in the alleged note book Annexured as “A-1 /BRAMC/2” is showing details of 18 students The balance 12 students are not even applied for admission. Hence, the notings in the said note book shall not be relied. Those 6 students who’s names are appearing have paid fee much more than what has been noted in the said note book. The actual amounts received from the candidates have been accounted. During the year we have accounted Rs.9,00,88,658/- towards fees from 20 students admitted under management category.

In view of the inconsistencies pointed out above, we request your honour not to rely on the notings appearing in the alleged note book. (In case you are drawing any adverse inference from the above seized material, which will be against the principle of natural justice, we request your honour to provide an opportunity to cross examine Mr. Manjunath)”.

66. The assessing officer did not accept the contentions of the assessee. Since the diary was seized from the premises of the trust, he held that the same is reliable u/s 132(4A) as well as u/s 292C of the Act. The AO also referred to the statement taken from Shri Manjunath, wherein he stated that the noting made in the diary pertain to the year 2013 and it was made as per direction given by the Chairman P L Nanjundaswamy. It appears that the search officials had also taken statement from two persons named N.Yatish and Dr Kailash, wherein they had stated that the moneys were received for admission. Shri P L Nanjudaswamy also confirmed that moneys were received for admission in his statement. After referring to the documents seized from the residence of Shri P L Nanjundaswamy and visitors slips, the AO also held that only 4 students have taken admission out of the list. He further held that all these documents would show that the assessee has been collecting fees over and above that was recorded in the books of accounts. The AO had computed average fee collected at Rs.74,32,327/-. Accordingly, he computed aggregate amount of fees collected for 20 students at Rs. 14.86 crores. After deducting the amount of Rs.9.00 crores accounted for by the assessee, the AO made addition of Rs.5.86 crores.

67. Before Ld CIT(A), the assessee disowned the diary maintained by Shri Manjunatha, P.A to Shri P L Nanjundaswamy. It further submitted that only four candidates have taken admission from the list of 18 candidates mentioned in the diary and the fee collected from the said four persons was more than the amount mentioned in the diary. Hence the figures mentioned therein Might have been noted at enquiry stage. It was contended that the diary did not indicate anything to show that the amounts mentioned in the diary was received by the assessee at all. It was also submitted that the AO did not supply copy of statement taken from Manjunatha and also did not afford opportunity to cross examine him, even though it was specifically sought for. With regard to the documents seized from the residence of P L Nanjundaswamy and also visitors slip, the assessee reiterated that they were at enquiry stage before the Chairman and hence the figures mentioned therein are not final. Accordingly it was submitted that the fees accounted for by the assessee are actual fees received. Accordingly it was contended that the AO was not justified in estimating the fee collections by entertaining certain presumptions.

68. The Ld CIT(A) was not convinced with the contentions of the He confirmed the addition by making same observations which were made in other years in respect of this issue.

69. We heard the parties on this issue and perused the record. Identical addition made in earlier years has been deleted by us for detailed reasons discussed in the relevant paragraphs dealing with the identical issue. As in earlier years, the Assessing officer has drawn adverse inferences in this year also without bringing any other corroborating material on record in order to disprove the explanations furnished by the assessee. The assessing officer has not made any enquiry with any of the students or parents or others. We notice that the assessing officer has placed reliance on the diary maintained by the P.A to Chairman named Manjunatha and also certain documents seized from the residence of Shri P L Nanjundaswamy. Even though the noting made in the diary related to the admission to MBBS management quota seats for the year relevant to AY 2014-15, yet it is an admitted fact that the entries made are not complete in all respects in the sense, there was no mention of the name of the candidates in two items and the fee amount agreed upon was not mentioned against all the candidates. Be that as it may, out of the 18 candidates mentioned in the diary, only four candidates have taken admission, which fact has also been accepted by the Hence, the explanation of the assessee that the entries made in the diary may relate to the enquiries made for seeking admission, i.e., at enquiry stage and nothing has not become final has to be accepted. Hence, it at all any addition is required to be made, it could be made only in respect of four candidates who have been admitted, if the assessee could not give proper explanations. We notice that the assessee has explained to the assessing officer that the aggregate amount of fees collected from these four candidates was more than that mentioned in the diary. The said explanation of the assessee could not be proved to be wrong by the AO. Thus, we notice that the assessee has effectively rebutted the presumption entertained by the AO in respect of diary maintained by Shri Manjunatha and the documents seized from the residence of Shri P L Nanjundaswamy. The AO has also referred to certain visitors’ slips, wherein also certain figures were found mentioned. We have noticed earlier that the visitors’ slips are also at enquiry stage and is not final.

70. We have noticed in other years that the fees for management quota seats are determined on case to case basis. Hence, unless there is any concrete material to show that the assessee has collected any amount outside the books of accounts, in our view, it is not justified to presume that the assessee would have collected fees outside the books. In the instant year, the assessee has explained that the fees collected from four students was higher than that mentioned in the diary. Under these set of facts, we are of the view that the assessing officer has made the addition in all this year also under surmises and conjectures and hence Ld CIT(A) was not justified in confirming the addition relating to suppression of fees under Management quota MBBS seats. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in this year and direct the AO to delete the

71. The next addition contested by the assessee in AY 2014-15 relates to suppression of fees of PG seats. We have noticed earlier that the search officials unearthed a diary maintained by Mr. Manjunatha, P.A. to the Chairman Shri P L Nanjundaswamy. The said diary also contained noting relating to P.G admissions for 10 candidates. The AO referred to the name of three candidates viz., Dr. N.S.Rajitha; Dr. Mary Sowmya and Dr. Sunil The fees mentioned in the diary against the above said three candidates was Rs. 1.10 crores; Rs. 1.20 crores and Rs. 1.35 crores respectively, where as the fees accounted in the books was Rs.60.04 lakhs; Rs.58.9 1 lakhs and Rs.65.00 lakhs respectively. The AO also referred to visitors slips, wherein also certain amounts were found noted.

72. Before the AO, the assessee contended that the diary maintained by Mr. Manjunatha is not reliable and, in this regard, it pointed out the inconsistencies therein. It was submitted that the diary contains details of 10 candidates out of which, nine candidates have taken admission. The total fees mentioned against the nine candidates is Rs.5.25 crores, whereas the aggregate amount of fees accounted for in the books of accounts was higher at Rs.5.58 crores. The assessee also furnished confirmation letters obtained from the students to prove that the fees actually accounted for in the books of accounts only have been collected. The AO was not convinced with the explanations of the assessee. Since the materials seized during the course of search revealed collection of higher amounts, the AO took the view that the assessee should have collected amounts outside the books of account also. Accordingly, based on the amounts noted down in the diary/documents and the actual amount accounted for by the assessee, the AO worked out the percentage of fees accounted for by the assessee. Accordingly, he estimated the fees that would have been collected for PG seats of other students by grossing up the fees accounted for in the books of Accordingly, the AO worked out the suppressed amount of fees at Rs.5,29,31,060/- and made addition. The Ld CIT(A) also confirmed the same.

73. Before Ld CIT(A), the assessee reiterated submissions made before the It also submitted that the assessee is not aware of the diary maintained by Mr. Manjunatha and the documents seized from the residence of P L Nanjundaswamy. It submitted that the confirmation letters obtained from the students were rejected by the AO without examining them. It submitted that the entries made in the above said documents as well as visitors’ slips were at enquiry stage and hence, it does not mean that the assessee has collected fees mentioned therein. The assessee also submitted that some of the PG courses were not recognized by Medical Council of India in this year and hence the students were admitted under Permitted category, in which case, the fees could not be fixed at higher level.

The assessee also placed reliance on the explanation given by Shri P L Nanjundaswamy explaining that the actual fees collected were lesser than the negotiated amount due to absence of recognition. However, the Ld CIT(A) was not convinced with the contentions of the assessee and accordingly confirmed the addition.

74. While dealing with identical addition made in AY 2009-10, we have held that the said addition made on estimated basis is not sustainable for the detailed reasons discussed in the earlier paragraphs. We have noticed that the fees for management quota seats are determined on case to case basis. Hence, unless there is any concrete material to show that the assessee has collected any amount outside the books of accounts, in our view, it is not justified to presume that the assessee would have collected fees outside the books. The AO has entertained the presumption of suppression of fees on the basis of noting made in the diary/documents seized from the residence of Shri P L Nanjundaswamy. We notice that the assessee has disproved the said presumption by furnishing confirmation letters obtained from the students. On the contrary, the AO did not conduct any enquiry from any of the students or their parents or others to disprove the confirmation letter filed by the assessee. We have also noticed earlier that the cash unearthed during the course of search were found to have been accounted for in the books of accounts. The assessee also shown that the aggregate amount of fees accounted for in respect of nine students is higher than that noted in the diary. The assessee has also given explanations as to why fees were collected at a lesser amount. We notice that none of those explanations were disproved by the AO. Under these set of facts, we are of the view that the assessing officer has made the addition under this head under surmises and conjectures and hence Ld CIT(A) was not justified in confirming the addition relating to suppression of fees under Management quota PG seats. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition made under this head in AY 20 14-15.

75. We shall now take up the appeal filed by the revenue for AY 20 14-15. The only issue urged by the revenue in this year relates to the addition made by the AO towards suppression of fees under COMED-K category, which has been deleted by the Ld CIT(A).

76. We have dealt with an identical issue in AY 2009-10 to 20 13-14 in the earlier paragraphs. We have noticed that the assessing officer has placed reliance on certain letters issued by the assessee to some students stating that their request shall be considered on availability of cancellation seats. In those letters, it was also mentioned that the fee shall be charged as applicable to management quota seats. The AO presumed that the assessee has collected fees applicable to Management quota seats from the students admitted under COMED-K cancelled seats. Accordingly he made the addition, computing the suppression of fees by adopting fee applicable to management quota seats. The Ld CIT(A) has deleted this addition in AY 2009-10. Following the same, he deleted identical addition made in this year also.

77. We have heard the parties on this issue and perused the record. For detailed reasons discussed in AY 2009-10, we have upheld the order of Ld CIT(A) on this issue in deleting the addition made by the assessing officer. We have noticed that the assessee has given proper explanation to show that the presumption drawn by the AO in respect of those letters, which were pertaining to AY 2014-15, was not correct on the facts and circumstances of the case. Further the assessee has also disproved the presumption by submitting confirmation letters obtained from students admitted under COMED-K category along with rank sheets of the Entrance examination conducted. We also noticed that the assessing officer did not make any enquiry from any of the students or parents or others to prove that the explanations and evidences furnished by the assessee were wrong. The facts and circumstances relating to this addition is identical in this year also. Accordingly, we do not find any reason to take a different view in this matter and accordingly confirm the order passed by Ld CIT(A) on this issue in this year also.

78. In the result, all the appeals of the assessee are allowed and all the appeals of the revenue are dismissed.

Order pronounced in the open court on the 29th May, 2020.

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