PCIT Vs Laxmi Memorial Education Trust (Karnataka High Court)
Unsigned Loose Sheets, Hostile Witnesses and Lack of Corroboration – Karnataka HC Upholds ITAT Relief to Educational Trust
The Karnataka High Court dismissed the Revenue’s appeal under section 260A and affirmed the order of the Income Tax Appellate Tribunal deleting an addition of ₹6.61 crore made in the hands of an educational trust for AY 2021–22. The addition was made on the allegation that the assessee had collected unaccounted cash from students, primarily based on unsigned loose sheets seized during search proceedings and statements recorded under section 132(4).
Revenue’s Arguments:
The Revenue contended that the Tribunal erred in deleting the addition despite the seizure of loose slips/electronic documents during search and statements recorded under section 132(4), which according to the department indicated collection of unaccounted fees. It was argued that these materials were corroborated by statements of certain employees and persons connected with the trust, and therefore the Tribunal should not have disregarded them. The Revenue proposed that substantial questions of law arose as to whether such seized materials and statements could validly sustain the addition.
Assessee’s Arguments:
The assessee supported the Tribunal’s findings, arguing that unsigned loose sheets, by themselves, have no evidentiary value unless corroborated by reliable and independent material. It was pointed out that detailed enquiries were conducted with 43 students/parents, most of whom categorically denied having paid any unaccounted fees during the relevant year through affidavits or sworn statements. Employees examined during cross-examination also denied receipt of such cash, and the witnesses relied upon by the Revenue had turned hostile and were found unreliable. The assessee emphasized that the Tribunal, as the final fact-finding authority, had examined all material and recorded clear findings of fact.
