आयकर अपील य अ धकरण, ’सी’ यायपीठ, चेनई IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI

ी चं पजार ू , लेखा सदय एवं ी वी. दगा!ु राव, या"यक सदय के सम$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER

. अपीलाथ& '(यथ& I.T.A. No. Assessment Appellant Respondent Year 2036 & 2006-07 & The Assistant Shri. P. Murugesan, 2037/Mds/2013 2007-08 Commissioner of Income No.35-36, II Street, Tax, Natarajapuram North Colony, Central Circle –II, Thanjavur. Tiruchirappalli. [PAN: AGCPM 7443H]

2039, 2040, 2001-02, Shri. P. Murugesan, The Assistant Commissioner 2041, 2042, 2002-03, No.35-36, II Street, of Income Tax, 2043, 2044, 2003-04, Natarajapuram North Central Circle –II, 2045/Mds/2013 2004-05, Colony, Tiruchirappalli and S.P. Nos. 2005-06, Thanjavur. 368 to 2006-07 & 373/Mds/2015 2007-2008 [PAN: AGCPM 7443H]

1884, 1885, 2001-02 Sri Ponnaiyah The Assistant Commissioner 1886, 1887, 2002-03 Ramajayathammal of Income Tax, 1888, 1889 & 2003-04 Educational and Central Circle –II, 1890/Mds/2013, 2004-05 Charitable Trust, Tiruchirappalli S.P.Nos.361 to 2005-06 No.33 & 34 367/2015 2006-07 and Natarajapuram South 2007-2008 Colony, Medical College Road, Thanajavur 613 007. 462/2011 2006-07 The Assistant Shri. R. Viswanathan, Commissioner of Income No.2, Saverior Koil Street, Tax, Vembarapatty, Central Circle –II, Dindigul Tiruchirappalli (PAN No.ADLPV 6760G)

www.taxguru.in :- 2 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 649/2011 2006-07 The Assistant Shri. P. Janakar, Commissioner of Income No.4/52,Spencer Compound, Tax, Dindigul. Central Circle –II, Tiruchirappalli (PAN NO. ACLPJ 9339C)

Appellant for Shri. P. Murugesan & : Dr. Anitha Sumanth, Advocate Sri Ponnaiyah Ramajayathammal Educational and Charitable Trust े / Respondent by : Mrs. Jayanthi Krishnan, IRS, CIT.

Appellant by : Mr. K. Ramasamy, Sr. Standing Counsel Respondent for R. Viswanathan & : Shri. V. Subbarayan, ITP (Retd. P. Janakar DCIT)

/Date of hearing : 17.08.2015 /Date of Pronouncement : 14.10.2015

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:-

ITA Nos. 2036, 2037, 2039 to 2045/Mds/2013:- P. Murugesan

The ITA Nos.2036 & 2037/Mds/2013 are filed by the Department

and ITA Nos.2039 to 2045/Mds/2013 are filed by the assessee. All

these appeals are directed against the common order of the

Commissioner of Income Tax (Appeals), Tiruchirapalli, dated

08.08.2013. Since the issues in these appeals are common in nature,

www.taxguru.in :- 3 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. these appeals are clubbed, heard together, and disposed of by this common order for the sake of convenience.

2. Shri. P. Murugesan:- ITA Nos.2039 to 2045/Mds/2013:

(assessee’s appeal):- First, we take up assessee’s appeals. The first common ground raised in assessee’s appeal is general in nature, which does not require any adjudication.

3. The second ground raised in assessee’s appeal is that the order passed by the Assessing Officer and confirmed by the Commissioner of

Income Tax (Appeals) suffered from violation of principles of nature justice

4. The facts of the issue are that the assessee, Shri P .Murugesan is a Chairman & Managing Trustee of Sri Ponnaiya Ramajayathammal

Educational & Charitable Trust (in short SPRECT), Tanjore. In his individual status he has engaged in running Computer Centre, travel business &

Proprietor of M/s. P R & Sons which deals with home appliances. There was a search action in the case of Shri R. Natham Viswanathan & his group cases on 23.08.2006. In that process survey u/s 133 A was conducted in the case of

Sri Ponnaiya Ramajayathammal Educational & Charitable Trust (in short

www.taxguru.in :- 4 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. SPRECT), Tanjore in order to unearth the link between the said trust and the

Titan Educational Trust [in short TET]. Later, on 05/10/06 there was a search in the residence of the assessee and survey operation on the educational institutions run by him on the same day in order to unearth the link between the assessee and the TET. In meanwhile, Shri R.Natham Viswanathan, Shri

P.Murugesan, Chairman of SPRECT was intercepted at Chennai Airport while carrying ₹1 Crore with him on 25.11.2006. Subsequently, his residence was also covered u/s.132 of the I.T. Act. During the course of search proceedings, several documents were found and seized both from his residence and from the offices of SPRECT. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) for all the years challenging the validity of the proceedings initiated u/s.153A of the Act and also the validity of the best judgement assessment done u/s.144 of the Act. The assessee assailed various additions and disallowances made by Assessing

Officer. The CIT(A) by way of a consolidated order dated 22.03.2011 allowed some of the claims of the assessee, whereas, confirmed certain other additions made by the Assessing Officer. Against this, the assessee preferred an appeal before the Tribunal. On appeal before the Tribunal the assessee raised a common grievance that he was not given proper opportunity either by Assessing

Officer or by CIT(A) for presenting his case in support of the returns. The

Tribunal remitted back the entire assessment and issues to the Assessing

www.taxguru.in :- 5 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Officer for consideration de novo. Following the directions of the Tribunal, the Assessing Officer made de novo assessment separately for all the assessment years. Against this, the assessee is in appeal before us.

4.1 We have heard both the parties and perused the material available on record. Now the ld. Authorised Representative for assessee submitted that the assessee was not given fair opportunity of hearing by the lower authorities. We have gone through the order of the lower authorities. The Assessing Officer recorded in the assessment order the dates of hearing of the case as follows:-

Hearing posted on Appellant appeared on

25.07.2012 Sought adjournment – filed letter dated 30.07.2012 04.10.2012 C.A. appeared and sought adjournment 30.10.2012 None appeared 09.11.2012 Appeared and sought time till 21.11.2012 21.11.2012 Appeared and filed part of the information called for and sought two weeks time to file details. 06.12.2012 Appeared on 14.12.2012, case partly heard and adjourned to 04.01.2013 31.01.2013 Filed a letter seeking 10 days to submit the particulars 05.02.2013, Appeared and heard 11.02.2013 and 06.03.2013

www.taxguru.in :- 6 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. The details of case being posted for hearing before the then

Commissioner of Income Tax (Appeals) is summarized as under:-

Hearing posted on Appellant appeared on

09.03.2010 Sought adjournment 12.08.2010 Filed written submissions 25.08.2010 Sought adjournment 16.09.2010 Filed submissions and sought adjournment 12.10.2010 AR appeared and partly heard 21.12.2010 Partly heard 08.03.2011 AR appeared and case discussed.

Further, the Commissioner of Income Tax (Appeals) while passing order on 08.08.2013, has also given proper opportunity of hearing.

4.1 Being so, we do not find any merit that the assessee was not given opportunity of hearing by the lower authorities. The lower authorities had given ample of opportunity of hearing to the assessee to present his case. Being so, in our opinion there is no justification in the plea of the assessee that there is inadequate opportunity of hearing to the assessee. Hence, this ground of the appeal of the assessee is rejected.

www.taxguru.in :- 7 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 5. The next common ground raised by the assessee is that the assessment is vitiated on account of lack of jurisdiction.

5.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income Tax (Appeals) erred in not noting that the impugned assessment had been passed in the absence of proper and valid authorization. The proceedings were thus wholly invalid and liable to be quashed as such. The assessments are based only on surmises, presumptions and assumption and no incriminating document was found at the time of search, warranting the proceedings in terms of

Sec. 153A of the Act. In the absence of any evidence found in the course of search, the impugned assessment are wholly devoid of jurisdiction and liable to be cancelled. The Commissioner of Income

Tax (Appeals) ought to have noted that the search on 05.10.2006 had not resulted in the seizure of any material, asset or books of account.

The cash that was found at the time of search has been properly explained by the assessee. The amount of F1 Crore found and seized by the department from the assessee on 25.10.2006 at the Chennai

Airport has also been properly explained. The impugned assessment are thus wholly devoid of jurisdiction and merits and liable to be quashed. The ld. Authorised Representative for assessee relied on the

www.taxguru.in :- 8 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. order of Special Bench in the case of All Cargo Global Logistics Ltd.

Vs. DCIT, Central Circle-44, Mumbai 137 ITD 257 wherein it was observed in assessments that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him u/s.153A for which assessments shall be made for each of the six assessment years separately. The ld. Authorised Representative for assessee submitted that for the assessment years 2001-2002, 2002-

2003 assessment was processed u/s.143(1) and further for the assessment year 2003-2004, assessment was completed u/s.143(3) of the Act and for the assessment years 2004-05 to 2007-08 assessment was pending. Thus, he submitted that for the assessment 2003-2004, the assessment was already completed u/s.143(3) of the Act. Being so, there is no incrementing material found during the course of search for this assessment year. The ld. Authorised Representative also relied on the judgment of Bombay High Court in the case of CIT vs. (1) Continental Warehousing Corporation (NHAVA SHEVA) Ltd, and

(2) All Cargo Global Logistics Ltd in 374 ITR 645 (Bombay) wherein it was held if there was no incriminating material found during the course of search/s.132 of the Act, power u/s.153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material.

www.taxguru.in :- 9 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 5.2 The ld. Departmental Representative submitted that there is seized material found during the course of search action u/s. 132 of the Act and the same was used for the purpose of framing assessment u/s.153A of the Act. There is no illegality in framing the assessment.

He relied on sec.153A(b) of the Act.

5.3 We have heard both the parties and perused the material on record. As seen from the facts of the case there was search in the residence of the assessee on 05.10.2006. Further, there was also a search on 25.11.2006 at Chennai Airport that a sum of F1 Crore was seized from the assessee. Consequent to this, notice u/s.153A was issued to the assessee on 16.10.2007. The assessee filed return of income for the assessment years 2001-2002 to 2005-2006 on

24.10.2008 and on 11.11.2008 for the assessment year 2006-2007.

Being so, we find no merit in the argument of the ld. Authorised

Representative for assessee. This ground of the appeals of the assessee is rejected.

6. Coming to merits in ITA No.2039/Mds/2013, in assessment year

2001-2002, the first ground raised by the assessee is with to regard

www.taxguru.in :- 10 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. to addition of F11,97,000/- as unexplained credit for the assessment year 2001-2002.

6.1 The fact of the case are that during the previous year relevant to the A.Y.2001-02, the assessee has shown loans from the following persons on the liability side of the "General Balance Sheet" filed along with the Return of Income. They are also shown on the receipts side of the "General Receipts and Payments A/c".

Sl.No Name of alleged creditor Amount in (F) 1 Loan from Swamy Bommu 8,00,000 2 NRI loan 3,97,000

In the return of income filed u/s 139 on 3-8-2001, loan from Shri

Swamy Bommu was shown at F8,00,000/. However in the return of income filed u/s 153A of the Act on 24-10-2008, this loan does not appear on the liability side or the Balance Sheet. The assessee was requested to explain the discrepancy by the Assessing Officer. Vide reply dated 21-11-2012, the ld. Authorised Representative for assessee stated that they do not have the copy of the return dated

3.8.2001 and requested to provide the same. A copy of the return was made available and the assessee was requested to explain the discrepancy by Assessing Officer. Vide reply dated 31.1.2013 the ld.

Authorised Representative for assessee submitted a statement

www.taxguru.in :- 11 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. prepared for Bank purposes reducing the assets and liabilities was filed in the return u/s 153A. The loan creditor Shri Swamy Bommu

F8,00,000/- was not found in the statement filed u/s 153A. This is due to the above reason. The AR further stated that F8,00,000/ was repaid on 23-10-2001 vide a cheque No.824741 and a copy of the

Bank statement of Shri P.Murugesan was enclosed with the letter before AO. In this Pass Book, there is no mention as to whom the cheque is issued. Further, the AR could not produce the original pass book or a certified copy of the Bank passbook for verification before

Assessing Officer. Even after 'affording further opportunities the assessee by AO could not produce the certified copy of the Bank a/c. nor the original pass book for verification. The loan from Shri Swamy

Bommu is stated to be repaid on 23-10-2001. The assessee has not produced any books of accounts for the "general accounts" other than the accounts of the concern M/s P.R. Sons before AO. The assessee has filed receipts & payments account of the general accounts which incorporates the loans taken and the repayments made during the year. In the receipts & payments a/c. filed along with the return for Assessment Year 2002-03, the above mentioned loan repayment to Shri Swamy Bommu is not shown. Therefore, the repayment of loan on 23-10-2001 cannot be considered to be

www.taxguru.in :- 12 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. satisfactorily proved. In view of the discrepancies noted above and the fact that no evidence is furnished to show the loan receipt of

F8,00,000/-from Shri Swamy Bommu, the credit of F8,00,000/- shown in the original Balance Sheet filed with the Return of Income dated 3-8-2001 is considered as unexplained credit by Assessing

Officer and was brought to tax 68 of the IT Act. The receipts and payments alc is credited by loan from NRI of F3,97,OOO/- and is shown in the Balance Sheet as a liability. The assessee has explained that it is from Shri G.Dinesh Kumar. The AR filed a photo copy of the

Account with Indian Overseas Bank, Thanjavur before Assessing

Officer purported to be belonging to Shri G.Dinesh Kumar wherein there are debits of F1,77,OOO/- on 4th August 2000, F70,000/- on

September 2000 and F1,50,000/- on 8th January 2001. In the pass book, it was not mentioned to whom the cheques are issued. No further evidence is produced. The copy of the pass book produced is only a photo copy and the original is not produced for verification.

The assessee was requested to furnish his bank alc copy reflecting the corresponding entries. The A.R. vide reply dt 14.12.2012 before the Assessing Officer stated that "a copy of the bank statement has been requested from the Bank and he shall furnish it in the next hearing." However no such bank alc statement was furnished. The

www.taxguru.in :- 13 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. assessee has not produced any confirmation from the loan creditor.

On giving opportunity also, the loan creditor was not made available

for verification. The assessee has also not furnished the details as to

the mode of receipt of the loans, the bank account where it was

credited. A letter written to Shri Dinesh Kumar at the address

provided by the assessee to confirm the loan has not elicited any

reply from him. The assessee has availed loan from Shri Dinesh

Kumar in other years also as under:

SI.No A.Y. Amount of Amount Balance . loan taken repaid outstanding 1 2001-02 3,97,000 0 3,97,000 2 2002-03 2,53,000 0 6,50,000

3 2003-04 14,17,000 0 20,67,000

4 2004-05 1,34,0000 0 22,01,000

5 2007-08 6,91,532 0 28,92,532 No repayments of the above loans are shown in any of the years till

31.03.2007. In the Receipts and payments account filed with the returns no interest payment on this loan is shown. No sane person will lend such huge amount of money without any interest. The assessee was also reminded that onus to prove the sources of credit and the genuinity of the transaction was with the assessee. The assessee was reminded that the Tribunal vide its order dated had directed the

www.taxguru.in :- 14 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. assessee to co-operate with the Department in completing the assessment. In spite of all this, the assessee has even failed to state as to how the loans are received, i.e., whether by cash or cheque, if by cheque, the cheque No. and the details of the Bank where it is credited. In View of the above, the above two loans of Rs.8,OO,OOO/- from Shri Swamy Bommu and Rs.3,97,OOO/-from Shri Dinesh Kumar are treated as unexplained credits and brought to tax. The ld.

Authorised Representative for assessee submitted that according to the Assessing Officer there was following two loan creditors during this year

a. Swamy Bommu F8,00,000/- b. NRI Loan F3,97,000/-

Before the Commissioner of Income Tax (Appeals), the assessee submitted that the Assessing Officer went wrong in making the addition without accepting the copies of bank account statements of the assessee and the creditor. After migrating to core banking solutions, no banks are in a position to furnish particulars of the accounts prior to 2006. Hence the question of their certifying the statements is ruled out and calling for certified copies of the bank accounts and further details from the assessee is in total violation of the principle of natural justice. According the ld. Authorised Representative for assessee the Assessing Officer went wrong in making the addition without accepting the copies of bank account statements of the

www.taxguru.in :- 15 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. assessee and the creditor as relating to the loan from Shri Dinesh Kumar of

F3,97,OOO/-. However, the Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

6.3 We have heard both the parties and perused the material available on record .We have gone through the submissions made by the Authorised

Representative of the assessee as well as the ld. Departmental

Representative. The Assessing Officer has made an addition of F11,

97,000/- on account of unexplained credits shown in the name of Mr.

Swamy Bommu at F 8,00,000/- and another amount of F3,97,000/- from NRl loan. The Assessing Officer has noticed a discrepancy in the return filed uls 139(1) on 3/8/2001 where a loan from Shri. Swamy

Bommu is shown at F8,00,000/- where as in the return filed uls 153A on 24/10/2008, this loan does not appear on the liability side of the balance sheet. When the assessee was requested to explain the discrepancy, the Authorised Representative of the assessee has stated that the amount of F8,00,000/- was repaid on 23/10/2001 vide a cheque no. 824741. However on verifying the copy of bank statement of Shri. P. Murugesan there was no mention as to whom the cheque was issued. The loan repayment has not been shown anywhere in his books of accounts as stated by the assessee. As the assessee could not

www.taxguru.in :- 16 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. substantiate his claim of receipt of loan as well as repayment the same is treated as unexplained credit and added to the income uls 68 of the

IT Act. Similarly a loan from NRI of F 3,97,000/- is shown as a liability in the balance sheet. When this issue was brought to the notice of the

Authorised Representative of the assessee by authorities who produced a photo copy of IOB account Thanjavur said to belong to Shri. G.

Dinesh Kumar (NRI) where some debits were found, but there is no mention to whom the cheques were issued. The original bank account statement has not been furnished by Authorised Representative of the assessee nor any confirmation letter filed from Shri. G. Dinesh Kumar.

No reply has been received from Shri. G. Dinesh Kumar for confirming the loan amount. Hence, the addition made by Commissioner of

Income Tax (Appeals) is confirmed. This ground of the appeal of the assessee is rejected.

6.4 The next ground raised by the assessee is with regard to confirming the addition in respect of agricultural income to the tune of

F14,910/-.

6.5 The facts of the issue are that the assessee had claimed

F40,353/- as income from agricultural land. In support of the claim,

www.taxguru.in :- 17 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the ld. Authorised Representative stated that the assessee has taken agriculture lands belonging to his brother Shri. Vasudevan on oral lease. It was stated that cultivation of grams were undertaken during the relevant previous year. The assessee could not give details of quantity of the produce obtained, name of the persons to whom it was sold and bills and vouchers for the sale of agricultural produce which were called for vide notice u/s.142(1) dated 31.10.2012. Under similar circumstances for the assessment year 2003-04, the

Commissioner of Income Tax (Appeals) vide order dated 01.09.2009 in

IT No.128/06-07 has directed to treat F3,66,000/- out of the agricultural income declared of F9,75,000/- as income from other sources. The disallowance works out to 37%. Therefore, 37% of the income returned as agricultural income i.e F14,910/- was considered as income from ‘’other sources’’. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). On appeal, the Commissioner of Income Tax (Appeals) confirmed the addition made by the Assessing Officer. Against this, the assessee is in appeal before us.

6.6 We have heard both the sides and perused the material on

record. Whenever the assessee claim any income as exempt from

www.taxguru.in :- 18 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. tax, it is the duty of the assessee to place necessary evidence to

prove the same. In the present case, the assessee was not able to

substantiate its claim to the extent of F14,910/- though it was

claimed as income from agriculture. Hence, we confirm the order of

the Commissioner of Income Tax (Appeals).

In the result, the appeal of the assessee in ITA No.2039/Mds/2013 is

dismissed.

Shri. P. Murugesan, ITA No.2040/Mds/2013 for assessment year

2002-2003(assessee’s appeal)

7. In this appeal, the first ground raised by the assessee is with regard to confirmation of addition of F10,96,000/- made towards unexplained cash credit.

7.1 The facts of the issue are that the assessee, during the previous year relevant to the assessment year 2002-03, had shown loans from the following persons on the liability side of the ‘’General Balance

Sheet’’ filed alongwith the return of income. They are also shown on the receipts side of the ‘’General Receipts and payments account’’

www.taxguru.in :- 19 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. SI.No. Name of alleged creditor Amount (in ") 1. PLA 2,00,000 2. KRA 4,00,000 3. Vasudevan 70,000 4. NRI 2,53,000 Total 9,23,000

In addition to the above loans, in the business of M/s.PR & Sons the following loans are shown on the liabilities side of the Balance sheet:

SI.No. Name of alleged creditor Amount (in' ) R.Elangovan 5,00,000 Vasudevan 73,000 Total 5,73,000

Vide Notice u/s 142(1) dated 30-10-2012, the assessee was requested to give the details of all the above loans along with ledger extracts of the above persons appearing in assessee's books along with complete address and income tax assessment details. Further, vide Notice dated

11-01-2013, the assessee was requested to furnish the confirmations from the loan creditors along with details of the loan i.e., amount of loans, cheque No., date, name of the bank and confirmation as to whether any interest on the loan and the repayment of the loan. The assessee was also requested to furnish details of interest paid on the above loans for various years till date. The assessee was also reminded that onus to prove the source of the credits and the

www.taxguru.in :- 20 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. genuinity of the transaction was with the assessee. Vide Notice u/s

142(1) dated 22.2.2013, the assessee was requested to produce the loan creditors for verification. The assessee has only furnished the address of the loan creditors. Even the PAN number of the loan creditors is not furnished by the assessee. The assessee has also not furnished the mode of availing the loan, date of loan and cheque

Number and bank details etc. The assessee has also avoided stating whether any interest is paid on the loans and whether, these loans are outstanding or repaid as on date. Letters were addressed to the loan creditors at the address given by the assessee. In case of Shri

K.R.Annamalai who has been cryptically mentioned as KRA. in the assessee's Balance Sheet, the confirmation has been received. The loan is from Smt.A.Mangalam who is the wife of K.R.Annamalai.

Although she has confirmed the loan outstanding of F4,00,000/- as on

31.03.2002, she has also enclosed a copy of another loan of

F7,00,000/ which was outstanding from the previous year but is repaid by the assessee with interest on 28.06.2001. This repayment of F

7,00,000 is not reflected in the receipts and payments account of the assessee. In case of PLA, i.e., PL.A.Chidambaram, the loan creditor has confirmed a loan of F2,OO,OOO/ availed on 14-11-2002 by

Ponnaiah Ramajayam College and no loan is mentioned for the

www.taxguru.in :- 21 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. previous year relevant to Assessment Year 2002-03. Shri Vasudevan is the brother of the assessee. He has stated that he has paid F70,000/- in cash during 2001-02 and he had money transactions with PR &

Sons from the year it was established. But, he was not having any details of the same. Since the loan is stated to be given in cash and no interest payment is made for the past 12 years, the transaction cannot be considered to be genuine. Thus, except the loan from K.R.

Annamalai of F4,OO,OOO/, none of the above credits can be considered to be satisfactorily explained by the assessee. Therefore, the above said loans amounting to F10,96,OOO/ is treated as income from undisclosed sources and brought to tax. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals).

7.2 On appeal before the Commissioner of Income Tax (Appeals) the ld. Authorised Representative for assessee submitted that the AO went wrong in making the addition without accepting the copies of bank account statements of the assessee and the creditor. After migrating to core banking solutions, no banks are in a position to furnish particulars to the accounts prior to 2006. Hence the question of their certifying the statements is ruled out.

Hence calling for certified copies of the bank accounts and further details from the

www.taxguru.in :- 22 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. assessee in total violation of the principle of natural justice. The AO went wrong in making the addition without accepting the copies of bank account statements of the assessee and the creditor as relating to the loan from Shri Dinesh Kumar of

F2,53,OOO/-. The AO went wrong in making the addition without accepting the submission of Shri Vasudevan, brother of the assessee. The AO went wrong in making the addition without accepting the copies of bank account statements of the assessee and the creditor as relating to the loan from Shri R.Elangovan of

F5,00,000/-. The assessee had filed his regular return of income. All these loans are reflected in the original returns filed. No new evidence or material had been found either during the course of Search or survey which would indicate even prima facie that the loan is not genuine, and hence the AO could not have considered these credits in this assessment. However, the Commissioner of

Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

7.3 We have heard both the sides and perused the material on record. The lower authorities made an addition of F 10,96,000/-- on account of unexplained cash credits in the name of various individuals mentioned above. During the course of assessment proceedings the assessee was asked to furnish ledger accounts of the said loan creditors and was also asked to furnish confirmation letters as well as details of amount

www.taxguru.in :- 23 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. of loan, cheque number, date, and mode of transaction along with charging of interest and the repayment of loan, if any. The Assessee has not furnished any details, no PAN number of the loan creditors, details of mode of receipt of loan and rate of interest. During the course of assessment proceedings, only one person by name Shri. K.

R. Annamalai responded by furnishing a confirmation letter. The amount of loan of F 4,00,000/- is received from Smt A. Mangalam wife of Shri K.R. Annamalai apart from F4,00,000/- amount pending as on

31/3/2002. She has also mentioned another loan amount of

F7,00,000/- which was repaid, but not reflected in the receipt and payment accounts of the assessee. In the case of PLA i.e. P.L.A.

Chidambaram, the loan creditor has confirmed a loan of F2,00,000/- availed on 14/11/2002 by Ponnaiah Ramajayam College and no loan is mentioned in the previous year relevant to the assessment year under consideration. Shri Vasudevan is the brother of the assessee who has stated that he has paid F70,000/- in cash during financial year 2001-02 and he had money transactions with PR & Sons since the beginning. Shri Vasudevan has not furnished any other details and loan is stated to have been given in cash and no interest has been made to this person for the last 12 years. Hence the lower authorities has not considered this transaction to be genuine, except in the case

www.taxguru.in :- 24 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. of K. R.Anamalai for having confirmed an amount of F 4,00,000/- from his wife's account, none of the above creditors could explain the details of loan transaction with any evidence. Hence the loan amounts amounting to F10,96,000/- is treated as income from undisclosed sources of the assessee and brought to tax. Since the Assessee could not file any details with concrete evidence the grounds of appeal filed by the assessee are rejected confirming the addition made by the

Commissioner of Income Tax (Appeals). This ground of the appeal of the assessee is dismissed.

8. The next ground raised by the assessee is with regard to addition of F7,66,000/- made towards unexplained expenditure u/s.69C of the Act.

8.1 The facts of the issue are that in order to verify the loan creditor a letter was written to Shri

K.R. Annamalai. The loan is from Smt. A.Mangalam who is the wife of

Shri. K.R. Annamalai. Although she has confirmed the loan outstanding of F4,00,000 as on 31.03.2002, she has also enclosed a copy of another loan of F7,00,000/ which was outstanding from the previous year but was repaid by the assessee with interest on 28.06.2001. This

www.taxguru.in :- 25 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. repayment of F 7,00,000/- was not reflected in the receipts and payments account of the assessee. In fact the loan outstanding as on

31.03.2001 is not shown in the balance sheet of the assessee as on

31.03.2001. Further the assessee has paid interest of F66,000 on the two loans. This interest payment was not shown in the accounts of the assessee. The copy of the account extract received from Sri. K.R.

Annamalai & Mrs. A. Mangalam were sent to the assessee vide letter dt.22.02.2003 and assessee was requested to explain, where each of the loans is reflected in his accounts. The ld. Authorised representative for assessee vide letter filed on 06.03.2013 merely stated that outstanding balances for A.Y. 2001-02, 2002-03 and 2003-

04 are confirmed by K.R. Annamalai. Since the assessee has not offered any explanation regarding the payment made by the assessee to Mrs. A. Mangalam of Rs.7,OO,000/- on 28.06.2001 and the interest paid of F66,000/-, the repayment of loan along with interest amounting to Rs.7,66,OOO/- is considered to be unexplained expenditure and brought to tax u/s.69C by Assessing Officer.

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

www.taxguru.in :- 26 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

8.2 We have heard both the sides and perused the material available on record. The assessee has not shown the repayment of

F7,00,000/- to the wife of Shri. K. R. Annamalai who has confirmed that an amount of another F7,00,000/- given to the assessee which has been repaid by the assessee with interest on 28/06/2001. This transaction has no where been reflected anywhere in the receipts and payments account of the assessee. The transaction itself has not been shown as outstanding as on 31/03/2001 in the balance sheet of the assessee. Similarly the assessee has paid interest of F66,000/- on the above two loan amounts to Shri. K. R. Annamalai family. The interest amount was also not reflected in the accounts of the assessee. When the account copy of Shri K. R. Annamalai and Smt A.Mangalam were sent to the assessee for cross verification, the assessee could not offer any explanation regarding payment made to Mrs. A. Mangalam of F7,00,000/- on 28.06.2001 and interest paid of F66,000/-. In view of this, we confirm the order of the Commissioner of Income Tax

(Appeals). Hence, this ground of the appeal of the assessee is rejected.

www.taxguru.in :- 27 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 9. The next ground raised by the assessee is with regard to addition of

F3,49,952/- made towards business income of the assessee.

9.1 The facts of the issue are that in the case of PR & Sons although the books of accounts were produced, no supporting vouchers i.e. the purchase invoices, sales bills, expenditure vouchers were produced for verification.

Since none of the expnenes could be verified, expenditure of F3,49,952/- was disallowed and the income from PR & Sons division was considered as Nil as against los of F3,49,952/- claimed by the assessee. Against this, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the Assessing

Officer. Against this, the assessee is in appeal before us.

9.2. We have heard both the parties and perused the material available on record. The assessee has not produced any vouchers, purchases, invoices, sale bills for the expenditure made for verification. In the absences of any evidence produced in support of the claim of the assessee, we confirm the order of the Commissioner of Income Tax (Appeals). This ground of the appeal of the assessee is rejected.

www.taxguru.in :- 28 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 10. The next ground raised by the assessee is with regard to addition of

F38,850/- made towards agricultural income of the assessee.

10.1 The facts of the issue are that the assessee had claimed F1,05,000/- as income from agricultural lands. In support of the claim, the ld.

Authorised Representative stated that the assessee has taken agriculture lands belonging to his brother Shri. Vasudevan on oral lease. It was stated that cultivation of grams were undertaken during the relevant previous year. The assessee could not give details of quantity of the produce obtained, name of the persons to whom it was sold and bills and vouchers for the sale of agricultural produce which were called for vide notice u/s.142(1) dated 31.10.2012. Under similar circumstances for the assessment year 2002-03, the

Commissioner of Income Tax (Appeals) vide order dated 01.09.2009 in

IT No.128/06-07 has directed to treat F3,66,000/- out of the agricultural income declared of F9,75,000/- as income from other sources. The disallowance works out to 37%. Therefore, 37% of the income returned as agricultural income i.e F38,850/- was considered as income from ‘’other sources’’. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). On appeal, the Commissioner of Income Tax (Appeals) confirmed the addition

www.taxguru.in :- 29 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. made by the Assessing Officer. Against this, the assessee is in appeal before us.

10.2 We have heard both the parties and perused the material available on record. As discussed in this order in para 6.6 in assessment year 2001-2002, this ground of the appeal of the assessee is dismissed.

11. The next ground raised by the assessee is with regard to addition of

F10,85,000/- made towards capital account of P.R & Sons as unexplained cash credit.

11.1 During scrutiny of the accounts of P.R& Sons division of the assesses, it was found that the Capital account in P.R & Sons as per the books was F39,88,236/-. But, as per the Balance Sheet in the rectum, balance in capital account is F15,00,000/-. The current account as per books of accounts is a debit balance of F13,98,221/-.

But as per the return there is a credit balance The A.R. vide letter dt.

11.02.2013 has reconciled the difference as under:-

www.taxguru.in :- 30 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Dr. Cr. Capital A/c. as per PR & Sons books. 39,88,236/- Current A/c. as per PR & Sons books 13,98,221 Net Capital balance as per books 25,90,015 Less Amount transferred from purchase 15,85,000 A/c Capital balance as per balance sheet 15,05,015

The A.R. has explained that the purchases which were F1,27,78,485/- as per the books it was reduced to the extent of F15,85,000/- to

F1,16,93,485/-. The Capital A/c is also reduced to the same extent.

No reasons are given for effecting the above mentioned changes in the final accounts without passing it through the books of account. Since no books are produced for the General A/c. i.e. transactions other than the PR & Sons, the sources for credits to capital A/c in PR & Sons cannot be verified. For the purchases also no vouchers are produced and thus cannot be verified. Therefore, the difference in capital a/c as per books of PR & Sons and that shown in Balance sheet amounting to

F10,85,000 is considered as unexplained cash credit in the books of PR

& Sons. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). On appeal, the

Commissioner of Income Tax (Appeals) confirmed the addition made by the Assessing Officer. Against this, the assessee is in appeal before us.

www.taxguru.in :- 31 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 11.2 We have heard both the sides and perused the material. The assessing officer has made an addition of ₹10,85,000/- as unexplained cash credit in the books of the assessee on the ground that capital account in the

PR & Sons as per the book a balance amount is shown ₹ 39,88,236/- but whereas as per the balance sheet filed with the return of income balance found in capital account is only ₹15,00,000/--. The current account as per books of accounts is a debit balance of ₹13,98,221/- where as as per the return there is a credit balance. When the Authorised Representative of the assessee was asked to reconcile the difference, he could not file any details to the extent of

₹15,85,000/-- show as amount transferred from purchase account. No books of accounts were produced for the general account i.e., transactions other than

PR & Sons hence the sources for credits to capital account in PR & Sons cannot be verifiable. Since the assessee has not produced purchase bills the above transactions cannot be verifiable. Therefore, the lower authorities has taken a correct decision in considering the differential amount of ₹ 10,85,000/-- between the capital account as per books of PR & Sons and that of amount mentioned in balance sheet treating the same as unexplained cash credit in the books of PR & Sons. This ground of the appeal of the assessee is rejected.

12. In the result, the appeal of the assessee in ITA No.2040/Mds/2013 is dismissed.

www.taxguru.in :- 32 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Shri. P. Murugesan :-ITA No.2041/Mds/2013, assessment year 2003-2004

(assessee’s appeal)

13. In this appeal, the first ground raised by the assessee is with regard

to addition of F3,66,000/- made towards agricultural income of the

assessee.

13.1 The facts of the case are that the assessee had claimed F9,75,000/-

as income from agricultural land. The Assessing Officer in the assessment

made u/s.143(3) dated 20.03.2006 had treated F7,32,000/- out of the above

as income from other sources. The Commissioner of Income Tax (Appeals)

vide order dated 01.09.2009 in IT No.128/06-07, has directed to treat

F3,66,000/- as income from other sources. Accordingly, F6,09,000/- is

assessed as income from agriculture and rest of F3,66,000/- is assessed

from ‘’income from other sources’’. Against this, the assessee is in appeal

before us.

13.2 We have heard both the parties and perused the material on

record. As discussed in this order in para 6.6 in assessment year

2001-2002, this ground of the appeal of the assessee is dismissed.

www.taxguru.in :- 33 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 14. The next ground raised by the assessee is with regard to addition of

F35,420/- made u/s.40A(3) of the Act.

14.1 The facts of the issue are that during scrutiny the Assessing Officer

has noticed that the assessee had made expenditure of F1,77,000/- in PR &

Sons in cash above F20,000/- on each occasion. Hence, the Assessing

Officer made an addition of F35,420/- u/s.40A(3) of the Act. Aggrieved, the

assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the order

of the Assessing Officer. Against this, the assessee is in appeal before us.

14.2 We have heard both the parties and perused the material available on

record. Since the cash payments above F20,000/- attracts the provisions of

section 40A(3), the same is confirmed. This ground of the appeal of the

assessee is rejected.

15. The next ground raised by the assessee is with regard to addition of

F1,00,000/- made towards drawings.

15.1 The facts of the issue are that the Assessing Officer had made an addition of F2,00,000/-towards low drawings on account of personal expenses taking into consideration, the affluent nature of living style of the assessee.

www.taxguru.in :- 34 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Aggrieved, the assessee preferred an appeal before the Commissioner of

Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

15.2 We have heard both the parties and perused the material available on record. The lower authorities had made an addition of F2,00,000/- on account of low drawings and also keeping in view of the lifestyle of the assessee.

Keeping in view of the low drawings this grounds of appeal of the assessee is rejected.

16. The next ground raised by the assessee is with regard to addition of

F51,27,000/- as unexplained cash credits.

16.1 The facts of the case are that during the previous year relevant to the assessment year 2003-04, the assessee had shown loans from the following persons on the liability side of the General Balance Sheet filed along with the return of income. They are also shown on the receipts side of the ‘’General Receipts and Payments A/c’’.

Sl.No Name of alleged creditor Amount 1 R. Elangovan 5,00,000/- 2 GG 8,00,000/- 3 Stephen 4,00,000/- 4 Dinesh Kumar 14,17,000/-

www.taxguru.in :- 35 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 5 Soundaravalli & lakshmi 10,50,000/- 6 Vasudevan 1,25,000/- 7 KRA 5,00,000/- 8 Y. Mohamed 1,00,000/- 9 Vijayakumar 1,00,000/- 10 Dharmaraj 50,000/- 11 Jayavel Raj 5,00,000/- 12 K. Subramanian 85,000/- Total 56,27,000/-

Vide Notice u/s 142(1) dated 30-01-2012, the assessee was requested by Assessing Officer to give the details of all the above loans along with ledger extracts of the above persons appearing in assessee's books along with complete address and income-tax assessment details, Further, vide Notice dated 11-01-2013, the assessee was requested to furnish the confirmations from the loan creditors along with details of the loan i.e., amount of loans, cheque No., date, name of the bank and confirmation as to whether any interest on the loan and the repayment of the loan. The assessee was also furnished details of interest paid on the above loans for various years till date;

The assessee was also reminded that onus to prove the source of the credits and the genuineness of the transaction with the assessee. Vide

Notice u/s 142(1) dated 22.2.2013, the assessee was requested to produce the loan creditors for verification. The assessee has only furnished the address of the loan creditors. Even the PAN number of the loan creditors is not furnished

www.taxguru.in :- 36 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. by the assessee. The assessee has also not furnished the mode of availing the loan, date of loan and cheque Number and bank details etc. The assessee has also avoided stating whether any interest is paid on the loans and whether these loans are outstanding or repaid as on date. Letters were addressed to the loan creditors at the address given by the assessee. In case of Shri K.R.Annamalai who has been cryptically mentioned as K.R.A. in the assessee's Balance Sheet, the confirmation has been received. Shri Vasudevan is the brother of the assessee. He has stated that he has paid F1,25,OOO/- in cash during

A.Y.2003-04 and he had money transactions with PR & Sons from the year it was established. But, he was not having any details of the same. In case of Shri Jeyavalraj, he has stated that he has given an amount of F.5,00,000/-- in cash during the month of February 2003.

He is not assessed to Income-tax. The amount is not yet received as on date and does not bear any interest. Shri K. Dharmaraj has stated that he has given an interest free loan of F50,000/-- in cash in

March'2003 and the amount is not received back as on 4.02.2013.

Since the loan is stated to be given in cash and no interest payment is made, the transaction cannot be considered to be genuine. In case of

Shri G.Govindaraju, he has stated that he has given a loan of

F8,00,000/- in cash in September 2002 and received back the amount

www.taxguru.in :- 37 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. in June 2003 in cash for the higher education of his children. The assessee has availed loan from Shri. G. Govindaraju, in other years also as under:-

Sl.No A.Y Amount loan Amount Balance taken repaid outstanding 1 2003-04 8,00,000 0 8,00,000 2 2004-05 17,50,000 8,00,000 9,50,000 3 2006-07 15,00,000 0 32,50,000

In the Receipts and payments a/c filed with the returns no interest payment on this loan is shown. No same person would lent such huge amount of money without any interest. The assessee has not established the creditworthiness of the loan creditor. Therefore, the transactions cannot be considered to be genuine. Thus, except for loan from K.R.Annamalai of F5,OO,OOO/-, none of the above credits can be considered to be satisfactorily explained by the assessee. Therefore, the above said loans amounting to F51,27,OOO/- is added to the income of the assessee as unexplained credits in the books u/s 68 of the Act by Assessing Officer. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the

www.taxguru.in :- 38 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. order of the Assessing Officer. Against this, the assessee is in appeal before us.

16.2 We have heard both the parties and perused the material available on record. The Assessing Officer had made an addition to F56,27,000/- on account of unexplained cash credits which the assessee could not prove with substantial evidence during the course of assessment proceedings. However the Assessee could not furnish any details such as confirmation letters from the loan creditors, along with the details of amount of loan, cheque number, date, name of the bank,

PAN numbers of the loan creditors apart from the above the assessee could not furnish the mode of availing loan as well as credit worthiness capacity to lend and genuineness of the transaction. Only in the case of K. R. Annamalai confirmation letter has been received where as in the case of Shri. Vasudevan, Shri. Jayavelraj and Shri. Dharmaraj as well as Shri G. Govindaraju could not produce any details of much evidence value and hence the Assessing Officer has added an amount of F1,27,000/- after accepting an amount of F5,00,000/- as loan received from K. R. Annamalai. In the absence of any evidence filed before the lower authorities for the balance of F51,27,000/- the

www.taxguru.in :- 39 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. loan amounts stated to have been taken from the above individual is treated as unexplained cash credits in the books of the assessee u/s.68 of the act. Hence, this ground of the appeal of the assessee is rejected.

17. The next ground raised by the assessee is with regard to addition of

F10,50,000/- made on account sale of flat at Shonoy Nagar, Chennai.

17.1 The facts of the issue are that the assessee sold Flat bearing

No.5, II Floor situated at Plot No.191/I, Type New No.6, II Main Road,

Shenoi Nagar, Chennai measuring 970 sqft with 588.6 sqft undivided share of land for F10,50,OOO/-. This property was sold vide document

No.3305/2002 on 21.9.2002. The Assessee vide letter dated 11-2-2013 claimed that the assessee was only a Power agent of Ms. K.A.

Soundaravalli and Ms K.A.Lakshmi and the assessee was not the owner of the flat. However, the sale deed of the above property, it is clearly mentioned that this property was earlier purchased by K.A.Soundaravalli, P.Murugesan and K.A.Lakshmi under a sale deed dated 12-05-1999 registered as document No.1627 of

1999 in Sub Registered Office, Anna Nagar. It is also mentioned that the three together constructed a flat on the undivided share of the

www.taxguru.in :- 40 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. land through the Builder Srijees constructions and since then the three persons are said to be in joint position and enjoyment of the said property. Therefore, the assessee's contention that he is not the owner of the property cannot be accepted Therefore, the value of the flat sold of F10,50,000/- is brought to tax as Short Term Capital Gains as the date of construction the land cost involved are not verifiable from the records and the assessee has not provided any details of the same.

Incidentally the assessee has shown Ms K.A.Soundaravalli and Ms

K.A.Lakshmi as loan creditors to the tune of F10,50,000/- being the sale value of the above flat. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the

Assessing Officer. Against this, the assessee is in appeal before us.

17.2 We have heard both the parties and perused the material. The

Assessing Officer has made an addition of' ₹10,50,000/- being the short term capital gain and the same has been brought to tax on account of sale value of the above said flat. The lower authorities has elaborately discussed this issue in their order and the contention of the assessee that the assessee is having only 1/3 rd share in the sale transaction is devoid of any truth because the assessee has shown the other two parties such as Mrs. K. A. Soundaravalli

www.taxguru.in :- 41 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. and Ms K.A.Lakshmi as loan creditors to the tune of ₹10,50,000/-. The version of the assessee cannot be believed. Hence the lower authorities are justified in calculating the short term capital gain and taxing the amount of'

₹10,50,000/- is confirmed. This ground of the appeal of the assessee is rejected.

18. The next ground raised by the assessee is with regard to addition of income of F7,30,418/- from PR & Sons.

18.1 The facts of the issue are that the assessee has not produced any sale bills, purchase & invoices or vouchers for businesses. Since none of the expenses could be verified, the books results of this concern are rejected. The net sales of the concern is ₹76,09,354/.

The income is estimated at 5% i.e., as against loss declared of

₹3,49,951/-. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

18.2 We have heard both the parties and perused the material. The lower authorities have made an estimated addition at 5% on the sales turnover of the assessee Concern shown at F 76,09,354/-

www.taxguru.in :- 42 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. against the loss declared at F3,49,951/-. During the course of

Assessment proceedings the assessee has not produced any sale bills, purchase invoices / vouchers for the business. Since no expenses could be verifiable the book results of the concern were rejected and the lower authorities has estimated an income at 5% on the turnover reported. We do not find any infirmity in the orders of the lower authorities. This ground of the appeal of the assessee is rejected.

19. The next ground raised by the assessee is with regard to addition of F13,00,558/- as unexplained capital in PR & Sons.

19.1 The facts of the issue are that during scrutiny of the accounts of

P.R& Sons division of the assessee, it was found that the Current account of the assessee as per the books is F 14,82,719/-. But, as per the return, the Current account is F 1,82,161/-. The AR was asked to explain why the difference should not be brought to tax. The assessee vide letter dated 11-02-2013 explained that the balance of

F14,82,719/- is as per the pre audited book which may be ignored. No further explanation as to why the entries taken as credits into the current account of the assessee were later reversed in the audited accounts was filed even after giving further opportunities

www.taxguru.in :- 43 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Therefore, the difference in current account of the assessee to the extent of F13,00,558/- is treated as unexplained cash credits u/s 68 and brought to tax. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer.

Against this, the assessee is in appeal before us.

19.2 We have both the parties and perused the material available on record. The lower authorities has made an addition of

F13,00,558/- as unexplained cash credit u/s 68 on noticing current account balance of the assessee as per the books shown at

F14,82,719/- whereas as per the return of income filed by the assessee the current account balance is shown at only F1,82,161/- when the assessee was asked to reconcile the difference the assessee stated that the difference is due to pre audit book balance which was wrongly mentioned as F14,82,719/-. No further explanation was filed by the assessee for the entries reflected in the current account and later reversed in the audited accounts hence we do not any find any infirmity in the decision taken by the lower authorities in taxing the balance amount of F13,00,558/- as unexplained cash credit u/s. 68

www.taxguru.in :- 44 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. and brought to tax. Accordingly, the ground of the appeal of the assessee is dismissed.

The appeal of the assessee in ITA No.2041/Mds/2013 for the assessment year 2003-2004 is dismissed.

Shri. P. Murugesan, ITA No.2042/Mds/2013, assessment year 2004- 2005 (assessee’s appeal)

20. The first ground raised by the assessee in this appeal is with regard to unexplained cash credits to the tune of F22,34,000/-.

20.1 The facts of the issue are that during the previous year relevant to the assessment year 2004-05, the assessee had shown loans from the following person on the liability side of the ‘’General

Balance Sheet’’ filed alongwith the return of income. They are also shown on the receipts side of the ‘’General Receipts and Payments

A/c’’.

Sl.No Name of alleged creditor Amount in (F) 1 GG 17,50,000/- 2 Stephen 3,50,000/- 3 Dineshkumar 1,34,000/- 4 KRA 6,00,000/-

www.taxguru.in :- 45 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Total 28,34,000/-

Vide notice u/s.142(1) dated 30.01.2012, the assessee was requested to give the details of the above loans with ledger extracts of the above persons appearing in assessee's books along with complete address and income-tax assessment details. Further, vide Notice dated 11-01-2013, the assessee was requested to furnish the confirmations from the loan creditors along with details of the loan i.e., amount of loans, cheque No., date, name of the bank and confirmation as to whether any interest on the loan and the repayment of the loan. The assessee was also furnished details of interest paid on the above loans for various years till date. The assesses was also reminded that onus to prove the source of the credits and the genuineness of the transaction with the assessee, Vide

Notice u/s 142(1) dated 22.2.2013, the assessee was requested to produce the loan creditors for verification. The assessee has only furnished address of the loan creditors. Even the PAN number of the loan creditors is not furnished by the assessee. The assessee has also not furnished the mode of availing the loan, date of loan and cheque Number and bank details etc.

The assessee has also avoided stating whether any interest is paid on the loans and whether these loans are outstanding or repaid as on date. Letters were addressed to the loan creditors at the address given by the assessee.

www.taxguru.in :- 46 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Only in case of Shri K.R.Annamalai Who has been critically mentioned as

K.R.A. in the assessee's Balance Sheet, the confirmation has been received. In case of Shri G.Govindaraju, he has stated that he has given a loan of ₹.8,00,000/- in cash in September 2002 and received back the amount in June 2003 in cash for the higher education of his children.

However, the assessee has shown that he has received fresh loan of

₹17,50,000/- The assessee has availed loan from Shri. G. Govindaraju, in other years also as under:-

Sl.No A.Y Amount loan Amount Balance taken repaid outstanding 1 2003-04 8,00,000 0 8,00,000 2 2004-05 17,50,000 8,00,000 17,50,000 3 2006-07 15,00,000 0 32,50,000

In his letter Shri Govindaraj has stated that he is a retired professor from Arts College, Thanjavur. It is hard to believe that a retired pensioner has given a loan of F32,50,000/- without any security and without expecting any interest. Thus, 'except for loan from

K.R.Annamalai of F6,00,000/-, none of the above credits can be considered to be satisfactorily explained by the assessee. Therefore, the above said loans amounting to F22,34,000/- is added to the income of the assessee as unexplained credits in the books

www.taxguru.in :- 47 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. u/s 68 of the Income tax Act. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the

Assessing Officer. Against this, the assessee is in appeal before us.

20.2 The ld. Authorised Representative for assessee submitted that the addition made without accepting the Copies of bank account statements of the assessee and the Creditor. After migrating to core banking solutions, no banks are in a position to furnish particulars so the accounts prior to 2006. Hence the question of their certifying the statements is ruled out. Hence calling for certified copies of the bank accounts and further details from the assessee in total violation of the principle of natural justice. The Addition made without accepting the copies of bank account statements of the assessee and the creditor as relating to the loan from Shri Dinesh Kumar of F1,34,000/- and confirmation from the creditors about the

Source of the money lent by Shri G.Govindaraju and Shri Stephen.

20.3 The ld. Departmental Representative relied on the orders of the lower authorities.

20.4 We have both the parties and perused the material available on record. The lower authorities made an addition of F28,34,000/- on

www.taxguru.in :- 48 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. account of unexplained credits u/s. 68 of the IT Act. The Assessee during the year under consideration introduced credits in the name of four persons amounting to F 28,34,000/--. During the course of assessment proceedings the Assessee was asked to furnish the confirmation letters from the loan creditors along with the details of amount of loans, cheque number, date, name of the bank and whether any interest on the loans paid and also any repayment of loans. The

Assessee failed to furnish any details proving the genuinity of the transactions along with the credit worthiness of the creditors as well as capacity to lend the loans to the Assessee. Since the Assessee has not proved the genuineness of the transactions of the loan amounts taken amounting to F22,34,000/-, the lower authorities has added the same as unexplained cash credits in the books of the Assessee u/s 68 of the IT Act. Only in the case of K. R. Annamalai for F6,00,000/- confirmation letter has been filed and the same has been accepted.

Whereas in case of the other loan creditors the Assessee could not prove with a substantial material on record and the addition made by the lower authorities to the extent of F 22,34,000/- is confirmed.

This ground of the appeal of the assessee is rejected.

www.taxguru.in :- 49 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 21. The next ground raised by the assessee is with regard to addition of income from PR & Sons for F4,13,001/-.

21.1 The facts of the issue are that the assessee has claimed a loss of F96,454/- from the PR & Sons and the loss was claimed against the income during the year. The assessee has not produced any sale bills, purchase & invoices or vouchers for businesses. The net sales of the concern is F63,30,945/- and the income of the concern is F63,30,945/.

Therefore, the books results of this concern was rejected and the income is estimated at 5% i.e., F3,16,547/- as against income declared loss of F96,454/-. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the

Assessing Officer. Against this, the assessee is in appeal before us.

21.2 We have heard both the sides and perused the material on record. the Assessing Officer has made an addition of F3,16,547/- against the loss of F 96,454/- declared by the Assessee . The

Assessee has not produced any bills of purchase and sale invoices or vouchers for business before the lower authorities. The lower authorities has taken net sales of the assessee concerned at F

63,30,945/-: and then estimated income' at 5% and arrived at the

www.taxguru.in :- 50 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. income of F3,16,547/-. We do not find any infirmity in the order of the

lower authorities. Hence, this ground of the appeal of the assessee is

rejected.

22. The next ground raised by the assessee is with regard to treating the agricultural income of F2,77,500/- as income from other sources.

22.1 The facts of the case are that the the assesses has claimed

₹7,50,000/ as income from agricultural lands. In support of his claim, the

AR stated that the assessee has taken agriculture lands belonging to his brother Shri Vasudevan on oral lease. It is stated that cultivation of grams were undertaken during the relevant previous year, The assessee could not give details of quantity of the produce obtained, name of the persons to whom it was sold and bills and vouchers for the sale agricultural produce which were called for vide

Notice u/s 1420) dt.3 1-10-2012. Under similar circumstances for

A.Y.2003- 04 the CIT (Appeals) vide order dated 01-09-2009 in IT No.

128/06-07 has directed to treat ₹3,66,000/- out of the agricultural income declared of ₹9,75,000/-as income from other sources. The disallowance

works out to 37%. Therefore, 37 % of the income returned as agricultural

www.taxguru.in :- 51 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. income i.e. ₹.2,77,500/- is considered as income from "other sources".

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

22.2 We have heard both the sides and perused the material on record. As discussed in assessment year 2002-2003 in para no.6.6 of this order, this ground of the appeal of the assessee is rejected.

23. The next ground raised by the assessee is with regard to treating the difference in current account balances of F32,64,525/- as unexplained cash credit.

23.1 The facts of the case are that discrepancies were noticed in the current capital account of PR& Sons division for which books were produced before Assessing Officer. The books for F.Y.2003-04, the previous year relevant to A.Y.2004-05 were not produced. The opening balance in Current a/c as per the books for F.Y.2004-05, shows credit of

₹45,65,083/-. However the closing balance as per the Balance sheet for

F.Y.2003-04 was shown as ₹15,53,300/-. The A.R. was requested to

www.taxguru.in :- 52 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. explain the discrepancies by Assessing Officer. The A.R. vide letter dt.

11.02.2013 has stated that the books of account for the year are not

traceable and hence the difference could not be reconciled. Vide Notice u/s

142(1) dated 22-02-2013 the assessee was once again requested to explain

the differences. The AR Vide letter dated 6.3.2013 stated that "the

difference in the current account balance as on 31-03-2004 and 01-04-2004

could not be explained since the books of accounts relating to the financial

year 2003-04 were not traceable". Therefore, the difference in current

capital a/c. as per books of PR & Sons and that shown in Balance sheet

amounting to ₹ 32,64,525/- is considered as unexplained cash credit in the books of PR & Sons and brought to tax u/s 68 of the Income tax Act.

Aggrieved, the assessee preferred an appeal before the Commissioner

of Income Tax (Appeals). The Commissioner of Income Tax (Appeals)

confirmed the order of the Assessing Officer. Against this, the

assessee is in appeal before us.

23.2 The ld. Authorised Representative for assessee submitted that

the Assessing Officer went wrong in making the addition without accepting the

submission of the assessee that the difference in the capital account of the assessee

in his proprietary business was on account of the drawings taken from the purchase

account.

www.taxguru.in :- 53 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

23.3. The ld. Departmental Representative relied on the orders of the lower authorities.

23.4 We have heard both the sides and perused the material on record. The

Assessing Officer has made an addition of F32,64,525/- on account of difference in current account balances. The opening balance in current account as per the books for financial year 2004-05 shows a credit of

F45,65,083/-, where as the closing balance as per the balance sheet for financial year 2003-04 was only at F15,53,300/-. The assessee failed to reconcile the difference and could not explain by stating that the relevant period books were not traceable. Hence, we do not have any hesitation to confirm the differential amount of F32,64,525/- as unexplained cash credit in the books of the assessee’s Concern i.e., PR and Sons and brought to tax u/s. 68 of the IT Act. Accordingly, this ground of the appeal of the assessee is rejected.

24. The next ground raised by the assessee is with regard to treating the deposits made in the bank account of Shri. P. Murugesan at F26,14,000/- as unexplained investments.

www.taxguru.in :- 54 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 24.1 The facts of the case are that Shri P.Murugesan has made several deposits for the F.Y. 03-04 on various dates. During the Search, the following credits were explained to be out of SPRECT Corpus Donation.

The A.R was requested to explain the credits into the bank a/c by Assessing

Officer.

Sl.No Date Bank Amount 1 14.06.2003 SBI Thanjavur 3,34,000/- 2 17.06.2003 SBI Thanjavur 10,00,000/- 3 19.06.2003 IOB Chennai 1618 30,000/- 4 23.06.2003 SBI Thanjavur 12,50,000/-

The AR. explained that the credits in the Bank a/c. were from available cash balances. However, the assessee not maintained books of accounts for transaction other than the concerns PR & Sons. The transactions in SBI, Thanjavur and lOB, Chennai are not reflected in the books of PR & Sons. Therefore, there is no basis for the assessee to say that these credits are made out of available cash balance. No cash flow statement is also filed explaining the credits into the Bank a/c. In view of the conflicting explanation filed during the Search and that filed in the assessment proceedings and there being no evidence for existence of cash balances on the days the credits were made, the whole of the credits in the bank a/c. mentioned above are added to

www.taxguru.in :- 55 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the total income as unexplained investments by Assessing Officer.

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

24.2 We have heard both the sides and perused the material on record. The Assessing Officer made and addition of ₹26,14,000/-- on account of deposits made into the bank accounts. The assessee has made several deposits on various dates in the SBI Thanjavur Account as well as lOB Chennai Account. When the Assessing Officer has confronted the assessee for the transactions in SBI Thanjavur and lOB Chennai that they are not reflected in the books of PR and Sons, the ld. Authorised

Representative for assessee has not submitted any details nor filed any cash flow statement explaining the credits in the above bank account. As there were no cash balances on the dates of credits made as mentioned above the entire amount of ₹26,14,000/-, we treat the deposits as unexplained investment of the assessee. This ground of the appeal of the assessee is dismissed.

The appeal of the assessee in ITA No.2042/Mds/2013 for the assessment year 2004-2005 is dismissed.

www.taxguru.in :- 56 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Shri. P. Murugesan, ITA No2043/Mds/2013, assessment year 2005-

2006 (assessee’s appeal):-

25. The first ground raised by the assessee in this appeal is with regard to treating the income from PR & Sons of F5,15,933/- as unexplained cash credits.

25.1 The facts of the case are that the assessee has not produced any sale bills, purchase & invoices or vouchers for business. The net sales of the concern is F1,12,25,426/-. Therefore, the books result of this concern are rejected and the income is estimated at 5% i.e.

F5,61,271/- as against income declared at F45,338/-. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

25.2 We have heard both the sides and perused the material on record. The income assessed by the Assessing Officer for the year under consideration at F 5,15,933/- on estimated basis at 5% on the net sales of the concern reported by the assessee at F1,12,25,426/-.

In the absence of any sale bills, purchase invoices and vouchers is

www.taxguru.in :- 57 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. justified as against the income declared by the assessee at F45,338/-.

There is no defence from the Authorised Representative of the assessee except stating some vague reasons without furnishing any evidence before the Assessing Officer for claiming various expenses.

Therefore the addition made by the lower authorities at F5,15,933/- is confirmed. This ground of the appeal of the assessee is dismissed.

26. The next ground raised by the assessee is with regard to treating F10,15,000/- as unexplained expenditure (loan repayment and interest payment).

26.1. The facts of the case are that for verifying the loan creditors, a

letter was issued by Assessing Officer to K.R.Annamalai of Tanjavur. The

assessee has availed loan from K.R.Annamalai and also from his Wife

Smt.A.Mangalam. The creditor furnished copies of all the loans availed by

Sri. Murugesan. As per the extract filed by K. R.Annamalai, the assessee

has taken a loan of ₹10,00,000/- on 01.11.2004 and has repaid the same

along with interest of ₹15,000 on 11.12.2004. However, this transaction is

not reflected in the assessee's accounts. This receipt of the loan as well as

the repayment is not reflected in the receipts and payments account of the assessee. The copy of the account extract received from K.R.Annamalai &

www.taxguru.in :- 58 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Mrs. A. Mangalam were sent to the assessee vide letter dt.22.02.2003 by

Assessing Officer and assessee was requested to explain where each of the loans is reflected in his accounts. The A.R. vide letter filed on 06.03.2013 merely stated that outstanding balances for A.Y.200102, 2002-03 and

2003-04 are confirmed by K.R.Annama1ai. Since the assessee has not offered any explanation regarding the payment made by the assessee to

K.R.Annamalai of ₹10,00,000/-on 11.12.2004 and the interest paid of

₹15,000/- are considered to be unexplained expenditure and brought to tax u/s. 69C by Assessing Officer. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the

Assessing Officer. Against this, the assessee is in appeal before us.

26.2 We have heard both the sides and perused the material available on record. The Assessing Officer has made an addition of'

F10,15,000/- on account of repayment of loan said to have taken from

Shri K.R. Annamalai along with interest. When the loan creditor who furnished copies of the ledger account for the loans given to the assessee on 01.11.2004 which has been repaid with interest on

11.12.2004. It was noticed by the lower authorities that this transaction of repayment is not reflected in the assessee 's accounts.

www.taxguru.in :- 59 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Even in the receipts and payment account also reflection of this transaction has not been found place. The assessee was asked to clarify regarding the above loan transaction but the same has not been substantiated by the assessee except stating that there are some outstanding balances for AY 2001 -02 onwards. There was no explanation from the assessee regarding the repayment of loan to

K.R.Annamalai for F10 lakhs on 11.12.2004 along with interest of' F

15,000/- and lower authorities have rightly added an amount of

F10,15,000/- as unexplained expenditure. We do not find any infirmity in the order of the Commissioner of Income Tax (Appeals). Hence, this ground of the appeal of the assessee is rejected.

27. The next ground raised by the assessee is with regard to deposits of F63,50,000/- made in the bank account as income of the assessee.

27.1 The facts of the issue are that the assessee made several deposits for the F.Y. 04-05 on various dates. During the Search, the following credits were explained to be out of SPRECT Corpus Donation.

The A.R was requested to explain the credits in to the bank account.

www.taxguru.in :- 60 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

SINO Date Bank Amount 1 02.05.2004 IOB-CHENNAI-27425 2,00,000 2 03.05.2004 lOB CHENNAI-1618 10,00,000 3 11.06.2004 IOB-CHENNAI-27425 11,00,000 4 29.09.2004 IOB-CHENNAI -27425 38,00,000 5 21.10.2004 IOB-CHENNAI-27425 3,50,000

The A.R. explained that the credits in the Bank alc were from available cash balances. However, the assessee not maintained books of accounts for transaction other than the concerns PR & Sons. The transactions in SBI, Thanjavur and lOB, Chennai are not reflected in the books of PR & Sons. Therefore, there is no basis for the assessee to say that these credits are made out of available cash balance. No cash flow statement is also filed explaining the credits into the Bank account. In view of the conflicting explanation filed during the Search and that filed in the assessment proceedings and there being no evidence for existence of cash balances on the days the credits were made, the whole of the credits in the bank account amounting

F.63,50,OOO/-- as mentioned above are added to the total income as unexplained investments. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer.

www.taxguru.in :- 61 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Against this, the assessee is in appeal before us.

27.2 The ld. Authorised Representative for assessee submitted that the Assessing Officer went wrong in making the addition of Rs.63,50,OOO/- on account of several deposits made in bank accounts of the assessee. The AO failed to understand that the assessee has cash balances to make the deposits in the bank accounts.

27.3 The ld. Departmental Representative relied on the orders of the lower authorities.

27.4 We have heard both the parties and perused the material on record.

The lower authorities had made several deposits in his bank account on various dates during the year under consideration in IOB account, Chennai totalling to

F63,50,000/-. These transactions are not reflected in the books of PR & Sons and explanation filed by the assessee that these credits are made out of available cash balance. No cash flow statement had been filed explaining the credits into the bank account. The explanation filed by the assessee regarding the availability of cash balances is devoid of any merit. Hence, we confirm the addition made by the lower authorities at F63,50,000/- on account of unexplained cash credit in the IOB bank. This ground of the appeal of the

www.taxguru.in :- 62 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. assessee is rejected.

28. The next ground raised by the assessee is with regard to

unexplained investment in property at Nilgiri South, Periarnagar at

F5,80,800/- as Short Term Capital Gains.

28.1 The facts of the issue are that on 11.02.2013, the ld. Authorised

Representative for assessee was provided with a copy of the document for sale of 4800 sqft of land at Nilgiri south, Perfarnagar, site no 8, Tanjavur dist. He was requested to explain where the transaction of sale was reflected in his accounts and returns. The AR vide his letter dated 6-03- 2013 has stated that the purchase and sale of above land had not reflected in the books of accounts. Therefore, the market value of property i.e. F5,80,800/- was considered as Short

Term Capital Gains (as the cost price is not ascertainable from the record) and brought to tax. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the

Assessing Officer. Against this, the assessee is in appeal before us.

28.2 The ld. Authorised Representative for assessee submitted that

www.taxguru.in :- 63 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the Assessing Officer erred in not treating 1/4th share of the property in the hands of the assessee. The assessing officer erred in not considering the cost price of the property and the share of the assessee in the property while computing the capital gains.

28.3 The ld. Departmental Representative relied on the orders of the lower authorities.

28.4 We have heard both the parties and perused the material on record. The

Assessing Officer has made an addition of F5,80,800/- on account of unexplained investment of property at Nilgris. When the assessee was confronted by the Assessing Officer to explain the transaction of purchase and sale of property at Nilgris, the Authorised Representative of the assessee vide his letter dated 6.3.2013 has accepted that the purchase and sale of the above land has not been reflected in the books of accounts of the assessee. The Assessing Officer has worked out the short term capital gain at F5,80,800/-- and the same was brought to tax. Since the Authorised Representative of the assessee has accepted that the transaction has not been accounted, the decision of the lower authorities in arriving at a short term capital gain at F5,80,800/- is hereby confirmed. This ground of the appeal of

www.taxguru.in :- 64 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the assessee is rejected.

29. The next ground raised by the assessee is with regard to unexplained expenditure on stamp duty and registration fees for the properties to the tune of F11,34,336/-.

29.1 The facts of the issue are that the assessee has bought the following three properties during the year :-

Sl.No Name of Price Stamp Registration Total property duty fees paid stamp paid duty and Reg. fee 1 Gopalapuram 90,00,000 7,20,000 90,160 8,10,160 2 T. Nagar 17,19,900 1,87,584 4,055 1,91,639 3 TPS Nagar 9,20,370 1,17,812 14,724 1,32,537 Total 11,34,336

Though the purchase price of the properties is reflected in the

balance sheet of the assessee, the amount spent on stamp duty and

registration fees for the properties amounting to F11,34,336/- is not

capitalized and shown in the balance sheet. The assessee was

requested to explain where the expenditure has been reflected. The

assessee vide letter dated 11-02-2013 has stated that only the

purchase cost has been accounted in the books and cost towards

stamp duty and registration fees have been omitted to be accounted.

www.taxguru.in :- 65 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Therefore, the expenditure of F11,34,336/- made on the registration

and stamp duty of the above three properties is brought to tax

as unexplained expenditure u/s 69C of the IT Act. Aggrieved, the

assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the

order of the Assessing Officer. Against this, the assessee is in appeal

before us.

29.2 We have heard both the parties and perused the material

available on record. The assessee cannot contest the addition made

by the lower authorities for unexplained expenditure u/s.69C of the

Income Tax Act for the amount spent on stamp duty and registration

fee for the properties purchased as the assessee has not disputed the

purchase of above property. Then it is natural to incur these

expenditure and as such, we do not find any infirmity in the order of

the lower authorities. Hence, this ground of the appeal of the

assessee is rejected.

In the result, the appeal of the assessee in ITA No.2043/Mds/2013

for the assessment year 2005-06 is dismissed.

www.taxguru.in :- 66 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Shri. P. Murugesan ITA No.2044/Mds/2013, assessment year 2006-

2007( assessee’s appeal)

30. The first ground raised by the assessee in this appeal is with

regard to unexplained cash credit to the tune of F15,00,000/- as

income from undisclosed source.

30.1 The facts of the issue are that the during the previous year relevant to the A.Y.2003-04, the assessee has shown loans from the following persons on the liabilities side of the "General Balance Sheet" filed along with the Return of Income. They are also shown on the receipts side of the "General Receipts and Payments A/c".

Sl.No Name of alleged creditor Amount (in F) 1 M/s. Sri Lakshmi Co 10,00,000/- 2 Loan from Dr. G Govindarajan 15,00,000/- Total 25,00,000/-

The Assessing Officer vide Notice u/s 142(1) dated 30-01-2012, the assessee was requested to give the details of all the above loans along with ledger extracts of the above persons appearing in assessee's books along with complete address and income-tax assessment details. Further, vide Notice dated 11-01-2013, the

www.taxguru.in :- 67 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. assessee was requested to the confirmations from the loan creditors along with details of the loan i.e., amount of loans, cheque No., date, name of the bank and confirmation as to whether any interest on the loan and the repayment of the loan.

The assessee was also furnished details of interest paid on the above loans for various years till date. The assessee was also reminded that onus to prove the source of the credits and the genuinenity of the transaction with the assessee. Vide Notice u/s

142(1) dated 22.2.2013, the assessee was requested to produce the loan creditors for verification. The assessee has only furnished the address of the loan creditors. Even the PAN number of the loan creditors is not furnished by the assessee. The assesses has also not furnished the mode of availing the loan, date of loan and cheque Number and bank details etc. The assessee has also not stated whether any interest is paid on the loans and whether these loans are outstanding or repaid as on date. Letters were addressed to the loan creditors at the address given by the assessee. In case of Shri G.Govindaraju, he has stated that he has given a loan of

F8,00,000/ in cash in September 2002 and received back the amount in June 2003 in cash for the higher education of his children. The assessee has

www.taxguru.in :- 68 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. availed loan from Shri G.Govindaraju, in other years also as under:-

Sl. A.Y. Amount of Amount Balance No loan taken repaid outstanding 1 2003-04 8,00,000/- 0 8,00,000/- 2 2004-05 17,50,000/- 8,00,000/ 9,50,000/- 3 2006-07 15,00,000/- 0 32,50,000

In the Receipts and payments a/c filed with the returns no interest

payment on this loan is shown. No sane person will lend such huge

amount of money without any interest. The assessee has not

established the creditworthiness of the loan creditor. Therefore, the

transactions cannot be considered to be, genuine. In case of M/s. Sri

Lakshmi Corporation, in response to this office letter, the loan

creditor has confirmed the loans. Thus, for the loan from

Sri.G.Govindrajan the assessee has not furnished any evidence to

prove the identity of the creditor, capacity of the creditor and the

genuenity of the transaction. The credits in the name

Sri.G.Govindrajan of F15,00,000 cannot be considered to be

satisfactorily explained by assessee. Therefore, the above said loan

amounting to F15,00,000/-is treated as income from undisclosed

sources and brought to tax for A.Y.2006-07. Aggrieved, the assessee

preferred an appeal before the Commissioner of Income Tax

www.taxguru.in :- 69 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. (Appeals). The Commissioner of Income Tax (Appeals) confirmed the

order of the Assessing Officer. Against this, the assessee is in appeal

before us.

30.2 We have heard both the parties and perused the material on

record. The Assessing Officer has made an addition of F15,00,000/-

stated to be received from Shri G.Govindarajan. The assessee has

failed to furnish the details of the said loan creditor and has not

established the creditworthiness capacity to lend and the genuineness

of the transaction. No prudent person will extend a loan without

charging any interest hence the addition made by the Assessing

Officer in the case of Sri G.Govindarajan for the loan advanced to the

assessee treating the same as income from undisclosed sources.

Therefore, we confirm the addition made by the Commissioner of

Income Tax (Appeals). This ground of the appeal of the assessee is

rejected.

31. The next ground raised by the assessee is with regard to

addition of income from PR & Sons to the tune of F9,30,081/-.

www.taxguru.in :- 70 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 31.1 The facts of the issue are that the assessee has not produced any sale bills, purchase & invoices or vouchers for businesses. The net sales of the concern is F32,54,299/. Therefore, the books results of this concern are rejected and the income is estimated at 5%i.e.,

F1,62,715/- as against loss of F7,67,367/-. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

31.2 We have heard both the parties and perused the material on record. The assessee had claimed a loss of F 7,67,367/- from PR &

Sons and the loss was claimed against income during the year. After verifying the submissions made by the Authorised Representative of the assessee it was observed that the assessee failed to submit the books of accounts and vouchers for the above mentioned businesses.

Hence the addition made by the lower authorities on estimated basis on the net sales of the concern that 5% which works out to

F1,62,715/- after ignoring the loss claimed by the assessee at

F7,67,367/- is perfectly justified and hence we confirm the addition

www.taxguru.in :- 71 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. made by the lower authorities at F9,30,081/-. This ground of the

appeal of the assessee is rejected.

32. The next ground raised by the assessee is with regard to deposits made in the bank account to the tune of F21,96,200/- as unexplained investments.

32.1 The facts of the issue are that the during the Search, the following credits were explained to be out of SPRECT Corpus Donation.

The A.R was requested to explain the credits in the bank Account.

Sl.No Date Bank Amount 1 25.04.2005 IOB Chennai-27425 1,00,000/- 2 27.05.2005 IOB Chennai-1618 4,50,000/- 3 30.11.2005 IOB Chennai-27425 5,50,000/- 4 06.12.2005 IOB Chennai-27425 10,00,000/- 5 13.03.2006 SBI- Tanjavur 50,000/- 6 22.02.2006 IOB Chennai-27425 46,000/-

21,96,020/-

The ld. Authorised Representative for assessee explained that the credits in the Bank a/c. were from available cash balances. However, the assessee not maintained books of accounts for transaction other than the concerns PR & Sons. The transactions in SBI, Thanjavur and lOB, Chennai are not reflected in the books of PR & Sons. Therefore,

www.taxguru.in :- 72 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. there is no basis for the assessee to say that these credits are made out of available cash balance. No cash flow statement is also filed explaining the credits into the Bank a/c. In view of the conflicting explanation filed during the Search and that filed in the assessment proceedings and there being no evidence for existence of cash balances on the days the credits were made, the whole of the credits in the bank a/c amounting to F21,96,200/- as mentioned above are added to the total income as unexplained investments. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

32.2 The ld. Authorised Representative for assessee objected to the additions made by the Assessing Officer on account of several deposits made in bank accounts of the assesses. According to the ld. Authorised Representative for assessee the Assessing Officer failed to understand that the assessee has cash balances to make the deposits to the bank accounts. The Assessing Officer failed to understand that if the assessee had no cash to make the deposits, the balance sheet at the year end would not tally.

www.taxguru.in :- 73 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

32.3. The ld. Departmental Representative relied on the orders of the Assessing Officer.

32.4 We have heard both the parties and perused the material on record. We have gone through the submissions made by the

Authorised Representative of the assessee as well as the detailed reasoning given by the lower authorities for the addition made on account of the unexplained credits appearing in the bank account mentioned supra. Even though the Authorised Representative of the assessee explained that the credits in the bank account were from available cash balances, he could not substantiate the same transactions from his books of accounts. As the transactions in SBI,

Thanjavur branch and IOB, Chennai branch are not reflected in the books of PR & Sons, the Authorised Representative of the assessee could not prove that these credits are made out of available cash balance. In the absence of any cash flow statement, the version of the

Authorised Representative of the assessee cannot be relied upon,

Thus, we confirm the addition made by the lower authorities to the extent of F21,96,200/- to the total income as unexplained investments. This ground of the appeal of the assessee is rejected.

In the result, the appeal of the assessee in ITA No.2044/Mds/2013 is

www.taxguru.in :- 74 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. dismissed.

Shri. P. Murugesan ITA No.2045/Mds/2013, assessment year 2007- 2008 (assessee’s appeal):-

33. The first ground raised by the assessee in this appeal is with regard to treatment of unexplained cash credits to the tune of

F21,91,532/-.

33.1 The facts of the case are that during the previous year relevant to the assessment year 2007-08, the assessee has shown loans from the following persons on the liability side of the ‘’General Balance

Sheet’’ filed alongwith return of income:-

Sl.No Name of alleged creditor Amount (F) 1 Sri Lakshmi Corporation 5,00,000/- 2 Ms. Sujatha 5,00,000/- 3 Shri. Balaji 5,00,000/- 4 Ms. Rajalakshmi 5,00,000/- 5 Shri. Dinesh 6,91,532/- Total 26,91,532/-

Vide Notice u/s 142(1) dated 30-01-2012, the assessee was requested to give the details of all the above loans along with ledger extracts of

www.taxguru.in :- 75 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the above persons appearing in assessee's books along with - complete address and income-tax assessment details. Further, vide

Notice dated 11-01-2013, the assessee was requested to furnish the confirmations from the loan' creditors along with details of the loan i.e., amount of loans, cheque No., date, name of the bank and confirmation as to whether any interest paid on the loan and the repayment of the loan. The assessee also not furnished details of interest paid on the above loans for various years till date. The assesses was also reminded that onus to prove the source of the credits and the genuineness of the transaction with the assessee. Vide

Notice u/s 142(1) dated 22.2.2013, the assessee was requested to. produce the loan creditors for verification. The assessee has only furnished the address of the loan creditors. Even the PAN number of the loan creditors is not furnished by the assessee. The assessee has also not furnished the mode of availing the loan, date of loan and cheque Number and bank details etc. The assessee has also not stated whether any interest is paid on the loans and whether these loans are outstanding or repaid as on date. Ms Sujatha, Ms Rajalakshmi and

Shri Balaji are children of Shri G.Govindaraj. In response to this office letter seeking confirmation of the loans Shri Govindaraj has replied for and on behalf of all the above three persons that he had given a loan

www.taxguru.in :- 76 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. F8,00,000/- in cash in September 2002 and received back the amount in June 2003 in cash for higher education of his children. The assessee has shown that he has availed loan from Shri G.Govindaraju, in other years also as under:

Sl. A.Y. Amount of Amount Balance

No loan taken repaid outstanding

1 2003-04 8,00,000/- 0 8,00,000/-

2 2004-05 17,50,000/- 8,00,000/ 17,50,000/-

3 2006-07 15,00,000/- 0 32,50,000

In the Receipts and payments a/c filed with the returns no interest payment on this loan 'is shown. No sane person will lent such huge amount of money without any interest. In his letter Shri Govindaraj has stated that he is a retired professor from Arts College, Thanjavur. It is hard to believe that a retired pensioner has given a loan of

F32,50,000/- without any security and without expecting any interest.

The assessee has not established creditworthiness of loan creditor.

Therefore, the transactions cannot be considered to be genuine. In case of Sri Lakshmi Corporation, in response to this office letter, the loan creditor has confirmed the loans. Thus, except for loan from Sri

Lakshmi Corporation, none of the

www.taxguru.in :- 77 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. above credits can be considered to be satisfactorily explained by the assessee. Therefore, the rest of the above said loans amounting to

F21,91,532/- is added to the income of the assessee as unexplained credits in the books u/s 68 of the Income-tax Act. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

33.2 We have heard both the sides and perused the

material on record. The assessee in his return filed for the assessment year under consideration has shown liability for the loans taken from the persons shown as in para 33.1. During the course of assessment proceedings the assessee was asked to file the details of loan creditors along with party ledger, complete address and their income tax particulars. Similarly, the Assessing Officer has also asked the confirmation letters from the loan creditors alongwith details of amount of loan and mode of receipt/repayment. The Authorised

Representative of the assessee has furnished only address of the loan creditors and has not submitted any details such as PAN No. of the loan creditors, mode of receipt /repayment of the loan. On behalf of

www.taxguru.in :- 78 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Mrs. Sujatha, Mrs. Rajalakshmi and Shri Balaji, their father G.

Govindaraj replied that they had given a loan of F 8 lakhs in cash/in

September 2002 and received back the amount in June 2003 also in cash. The assessee has also shown that he has availed loan from Shri.

Govindaraj as shown in para 33.1. In the receipts and payments account filed along with returns no interest payment on the above loan amount is paid out of the total amount of loan received from

Govindaraj family during the year under consideration. Out of the total loans accepted by the assessee during the year that F26,91,532/- only one confirmation received to the extent of F 5 lakhs from Shri Lakshmi

Corporation confirming the amount of loan. Whereas other loans received from the family members of Sri G.Govindaraj to the extent of

F 15 lakhs in the name of 3 family members as well as from Shri

Dineshkumar at F 6,91,532/- there is no evidence or confirmation from the above loan creditors to prove the creditworthiness, capacity to lend as well as genuineness of the transaction. Since, the

Authorised Representative of the assessee failed to explain or substantiate the genuineness of the transaction, an amount of

F26,91,532/- is added to the income of the assessee as unexplained cash credit u/s 68 of the I.T. Act. Since the assessee did not offer any explanation about the nature and source of such credits and failed to

www.taxguru.in :- 79 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. offer an satisfactory explanation the Assessing Officer had added the above said amount with the income of the assessee as unexplained cash credits. The same view is supported by the following judgments:-

01. Sunsathi Dayal vs. CIT (SC) 214 ITR 801. 02. Vasanthi Bai vs. CIT(Bom) 213 ITR 805 03. Srilekha Banerii and others vs. CIT (SC) 49 ITR 112.

It is to be noted that any sum was found credited in the books of the assessee for any previous year, the explanation offered by the assessee about the nature and source is not satisfactory in the opinion of the lower authorities, the same can be added as unexplained cash credits in the books u/s.68 of the I.T. Act. Hence, this ground of the appeal of the assessee is rejected.

34. The next ground raised by the assessee is with regard to addition of income from PR & Sons to the tune of F13,02,664/-.

34.1 The facts of the issue are that the assessee has claimed a loss of F11,70,450/- from the PR & Sons and the loss was claimed against the income during the year. The assessee has not produced any sale

www.taxguru.in :- 80 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. bills, purchase & invoices or vouchers for businesses. The net sales of the concern is F26,44,295/-, Therefore, the books results of this concern are rejected and the income is estimated at 5% i.e.,

1,32,214/- as against loss of F 11,70,449/-. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

34.2 We have heard both the sides and perused the material on record. The assessee in this case could not furnish any bills purchase invoices / vouchers could not substantiate the loss claimed at F

11,70,449/-. In the absence of a detailed working out for arriving at a loss of F 11,70,449/- out of the net sales turnover of the concern i.e.,

PR & Sons at F26,44,295/-, the loss arrived at could not be given credit. In the absence of proper explanation, the lower authorities are justified in disallowing the claim of loss by rejecting the book results and also estimating the income at 5% and hence the addition made by the lower authorities at F13,02,6641- is confirmed. This ground of the appeal of the assessee is rejected.

www.taxguru.in :- 81 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 35. The next ground raised by the assessee is regard to unaccounted cash to the tune of F7,65,600/-

35.1 The facts of the case are that during the course of Search proceedings on 05/10/2006 at the residence of Shri P.Murugesan,

No.35 & 36, 2nd Street, North Colony, Natarajapuram, Tanjore, cash of F3,14,320/- was found & inventorised vide Ann/MR/C/F-I. Out of this cash, the assessee said that F1,22,620/- belongs to himself,

F1,75,000/- belongs to PR group of institutions and F16,700/- was of his wife, Smt.Menaka. Further, the assessee has not furnished any evidence regarding cash balance nor he is maintaining books of account. In the absence of proper evidence, F3,14,320/ has been treated as unaccounted cash and has to be included to the total income of the assessee. Again, on 26/11/06, during the course of

Search proceedings in the residence of Shri P,Murugesan at the above address, the total cash of F4,51,2S0/ was found & inventorised vide

Ann/ SR/C/F- 1, dt.26/11/06. Shri. Murugesan was not in a position to explain the sources with proper evidence. The assessee is not maintaining cash book for the period relevant to A.Y.2007-08. In reply to this office notice dated 31-10-2012, the assessee replied that the source from which this cash is seized is reflected in the books of

www.taxguru.in :- 82 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. SPRECT for which an account copy is enclosed. However, no such account has been furnished. There is contradiction in the explanation made during the Search and that is being made now. Further, the seizure of the cash was made from the residence and no proof is produced to show that the SPRECT funds were carried to the house.

Hence, the cash found of F7,65,600/-(3,14,320 + 4,51,280) has been held as unexplained money and is added to the total income of the assessee. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

35.2 We have heard both the sides and perused the material on record. During the course of search proceedings In the residence of Shri

P.Murugesan an amount of ₹4,51,280/- was found and seized on 26.11.2006.

Shri P.Murugesan could not explain the source of the cash. Similarly, an amount of ₹3,14,3201/- was also seized from the same residence of Shri

P.Murugesan on 05.10.2006 for which also the assessee could not explain except stating that ₹1,26,620/- belongs to himself, and ₹l,75,000/- belong to

PR group of institutions and ₹16,700/- belong to his wife Smt.Menaka. None of the sources of cash found in his residential premises was explained with

www.taxguru.in :- 83 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. substantial evidence and hence both the cash amounts totalling to ₹7,65,600/- has been seized and held as unexplained income and added to the income of the assessee. Even though the assessee replied that the cash seized is sourced from the books of SPRECT but no evidence or account copy has been produced either before the Assessing Officer or before the Commissioner of

Income Tax (Appeals). It is the fact that the assessee failed to link any evidential proof that the funds belonging to SPRECT have been found placed in his residence on two different dates. Hence, we do not find any rational in the argument of the Authorised Representative of the assessee and the addition made by the lower authorities at ₹7,65,600/-- is confirmed. This ground of the appeal of the assessee is rejected.

36. The next ground raised by the assessee is with regard to unexplained payments made for properties to the tune of F82,24,580/-

36.1 The facts of the issue are that there were loose sheets found during the search action in bundle marked ANN:CRK/LS-4 page nos.19, 20,21,22, 23,24, 25,26, 27, 28, 29,30,31. These documents indicate payment of moneys by Shri P.Murugesan for purchase of properties. The assessee was requested to state where the payments

www.taxguru.in :- 84 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. mentioned therein are reflected in his accounts. A summary of the

transactions are given below:

Page Description Name of the person Property Amount involved No. making the receipt

19. Letter from U. Buvaneswari to P. Murugesan dated 7.6.2006 regarding the property.

20 Receipt dt.13.6.06 U. Buvaneswari Door No.22, 15,00,000/- Rainbow Arcade, Thiyagaraya Raod, Chennai. 21 Receipt dt.13.6.06 U. Buvaneswari Door No.22, 19,00,000/- Rainbow Arcade, Thiyagaraya Raod, Chennai 22 Receipt dt.09.6.06 U. Buvaneswari Door No.22, 4,00,000/- Rainbow Arcade, T.Nag ar, Chennai 23/24 Copies of DDs 9,05,580/- 667424, 667421, 6,19,000/- 667423, dated 21.4.2006 10,00,000/- 25 Receipt dt.09.6.06 U. Buvaneswari Door No.22, 11,00,000/- Rainbow Arcade, Thiyagaraya Raod, Chennai 26 Receipt dt.07.4.06 Landmark Door No.22, 1,00,000/- constructions, Chennai Rainbow Arcade, Thiyagaraya Raod, Chennai 27 Draft affidavit in favour of K. Balsubramanian 28 Receipt dt 27.7.06 K. Balasubramanian Door No.147, 3,00,000/- Greams Road, Chennai 29 Receipt dt 27.7.06 Door No.147, 4,00,000/- Greams Road, Chennai 30 Description of property at Door No.147, Greams Road, Chennai 31 Letter by P. Murugesan to Shri. K.N. Subramanian, dated 26.04.2006 offer of purchase of property at Door No.147, Greams Road, Chennai. Total F82,24,580/-

www.taxguru.in :- 85 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

The assessee was asked by Assessing Officer to furnish the details of transaction relating to properties at Door No.22,23 and 23L II floor,

Rainbow Arcade, Thyagaraya road, T.Nagar, Chennai. The AR vide letter dated 11-02-2013 by Assessing Officer stated that he had not made any transactions for the above said property. Further, it was stated that the above mentioned loose sheets do not relate to the assesses. A letter was written by Assessing Officer to Indian Overseas

Bank, Santhome Branch, Chennai from where the DDs mentioned in page No.22,23 and 24 were stated to be purchased. The Bank has furnished the copies of the applications for DDS made by K.A.Soundaravaili and K.A. Lakshrmi for purchase of DD Nos.667424 for ₹9,05,580/--, 667421 for

₹6,19,OOO/- and 667423 for ₹10,OO,OOO/-. It was seen from the applications for DDs that the application for the DDS were signed by

Shri P.Murugesan on behalf of Smt K.A.Soundaravalli and

Smt.K.A.Lakshmi. Thus, it is clear that Shri P. Murugesan has transacted the above properties and is not furnishing the correct information. Since the narration in the above loose sheets clearly indicate that the payment of the sums were made by Shri

P.Murugesan. The whole of the amounts stated to be received from

www.taxguru.in :- 86 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Shri P.Murugesan by U.Buvaneswari and K.B.Subramaniam in the above mentioned loose sheets is added to the total income as unexplained investment in the immovable made by Shri

P.Murugesan. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

36.2 We have heard both the sides and perused the material on record. During the course of search some documents were found and inventorised as Ann. /CRK/LS-4 wherein documents numbered from 19 to 31 as depicted for the transaction amounting to F82,24,580/- indicating the payment of money by the assessee for purchase of property from various parties. None of these properties have been reflected in the assessee’s books or in his returns of income filed. The

Authorised Representative of the assessee has simply stated that the above transactions were not related to the assessee which is not proved. On analysing the material on record as well as the Assessing

Officer's findings that the DDs taken for purchase of the above mentioned properties from the lOB, Santhom Branch, Chennai were, in fact, transacted by the assessee and also signed by the assessee on

www.taxguru.in :- 87 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. behalf of Mrs. K.S.Sundaravalli and Smt.K.A.Lakshmi for purchase of the above properties. The entire amount is stated to have been received by Mrs.U.Buvaneswari and K.V.Subramaniam from

P.Murugesan and they are not reflected anywhere in his accounts and accordingly not shown in the return of income. Since the assessee could not substantiate the evidence found as mentioned above, the entire amount of F82,24,580/- is treated as unexplained investment in the immovable properties purchased by the assessee and these are not deemed documents. Hence, we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals). This ground of the appeal of the assessee is rejected.

37. The next ground raised by the assessee is with regard to sale of land & building at VOC Nagar, Thanjavur to the tune of F56,61,673/-.

37.1 The facts of the case are that during the assessment year the assessee has sold a property in Patta No.4013, at 6th Ward,

V.O.C.Nagar, Thanjavur to Ponnaiah Ramajayam Public School. The sale deed was registered for F25,05,300/-. However, the market value of the land for stamp duty purposes was F.68,89,600/-. The assessee was requested to state where the sale of the above property was

www.taxguru.in :- 88 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. reflected in his accounts and returns. The ld. Authorised

Representative for assessee vide letter dated 11-02-2013 stated that due to the survey and search in October & November 2006 and dislocation of the papers & documents, this transaction remain to be accounted and it is accounted in the accounting year 2009-10. The sale transaction has taken place on 1.8.2006 and is assessable to

Capital Gains for the assessment year 2007-08. Further the provisions of 5OC are applicable as the value for stamp duty purposes is more than the price for which it is registered. Therefore, Long Term Capital

Gain is calculated as under:

SINO. Description Amount 1 Sale consideration 6889600 2 Cost of purchase 960575 3 Index cost of purchase 1227927 4 Long Term Capital Gains 5661673

Therefore, the Long Term Capital Gains of F56,61,673/- is brought to tax. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The CIT(A) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us.

www.taxguru.in :- 89 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

37.2 We have heard both the sides and perused the material on record. The assessee has not shown the sale of property to Ponnam

Ramajayam Public School which took place on 01.08.2006 relating to the AY under consideration. However the Authorised Representative of the assessee in his explanation stated that due to search operations this transaction could not be accounted and it is accounted in the financial year 2009-10 instead of the year under consideration. When the property belongs to the assessee in his individual capacity which was sold to a charitable institution and also not accounted the transaction during the relevant financial year, the assessee could not substantiate the concealment of this sale transaction which is clearly establishes the default on his part and hence the lower authorities are justified in calculating the capital gains on account 'of sale of land and building at VOC Nagar, Thanjavur by applying the provisions of section 50C working out the LTCG at F56,61,673/-.We do not find any infirmity in the order of the Commissioner of Income Tax (Appeals).

This ground of the appeal of the assessee is rejected.

38. The next ground raised by the assessee is with regard to notional income on deposit for Rent for F5,00,000/-.

www.taxguru.in :- 90 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

38.1 The facts of the issue are that the assessee has received F3 crores from SPRECT as advance towards lending out of the Greams

Road property to it. The amount of deposit paid is around 50% of the purchase price of that property. The deposit made is interest free and is abnormally high when viewed from the normal commercial practice.

In view of this, notional interest of 12% on the above deposit is brought to tax in the hands of the assessee. Since the deposit of F2.5 crores on 27-01-2007, interest is calculated at 12% for two months which works out to F5 lakhs. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the

Assessing Officer. Against this, the assessee is in appeal before us.

38.2 We have heard both the sides and perused the material on record. As far as estimation of notional income in the form of interest on deposit calculated by the Assessing Officer at F5,00,000/- is concerned, the assessee has received an amount of F3 crores from

SPRECT as advance towards letting out of the Greams Road property.

Thus the Assessing Officer has calculated the notional interest of 12% on the above deposit keeping in view of the normal business

www.taxguru.in :- 91 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. expediency. Thus the interest calculated on the deposit of F2.5 crores on 27.01.2007 at 12% for 2 months which works out to F 5 lakhs is reasonable and hence we reject the ground of the appeal of the assessee.

39. The next ground raised by the assessee is with regard to interest levied u/s.234A, 234B and 234C of the Act. Levy of interest u/s 234A, 234B and 234C are consequential and mandatory and accordingly, the Assessing Officer has to compute the same.

In the result, the appeal of the assessee in ITA No.2045/Mds/2013 is dismissed

P. Murugesan, ITA No.2036/Mds/2013, assessment year 2006-2007

(Revenue Appeal) :-

40. The first ground raised by the department in this appeal is that the Commissioner of Income Tax (Appeals) has erred in deleting the addition on account of generation of unaccounted money in the trust,

Sri Ponnaiah Ramajayathammal Educational & Charitable Trust

(SPRECT) as the Commissioner of Income Tax (Appeals) has confirmed such additions in hands of the trust (SPRECT) even though the trust has not accepted the unaccounted capitation fees collected as its

www.taxguru.in :- 92 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. income and the matter has not attained finality in the hands of the trust to tune of F1,08,59,950/-.

40.1 The facts of the issue are that during the course of survey in the premises of the Trust at No.33

& 34, Natarajapuram South Colony, Thanjavur on 5.10.2006, two file folders were impounded with following descriptions:

(I) Annexure KT/IMP/ LS-7 (2) Annexure KT/IMP/LS-13

Impounded material No.7 is a green colour Venkateshwara folder containing loose sheets serially numbered from 1 to 352. The impounded sheets are nothing but the "Daily Admission Reports" in which the detail's of fee collected from the students for the various courses offered are entered. The Daily Admission Report contains several columns such as the serial number, name of the student,

Receipt Number, Amount of fee collected, balance amount payable and finally, the Remarks column. Against the column "Amount/DD", the amount of fee collected both in the form of DD and cash are written.

However, while writing the amount, the last three digits are omitted.

For example, in Annexure KT/IMP/LS-7, in Loose Sheet No.219 against

SI.No.1, collection of F30,000/ by Way of DD is written as" 30/DD".

www.taxguru.in :- 93 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Similarly, against SI.No.9, fee of F75,000/ received in cash is shown as

"F75/-cash". In all the 'Daily admission report where there was cash collection, on the reverse page or the front page itself of the Daily

Admission Sheet, "Denominations of cash collection is also mentioned".

The total amount of fee collected from the students in "Cash" during the financial years 2004-2005; 2005-02006 and 2006-2007 are given below:

Financial Year Amount (t) 2004-05 (18.2.2005 to 4.3.2005) 3,30,000 (included in corpus donation)

2005-2006 1,08,89,950 2006-2007 (1.6.2006 to 29.9.2006) 1,78,14,200 Total 2,90,34,150

Verification from the Working copy CD containing books of accounts maintained in the computer of the trust in Tally software and seized shows that the above receipts for the period Financial year 2004-05 were not reflected/not entered in the books of accounts. Materials in these annexure KT/IMP/LS-7 and KT/IMP/LS-13 indicate collection of capitation fees by the trust. During the course of Search & Survey operations, it was found that the assessee is maintaining his own system of accounting of receipts. It is found that the course fee is collected in the form of Demand Drafts and the capitation fees by way

www.taxguru.in :- 94 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. of cash. Daily admission reports prepared by Shri K. Devasenathipathi,

In-charge of New Admission & Collection of Cash & DD and seized material vide Annexure No. KT/lMP/LS-7 and KT/IMP/LS-13 are evidence for the collection of capitation fees in cash. Shri Murugesan himself admitted the same in his statement vide answer to Q.NO.26 &

53 on 25.11.2006 and Q.No.2, 3 on 28.11.2006 and Q.No.5 & 6 on

1.12.2006 that the corpus donations/capitation fees is not entered into the regular books of Accounts as & when the same is received. These amounts are kept separately with him for entire year and out of the said funds, he incurs the expenditure on behalf of the trust and at the end of the year, a journal entry will be passed to that effect. The assessee had stated that at the end of the year the buildings created will occupy the Assets side of the balance sheet and left out capitation fees is accounted in the liability side of the balance sheet. It was claimed that he will submit a separate sheet consisting all the receipt & payments of the capitation fees & other donation to the Accounts department for making necessary journal entries at the end of the year. Apex Court in the case of Mohini Jain (Miss) vls.

State of Karnataka and Others (1992) 2 SCC 666 considered the issue of capitation fee collected by the private educational institutions. It held that Capitation fee is nothing but a price for selling education.

www.taxguru.in :- 95 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. The concept of teaching shops is contrary to the constitutional Scheme and is wholly abhorrent to the Indian culture and heritage. Some of the State Legislatures passed legislation prohibiting the collection of capitation fee and also made the same as a punishable offence. The

Supreme Court in the ease of Islamic Academy of Education and

Another V/s. State of Karnataka and Anr. (2003) 6 SCC 697 directed all the State Governments to constitute a Committee headed by a Hon'ble retired High Court judge for prescribing fee structure for professional colleges. The Apex Court further held that if any amount is charged other than the fee prescribed by the Committee under any head or guise the same would amount to capitation fee. Therefore, collection of money over and above the fee prescribed by the committee would amount to collection of capitation fee which is contrary to the Constitutional scheme and prohibited by State enactments. As the decision of the Supreme Court is Law of the Land, any act in contravention to the above would be against Public Policy and no Trust deed can authorize an act which is against

Constitutional Scheme or against Public Policy. The seized materials in the case of SPRECT read in conjunction with the statements recorded from the Managing Trustee Shri.P.Murugesan, Shri

K.Devasenathipathy, Incharge of New Admission & Collection of

www.taxguru.in :- 96 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Capitation fees, Shri R.Prabhakaran Samdass, Accounts Officer and

Internal Auditor of " SPRECT " establishes the following:

40.2 The money collected in cash as capitation fee is handed over regularly to the Managing Trustee, Shri P.Murugesan. The managing trustee then accumulates the 'money and spends the same for acquisition of assets. There are no documents regarding transfer of money from SPRECT to the managing trustee. No receipts are issued against capitation fee collected in cash. During the course of Search proceedings, documents have been found & seized which stands as concrete evidence regarding collection of capitation fee in cash and subsequently transfer of the same in the form of regular statements prepared by the college authorities. Thus, at any given point of time, the managing trustee will have the handful of money of the trust for expenditure/ investments. The above evidences go to prove that the managing trustee, P.Murugesan receives regular money collected as capitation fee. On verification of the documents for the period relevant to AY 2006-07, F1,08,59,950/, has been collected by the trust as capitation fee and passed on to Shri P.Murugesan, the managing trustee of the SPRECT. The assessee was requested by Assessing

Officer to offer his comments as to why such capitation fees collected

www.taxguru.in :- 97 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. by him should not be treated as his income. The assessee vide letter dt. 21.11.2012 stated that SPRECT is maintaining regular books of accounts and the Corpus Donation is duly accounted for. As detailed analysis made in the assessment of SPRECT it is quite clear that no proper books were maintained for collection of such Capitation fees in cash. It is seen from the details filed in the returns for Assessment

Years 2001-02 to 2007-08 that the assessee has claimed corpus donations as detailed below:

Corpus donation Assessment Years (₹) 2001-02 14,62,000 2002-03 81,34,975 2003-04 21,91,000 2004-05 23,21,000 2005-06 21,75,000 2006-07 1,09,00,000 2007-08 2,95,03,750

From the above table it was very clear that the capitation fees collected in the previous years' relevant to A.Y. 2001-02 to 2005-06 were grossly under reported. For the A.Y.s 2006-07 and 2007-08, the returns were filed only after the Search and there is no claim of 'corpus

www.taxguru.in :- 98 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. donations' made in the computation of income u/s 11 of the IT Act, but they were reflected in the Receipts and Payments accounts. But materials seized at the time of Search on 5.10.2006 Vide Annexure

KT/IMP/LS-7 and Annexure KT/IMP/LS-13(Daily Admission reports) and other materials collected during post search enquiries indicated collection of capitation fees in cash to the extent of F1,08,89,950 for

2006-07 and F3,01,86,771/- for A.Y.2007-08. It is also very evident that the capitation fees were correctly reported only because of the survey and Search operations. Therefore, if there is no survey and serach operation, Sri. P. Murugesan would have continued to misuse his office as Managing Trustee of the Trust SPRECT and not only colllect illegal Capitation fees but also under report the collection of capitation fees and use the same for his personal purposes. Therefore, such illegal capitation fees collected is to be assessed in the hands of

Sri. P. Muruqesan. On verification of the documents for the period relevant to assessment year 2007-08 F3,19,56,172/-, it is seen that money has been collected by the trust as capitation fee vide Ann/MR/

B&D/S Page 7-16, dated 11.12.2006. Out of this total fee collected in cash of F3,01,86,771/- includes F1,76,940/- drawn from bank. Hence,

F3,01,86,771/-has been held as cash received on account of capitation fee and had been passed on to Shri P.Murugesan, the

www.taxguru.in :- 99 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. managing trustee of the SPRECT. Hence, F3,01,86,771/- has to. be treated as unaccounted capitation fees and added to the total income of the assessee for the period relevant to A.Y.2007-08, Hence,

F1,08,59,950/- has been treated as. unexplained money and added to the total income of the assessee for the period relevant to AY 2006-07.

This income is assessed in the hands of the trust SPRECT substantively. Therefore, it is assessed in the hands of the individual protectively. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) deleted this addition as this only protectively made.

Against this, the Revenue is in appeal before us.

40.3 We have heard both the sides and perused the material on record. The addition made by the Assessing Officer in the case of the assessee at F1,08,59,950/- as unexplained money on account of capitation fees collected by the Managing trustee during the year under consideration on protective basis is deleted as the same addition is sustained in the case of the trust assessment. The Assessing· Officer has also made the addition in the case of SPRECT assessment on account of capitation fees collected at F1,08,59,950/-which was unaccounted and added as unexplained income on substantiate basis

www.taxguru.in :- 100 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. and hence the ·same is confirmed in the trust assessment. Therefore the same cannot be again assessed in the hands of the assessee.

Hence, we confirm the order of the Commissioner of Income Tax

(Appeals). This ground of the appeal of the Department is dismissed.

41. The second ground raised by the department is that the

Commissioner of Income Tax (Appeals) erred in deleting the addition on account of gift of educational institutions at Natham as he had confirmed such addition in the hands of the trust, Sri Ponnaiah

Ramajayathammal Educational and Charitable Trust (SPRECT), even though the trust has not accepted such addition and the matter has not attained finality in the hands of the trust (SPRECT).

41.1 The facts of the issue are that the SPRECT gifted three educational institutions at Natham to M/s. Titan Education Trust, This gift was conveyed through two gift deeds :-

(i) One with Doc. No.2023/2005 dated 28.12.2005. Schedule of

Properties transferred through this Gift deed indicate transfer of 7 acres and 46 cents in Punnakkudi village, Natharn Taluk, another

3.875 hectors 9 acres and 57 cents and another parcel of land totaling

www.taxguru.in :- 101 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 3 acres 34 cents.The two. parcels of lands are situated in Punnakkudi village, Natham Taluk. Market value F6,45,750/-.

(ii) Another gift deed with Doc.No.78/2006 dated 19.01.2006.Shedule of properties as per this gill deeds:- Three Educational institutions functioning at Uluppakkudi village, namely,

a) P.R.Colleges of Arts and Science, b) Natham P.R: College of Education and c) Natham PR. College of Training Institute.

Consideration for the transfer is mentioned as ‘’. Nil'. However the market value of the property mentioned in the deed was F

1,06,00,000/- and the value fixed by stamp authority was

F1,29,32,524/- and the value as per the. Valuation Report by Arul

Murugan Designes, Dindigul dated 12.1.2.006 was F1,82,00,000/-. The value of the said assets mentioned in' Receipts and Payments A/c. filed show the entry "By assets transferred to Titan F1,52,52,410.75’’.

Vide notice u/s.142(1) the assessee was requested to explain the transaction of gift of the above mentioned institutions. The ld. AR vide letter dated 21.11.2012 stated as under:

We wish to state that, the SPREC Trust gifted three educational institutions . at Natham by way of registered Gift Deeds.

It is admitted fact that the transfer was by a charitable trust to another Charitable Trust. It is also an admitted fact that there is no

www.taxguru.in :- 102 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. consideration for the transfer. A settlement reached between two independent trust, both working for advancement of education. The SPREC Trust had not sold any of the educational institutions but had only, transferred by way of gift. to another charitable institution. The gift deeds have also been duly registered with the Registrar of assurances. The Assessing Officer in the case of SPRECT, in the set aside assessment completed on 31.12.2010 has discussed the issue at. length and has come to the conclusion that the Managing Trustee

Shri P.Murugesan was not authorized by the trust deed to make gift of its assets, did not act in a fiduciary capacity and caused loss to the trust because of gifting of property valued at F1.82 crores.

The relevant portion from the assessment order are reproduced here;

12.2.E) The Managing Trustee, even if he happens to be the founder trustee, in his 'fiduciary' capacity of a 'Trustee' cannot fritter away the valuable properties of the trust for nothing - though the recipient trust may have similar objects. The trust SPRECT has not made out a case for any benefit derived in its favour out of the gift. At the point of time of gifting of the trust properties the trust had liabilities i) loans of Rs.12.22 crores, ii) current liabilities of Rs.1.35 crores and iii) Advance Received from Trustees of Rs.2 1 ,87,141/ - as found from the details available in the Balance Sheet as at' 31.3.2006 filed for A.Y. 2006-07. Hence, the gifting away of the three educational Institutions at Natharn is detrimental to the interests of the Trust. Any Trustee of a Public Charitable trust acting prudently would not normally give away trust properties for nothing. No palpable advantage gained for the donor trust has been brought on record. The Managing Trustee who is privy to all the facts surrounding the gift alone

www.taxguru.in :- 103 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. can reveal' the real cause for making such gift. He there by caused loss to the trust which is injurious to the Trust. Any trust, being an inanimate person, cannot function on its own and has to function only through its trustees. When there is some mischief carried on by the Managing Trustee, the value of the property lost has to be made good to the Trust.

12.4 Taking into account the totality of the circumstances namely, a) the Managing Trustee is not authorized by the trust deed to make gift of its assets b) the reasons as per the resolution passed on 28.12.2005 "due to operational difficulties and administrative reasons" are too vague" c) the trust SPRECT was having a minor as trustee at the time of gift on 28. 12. 2005. d) there is no Occasion or human probability for making a gift of F1.82 crores worth three educational institutions to totally a new trust M/s. TET which came into existence only on 1-10-2005; M/s TET has no track record of running educational institutions when it received the gift on 28.12.2005 and M/s TET having been registered u/s 12AA and granted recognition u/s 80G only on 18-07-2006,

I hold that i) SPRECT, by its above act has not applied its funds /properties for the purposes for which it was established and hence not entitled to the exemption u/ s 11 of the Act.

12.5 As pointed out in para 12. 2 E, the Managing

www.taxguru.in :- 104 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Trustee of the assessee trust "SPRECT" has to make good the loss incurred by the trust because of gifting of property valued at F 1.82 crores. The trust may have to recover the same from the Managing Trustee. This amount of F 1.82 crores is deemed as income of the trust because of the impermissible gift to TET. The sum of F 1.82 crores is deemed -as income of the assessee trust (recoverable from the Managing Trustee) and hence the same is added to the total income for the Assessment Year 2006-07 and brought to tax.

In view of the above finding the value of the properties gifted,

F1,82,00,000/- is assessed in the hands of Shri P.Murugesan as income from other sources. This income is assessed in the hands of the trust SPRECT (recoverable from the Managing Trustee) substantively. Therefore, it is assessed in the hands of the individual protectively. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) deleted the addition of the Assessing Officer. Against this, the Revenue is in appeal before us.

41.2 The ld. Departmental Representative relied on the order of the Assessing

Officer.

41.3 The ld. Authorised Representative for assessee submitted that the assessee is the chairman of Sri Ponnaiah Ramajayathamml Educational

www.taxguru.in :- 105 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Charitable Trust (SPRECT). The said trust by two deeds of gift duly registered with the Registrar of assurances gifted the following educational institutions to TITAN

EDUCATIONAL Trust, also a charitable trust.

a)P.R.Colleges of Arts and Science, b) Natham P.R: College of Education and c)Natham PR. College of Training Institute.

The market value of the properties adopted by the Sub-Registrar for quantifying the stamp duty was F1,82,00,000/-. The lower authorities has treated the said sum as income of SPRECT on a protective basis; and added it as income in the hands of the assessee. The ld. Authorised Representative for assessee submited that there was no independent application of mind by the Assessing Officer , quasi judicial authority. On this ground itself the addition is liable to be deleted. It was an admitted fact that the transfer was by SPRECT, a charitable trust. It was also an admitted fact that there is no consideration by the transfer. That being so, there can be no income in the hands of SPRECT. In any event, we are at a loss to understand as to how it could be considered in the hand of the assessee. No reason is given by the Assessing Officer for his action. Even going by the said order of the assessment of Mr. Viswananthan, the Assessing Officer could not have made the addition. In the said order of assessment of Mr. Viswananthan, his Assessing Officer has concluded the transaction.

(i) As a gift made by SPRECT (ii) The gift had been made to Mr.v1swananthan, individual.

www.taxguru.in :- 106 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

(iii) In accordance with Sec. 56, the gift having been received from a 'non relative; it is to be treated as income from other sources.

Thus, it was submitted that the findings of the Assessing Officer in respect of Mr.

Viswananthan, are in no way against the claim of SPRECT of the assessee. In fact the conclusions go to Support and advance the claim of SPRECT. The addition made by the AO is totally unsustainable in law and is therefore liable to be deleted.

41.4 We have heard both the parties and perused the material on record. We have considered the reasons given for the additions made in the assessment order. The Assessing Officer has made an addition of

F1.82 crores in the case of the assessee even though on protective basis on account of gift of educational institutions at Natham at

F1,82,00,000/-. The Assessing Officer has elaborately discussed in his assessment order wherein it was held that the value of the properties gifted at F1,82,00,000/- is assessed in the hands of Shri.

P.Murugesan as income from other sources and also stated that this income is assessed in the hands of the trust SPRECT substantively and assessed the same in the hands of the assessee protectively.

Since the addition is only on protective basis and the same addition is confirmed in the case of the trust no addition of the same amount again is required to be added in the hands of the assessee. The

www.taxguru.in :- 107 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. reliance was placed by both parties on the judgment of Supreme

Court in the case of Sonia Bhatia vs. State of Uttar Pradesh 2 SCC

585 is not relevant to the facts of the present case. Hence, we delete F1,82,00,000/- in the hands of the assessee during the year under consideration. This ground of the appeal of the Revenue is rejected.

In the result, the appeal of the Revenue in ITA No.2036/Mds/2013 is dismissed.

P. Murugesan, ITA No.2037/Mds/2013, for the assessment year 2007-

2008 (Revenue :-

42. The first ground raised by the Department in this appeal is that

the Commissioner of Income Tax (Appeals) erred in deleting the

addition on account of generation of unaccounted money in the trust,

Sri Ponnaiah Ramajayathammal Educational & Charitable Trust

(SPRECT) as he had confirmed such additions in hands of the Trust

(SPRECT) even though the trust has not accepted the unaccounted

capitation fees collected as its income and the matter has not

attained finality in the hands of the Trust SPRECT.

www.taxguru.in :- 108 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 42.1 The facts of the case are that during the course of survey in the premises of the Trust office at

No. 33 & 34, Natarajapuram South Colony, Thanjavur on 5.10.2006, two folders were impounded with following descriptions;

(1) Annexure KT/IMP/ LS-7

(2) Annexure KT/IMP/ LS-13 Impounded material No.7 is a green colour Venkateshwara folder containing loose sheets serially numbered from 1 to 352. The impounded sheets are nothing but the "Daily Admission Reports" in which the details of fee collected from the students for the various courses offered are entered. The Daily Admission Report contains several columns such as the Serial Number, Name of the student,

Receipt Number, Amount of fee collected, balance amount payable and finally, the Remarks column. Against the column "Amount/DD", the amount of fee collected both in the form of DD and cash are written.

However, while writing the amount, the last three digits are omitted.,

For example, in Annexure KT/IMP/LS-7, in Loose Sheet No.219 against

SI.No.l, collection of F30,000/- by way of DD is written as "30/-DD".

Similarly, against SI.No.9, fee of F75,000/- received in cash is shown as ‘’F75/- cash". In all the 'Daily admission report where there was cash collection, on the reverse page or the front page itself of the Daily

www.taxguru.in :- 109 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Admission Sheet, "Denominations of cash collection is also mentioned".

The total amount of fee collected from the students in "Cash" during the financial years 2004-2005; 2005-2006 and 2006-2007 are given below:

Financial Year Amount (t) 2004-05 (18.2.2005 to 4.3.2005) 3,30,000 (included in

corpus donation) 2005-2006 1,08,89,950 2006-2007 (1.6.2006 to 29.9.2006) 1,78,14,200 Total 2,90,34,150

Verification from the working copy CD containing books of accounts maintained in the computer of the trust in Tally software and seized shows that the above receipts for the period Financial year

2004-05 were not reflected/not entered in the books of accounts.

Materials in these annexure KT/IMP/LS-7 and KT/IMP/LS-13 indicate collection of capitation fees by the trust. . During the course of Search

& survey operations, it was found that the assessee is maintaining· his own system of accounting of receipts. It is found that the course fee is collected in the form of Demand Drafts and the capitation fees by way of cash. Daily admission reports prepared by Shri K. Devasenathipathi,

In-charge of New Admission & Collection of Cash & DD and seized

www.taxguru.in :- 110 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. material vide Annexure No. KT/IMP/LS-7 and KT/IMP/LS-13 are evidence for the collection of capitation fees in cash. Shri Murugesan himself admitted the same in his statement vide answer to Q.No. 26 & 53 on 25.11.2006 and

Q.No. 2 & 3 on 28.11.2006 and Q.No. 5 & 6 on 1.12.2006 stated that the corpus donations/capitation fees is not entered into the regular 'books of

Accounts as & when the same is received. These amounts are kept separately with him for entire year and out of the said funds, he incurs the expenditure on behalf of the trust and at the end of the year, a journal entry will be passed to that effect. The assessee had stated that at the end of the year the buildings created will occupy the Assets side of the balance sheet and left out capitation fees is accounted in the liability side of the balance sheet. It was claimed that he will submit a separate sheet consisting all the receipt & payments of the capitation fees & other donation to the Accounts department for making necessary journal entries at the end of the year. The Supreme Court in the case of Mohini Jain (Miss) vls. State of Karnataka and Others (1992) 2 SCC

666 considered the issue of capitation fee collected by the private educational institutions. It held that Capitation fee is nothing but a price for selling education. The concept of teaching shops is contrary to the constitutional scheme and is wholly abhorrent to the Indian culture and heritage. Some of the State Legislatures passed legislation prohibiting the collection of capitation fee and also made the same as a punishable offence. The Supreme

Court in the case of Islamic Academy of Education and Another v/s. State of

www.taxguru.in :- 111 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Karnataka and Anr. (2003) 6 SCC 697 directed all the State

Governments to constitute a Committee headed by a Hon'ble retired

High Court judge for prescribing fee structure for professional colleges.

The Supreme Court further held that if any amount is charged other than the fee prescribed by the Committee under any head or guise, the same would amount to capitation fee. Therefore, collection of money over and above the fee prescribed by the committee would amount to collection of capitation fee which is contrary to the Constitutional scheme and prohibited by State enactments. As the decision of the Supreme Court is Law of the Land, any act in contravention to the above would be against Public Policy and no Trust deed can authorize an act which is against Constitutional

Scheme or against Public Policy. The seized materials in the case of

SPRECT read in conjunction with statements recorded from the

Managing Trustee Shri.P.Murugesan, Shri K.Devasenathipathy,

Incharge of New Admission & Collection of Capitation Shri R.

Prabhakaran Samdass, Accounts Officer and Internal Auditor of

"SPRECT" establishes the following:

42.2 The money collected in cash as capitation fee is handed over regularly to the Managing Trustee, Shri P.Murugesan. The managing trustee then accumulates the money and spends the same for

www.taxguru.in :- 112 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. acquisition of assets. There are no documents regarding transfer of money from SPRECT to the managing trustee. No receipts are issued against capitation fee collected in cash. During the course of Search proceedings, documents have been found & seized which stands as concrete evidence regarding collection of capitation fee in cash and subsequently transfer of the same in the form of regular statements prepared by the college authorities. Thus, at any given point of time, the managing trustee will have the handful of money of the trust for expenditure/investments. The above evidences go to prove that the managing trustee, P,Murugesan receives regular money collected as capitation fee. On verification of the documents for the period relevant to AY 2006-07, F1,08,59,950/-, has been collected by the trust as capitation fee and passed on to Shri P.Murugesan, the managing trustee of the SPRECT.

42.3 The assessee was requested to offer his comments as to why such capitation fees collected by him should not be treated as his income. The assessee vide letter dt. 21.11.2012 stated that SPRECT is maintaining regular books of accounts and the Corpus Donation is duly accounted for. As discussed in the above para and the detailed analysis made in the assessment of SPRECT it is quite clear that no proper books were maintained for collection of such Capitation fees in

www.taxguru.in :- 113 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. cash. It was seen from the details filed in the returns for assessment years 2001-02 to 2007-08 that the assessee has claimed corpus donations as detailed below:-

Assessment Yea rs Corpus donation (Rs.) 2001-02 14,62,000 2002-03 81,34,975 2003-04 21,91,000 2004-05 23,21,000 2005-06 21,75,000 2006-07 1,09,00,000 2007-08 2,95,03,750

From the above table it is very clear that the capitation fees collected in the previous years' relevant to A.Y. 2001-02 to 2005-06 were grossly under reported. For the A.Y.s 2006-07 and 2007-08, the returns were filed only after the Search and there is no claim of

'corpus donations' made in the computation of income u/s 11 of the IT

Act, but they were reflected in the Receipts and Payments accounts.

But materials seized at the time of search on 5.10.2006 vide Annexure

KT/IMP/LS-.7 and Annexure KT/IMP/LS-13(Daily Admission reports) and other materials collected during post Search enquiries indicated collection of capitation fees in cash to the extent of F1,08,89,950/- for

2006-07 and F3,01,86,771/- for A.Y.2007-08. It was also very evident

www.taxguru.in :- 114 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. that the capitation fees were correctly reported only because of the survey and search operations. Therefore, but for the survey and search operation, Sri. P. Murugesan would have continued to misuse his office as Managing Trustee of the Trust SPRECT and not only collect illegal Capitation fees but also under report the collection of and use the same for his personal purposes. Therefore, such illegal capitation fees collected is to be assessed in the hands of Sri. P.

Murugesan. On verification of the documents for the period relevant to assessment years 2001-02 to 2007-2008 has been collected by the trust as capitation fee (vide Ann/MR/B&D/S page 7-16 dt.11/12/06) shows that out of this total fee collected in cash of Rs.3,19,56,172/- includes Rs.1,76,940/- drawn from bank. Hence, F3,01,86,771/- has been held as cash received on account of capitation fee and has been passed on to Shri P.Murugesan, the managing trustee of the SPRECT.

Hence, F3,01,86,771/- has been treated as unexplained money and added to the total income of the assessee for the period relevant to

A.Y.2007-08. This income is assessed in the hands of the trust SPRECT substantively. Therefore, it is assessed in the hands of the individual protectively. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) reversed the the order of the Assessing Officer on this

www.taxguru.in :- 115 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. issue. Against this, the Department is in appeal before us.

42.4 We have heard both the sides and perused the material available on record. As discussed in para 40.3 of this order in ITA

No.2036/Mds/2013, this ground is dismissed.

43. The next ground raised by the department is that the

Commissioner of Income Tax (Appeals) has erred in deleting the

addition on account of cash seizure of F1 crore at Airport as he had

confirmed such additions in the hands of the trust, Sri Ponnaiah

Ramjayathammal Educational & Chairtble Trust even though the

Trust has not accepted such addition and the matter has not attained

finality in the hands of the Trust.

43.1 The facts of the issue are that based on the information

received from AIU, New Delhi, Shri. P. Murugesan, Chairman, SPRECT

was intercepted at Chennai Airport while alighting lC 540. F1 crore in

cash has been recovered from Shri

P.Murugesan. Shri P.Murugesan in his sworn statement recorded u/s

131 on 5/111/06 could not explain the sources for the same. He gave

contradictory replies in the statement. Finally, he has admitted that

www.taxguru.in :- 116 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the cash amounting to F1 crore was unaccounted. While answering to

Q.No.77 & 78 says that the entire cash is unaccounted and agrees to pay tax on F1 crore. In response to Notice u/s 142(1) dated 31-10-

2012 seeking explanations for sources for the cash of F1 crore found at airport on 5.11.2006, the AR replied that "the source for which cash seized was reflected in the Books of SPRECT, for which accounts copy is enclosed". Purchase advance ledger account of SPRECT is enclosed. In this account, on 1.11.2006, a debit entry has been made to corpus donation account, corpus donation accounted

F1,12,30,000/-. Then on 28.11.2006, an amount of F1 crore is credited by Income-tax deposit being the amount seized by the

Income-tax Department at Chennai airport. During the search, it was noticed that there were no accounts written for corpus donation. The

Assessing Officer in the case of SPRECT, in the set aside assessment completed on 31.12.2010 has discussed the issue at length and has come to the conclusion that the money of F1 crore seized from Shri

P.Murugesan is not satisfactorily explained in the hands of the trust

SPRECT. Hence, the amount of F 1 crore, seized from the Airport has been treated as unaccounted income of Shri P.Murugesan and has been added to the total income of assessee for the period relevant to A.Y.2007-08. This income is assessed in the hands of the

www.taxguru.in :- 117 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. trust SPRECT substantively. Therefore, it is assessed in the hands of

the individual protectively. Aggrieved, the assessee preferred an

appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) allowed the appeal of the

assessee . Against this, the Department is in appeal before us.

43.2 We have heard both the sides and perused the material

available on record. As far as addition of F1,00,00,000/- seized

from the assessee at Chennai Airport is concerned, the assessee in

his statement recorded on 5.11.2006 stated that it was his

unaccounted income and he will pay tax thereon. Later on, the

assessee has retracted his earlier statement on 27.11.2006 stating

that the money seized belongs to the trust SPRECT. Since the

same amount has been added in the case of the trust

substantively as the unaccounted income of the trust based on the

statement given by the assessee and the same is confirmed in the

hands of the trust and to that extent relief is given to the assessee.

Hence, this ground of the appeal of the department is rejected.

In the result, the appeal of the Revenue in ITA No.2037/Mds/2013 is dismissed.

www.taxguru.in :- 118 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

43.3 The assessee has filed stay petitions Nos. 368 to 373/Mds/2015

seeking stay of outstanding disputed demand of tax. Since, we

have disposed off all the appeals of the assessee herein,

the stay petitions are dismissed as infructuous.

Sri Ponnaiyah Ramajayathammal Educational and Charitable Trust. ITA Nos.1884 to1890/Mds/2013, assessment years 2001-02 to 2007-08 (Assessee appeals).

44. These seven appeals are filed by the assessee directed against

the common order of the Commissioner of Income Tax (Appeals),

Tiruchirapalli, dated 08.08.2013. Since the issues in these appeals

are common in nature, these appeals are clubbed, heard together, and

disposed of by this common order for the sake of convenience

45. The first ground 1(a) and 1(b) raised by the assessee is general

in nature, which does not require any adjudication.

46. The second common ground raised by the assessee in these

appeals is that the order passed by the Assessing Officer and

www.taxguru.in :- 119 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. confirmed by the Commissioner of Income Tax (Appeals) suffered from violation of principles of nature justice.

46.1. The facts of the issue are that the assessee Trust Sri Ponnaiah

Ramajayathammal Educational & Charitable Trust (hereinafter in short

SPRECT), Thanjavur was created through a Trust deed dated

18.08.1989 (Document No.153/1989 - Registered before the Joint

Registrar-Il, Thanjavur). The founder of the Trust is Shri P. Murugesan,

S/o Ponnaiah, aged 33 years at that time. The founder Trustee appointed himself as Managing Trustee and also appointed six other trustees. At the time of inception, the total number of trustees are seven. The Main objects of the trust are: 1) To spread higher technical, engineering, medical and business education in the industrially backward Taluks or Districts of Tamilnadu, 2) To create necessary and adequate technical and engineering skill in the youths

01 the country and 3) To serve the younger generations of this country by means of education in general or industrial, technical vocational, professional, management, medicine either by way of residential courses or correspondence courses. The trust deed was amended four times, viz., 230/1994 dt.12.8.1994, 445/1998, dt

9.10.1998, 498/1998 dt.16.11.1998 and 881/2004 dt. 9.11.2004.

www.taxguru.in :- 120 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Though the trust was created on 18.08.1989, it filed application for

Registration u/s. 12AA only on 11.9.1998 after a considerable delay of

8 years. The Commissioner of Income-tax, Tiruchirapalli granted registration u/s 12AA of the I.T.Act in C.No.6162-E(133)/98-99/TRY dt.

02.12.1998 w.e.f 11.09.1998. It was also mentioned in the order that registration does not automatically mean that its income will be exempt u/s 11 & 12 of the Act, which will be examined independently by the Assessing officer. Registration granted u/s. 12AA of the IT Act was cancelled by the Commissioner of Income-Tax, Central-II, Chennai vide his Proceedings in C.No.2860/I/08-09/C-II dated 30/03/2009 for reasons discussed in that order. Aggrieved by the cancellation of registration, the assessee trust filed an appeal before the Tribunal,

Chennai. The Tribunal in its order in ITA No. 647Mds/09 dt.

10.12.2009 while allowing the assessee's appeal, held vide para 10 at

Pages 10 and 11 as below:

In our considered opinion, the show cause notice issued in this case is not a valid show cause notice and deserves to be quashed. Even if various irregularities were found to have been committed by the Managing trustee, it is the duty of the Id. CIT to give show cause notice of specific proposed grounds to the assessee-trust and only after considering the explanation given by the trust he could have come to any conclusion based on the facts and law in those circumstances. But in this case, the show cause notice itself is vague and the Id. CIT has not even given proper opportunity of hearing to the assessee. Consequently, we quash the impugned show cause notice

www.taxguru.in :- 121 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. as well and restore the certificate granted u/s 12AA of the Act"

It is to be noted that this case the Assessing Officer completed the assessments for Assessment years 2001-02 to

2007-08 on 31.12.2008. Aggrieved against the assessments made by the Assessing Officer the assessee filed appeals before the then

Commissioner of Income-tax (Appeals), Trichy. The CIT(Appeals) vide orders in ITA Nos.483/08-09 to 489/08-09 dated 9.11.2009 confirmed the additions made. The assessee took up the matter before the

Tribunal. The Tribunal vide its orders in ITA Nos.1832 to

1838/Mds/2009 for Assessment Years 2001-02 to 2007-08 dated

11.2.2010 set aside the orders of the Assessing Officer and CIT(A), and remitted the matter back to the Assessing Officer for all the years for de novo consideration, after giving opportunity to the assessee to explain its returns and furnish all details. The Tribunal also observed:

"Needless to say that while framing the fresh assessments the Assessing officer will consider all the explanations furnished by the assessee, and proceed in accordance with Law. The legal issue of validity of assessment is kept open".

As per the directions of the Tribunal, Chennai, the Assessing Officer considered all the materials filed and discussed the same at appropriate places in the assessment order. After hearing the assessee

www.taxguru.in :- 122 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. trust, the Assessing Officer completed the assessments on 24.12.2010.

For all the assessment years, viz., 2001-02 to 2007-08 the assessee went in appeal before the Commissioner of Income Tax (Appeals) challenging that proper opportunity of hearing has not been given to assessee by the Assessing Officer.

46.2 The Commissioner of Income Tax (Appeals) observed that the cases being posted for hearing before the Assessing Officer as under:-

Notice issued on Hearing posted on Appellant appeared on 26.03.2010 12.4.2010 AR appeared 05.05.2010 AR appeared 20.05.2010 03.06.2010 Sought adjournment 28.05.2010 07.06.2010 AR appeared 07.06.2010 21.06.2010 AR appeared and adjourned to 05.07.2010 09.05.2010 13.08.2010 Sought adjournment to 20.08.2010 08.10.2010 13.10.2010 Sought adjournment vide letter dated 12.10.2010 13.10.2010 19.10.2010 AR appeared and adjourned to 28.10.2010 26.10.2010 28.10.2010 AR appeared 10.11.2010 15.11.2010 Details filed.

46.3 On verifying the dates of hearing from the assessment orders it

www.taxguru.in :- 123 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. is amply clear that the Assessing Officer has given sufficient number of opportunities of being heard to the assessee trust and the allegations made by the Authorised Representative of the assessee are not tenable and since the issues are commonly dealt, several opportunities of being heard have ne accorded to the assessee trust as well as to the

Managing Trustee whose cases are taken up simultaneously as a group concern. There is no truth in the allegations made by the Authorised

Representative of the assessee that the materials seized during the course of search u/s 132 as well as connected to such proceedings, a survey was also conducted u/s. 133A in the case of the assessee trust wherein huge incriminating materials were found and the same has been analysed by the Assessing Officer and proper assessments have been formed keeping in view of the materials seized/impounded.

Therefore, this ground of appeal of the assessee is rejected, confirming the additions made by the Assessing Officer. Against this, the assessee is in appeal before us.

46.4 We have heard both the sides and perused the material on record. In the assessment order, the Assessing Officer has clearly brought out the chronology of events, to conclude that the assessee has not co-operated in the assessment proceedings. Moreover, during

www.taxguru.in :- 124 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the appeal proceedings, the Commissioner of Income Tax (Appeals) had granted enough opportunity to the assessee to put forth his case.

Therefore there is no force in these grounds. Hence, we reject the ground of the appeal of the assessee.

47. The third ground raised by the assessee is that the assessment vitiated on account of lack of jurisdiction u/s.153A of the Act.

47.1 We have heard both the sides and perused the material available on record. The main contention of the assessee counsel is that there was no search in the assessee’s case and there was no material found during the course of search u/s.132 of the Act. The search took place in the case of Titan Educational Trust. Being so, the assessment was to be framed u/s.153C of the Act after recording statement. According to ld. Authorised Representative for assessee both the conditions to frame assessment either u/s.153A or 153C is not fulfilled. She relied on the judgment in the case of Smt. Rajkumari

Chandk vs. DCIT in T.C.A. No.2202/06, dated 29.04.2015 and in the case of Anjuga Chit Funds (P) Ltd vs. DCIT 113 TTJ 869. However, we find that there was search on 05.10.2006, and on 25.10.2006 at

Chennai Airport wherein F1 crore was seized by the department and

www.taxguru.in :- 125 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. also search was conducted on 26.11.2006. Being so, we are in full agreement with the findings of the Commissioner of Income Tax

(Appeals) with regarding to initiating proceedings u/s.153A of the Act.

This ground of the assessee is rejected.

48. The next ground raised by the assessee is with regard to rejection of claim of exemption u/s.11 of the Income Tax Act.

48.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the rejection of exemption claimed u/s 11 of the Act. He ought to have noted that all conditions set out for the claim of exemption have been satisfied by the Assessee in full. The Commissioner of Income-tax

(Appeals) erred in concluding that the Assessee Trust has not been maintaining proper books of accounts. It is reiterated that proper, full and complete books of accounts are maintained by the Assessee and all details called for by the lower authorities duly produced. The

Commissioner of Income-tax (Appeals) erred in stating that voluntary

Corpus donations received have not been accounted for by the assessee. The Commissioner of Income-tax (Appeals) further erred in stating that the Assessee has collected capitation fee which is wholly

www.taxguru.in :- 126 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. contrary to fact. The Corpus donations have been voluntarily made by students and third parties and are applied in full towards the objects of the Trust. Complete documentation has been maintained by the

Assessee in regard to the same. The Commissioner of Income-tax

(Appeals) erred in confirming the conclusion of the Assessing Officer that the donations received have not been applied by the Assessee for the purpose of fulfillment of its objects. The Assessee denies the statement of the Managing Trustees, Shri R. Prabakaran Samdoss and

Shri K. Devasenapathy to the effect that the donations received are not accounted for. This is wholly incorrect in so far as complete documentation is maintained in respect of the receipt of donations as well as utilization thereof for the purpose of its objects. The

Commissioner of Income-tax (Appeals) further erred in confirming the conclusion of the Assessing Officer that there has been diversion, by the Managing Trustee of funds received in the form of donations, for personal benefit. In fact substantial material has been produced before the lower authorities to substantiate the submissions that the

Managing Trustee has independent sources of income and no Trust funds have been diverted. The submissions made in this regard and the voluminous documentation produced have been wholly disregarded by the Commissioner of Income- tax (Appeals) while

www.taxguru.in :- 127 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. confirming the order of assessment. The Commissioner of Income-tax

(Appeals) erred in confirming the rejection of claim of exemption without passing a speaking order in this regard, but merely reiterating the conclusions of the Assessing Officer without even discussing the same in the light of the assessee's submissions and materials produced.

48.2. The ld. Departmental Representative relied on the orders of the lower authorities and also relied on the orders of Shri Digamar Jain

Naya Mandir vs. ACIT, 70 ITD 121 and Vodithala Education Society vs.

ACIT (Exemptions) 20 SOT 353.

48.3 We have heard both the parties and perused the material on record. We have gone through the issue regarding denial of exemption u/s.11 of the I.T. Act, wherein the lower authorities has elaborately discussed in their orders and given reasons for denial of exemption u/s 11 of the I.T. Act After considering the submissions of the Authorised Representative of the assessee, it is a fact that the assessee trust has not maintained proper books of accounts and has not accounted all the donations taken over and above the prescribed fee by the Govt. of Tamilnadu order for collection of fee towards

www.taxguru.in :- 128 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. professional colleges. Simply because a portion of corpus donations received is applied in the construction of building by the assessee trust exemption claimed u/s 11(1)(a), denied by the Assessing Officer is on valid grounds as the assessee has not accounted corpus donations received against the intent of the legislature. The reliance placed by the Assessing Officer in the case of Mohini Jain vs State of

Kamataka and Others (1992) 2 SCC 666 wherein it was held that capitation fees is nothing but a price for selling education. The concept of teaching shops is contrary to the constitutional scheme and is wholly abhorrent to the Indian culture and heritage. Several State legislatures passed legislation prohibiting the collection of capitation fee and also made the same as punishable offence. The Apex court in the case of Islamic Academy of Education and Another vs State of

Kamataka and another (2003) 6 SCC 697 wherein it was held that if any amount is charged other than the fee prescribed by a committee headed by a retired High Court judge, under any head or guise, the same would amount to capitation fee. Therefore, collection of money over and above the fee prescribed by the committee would amount to collection of capitation fee. The case laws mentioned supra are well founded to deny the exemption claimed by the assessee u/s 11 as the charging of donation over and above the prescribed fee is in violation

www.taxguru.in :- 129 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. of all trust provisions under the Act. The assessee cannot interpret the definition of corpus donations to suit his collection of donations under the guise of imparting education. It is not a charitable activity.

It is purely a business activity and therefore the assessee own decision of corpus donation for claiming exemption cannot be accepted u/s 215 of the I.T. Act. No donation accepted by the recipient trust from the parents of the students can never be a voluntary donation and the assessee trust cannot collect any donation especially from the parents of the students in the guise of corpus donation for the construction of buildings. The assessee trust has not issued receipts to the parents mentioning the full amount of donation received over and above the prescribed fee. Any donation received from donors has to be a purpose oriented and the donor has to specify the purpose for which donation is given or meant to be expended. In the absence of any such conditions Assessing Officer can always deny the exemption claimed u/s. 11. Forms and modes of investing/ depositing money (corpus donations) have to be specified as per the provision of section 11(5) of the I. T. Act. Apart from the above, voluntary contributions not received with a specific purpose towards corpus of the trust is clearly taxable u/s. 12 of the I.T. Act. Similarly, value of any medical or educational services received by a person

www.taxguru.in :- 130 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. referred to in section 13(3)( a ),(b ),( c) or (d) from a trust running a medical or educational institution free of cost or at concessional rate deemed as income of the trust. Similarly, enormous donations received by an educational institution run by a trust has to be taxed at 30% of the amount in excess of 5% of donations or F1 lakh as per the provision of section 115 BBC. It is a well settled law that registration uls 12AA does not necessarily entitle the assessee to get the income excluded, it only entitles the assessee to claim such exemption which otherwise could not be claimed. In the instant case the assessee trust could not prove that donors were able to give direction before or at the time of donation to corpus funds nor assessee was maintaining separate accounts for this purpose, the Assessing Officer is right in denying the exemption claimed U/S 12. Since the assessee trust is maintaining its own system of accounting receipts for the sake of its own convenience without maintaining proper books of accounts as was found in the form of collection of cash and DD and the seized material vide Anne No KT/IMP/LS-7 and KT/IMP/LS-13 which are evident for the collection of capitation fee in cash. The Managing Trustee P.

Murugesan himself admitted the same in his statement recorded on

25.11.2006 and 28.11.2006 and also on 01.12.2006 by stating that the corpus donations / capitation fees is not entered into the regular

www.taxguru.in :- 131 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. books of accounts as and when the same is received. He kept the amounts with him and only enters the books of accounts when required for expenditure such as construction work i.e., building etc, by passing a journal entry by bringing in unaccounted donations in the books of accounts only at the end of the year the asset created in the form of building is brought into balance sheet and left out capitation fees. if any, is accounted on the liability side of the balance sheet.

Because of accounting system followed by the Managing Trustee there is no way to deduct how much money collected, unaccounted is spent towards construction of building by the trustee. The lower authorities have clearly brought out in his assessment order regarding collection of donations which are unaccounted from the statements recorded from the Managing trustee as well as R.Prabakaran Samdoss, Accounts officer, Internal Auditor of the assessee trust and also from Shri

K.Devasenapathy, In-charge of new admissions who have confirmed that the donations are received and not accounted in the regular books of accounts. The Assessing Officer has also noted elaborate reasons for denying the exemption claimed u/s. 11 of the I.T. Act. Keeping in view of the substantial material found against the assessee trust for collecting donations from the students by misusing the provisions of the trust, the Assessing Officer has clearly established that the

www.taxguru.in :- 132 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Managing trustee diverting the cash received in the form of donations for his personal benefit and therefore justified in denying exemption

U/S 11 of the I. T. Act. Therefore, we reject this ground of the appeal filed by the assessee in confirming denial of exemption u/s. 11 of I.T.

Act.

49. The next ground raised by the assessee is with regard to corpus donation for the assessment years 2001-02 to 2007-2008.

49.1. The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the addition of an arbitrary percentage of 12% of gross receipts estimated by the Assessing Officer and added as income. The Commissioner of

Income-tax (Appeals) ought to have noted that the Assessee followed and established a methodical pattern in the accounting of receipts. This methodology captures all receipts and expenditures and projects a full and true picture of the income and the expenditure of the Assessee Trust. The Commissioner of Income-tax (Appeals) thus erred in stating that the money collected and spent towards construction cannot be detected. His resultant conclusion therefore, that the Assessee Trust has diverted funds for the personal use of the

www.taxguru.in :- 133 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Managing Trustee is based on assumptions and an incorrect understanding of the method of accounting followed by the assessee.

The Commissioner of Income-tax (Appeals) erred in confirming the estimation by the Assessing Officer of 12% of the gross receipts of corpus donations and bring to tax the difference between receipts and application of the corpus donations as income of the Assessee u/s.2(24) (iia) of the Act. He ought to have noted that the entire donations are towards corpus and are thus exempt u/s 11(1) (d) of the

Act. The Commissioner of Income-tax (Appeals) ought to have noted that the rationale of the judgment of the Madras High court in the case of Padanilam Welfare Trust, Chennai vs. Department of Income Tax

(324 ITR 44) is based on the facts of that particular case and cannot be applied in a wholly different factual and legal context. The

Commissioner of Income-tax (Appeals) erred in confirming the estimation of corpus donations @ 12% of the gross receipts and the treatment of the same as income u/s 2 (24) (iia) in respect of

Assessment Years 2001-02 to 2007-08.

49.2 The ld. Departmental Representative relied on the orders of the lower authorities.

www.taxguru.in :- 134 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 49.3 We have heard both the sides and perused the material on record. During the year i.e., 2001-02, corpus donations is shown at

F14,62,000/-. On verifying the details of donation receipts filed by the assessee trust would show only the name of the donor, date and amount on printed receipts in the name of the trust. The Authorised

Representative of the assessee stated that the above receipt pertains to voluntary donation. However, on analysing the above receipt No.

137 that donation is not voluntary as can be seen from the receipt issued by the trust and also it does not contain full address of the donor. This is the case with every receipt furnished by the Authorised

Representative of the assessee. There is no specific direction given by the donors as to how these donations are to be utilized by the trust.

Similarly for AY 2002-03, the trust claimed corpus donation of

F81,34,975/- as for computation of income for the purpose of section

11. But in the receipts and payments account and balance sheet only a sum of F31,09,974/- has been shown. There is no list of donors for receipt books produced. Similarly for

AY s 2003-04, 2004-05, 2005-06, the assessee trust furnished the list of donors indicating names, course, stream, year and amount of donation. On verifying the above list shows that every donor is a student admitted in some courses of the institutions run by the

www.taxguru.in :- 135 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. assessee trust. All the donors are only students / parents or relatives of the students. There is no outside donors who contributed to the corpus donation. The list clearly establishes close nexus between collection of donation and admissions of students thereby establishing a quid pro quo arrangement. These donations are from students and not voluntary and there is no specific direction from the donors for the utilization of this above said donations and hence the Assessing Officer has treated them as revenue receipts and are not eligible for benefit U/S 11(1)(d) /12(1) of the I. T. Act. During the course of search and survey operations, the assessee trust adopted its own system of accounting of receipts. It is observed that the course fees is collected in the form of Demand

Drafts and the capitation fees by way of cash. This can be seen from the seized material vide annexure No. KT/IMP/LS-7 and KT/IMP/LS-13 which are evidence for collection of capitation fees in cash.

This aspect has been endorsed by the Managing trustee in his statement recorded, who stated that the corpus donation / capitation fees are not entered into the regular books of accounts as and when they are received. These amounts are kept with him for the entire year and passes a journal entry at the end of the year for the amount spent in acquiring / constructing buildings on the asset side of

www.taxguru.in :- 136 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the balance sheet. And if any capitation fees left also is accounted in the liability side of the balance sheet. Because of this system of accounting followed by the assessee trust, nobody can detect how much money collected and spent towards construction of building by the assessee trust and how much money is collected in the form of corpus donation and spent. In the absence of proper accounting system the details of donation towards corpus fund submitted by the assessee trust cannot be relied upon since the same has not been properly accounted. The corpus fund collection brought into the books through a journal entry at the fag end of the year is also considerably less compared to the capitation fees collected as evidenced from the seized / impounded material.

Thus the trust has not disclosed actual rcceipts and such receipts are diverted for the personal use of the Managing Trustee. Keeping in view of the observations made, the corpus fees / capitation fees collected in cash for all the years from 2001-02 to 2007-08 have been estimated by the lower authorities at 12% of the gross receipts based on the corpus donations collected in cash admitted for the AY s. 2006-

07 and 2007-08 and accordingly cash component has been worked out at 12%. Thus the difference in corpus donations has been treated as income of the trust u/s 2(24)(iia). The lower authorities has worked

www.taxguru.in :- 137 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. out the corpus donation at 12% based on the ratio worked out by the

Madras High Court decision reported in 324 ITR 44 in the case of

Padanilam Welfare Trust Chennai vs Department of Income Tax. Thus, the corpus donations calculated by the lower authorities on the basis of the above citation for treating the same as income u/s. 2(24)(iia) for all the assessment orders i.e, AY 2001-02 to 2007-08 are hereby confirmed. This ground of the appeal of the assessee is rejected

50. The next ground raised by the assessee is with regard to estimation of capitation fees for the assessment years 2001-02 to

2006-2007.

50.1 The facts of the issue are that for the AY 01-02 the Assessing

Officer has estimated capitation fees at F 35,24,0961- as well as for other years upto 2005-06. For collection of capitation fees, the assessee trust has not kept proper records and the Managing Trustee has been indulging in diverting the capitation fee collected for his own benefit. The capitation fees collected has not been accounted and the amount is kept with the Managing Trustee. The Assessing Officer has calculated corpus donation estimated at 12% of gross receipt and the corpus donations admitted by the assessee trustee worked out the

www.taxguru.in :- 138 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. difference between col. 3 & 4 for the estimation of capitation fee right from 2001-02 to 2005-06. Whereas for AY 2006- 07 & 2007-08 the assessee came out with a disclosure of the corpus donation to the extent of materials found. For the AY 2006-07 & 07-08 the corpus donation collected in cash roughly works out to 10 % to 13% of the gross collection of tuition fees in the form of DD which are accounted and admitted. Based on the above analysis the Assessing Officer has worked out similar capitation fee collected in the form of DDs during the period relevant for the AY 2001-02 to 2005-06. Thus corpus donation of the trust has been estimated at 12% of the tuition fees and other fees collected. Thus capitation fees estimated for all these years by the Assessing Officer following the judgment in Padanilam

Welfare Trust vs Income tax department (Madras High Court) reported in 324 ITR 44 and treated the same as income u/s 2(24)(iia) and rejecting the grounds of appeal raised by the assessee. Against this, the assessee is in appeal before us.

50.2. The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the estimation of the Assessing Officer of alleged capitation fees in respect of above assessment years. The Commissioner of Income-tax

www.taxguru.in :- 139 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. (Appeals) erred in alleging that the assessee trust has not kept proper records and that there is a diversion of funds to the Managing Trustee from the Trust.

50.3 The ld. Departmental Representative relied on the orders of the lower authorities.

50.4 We have heard both the sides and perused the material on record. We do not find any infirmity in the order of the Commissioner of Income Tax (Appeals). This ground of the appeal of the assessee is rejected as discussed in para 49.3 of this order.

51. The next ground raised by the assessee is with regard to capital expenditure for the assessment year 2001-02 to 2007-2008.

51.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the disallowance by the Assessing Officer of capital expenditure relating to AY 2001-02 and 2002-03 of an amount of F1,56,76,948/-.

The disallowance has been effected consequent to the denial of exemption u/s 11 as claimed. The exemption u/s 11 has itself been rejected on the basis of assumptions, presumptions and total

www.taxguru.in :- 140 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. misapplication of mind. In fact the assessee has produced voluminous material to substantiate its averment that there has been no diversion of funds and that the provisions of Sec. 13 (1) (c) (ii) r.w.s. 13 (2)

(a),13 (2) (g), 13 (2)(h) and 13 (3) (a) of the Act are wholly inapplicable. The rejection had been confirmed notwithstanding the specific submissions made by the assessee and evidence produced in that regard and is liable to be reversed.

51.2 The ld. Departmental Representative relied on the orders of the lower authorities.

51.3. We have heard both the sides and perused the material on record. The lower authorities have disallowed capital expenditure for the AY 2001-02 & 2002-03 at F1,56,76,948/- on the ground that the assessee trust has collected capitation fees for all the years from 2001-

02 to 2007-08 against the provisions of law thereby losing the benefit u/s. 11. The assessee trust diverted the funds of the trust towards deposits into personal accounts of the Managing Trustee Shri

P.Murugesan's individual bank accounts and used the trust funds for proprietary concern of the Managing Trustee i.e., PR & Sons and

www.taxguru.in :- 141 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Travel businesses. The exemption U/S 11 also was denied to the trust by the reason of diversion of funds U/S 13(l)(c)(ii) r.w.s. 13 (2)(a),

13(2)(g), 13(2) (h) and 13(3)(a) of the l.T. Act. As per the provisions section 13(2)(h) if any funds of the trust or institution are invested for any period during the previous year in any concern in which any person referred to in sub section 3 has a substantial interest including the Managing Trustee who manages the affairs of the trust. Thus the lower authorities have validly disallowed capital expenditure in all the

AY s under consideration for violation of trust provisions as well as diversion of funds and hence we confirm the disallowance and this ground of the appeal of the assessee is dismissed.

52. The next ground raised by the assessee is with regard to advertisement expenditure to tune of F2,99,697 for the AY 2001-02 and F2,84,090/- for the AY 2002-03 respectively.

52.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the order of assessment making a disallowance of an amount of F

2,99,697 (AY 2001-02) and F2,84,090/- (AY 2002-03). The disallowance has been effected by the Assessing Officer on the

www.taxguru.in :- 142 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. erroneous basis that no books of accounts have been made available in respect of the relevant assessment years. This is wholly incorrect in so far as the books had been specifically produced before the

Assessing Officer on 9.4.2010 and this fact had been confirmed before the Commissioner of Income-tax (Appeals) as well. The Commissioner of Income-tax (Appeals) erred in confirming the disallowance simply relying on the order of assessment and on the basis that the vouchers have not been produced for authentication of expenditure incurred. In fact no vouchers were sought from the assessee and if sought, could have been produced before the authorities.

52.2 The ld. Departmental Representative relied on the orders of the lower authorities.

52.3 We have heard both the sides and perused the material on record. The lower authorities has made an addition of F 2,99,697/- for AY 2001-02 and F2,84,090/- for AY 2002-03 for non production of books of accounts along with vouchers for advertisement expenditure even though the Authorised Representative of the assessee has defended the expenditure by stating that the books of accounts have been produced before the Assessing Officer. Since the vouchers have

www.taxguru.in :- 143 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. not been produced for authentication of advertisement expenditure the version of the Authorised Representative of the assessee are rejected and we confirm the addition made by the Commissioner of Income Tax

(Appeals) for both the assessment years 2001-02 and 2002-03. This ground of the appeal of the assessee is rejected.

53. The next ground raised by the assessee is with regard to function expenditure to the tune of F1,24,335/- for the assessment year 2001-2002.

53.1 The facts of the issue are that claim of function expenditure was disallowed at F1,24,335/- on account of non production of books of accounts and supportive evidence in the form of vouchers for verification of function expenditure. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) confirmed the order of the

Assessing Officer. Against this, the assessee is in appeal before us.

53.2 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in disallowing a sum of F1,24,335/- incurred in relation to various functions carried on at

www.taxguru.in :- 144 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the premises of the Trust. The Commissioner of Income-tax

(Appeals) erred in confirming the order of assessment making a disallowance of an amount of F2,99,697/-(AY 2001-02) and

F2,84,090/- (AY 2002-03). The disallowance had been effected by the

Assessing Officer on the erroneous basis that no books of accounts have been made available in respect of the relevant assessment years.

This was wholly incorrect in so far as the books had been specifically produced before the Assessing Officer on 9.4.2010 and this fact had been averred before the Commissioner of Income-tax (Appeals) as well. The Commissioner of Income-tax (Appeals) erred in confirming the disallowance simply relying on the order of assessment and on the basis that the vouchers have not been produced for authentication of expenditure incurred. In fact no vouchers were sought from the assessee.

53.3. The ld. Departmental Representative relied on the orders of the lower authorities.

53.4 We have heard both the parties and perused the material on record. The assessee failed to produce the books of accounts and supporting vouchers before the lower authorities. In the absence of

www.taxguru.in :- 145 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. this, we do not find any infirmity in the order of the Commissioner of

Income Tax (Appeals). This ground of the appeal of the assessee is dismissed.

54. The next ground raised by the assessee is with regard to loan creditors to the tune of F50,33,166/- and F19,00,000/- for the assessment years 2001-02 and 2002-2003 respectively.

54.1. The ld. Authorised Representative for assessee submitted

that the Commissioner of Income-tax (Appeals) erred in confirming the disallowance by the Assessing Authority of loan creditors of an amount of F50,33,166/- (AY 2001-02) and F19,00,000/- (AY 2002-03) treating the same as non-genuine. The Commissioner of Income-tax

(Appeals) ought to have noted that all details have been produced to establish genuineness of the creditors such as identity, address, capacity to lend and genuineness of the transactions Confirmation letters have been submitted before the lower authorities and in the light of satisfaction of all applicable parameters, the additions made in this regard are liable to be reversed.

www.taxguru.in :- 146 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 54.2 The ld. Departmental Representative relied on the orders of the lower authorities.

54.3 We have heard both the sides and perused the material available on record. The Authorised Representative of the assessee could not substantiate by submitting details of loan creditors and produce the proof of loan creditors of F.50,33,166/- for AY 2001-02 as well as an amount of F 19,00,000/-- for AY 2002- 03. The assessee trust could not furnish the details of identity of the creditor, capacity of the lenders and genuineness of transactions of loan creditors. The

Authorised Representative of the assessee in her submissions stated that the confirmation letters were submitted. There is no evidence on record to show that confirmation letters as well as other details as mentioned above have been furnished before the Assessing Officer.

The assessee has failed to prove the source of credit as well as identity of the creditors, capacity of creditors to advance money and genuineness of the transaction. Since the assessee trust failed to prove details of the loan creditors, we confirm the additions made by the lower authorities. This ground of the appeal of the assessee is rejected.

www.taxguru.in :- 147 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 55. The next ground raised by the assessee is with regard to special allowance to the tune of F3,39,819/- for the assessment year 2002-

2003.

55.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the disallowance of a sum of F3,39,819/- relating to special allowance extended to teaching staff. The vouchers and all supporting documents in this regard were never sought by the Assessing Officer. In any event, the authority ought to have noted that the special allowance is an expenditure directly connected to the running of the

Educational Institutions and is thus allowable.

55.2 The ld. Departmental Representative relied on the orders of the lower authorities.

55.3 We have heard both the sides and perused the material on record. The assessee trust has not furnished any supporting evidence claiming an expenditure of F3,39,819/- as special allowance which in terms of the Authorised Representative of the assessee payments made to teaching staff which is a routine expenditure in an educational

www.taxguru.in :- 148 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. institution. However he could not produce any voucher for the expenditure for special allowance over and above the salary paid to the teaching staff. Since no evidential value can be attributed to the assessee's version the expenditure claimed is disallowed and hence the same is confirmed. This ground of the appeal of the assessee is rejected.

56. The next ground raised by the assessee is with regard to

Singapore trip to the tune of F1,11,200/- for the assessment year

2004-05.

56.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the disallowance of expenditure incurred of an amount of F.1,11,200/- relating to a trip to Singapore on official work related to the

Educational Institutions. The same is thus liable to be allowed.

56.2 The ld. Departmental Representative relied on the orders of the lower authorities.

www.taxguru.in :- 149 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 56.3 We have heard both the parties and perused the material on record. As far as Singapore trip expenses claimed at F1,11,200/- the assessee has not provided any details and hence the foreign trip expenses are not related to trust activities and hence the same was disallowed being the personal expenditure of members of the trust.

Hence, we confirm the addition made by the lower authorities. This ground of the appeal of the assessee is rejected.

57. The next ground is with regard to College expenses to the tune

of F51,500/- for the assessment year 2004-05.

57.1 The ld. Authorised Representative for assessee submitted that

the Commissioner of Income Tax (Appeals) erred in confirming the

expenditure of a sum of F51,500/- relating to the Registration of land.

In so far as the expenditure in revenue in nature being related to

purchase of an asset, closely connected to the activity of the trust,

and the fulfillment of its objects, the same is allowable.

57.2 The ld. Departmental Representative relied on the orders of

the lower authorities.

www.taxguru.in :- 150 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 57.3. We have heard both the sides and perused the material

on record. As far as college expenses are concerned, the assessee

trust has claimed F51,500/- being land registration expenses which is

capital in nature and cannot be allowed as an expenditure. Hence,

the addition made by lower authorities is confirmed. This ground of

the appeal of the assessee is rejected.

58. The next ground raised by the assessee is with regard to grant in aid to the tune of F11,70,000/-, F75,000/-, F75,000/- and

F12,00,000/- for the assessment years 2004-05, 2005-06, 2006-07 and 2007-2008 respectively.

58.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the disallowance of grand in aid by the Government of Tamil Nadu,

Ministry of Human Resources Development for fulfilment of the objects of the Trust. The disallowance of a sum of F11 ,70,000/- (AY

2004-05), F75,000/- (AY 2005-06), F75,000/- (AY 2006-07) and

F12,00,000/- (AY 2007-08) is thus wholly incorrect in law and on facts.

The ld. AR further submitted that the Commissioner of Income-tax

(Appeals) ought to have seen that the grant had been given with the

www.taxguru.in :- 151 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. specific purpose of being utilized for the objects of the Trust and is thus allowable. The Commissioner of Income-tax (Appeals) ought to have noted that all details required in connection with the grant-in-aid have been furnished to the lower authorities. The disallowance has been effected consequent on the denial of exemption u/s 11 of the Act which is itself erroneous in law and contested. The disallowance are thus liable to be reversed and exemption u/s 11 granted.

58.2. The ld. Departmental Representative relied on the orders of the lower authorities.

58.3 We have heard both the sides and perused the material on record. The ld. Authorised Representative for assessee submitted that the grants in aid given by the government for self financing colleges, stating that this amount received from the Ministry of HRD for construction of work but the assessee has failed to submit details regarding the same. Moreover, the receipt of grants in aid becomes revenue in nature since the trust is not exempt u/s 11 and hence all the years from 2004-05 to 07-08 the respective amounts mentioned against each year are disallowed by the lower authorities are confirmed. This ground of the appeal of the assessee is rejected.

www.taxguru.in :- 152 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

59. The next ground raised by the assessee is with regard to unexplained cash credit to the tune of F18,00,000/- for the assessment year 2005-06.

59.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer bringing to tax a credit aggregating to a sum of F18,00,000/-. He ought to have noted that the disallowance was itself based on suspicions and surmises and is wholly erroneous in law. The amount had been advanced through normal banking channels and all parameters to establish the genuineness of the credits have been fulfilled such as name, identity of the creditors, credit worthiness and genuineness of the transactions. The credits are thus liable to be accepted as such. The disallowance are thus liable to be reversed.

59.2 The ld. Departmental Representative relied on the orders of the lower authorities.

www.taxguru.in :- 153 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 59.3 We have heard both the sides and perused the material on record. The issue is related to unproved cash credits in the books of the assessee trust. The assessee could not file any confirmation letters regarding cash credits for their genuinity. As the assessee failed to prove creditworthiness and capacity to lend as well as genuineness of the transaction. the claim of the assessee is rejected and the addition made by the lower authorities at F18,00,000/- against unexplained cash credit is confirmed. The Authorised Representative of the assessee in this regard has stated that these credits have been received through cheques only. However, without proving the genuineness of the credit, even mere proof of identity of creditor or the transaction by cheque is not sufficient. Hence the addition made by the lower authorities u/s. 68 for unproved credits is confirmed. This ground of the appeal of the assessee is rejected.

60. The next ground raised by the assessee is with regard to value of properties gifted to other charitable trust for the assessment year

2006-2007.

60.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the

www.taxguru.in :- 154 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. action of the Assessing Officer in treating the value of the properties gifted vide two Registered Deeds of Gift, as income. The gift has been made solely in fulfillment of the objects of the Assessee Trust to another Charitable Trust that is also engaged in activities of promotion of education. It is thus allowable as application of income. The

Commissioner of Income-tax (Appeals) ought to have accepted the submissions of the Assessee and not merely relied upon the averments in the order of assessment indicating that there has been no application of mind in arriving at his conclusion. The Commissioner of Income-tax (Appeals) ought to have noted that the gifts have been accepted as bonafide in the hands of the recipient by the Income-tax

Department. A contrary position cannot thus be adopted in the case of the Assessee and this is wholly contrary to law. The ld. Authorised

Representative for assessee relied in the order of the Tribunal Mumbai

Bench,in the case of DCIT vs. KDA Enterprises Pl. Ltd in ITA No.

2662/M/2013, dated 11.03.2015 and also gift tax Act.

60.2 The ld. Departmental Representative relied on the orders of the lower authorities and also submitted that in the absence of material to show to love and affection between donor and donee, the gift cannot

www.taxguru.in :- 155 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. be considered as valid gift. He relied on the judgement of the Supreme

Court in the case of Sonia Bhatia vs. State of U.P. 2 SCC 585.

60.3 We have heard both the sides and perused the material on record. The assessee trust gifted three educational institutions at

Natham to M/s. TET by way of gift deeds. The details of property transferred vide gift deed document No. 2023/2005 dated 28.12.2005 by transferring land measuring 7.46 acres in Natham Taluk (ii) land measuring 3.875 hectares i.e. 9.57 acres (iii) land measuring 3.34 acres having market value of F6,45,7501-, (iv) Gift deed vide document No.78/2006 dated 19.01.2006, 3 educational institutions functioning at Uluppakudi village namely,

1. PR college of Arts and Science 2. Natham PR College of education 3. Natham PR college of Training Institute

The market value of the property mentioned in the gift deed around

F1,06,00,000/- and the value fixed by stamp duty authority was F

1,29,32,524/-. All the properties valued by the valuer Mls.

Arulmurugan designs, Dindigul dated 12.01.2006 was at

F1,82,00,0001-. The value of the said assets in receipts and payment account filed show the entry "By assets transferred to TITAN at F

www.taxguru.in :- 156 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 1,52,52,410.75". In the assessment order the Assessing Officer held that the assessee trust by act of gift has not applied its funds or properties for the purpose for which it was established and hence not entitled to exemption u/s. 11 of the I. T. Act. Since the assessee trust through its Managing Trustee has gifted 1.82 crores worth of properties whose assets were created out of the accumulated funds of the assessee trust, it was observed that the Managing Trustee was not authorised by the trust deed to make gift of its assets. Simply the assessee trust on account of operational difficulties and administrative reasons gifted properties worth 1.82 crores to a new trust which came into existence from 1.10.2005 onwards, We are of the opinion that the lower authorities are justified in treating the gift amount of F1.82 crores as income of the assessee and added to the total income of the assessee trust for the year under consideration.

Accordingly, this ground of the appeal of the assessee is rejected.

61. The next ground raised by the assessee is with regard to cash

seized at airport to the tune of F1,00,00,000/- for the assessment

year 2007-2008.

www.taxguru.in :- 157 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 61.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the addition of an amount of F.1,00,00,000/- as unaccounted income of the assessee. The Commissioner of Income-tax (Appeals) ought to have taken into account the detailed explanation furnished by the

Assessee that the amount of F1,00,00,000/- had been duly recorded in the books of accounts of the Trust and had been withdrawn from the

Trust account for the specific purpose of purchase of Guest House in

New Delhi. The amount had been declared to the Airport authorities by the Managing Trustee prior to travel. The detailed explanation by the Managing Trustee in this regard has been wholly ignored by the lower authorities. The Assessing Authority had made the disallowance based on assumptions and wild imagination and this has been arbitrarily confirmed by the Commissioner of Income-tax (Appeals) without application of mind.

61.2. The ld. Departmental Representative relied on the orders of the lower authorities.

61.3 We have hard both the sides and perused the material on record. An amount of F 1 crore was seized from Shri P.Murugesan,

www.taxguru.in :- 158 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Chairman and Managing Trustee of the assessee trust at Chennai

Airport on 25.11.2006. The assessee in his reply to the statement recorded u/s. 131 & 132 on 25.11.2006 could not explain the source of the cash seized from him. The Managing Trustee of the assessee trust narrated the transaction that the money is withdrawn from the trust account to purchase a Guest House in New Delhi in East Patel

Nagar, New Delhi. Since the transaction did not take place he was returning back with the money. The Managing trustee has no reply for the query that the money has been withdrawn from North Indian banks, in places like Ajmer and Delhi, he initially told that the money is taken from the trust, Thanjavur. All the bundles of cash bearing bank seals from North Indian branches much against the version narrated by the Managing Trustee that this cash belongs to the assessee trust.

No credence can be attributed to the version of the Managing Trustee that small denominations have been carried from Thanjavur and got converted into bigger denominations also not supported by any evidence. Apart from the above, it was not physically possible to transfer small denominations of money worth F1 crore from Thanjavur to Delhi and bring back. It has been amply proved beyond doubt by the department that the assessee trust is not having proper accounts maintained such as regular books of accounts under

www.taxguru.in :- 159 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the head corpus fund account. The cash book does not reflect the receipt of any cash by way of donations from the corpus account.

Apart from regular books of accounts of the assessee trust the

Managing Trustee maintained his own separate sheet at his disposal for all the capitation fees and other donations received during the year and at the fag end of the year some convenient amount is reported to accounts department and the same is brought into accounts. On the date of seizure of F1 crore cash from the Managing Trustee, the books of accounts of the trust do not reflect any bearings in trust cash book.

There are no entries made in the corpus fund account as well as no sufficient withdrawals from the bank account belonging to SPRECT in

Thanjavur district. Thus the Managing Trustee manipulated the accounts and subsequently shown after the audit for the year ending

31.03.2007 made an entry as on 1.11.2006 that corpus donation account is shown at F1,12,30,000/-. On 28.11.2006 amount shown as credit is F 1 crore being the amount seized by IT department. The account copy is prepared after audit of SPRECT books in 2007. It is not backed by any primary evidence for the debiting of F1,12,30,000/- on a single day. Hence, we are in agreement with the Assessing Officer's observation that no credence can be given to this journal entry which is prepared only after the search to suit the needs of the assessee

www.taxguru.in :- 160 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. trust to explain away F 1 crore seized at Chennai Airport. As per the copy of the CD seized the cash balance available as on 23.11.2006 is only F16,456.75. Declaration on money at Delhi Airport would not tantamount to say that the money is accounted for. There was no proper reply from the Authorised Representative of the assessee that cash balance of all the institutes put together as on 5.10.2006 and

23.11.2006 are at F 14,09,198.32 and F14,23,434.82 respectively.

When the cash balance as on 23.11.2006 is F14,23,434.82 how could the managing trustee carry one crore amount of cash seized at Airport and he has accounted for in the trust subsequently by manipulating computerized disc figures. However, there was no reply from the

Authorised Representative of the assessee. Since the amount is unaccounted the managing trustee could not substantiate the carrying of the cash. It was amply clear that the managing trustee taking the money of the trust without accounting the same which is a clear violation of the provisions of the trust and also diversion of the funds for the benefit of managing trustee thereby violating the provisions u/s

13(1)(c)(ii) leading to the denial of exemption u/s 11 of the Act.

Therefore the addition made by the lower authorities at F1 crore as unaccounted cash in terms of the assessee trust is confirmed. This ground of the appeal of the assessee is rejected.

www.taxguru.in :- 161 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

62. The next ground raised by the assessee is with regard to miscellaneous expenses to the tune of F91,71,078/- for the assessment year 2007-2008.

62.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the disallowance of a sum of F91,71,078/- in respect of various miscellaneous expenses incurred in the running of the Trust and the fulfillment of the Trust's objects. The Commissioner of Income-tax

(Appeals) ought to have noted that complete details of expenditure incurred, including ledger account and vouchers, have been produced before the lower authorities. A specific confirmation has been furnished before the Commissioner of Income-tax (Appeals) in this regard who merely ignores the same in confirming the disallowance.

62.2 The ld. Departmental Representative relied on the orders of the lower authorities.

62.3 We have heard both the sides and perused the material on record. The Authorised Representative of the assessee who in this

www.taxguru.in :- 162 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. grounds of appeal stated simply that the lower authorities erred in disallowing a sum of F91,71,078/- out of the miscellaneous expenses claimed. The assessee has not furnished details of miscellaneous expenses during the course of assessment proceedings. Ledger account as well as vouchers furnished by the assessee trust is only to the extent of F 94,432/-. Hence the lower authorities has disallowed an amount of F91,71,078/- out of the total claim of miscellaneous expenditure claimed by the appellant at F 92,55,510/--.

Since the lower authorities has allowed to the extent of vouchers produced there cannot be any grievance for disallowing the balance amount on account of non furnishing of vouchers as well as ledger extract from the expenses said to have incurred by the assessee trust.

Therefore, we reject this ground of the appeal of the assessee and confirm the addition made by the lower authorities at F91,71,078/-.

63. The next ground raised by the assessee is with regard to travelling expenses to the tune of F16,01,125/- for the assessment year 2007-2008.

63.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the

www.taxguru.in :- 163 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. disallowance of a sum of F16,01,125/- of expenditure incurred on travel in the course of fulfillment of the objects of the Trust. The

Commissioner of Income-tax (Appeals) ought to have noted that complete details of expenditure incurred, including ledger account and vouchers, have been produced before the lower authorities. A specific confirmation has been furnished before the Commissioner of Income- tax (Appeals) in this regard who merely ignores the same in confirming the disallowance.

63.2 The ld. Departmental Representative relied on the orders of the lower authorities.

63.3 We have heard both the sides and perused the material on record. The ld. Authorised Representative for assessee who in this ground of appeal stated simply that the lower authorities erred in disallowing a sum of F16,01,125/- out of the travelling expenses claimed. The assessee has not furnished details of travelling expenses during the course of assessment proceedings. Ledger account as well as vouchers furnished by the assessee trust is only to the extent of

F11,03,504.50. Hence the lower authorities has disallowed an amount of F16,01,125/- out of the total claim of travelling expenditure claimed by the assessee at F27,04,629/- . Since the lower authorities has

www.taxguru.in :- 164 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. allowed to the extent of vouchers produced there cannot be any grievance for disallowing the balance amount on account of non furnishing of vouchers as well as ledger extract from the expenses said to have incurred by the assessee trust. Therefore, we reject this ground of the appeal of the assessee and confirm the addition made by the lower authorities Assessing Officer at F16,01,125/-

64. The next ground raised by the assessee is with regard to interest on loan to the tune of F44,04,327/- for the assessment year 2007-

2008.

64.1 The ld. Authorised Representative for assessee submitted that

The Commissioner of Income-tax (Appeals) erred in confirming the disallowance of an amount of F44,04,327/- being interest paid to bank. The Commissioner of Income-tax (Appeals) ought to have noted that full particulars and explanations have been furnished in this regard, whereas the disallowance has been made and confirmed merely on assumptions and presumptions. The Commissioner of

Income-tax (Appeals) adopted the erroneous view that the interest paid relates to an entity by the name and style of PRIST and thus cannot be claimed by the assessee. This is factually incorrect in so far

www.taxguru.in :- 165 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. as it has been specifically confirmed that the payment of interest relates to a loan availed of by the assessee. The disallowance is thus liable to be reversed. The Commissioner of Income-tax (Appeals) erred in concluding the transaction would attract the provisions of

Sec. 13 (1) (c) (ii) r.w.s. 13 (3) (e) of the Act, on the erroneous understanding that PRIST, an entity falling within the purview of Sec.

13 (3) (e) of the Act has utilized funds belonging to the assessee. All averments in this regard are factually incorrect and the consequent conclusion therefore is wholly bad in law.

64.2 The ld. Departmental Representative relied on the orders of the lower authorities.

64.3 We have heard both the sides and perused the material on record. As far as interest disallowed by the Assessing Officer at

₹44,04,327/- is concerned, the assessee trust has given ₹ 5 crores deposit in the name of PRIST by raising a loan to make the deposit.

The funds were deposited with the SPRECT by the assessee trust sourcing from its own term loan. Wherein the assessee trust has availed term loan of ₹ 5 crores and made a deposit in the name of

PRIST. As PRIST is a separate entity, the loan could have been taken

www.taxguru.in :- 166 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. on 25.11.2004 in the name of PRIST itself instead of making the assessee trust as a medium for getting the loan. It was observed from the return filed by the assessee trust for the AY 2007-08 that the assessee trust claimed bank charges of ₹ 1,25,57,885/-. No details for this interest payment were furnished. In its reply the assessee trust has mentioned that the interest arising out of deposit of ₹5 crores in the name of PRIST had been offered in the hands of SPRECT. Thus it can be inferred that the payment of ₹44,04,327/- is included in the bank charges of the schedule-9 to Income and expenditure statement.

The interest payment on the loan does not relate to SPRECT but it pertains to PRIST. Hence the lower authorities disallowed the interest paid on behalf of PRIST in the hands of assessee trust and added to the income in the year under consideration i.e, for AY 2007-08 since the Managing Trustee for both trusts being the same and all the trustees except one are the same family members of Shri P

.Murugesan. Even though PRIST is a separate entity which falls under section 13(3) (e) of the I.T. Act, as the funds of SPRECT are utilized for PRIST, these transactions is hit by the provisions of sec

13(1)(c)(ii) r.w.s 13(3)(e) of the I.T. Act thereby the assessee trust loosing the exemption u/s. 11 for the assessment year under consideration. Thus interest paid by the assessee trust on the term loan taken out of its own funds and deposited in the name of PRIST at

www.taxguru.in :- 167 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. ₹44,04,327/-, we hereby reject the ground of the appeal of the assessee.

65. The last ground raised by the assessee in this appeal is with regard to interest on rent advance to the tune of F4,60,544/- for the assessment year 2007-2008.

65.1 The ld. Authorised Representative for assessee submitted that the Commissioner of Income-tax (Appeals) erred in confirming the addition of a sum of F4,60,544/- being interest @ 13.75% on a sum of F2.5 Crores being the rental advance paid by the assessee for a property rented to the assessee. The Commissioner of Income-tax

(Appeals) ought to have noted that it was a genuine transaction and charging of Interest on Rent advance paid is not prevalent anywhere.

65.2 The ld. Departmental Representative relied on the orders of the lower authorities.

65.3 We have heard both the sides and perused the material on record. The assessee trust has raised a loan of ₹2.5 crores to pay a rent advance of ₹3 crores to the Managing trustee. Hence the lower authorities has disallowed the interest at 13.75% which works out to

www.taxguru.in :- 168 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. ₹4,60,544/- and added to the income of the assessee trust and we do not find any infirmity in the orders of the lower authorities. This ground of the appeal of the assessee is rejected.

65.4 In the result, the appeals of the assessee in ITA Nos.1884 to

1890/Mds/2013 are dismissed.

65.5 The assessee has filed stay petitions Nos.361 to 367/Mds/2015 seeking stay of outstanding disputed demand of tax. Since we have disposed off all the appeals of the assessee herein, the stay petitions are dismissed as infructuous.

Shri. R. Viswanathan :- ITA No.462/Mds/2011, assessment year 2006-

2007 (Revenue’s appeal)

66. This appeal by the department is directed against the order of

Commissioner of Income Tax (Appeals), Tiruchirapalli, dated

16.12.2010 for the assessment year 2006-2007.

66.1 The facts of the case are that a search under sec. 132 of the

Act was conducted on 23-08-2006 at his Natham Residence. The

www.taxguru.in :- 169 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Chennai residence of Shri R Viswanathan's son Sri V. Amarnath was also covered under sec. 132. Pursuant to the above searches, the

Assessing Officer initiated proceedings under sec. 153A and completed the assessments for AYs 2001.02 to 2006-07 and the scrutiny assessment for AY 2007-08 (year of search) on 30-12-2008. The present appeal is relating to assessment year 2006-07.

66.2 In the assessment of the assessee for the year under consideration, the A.O. had come to a finding that the assessee is the

'beneficial owner' of the income / assets of Titan Educational Trust

(TET, in short). According to the A.O., the assessee had invested his unaccounted income in the Trust/colleges run by the Trust. The assessee has utilized the beneficial provisions of the Tax Law on the

Trusts and acquired the educational institutions belong to other trust for a consideration. Therefore, the trust is a conduit to acquire the assets. " TET was constituted as a Public Charitable trust as per deed dated 1-10-2005 registered as Document No. 1609 of 2005 in the office of the Sub Registrar, Thiagaraya Nagar, Chennai - 17. Sri P.

Janakar was the author of the Trust as also the Managing Trustee. Sri

R. Mohan Kumar, Coimbatore is the other Trustee. As per Deed of

Amendment dated 03-01-2006 registered as Doe. No. 605 of 2006,

www.taxguru.in :- 170 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. certain amendments relating to "Objects" were carried out. The

'objects' of the trust were charitable in nature, mostly in the field of education, medical services and service to the poor. The Trust made an application under sec. 12A(a) and was granted registration under sec. 12AA(l) of the Income tax Act, 1961 by the DIT (Exemptions),

Chennai, as per orders dated 18-07-2006.

66.3 The issue of genuineness of the Titan Educational Trust and its activities in running the NPR group of educational institutions at

Natham were considered by Commissioner of Income Tax (Appeals) in the appeal filed by the Trust. After a detailed discussion, it was held that the Trust is genuine and the findings of the A.O. in this regard are not based on evidence on that case, the findings of the

Commissioner of Income Tax (Appeals) for AY 2006-07 are extracted below:-

6.1. Benami ownership of assets of the Trust:-- In the assessment order, the A.O. has given a finding that it is Shri R. Viswanathan, who is the person behind the trust and also enjoying the income of the trust. In this connection, the Assessing Officer had discussed the basis on which he came to such a conclusion. In its written submissions dt. 10-02-2010, the assessee had stated its defense and vehemently argued that the conclusion of the A.O.. is without any basis or rationale and stated its case elaborately as under:-

www.taxguru.in :- 171 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

5.1 In para 6.2.1 of the assessment order, the Assessing Officer observed thus: " .. . in his sworn statement which was recorded from shri Janakar on 05-10-2006 had admitted that he had been associated with Sri R. Viswanathan for a long time and both of them are close friends and hails from near by villages. In other words, both Sri Viswanathan and Sri Janakar are close friends by way of their common place, blood affiliation and community mores" (sic). We wish to state that except for the fact that Sri Janakar and Sri R. Viswanathan belong to the same district and mutually know each other; there is no other personal or business relationship between them. We do not understand what the learned Assessing Officer is trying to infer while saying "common place, blood affiliation and community mores". The dictionary meaning of the word 'mores' is customs, usages, conventions, regarded as essential to a social group. The leaned Assessing Officer is factually incorrect that the two have 'blood affiliation '. As a matter of tact; they belong to different Hindu communities. Even assuming for the sake of argument that they have mutually known each other and that they both belong to the same place / district; is it fair, correct, proper, not illogical and above all legally sustainable to allege that one is the 'benami' of the other? There may be thousands of such persons known to Sri R. Viswanathan and if so, is it correct for the learned Assessing Officer to raise such a unfounded allegation or presumption? Suffice it to say, your assessee submits, that the learned Assessing Officer is certainly not correct; particularly in the context of proceedings under the Income tax Act 1961.

5.2. In the same paragraph, The leaned Assessing Officer had observed as under: "... . …………….. Therefore, the constitution of trust itself is not genuine as one of the trustee is a name lender. Sri Mohan kumar not only not signed the trust deed but also never participated in any of the activities of the trust and therefore, the trust was left with single trustee. Hence, these events indicate enough that there is a

www.taxguru.in :- 172 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. ulterior motive behind initiation of the trust itself': We wish to state that Sri Mohan Kumar did not sign anywhere in the Trust Deed or the Amendment deed, for the simple reason that only the signature of the Author/Managing Trustee was required and not that of the other trustee under the Registration Act Rules. The Commissioner of Income Tax (Appeals) wish to state that the involvement of Sri R. Mohan Kumar in the affairs of our Trust can be easily proved with reference to the records of our Trust like Minutes Book, Loan Papers, Bank Accounts, Forming new institutions, New proposals etc. and, therefore, the learned Assessing Officer 's inference that Sri Mohan Kumar is merely a name lender is not correct In this connection, The Commissioner of Income Tax (Appeals) wish to state, with all the emphasis at our command, that the learned C1T (A) may please summon Sri Mohan Kumar for examination. The postal address of Sri R. Mohan Kumar is s/o Sri Ranganathan,,c/o. Vijaya Prabha Oills, Ganapathy P. O. Coimbatore.

5.3 In the assessment order; the learned Assessing Officer has recorded a finding that ''Sri Sivakumar is the Manager of the Trust and not Sri Janakar". In this connection, we wish to place the facts for the consideration of the CIT (A). Sri R. Meganathan is the elder brother of Sri R. Viswanathan and Sri M. Sivskumsr; s/o Sri Meganathan is working as the Administrative Officer of the NPR Group of colleges. We wish to state that when Sri Ponniah Ramajayathammal Education and Charitable Trust (SPRECT; in short) mooted the idea of starting educational institutions at Natham, Sri Meganathan and Sivakumar were in the forefront to request the land owners of that area to come forward to transfer / sell their lands to the Trust; besides, the duo also came forward to sell a major part of their own family lands - the lands acquired by the Trust for college purposes from the duo is approximately 10 acres, which should indicate their involvement in starting a good venture - a group of

www.taxguru.in :- 173 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. educational institutions at a remote place like Natham. Sri Sivakumar who was working in the Police Department, Govt. of Tamil Nadu resigned his job to join the services of the colleges. Sri Sivakumar was working as Adm. Officer of the colleges which were previously run by SPRECT. He was not appointed by our Trust. Sri Sivakumar and other staff of SPRECT continue to work for the colleges run by our Trust after the 'transfer' of assets by SPRECT to our Trust. From the point of view of the Trust, the vital consideration is his involvement and sense of devotion in the management of the colleges than his qualification or experience. Having been assigned duty as an Adm. Officer of the colleges, it is but natural that the related documents like RC books for the college vehicles, bank cheque books etc. were in the personal custody of Sri Sivakumar and found at the time of search. The learned A.O. . is certainly not logical or legally correct to draw an inference that it was Sri Sivakumar - and not Sri Janakar - who was managing the affairs of the Trust. As a matter of fact, Sri Sivakumar was only managing the affairs of the colleges and not that of the Trust.

5.4 In para. 6.2.3 of the assessment order; the learned A. 0. had discussed the relationship between Sri P. Murugesan (Managing Trustee of SPRECT) and Sri P. Janakar - as casual. peripheral and ephemeral When the construction of college buildings for SPRECT was in progress, its Managing Trustee was of the view that it would be rather too difficult to manage and such a decision was on his own volition. Accordingly, Sri Murugesan came forward to donate the land and buildings under construction to our Trust. That was in November; 2005 and accordingly, to give effect to the desire of the donor Trust, a registered deed was executed and registered We also wish to state that during the post- search period and during the course of the assessment proceedings, we had explained to the Officers of the Income tax Department's Investigation Wing and the 1eamed A. 0. the whole back ground of

www.taxguru.in :- 174 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the events leading to the 'gift' of the assets by SPRECT to our Trust. Men the gift / transfer of the assets of SPRECT to our Trust is by means of a registered deed, we wish to submit that no more proof may be required to say that SPRECT gifted / donated its assets to our Trust. The learned A.O. has observed thus: "Therefore the transfer of the institutions to TET is a make believing affair and the real transfer is to sri R. Viswanathan for a consideration……………….. It appears from the facts of the case that the unaccounted income of Sri R. Viswanathan was paid to Murugesan and acquired the said colleges with the assets". We only wish to state that the A.O.. is certainly not correct to make such conclusions without letting in necessary evidences gathered as a result of the search. Assuming for the sake of argument that it was Sri R Viswanathan who had invested in the Trust; certainly the Income tax Dept. as a result of the search under sec. 132 ought to have come across enough proof / evidences in this behalf. The fact is that there were none. We wish to state that the inferences of the learned A.O. in this regard has no basis or logic or unsustainable inasmuch as they are not evidence based, but merely wishful.

5.5 In para. 6.2.4, the learned A.O. had observed thus: "There was a search conducted in this group on 23-08-2006 and surveys u/s. 133A was conducted on the same date on both NPR college of Institutions at Natham and SPRECT at Tanjore. The value of Canara Bank balance (₹6,05,000) and computers ₹8,31,015/- in the Trial Balance of NPR college at Natham as on 31-10-2008. It is otherwise impossible for this type of convergence / matching of the assets and their value even before the legal existence of the TET except for the secret understanding between P. Murugesan and R. Viswanthan. ……… ……..Thus, it is clear that the investment was made by R. Viswanathan under the cover of P. Murugesan. The front face of Sri R. Viswensthan in this regard are P. Janakar and M Sivekumsr". The simple fact is that the value as appearing in the books of the donor

www.taxguru.in :- 175 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. (SPRECT) are the same as appearing in our books. The leaned A. 0. failed to note that they cannot at all be different. For that reason, the learned A.O. was certainly not correct in raising an incorrect presumption about a non-existent relationship between Sri P. Murugesan and Sri R. Viswanathan, for the A.O. had not let in any evidence for his presumption.

5.6. In para . 6.2.5 of the assessment order; the learned AO. observed that "the transactions are not possible in normal human relations, against normal practices and human behaviour and also defies human logic and is colorable devise to acquire assets. ... The transactions in this case are colorable destined to malign the beneficial provisions of the Income tax act with regard to trusts and an attempt to fall the intention of the Legislature to encourage education for the benefit of the general public at large." (sic) It may be observed that the learned A.O. makes conclusions, without letting in evidences for such inferences. In 260ITR 433, the Hon 'ble Madras High Court held that "in a taxing statue, there cannot be presumption as to the facts. It is rather unfortunate that the learned AO is proceeding on the basis of pure presumptions and nothing more. Your appellant wishes to submit that the accepted position in law IS that in an assessment made pursuant to the search conducted, the conclusions /additions are to be made only with reference to the materials found during search - please see 310 ITR 303 (Mad), 315 ITR 204 (Raj) 256 ITR 76, 298 ITR 98 (Raj) 296ITR 619 (Del), etc. We wish to state that the Trust had been formed with the objective of running educational institutions and to the best of our knowledge and belief; all our actions and activities are aimed at achieving such declared objectives, as per the rules and law concerning our activities. We only pray that the learned A. 0. ought to be more specific and at the same time disclosing the basis or proof or evidences for his inferences.

www.taxguru.in :- 176 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 5.7. In para. 6.2.6 of the assessment order; the learned A.O. had observed that "It has been observed that Sri R. Viswanathan was very keen to start educational institutions at Natham...... Given the facts of the case, Sri Janakar is not the person who was instrumental in starting the TET but Sri R. Viswanathan who not only made Sri Murugesan of SPRECT to start educational institutions at Natham and also got the gift of same" (sic). Your appellant only wishes to reiterate that without letting in evidences to support his inference, the action of the learned A.O. is legally unsustainable.

5.8. In para. 6.2.7 of the assessment order; the learned A. 0. had referred to the provisions of sec. 56(v) of the IT Act. It is presumed that the learned A.O. is referring to sec. 56(2)(v) which applies to gifts received by an Individual or HUF. We wish to state that the gift of the property was by SPRECT to our Trust i.e. from one trust to another trust and, therefore, the provisions are not applicable to the gift in question. The learned A.O.’s observation that the gift was to Sri R. Viswanathan is merely a presumption raised by the A. O. and not based on any evidence.

5.9. In para. 12 of the assessment order, the learned A.O. has fairly conceded that there is no direct evidence for the presumption that it is Mr. R. Viswanathan who is the 'owner' of the Trust. The learned A. 0. has taken pains to distinguish 'education ‘ vis-à-vis 'charitable purpose', commercialization of education in India, taking over of trusts in benami names by some interested parties etc. etc. Your appellant does not want to say anything on those observations of the 1earneded A.O. as according to us they are not directly connected to the issues involved in these appeals. We consider that it is extremely essential on the part of the A.O. to discuss our case with reference to the facts and materials gathered during the course of the search and there is little or no need to straggle, stray away from the main subject or to scoff at us. In

www.taxguru.in :- 177 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. this connection, we are only reminded of the old adage: "Let the cobbler stick to his lest". However, we are keen to asseverate and declare solemnly as to the genuine nature of our trust and its charitable objects.

5.10. In para. 6.2.8 of the assessment order; the learned A.O had discussed the "sudden increase in assets in a span of about 3-4 months and their values as per books and valuation". He had observed thus: "However; the assets shown in the TET as per its balance sheet as on 31-3-2006 ₹5,35,58,750/- and in other words the reason increase off ₹3,48,59,481/- in the assets within a span of hardly 4 months this is to be seen from the context of heavy payments made by the assessee Trust to the contractors without the actual work done by the contractors. " (sic). In this connection, we wish to state that the value of the assets received by 'gift' from SPRECT is ₹1,02,00,000/- as per the Gift / settlement deed which is also shown in our books. The value of ₹1,82,00,000/ -is as per the valuation report of the engineer. We also wish to state that the learned A.O. had summoned some of the contractors and examined them - recorded statements from them - please see para. 5.3 of the assessment order. Had there been any variation, the A. 0. ought to have discussed the same. We have furnished the returns of income for the assessment years 2006-07 and 2007- 08 and we will be ready to answer any question with reference to the accounts submitted.

5.11. In para. 6.2.9 of the assessment order; the learned A.O had observed that as the administrative office of the Trust is at Chennai and "therefore, the Trust is remote controlled and not controlled by the trustee as per records’’. In this connection, assessee wishes to state that though the adm. Office of the Trust is at Chennai, the charitable objects viz. the running of the educational institutions are carried out at Natham. The tact that the adm. Office is at Chennai may not be a ground for drawing any adverse inference. In the same paragraph, the

www.taxguru.in :- 178 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. learned A. O.. had observed that "I do not have any hesitation in concluding that the trust is not running according to its objects and therefore the gift received by the trust is a make believe and the real benefit enjoyed by some body else not the trust. Therefore, the gift received of ₹1,82,00,000/- is taken as taxable income of the appellant trust treating it as an association of persons (AOP). it is taxed protectively for A. Y. 2006-07 in order to protect the interests of revenue': The learned A.O. is incorrect in drawing inferences without revealing the basis or discussing the evidences on the basis of which such inferences are drawn. The Hon 'ble Supreme Court in Suresh Budhermal v. State of Maharashtra AIR 1998 SC 3258 - 3259 held that '' a presumption can be drawn only from facts and not from other presumptions - by a process of probable and logical reasoning': Without mincing words and to speak plainly, candidly and frankly, your appellant has only one prayer to make before the CIT (A). Let the learned A.O. in order to prove that he is on the right side of the divide, let in evidences in his possession or found as a result of the search that support the type of inference he is drawing. Let the learned Assessing Officer without spinning the wheel or indulging in circumlocution reveal the basis that form the basis for his conclusions. Your appellant is just reminded of the words of Martin Luther King: "Injustice anywhere is a threat to justice everywhere':

6.2 In his written submissions dated 20-5-2010, the ld AR made the following supplemental submissions in support of the above arguments.

"We have already pointed out that the Id A.O. tailed to discuss the materials found / evidences gathered as a result of the searches for his presumption that Sri R. Viswansthan, Natham is the 'owner' of the Trust. In this connection we wish to place reliance on the following case laws:--

www.taxguru.in :- 179 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. (a) In CIT v. Kishan Kumar 315 ITR 204 (Raj), the Hon'ble Rajasthan High Court held that "the computation of income is to be made on the basis of evidence found as a result of search or other documents and such other material or information as is available with the Assg. Officer and relatable to such evidence':

(b) In CIT v. Pramod Kumar Gupta 320ITR 408 (Del) the Hon 'ble High Court held that "a block assessment can only be made on the basis of evidence found during search and / or any other material or information relatable to such evidence': It has also worthwhile to state that the Hon 'ble Supreme Court has dismissed the SLP filed by the Dept. against this judgement - please see 312 ITR (st) 6.

(c) In CIT v. R.ML. Mehrotra 320ITR 403 (All), the Hon 'ble Allahabad High Court held that "a block assessment in the case of a search has to be confined to income attributable to the material and evidence found therein or other information available with the Assg. Officer relating to such materials. A best judgement assessment cannot be made':

(d) In Anil Kumar Bhatia vs. ACIT 1 ITR 9Trib) 484 (Delhi), the Hon'ble ITAT, 'B' Bench, Delhi held that as no material was found, no addition could be made.

(e) In CIT v. Kamlesh K Shah, the Hon'ble Gujarat High Court held that additions made merely on presumptions was not sustainable and the Dept's SLP against the judgement was dismissed by the Hon 'ble Supreme Court - please see 312 ITR st. 331

6.3. The appellant has thus made its elaborate submissions in respect of each and every point

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raised by the A.O. and pleaded that the A.O 's conclusion that R V is the 'owner' of the Trust is without any evidence whatsoever. The appellant while placing its arguments in its favour had also extracted the observations of the A.O. Therefore, I deem it not necessary to repeat them. After going through the assessment order and the records, I am inclined to accept the arguments of the appellant in this regard. The A.O. had not quoted any evidence which surfaced as a result of the search. As already observed, the tact is that there were no seizure of assets or books or documents etc. in the searches conducted in RV's case. There is considerable force in the appellant's argument that if it true that R V had worked to a plan and had invested his unaccounted income running to crores of rupees there ought to have been enough evidence for the same which the officers who searched the residence of R V ought to have come across. There is not even a single instance of such evidence or proof which emerged as a result of the search which vindicates the appellants stand in this regard. In the circumstances, it is legally not correct on the part of the A.O to harp on the theory of 'benami ownership’ of the assets of he appellant trust. It may not be incorrect to say that the A.O. merely hazards a guess without any basis or evidence in his possession. It is worthwhile to point out that as per the provisions of the Benami Transactions (Prohibition) Act 1988, the onus is on the person who alleges 'benami’. Thus, it is the 'responsibility of the A. 0. to adduce concrete evidence before coming to the conclusion that it is RV who is the 'owner' of the appellant-trust and that Sri Janakar is a 'benami' of RV. A bare reading of the assessment order clearly reveals that the A.O. is only making repeated references to peripheral issues like relationship between RV and Sri P. Janakar, the role of the second trustee Sri R. Mohan Kumar, the role of Sri M. Sivakumar in the administration of the colleges, the relationship between Sri P. Murugesan and Sri P. Janakar and

www.taxguru.in :- 181 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. that of Sri P. Janakar and RV, human behaviour; intention of R V to start educational institutions at Natham, gift of property by SPRET; location of the administrative office of the trust etc. As rightly pointed out by the appellant, the A. 0. is only harping on the presumption of 'benemi ownership’ without disclosing the legal evidences or proof based on which he logically came to such conclusion. I must also observe that the ld AR's reliance on some of the case laws, as reproduced in para. 6.2 above, rendered in the context of 'Block Assessment' under Ch. XIV-B of the Act may not be valid in the context of assessment u/s. 153A / 153C. Nevertheless, the fact remains that the A.O 's presumption regarding the 'benami ownership' of the assets of the appellant trust is bereft of any evidence or proof found during search or materials gathered / in the possession of the A. 0. In the circumstances, I am constrained to observe that the A.O's conclusion in this regard is legally unsustainable. Accordingly, I hold that the appellant- trust is the owner of the properties owned and accounted for by it in its books of accounts. "

66.4 Having made a rather serious 'theory' or 'allegation' that TET is merely an ostensible owner of its assets and that assessee is the

'real' owner, it becomes the duty of the A.O. to go deep and marshal evidences in this regard to drive home his theory or view point. The fact of the matter are that there is not even proximate evidence, not to speak of concrete evidences, brought in by the A.O. On the contrary, the A.O. had recorded a finding in the assessment order that 'direct evidence is not possible' and thus comes close to confessing that his theory does not reflect the reality. That clinches the issue in favour of

www.taxguru.in :- 182 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the assessee. The A.O. 's findings that the assessee is the 'owner and enjoying the fruits of TET' is without any evidence or proof brought in by the A.O. and is unacceptable for the purpose of proceedings under the I. T. Act, 1961 which are quasi -judicial in nature. In view of the findings given in the case of the Trust [TET] that there is no relationship between the assessee and TET and that TET is the owner of the properties held and accounted for by it in its books, the A.O. 's action to consider the same in the assessments of the assesee is legally not correct and accordingly unsustainable. It was noticed that the A.O. had assessed the income / investment in the assets etc. of

Titan Educational Trust in the hands of the assessee substantively and in the hands of the Trust protectively. The additions so made are the following:-

Para No.of Details of addition. the asst. Amount (₹) order (a) Towards transfer of assets by Sri Para. 6.9 1,82,00,000 Ramajayathammal Educational & Charitable (SPRECT)Trust to Titan Educational Trust.

(b) -do- -do- 82,97,676 (c) Investment in NPR Group of colleges. Para 8.0 5,97,00,000 Unaccounted payments to contractors by (d) Para 9.0 67,80,000 TET. (e) Towards disallowance u/s. 40A(3) in the Para. 10.0 9,16,000 Titan Educational Trust. (f) Towards unaccounted fees collected by Para. 11.0 52,90,000 of colleges.

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In view of the findings given in the case of Titan Educational Trust, it was held by the Commissioner of Income Tax (Appeals) that the assessment of the income / assets of TET in the hands of the assessee on a 'substantive basis' is legally unsustainable. While discussing the addition of assets of Titan Educational Trust, the A.O. had also discussed the unsecured loan amounts of F2.85 crores and corpus donations of F2,46,99,161/- relating to Titan Educational Trust. It is to be mentioned that the above issues have been considered in detail in the appellate order in the case of Titan Educational Trust. In the light of the findings arrived at in the case of Titan Educational Trust, the above additions made in the case of the assessee were deleted by

Commissioner of Income Tax (Appeals). Against this, the Revenue is in appeal before us.

67 The first ground raised by the Revenue is as under:-

‘’1.a. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that "M/s Titan Educational Trust is the owner of the properties held and accounted for it in its books" without considering the ratio of the judgement of the Hon'ble Supreme court in the case of M/s McDowell & Co Ltd vs IT0 154 ITR 149(SC) and the judgement of the ITAT 'B' Bench Delhi in I.T.A. Nos. 3088 to 3098 & 3107/Del/2005 for the assessment years 1987-88 to 93-94 and 1995-96 to 1999-

www.taxguru.in :- 184 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 2000 in the case of Hersh W.Chadha vs DDIT, Circle 1(1) International Taxation New Delhi.

1.b The learned CIT(A) has failed to note that order of the CIT(A) in ITA No. 430/08-09 dated 02.12.2010 for the assessment year 2006-07 in the case of Mls Titan Educational Trust has been disputed and that the issue has not become final’’.

67.1 We have heard both the sides and perused the material on record. This issue was considered by the Tribunal in the case of M/s.

Titan Educational Trust in ITA Nos.471 & 472/Mds/2011 and ITA

No.221/Mds/2011 vide order dated 16.12.2011 wherein it was held as under:-

6. We have considered the rival submissions and we have also perused the documents placed before us. At the outset, it is noticed from the assessment order that Ld. Assessing Officer is relying upon the search done in the case of R.Viswanathan and the survey conducted in the case of the assessee and NPR group of colleges for the purpose of completing the assessment u/s.153C.Perusal of the assessment order in the case of Shri R.Viswanthan as also the show cause notice shows that the Assessing Officer is questioning the creation of the assessee trust as also the genuineness of its trustees in the assessment order and show cause notice. The Assessing Officer in the assessment order of Shri R.Viswanathan has basically attempted to hold that the assessee trust is under the control of Shri R.Viswanathan and that it is his money, which has been routed through to assessee trust. No where in the show cause notice or in the assessment order is there any whisper of any evidence having been found in the course of the search against the assessee trust. A copy of the order sheet noting in the case of R.Viswanathan, a copy of which is enclosed with this part of the order, as Annexure- ‘A’ does not show of any

www.taxguru.in :- 185 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. satisfaction having been recorded for the purpose of making an assessment in the case of the assessee trust. Perusal of the provisions of sec.153C shows that it categorically use the words ‘ where the Assessing Officer is satisfied in ….. belong to a person other than the person referred to in Sec.153A’. These wordings are identical to the wordings in Sec.158BD. The Hon’ble Supreme Court in the case of Manish Maheswari reported in [2007] 289 ITR 341(SC) has categorically held that it is incumbent to record satisfaction in the hands of the person searched before initiating the proceedings in the hands of the person against whom incriminating evidences have been found. In the circumstances, respectfully following the decision of the Hon’ble Supreme Court in the case of Manish Maheswari (supra) as no satisfaction has been found recorded in the case of R.Viswanathan, the initiation of proceedings u/s.153C and the consequential assessment on the assessee would have to be held to be bad in law and the finding of the Ld. C.I.T.(A) on this issue stands confirmed.

7. Further reading of the assessment order in the case of assessee clearly shows that some additions have been made on the basis of evidences found in the course of survey in the premises of NPR group of colleges at Dindigul. Here a perusal of the provisions of Sec.153C clearly uses the words ‘seized or requisitioned’. Seizure is normally done by invoking Provisions of the Sec.132 and requisition by invoking the provision of Sec.132A. Survey is under section 133A. Where any evidence is found in the course of survey, the same can validly be used for making an assessment under the regular provisions. Where evidences are found in the course of search or requisition, then such provisions of Sec.153A, C etc. come into play. The perusal of the assessment order in the case of the assessee clearly shows that there is no evidence which has been used by the Ld. Assessing Officer for making the assessment that has been found in the course of search. In fact in para 6.1 of the assessment order, assessee has categorically raised this issue before the Assessing Officer and the Ld. Assessing Officer held that assessee appears to be myopic in viewing the provisions of Sec.153C r.w.s. 153A. Ld. AO has also mentioned that incriminating documents have been seized from the office of SPRECT Tanjore, from the residence of the so

www.taxguru.in :- 186 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. called Managing Trustees Shri P.Janakar and signed cheque books and other valuables from the house of Shivakuamr, administrative officer of the assessee. However, none of these incriminating evidences found have been used against the assessee in the assessment. Further perusal of the Ground No.1.b also clearly shows that Ld. Assessing Officer is clearly relying on the search in the case of Managing Trustees Mr.P.Murugesan and survey on the premises of Ponnaiah Ramajeyathammal educational and charitable trust. Again no satisfaction nor any incriminating evidences found against the assessee has been shown to have been recorded or used. Just because search has been conducted on a person, even assuming he has any charge or control of the institution, it would not mean that the institution would also be liable for an assessment u/s.153C as the words used u/s.153C uses the words “belongs or belong to a person other than a person referred to sec.153A”. So unless any incriminating evidence is found and shown to be relating to the person other than the person searched, the provisions of Sec.153C cannot be invoked on such other person, who is not searched and in whose case no incriminating evidence has been found or used. Even on this ground it is found that the assessment order passed u/s.153C in the case of the assessee is liable to be quashed and we do so. 8. The other aspect that has been raised which supports the contention of the Ld. AR that no satisfaction has been recorded is that in the assessment order of the assessee the additions are made protectively. The fact that protective additions have been made shows that the Assessing Officer himself was not satisfied in regard to the hand in which the addition is liable to be made. Much worse the Assessing Officer was satisfied that the substantive addition was liable to be made only in other hands. This by itself quashes any doubt in regard to the possibility of recording of satisfaction. In the circumstances, we are of the view that assessment order passed by Ld. Assessing Officer u/s.153C r.w.s. 153A dt.30.12.08 in the case of the assessee for Assessment Year 2006-07 is without jurisdiction and stands quashed. In the circumstances the finding of the Ld. Commissioner of Income Tax(A) on this issue stands upheld. As we have quashed the assessment order itself on account of the jurisdictional aspect, we have not gone into the issue on merits of the addition.

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9. In regard to the appeal filed by the assessee, it was submitted that Ld. Commissioner of Income Tax(A) had sustained the addition to the extent of Rs.33,70,000/- on the basis of document found in the course of survey. It was the submission that the document itself did not relate to the Assessment Year 2006-07 as the date of document itself was ‘as on 08.08.06’. In reply Ld. DR vehemently supported the order of the Ld. Commissioner of Income Tax(A). Perusal of the document, which is the impounded loose sheet found in the course of survey conducted in the premises of NPR group of colleges, Dindigul on 23.08.06 clearly shows that the document mentions the date as 08.08.06. Obviously, this relates to the Assessment Year 2007-08. No addition on this count can be made at all in Assessment Year 2006-07. In any case, in Revenue’s appeal, we have already upheld the action of the Ld. Commissioner of Income Tax (A) and quashed the assessment order. Consequently, this issue would become academic in nature as it is part of the assessment for the Assessment Year 2006-07, which was made by the Assessing Officer and has been quashed by us. In the circumstances, the appeal of the Revenue in ITA No.471/11 is dismissed and appeal of assessee in ITA No.221/11 is allowed.

Being so, the findings of the Tribunal in the above order has not been disturbed by any process of law by higher forum. As of now, the findings hold good and applicable in assessee’s case also.

Further, in the present case, there was no iota of evidence to show unaccounted investment by assessee in Titan Educational Trust and the conclusion of the Assessing Officer is based only on presumption to hold that the assessee had invested unaccounted money in Titan

Educational Trust. The Titan Educational Trust is duly registered

www.taxguru.in :- 188 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. u/s.12A of the Act and assessed to Income Tax Act and separate assessment order was framed for the assessment year 2006-07 by the same officer i.e. The Assistant Commissioner of Income Tax,

Central Circle-II, Tiruchirappalli, wherein he has considered the assets and liabilities of the Trust while framing assessment. Being so, the findings of the Assessing Officer that assessee is a ‘'benami owner of the Titan educational trust’’ cannot be upheld. The findings of the Commissioner of Income Tax (Appeals) is based on proper appreciation of records as seen from his order at para 6.3. In such circumstances, the transaction of the Titan Educational Trust cannot be doubted and the principle laid down by Supreme Court in the case of McDowell & Co Ltd (cited supra) cannot be applied to the fact of the present case. Accordingly, the ground nos.1(a) and

1(b) raised by the Department are rejected.

68. The next ground raised by the department is with regard to transfer of assets by Sri Ponnaiyah Ramajayathammal Educational and Charitable Trust to M/s. Titan Educational Trust amounting to

F1,82,00,000/-.

68.1 The facts of the issue are that the Assessing Officer made an

www.taxguru.in :- 189 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. addition of F1,82,00,000/- in respect of undisclosed income in NPR college at Natham. In this case the Assessing Officer considered the transfer of asset vide deed of gift dated 28.12.2005 executed by Sri

Murugesan, Managing trustee of Sri Ponniah Rammajeyathammal

Educational and Charitable Trust, Thanjavur to Titan Educational

Trust wherein the market value of the land and building was

F1,06,00,000/-. Not only the assets and liabilities of the above mentioned three institutions passed on to the newly formed Titan

Trust. It is to be also noted that hardly within a matter of one month from the formation of the Titan Trust, it was able to acquire assets over a crore and also the control and management of a flourishing institution absolutely for no consideration i.e. without spending even a single rupee. According to the Assessing Officer this is not a transfer of Educational Institutions from one trust to another. It is a route devised to establish ownership over the said Educational Institutions with a motive to earn profit. Therefore it is a gift that should be treated in accordance with the provisions of section 56(v) of the Income tax Act. According to said section any sum exceeding Rs. 25,000/- received without any consideration by an individual or HUF from any person on or after first day of September

2004 other than from the following persons:-

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a) from any relative; or b) on the occasion of marriage of the individual; or c) under the will or under the way of inheritance; or d) in contemplation of death of the payer,

The said gift has to be taxed under the head income from other sources. Therefore the value of the Institutions which were transferred by Sri Ponnal Ramajayathmal Educational and charitable

Trust to Shri. Viswanathan in the guise of Titan Educational Trust is taxed in his hands as gift to relative within the meaning of Section

56(v) of the Income tax Act. Shri. Viswanathan has purchased the

NPR colleges from Shri.P.Murugesan , Chairman and Managing trustee of Sri Ponnaiah Ramajathmal Educational and charitable trust for a consideration. Therefore the so called transfer of assets from a trust to another trust with similar objective need to be discounted and disbelieved and accordingly F1,82,00,000/- (being the value of assets as per valuation report) is assessed in the hands of the assessee as undisclosed investment in NPR college at Natham. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals).

68.2 The Commissioner of Income Tax (Appeals) observed that the A.O. had assessed the income / investment in the assets etc. of

www.taxguru.in :- 191 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Titan Educational Trust in the hands of the assessee substantively and in the hands of the Trust protectively. The additions so made are as discussed in para 66.4 of this order. In view of the findings given in the case of Titan Educational Trust, it is to be held that the assessment of the income / assets of TET in the hands of the assessee on a

'substantive basis' is legally unsustainable. While discussing the addition of assets of Titan Educational Trust, the A.O. had also discussed the unsecured loan amounts of F2.85 crores and corpus donations of F2,46,99,161/- relating to Titan Educational Trust. It is to be mentioned that the above issues have been considered in detail in the order in the case of Titan Educational Trust. In the light of the findings arrived at in the case of Titan Educational Trust, the above additions made in the case of the assessee are deleted. Against this, the Revenue is in appeal before us.

68.3 The ld. Authorised Representative for assessee submitted that gift given by one trust to another is not unusual. The Assessing

Officer doubted the transfer of property on the reason that the trust is not running according to its objects and therefore the gift received by the trust is a make believed and the real benefit enjoyed by somebody else not the trust. Therefore, the gift of F1,82,00,000/- cannot be

www.taxguru.in :- 192 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. considered as income of the assessee. According to the ld. Authorised

Representative for assessee there is no evidence as the assessee is benefited by the gift. Both the trust are having separate entity and assessable separately. She relied on the order of the Mumbai Bench in the case of DCIT vs. KDA Enterprises Pvt. Ltd in ITA No.2662/M/2013, dated 11.03.2015, wherein it was held that companies, if authorized by the MOA and AOA, are competent to make and receive gifts. Natural love and affection is a not necessary requirement for a gift. The gift is neither taxable as income sec.56 nor as capital gain nor as income u/s.2(22) (e) of the Act. Three elements are essential in determining whether or not a gift has been made a) delivery b) donative intent and c) acceptance by the donee. The companies are competent to make and receive gifts and natural love and affection are not necessary requirement. The only requirement for company to make gifts as per respective MOA and AOA, is to authorize the company for the same.

According to the ld. Authorised Representative for assessee as per the decision of the Tribunal there is no bar or restriction to receive gift from one trust to another and this is not prohibited transaction.

68.4 The ld. Departmental Representative relied on the order of the lower authorities.

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68.5 We have heard both the parties and perused the material available on record. Since we have already confirmed the addition with regard to this issue in the hands of Sri Ponnaiyah Ramayathammal

Educational and Charitable Trust, in the assessment year 2006-2007 by observing that the gift is in violation of trust objects and treated it as its income and any such addition in the hands of this assessee will lead to double addition. As such, the deletion of addition made by the

Commissioner of Income Tax (Appeals) is justified. Accordingly, this ground of the Revenue is rejected.

69. The next ground raised by the department is with regard to transfer of assets other than building in respect of gift from one trust to another to the tune of F 82,97,656/-.

69.1 The findings of the Commissioner of Income Tax (Appeals) is confirmed as discussed in this order at para No.68.5. This ground of the Department is rejected.

70. The next ground raised by the department is with regard to investment in NPR group of college amounting to F5,97,00,000/-.

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70.1 The facts of the issue are that the during the course of survey,

profit and loss account, balance sheet as on 31.03.2006 and other

annexure of M/s. Titan Educational Trust were found. The balance

sheet is reproduced as under;-

Liabilities as at 31.03.2006 Assets as at 31.03.2006 Capital account 1,52,46,751 1,52,46,751 Fixed Assets Buildings 6,000 4,29,88,427 Buildingunder construction Land 1,31,76,244 Library books 2,183 Water equipments 4,000 Loans (liability) 2,00,00,000 2,85,00,000 Current Assets 1,00,51,053 unsecured 85,00,000 Closing stock loans Apollo Deposits(Assets) 85,00,000 inst of CHMFT Cash in hand 14,56,000 Bank accounts 94,688

Current 98,00,000 98,12,000 P & L account 5,19,270 liabilities 12,000 Opening balance Sundry Current period 5,19,270 Creditors Expenses payable Total 5,35,58,751 5,35,58,751

A reference has been made to the valuation cell of the department

vide office letter dated 06.09.2006. The valuation officer of valuation

cell, Madurai had inspected the college properties at Natham on

07.09.2006 and made preliminary valuation of the buildings as under;-

www.taxguru.in :- 195 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. (1) College Main Building 2,50,00,000 Power Room 7,50,000 Hostel Building (rear side) 70,00,000 Hostel building polytechnic/sheds 1,18,00,000 Dining /Kitchen –I, 17,00,000 Dining Hall-II 15,00,000 Workshop Building (AC Sheet 12,00,000 Roof-I) Workshop Building (AC Sheet 10,75,000 Roof-II) Polytechnic Building 40,00,000 Polytechnic Building- Phase I 2,35,00,000 Polytechnic Building- Phase II 1,01,00,000 (under construction) Compound wall in front of the 22,00,000 college, Entrance Arch (unfinished) entrance gates and internal roads etc., Canteen (GI SHEET) on the rear 1,00,000 side of College building Horticulture works 1,00,000 Bore, Pump etc 75,000 Total 9,01,00,000/-

The valuation officer of the department has arrived at F9,01,00,000/- being the cost of construction of the assets as mentioned in the above table. Whereas as per the balance sheet, value of building submitted is

F3,04,00,000/- (2,98,00,000/- + 6,00,000/-), so the difference in the cost of construction has shown by the assessee is F5,97,00,000/-

(F9,01,00,000/- - 3,04,00,000/-). The Assessing Officer observed that the only inference that can be drawn from this facts is that the unaccounted money, has been used by Shri. R. Viswanathan for the construction of buildings. Therefore, the difference of F.5,97,00,000/- is added to the total income of the assessee. Aggrieved, the assessee

www.taxguru.in :- 196 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer. Against this, the Department is in appeal before us.

70.2 We have heard both the sides and perused the material on record. In this case, the Assessing Officer had not quoted any evidence which surfaced as a result of search. There is no material seized during the course of search action. Had it been the assessee invested his unaccounted income, there ought to have been found during the course of search action. There is not even a single instance of such evidence or proof which emerged as a result of the search to show the assessee has invested the impugned amount. In the circumstances, it is legally not correct on the part of the A.O to harp on the theory of

'benami ownership’ of the assets of the assessee trust. It may not be incorrect to say that the A.O. merely hazards a guess without any basis or evidence in his possession. It is worthwhile to point out that as per the provisions of the Benami Transactions (Prohibition) Act

1988, the onus is on the person who alleges 'benami’. Thus, it is the

'responsibility of the A.O. to adduce concrete evidence before coming to the conclusion that it is RV who is the 'owner' of the assessee-trust

www.taxguru.in :- 197 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. and that Sri Janakar is a 'benami' of RV. A bare reading of the assessment order clearly reveals that the A.O. is only making repeated references to peripheral issues like relationship between RV and Sri P.

Janakar, the role of the second trustee Sri R. Mohan Kumar, the role of Sri M. Sivakumar in the administration of the colleges, the relationship between Sri P. Murugesan and Sri P. Janakar and that of

Sri P. Janakar and RV, human behaviour; intention of R V to start educational institutions at Natham, gift of property by SPRET; location of the administrative office of the trust etc. As rightly pointed out by the assessee, the A. 0. is only harping on the presumption of 'benemi ownership’ without disclosing the legal evidences or proof based on which he logically came to such conclusion. The fact remains that the

A.O 's presumption regarding the 'benami ownership' of the assets of the assessee trust is bereft of any evidence or proof found during search or materials gathered / in the possession of the A.O. Hence, we are of the opinion that the A.O's conclusion in this regard is legally unsustainable. Accordingly, we hold that the trust is the owner of the properties owned and accounted for by it in its books of accounts. Further, the A.O. 's findings that the assessee is the 'owner and enjoying the fruits of TET' without any evidence or proof brought in by the A.O. are unacceptable for the purpose of proceedings under

www.taxguru.in :- 198 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. the I. T. Act, 1961 which are quasi -judicial in nature. In view of the findings given in the case of the Trust [TET] that there is no relationship between the assessee and TET and that TET is the owner of the properties held and accounted for by it in its books, the A.O. 's action to consider the same in the assessments of the assessee is legally not correct and accordingly unsustainable. This ground of the appeal of the Revenue is rejected.

71 The next ground raised by the Department is with regard to unaccounted payments to contractor to the tune of F.67,80,000/-

71.2 The facts of the issue are that it was observed during the course of survey that F55,00,000/- had paid to M/S. Sathya Home,

Chennai, outside the books (loose sheets vide annexure

WVS/S/LS-3 serial number (72). Again it was found as per loose sheets that F 12,00,000/- had already been paid in the form of steel advance to them. As stated already payments are made from the unaccounted income of the assessee and same is not accounted in the books also. The other corroborative evidence in this regard is the sudden increase in the assets. The abstract found in that loose sheet is reproduced below.

www.taxguru.in :- 199 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

NPR college : Stagewise payment due as on 15.02.2006.

Sl.No. Building Total value of work done 1 Gents Hostel 19.62 (65.42) 2 Polytechnic Sheet 15.40 (31.50) (17.52-2.12- 15.40)Roof level 3 College Building 15.40 (38.00) 4 Ladies Hostel 2.89 (28.91)

53.31 163.83

Add: Cost of steel cost : 12.00 (will be adjusted in 4 installments one inst. Already adjusted) : 65.31

Amount already received. 10.00 24.80 9.00 12.00 ------55.80 ------

9.51 Due as on 20.02.2006.

The same loose sheet copy was also found in the college

premises during the course of survey on 23/08/2006. Payments

to the tune of F55 lakhs had been made outside the books.

These are unaccounted payments made to the contractors

against the construction of the college buildings. When Janakar

www.taxguru.in :- 200 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. was asked: to explain the details found in the slip, he accepted that it contains the details of expenditure of construction and he is not aware of any other detail. In the letter filed on

14/12/2006, Janakar claimed that only forty five lakhs eighty thousand was paid in cash to M/s. Sathya Home before executing agreement with them. He further .stated based on the quotations, Sathya Home only, the entries were made. It clearly represents the amount received by M/s. Sathya Home in cash.

Though Janakar claimed that only F45.80 lakhs was paid in cash, the payment of Rs.55 lakhs in cash to M/S. Sathya Home is evidenced by the entries in the loose sheet. Further as per the entry in the loose sheet, an amount of Rupees twelve lakhs had already been paid to them as steel advance. Hence, a sum of rupees 67,80,000/- (55,80,000+12,00,000) has been paid to Sathya Home outside the books. It was inferred that from undisclosed funds of Viswanathan the above expenditure was incurred and this has to be treated as unaccounted Income of the assessee and is to be brought to tax. On query in this regard, the assessee in his reply to pre assessment notice has stated that he was no where connected to the trust and therefore he is not aware of the contractors and payments made

www.taxguru.in :- 201 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. to them. Under the circumstances, F67,80,000/- is to be

assessed in hands of the assessee as unaccounted income as

the assessee appears to be the real owner of the NPR group of

college. Aggrieved the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of

Income Tax (Appeals) deleted the addition made by the Assessing

Officer. Against this, the Department is in appeal before us.

71.3 We have heard both the sides and perused the material on record. The Commissioner of Income Tax (Appeals) deleted the addition on the reason that addition was considered in the hands of the Titan Educational Trust and there is no question treating the same in the hands of the assessee on substantive basis. Being so, in our opinion, the deletion made by the Commissioner of Income Tax

(Appeals) in para 4.5 is justified. Further, the addition on merits, the addition made based on loose sheets without any substantive evidence cannot be considered. Accordingly, this ground of the

Revenue is rejected.

72 The next ground raised by the department is with regard to payments made in contravention of section 40A(3) to the tune of

www.taxguru.in :- 202 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. F9,16,000/-

72.1. The facts of the issue are that during the construction of the buildings for the NPR Group of Colleges the cash payment of

F45,87,000/- has been made to M/s. Sathya Homes and thereby contravened the provisions of section 40A(3). Therefore, 20% of the said expenditure which amounts to F9,16,000/- is added to the total income of the assessee. It is to be noted that since the assessee is a real owner of the colleges, the section 40A(3) would definitely apply and the Assessing Officer added a sum of F9,16,000/- as income of the assessee. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) deleted the addition made by the Assessing Officer.

Against this, the Department is in appeal before us.

72.3 We have heard both the sides and perused the material on record. Since we have already observed in earlier para No.70.2 of this order that investments in Titan Educational Trust cannot be considered in the hands of the assessee, the expenditure incurred in NPR Group of colleges cannot be considered in the hands of the assessee.

Accordingly, provisions of section 40A(3) of the Act cannot be invoked.

www.taxguru.in :- 203 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. This ground of the Revenue is rejected.

73 The next ground raised by the department is with regard to unaccounted fees collected by NPR Group of colleges to the tune of

F52,90,000/-

73.1 The facts of the issue are that during the course of survey in the premises of NPR Group of colleges at No. 20, Thiruvalluvar Salai,

Dindigul on 23/08/2006, the loose sheets were inventorised and impounded vide order dated 23/08/2006. It is seen that two types of fees were collected. One is the regular fees and the other is called

'fixing' as found in the sheet number 120. As per recognition rules of the Government, only regular fees at the prescribed rates can be collected from the students. "Fixing" is the amount collected by the assessee over and above the prescribed fees and this was not accounted. Fixing is thus nothing but the capitation fees called by different name. The loose '"sheet number 120 contains the details of amounts collected from 28 applicants in different streams of B.Ed., training courses such as Science, Arts and Vocational. The total course fees amount collected till 08/08/2006 is F29,36,000/- as against the

"fixing" of F49,90,000/-. To this effect sworn statement from Sri M.

www.taxguru.in :- 204 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Sivakumar, the Administrative Officer was recorded on

08/12/2006. In reply to question number 1, when he was asked to file the details of fee collected from the students for the various courses, he stated that F40,000/-- is collected as yearly fees from every student for the B.Ed. Course. As per the loose sheet number

120, the number of students admitted for B.Ed., is 28. Total number of students admitted for the

B:Ed., Course is 40 and the admitted fee receipts for 40 students is F11,20,000/-. Since "fixing" (capitation fees) for 28 students itself is F44,90,000/-, the proportionate fixing for the balance 12 students works out, to F19,20,000/-. Thus the total amount collected from students as "fixing" works out to F64,10,000/-. The assessee had understated the fees collected to the tune of

F52,90,000/- and this has not been accounted in the books of the

College. Therefore, the Assessing Officer added a sum of

F52,90,000/- to the total income of the assessee. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer. Against this, the Department is in appeal before us.

www.taxguru.in :- 205 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 73.2 We have heard both the sides and perused the material on records. The loose sheets found during the course of survey in the premises of NPR Group of Colleges at No.20, Thiruvalluvar Salai,

Dindigul. As we have already held that Titan Educational Trust is separate entity loose sheets cannot be considered without any corroborative material. The deletion of addition made by the

Commissioner of Income Tax (Appeals) is justified. Hence, this ground of the Revenue is rejected.

74 The next ground raised by the department is with to regard to unaccounted purchase of movable property to the tune of F3,36,700/-

74.1 The facts of the issue are that during the course of search on

23/08/2006, an inventory of valuables found in the residence at Giri

Road was made. Vide Annexure: MR/ Valuable articles/N.S. The details are tabulated below:

I- Hall II- Bedroom III Bedroom Kitchen Balcony of of Shri. V. Viswanathan Ararnath Sony LCE Window Ac - Sony TV 29 Godrej IFB washing CTV 51 1 ton pentacool machine fridge Split AC 1.5 Panasonic PC with

www.taxguru.in :- 206 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Ton TV 21 Samsung LCD Monitor Ceiling Fan Ceiling Fan Window AC – 1 ton, Ceiling Fan

During the search a bill dated 07.02.2006 issued by M/S. Sony

World, T. Nagar, Chennai-17 for the purchase of Sony LCD Colour T.V

Vide Serial number 43 of annexure: MR/LS/S for F1,72,700/- was found and seized. The amount was paid in cash. When Viswanathan was questioned about the source for the purchase, he replied that only his son could answer that point. However it is seen that there are no drawings to this effect in the accounts of Amarnath. Therefore theamount spent for the purchase of TV should have come out of the unaccounted income of Shri. Viswanthan. The same may be brought to tax. It may also be seen that there are no drawings or entries in the accounts of Amarnath that would show the source of funds for the investment in other movables listed in Para above. The approximate value of the same is worked out as under:

Sl.No Name of the item Approximate value 1 1.5 Ton split AC 30,000/- 2 Window AC 1 ton 22,000/- 3 Panasonic TC 21 15,000/- 4 Sony TV 29 25,000/-

www.taxguru.in :- 207 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. 5 Window Ac 1 ton 22,000/- 6 PC with Samsung 25,000/- LCD Monitor 7 Godrej Pentacool 10,000/- Fridge 8 IFB washing machine 15,000/-

Thus the purchase of sony lcd colour TV and these household articles amounting to F3,36,700/- (F1,72,700/- + 1,64,000/-) should have come out of the undisclosed earnings of Shri. Viswanathan accordingly taxed in his hands. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing

Officer. Against this, the Department is in appeal before us.

74.2 We have heard both the sides and perused the material on record. In this case, the Assessing Officer listed items found in the residence of the assessee at Giri Road and made an estimated value of

F.3,36,700/-. There is no material with regard to unaccounted purchase of all these items made by the assessee. The Commissioner of Income Tax (Appeals) observed in this issue are under:-

“ I have considered the observations of the Assessing Officer and the explanations of the assessee. It is clear from the observations of the Assessing Officer that the addition has been made purely on the basis of an unsubstantiated presumption that the assessee used his unaccounted income for the purchase of the items.

www.taxguru.in :- 208 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. Moreover, the issue of above investment/expenditure is being considered in the appeal relating to his case for A.Y. 2006-07. In the circumstances, the protective assessment of the same in the hands of the appellant is unwarranted and accordingly, the addition is deleted’’.

This findings of the Commissioner of Income Tax (Appeals) was not controverted by the ld. Departmental Representative. Being so we have no hesitation in confirming the same. This ground of the

Revenue is dismissed.

75 The next ground raised by the department is with regard to unexplained marriage expenditure to the tune of F9,20,000/-,

75.1. The facts of the issue are that Smt. Ranjitha, the second daughter of Sri. Viswanathan got married on 5th September 2005 at

Chennai. The marriage was conducted at Kalaiyanar Arangam and the reception was held at Raja Muthaih Hall, Chennai. During the reception there was light music programme by the eminent Film Music Director

"Deva". In the statement recorded from Smt. V. Selvarani, W/o

Viswanathan on 23/08/2006; she admitted that 50 sovereigns of gold jewellary were given to her daughter, Sri Viswanathan was asked about the details of expenditure incurred for the above marriage vide question number 14,20 & 21. Viswanathan claimed that the expenditure

www.taxguru.in :- 209 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. incurred at Kalaivanar Arangam was shared by two other ministerial colleagues whose children also got married on the same day. During the course of assessment proceedings the assessee has submitted the same reasons above but failed to give any evidences in this regard.

Therefore the Assessing Officer has no other option except to estimate the marriage expenditure keeping the social status of the assessee and facts and circumstances of the case. The same is estimated as below:

Sl.No Narration of Amount expenditure 1 50 sovereigns of 3,20,000/- jewellary ( 50 X 6400) 2 Rent to Raja Muthiah 1,50,000/- Hall 3 Dinner for 1000 guest 1,00,000/- estimated @ 100 4 Dresses and sridhan 2,00,000/- items 5 Transport and 50,000/- accommodation 6 Music programme by 1,00,000/- Deva Total 9,20,000/-

The expenses incurred in connection with the marriage of his second daughter are not reflected in his return of income for the assessment year 2006-07. The whole amount of expenditure incurred for the

www.taxguru.in :- 210 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. marriage has come out of the unaccounted income of the assessee and accordingly F9,20,000/- was taxed in his hands of the assessee.

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer. Against this, the

Department is in appeal before us.

75.2 We have heard both the sides and perused the material on record. It is clear that the lower authorities merely proceeded to make an estimate without considering the explanation of the assessee. This is not a case where the information was gathered during the course of search or as if in a survey under' sec. 133A(5) after the marriage celebrations (event or function) and thereafter, using that material for the purpose of assessment. The Assessing Officer merely has made estimates under various heads and the reasonableness of such estimates is open to question. Further, it was also noticed that there was nothing to indicate whether the lower authorities considered the explanation offered by the assessee. According to sec. 69C, "where an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or the explanation, if any, offered by him is not satisfactory, the amount covered by such

www.taxguru.in :- 211 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. expenditure may be deemed to be the income of the assessee for such financial year". Thus, the law mandates that the lower authorities should consider the explanation, if any, offered by the assessee in this regard. As such a procedure was not observed, the action of the

Assessing Officer in this regard is legally unsustainable. If the

Assessing Officer entertained any doubt about the explanation offered by the assessee, he ought to have made enquiries with the bridegroom's parents to know if the version of the assessee is correct or not. There is nothing to show that the Assessing Officer made any such attempt or enquiries. In the circumstances, we confirm the order of the Commissioner of Income Tax (Appeals) in deleting the addition made by the Assessing Officer. Accordingly, this ground of the

Revenue is rejected.

76 The last ground raised by the department in this appeal is with regard to unaccounted investment in movables to the tune of

F9,00,000/-.

76.1 The facts of the issue are that during the course of search in the assessee’s residence at Vembarpatti on 23.08.2006, three cars were found and Sri Kannan, Son-in-law of Sri Viswanathan was asked to

www.taxguru.in :- 212 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. explain the ownership of the cars. In response to question number, 7,

8 and 9 he stated as under:-

01. Ambassador Car TN-33 AJ-4444 said to be owned by Rajendran, Madurai. 02. Qualis Car TN -33AB 6567 said to be owned by Rajendran, Erode. 03. Maruthi Zen Tn-07 AZ 3434 ownership not known.

Shri. Kannan also said however the cars are being used by

Viswanathan family only and there is no relationship between the claimed owners and Viswanathan family. He further asserted that no rent was paid to the claimed owners, for the use of cars. Shri.

Viswanathan was also asked to explain about the availability of these cars in his residence at Vembaraptti vide question number 12 in sworn statement recorded from him on 23.08.2006. He stated that there was no connection between him and the said car owners. The use of the above vehicles by Viswanathan family, said to be owner by persons with whom they have neither personal nor official connection, clearly indicates that the cars owned by Viswanathan but held in benami names. The value of the cars would be around F9,00,000/-

(Ambassador – 3 lakhs + Qualis – 4 lakhs + Marthi Zen – 2 lakhs) and this investment should have come from the unaccounted earnings of

Shri. Viswanathan. Therefore, the value of the movable assets is

www.taxguru.in :- 213 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. taxed in the hands of the assessee. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer. Against this, the Department is in appeal before us.

76.2 We have heard both the sides and perused the material on records. The Assessing Officer had proceeded simply on the presumption that the cars were found parked before the assessee’s residence on the date of search and for that reason, the Assessing Officer concluded that the cars belong to the assessee i.e. they represent unaccounted investment by the assessee out of his undisclosed incomes. As claimed by the assessee, the Assessing Officer could have ascertained the registered owners of the cars from the State Transport Department and made enquiries with the respective owners. Further, without ascertaining the previous year in which the cars were purchased, it was not possible to determine the year of assessment. We are rather constrained to observe that the Assessing Officer made the addition without proper verification. According to sec. 69, it is incumbent upon the Assessing Officer to ascertain that the unexplained investments relate to the previous year relevant to the assessment year in question

www.taxguru.in :- 214 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. and that the assessee's explanation about the sources for the investments are not satisfactory. Further, as per Circular dated

10.03.2003 issued by the Central Board of Direct Taxes, the emphasis should be on evidences / materials gathered during search rather than mere confessions in the statements recorded during search. In this case, the assessee has totally denied having made the investment and it was now the turn of the Assessing Officer to prove that the explanation of the assessee is incorrect. As this was not done by the

Assessing Officer, the CIT(A) had deleted the addition. We do not find any infirmity in the order of the Commissioner of Income Tax

(Appeals). This ground of the appeal by the Revenue is rejected.

In the result, the appeal of the department in ITA No.462/Mds/2011 is dismissed.

Shri. P. Janakar, ITA No. 649/Mds/2011, assessment year 2006-07

(Revenue’s appeal)_

77. This appeal by the department is directed against the order of the Commissioner of Income Tax (Appeals), Tiruchirapalli, dated

18.01.2011 for the assessment year 2006-2007.

www.taxguru.in :- 215 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

77.1 The ground raised by the department is that the Commissioner of Income Tax (Appeals) deleted the addition made towards unexplained investment in residential house amounting to

F21,61,040/-.

77.2 The facts of the case are that the assessee is a civil engineer cum builder. He is the Managing Trustee of Titan Educational Trust which is running the NPR Group of Colleges [an Arts and Science

College, a Polytechnic College and a Teacher training College] at

Natham, Dindigul District. In the case of Sri R. Viswanathan,

Vembarpatti, Natham, Dindigul District, a search under sec. 132 was conducted by the Income tax Department on 23-08-2006. The residence of the assessee [at No. 4/52, Spencer Compound, Dindigul

Town] was also searched under sec. 132 on the same day. Pursuant to the search and seizure action, the Assessing Officer initiated proceedings under sec. 153A in the assessee's case for the assessment years 2001-02 to 2007-08 and completed the assessments on 30-12-

2008. The present appeal relates to AY 2006-07. The facts are that the assessee purchased a residential house at Door No. 50,

Plot No.8, Nehruji Nagar, Dindigul, for a consideration of F19,90,000/-

www.taxguru.in :- 216 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. on 16-03-2006 and that the total cost including stamp duty and registration charges came to F 22,71,270/-. This was disclosed in the return filed on 11-08-2006 i.e. before the date of search. While discussing the issue, the A.O. observed that the assessee had introduced credits to the tune of F17,12,500 in an attempt to explain the sources for the investment. The A.O. had also observed that except the loan from Kulandairaj the assessee has submitted confirmation letters from the alleged creditors. According to the A.O. credits of F12,12,500/- (out of F17,12,500/-) will have. to be treated as unexplained cash credits. The A.O. had also referred to the gifts of

F4,37,500/- from Sri Subbiah (uncle) and F5,00,000/- from Sri S.

Dharmaraj (brother-in-law). The A.O. doubted the genuineness of the gift transactions. The A.O. held that the value of the property was shown as land purchase for F22,71,720/- in the balance sheet for the year ended 31-3-2006. It is seen from the capital account of P.

Janakar that no amount was debited against the purchase of property.

The closing balance of capital account of Sri P. Janakar as on 31-3-

2005 was F8,13,748/-. Even after giving credit of the alleged gifts of

F9,85,000/- the available balance including the profit for the year ended 31-3-2006 is F21,38,670/- excluding the expenses for the year, is short of the sale consideration. As the purchase of property and

www.taxguru.in :- 217 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. loans obtained for the same is not reflected in the capital account as well as in the balance sheet, the entire investment off 21,61,040

(19,90,000 + 1,71,040) should have come out of the unaccounted earnings of the assessee and to be brought to tax. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax

(Appeals). The Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer. Against this, the Department is in appeal before us.

77.3 We have heard both the sides and perused the material on record. We are of the opinion that the A.O. should not have ignored the fact that purchase of the house as disclosed in the Balance Sheet as on 31-3-2006 filed along with the return of income filed on 11-08-2006 i.e before the date of search. As explained by the assessee, the purchase of the house property was duly disclosed in his accounts and therefore, it would be factually incorrect to come to the conclusion that the same represents undisclosed investment. If, on the other hand, the A. O. entertained any doubt about the genuineness of the sources as disclosed in the Balance Sheet, he ought to have taken steps to verify the claim of the assessee by making independent enquiries with the creditors and the donors. As a matter of fact, the assessee had

www.taxguru.in :- 218 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. furnished confirmation letters from the creditors / donors along with necessary documentary evidence like bank account details, their own sources of income etc. and this fact is acknowledged by the A.O. himself in the assessment order. Thus, it became the responsibility of the A.O. to verify the genuineness of the claims made by the assessee.

Having failed to do, it is incorrect for the A.O. to hold that the property represented unaccounted investment of the assessee. It needs to be mentioned that the requirement of sec. 68 is that when the assessee offers an explanation regarding a credit, it is the responsibility of the

A.O. to disprove the claim by independent enquiries to come to the conclusion that the explanation offered is unsatisfactory. In the circumstances, we hold that there is no warrant or justification for the addition of F21,61,040/- and we uphold the order of the Commissioner of Income Tax (Appeals). This ground of the appeal of the Department is rejected.

In the result,

(a) The appeals filed by the assessee Shri. P. Murugesan in ITA

Nos.2039 to 2045/Mds/2013 and Stay Petitions filed by the

assessee in S.P.Nos.368 to 373/Mds/2015 are dismissed.

www.taxguru.in :- 219 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011. (b) The appeals filed by the assessee Sri Ponnaiyah

Ramajayathammal Educational and Charitable Trust in ITA

Nos.1884 to 1890 and Stay Petitions filed by the assessee in

S.P.Nos.361 to 367/Mds/2015 are dismissed.

(c) The appeals filed by the Department in the case of Shri. P.

Murugesan, in ITA Nos.2036 & 2037/Mds/2013 are

dismissed.

(d) The appeal filed by the Department in the case of Shri. R.

Viswanathan, in ITA No.462/Mds/2011 is dismissed.

(e) The appeal filed by the Department in the case of Shri.P.

Janakar in ITA No.649/Mds/2011 is dismissed.

Order pronounced on Wednesday, the 14th of October, 2015, at Chennai.

Sd/- Sd/- (वी. दगा!ु राव) (चं पूजार ) V. DURGA RAO (CHANDRA POOJARI) या"यक सदय / JUDICIAL MEMBER लेखा सदय/ ACCOUNTANT MEMBER

े/Chennai. /Dated:14.10.2015. KV े े/Copy to: 1. Appellant 2./ Respondent 3. ()/CIT(A) 4. /CIT 5. /DR 6. /GF.

www.taxguru.in :- 220 -: I.T.A.Nos.2036 & 2037, 2039 to 2045/Mds/2013, 1884 to 1890/ 2013, 462/2011 & 649/2011.

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