The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that information found in the pen drive /laptop of employees cannot be considered as credible evidence and directed to delete the addition under the Income Tax Act, 1961.The assessee was represented by Shri Neelkanth Khandelwal and Shri K.C. Selvamani represented the respondent.
Padmashree Dr. D.Y., the assessee is a charitable trust. It has been granted registration under section 12A of the Income Tax Act by DIT (Exemptions), Mumbai, vide Registration No.40651 dated 21.03.2007 w.e.f 01-04-2006. The assessee, inter alia, runs a Medical college, Dental college, physiotherapy, Biotechnology and Nursing colleges at Nerul, Navi Mumbai. Shri Vijay D Patil and Smt. Shivani Patil is the main trustee.
The revenue carried out search and seizure operations in the hands of the assessee under section 132 of the Act and the assessments of AY 2013-14 to 2016-17 were completed under section 153A r.w.s 143(3) of the Act. The case of the revenue is that the assessee has collected Capitation fees through various employees for giving admission to students in various courses conducted by it. Such collection of capitation fees has not been accounted for in the books and further, it violated the clauses of the Trust deed and also the Maharashtra Educational Institutions (Prohibition of Capitation fee) Act.
Accordingly, the AO held that the assessee cannot be considered to be carrying on any charitable activity and accordingly denied exemption under section 11 of the Income Tax Act in all the years under consideration. The documents seized from the employees also revealed various types of payments made outside the books of account. Accordingly, he took the view that the books of accounts of the assessee were not reliable and accordingly, rejected them.
The assessee contended before the AO that it has not collected any capitation fees as alleged by him. However, the AO did not accept the same and accordingly assessed the capitation fees computed from the material seized from various employees from their residences as income of the assessee. Consequent to the denial of exemption under section 11 of the Act, the AO computed income under normal provisions of the Act and also levied tax under section 115BBE of the Act. Accordingly, various types of exemptions claimed by the assessee in terms of sec. 11 of the Act were also denied by the AO.
The search officials seized one pen drive and a diary from his residence, which contained the details of capitation fees collected in cash. The AO has relied upon those documents and also the answers given by Shri Pratap Patil to various questions posed to him in the statement taken under section 132(4) of the Act.
A two-member bench comprising of Shri B.R. Baskaran (AM) & Shri Pavan Kumar Gadale held that the information found in the pen drive/laptop of employees cannot be considered credible evidence unless they have been corroborated with any other evidence. Accordingly, no credence could be given to the abstract entries made in the pen drive/laptop. The ITAT viewed that the AO could not have made additions based on that information. Accordingly, we confirm the decision of CIT(A) to delete the additions in both years for the reasons discussed above.
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