In a major relief to Ananda Social & Education Trust, the Income Tax Appellate Tribunal (ITAT), Bangalore bench has deleted additions holding that the Assessing Officer has made additions in respect of suppressed fee receipts and COMED-K seat blocking scam merely based on seized materials without conducting proper inquiries on the allegations against the assessee-Trust.
In the year 2015, there were news reports that the CBI initiated an investigation in the seat-blocking scam involving the Consortium of Medical, Engineering and Dental Colleges of Karnataka (COMEDK) and some private colleges where the Trustees of the assessee was involved.
A search was conducted on the premises of the assessee, following which the assessing officer completed assessments based on the seized documents and other materials for the periods 2008-09 to 2014-15.
The main observations of the assessing officer was that (i) the assessee is the taxable fee charged for MBBS seats under Management/NRI quota, (ii) the fee charged by the assessee MBBS seats under COMED-K cancellation seats was not offered to tax, and (iii) the assessee suppressed the fee charged for PG Courses.
The “COMED-K entrance test” is conducted by the body or association of Professional colleges on the basis of an agreement entered between the Government and the Association, based on the ranks secured, the candidates will be admitted as per the fee agreed between the Government and Association. As per the agreement, if any of the seats falling under COMED-K quota remain unfilled after completion two rounds of COMED-K counseling process, those seats shall be handed over to the respective colleges and the management may fill them at their discretion, but the fees to be charged for these seats should not exceed the fees agreed upon through the Agreement entered between the Government and Association.
The management/NRI quota seats are filled by the respective colleges and they exercise their own discretion in allotment and charging of fees. The fee charged under this quota shall be higher.
The assessing officer alleged that the assessee is collecting money over and above the regular fees from the students at the time of admission.
The Tribunal accepted the argument of the assessee that it has received fees from students both by way of cash and also through banking channels and the same is duly accounted.
“We notice that the assessee has contended that the presumption to be entertained in such kind of situation is that the students have only confirmed the payments which have been duly accounted for by the assessee, i.e., no adverse report was given by any of the students,” the Tribunal said.
“Even though the AO has observed that huge cash was seized during the course of a search, yet it was shown by the assessee that all those cash are accounted for in the books of accounts,” it added.
Based on the decisions of the Madras High Court, the Tribunal deleted the addition noting that the assessing officer has only drawn certain inferences on surmises and conjectures.
Commenting on the scam, the Tribunal further noted that “there is no dispute that the assessee has to admit the students under the COMED-K category out of the rank list published for the entrance exam conducted for this category. It is not the case of the AO that any students outside the rank list have been admitted under this category. There is no dispute that the fee structure under this category is lower than the fees applicable for management quota. In this kind of situation, if any student has qualified under entrance examination conducted for COMED-K category and admission is also made out of the rank list of that examination, then no one will agree to pay higher fees than that prescribed for COMED-K category. If anybody agrees to pay, the same would be against human probabilities. If the assessee had demanded higher fees, then the concerned student had a right to lodge a complaint with the State Government, as it violative of the consensual agreement entered between the Association and Government.”
