Statement of College Authorities that Capitation Fee was paid in Cash can’t be used against Assessee: ITAT deletes Addition

Capitation Fee - Capitation-Fee-ITAT - assessee - Taxscan

The Income Tax Appellate Tribunal (ITAT), Delhi bench has recently deleted an addition against the assessee by observing that the addition cannot be made against the assessee solely on the basis of the statement from the college authorities that the capitation fee was paid by the assessee in cash.

The assessment against the assessee was reopened based on the information from the Investigation Wing that search was conducted under section 132 of the I.T. Act, 1961 on 27.06.2013 in Santosh Group of Institutions and Dr. P. Mahalingam. During the search, certain documents/books of account were seized from their premises and Administrative Block at Ghaziabad which reveals receipt of donation/capitation fees over and above the regular course fees paid in cash by parents of the students for taking admission in various medical courses. Allegedly, during the search proceedings, Dr. P. Mahalingam, Chairman of the Trust in which he has categorically admitted of accepting donation/capitation fees in cash and offered this unaccounted money for taxation in relevant assessment years.

The Tribunal, while hearing an appeal filed by the assessee, noted that the entire addition is based on the statement made by Dr. P. Mahalingam which were recorded under section 132(4) of the Act, in which, he has admitted to having received donation/capitation fees in cash which was surrendered for taxation.

“The assessee, however, denied having paid any amount in cash on account of donation/ capitation fees to Dr. P. Mahalingam or the College in which his son was admitted for MBBS Course. Since the Revenue Department alleged that assessee has paid cash of Rs.27 lakhs as donation/capitation fees, therefore, the onus is upon A.O. to prove through cogent and reliable evidence that assessee has in fact paid cash by way of donation or capitation fees to the Medical College and Dr. P. Mahalingam,” the Tribunal observed.

Noting that the right to cross-examination was denied to the assessee to check the authenticity of the statement recorded, the Tribunal observed: “It is well settled Law that any adverse material collected at the back of the assessee when not confronted and that if any statement is recorded by the A.O./Revenue Department at the back of the assessee and such statement is not allowed for cross-examination on behalf of the assessee, such material cannot be considered against the assessee in the Income Tax proceedings and such material/statement cannot be read in evidence against the assessee.”

Deleting the addition, the Tribunal noted, “there is no other material available on record so as to make any addition against the assessee. Thus, onus upon the Revenue Department to prove that assessee paid cash to Dr. P. Mahalingam or the Medical College is not discharged in the present case.”

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