ITAT Deletes Rs. 24 Lakh Capitation Fee Addition Due to Lack of Evidence Linking Payment to Assessee [Read Order]

The case revolved around an assessment order passed u/s 147 and section 143(3) of the Income Tax Act, where the Assessing Officer had added Rs. 24 lakh to the assessee’s income, treating it as unexplained expenditure under section 69C. This addition was based on information received from the Investigation Wing following a search at Santosh Medical College, Ghaziabad, and statements made by Dr. P. Mahalingam, Chairman of the Santosh Group of Institutions.

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Hitesh Rohilla, a student at the time of admission to the medical college, had filed his return declaring an income of Rs. 2,18,060.

The Assessing Officer, relying on seized documents and the statement of Dr. Mahalingam, concluded that the assessee had paid Rs. 24 lakh in cash as capitation fee for admission. The officer reasoned that since the institution’s chairman had admitted to accepting capitation fees from students, and the assessee’s name appeared in the seized records, the payment could be reasonably inferred. The regular tuition fee of Rs. 7,18,000 paid by the assessee was accepted, but the alleged cash payment was treated as unexplained and added to the income.

The assessee challenged this addition before the Commissioner ofIncome Tax (Appeals), arguing that he had never paid any capitation fee and that all admission formalities were handled by his parents. He further submitted that the authorities had not provided any documentary evidence directly linking him to the alleged cash payment. He also contended that he was not given an opportunity to cross-examine Dr. Mahalingam, whose statement formed the primary basis for the addition. The CIT(A) upheld the addition, citing the Supreme Court’s decision in Sushil Bansal vs PCIT (2020), and held that the statement of the chairman was sufficient to support the addition.

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On further appeal, the ITAT examined the matter in detail. The bench, comprising Anubhav Sharma, Judicial Member, and Brajesh Kumar Singh, Accountant Member, noted that the documents and statements relied upon by the Assessing Officer only indicated that capitation fees were generally collected from parents of students, not directly from the students themselves. The Tribunal observed that neither the assessment order nor the CIT(A)’s order provided any concrete evidence or analysis to show that the sum of Rs. 24 lakh was actually paid by Hitesh Rohilla. The ITAT emphasized that in the absence of any direct evidence linking the payment to the assessee, the addition could not be sustained.

Citing the Delhi ITAT’s earlier judgments in the cases of Shri Naresh Pamnani V. ITO (2019) and Shri Manjit Singh Gahlot V. ITO (2022), the ITAT reiterated that additions based solely on statements or third-party documents, without sharing adverse evidence or granting cross-examination, are not justified.

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