Ved Jain, Adv., Ravindra Kumar Agarwal, C.A. for the Assessee. S. K. Madhuk, CIT (D.R.) for the Revenue.

The order deals with the following appeals.

1. I.T.(SS)A. No.293/Lkw/2019 – AY 2009-10

2. I.T.(SS)A. No.294/Lkw/2019 – AY 2010-11

3. I.T.(SS)A. No.295/Lkw/2019 – AY 2011-12

4. I.T.(SS)A. No.296/Lkw/2019 – AY 2012-13

5. I.T.(SS)A. No.297/Lkw/2019 – AY 2013-14

6. I.T.(SS)A. No.298/Lkw/2019 – AY 2014-15

7. I.T.(SS)A. No.299/Lkw/2019 – AY 2015-16

8. I.T.(SS)A. No.437/Lkw/2019 – AY 2013-14

9. I.T.(SS)A. No.438/Lkw/2019 – AY 2015-16

10. I.T.A. No.300/Lkw/2019 – AY 2015-16

In all the appeals the assessees have raised as many as 13 grounds of similar nature, consisting of legality of the assessment conducted under section 153 A of the IT Act and denial of exemption under section 11 of the Act. Owing to the similarity in the grounds raised, they are being adjudicated together.

2. The facts of the cases in brief, are that a search and seizure operation u/s.132 of the Income tax Act, 1961, was carried out in this case along with all the institutions/medical colleges and hospitals run by the assessee trust on 18.9.2014 at Head office of Sri Ram Murti Smarak Trsut at 4, LA Place,Lucknow and Registered office of Sri Ram Murti Smarak Trust N-3, & 4 ,MurtiBhawan , Rampur Garden, Civil Lines .Bareilly, (U.P)-243001.

3. The Trust, as part of its educational activity, runs:

(I). Shri Ram Murti Smarak Institute of medical Science. (SRMS-IMS), 13 Kilometres on Bareillt Nainital Road, Bhojipura ,Bareilly

(II). Shri Ram Murti Smarak School of Nursing 13 Kilometres on Bareilly Nainital Road, Bhojipura, Bareilly.

(III) Shri Ram Murti Smarak Institute of Paramedical Science, 13 Kilometres on Bareilly Nainital Road, Bhojipura ,Bareilly 13 Kilometres on Bareilly Nainital Road, Bhojipura ,Bareilly.

(IV) Shri Ram Murti Smarak Super Speciality Hospital & Trauma Centre, 13 Kilometres on Bareilly Nainital Road, Bhojipura ,Bareilly.

(V) Shri R.R. Cancer Institute & Research Centre,

(VI) Shri Ram Murti Smarak College of Engineering & Technology, 13 Kilometres on Bareilly Nainital Road, Bhojipura ,Bareilly.

(VII) Sri Ram Mrti Smarak College of Pharmecy, 13 Kilometres on Barilly Nainital Road, Bhojipura, Bareilly.

(VIII) Shri Ram Murti Smarak Women's College of Engineering & Tecnology, 13 Kilometres on Bareilly Nainital Road, Bhojipura ,Bareilly and (IX) City Centre Clinic, N-5, Rampur Garden , Bareilly.

4. Shri Dev Murti is the main Trustee and Chairman of the Trust while his spouse Smt. Asha Murti is also a trustee. Shri Aditya Murti is son of the main trustee Shri Dev Murti and looks after the management of the hospital and medical college of the trust.

5. During the search operation, many loose papers, registers and diaries of incriminating nature and cash were seized from the residence of Shri Dev Murti at 4, La-Place , Shahnajaf Road, Lucknow (which is also used as head office of the trust), residence of Shri Dev Murti at N-3,4, Murti Bhawan, Rampur garden, Bareilly which is also registered office of the trust and from the premises of M/s SRMS Institute of Medical Science, M/s SRMS Institution of Paramedical Science and SRMS College of Engineering & Technology, 13 Kms on Bareilly -Nainital Road, Bhojipura, Bareilly. Issue of Capitation Fees:

6. During the course of search of bedroom of Shri Aditya Murti in residential premises, situated at Rampur Garden Bareilly incriminating documents inventoried as annexure LP-1 was found and seized. Similarly incriminating documents found and impounded as annexure LP-6 from the medical college, incriminating documents found and impounded as annexure LP-7 were also found which indicated that the SRMS Trust was charging substantial amount in the nature of capitation fees from the students over the years which were not being accounted for in the accounts of the trust.

7. During the search Shri Aditya Murti was confronted with contents of the Annexure LP-1 containing page 1 to 27 particularly page No. 27 of this annexure which was found from his bedroom and following was found written on it:-

1) Shobhit Pal 23,00,000

2) Anuj Agrawal 50,00,000 73,00,000

C A Sir 7,50,000 65,00,000

Cash De

1000*2500 25,00,000

500 *8100 40,50,000

65,00,000

Shri Aditya Murti denied having any knowledge about these two names though the page was found from his bedroom.

8. From the findings of the Party MM-5 at the medical college it was gathered that Shri Shobhit Pal was an undergraduate student admitted to the medical college in the academic session 2013-14. His records were also impounded as Annexure LP-6 from the Medical College. His record showed that Rs. 9,08,500/- was paid as fee and other charges during admission. Hence the AO held that the amount of Rs.23,00,000/-, as mentioned on the seized paper, is a clear-cut evidence of acceptance of capitation fee over and above the usual fee for the said course.

9. Similarly case records of Shri Anuj Agarwal was found and impounded by the Party- MM-5 as Annexure LP-7. From the record it is evident that Shri Anuj Agarwal is a post graduate (MD) student of the medical college admitted for session 2013-14. An amount of Rs.18,94,940/- was paid for admission towards fee and other charges. The AO held that the amount of Rs. 50,00,000/- as found written on the seized paper is nothing but the proof of capitation fee charged by the Trust for ensuring his admission for the post-graduate course.

10. When Shri Aditya Murti was confronted that these papers indicated towards the capitation fee in cash, over and above the normal fee of Rs 8.5 lakh per annum, taken by the trust from these students for the admission, he again denied of having any knowledge about the noting on the page 27 and stated that no capitation fee was charged for admitting any student.

11. Shri Dev Murti was also confronted on this issue during operation of restrained order at his residence at Lucknow on 15/10/2014. He also denied having any idea about these two names and the nature of transaction inscribed on the page no. 27.

12. The AO held that in Page No. 27 of LP-1 is clear cut evidence of the system of acceptance of capitation fee/donation in cash for admission to the medical College. It was held that the finding gets substantiated by the Annexure LP-6 & LP-7.

13. The AO came to the conclusion based on the seized material that Rs.23,00,000/- represents cash donation being taken by the SRMS Trust for admission in the undergraduate (MBBS) medical course while it is Rs.50,00,000/- for the Postgraduate course (MD/MS).

14. Further, the paper recovered from the Sri Ram Murti Smarak College of Engineering & Technology, Bareilly by the Party ME-10, marked as Page no. 26 in Annexure LP-2 mentioned the name Ms. Ambika Mittal D/o Anil Kumar Mittal, UdhamSingh Nagar against which an amount of Rs. 40,00,000/- was written. The record of Ms. Ambika Mittal was found and impounded by the Party MM-5 as Annexure LP-8. The records showed that Ms. Ambika Mittal had been admitted for the MS in Ophthalmology course for the academic session 2014-15 in the SRMS- Institute of Medical Sciences, Bareilly. It was revealed that Rs. 11,25,000/- was paid by her during the time of admission for the course while the scribbling on the Page no. 26 an amount Rs. 40,00,000/- mentioned and based on these noting, the AO treated this as capitation fee by Sri Ram Murti Smarak Trust for admission in the medical college.

15. Shri Dev Murti was confronted on this issue during the operation of restrained order placed at residence at Lucknow on 15/10/2014. He denied having any idea about Ms. Ambika Mittal and stated that the amount written on the paper is just a rough calculation done at Accounts section. The AO held that the seized paper is one more evidence for acceptance of capitation fee/donation, over and above the normal fee for the course, by the Sri Ram Murti Trust while admitting students to the medical college.

16. During the course of assessment proceedings the assessee trust was again confronted on this point vide point No. 11 of questionnaire dated 07/11/2006 reproduced below:-

1. Pl go through the page No. 27 of Annexure LP-1 seized documents from the Bareilly residence of Shri Dev Murti and family (Party MR-1), containing page number 1 to 27, on which the following two students' name were found: -

1) ShobhitPal 23,00,000

2) AnujAgrawal 50,00,000 73,00,000

C A Sir 7,50,000 65,00,000

Cash De 1000*2500 25,00,000

500 *8100 40,50,000

65,00,000

Records of Shobhit Pal and Anuj Agrawal found and impounded as Annexure- LP-6 and LP-7 respectively from SRMS Medical College, Bareilly (Party-MM-5) shows that in Shobhit pal's case only Rs.9,08,500/- was paid as fee and other charges during admission. Similarly a piece of paper was received from Shri Ram Murti Smarak College of Engineering & Technology , Bareilly by Party ME-10 where on page No. 26 of Annexure-A, LP-2 it is written in hand writing the name Ms Ambika Mittal D/o Anil Kumar Mittal,Udhamsingh Nagar, in which an amount of Rs.40 lacs is written where as from the records of Ms Ambika Mittal found and impounded by party MM-5 as Annexure-LP-8 shows that she had been admitted for the MS in Ophthalmology course for the academic session 2014-15 in the SRMS institute of Medical Science Bareilly. It also reveals that only Rs.11,25,000/- was paid by her during the time of admission for course. Further there was seizure of two envelops marked as Annexure A-ll, on first envelop cash denomination "1000*2500" dated 18.4.14 was mentioned while on the second envelop cash denomination "1000*2000" was written. Shri Aditya Murti and Dev Murti could not explain the same. From the above seized documents mentioning specific amounts against the specific students these are clear cut evidences of acceptance of capital fees received from the students over and above the regular/ usual fees taken from the students at the time of admission in your medical /engineering college.

17. To the query, the assessee trust submitted its reply dated 30.11.2016 as under:-

"This is a rough paper having no specific date sign or any other particulars on it. It is reiterated that whatever amount is received from students, the same is dulynrecorded in the books of account of the Trust. As your good self has complete file of the student, direct confirmation may also be obtained in this regard. The subsequent Para of notice of your good self regarding LP-6 & LP-7 is reproduction of contents or records of college. We have verified the records of college and confirm that Shobhit Pal and Anuj Agarwal are the students in the College run by the Trust. Page 26 of Annexure A, LP-2 of Part ME -10 at SRMS GET is reproduced below- On perusal of the same your good self will find that it is as introductory slip and appears to have been written by the student at the time of visit to the Chairman and its contents are in congruity with the visitors slip used at the Trust whose specimen is reproduced below————-— while slip in question was lying there some rough calculation appears to have been done on its back. On verification of front & back of the said your good self will find that on both sides even writing is different. Further, rough calculation is in two different hand writing.

Thus , on a small piece of paper three different hand writings are there. In case of any doubt direct confirmation may be obtained from the student by sending notice u/s. 133(6) , as no capitation is received by the trust , whatever fee is received ,the same is duly recorded in the books of account."

18. The AO held that these documents cannot be termed as dumb documents. Based on these facts as emerging out of seized /impounded documents the AO held that it may be reasonably inferred that the SRMS Trust had been taking Rs.25,00,000/- as capitation fees on an average per student for admission in the MBBS course and Rs.75,00,000/- for MD/MS course. Holding thus the AO made addition of an amounts spread over the 7 years of assessment under section 153A . The details are as under:

TABLE-A

Batch Range(Rs.) Average

2008 5,00,000 to 7,00,000 6,00,000

2009 7,50,000 to 8,50,000 8,00,000

2010 8,50,000 to 10,00,000 9,25,000

2011 10,00,000 to 12,00,000 11,00,000

2012 11,00,000 to 14,00,000 12,50,000

2013 12,00,000 to 17,50,000 14,75,000

2014 23,00,000 to 25,00,000 24,00,000

MD/MS Post graduate Course Table –B

Course /Course Name Year 2014 Year 2013 Year 2012 Year 2011 MD/ Dermo Skin/VD

1,10,00,000 90,0,000 30,00,000

MD (TB & Chest) 51,00,000 45,00,000 - -

MS (Surgery) 51,00,000 35,00,000 - -

MD (Anesthesia) 30,00,000 35,00,000 & 37,50,000

49,50,000

MD(Medicine) 90,00,000 & 1,25,00,000

90,00,000 & 80,00,000

80,00,000

MD (Pethology) 21,00,000 - - 24,00,000 MS (ENT) 40,00,000 & 57,00,000

45,00,000 45,00,000

MS (Ophthalmology) 14,00,000 8& 18,00,000

MD (Radiology) 1,40,00,000

MS (Ortho) 1,40,00,000 73,00,000 47,00,000

On the basis of data depicted in tables A and B the year wise capitation fees for different years for MBBS courses has been worked out as under:-

TABLE-C

A.Y No. of seats Average capitation fees (Rs.) Total amount of capitation fees

2009-10 100 6,00,000 6,00,00,000

2010-11 100 8,00,000 8,00,00,000

2011-12 100 9,25,000 9,25,00,000

2012-13 100 11,0,000 11,00,00,000

2013-14 100 12,50,000 12,50,00,000

2014-15 100 14,75,000 14,75,00,000

2015-16 100 24,00,000 24,00,00,000

19. Further, the AO held that since this donation /capitation fee amount charged from the students is neither in the nature of the voluntary contribution nor found to have been derived from any property held under trust, it loses the character of being in the nature of income qualifying for any exemption under the provisions of section 11 and 12 of f the IT Act.

20. The AO while making the addition relied on the judgement in the case of Rohilkhand Educational and Charitable Trust, who is also in the similar line of activity of imparting medical education through its various institutions.

21. Aggrieved with the addition, the assessee filed appeal before the Learned CIT(A)-3, Lucknow. The observation of learned CIT(A), while confirming the addition, is reproduced as Under:

“I have examined the facts & circumstances of the case. I have considered the finding of the AO in the assessment order and the submissions of the appellant made during the appellate proceedings. The AO has noted that during the course of search at the premises situated at Rampur Garden, Bareilly, incriminating documents Annexure LP1-page 1 to 27, was found and seized from the room of Shri Aditya Murti on which name of two persons Shobhit Pal, Anuj Agarwal and amounts was found to be written, details of which are given as under:

1) ShobhitPal 23,00,000

2) AnujAgrawal 50,00,000 73,00,000

C A Sir 7,50,000 65,00,000

Cash De

1000*2500 25,00,000

500 *8100 40,50,000 65,00,000

Further it was noted by the AO that Shri Shobhit Pal was the undergraduate student at the medical College admitted for the academic session 2013-14 which is based on the records impounded as Annexure LP-6 from the Medical College and had paid Rs.9,08,500/- as fees and other charges. Similarly case records of Shri Anuj Agarwal found & impounded as Annexure LP-7 shows he was admitted as post graduate student in the medical college for session 2013-14 and had paid Rs. 18,94,940/- as admission fees and other charges. The AO held that Rs.23,00,000/- & Rs. 50,00,0007- written on the paper against the above students showed that the appellant has charged capitation fees in cash for the under graduate & post graduate courses.

Similarly annexure LP-2, Pg.26 which is a piece of paper recovered from Shri Ram Murti Samarak College of Engineering & Technology, Bareilly, the name of Ms. Ambika Mittal has been hand written and total amount written is Rs. 40,00,000/-. The case records show that she has been admitted for the course of MS in Ophthalmology course for academic session 2014-15 in SRMS Institute of Medical Sciences, Bareilly and paid Rs.11,25,000/-for admission. The AO held that Page 26 of Annexure LP-2 is a clear cut evidence that Rs. 40,00,000/- as capitation fees has been paid by the appellant Trust. Shri Aditya Murti,consultant of the Trust, who of the trust, could not satisfactorily explain the seized /impounded documents, mentioned as above. The AO made an addition of Rs. 8,00,00,000/- on account of undisclosed capitation fees charged by the appellant for undergraduate and post graduate courses....

The appellant has stated that the contention of the AO holding that assessee is receiving capitation fees in the year under consideration is not supported by any documents and is solely and purely based on conjectures and surmises since no incriminating documents were found for A.Y.2013-14, on the basis of which AO can claim that capitation fees was received by the appellant.

The appellant has contended that the pillar of assessment on the basis of which assessment proceedings has been framed and completed are the 3 dumb documents only.

There were no other documents found during the search proceedings from which some adverse inference could have been drawn. These dumb documents in itself can not in any circumstances become a conclusive evidence to prove that cash has been actually received. Assessee in its submission clearly explained all these three loose slips. Assessee has submitted that, out of these slips, Annexure A-11 is just an empty envelope which in itself does not prove anything, Annexure LP-2, Page no. 26 is just an visitor's slips which assessee has substantiated during assessment proceedings as well and explained above and Annexure LP-1, Page no. 27 is some rough calculations only, incidentally name of 2 students are mentioned in front of them. Ld. Assessing Officer has grossly erred in concluding that assessee is receiving capitation fees on the basis of above slips only, which is nothing but dumb documents.

The appellant has further stated that the addition has been made by the AO by extrapolating on the basis of loose slips found and by assuming that capitation fees has been received for all students despite the fact that only 3 loose slips found wherein name of the 3 students were mentioned, out of these 3 students, 2 were admitted in academic session 2013-14 and one student was admitted in academic session 2014-15. The appellant has contended that the AO was not justified in extrapolating the average of capitation fees received in the case of M/s Rohilkhand Educational & Charitable Trust in the case of the appellant.

On examination, I find that incriminating document annexure LP-1 page 1 to 27 were found and seized from the bedroom of Shri Aditya Murti who is the, consultant and looking after day to day management of the trust on which it is clearly written that the appellant has received Rs. 23,00,000/- from Shri Shobhit Pal and Rs. 50,00,000/- from Shri Anuj Agarwal. And the records of Shri Shobhit Pal and Shri Anuj Agarwal found and impounded as LP-6 & LP-7, showed that they have only paid Rs. 9,08,500/- and was admission fees. The receipt of Rs. 23,00,000/- from Shri Shobhit Pal & from Anuj Agarwal was also not found recorded in the books of account of the appellant and Shri Aditya Murti, son & consultant of the trust, could not explain the incriminating documents mentioned as above. Further it is noted that cash of Rs. 6,30,53,000/- was found during the course of search at 4-La Place, Shahnjaf Road, Lucknow residence of the trustee, out of which cash of Rs, 6,28,00,000/- was seized. Shri Dev Murti, trustee of the Trust did not satisfactorily explain the source of cash found during search hence it was treated as unexplained. Also during the course of search locker No. 5049 at Axis Bank, Ashok Marg,Lucknow in the name of Smt. Asha Murti and Shri Dev Murti, Trustee of the Trust was operated and cash of Rs.1,00,00,000/- was found kept in envelopes. Rs.25,00,000/- & Rs.20,00,000/- were found in sealed envelopes P-1 & P-2. On P-1 it was written 'Donation received from Ankita Srivastava', on P-2 from Mr. Vineet Verma, SRMS. Rest of the amount was found in bundle of Rs.1,00,00,000/- with slips bearing signature and different dates. Shri Dev Murti could not satisfactorily explain the cash of Rs. 1,00,00,000/-found in the Locker.

Considering the fact that the cash found during the course of search of Rs. 6,30,53,000/- found (un)recorded in the books of account, on the date of search the reconciliation of cash submitted by the appellant during assessment proceedings is considered as an afterthought and not found acceptable. The source of cash of Rs.6,30,53,000/- & Rs.1,00,00,000/- found during the course of search have been found to be not satisfactorily explained by Shri Dev Murti, trustee of the Trust. The documents found during the course of search i.e. LP-1, pg. 1 to 27, LP-6,LP-7,LP-2,LP-8 and the cash found during the course of search of Rs. 6,30,53,000/- and Rs.1,00,00,000/- have to examined together rather than in isolation and it reflects the true state of affairs of the appellant trust. It substantiates the fact that the appellant has charged capitation fees over and above the admission fees charged for under graduate and post graduate courses for the year under consideration. Hence appellant's contention that documents found and seized during the course of search are rough and dumb documents and no incriminating documents were found during search is devoid of any merit and is found to be unacceptable.

Considering the totality of facts and circumstances of the case and the material on record, I find that the appellant has charged capitation fees, over and above the admission fees charged for graduate and under graduate courses for the year under consideration, hence addition of Rs.8,00,00,000/- made by the AO on account of undisclosed receipts of capitation fees on the basis of the comparable case of M/s Rohilkhand Educational & Charitable Trust is held to be justified & is hereby upheld.

22. Aggrieved with the order of the LD.CIT(A), the assessee filed appeal before the ITAT, Lucknow.

23. During the arguments before us, the learned A.R. reiterated the arguments taken before the learned CIT (A). It was argued that the loose slips found during the course of search relates to FY 2014-15 & 14-15 only.

It was argued that there were empty envelops and no cash has been found in the envelopes hence, this cannot be treated that any amount has been received from the college students. It was explained that the discretion of the college to admit the students is minimal and the students are alloted to different medical colleges by the U.P. unaided medical colleges welfare association(UPUMCWA). The association in turn calls for advertisement for admission from the eligible people and a merit list is declared by the UPUMCWA on the basis of the entrance test or any other criteria prescribed.

The LD. AR has took us to the process of admission of Anuj Agarwal, Shobhit Pal and Ambika Mittal. It was argued that the seat allotment was given to Ambika Mittal vide letter dated 14/04/2014, in the case of Anuj Agarwal vide letter dated 22/05/2013. Similarly in the case of Shobhit Pal, the allotment letter has been issued on 06/07/2013 based on the general merit of the student. Since the allotment letters also show different FY, the addition made by the assessee based on the scribbling on the empty envelopes cannot be held to be legally valid. Further the hand writing on the letters was not examined by the Revenue but only the presumption clause has been invoked just because the envelopes have been found from the premises of the one of the trustees, namely Aditya Murti. It was also argued that the reliance on the case of Rohilkhand Educational and Charitable Trust is totally unwarranted as the facts of that case are totally different to the operations of the assessee trust. Regarding the extrapolation, the learned A.R. argued that the order of the Revenue extrapolating the amounts for the period of seven years based on three loose slips is totally unwarranted as no evidences of collection of donation has been found during the search.

24. On the other hand, the learned D.R. argued that the provisions of section 132(4A) allows the Revenue to presume that the contents of the books of accounts or other documents are true and in cases wherein it is reasonably assumed to have been signed, stamped, executed or attested. Coupled with the fact that there has been seizure of Rs.6.30 crores of cash during the search only reflects that the assessee is in the course of collection of capitation fees on a regular basis.

25. Heard the arguments of both the parties and perused the records available before us.

26. We have gone through the seized materials mainly page No. 27 of Annexure LP1, page No. 26 of LP2 and Annexure A-11, the same are as under: (The scanned copies)

27. For the adjudicatory purpose, we have examined evidence collected by the revenue and other factors which were considered /not considered while resorting the addition and consequent extrapolation.

28. The evidence collected is, the writings on an empty envelope in which no money was found. There is another slip which is a visitor’s slip. Other than these two slips there was no evidence in the possession of the revenue. Cash of Rs.7.3 crores was also found during the search action. We have examined the issue in the context of the post search investigations, assessment completed and the material on record.

• Whether any examination/enquiry as to the handwriting on the seized material namely, the envelope and the visitor slip – NO

• Whether any statement of the students mentioned on the envelopes has been recorded – NO

• Whether any other material corroborating the writing on the envelope is available – NO

• Whether any statement u/s 132(4) proving the receipt of the donation during the search/post-search/assessment proceeding – NO

• Whether any statement of any other student/parent recorded for verification of payment of donation – NO

• Is there any other seized material /documents reflecting the receipt of donation – NO

• Whether any infarction in admission of students against the guidelines of UPUMCWA were unearthed – NO

29. We have also considered the arguments of ld. DR as to the clause of presumption as per the Income Tax Act. The Revenue is basically relying on the presumption as contained in Section 132(4A) read with Section 292C. For the sake of convenience, we reproduce Sections 132(4A) and 292C as under:

132 (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed –

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person,are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. Presumption as to assets, books of account, etc.

292C. [(1)] Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 [or survey under section 133A] it may, in any proceeding under this Act, be presumed –

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person,are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.]

[(2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of section 132A then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub- section (1) of section 132A, had been found in the possession or control of that person in the course of a search under section 132.]”

30. In respect of Section 132(4A), the Hon’ble Supreme Court in the case of P.R. Metrani v. CIT, 287 ITR 609 held that such presumption is restricted to summary assessment under section 132(5) for deciding as to retain or release assets seized in the search for the purposes of determining the estimated tax liability. The presumption does not extend to regular assessment thereafter.

31. In order to overcome this difficulty, Section 292C was introduced which provided raising of presumption in regular assessment in respect of books of account or documents, money bullion, jewellery etc found in the possession or control of any person in the course of search under section 132. However, basic ingredients of these presumptions are contained in Section 132 (4A). These ingredients are (i) books of account, other documents, money, bullion, jewellery or valuable article or things should be found in the search. (ii) they should be found in the possession or control of any person in the course of search (iii) if these two conditions are satisfied then a presumption is raised against the assessee (i) about ownership of the documents/ books of account/money/ bullion/jewellery /valuable articles or things as belonging to such persons, (ii) about truthfulness of books of account and documents; and (iii) about signature or handwriting which is presumed to be of such person. Section 132(4A) or 292C shows that for raising the presumption against a particular person, it is not necessary that search should be carried out against such person. Where a search is carried out against a person and documents, money, bullion, jewellery, valuable articles or things are found in possession/control of another person during the course of the search then such presumption can be raised only against such another person in whose control and possession the valuable assets/documents are found, even though no warrant for search has been issued against him. Carrying out search against the person i.e issuance of warrant of authorization against the person for raising presumption is not necessary. There should be a search and the person is whose control and possession assets/books/ documents are found may be some person or may be other. If these items are found in control and possession of the person searched then presumption would be raised against the person searched in respect of these items. But if these items are found in control and possession of some other person during the course of search then presumption would be raised against that other person.

32. In the absence of working out of the basic parameters regarding the ownership of transactions as to how they culminate into the determination of concealed income, the presumptive clauses provided u/s 132(4A) cannot be invoked in the instant case.

33. We have also considered the fact of seizure of cash and its relation to the collection of capitation fees. The cash balance as per the books of account as on 18.09.2014 was Rs.8.5 crores. The cash seized was Rs.6.6 crores. Hence, the revenue’s endeavor to relate the presence of cash to collection of capitation fee false flat. The issue of cash seizure is dealt further in this order about its source, accountability, reconciliation and taxation thereof.

34. We find that there has been a sequence of admission of Shobhit Pal and Anuj Agarwal to the medical courses which has been narrated above. No examination of the students from whom the amounts purportedly have been received has been undertaken by the revenue to prove receipt of donation. The writings on the empty envelops have not been examined. Other than the loose papers, there has been no evidence corroborating receipt of the amounts from these two persons to the tune of Rs.73 lacs.

We also find that no primary evidence has been available with the Revenue authorities extrapolating the amount and work out the donation purportedly received. The addition of Rs.29.30 crores has been made on the strength of two papers wherein the amount of Rs. 65 lakhs has been purportedly written cannot be held to be valid. The reliance on the case of M/s Rohilkhand Educational & Charitable Trust is found to be misplaced.

35. Hence, keeping in view, the entire facts of the case, having given due consideration to of the seized material, having mulled over the arguments of ld. AR and the ld. DR, after going through the presumption as to assets, books of accounts u/s 292C and after examining the process of admission as per UPUMCWA, we hereby direct that the addition made by the Assessing Officer cannot be held to be legally valid and so as the extrapolation made by the AO for the other years.

I.T.A.No.299/Lkw/2019 (Assessment Year 2015-16) CASH SEIZURE:

36. During the course of search a total amount of Rs.7,30,53,000/- has been found in the residential premises belonging to Sri Ram Murti Smarak Trust, which is also the registered office of the trust and at 4, La Place, Lucknow, the Head Office of the assessee trust,. The statement of Shri Dev Murti has been recorded during the search as well as post search proceedings, who stated that the amount of Rs.7,53,000/- belongs to him and rest of the amount of Rs.6,22,47,000/- belongs to assessee trust. The Revenue made substantive addition on account of unexplained cash in the hands of Shri Dev Murti for the assessment year 2015-16 and on protective basis in the hands of the assessee trust. The learned CIT(A) upheld the addition of Rs.7,30,53,000/- in the case of Shri Dev Murti holding that the cash belonging to Shri Dev Murti and confirmed the addition and deleted in the hands of the assessee.

37. During the course of arguments before us, Learned AR. argued that the reconciliation chart pertaining to cash seizure has been submitted to the Revenue authorities, which proves that the cash balance as per the books of account is Rs.7,30,77,143/-. He also brought to our notice the letters dated 27/10/2014 and 09/01/2015 filed by the assessee before the Revenue authorities for release of this seized cash. He also brought to our notice various statements recorded by the Revenue authorities on the date of search as well as during the post search enquiries.

38. Learned DR. argued that the fact the cash has been found at the premises of Shri Dev Murti cannot be disputed and hence, the same needs to be assessed in the hands of Shri Dev Murti as unexplained income. Rebutting the arguments of Learned DR., Learned A. R. argued that it has been submitted time and again along with the evidence that the cash belongs to the assessee trust and the books of account seized by the department shows Rs.8,50,72,654/- as cash balance as on 18/09/2014. Hence under no circumstances, it can be treated the cash belonging to Shri Dev Murti as unaccounted.

39. Further during recording of the statement on oath of Shri Dev Murti on 15/12/2014, question No. 1 to 5, it was again clarified that the amount found and seized belongs to the assessee trust and is duly accounted for and also complete reconciliation along with the supporting vouchers and bank statements have been submitted. The summary of the cash reconciliation is as under:

40. We have heard the arguments and perused the statement and facts on record.

41. During the search proceedings, it was categorically explained that the cash found belongs to the assessee trust. The relevant portion of the statement of Shri Dev Murti, Trustee of the assessee is as under:

42. Further, we also find that during the statement recorded on 15/03/2014, Shri Dev Murti explained that the cash belongs to the trust and reconciliation has been provided. The relevant part of the statement of Shri Dev Murti is as under:

43. We find that the evidence of cash as per books is in the knowledge of the department. It is not in dispute that the books of account as on the date of search have been seized/impounded by the revenue by the way of computer backups and hard discs. We have gone through the reconciliation filed by the assessee. The cash deposited in the bank account can be examined from the bank statement, which is to the tune of Rs.3,70,25,184/- an amount of Rs.4,83,18,695/- has been spent for expenses but not accounted for. The receipts have been shown as registration fee received and to be accounted, students fee received and to be accounted from SRMS CET and SRMS IMS. Further, it has also shown to have been received on account of hospital revenue of SRMS IMS. The expenses consists of petty cash expenses, hospital revenue deposited in bank, fee received in cash, expenses incurred in construction and expenses of SRMS Trust, Diagnostic centre. Based on these facts, it can be conveniently arrived that the cash has to be assessed in the hands of the trust SRMST, Bareilly. The reconciliation statement has been rejected en-bloc by the revenue. The facts or the explanation given by the assessee has not been examined by the Revenue in a right perspective so as to determine the accountability of these amounts in the regular books or not. Hence, keeping in view the cash deposited in the bank, expenses, cash balance as per the books and cash found at the premises, the reconciliation filed by the assessee, we here by remand the matter to the file of the assessing officer for the limited purpose of verifying the cash balances with the regular books of accounts filed by the assessee as well as with the balance sheets and income and expenditure accounts available with the revenue along with the returns and the books of accounts available in the seized material. In order to arrive at a coherent decision, this exercise of verification shall be carried out under the effective supervision of the officer who authorizes the officers to file appeals before the tribunal so as to avoid duplication.

ITA 300/Lkw/2019 (AY 2015-16)

44. The only issue involved in this case is the addition of cash seized during the search conducted in the premises on 18/09/2014 in the group cases of Shri Ram Murti Smarak Trust. The cash seized has been treated as income of the assessee whereas it has been explained undisputedly that the cash belongs to the trust in which the assessee is a trustee. The material found during the course of search, books of account and the cash found have to be examined together rather than in isolation and it should reflect the true state of affairs of the assessee. The taxation has to be done as per law in the correct hands. Since we have already adjudicated on the issue of cash seizure in the case of the trust, we hereby delete the addition made in the hands of the trustee.

I.T.A.Nos. 437 & 438/Lkw/2019.

Valuation of properties/Unexplained investment in the building:

45. During the course of assessment proceedings, the valuation of buildings of various institutions of the SRMS trust at Bareilly was referred to the valuation Cell. The assessee's objections on such reference filed vide its letter dated 30.9.2016 were disposed off vide the office letter dated 14.10.2016. The report of the DVO dated 27.12.2016 was confronted with the assessee trust by the AO. The assessee in the reply dated 29.12.2016 has submitted that no addition on account of difference in the cost of construction reported by its valuer and as per report of the DVO could be made as the difference worked out of Rs.4,03,72,178/- by the assessee trust is calculated to be less than 15%. It is further stated that the investment of Rs.2,37,75,119/- made in the financial year 2014-15 has not taken into account by the DVO. However, the AO held that since the DVO has worked out the difference of Rs.4,03,72,178/- arising upto A.Y.2013-14 in his report, therefore the difference has been added in the assessment year 2013-14 u/s.69B of the I.T. Act.

46. The learned CIT(A) deleted the addition as the difference between the actual investment, shown by the assessee and the estimated by the D.V.O., is only 9.86%, which is less than 15%. During the arguments before us, the Revenue could not controvert the factual findings. Hence, the addition made on account of the difference of the investment and as estimated by the D.V.O., being less than 15%, the same is hereby ordered to be deleted. The order of learned CIT(A) on this issue is confirmed.

47. In the result, the appeals of the assessee are allowed whereas the appeals of the Revenue are dismissed.

48. Before parting, it is noted that the order is being pronounced after 90 days of hearing. However, taking note of the extra ordinary situation in the light of the covid-19 pandemic and lockdown, the period of days of lockdown have been excluded for the purpose of computation of limitation relying on the decision of Co-ordinate Bench of ITAT Mumbai in the case of DCIT Vs JSW Ltd. in ITA No. 6264/Mum/2018 order dated 14.05.2020.

(Order pronounced in the open court on 25/06/2020)

Sd/- Sd/-

( A. D. JAIN ) ( Dr. B. R. R. KUMAR )

Vice President Accountant Member

Dated: 25/06/2020