The assessee is a charitable trust registered under Section 12A of the Act. A search was carried out at the premises of the assessee on 18^th July, 2013. It was held that:

1. Amounts paid to contractors in cash or for other non-specified purposes cannot be added as unexplained expenditure under Section 69C of the Act simply because they have been paid in cash, and without any material to sustain the addition and merely if the assessee has not produced evidence in addition to the books of account, if the assessee has accounted for the expenditure in its books of account, and the same has been audited as genuine and the Assessing Officer has not rejected the books of account, the addition is to be deleted. Even if the expenditure is deemed to be for non-specified purposes, the assessee must have the benefit of the Explanation to Sections 11(1) and 11(2) of the Act.
2. Information found during the course of search pertaining to amounts given as unsecured loans cannot be added to the income of the assessee since the CIT(A) has given a clear finding that the amounts do not belong to the assessee. Also, the matter was remanded to the Assessing Officer for the limited purpose of verifying the bank statement showing payments of the amounts not from the assessee but from an account of a third party viz. Hotel Solitaire.

• Amounts withdrawn by the assessee from the bank and alleged to have been made to three parties cannot form the basis of addition since additions cannot be made on surmises and conjectures. The amounts were recorded in the books of account and there was nothing to show that payments had been made to the three parties mentioned. Also, the break-up of payments were not provided the Assessing Officer. The Assessing Officer ought to have made an enquiry pursuant to the books of account but none was made and hence the addition is deleted.

1. Amounts received as development fee over and above that prescribed by the government cannot be termed as capitation fee is the Assessing Officer has no material to show that the amounts received were not in the nature of voluntary donations. Reliance placed on statements of persons that the assessee collected capitation fee cannot be accepted since no opportunity of cross examination was provided to the assessee. Also, there was no evidence to show that payments were made de hors the books of account. Hence, the additions on account of capitation fee are to be deleted and exemption under Section 11 to be given.

A statement made during course of search under Section 132(4) of the Act cannot form basis of addition even if the same is not retracted since neither the assessee nor the AO could justify the addition and in fact the assessee has produced evidence through books of account that the payment was made towards construction. It is the duty of the Assessing Officer to prove the same with corroborative documentary evidence and failure to do so would warrant deletion of addition. Also, the assessee had made the statement under a wrong notion of law and to buy peace with the department.  (AY. 2010-2011, 2011-2012, 2012-2013, 2013-2014, 2014-2015)