2017 (10) TMI 418 - AT - Income Tax

Tribunal reinstates trust registration, citing lack of evidence under Section 12AA(3).

Vishwaroopa Charity Trust Versus CIT (Exempt ion), Kolkata

The Tribunal found the cancellation of the appellant trust's registration under Section 12AA(3) unsustainable due to lack of evidence showing the trust's ... Cancelling the registration granted to the assessee trust u/s 12AA - bogus donations - grounds for cancellation for registration u/s 12AA(3) is that the activities of the trust should not be genuine or the activities of the trust are not being carried out in accordance with the objects of the trust - Held that:- There is no evidence whatsoever brought on record to show that the cash was paid by the assessee which in turn reached the hands of HHBHRF which was returned in the form of donation to the assessee after retaining the commission. As we have already observed that the answer to question no.22 given by Shri Swapan Ranjan Dasgupta referred to donations given in the financial year 2011-12 as bogus donations. With regard to the donations received/given prior to 31.03.2011 there is no reference to such donations given or received by HHBHRF being in the nature of bogus donations. The assessee had received the donation from HHBHRF on 03.03.2011. It is therefore not possible to place reliance on the statement recorded at the time of survey and come to a conclusion that the assessee has been indulging in money laundering. In answer to question no.23 Shri Swapan Ranjan Dasgupta founder director of HHBHRF has made reference to certain middle men who are engaged in money laundering using HHBHRF as a medium for money laundering. There is no evidence brought on record to show any connection between those brokers and the assessee. In the absence of such corroborative evidence, it is not possible to come to any conclusion that the assessee indulged in money laundering and that the donation received by the assessee from HHBHRF was a bogus donation. Cancellation of registration granted to the assessee u/s 12A of the Act cannot be sustained and the impugned order is hereby quashed. The appeal of the assessee is accordingly allowed. Issues Involved:1. Legality of the cancellation of registration under Section 12AA(3) of the Income Tax Act, 1961.2. Examination of the genuineness of the activities of the appellant trust.3. Consideration of evidence regarding the corpus donation received.4. Opportunity for cross-examination of the Director of Herbicure Healthcare Bio-Herbal Research Foundation (HHBHRF).5. Validity of retrospective cancellation of registration.Detailed Analysis:1. Legality of the Cancellation of Registration under Section 12AA(3):The appellant challenged the order dated 10.01.2017 by the Commissioner of Income Tax (Exemptions), Kolkata, which canceled its registration under Section 12AA(3) with effect from 1.4.2010. The Tribunal noted that the assessee trust was registered on 06.07.1981 and had been enjoying the benefits of registration while engaging in various charitable activities.2. Examination of the Genuineness of the Activities of the Appellant Trust:The CIT(E) canceled the registration based on a survey conducted on HHBHRF, which revealed that HHBHRF was involved in providing accommodation entries for bogus donations. The CIT(E) alleged that the appellant trust received a corpus donation of Rs. 5 lakh from HHBHRF during the Financial Year 2010-2011, which was considered an accommodation entry. However, the Tribunal found no evidence that the activities of the appellant trust were not genuine or were not being carried out in accordance with its objects.3. Consideration of Evidence Regarding the Corpus Donation Received:The Tribunal examined the statement of the founder director of HHBHRF, which indicated that HHBHRF started receiving bogus donations after the Financial Year 2010-2011. The donation received by the appellant trust was dated 03.03.2011, before the period of alleged bogus donations. The Tribunal found no direct evidence that the appellant trust had indulged in money laundering or arranged for bogus donations through brokers.4. Opportunity for Cross-Examination of the Director of HHBHRF:The appellant argued that the CIT(E) canceled the registration without providing an opportunity for cross-examination of the Director of HHBHRF, violating principles of natural justice. The Tribunal agreed that no such opportunity was provided, and there was no corroborative evidence linking the appellant trust to the alleged money laundering activities.5. Validity of Retrospective Cancellation of Registration:The Tribunal noted that the CIT(E) canceled the registration with retrospective effect from 1.4.2010, which was not supported by the provisions of the Income Tax Act. The Tribunal emphasized that the grounds for cancellation under Section 12AA(3) require evidence that the trust's activities are not genuine or not in accordance with its objects, which was not established in this case.Conclusion:The Tribunal concluded that the cancellation of the appellant trust's registration under Section 12AA(3) was unsustainable due to the lack of evidence showing that the trust's activities were not genuine or not in accordance with its objects. The Tribunal quashed the impugned order and allowed the appeal, reinstating the trust's registration.