2023 (6) TMI 1404 - AT - Income Tax

ITAT restores trust registration and approval after finding cancellation based on inadmissible evidence without cross-examination

ITAT Raipur set aside CIT(E)'s order cancelling trust's registration under section 12AA and approval under section 10(23C)(vi). The cancellation was based ... Revocation of registration granted u/s 12AA - proceedings of cancellation were initiated against the assessee trust as inspired by the report of ld. CIT(E), Kolkata wherein it is informed that the assessee society has received bogus donations from 3 of entities - HELD THAT:- Submission of the assessee that the same trust has given donation to Sh. Jainarayan Hariram Goel Charitable Trust [2021 (8) TMI 421 - ITAT RAIPUR] wherein name of Hebicure Healthcare BioHerbal Research Foundation wherein it was the observation that a statement cannot be used as evidence since the statement was never supplied to the assessee nor the assessee was allowed an opportunities to cross examine such person whose statement is being sought to be relied upon by the ld. CIT(E). Once these documents are ignored, there remains no material with the department to hold that the assessee received the donation from M/s Hebicure Healthcare Bio-Herbal Research Foundation, Kolkata in lieu of the cash. Therefore, on the basis of such information registration could not be withdrawn. The assessee’s contention has got merit which is further substantiated by the department by granting them registration u/s 12A(1)(ac)((vi) & 80G(5)(iv) of the Income Tax Act on 10.03.2022. No substance in the contention of the department and therefore, are of the view that once the department itself has accepted that the assessee’s activities are genuine, the cause for invoking provisions of section 10AA(3), effecting the cancellation of registration u/s 12A becomes nullified and therefore, considering the explanations and decisions in favour of various donors allegedly involved in the transactions of bogus donations who have granted donations to the assessee trust, we are of the opinion that the order of cancelation by ld. CIT(E) cannot survive, since the registration is granted to the assessee society having no change in its activities, byelaws and objects in a later year. We therefore, set aside the order of ld. CIT(E) and direct to restore registration u/s 12A of the society. Approval u/s 10(23C)(vi) - Since, the provisional registration u/s 12AA(i)(ac)(vi) and 80G(v)(iv) of I.T. Act has already been granted by ld. PCIT on 10.03.2022, therefore, the activities of the assessee societies are considered as genuine. In back drop of aforesaid discussion, we are inclined to set aside the order of ld. CIT(E) withdrawing the approval to the assessee society u/s 10(23C)(vi) dated 15.02.2019 and direct ld. CIT(E) to restore approval u/s 10(23C)(vi) to the assessee society. In the result ground of the appeal in the instant appeal of the assessee are allowed. Issues Involved:1. Revocation of registration granted under section 12A.2. Cancellation of approval granted under section 10(23C)(vi).Issue-wise Detailed Analysis:1. Revocation of Registration Granted Under Section 12A:The assessee, a trust registered under section 12A since 07.03.2003, faced revocation of its registration by the Commissioner of Income Tax (Exemption) [CIT(E)], Bhopal, effective from 1st April 2010. The primary allegation was that the trust was involved in money laundering through bogus donations, which was deemed not in accordance with its objectives. The CIT(E) relied on reports from CIT(E), Kolkata, and statements from various entities to support the revocation.The assessee contended that the revocation was based on unsubstantiated allegations and statements that were not corroborated by tangible evidence. The assessee argued that no specific evidence was provided to show that cash was exchanged between it and the donor trusts. Additionally, the statements relied upon did not specifically implicate the assessee. The assessee emphasized that its activities were genuine and aligned with its objectives, as evidenced by the re-registration under sections 12A and 80G granted on 10.03.2022.The Tribunal found merit in the assessee's arguments, noting that the department failed to provide concrete evidence against the assessee. The Tribunal also observed that the re-registration granted to the assessee indicated the department's acceptance of the trust's genuine activities. Consequently, the Tribunal set aside the CIT(E)'s order and directed the restoration of the registration under section 12A.2. Cancellation of Approval Granted Under Section 10(23C)(vi):Following the revocation of registration under section 12A, the CIT(E) also canceled the approval granted to the assessee under section 10(23C)(vi) based on similar allegations of receiving bogus donations. The CIT(E) issued a show-cause notice and, after considering the assessee's submissions, concluded that the activities of the assessee were not genuine.The assessee reiterated its earlier arguments, asserting that the cancellation was based on unverified statements and lacked substantive evidence. The Tribunal, considering its earlier decision to restore the registration under section 12A, found that the activities of the assessee were indeed genuine. The Tribunal noted that the provisional registration under sections 12AA(i)(ac)(vi) and 80G(v)(iv) granted on 10.03.2022 further substantiated the genuineness of the assessee's activities.In light of these observations, the Tribunal set aside the CIT(E)'s order canceling the approval under section 10(23C)(vi) and directed the restoration of the approval to the assessee.Conclusion:The Tribunal allowed both appeals filed by the assessee, restoring the registration under section 12A and the approval under section 10(23C)(vi). The Tribunal emphasized the lack of concrete evidence against the assessee and the subsequent re-registration granted by the department as indicative of the genuineness of the assessee's activities.