TaxTMI 
TaxTMI 
2016 (8) TMI 862
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....n 133A of the Act conducted on December 4, 2015, in the case of one M/s. Quadeye Securities Pvt. Ltd. by the Investigation Wing, Kolkata. In the course of the survey statement of Shri Dinesh Kumar Agrawal, director of M/s. Quadeye Securities Pvt. Ltd. was recorded. In the said statement he had stated that he had given donation of Rs. 50,00,000 to the assessee in lieu of cash given by the assessee. It was his statement that he was taking cash from several trusts/societies and providing them entries. 4. The respondent herein on receipt of the aforesaid information issued show-cause notice dated December 18, 2015, under section 12AA(3) of the Act for cancellation of registration already granted to the assessee. The action was proposed on the ground that the activities of the assessee were not genuine and, therefore, the trust does not deserve continuance of registration under section 12A of the Act. 5. In reply to the aforesaid show-cause notice the assessee, vide letter dated December 26, 2015, submitted that even in the assessments completed for the assessment year 2012-13 the donations in question received by the assessee were accepted as genuine by the Assessing Officer. The ass....
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....otice addressed another letter dated February 12, 2016, in which the assessee reiterated its stand as was taken in its letter dated January 9, 2016. 8. In the given circumstances the respondent proceeded to pass an order under section 12AA(3) of the Act cancelling the registration granted to the assessee under section 12A of the Act. The respondent in this order referred to the statement of Shri Dinesh Kumar Agrawal, director of M/s. Quadeye Securities Pvt. Ltd. The relevant portion of the statement is as follows : "Question 18 Please furnish details of donation made to various charitable trust/organisation during the financial years 2009-10 to 2014-15. Answer Sir, the details of donation made by M/s. Quadeye Securities Pvt. Ltd. and Quadeye Trading are as under : Details of donation paid by Quadeye Securities P. Ltd. Sl. No. Name of trust Donation paid during the financial year. Total 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10 1. Vidyya Jyothi Trust 100,00,000 - 52,00,000 - - - 152,00,000 2. Goldfield Siksha Sansthan - 100,00,000 - - - - 100,00,000 3. School of Human Genetics and Population Health - - 50,00,00....
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....do you know any member/trustee of trust ? If yes, how you came to know him and provide the other details. Answer Sir as I stated above the donation was prearranged in order to get exemption under section 35(1)(ii) and section 80G of the Income-tax Act, 1961, in lieu of such arrangement commission was paid to Mr. Pradeep Kumar Agarwal and Mr. Ajay Agarwal both being chartered accountants. Question 24 Please state how did you get the request letter for donation ? Answer Sir, the same was arranged by Mr. Pradeep Kumar Agarwal and Mr. Ajay Agarwal. I do not have contact with the trust. Question 25 Please state had you verified the genuineness, nature of charitable activity of the trust/organisation before making donation ? Answer Sir, I have never verified the genuineness, nature of charitable activity of trust/organisation. Actually it was prearranged bogus donation by Quadeye Securities Pvt. Ltd. and Quaeye Trading in order to get exemption under section 35(1)(ii) and section 80G of the Income-tax Act, 1961, during the financial years 2009-10 to 2014- 15. Question 26. Please state the modus operandi of such bogus dona tion and also furnish names and addresses of brokers w....
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....cts. (f) Even ingenuine and illegal activities carried on by the assessee through money laundering do not come within the conceptual frame work of charity vis-a-vis activity of general public utility envisaged in the Income-tax Act as laid down in section 2(15). (g) They have always avoided to come forward to file details of donations, balance-sheet and income and expenditure account. (h) Even they did not avail of cross-examination and were well determined that they will not attend any proceedings. They failed to prove genuineness of transactions. (i) Looking at the volume and depth of the illegal activities performed and indulged by the society to use the provisions of the Income-tax Act providing support and encouragement to the organisations for doing the benevolent activities, the assessee-society only opened the pandora's box defying the sole benevolent purpose of the provisions as per the Income-tax Act but also challenged the cause of the constitutional provisions by maintaining certain well needed objectives as per the Act and performing the reverse in reality. 7. Hence, the provisions of section 12AA(3) is invoked and registration granted under section 12AA ....
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.... upon the statement of Shri Swapan Ranjan Das Gupta, the founder director of M/s. Herbicure Health Care Bio Herbal Research Foundation, the learned Commissioner of Income-tax (Exemptions) issued show-cause notice for cancellation of registration under section 12AA(3) of the Act." 11. The Tribunal, while quashing the order under section 12AA(3) of the Act, held as follows (page 284) : "But in the instant case the learned Commissioner of Income-tax (Exemptions) has simply received information from the learned Commissioner of Income-tax (Exemptions), Kolkata, that M/s. Herbicure Health Care Bio Herbal Research Foundation was engaged in giving donations on receipt of cash through brokers but nowhere it has been stated that M/s. Herbicure Health Care Bio Herbal Research Foundation has paid donation to the assessee on receipt of cash of the equal amount through brokers. Similar statement of Shri Swapan Ranjan Das Gupta was also made but in that statement also there was no reference of the assessee. The learned Commissioner of Income- tax (Exemptions) has simply shown this information to the assessee on November 27, 2015, but did not offer any further opportunity to make his comments i....
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....n the ground that the trustees are misappropriating the funds of the trust the registration of the trust cannot be cancelled. If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income-tax Act but that is not a ground for cancellation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the Revenue. Therefore, is no merit in this appeal." 13. The learned counsel drew our attention to the decision of the hon'ble Supreme Court in the case of Queen's Educational Society v. CIT [2015] 372 ITR 699 (SC) in Civil No. 5167 of 2008 order dated March 16, 2015, wherein the hon'ble Supreme Court took a view that so long as the funds were applied for charitable purpose exemption cannot be denied to a trust. The learned counsel further submitted that at best the donation in question could be treated as anonymous donation under section 115BBC of the Act but registration under section 12AA(3) of the Act cannot be cancelled. 14. The learned Departmental representative ....
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....ed to cross-examination by the assessee and further corroborated by evidence of the persons who are stated to have arranged for bogus gifts cannot be believed in toto. Nevertheless the fact remains that there are grounds to believe that the donations received by the assessee had to be decided with regard to its genuineness. The fact that opportunity of cross-examination of Shri Dinesh Kumar Agrawal and the person who are alleged to have arranged the bogus gifts was not afforded to the assessee cannot be the basis to quash the order under section 12AA(3) of the Act. As rightly contended by the learned Departmental representative if it is found that the assessee was accepting bogus donations, then that fact can only lead to an inference that the activities of the trust are not genuine or are not carried out in accordance with the objects of the trust. We, therefore, are of the view that it would be proper in the interest of justice to set aside the order of the respondent and remand the issue of cancellation of registration to the respondent for fresh consideration. 17. The assessee will present himself before the respondent and if the respondent desires he is at liberty to issue su....