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2016 (8) TMI 862
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....public utility." 3. There was a survey under section 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 ....
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....f the Act. The assessee in reply to the aforesaid show-cause notice 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. Go....
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....sited the office of the trust ? Answer Sir, I never visited the office of the trust. The trust to whom donation was made was arranged by Mr. Pradeep Kumar Agarwal, chartered accountant and Mr. Ajay Agarwal. Question 22 Please state have you personally seen their work ? If, yes provide the details. Answer I never seen their work or never visited their office. I have already stated it was prearranged bogus donation. Question 23 Please state 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 ....
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....12AA and section 80G(5)(vi). (b) They have violated the objects of the society as converting cash in cheque is beyond the objects (c) The activity of converting unaccounted cash available with trustee through corpus donation is illegal, ingenuine and immoral. (d) Donation received is not voluntary, merely an accommodation entry and fictitious. Therefore, the claim of exemption under section 11(1)(d) was not absolutely enable. (e) Activities of the society are not genuine as well as not being carried out in accordance with its objects. (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 o....
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.... 18, 2016, [2016] 49 ITR (Trib) 276 (Lucknow) wherein on identical facts the Tribunal held that cancellation of registration under section 12AA(3) of the Act was not valid. He brought to our notice the facts in the aforesaid case which were as follows (page 279) : "On the basis of the report of the learned Commissioner of Income-tax (Exemptions), Kolkata, vide letter dated October 28, 2015, in which it was mentioned that bogus donations were received in lieu of cash by the assessee from M/s. Herbicure Health Care Bio Herbal Research Foundation of Kolkata in the assessment year 2011-12 and having relied 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/....
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....o provide other facilities to the students who are studying in the college. The college is recognised by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it cannot be said that the trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus, the object of the constitution of the trust namely imparting of education is going on uninterruptedly. Therefore, it cannot be said that the activities of the trust are not being carried out in accordance with the objects of the trust. When the aforesaid two conditions are fully satisfied, on 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 appea....
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....Dinesh Kumar Agarwal of M/s. Quadeye Securities Pvt. Ltd. it appears that there is prima facie ground to believe that the donation of Rs. 50,00,000 given by M/s. Quadeye Securities Pvt. Ltd was not genuine. Based on this statement alone it cannot be conclusively said that the donation in question was bogus. When the statement of Shri Dinesh Kumar Agarwal was confronted to the assessee and when the assessee was asked to appear before the respondent, the assessee chose to avoid appearing before the respondent. This conduct of the assessee was not justified. It is no doubt true that the statement of Shri Dinesh Kumar Agarwal without being subjected 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 secti....