TaxTMI 
TaxTMI 
2017 (3) TMI 962
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....(A) For that the order withdrawing/cancelling registration under section 12A was passed in gross violation of the principles of natural justice, without disclosing the materials relied upon, without affording opportunity to controvert and/or deal with the same including by way of cross-examination and without taking into consideration the submissions of the assessee made, inter alia, on March 3,2016 and March 7, 2016. (B) For that the CIT erred in withdrawing/cancelling the assessee's registration under section 12A and that too with retrospective effect from April 1, 2006. (C) For that the CIT erred in holding that- (i) any donation made by the assessee was bogus, fictitious, accommodation entry or for money laundering or that the assessee received back any cash; (ii) the assessee resorted to any modus operandi or transacted through any entry operator or mediator or siphoned off trust money; (iii) trustees of the assessee received cash or benefitted from the donations; (iv) section 13(1) or section 13(2) was applicable; (v) the assessee misused the provisions ofsections12AA and 80G(5)(vi); (vi) no charitabl....
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....nations received in these two FYs viz. 2011-12 and 2012-13 shown as Corpus Donation, were in the nature of accommodation entries to facilitate two things:- a) To procure Loans from the Bank we had to show substantial amount of Capital Reserve in our Balance Sheet. b) We required funds for the expansion of our college. The fees received from the students along with genuine donations from the Trustees and their contracts were not sufficient to run the institution. Q. 12 Why are you saying that a major part of the donations received were not genuine? Ans. In those cases, which I admit accommodation entries, a part of the donation received was returned back to the donors through intermediaries. Q. 13. Who were the intermediaries and what were the modes of returning the money? Ans. We were instructed to transfer funds through TGS to the following seven [7] persons:- 1. Santwana Syndicate, 2. P.C. Sales Corporation 3. Kalyani Enterprises, 4. Riya Enterprises, 5. Laxmi Narayan Traders 6. Hanuman Traders 7. Rani Sati Trade cum Pvt. Limited. These payments were booked as capi....
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.....1 Besides the above clarification, the ld. CIT(Exemption) has also called other information in the relation to the activities carried on by the assessee in the earlier assessments years. The ld. CIT(Exemption) from the details submitted by the assessee also observed that the assessee has given donation to various other trusts/ societies as detailed under :- Sl.No Name & address Amount 06-07 1 Centre for advance studies in Engineering AK- 11, Arra kasha Road, near Chand palace Hotel, Paharganj, New Delhi-55 4,00,000 2 Vidyapati Smarak Manch 511, Rabindra Sarani, Kolkata-700 005 25,000 07-08 1. Indian Centre for Advancement of Research & Education 4, B.B.D.Bag (East) Stephen House, 5th Floor, Room No.87, Kolkata-1 5,00,000 2 Seth Pokhar Mal Education Society Rukmani Devi Public School, CD Block, Pitam Pura, New Delhi-110034 5,00,000 3 Lord Krishna Education Trust KE-81, Kavi Nagar, Ghaziabad 5,00,000 4 -do- 5,00,000 09-10 1 Vidyapati Smarak Manch 511, Rabindra Sarani, Kolkata-005 25,000 2 Monad Educational Society 66, Shankar ....
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.... Q.3. Do you know Disha Educational Society, Sandipani Charitable Trust, Seacom Marine College, MRS Educational Trust? What are their activities? Ans. My answer is same as in Q.1." 6.2 From the above, the ld. CIT(Exemption) opined that the assessee is engaged in the money laundering activities. It was also observed that the trust to which the donation was given, their registration certificate u/s 12A of the Act were either cancelled or they were issued show cause notices for the cancellation of the registration certificate under section 12A of the Act. In view of above the ld. CIT(Exemption) has cancelled the registration certificate granted u/s 12A of the Act by observing as under :- "10. Conclusion:- 10.1 The intention of the legislature to grant registration u/s. 12AA and 80G, to give the benefit u/s. 11 to encourage medical relief to the poor and needy persons, promote education among masses and support to the poor section of the society. But time and again these provisions have been misused for personal need and for benefit of trustees/members of the trusts and societies. The act of misuse sometimes discovers itself so wide that it may ....
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....es carried on by assessee through money laundering do not come within the conceptual framework of charity vis-à-vis activity of general public utility envisaged by the Income Tax Act as laid down in Section 2(15). 10. Keeping in view the above, provisions of section 12AA(3) and 12AA(4) are invoked and registration granted u/s.12A is withdrawn/cancelled w.e.f. 01.04.2006 from the starting of financial year, in which the Trust was found to be involved in money laundering through payment of bogus donation, ingenuine activities and not carrying out activities as per object of the trust." Being aggrieved by the order of ld CIT(Exemption) the assessee came in appeal before us. 7. Before us Ld. AR of the assessee filed a paper book which is running from pages 1 to 426 and submitted that:- 1. The show cause notice was issued for the cancellation of registration granted under section 12A/ 12AA of the Act by invoking the provisions of section 12AA(3) of the Act vide No. CIT(E)/Kol/12AA/2015-16/3595 on 3.12.2015. But the ld CIT(Exemption) has cancelled the registration vide its order dated 10.03.2016 by invoking the provisions of section 12AA(3) and 12AA(4) of t....
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....ustee of the assessee trust about the details of the trust/ societies to which the donation has been paid by it but the managing trustee could not make any satisfactory reply to the learned CIT(exemptions) The ld. DR vehemently supported the order of the ld. CIT (Exemption). 8. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the cancellation of registration certificate issued u/s 12A/12AA of the Act on the ground that the assessee was involved in providing the bogus donation to the various trust and societies. This fact of bogus transactions in the form of donation was revealed on the basis of the statement of the managing trustee recorded in the course of survey u/s 133A of the Act on BERT. The managing trustee of be BERT admitted that it has received bogus donation through a person namely Shri Gulab Pincha. Thus the ld. CIT(Exemption) cancelled the registration certificate issued u/s 12A of the Act. However on the perusal of the statement given by the managing trustee of the BERT we find that he admitted that the major bogus donation was received from various trust/ societies but....
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....hin the provisions of law. The objects/ byelaws of the trust are placed on pages 264 to 283 of the paper book and on the basis of same objects the assessee was given registration certificate u/s 12A and 80G and 10(23C) of the Act. While holding so, we find support & guidance from the judgment of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Apeejay Education Society reported in 59 taxmann.com 102 wherein it was held as under : "Under Section 12AA of the Act, the Commissioner, at the relevant time in the year 1999 had called for all documents and information from the respondent-assessee to satisfy himself about the genuineness of the activities of the institution and after making enquires had passed the order registering the said institution and giving it the benefit under Section 12A of the Act, which made the institution eligible for exemption from the provisions of Sections 11 and 12 of the Act. Under Section 12AA(3) of the Act, the Commissioner was to be satisfied about the activities of the said institution and if they were not genuine and the same were not being carried out in accordance with the objects of the institution he could pass the order cance....
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....sed on pages 6Â to 6C of the paper book. It was also observed that no donation whatsoever has been received by Jha Trust (in short) till date. Jha Trust is running schools in two campus since last several years. One is primary and junior High School on VIP Road, Baguiati, Kolkata-159 and another is secondary (ICSE) and Higher Secondary (ISC) School at Aswini Nagar, Baguiati, Kolkata-159. The school is affiliated with Council for the Indian School Certificate Examinations New Delhi (ICSE-X and ISC-XII). The trust has started another school near Ranchi which is situated in remote area mainly with the object of imparting education to general and tribal poor students and providing free tuition and/or charging concessional rate of tuition fees to a large number of students in deserving cases. The school is operational since April 2015. The Roll strength of students at present is about 3000 in all the schools taken together. At present, more than 200 staff members are involved in the school including teaching and non- teaching staff. Apart from staff several other persons are dependent on schools for their livelihood as they are associated with related activities of school such as ....
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....case of Islamic Academy of Education (Supra), it can be concluded that even the donation to BERT is proved to be bogus then also the registration u/s 12A of the Act cannot be cancelled but the said amount of donation will not be eligible for exemption u/s 11 of the Act. The provisions of section 12A of the Act prescribe conditions for registration of trust and make obligatory to the trust or the institution to seek registration under section 12AA of the Act, if such trust or institution intends to have the benefit of the provisions of section 11 and 12 of the Act. These provisions thus make it clear that if the trust or the institution is not registered under section 12AA of the Act, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable to be excluded under any of the clauses of section 11 of the Act. Thus, in a case where registration is refused, the trust or the institution would not be allowed to claim any such exemption or exclusion of its income from the total income of the previous year. The Income-tax Act through section 12A has made it obligatory for charitable trusts and....
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....tivities of the trust or the institution and also about its objects, the CIT would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, the CIT is again empowered to make enquiries as he thinks fit. In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, of course, the registration can again....
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....e stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 for assessing the income which has not been applied to the purpose of the trust or the institution, the intention of the law maker and the scope and purport of the provision is apparent while considering the question of registration." In view of above precedent, we find that the activities of the trust in relation to its education activities have not been doubted and on the basis of same activities various registrations u/s 12A, 80G and 10(23C) were awarded to the assessee. Simply the assessee has given donation to a trust which is involved in the bogus transactions cannot be the basis for the denial of the registration certificates as discussed above. 8.3 It is also important to note that the assessee has been giving donation in every year which has been duly accepted by the Revenue as evidenced from the details submitted which is placed on pages 23 of the paper book. The amount of donation given by the assessee trust over the several years to the other trust is very much charitable activities. In this connection the CBDT has issued instruction No. 1132 date 05.01.1978 wherein it was clarif....