TaxTMI 
TaxTMI 
2017 (3) TMI 962
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 charitable work was done by the assessee by giving donations; (vii) the activities of the assessee were not genuine or wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs:- 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 capital expenditure under the head Building. Q. 14. In response to the earlier question you have stated that you were "Instructed". Who gave you the instruction? Ans. I can remember only one name right now that is Shri Gulab Pincha, Mob. No.9....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Vihar, Delhi-110092 5,00,000 3 -do- 5,00,000 4 Global Cultural and Education Foundation 103, Engineers Enclave, Pitampura, New Delhi- 110034 10,00,000 5 Disha Education Society Disha Tower, New Shanti Nagar, Raipur-492007 10,00,000 10-11 1 Disha Education Society, Disha Tower, New 5,00,000 &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 confuse the trust purpose and objectives for allowing such benefit in the Act, rather it evaluates the purpose of the Act for the benefit of individual persons having motive to earn loose and easy money deviating from the concept of benefit of enduring mass. 10.2 Looking at the volume and depth of thee illegal activities performed and indulged by the trust to use the provisions of the IT Act providing support and encouragement to the organizations for doing the benevolent activities, assessee trust not only opened the pandora's box ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing 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 the Act. The assessee has made the submission in the response to the show cause notice issued on dated 3.12.2015 considering the provisions of section 12AA(3) of the Act. Therefore the action of the ld CIT (Exemption) u/s 12AA(4) of the Act is not within the provisions of law and against the principle of natural Justice. 2. The ld. AR further submitted that the name of the assessee is not appearing in the list of the persons to whom the amount of donation was returned by BERT in the form of booking of bogus capital expenditure under the head building. 3. The person acting as conduit between the assessee and BER....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 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 the ld CIT(Exemption) has not provided any list in its order where the name of the assessee trust is reflecting. We also find as per the statement of managing trustee of BERT that the bogus donation was received from the various trusts/ societies through Shri Gulab Pincha and he has not provided the names of the donors. Similarly, the bogus donation received was shown as incurred for the capital expenditure by issuing cheques in the name of several persons. The names of these persons were very much disclosed by the managing trustee of BERT but the name of the donors was not anywhere shown in the recorded statement. 8.1 In view of above, we find that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies 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 cancelling the registration. It cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted. The allegation is regarding the alleged supply of the installation of the software and whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in cancelling the registration granted on 13.05.1999 w.e.f. the assessment year 2004-05. The assessee had placed various materials before the Tribunal to show that software modules purchased were installed between 2004 to 2011 and the assessee had incurred as much as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 canteen, transportation etc., the Higher secondary school is imparting good education. The pass result is between 97% to 100% at class X and Class XII levels with highest score touching as high as 98%. Further, every year more than 40 students score more than 90% and many meritorious students have come out from this school who have gone for further higher studies in engineering, medical and other professional degrees. Every year a school magazine "Dawn" is published by the students and teachers. Trust also publishes quarterly News bulletins for the benefit of students. A sample copy was also filed during the course of hearing for the purpose of the record. In other co-curri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 institutions to get themselves registered with the income-tax authorities failing which the benefit of exemption from income-tax would be denied. The requirement of registration being procedural is prescribed under section 12AA of the Act which reads as under:- "Procedure for registration. 12AA. (1) The [***] [Principal Commissioner of] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inqui....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Sec. 12AA, which lays down the procedure for registration, does not speak anywhere that the CIT, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean, they are in consonance with the object....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 clarified that the payment of a sum by one Charitable Trust to another for utilization by the donee-trust towards its charitable objects is proper application of income for a charitable purpose. We also find that the notice for the cancellation of the registration certificate was issued u/s 12AA(3) of the Act as evident from the notice placed on page 12 of the paper book. However, Ld. CIT(Exemption) has also invoked the provisions of section 12AA(4) of the Act for cancelling the registration certificate which in our considered view against the principal of natural justice. The ld. CIT(E) before invoking the provisions of Section 12AA(4) should have issued the show cause notice. Therefore, we find that the proper opportunity to the assessee has not been furnished. 8.4 We also find....