TaxTMI 
TaxTMI 
2017 (6) TMI 332
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....ppeal on the basis of concise grounds of appeal, which are reproduced herein below:- GROUNDS OF APPEAL IN CONCISE FORM 1. That the learned Commissioner of Income Tax (Exemptions), Kolkata erred in wrongly and arbitrarily cancelling / withdrawing the registration granted to the Appellant Trust under section 12AA of the Income Tax Act, 1961 with effect from pt April, 2008. 2. That the learned Commissioner of Income Tax (Exemptions), Kolkata failed to appreciate that the conditions precedent for the exercise of powers vested in him under sub-section (3) of section 12AA of the said Act were not satisfied in the instant case of the Appellant Trust. 3. That the learned Commissioner of Income Tax (Exemptions), Kolkata erred in wrongly and arbitrarily alleging on mere suspicions, surmises and conjectures, without any material evidence on record to the effect that the activities of the Appellant Trust were either not genuine and/or that such activities were not being carried out in accordance with the objects of the Appellant Trust, as set out in its Trust Deed dated dt October, 2007. 4. That the impugned Order dated 15th March, 2016 passed by th....
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....rried out in consonance with the objects of the Trust. He argued unless the CIT(E) satisfies the conditions as contemplated in section 12AA(3) of the Act, the registration cannot be cancelled basing on the statements as given by Smt. Moumita Raghavan in survey operation and Smt. Samadrita Mukherjee Sardar before the Settlement Commission. 7. The ld.AR also argued that there was no basis to implicate the Assessee involved in the process of making any black money of the group concern into white money in the hands of the Trust. He submits that the observation of the CIT (E) is wrong that the Assessee received donations in the form of corpus fund to give benefit of section 80G of the Act to the alleged donors. The ld. AR also argued that the said observation of the CIT (E) does not constitute to say that the assessee is involved in ingenuine activities and misused the provisions of the Act. In support of his contention he placed reliance on the decision of the Hon'ble High Court of Allahabad in the case of CIT Vs Red Rose School reported in (2007) 163 taxman 19 (All). He referred to para no- 34 and argued that the scope for conducting enquiry by the CIT(E) u/sec 12AA (3) of the Act,....
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....income from such property. 37. Sub-section (2) of section 11 states about a situation where eighty five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, and says that in such a situation, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the conditions given in sub-clauses (a) and (b) are complied with. 38. This also means that even that income, which could not be exempted under sub- clause (a) or (b) of sub-section (1), can still be exempted, if the conditions attached to sub- section (2) in its sub-clauses (a) and (b) are complied with. 39. Sub-section (3) again says that if any income referred to in sub-section (2) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application ....
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...., the registration has to be considered in the light of the specific provisions aforesaid and in the manner that it furthers the object of the scheme of registration and, of course, exemption of the entire income or the part of the income, as the case may be, of a charitable trust or institution has to be considered during assessment proceedings. 44. It is significant to mention that registration under section 12AA, does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purpose of determination of tax liability but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry by the Commissioner shall remain restricted to the examination, as to whether the assessee, who has moved the application for registration under section 12A, is actually in the activities which are genuine. Genuineness of the activities of the trust or the institution has to be seen, keeping in mind the objects thereof, which necessarily means that the Commissioner shall satisfy himself about the fact that the activities are qenuine and in consonance with the objects of ....
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....Trust in the aggregate of Rs. 11,10,00,000/- for setting up a medical college and hospital at Budge Budge and argued that the Assessee conducting its affairs in consonance with the objects of the Trust and are genuine. 9. The ld.AR argued that the assessee is conducting its affairs of Trust for the purpose of charitable and as such registration cannot be cancelled on the reason as set out by the CIT (E) in his show cause notice. In support of which, he relied on the decision dt:09-09-2014 of Hon'ble High Court of Karnataka in the case of CIT Vs. M/s. Islamic Academy Education in ITA No. 805/2008 and referring to para no's 7 & 8 and argued that unless the CIT(E) satisfies that the activities of the Trust are not genuine and not being carried out in consonance with the objects of the Trust, then registration cannot be cancelled for any other reasons except the two conditions as contemplated in Section 12AA(3) of the Act and the relevant portion of the same are reproduced herein below:- "7. Section 12AA provides for procedure for cancellation of registration of the Trust or Institution by the Commissioner of Income Tax. The power of cancellation of registration flows from ....
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....aid two grounds and on no other ground, an order cancelling registration of the Trust could be passed. 8. In the instant case, the material on record shows that the Trust has established educational institution and imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the College. The College is recognized 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 th....
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.... Krishna Kr. Gupta, Trustee and Secretary of Jagannath Gupta Family Trust and Vice Chairman of Budge Budge Institute of Technology hereafter for short as BBIT. 13. The Ld.DR submits that in the said operation the CIT (E) impounded documents and books of account and marked as BBIT-1 to BBIT-4 and BBIT/PD/1. The ld. DR referred to page no-15 of the paper book and argued that the said Secretary did not give any satisfactory explanation. The ld. DR also submits that the said statement from pages 13 to 30 of the paper book was recorded on oath and the said Shri Krishna Kumar Gupta deposed his statement voluntarily. In support of his contention referred to pages 18, 19 and 28 and he supported the impugned order of the CIT(E) in cancelling the registration u/s. 12AA(3) of the Act. The Ld.DR submits that the decisions as relied by the Assessee are not applicable to the present case for the reason that the facts and circumstances therein are different from the present case. 14. The Ld.DR further submits that the Hon'ble High Courts decided the issues involving proceedings u/sec 12AA of the Act and whereas in the present case, the CIT(E) initiated the proceedings against the basing on ....
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....erimental Research & Education, Kolkata are found to be involved in such money laundering through sums received as Scientific Research Contribution u/s. 35(1)(ii) from various corporate, firms and individuals situated all over India and returning the same in cash. The said kind of modus operandi came to light after a survey was conducted on 27-01-2015 by Investigation Wing, Kolkata on such three societies. 18. On perusal of the record it shows that the Investigation Wing conducted a survey u/s. 133A of the Act on School of Human Genetics and Pollution Health on 27-01-2015. Thereafter, on 07-10-2015 a survey was conducted at the premises of BBIT belonging to Assessee Trust. During the survey a statement of Shri Krishna Kumar Gupta, Trustee and Secretary, of Assessee Trust and Vice Chairman of BBIT was recorded and documents and books of account were impounded. On perusal of the show cause notice dt. 04-12-2015, it clearly shows the CIT (E) issued such notice basing on the survey conducted on School of Human Genetics and Population Health and on a statement of Smt. Moumita Raghavan wherein she admitted that the said concern is engaged in the business of providing accommodation ent....
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....he CIT(E) while cancelling the registration u/s.12AA(3) of the Act referred the said admission as made by Secretary, Smt. Samadrita Mukherjee Sardar vide letter dt. 24-10-2015 confirming before the Income Tax Settlement Commission that the donations paid by their society to various trusts and societies before the Settlement Commission shown as part of refunds made against donations received vide para 4.4 of the CIT(E)'s order at page no-83 of the paper book. We find that the statement of Samadrita Mukherjee Sardar goes to establish that their society has been receiving donations and returning the same by keeping 30% being donation. Smt.Smadrita Mukherjee also confirmed the statement given Smt. Moumita Raghavan at page no-80 of paper book. All the statements including the statement of Shri Krishna Kumar Gupta establishes that they indulged activity not in consonance with the objects of the Assessee trust by accepting the donations and returning the same by retaining the same being commission. 21. We find that with regard to Q.No's. 19 & 20 dt. 7-10-2015 as confronted to Shri Krishna Kumar Gupta, he did not give any specific answer. Regarding the letter dt. 28-09-2015 filed by Sch....
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....of Shri Biswajit Das for a work related to land development and also reiterated that the said amount was paid from his pocket. Inspite of the same the Respondent found it illegal as it was contrary to rules of AICTE. The ld.AR argued that when such amount was not entered in the books of account of Assessee and cancelling the registration on the same allegation and without drawing any adverse inference against the assessee is illegal and unwarranted. The ld.AR referred to page no- 93 of the paper book and submitted that having admitted by Shri Krishna Kumar Gupta before the Respondent that the said amount was borne by him from his pocket and finding thereon against the assessee is arbitrary and illegal. The ld.AR also submits that this allegation alone cannot constitute a ground for cancellation of registration u/s. 12AA(3) of the Act. 24. On the contrary, the ld.DR submits that Shri Krishna Kumar Gupta on confronting with the bunch of loose sheets inventoried as BBIT-1 containing voucher did not give any specific reply regarding the payment of Rs. 25,000/- and referred to page no.17 of the paper book. The ld.DR also submits that the statements on 07-10-2015 and 28-10-2015 were r....
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....(3) of the Act cancelled the registration granted to assessee w.e.f 01-04-2008. We find that the Respondent examined Shri Krishna Kumar Gupta on 07-10-2015, wherein said Shri Krishna Kumar Gupta replied that he requires sufficient time to answer the questions and subsequently he stated that he paid commissions towards for a work related to land development. It is also observed from the impugned order of the CIT (E) that Shri Krishna Kumar Gupta reiterated the same before him during course of 12AA(3) of the Act proceedings as made in the statements. We also find that on confrontation with the admission list contains the name of one person Susanta Baidya as provided by the Registrar, Maulana Abul Kalam Azad University of Technology to which Shri Krishna Kumar Gupta has stated that Susanta Baidya and Shri Sushanta Baidya are two different persons and denied the said payment of Rs. 25,000/- towards commission in connection with the admission in its educational institution. It is observed except making the said statements the assessee did not take any step to falsify the allegation as made by the Respondent Revenue by brining any evidence to show that the said two persons are different ....
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....have given money to N. C. Dey Sarkar directly, why the same was not recorded in the books. A25. Since the money was paid to Mr N.C. Dey Sarkar out of my own pocket that is why it is not reflected in the trust's books of accounts. As per usual practice, the accounts department first makes the voucher and gets it received by the recipient. Only after that cashier releases the payment. Under this instance the voucher was made and received but the cashier did not make the payment. Since in both the instances the money was paid or was about to be paid from my own pocket, therefore. it was kept such et secured manner. Q26.You told that since the payments were made or about to pocket, those were not recorded in the trust's books of accounts. Then why vouchers, which are a part of the books of accounts, were made for the same. A. 26.The cashier, to keep an evidence, had made the receipt, only to show me, as a proof. Since the payment was made out of my own pocket, it did not reflect in the books of the trust. Q.27. The following question was asked vide Q27 of Final Statement during survey operation. The same question is reproduc....
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....f my department. Q.35 If a commission was paid to engage a contractor, then why the same was not booked as a legitimated expense. A.35 As the expense was made out of my own pocket, therefore it was not reflected in the books of the trust. Q. 36 Why did you pay an expense of the trust from your own pocket which cannot be booked as an expense in your individual income tax file. A. 36 Since I had the money in my pocket and I made the expense. Q.37 Do you follow any tendering procedure for awarding contracts? A.37 No. We do not follow. Finding of CIT-E: 5.6. Rebuttal of the Reply to the Show Cause Notice: a) In response to the SI No 1 above: The assessee repeatedly took the absurd plea of engaging commission agent and claimed that Shri Susanta Baidya was a contractor engaged in the work of land development. But the assessee: i. Could not tell specifically for which land development work he was engaged. ii. Could not tell the whereabouts of Shri Susanta Baidya iii. At time of recording of statement of Shri K K Gupta under oath, the questions were also read out before him. Shri Sus....
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....ion)is reproduced herein below: 16. We have given very careful consideration to the rival submissions. From the statement of Shri 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 conclusive 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 assesee 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 is genuineness. The fact that opportunity of cross examination of Shri Dinesh Kumar Agrawal and the per....