TaxTMI 
TaxTMI 
2017 (6) TMI 332
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....al, 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 the learned Commissioner of Income Tax (Exemptions), Kolkata under section 12A....
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....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, that CIT(E) has to satisfy that the activities of the Assessee are genuine and being....
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....ve 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 thereto, or ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or is not ut....
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....eme 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 the trust or the institution. In other words, if establishing and running a school is the object of the Society, as given in its bye-laws, it has to be ....
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....re 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 the power to register. However, there has been unnecessary litigation on this issue. Under what circumstances, the registration of a Trust or Institution granted under section 12A could be cancelled by the Commission....
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.... 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 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 cancelation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial q....
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....rked 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 the admissions made by the similar Trust that it involved in accommodation entry to different individuals and organisations. The Secretary representing the Assessee did not offer any explanation rebutting the admissions made by the Treasurer and Secretary of School of Huma....
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....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 entries in respect of different individuals and organization. On verification the CIT (E) found that the Assessee Trust received donation of Rs. 37,00,000/- for the A.Y 2013-14 which is bogus. We find that on 07-10-2015 the Respondent examined said Shri Krishna Kumar Gupta and was co....
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....usts 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 School of Human Genetics and Population Health during their assessment proceedings for the A.Y 2013-14, the said Shri Krishna Kumar Gupta did not give any specific answer to Q. Nos. 16 & 17 as confronted to him on 28-10-2015. Regarding the fact of admission of accommodation entry before th....
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....ount 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 recorded on oath and the said Shri Krishna Kumar Gupta participated voluntarily and deposed his statement without any threat, coercion or force and referred to pages 18,19 and 28 of the paper book. The ld.DR also referred to page no- 105 of the paper book annexed herewith and argued that the A....
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....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 and evidence concerning the land development work. The relevant portion of statements dt: 07-10-2015 and 28-10-2015 given by Shri Krishna Kumar Gupta are reproduced herein below: Statement dt:07-10-2015 Q.25 Please go through the bunch of loose sheets inventorised as BBIT-1, containing vou....
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....fter 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 reproduced as under: Please go through the bunch of loose sheets inventorised as BBIT - 1, containing voucher serially page marked as 14 found in the Locker, placed in the adjacent and connected room with the room of the Executive Director, Smt Shubhangi Gupta, wherein payment of Rs. 25,0001- was made on 19.08.2014 as "Commission in B. Tech." and paid to Shri Susanta Baidya A/c Biswajit Das. Pl....
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....ing 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 Susanta Baidya and Shrl Sushanta Baldya, these two names are Phonetically similar names. He took time to verify whether any student named Shri Susanta Baldya was admitted in his college during the academic year 2014-15. But, 'under oath, he suppressed the fact that a student with Phonetically similar name and with minor difference in the spelling from that of which found on that loose slip, was admitted in his college during that period. He came out with his claim of dual entity of Shri Susanta Baidya and Shri Sushanta Baidya, only after the department ....
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....espondent, 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 person who are alleged to have arranged the bogus gifts was not afforded to the assessee cannot be the basis to quash the order u/s 12AA(3) of the Act. As rightly contended by the ld. DR 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 registrat....