TaxTMI 
TaxTMI 
2016 (11) TMI 1466
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...., 1961 on surmises and conjectures having not been satisfied about the violation of the particular provisions of section 12AA(3) or 12AA(4). 4. For that the Ld. CIT (Exemption) erred in cancelling the Registration of the Trust U/s 12AA(3) & 1AA(4) of the IT Act, 1961 on the assumption that the trust was involved in money laundering through payment of bogus donation, in genuine activities and was not carrying out the activities as per the objects of the trust and acted on surmises and conjectures, when the donation was made to a trust carrying on educational activities and all the activities of the trust were as per objects and in accordance with law. 5. For that the Ld. CIT (Exemption) erred in relying on the statement of Sri Rabindranath Lahiri Managing Trustee of Batanagar Education and Research Trust, when such statement itself was not admissible as evidence and further in spite of specific requests made, the said Sri Rabindranath Lahiri and the intermediaries were not produced for cross examination. In fact the Ld. CIT was not correct in observing that the assessee did not avail cross examination when no such cross examination was ever offered nor the parties to be cross ex....
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....ed u/s 12A of the Act. 3. The facts in brief are that the assessee in the present case is a trust and having registration u/s 12A and 80G of the Act. The registration u/s 12A of the Act was granted to the assessee on the 14th May 1985 and 80G certificate was renewed on 17.10.2011. The assessee-trust was established with the objects of providing relief to the poor & needy people, medical relief, education and advancement of any other objects of general public utility. 4. Before coming to the specific issue of the case, a brief history of the case is as followed. A survey operation was conducted u/s 133A of the Act on 03.09.2015 in the case of trust namely Batanagar Education and Research Trust (for short BERT). The statement of the managing trustee i.e. Sri Rabindranath Lahiri of BERT was recorded. The relevant extract of the statement is reproduced below:- "Q. 11. Please confirm the authenticity of the above mentioned Corpus Donation. Ans. A major part of the donations that were claimed exemption u/s. 11(1)(d) were not genuine. The donations received in FYs. 2008-09, 2009-10 and 2010-11 were genuine Corpus Donation received either from the Trustees or persons who were close t....
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....ions along with bogus donors. Ans. After going through the list of the donors appeared in such ledger, it is understood that the Donors whose names are written in capital letters under the sub-head "Donation-13", "Donation-I" and "Donation-II having total amount of Rs. 6,03,07,550/- is bogus and out of which rs.5,96,28,973/- was returned back through RTGS to the above mentioned seven (7) persons following the instructions of the mediators." The name of the assessee was reflecting in the list of bogus donors as provided by the Managing trustee of the BERT in his statement. As per the statement, the assessee trust has given donation of Rs. 20 Lacs in the AY 2012-13 to BERT through the banking Channel. But subsequently the cash was paid back to the assessee through the medium of certain outsiders. 5. On gathering the above information, the ld CIT(Exemption) has also called the other information in the relation to the activities carried on by the assessee in the last 5 AYs which depict as below:- "Corpus donations and its applications:- A) Corpus donations AY 11-12 AY 12-13 AY 13-14 AY 14-15 AY 15-16 a) corpus donations (during year) 0.90 cr. 1.48 cr.....
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....es, MFs, bonds, Main source f their income is short term/long term capital gain, dividend, interest income etc. it is pretending to be involved in activities like investment/Finance business beyond its objects. f) Corpus funds received u/s 11(1)(d) were never utilised for the purpose they were received but used as trading activity in shares, MFs, bonds etc. g) In spite of facts that trust is public charitable trust receiving corpus donations from public at large but actually it has been used by trustees as private trust. Assets being investment, expenditure as donation have been managed according to the need of trustees. h) Society/Trust has grossly misused the provision of Section 12AA and 80G(5)(vi). i) Activities of the trust are not genuine as well as not being carried out in accordance with its declared objects. Assessee's case is covered within the both limb of Section 12AA(3). j) Even ingenuine and illegal activities 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). 9. Keeping in view the above....
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....by CIT by invoking powers under s. 12AA(3); even assuming, the CIT has power to rescind the order of registration on the ground that the registration had been obtained by practising fraud or forgery, there was nothing in the show-cause notice or in the impugned order, alleging that the petitioner had obtained the registration by practising fraud or forgery." Similarly, the ld AR also relied in the case of B.P. AGARWALLA & SONS LTD. vs. COMMISSIONER OF INCOME TAX & ORS 208 ITR 863 where the Hon'ble Jurisdictional High Court has held as under:- "There is nothing in the language of s. 35 which would justify the Court in coming to the conclusion that the power to rescind an approval of a research association could be withdrawn with retrospective effect. If there were any doubts in the matter, on the authority of the decisions noted earlier, the Central Government could not have withdrawn the approval granted under s. 35(1)(ii) to the research centre with retrospective effect. It also follows that the basis of the CIT's assumption of jurisdiction under s. 263 was wholly illegal. The CIT would not be able to determine the legality and validity of the Notification dt. 2nd Jan., 198....
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....me of the assessee for returning the amount of donation to the assessee. The Ld. AR has also submitted the request letter from BERT for the donation of a Rs. 20 Lacs which is placed on page 28 of the paper book along with the necessary details of the donee such as donation receipt, 80G certificate, bank statement, profile, details of the trustee, which are placed from pages 29 to 80 of the paper book. There is no evidence that the amount of donation made by the assessee has come back to the assessee or its associate concern in any form. 4. On the other hand the ld. DR submitted that the managing trustee of BERT has clearly stated that the money received from the assessee as donation for Rs. 20 lacs was returned back. The registration granted under section 12A/12AA of the Act was cancelled in the back date in the financial year 2011-12 as the transaction of bogus donation took place in the relevant previous year 2011-12. The assessee was given several opportunities for the cross examination but the assessee did not avail any of the opportunity. The facts of the case cited by the ld. AR in the case of Fateh Chand Charitable Trust ITA No.792/LKW/2015 are different from the facts of t....
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....rities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter referred to as investor) in the equity share capital of a company (hereafter referred to as investee)- (A) which is engaged in dealing with securities or mainly associated with the securities market; (B) whose main object is to acquire the membership of another recognised stock exchange for the sole purpose of facilitating the members of the investor to trade on the said stock exchange through the investee in accordance with the directions or guidelines issued under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by the Securities and Exchange Board of India established under section 3 of that Act; and (C) in which at least fifty-one per cent of equity shares are held by the investor and the balance equity shares are held by members of such investor;] 73 [(vi) investment by way of acquiring equity shares of an incubatee by an incubator. Explanation.-For the purposes of this clause,- (a) "incubatee" shall mean such incubatee as may be notified by the Government of India in the Ministry of Science and Technology; (b) "incubator" shall mean such Technology Business Incubator or Science and Te....
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....icate 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. However, we do not agree with the contention of the assessee that the certificate cannot be cancelled from the retrospective date. If the contention of the AR is allowed then we are confirming the default of the assessee committed in the earlier year. However, we also find that the lower authority should have issued summon u/s 131 of the Act for the cross examination but from the facts we find that the no such summon has been issued. We also find that assessee has given the detailed profile of the donee along with the correspondence which is placed on pages from 27 to 80 of the paper book. The transaction for the donation was made through banking channel and the department failed to bring anything on record that the donation given by the assessee has come back to it in the form of the cash. At the most, in our considered view, the Revenue could have brought the amount of donation to the tax as the evidence collect....
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....Revenue is only that the donation was received by the assessee on making payment in cash to M/s Herbicure Health Care Bio Herbal Research Foundation, but to substantiate this claim, no evidence was brought on record by the Revenue. It was simply an oral assertion and moreover the assessee was not afforded any opportunity to cross-examine the witness, whose statement was relied on by the ld. Commissioner of Income Tax (Exemptions) for cancellation of registration under section 12AA of the Act earlier granted to the assessee. even assuming, for the sake of argument, that if the assessee has received donation on making payment in cash and it may be his own money which was introduced in the trust through circuitous means, but it was applied for charitable purposes, therefore, it cannot be added under section 68 of the Act. Thus, even on merit, we do not find any force in the allegations raised by the Revenue. The ld. Commissioner of Income Tax (Exemptions) has cancelled the registration under section 12AA of the Act on the basis of conjunctures and surmises, as he has observed in his order that the assessee might have been charging capitation fee from the parents of the students, but i....