TaxTMI 
TaxTMI 
2016 (11) TMI 1466
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....Registration of the Trust U/s. 12AA(3) & 12AA(4) of the I.T. Act, 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 ....
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....e raised by assessee in the grounds of appeal is that learned CIT(Exemption) erred in cancelling the registration certificate granted 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 14^th 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. ....
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....ected the money receipts 80G certifications on behalf of the donors. Q. 19. The Ledger copy for the period from 01.04.2014 to 04.09.2014 in respect of "General Fund" of your trust having details of the donors is being showing to you to identify the bogus donations 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 rela....
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.... M/s Batanagar Education & Research Trust and received in cash. b) Trustees of the Trust have been benefitted out of the cash so received. c) They have violated the objects of the trust as covering cheque paid through donation and received in cash. d) Charity done through paid donation is not voluntary, merely an accommodation entry and fictitious. e) Moreover, trust was found to be doing business in shares, 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) Activ....
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....er the provisions of section 12AA(3) of the Act. In this connection the learned AR has relied in the judgment of Hon'ble High Court of Allahabad in the case of OXFORD ACADEMY FOR CAREER DEVELOPMENT vs. CHIEF COMMISSIONER OF INCOME TAX & ORS, 315 ITR 382. The relevant extract of the judgment reads as under : "Sec. 12AA(3) was incorporated in the Act w.e.f. 1st Oct., 2004 and not applicable retrospectively; registration granted to assessee on 1st April, 1999 could not therefore be cancelled 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 approv....
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....to the assessment year under consideration. The impugned notice of the ITO issued under s. 48 is, therefore, quashed and set aside - State of Maharashtra vs. Suresh Trading Co. (198) 109STC 439 (SC) applied.' 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. The person acting as conduit between the assessee and BERT has not taken the name 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 ass....
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.... 69 [(iii) deposits made with an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;] 70 [(iv) investment by way of acquiring equity shares of a depository as defined in clause (e) of sub-section (1) of section 2^71 of the Depositories Act, 1996 (22 of 1996);] 72 [(v) investment made by a recognised stock exchange referred to in clause (f) of section 2 of the Securities 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 ....
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....e placed on pages 91 to 130 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. There is also no adverse remark in the audit report about the investment made by the assessee, which is placed on pages 101 to 103 and 109 to 111 of the paper book. We also find that the notice for the cancellation of the registration certificate was issued under section 12AA(3) of the Act as evident from the notice placed on page 12 of the paper book. However, Ld. CIT(E) 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. 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 ....
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....e also find support and guidance from the order of Hon'ble ITAT Lucknow, in the case of Fateh Chand Charitable Trust versus CIT (Exemptions) in ITA No.792/LKW/2015 order dated 18.03.2016 where it was held as under : "22. Undisputedly, the assessee has taken receipt of donation as part of its income and the same was applied for charitable purposes and these facts are borne out from the consolidated balance sheet of the assessee available at page 8 of the compilation of the assessee. The Revenue has not made out a case that the donation received by the assessee was not taken as part of income and was applied for non-charitable purposes. The allegation of the 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 assess....