TaxTMI 
TaxTMI 
2017 (11) TMI 1586
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..... For that the Ld. Commissioner of Income tax Exemption erred cancelling the registration simply relying on the statement of Dinesh Agarwal which was obtained in the proceedings u/s 133A which cannot be relied on as evidence without bringing on record any evidence to support the same. 4. For that on the facts and circumstances of the cases the Ld. CIT(Exemption) erred in cancelling the registration u/s.12AAA(3)/254 when the assessee was carrying on its activities in accordance with the objects, all donations received were applied for education and charitable purpose and there was nothing on record to suggest that the activities were not carried on in accordance with the deed of settlement. 5. For that on the facts and circumstances of the case the order of the Commissioner of Income Tax (Exemption) cancelling the registration is not in accordance with law and the trust was entitled to continue its registration under the provisions of the IT Act, 1961. 6. For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing." Shri S.M. Surana, Ld. Advocate appeared on behalf of assessee and Shri G. Hangshing, Ld. Departme....
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....kata stand as under:- "a) The assessee trust has an agreement with Alagappa University, Tamil Nadu for facilitating the running of distance learning programme of that university. b) It was seen from the terms and conditions that the assessee trust did not have any discretion. i) to decide the programme to be offered. ii) to prescribe the regulation and syllabi to conduct session or prepare material. iii) to prescribe fees etc. c) the only object of the assessee trust was to advertise, give publicity and conduct practice guidance to the teachers. The trust did not have any right even to admit or reject any student. Only activity of the assessee trust was to provide infrastructure and technical manpower to the university. The only expenses of the assessee trust was administrative expenses and income were from the said university and various corpus donations received." 3.2 Accordingly, Ld. CIT(Ex) again issued show cause notice for cancellation of registration certificate and fixed the date of hearing on 15.02.2016. The assessee failed to appear before Ld. CIT(Ex) and sent its reply by postal letter stating that it runs a school....
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....he activities of the trusts are not genuine or are not carried in accordance with the object of the trust. e) We therefore are of the view that it would be appropriate in the interest of justice to set aside the order of the respondent and remand the issue of the cancellation of registration to the respondent for fresh consideration. 2.13 Thereafter, the Hon'ble ITAT directed: a) Assessee should be provided opportunity to cross-examination Sri Dinesh Kumar Agarwal. b) Before cancelling the registration an opportunity must be provided to the assessee of being heard. c) If the CIT(Exemptions), Kolkata desires then he may also examine Sri Pradip Agarwal, Sri Ajay Agarwal but in that case the opportunity of crossexamination of the said persons should be provided to the assessee. d) Regarding the case laws cited by the assessee, the Tribunal observed that the facts of the cases are entirely different and hence not relevant." In consonance with the direction of Hon'ble ITAT vide order dated 14.10.2016 the case was fixed for hearing to facilitate cross-examination of Shri Dinesh Kumar Agarwal. Similarly, a summons was also issued to ....
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....0.1.2017 the assessee and ld. AR appeared before the ld. CIT(Ex) who showed the letter written by Shri Dinesh Kumar Agarwal to both of them i.e. Assessee and his AR. Subsequently the ld. AR for the assessee made a reply in response to the letter of Shri Dinesh Kumar Agarwal vide letter dated 25.1.2017. The contents of the reply of the assessee read as under : "a) It is apparent from the statement of Sri Dinesh Kumar Agarwal that he runs a huge business and therefore have a solid creditworthiness. No material has been brought on record to show that the donation was bogus and the same was declared under IDS. b) The assessee appeared for cross-examination whereas Sri Dinesh Kumar Agarwal tried to avoid. c) Sri Dinesh Agarwal never admitted that he received money from the assessee for making the donations. d) It claimed that the assessee had purchased land with the donation and therefore the donation received has been applied. So under no circumstances, the activities can be held as not genuine." On the basis of above discussion, Ld. CIT(Ex) made following observations:- 1) To prove a transactions as genuine there has to be three in....
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....ds to the inescapable conclusion that the donation made by M/s. Quadeye Securities Private Ltd. to the assessee Trust by cheque has ill fact CI)J11e back to the chest of M/s. Quadeye Securities Private Ltd. in form of cash. Now who in the world will return the cash other than the assessee trust or the trustees of the assessee trust itself? All income tax proceedings are guided by the principle of preponderance of human probabilities. Going by that very principle, the fact of the case leads to the inescapable conclusion that the assessee trust has parked unaccounted money of its trustees in the garb of corpus donation. 5.2. It must be understood (hat charitable trusts that enjoy the benefit u/s. 12AA arc, by its very nature, akin to public institutions. It runs on public money and for the welfare of the general public. The exemption u/s 11 etc. is allowed as such organisations are supposed to perform a role that the Government, because of different constraints, cannot. So for all practice purposes, the activities or the trust which is registered u/s. 12AA and enjoying benefits of section 11 must have probity and adhere to transparent, genuine, legal and welfare activities l....
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..... CIT(Ex) in the instant case. Therefore, the impugned order of Ld. CIT(Ex) is not tenable in view of the principle laid down by Hon'ble Supreme Court in the case of M/s Andaman Timber Industries vs. Commissioner of Central Excise in Civil Appeal No. 4228 of 2006 dated 02.09.2015. Ld. AR also relied on the order of this CoPage 10 ordinate Bench of this Tribunal in the case of Sri Mayapur Dham Pilgrim And Visitors Trust vs. CIT (Exemptions) in ITA No. 1165/Kol/2016 dated 03.05.2017. The statement taken under oath during the survey operation is not admissible in terms of the principle laid down by Hon'ble Supreme Court in the case of S. Khader Khan Son reported in 352 ITR 480 where the Hon'ble Supreme Court has held that:- "Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition" In the instant case, Ld. CIT(Ex) has accepted the identity and creditworthiness of the donor but rejected the genuineness of the transactions though the transactions was made through banking channel. Thus, the genuinenes....
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....) in the instant case erred in not giving the opportunity of cross examination. Thus the cases laws cited by the ld. AR for the opportunity of cross examination is very much applicable to the instant case. 6.1 In this connection we also rely on the case CIT Vs. S. Khader Khan Son reported in 352 ITR 480 where the Hon'ble Supreme Court has held that:- "Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition" 6.2 In the absence of the cross examination of the statement the impugned addition cannot stand as held by the Hon'ble Supreme Court in the case of Anadaman Timber Industries in civil appeal no. 4228 of 2006. The relevant extract of the judgment reads as under : "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assesse....
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....he aforesaid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." There is no evidence brought on record to show any connection between those brokers and the assessee. In the absence of such corroborative evidence, it is not possible to come to any conclusion that the assessee indulged in money laundering and that the donation received by it was a bogus donation. In fact on identical facts this Tribunal in the case of Sri Mayapur Dham Pilgrim and Visitors Trust (supra) came to the conclusion that cancellation of registration u/s 12AA cannot be sustained. 7. Apart from the above, the grounds for cancellation for registration u/s 12AA(3) of the Act is that the activities of the trust should not be genuine or the activities of the trust are not being carried out in accordance with the objects of the trust. There is neither an allegation in the impugned order nor finding that any of the aforesaid conditions exist in the case of the assessee. We therefore are of the view that the cancellation of registration granted to the assessee u/s 12A of the Act cannot be sustained and the ....
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....d above, High Court are of the opinion that the Commissioner of Income Tax was not justified in passing the impugned order for withdrawing the exemption as admittedly, the respondent-assessee is carrying out educational activities by running a large number of educational institutions all over the country and, therefore, the questions of law sought to be raised do not arise." 8.1 The facts of the above case are similar to the instant case before us. In the instant case the assessee is a charitable trust duly constituted as Charitable Trust under a Deed of Trust as a Public Charitable Trust for imparting education which is a "Charitable Purpose" u/s. 2(15) of the Income Tax Act. The trust duly applied for registration u/s. 12AA of the IT Act before the Director of Income Tax (Exemption) in conformity with rule 17A and submitted Form No. 10A together with other requisite documents. The Director of Income Tax (Exemption) after verification of documents and after being satisfied about the object of the trust and genuineness of its activities granted registration effective from 01.03.2003 vide Registration No. DIT(E)/T- 41/8E/391/02-03 dated 27.03.2003. Similarly, we also rely in t....
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.... also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant;" From the above provisions, it is clear that the ld CIT(Exemption) before granting the registration certificate shall conduct necessary enquiries as he thinks fit in order to satisfy himself about the genuineness of activities of the trust. Once the ld CIT(Exemption) is satisfied with the genuineness of the activities then he will grant the registration certificate. In the instant case before us, we find that the activities of the trust have not been doubted except the donation received by the assessee from two parties. Thus in our view at the most the exemption u/s 11 of the Act will be denied to such donation. Thus, in such circumstances the registration u/s 12A of the Act cannot be cancelled. In this regard, we rely in the prin....
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....ingly would mean, they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities, may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. It is significant to mention that registration under s. 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 CIT shall remain restricted to the examination, as to whether the assessee, who has moved the application for registration under s. 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 CIT shall satisfy himself....