TaxTMI 
TaxTMI 
2017 (12) TMI 909
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.... is placed at page 3 and 4 of the paper book, wherein vide letter dated 26.06.2012, the AO stated that the exemption shall be deemed to be extended in perpetuity unless specifically withdrawn. The Memorandum of Association has been seen kept at page nos. 32 to 40 of the paper book wherein the main objects of the society were for education, health for the poor and needy people and other social cultural activities. 3. The Ld. CIT(E) took note of the survey operation carried out u/s. 133A of the Act on 27.01.2015 at the premises of M/s. Herbicure Healthcare Bio-Herbal Research Foundation (in short "M/s. Herbicure") wherein the statement of the founder Director Shri Swapan Ranjan Dasgupta was recorded on oath, wherein he has stated that they had been accepting donations on behalf of M/s. Herbicure and returned the same to the donor after retaining the commission and likewise, M/s. Herbicure accepts money by cash and thereafter disburse the donation through cheque after retaining the commission. The Ld. CIT(E) noted that the assessee society in AY 2011-12 had received a donation of Rs. 50 lacs from M/s. Herbicure, therefore, he issued notice to the society on 02.12.2015 to explain as....
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....e free distribution of spectacles and free eye operation of the poor and needy people. The assessee is also providing free treatment, medicine and financial help to needy persons and distributing free calipers, artificial limbs and cycles for the handicapped persons. Assessee also organizes cultural programs, symposium, seminars, debates etc. Meanwhile, the Ld. CIT(E) had stumbled across a statement given by Shri Swapan Ranjan Dasgupta, the founder Director of M/s. Herbicure which was recorded on oath during survey carried out u/s. 133A of the Act wherein Shri Swapan Ranjan Dasgupta has stated that they provide donation in lieu of cash; and also they indulged in accepting donation which is returned back in cash to the donor. The Ld. CIT(E) found that the assessee society in AY 2011-12 had received a donation of Rs. 50 lacs from M/s. Herbicure, therefore, he issued notice dated 02.12.2015 asking the assessee why the registration granted u/s. 12A of the Act should not be cancelled. The assessee society replied that the amount of Rs. 50 lacs donated by M/s. Herbicure was received and found utilized for purchase of building and stoutly refused that it was a bogus donation. There was se....
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..... Thus, the accommodation entry is completely controlled and managed by Mr. Kishan Bhawasingka. The bogus donations are received vide cheque/RTGS into any of the bank accounts mentioned by me in response to question no.7 of this statement. After this, payment is made to any of the paper/bogus companies on account of bogus purchase/expense on the advice of Mr. Kishan Bhawasingka. The remaining transaction is also managed on paper by him only which happens in the form of routing of the donation amount through his bogus/paper companies in 2 to 3 layers. Finally, cheque of the donation amount (after deducting the cut of commission charged by us and broker Mr. Kishan Bhawasingka) is given back to the original beneficiary who gave donation to us. Sometimes, the amount is withdrawn at 3rd or 4th level and cash is given back to the original beneficiary (after deducting the cut of commission charged by us and broker Mr. Kishan Bhawasingka) who gave donation to us. In this entire process of providing entry in the form of bogus Donation to different beneficiary companies/individuals a commission of 5% approx is charged by us which is the actual donation we receive from that particula....
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....gupta recorded during survey cannot be the sole basis for the impugned action as well as requested for cross examination of Shri Swapan Ranjan Dasgupta and Shri Kishan Bhawasingka. We note that the Ld. CIT(A) repelled the plea of the assessee for cross examination and passed the impugned order holding that the assessee has taken donation in lieu of cash and, therefore, has indulged in ingenuine activity of money laundering and, therefore, as per section 12AA(3) of the Act he was of the opinion that the activities of the assessee are not genuine and it was not being carried out in accordance with the objectives of the society. Therefore, registration granted u/s. 12A of the Act dated 19.12.1973 was cancelled w.e.f. 01.04.2010 vide impugned order dated 16.12.2016. It is an undisputed fact that the assessee is a charitable organization which is indulged in various philanthropic activities including in the field of education and health for the poor and needy section of the people and has been provided with certificate of registration u/s. 12A of the Act as early as that of 19.12.1973. The sheet anchor of the entire exercise emanates from a statement recorded during survey which was rec....
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....ssee for cross examination of Shri Swapan Ranjan Dasgupta and Shri Kishan Bhawasingka was not heeded to by citing observation from few judgments. We do not uphold the impugned action of the Ld. CIT(E). Right from the notice given by the ld. CIT(E) the assessee pleaded that the assessee had utilized Rs. 50 lacs donated by M/s. Herbicure for purchase of property and is not involved in money laundering or has not given any cash in lieu of the donation it received. We note that the statement of Shri Swapan Ranjan Dasgupta does not specify as to whether the assessee society has indulged in receiving donation in lieu of cash. The statement of Shri Swapan Ranjan Dasgupta is general in nature and we note that from the answer to question no. 9 that M/s. Herbicure is engaged in the basic and fundamental bio-medical research in the field of microbiology and analytical chemistry (molecular biology and cell culture) and it was involved in research to come out with the solution in respect of resistance to various levels of drug resistance and there were eight full time researchers, which we find from a perusal of paper book page 168. It has been stated by Shri Swapan Ranjan Dasgupta that since t....
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....a of the assessee to cross-examine Shri Swapan Ranjan Dasgupta and Shri Kishan Bhawasingka was not heeded to by the ld. CIT(E) which makes the order fragile for violation of natural justice and, therefore, the sole basis for the impugned action is infirm and not legally sustainable. 6. Moreover, we note that the donation it received from M/s. Herbicure to the tune of Rs. 50 lacs has been utilized for purchase of property, therefore, even if the receipt of donation has to be treated as unexplained receipt of the assessee as per section 68 of the Act, addition cannot be made because the assessee itself has applied the entire receipt for the objects of the assessee society. For the aforesaid proposition of law, we rely on the Hon'ble Allahabad High Court's order in the case of CIT Vs. Uttaranchal Welfare Society 42 taxman.com 361 wherein their Lordships held that section 68 of the Act has no application where the assessee has disclosed donations as its income. The Hon'ble Allhabad High Court has followed the view taken by the Hon'ble Delhi High Court in the case of DIT (Exemption) Vs. Keshav Social & Charitable Foundation, 278 ITR 152 and the decision of the Hon'ble Apex Court in t....