TaxTMI 
TaxTMI 
2019 (6) TMI 707
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....t. (ii) The ld.CIT(Exemptions) has erred in challenging the genuineness of the activities of the trust by stating that the said activities are not being carried out in accordance of the object of the trust. 3. (i) The ld. Commissioner of Income-tax (Exemptions) has erred in cancelling the registration of the applicant on the ground that applicant has received voluntary donation in exchange of cash and was not justified in stating without any basis that the applicant is not doing any charity but it is making clear profits. (ii) The Ld.CIT(Exemptions) has erred in cancelling the registration of the trust on the ground of unverifiable donation of Rs. 85,00,000/- without confronting the assessee with the evidence he purportedly had and hence ignoring the principles of natural justice. (iii) That the ld. Commissioner of Income-tax (Exemptions) was not justified in cancelling the registration without providing the opportunity of cross examination to the appellant. 4. The Ld. Commissioner of Income-tax (Exemptions) was not justified in cancelling the registration without giving any meaningful opportunity to the appellant to show cause. ....
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.... based upon presumptions and suspicion without giving any specific finding or any specific instance where the assessee carried out any activity which is outside the purview of the trust or the institution. 6. Learned counsel further argued that learned CIT(Exemptions) issued notice for cancellation of registration on 25th January, 2016 but the registration was cancelled with retrospective effect from 1st April, 2010. This act of the Assessing Officer is contrary to the decision of Hon'ble Jurisdictional High Court in the case of ACIT Vs. Agra Development Authority - [2018] 407 ITR 562 (Allahabad). He, therefore, stated that the order of the CIT passed under Section 12AA(3) may be cancelled. 7. Learned CIT-DR, on the other hand, relied upon the order of learned CIT(Exemptions) and he stated that the CIT, after considering the evidences on record with him, has arrived at the conclusion that the assessee was earning income outside the books. Obviously, such income could have been earned from the activity which is not as per the object of the trust. Therefore, learned CIT(Exemptions) was fully justified in withdrawing the exemption granted to the assessee. He has also relied ....
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...."12AA. (1) The [Principal Commissioner or] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) [or clause (ab)] of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he things necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may 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 : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. [(1A) All applications, pending before the [Principal Chief Commissioner or] Chief Commissioner on which no order has been passed under clause (b....
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.... Commissioner registers the trust or institution under sub-section (1) and he has been given the power under sub-section (3) to cancel the registration granted under subsection (1). However, under sub-section (3), he can cancel the registration granted under sub-section (1) only when he is satisfied - a. that the activities of such trust or institution are not genuine; and b. the activities of such trust or institution are not being carried out in accordance with the objects of the trust or institution. 10. In the case under appeal before us, the CIT has cancelled the registration granted under Section 12AA(1) on the alleged ground that the trust had received the donation of Rs. 85 lakhs from HHBRF in lieu of cash. The above finding of the CIT(Exemptions) is based upon the report received from CIT(Exemptions), Kolkata. On the basis of above, the CIT(Exemptions), Lucknow has held that the activities of the society cannot be said to be carried out in accordance with the objects of the society. At the same time, he further drew the inference that no genuine activities are being carried out by the assessee. The learned counsel for the assessee has stated before us ....
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....same is reproduced below :- "9. As per the detailed report of the Ld.CIT(Exemption) Kolkata and the Assessing Officer and Joint Commissioner of Income-tax (Exemption), Ghaziabad, M/s Herbicure Healthcare Bio-Herbal Research Foundation has admitted that this amount was paid by cheque to the assessee after payment of equal amount in cash and commission through brokers. Thus total amount of Rs. 85,00,000/- has been received by cheque from M/s Herbicure Healthcare Bio- Herbal Research Foundation by the assessee after paying cash of Rs. 85,00,000/- plus 5 to 10% of this amount also in cash as commission." 12. Similarly, in paragraph 13, which reads as under, he has relied upon the statement on oath and the letter signed by HHBRF :- "13. Moreover, the statement on oath and the letter signed by M/s Herbicure Healthcare Bio-Herbal Research Foundation have clearly demonstrated that the assessee trust has paid cash and commission to get donation in cheques from M/s Herbicure Healthcare Bio-Herbal Research Foundation. It has been clearly indicated in the statement and report send by the Ld. CIT(E), Kolkata that the assessee has paid cash in addition to commission to manag....
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....n dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to wh....
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.... the basis of which it could justify its action. Therefore, in our opinion, the above decision of Hon'ble Apex Court would be squarely applicable. 15. Learned DR has also relied upon the decision of Hon'ble Jurisdictional High Court in the case of UP Distillers Association (supra) and has also pointed out that the SLP filed by the assessee against the above decision was dismissed by the Hon'ble Apex Court. From a perusal of the above decision, we find that the facts in the aforesaid case were altogether different. In the aforesaid case, there was search and seizure operation on the assessee i.e., UP Distillers Association and during the course of such search, the material was found as well as statement of Shri R.K. Miglani was recorded under Section 132(4). Thus, the facts in the aforesaid case were altogether different. In the case of the assessee, there is no search but the Department is relying upon some letter claimed to have been received from CIT(Exemptions) and the statement of some office bearers of HHBRF. Learned DR has also relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of Scientific Educational Advancement Society (supra). We find t....
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....doubted, it cannot be a ground to draw the inference that the activities of the assessee society are not being carried out in accordance with the objects of the society or that no genuine activities are being carried out by the assessee. That if the genuineness of a donation in one year is doubted, the addition, if any, can be made in the assessment of the relevant assessment year in accordance with law. However, that, by itself, would not be sufficient to withdraw the registration under Section 12AA(3). If the genuineness of a donation is doubted, at the most, it can be a ground to examine deep into the activities of the society so as to ascertain whether the activities of the society are being carried out in accordance with the objects of the society. However, a conclusion cannot be drawn that the activities of the society are not being carried out in accordance with the objects of the society or that no genuine activity is being carried out by the assessee merely because the genuineness of one donation in one year is doubted. 17. Learned counsel for the assessee has also relied upon the decision of Hon'ble Jurisdictional High Court in the case of Agra Development Autho....