TaxTMI 
TaxTMI 
2021 (2) TMI 466
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivities in medical and education field. In order to run the society for carrying out these objects it has established various colleges and hospitals namely Chirayu Meical College & Hospital, Bhopal, Chirayu College of Nursing, Chirayu College of Para medical and Chirayu Cancer Hospital. These colleges have courses of MBBS, MD, B.Sc Nursing. Post B.Sc. Nursing. GNM, MSc. Nursing, and various courses under paramedical college like DMIT, BMLT and physiotherapy etc. The medical college and hospital run by the assessee are approved by Medical Council of India (MCI), New Delhi. Indian Nursing. Council. State Nursing Council. Director Medical Education (DME). Madhya Pradesh Medical Science University, Jabalpur and Barkatulah University, Bhopal. 3. The assessee society was granted registration u/s 12AA of the Income Tax Act on 29.11.2002 effective from 1.4.2002. Search & seizure action u/s 132 of the Act was carried out at various premises of Chirayu group and its associates on 4.11.2016. This action was carried out subsequent to the search conducted by Central Bureau of Investigation (In short `CBI') on 4.11.2016 at the residence of family member of Director and promoter of various ent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rn for A. Y. 2013-14 has filed NIL gross total income. Further, Zagdu Singh Charitable Trust and Thakur Education Trust have the same registered address as evident from the seized documents. Further, from the documents seized, copies of resolution of both the abovementioned trusts were found which are of the same date i.e. 03.06.2013. All the above circumstances along with the failure of assessee to furnish any details or confirmation of donations received are suggestive of manipulation and show that the donations are suspect. (ii) Corpus Donation of Rs. 8,15,90,000/- has been received by Chirayu Charitable Foundation from Riviera Infoway Ltd on 01.07.2011. The assessee has not submitted any documents/confirmation of the same. From enquiry conducted, it has been observed that M/s Riviera Infoway Ltd has filed return of A. Y. 2012-13 declaring gross total income of Rs. 2,022/-. This does not justify the huge amount of donation made by the said company. Further, as the assessee has failed to furnish any details or confirmation of donations received, the same remains unexplained. (iii) Donation of Rs. 50,00,000/- has been received from Udodas Mundhra Seva Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C3656P -Show cause - reg. The Trust, "Chirayu Charitable Foundation" was granted registration u/s 12AA of the Income tax Act, 1961 by Commissioner of Income tax, Bhopal vide order dated 29.11.2002 from Assessment Year 2003-04 onwards. Accordingly the assessee trust is claiming exemption u/s 11 of the Income tax Act, 1961 on account of income applied for charitable and religious purpose in India during every year since its inception. Search and seizure action u/s 132 of the Income tax Act, 1961 was carried out at the various premises of Chirayu Health Group and its associates on 04/11/2016. Search warrant was also executed by the Central Bureau of Investigation (CBI) on 04/11/2016 at House No. 11, Professor Colony, Bhopal which is the residence of family members of Directors and Promoters of various entities of Chirayu Group. During the course of search and seizure operation by the Investigation Unit of Income tax Department on 04/11/2016, various documents were seized from premises located at Bhainskhedi, Near Bairagarh, Bhopal-Indore Highway, Bhopal The seized documents establish that the assessee Trust had received large donations from various entities ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in order to prove the identity, genuineness and creditworthiness of the donors stating that the assessee is consistently carrying out the charitable activities as per the objects and also further placed reliance on various decisions. It was also submitted by the assesse that regular assessment proceedings were conducted much prior to the search and all the documents with regard to the receipt of donation were furnished before the assessing authority who has accepted the same and the assessments were duly completed without making any addition on this issue observing that there is no concrete material/evidence which may prove that the alleged donation are not genuine and activities of the trust are not carried out in accordance with the objects of the society. It was contended before the Ld. PCIT that the proposal for cancellation of registration u/s 12AA is merely based on suspicion which is neither allowable nor justifiable. 7. However the submission made by the assessee could not convince Ld. PCIT as he was of the opinion that firstly the alleged donations received are not genuine and secondly referring to the alleged irregularity in admission process observed by CBI at Chiray....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t genuine arc wholly wrong, unjustified, opposed to facts and unlawful and. therefore, the findings of the learned PCIT be quashed. (7) That on the facts & in the circumstances of the case and in law, the findings of the learned PCI'T in para 6, 8, 9 10 & 11 of the order are wholly wrong. unjustified, opposed to facts and unlawful hence all such findings be quashed and order of the learned PCIT u/s.12AA(3) be kindly cancelled. (8) That on the facts & in the circumstances of the case and in law, the findings of the learned PCIT that the provisions of section 13 are applicable are wholly wrong, opposed to facts and are unlawful and. therefore, such findings be quashed and it be held that the provisions of section 13 are not at all applicable. 9. With regard to the above grounds Ld. Senior Counsel for the assessee apart from referring to the written submission submitted that firstly there is no iota of evidence to show that the assessee society is not carrying out its activities as per the objectives of the trust, secondly the identity, genuineness and creditworthiness of the donors has been duly proved at multiple occasions before the assessing authority, thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t and in avoiding the unnecessary trips to metros. Similarly, Chirayu Cancer Hospital houses the ultra modern Vital Beam Linear Escalator, Pet-Scan, Gama Camera, Dual CT-Scan 16 slice etc. The society also organizes free camps for the needy and poor. Treatment is available to patients under the schemes of the govt. at low cost. The hospital is recognized by the Central Govt. as well as State Govt. for treatment of its employees. Similarly, it is recognized by many reputed institutions and corporations etc. All these facilities have helped the people of state in living and enjoying better life. It is, therefore, submitted that the assessee is carrying out the activities genuinely and in accordance with the objects of the society. The assessee submits that such charitable institutions do need the help of rich and affluent as well as philanthropist. These persons contribute to the charitable institutions for the welfare of the society. Thus, donations are received by such societies including the assessee society. Donations may range from very small amounts to very large amounts. That the assessee has obtained large donations totaling Rs. 14,25,90,000. Large ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he confirmations and other documents as above said and thus, there is no ground to treat the said donations as unexplained and suspect. It is further submitted that apart from the above said two occasions reflecting that the detail and confirmations of the donors were available with the deptt., the assessee filed a submission dt. 26.11.2018 on 04.12.2018 enclosing therewith all the details, confirmations and other documents of the donors establishing the genuineness of the donations. Even, this submission of the assessee seems not to have been considered before concluding that the assessee failed to furnish any details or confirmation of donation received hence the same are suspect. It is, therefore, submitted that the assessee furnished the confirmations and other documents thrice and thus, cancellation of registration is unlawful. It has also been observed that some entities who had given large donations to the assessee have filed their return of income showing very nominal income. It is apparent that this is not the concern of the assessee. Someone wishing to donate to the assessee society is always welcome and it is up to the donor how he/she or it ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t being carried out in accordance with the objects of the institution. In the order it is observed that certain post search enquires were made which revealed that the assessee failed to furnish the confirmation of donations received or which established that the activities of the assessee are against the bye laws and objects of the charitable and religious purposes. But, no material regarding the said post search enquiries which has been used against the appellant have been made available to the appellant. In fact there is no such material with the department. In any case, copies of the confirmations and other documents related to the donations were filed with the CIT. These show beyond doubt that the donations are genuine, explained and not suspect. 11. The seized documents contained in LPS 10 fully establish the fact that donations are genuine in view of the provisions of section 292C of the Income Tax Act, 1961. It is reiterated that in the regular assessment proceedings conducted much prior to search, above documents were furnished and receipts of donation were examined and genuineness was accepted and the assessments were completed. It is submitted t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompany for receiving donations. The copy of receipt was also duly filed. 12.2. It is submitted that the assessment for A.Y. 2011-12 was completed as scrutiny assessment u/s 143(3) on 18.03.2014 in the normal course. It is submitted further that in the course of regular assessment proceedings, on specific query from the A.O., the confirmation of all loan creditors along with all related documents were furnished which, inter alia, included the confirmation letter of the said company giving an amount of Rs. 72890000. The copy of the bank account of the company along with the acknowledgment of return for A.Y. 2009-10 was also furnished in the said regular assessment proceedings. In the said regular assessment, the genuineness of the receipt of money of Rs. 72890000 was accepted and accordingly the assessment order was passed much prior to the search. The assessee submits that all the above documents exist on the assessment record of the assessee of A.Y. 2011-12. 12.3. It is submitted that the assessment for AY 2012-13 was also completed as scrutiny assessment u/s 143(3) on 24.03.2014 in the normal course. It is submitted further that in the course of regular assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd and further submitted in para-2 of the said letter that in case, she (A.O.) doubts the genuineness of the transactions and the documents furnished, then the assessee made a specific request to kindly get the verification done by issue of summons u/s. 131/133(6) of the Act to the concerned donor person. The request was again repeated vide letter dated 28.12.2018. However, without communicating the outcome of the enquiry, the AO made the addition of the donation of Rs. 81590000. In the assessment order, in para 11.5(a), the A.O. mentions that during the course of post search enquiry, detailed investigation was done by Investigation Wing. The assessee submits that the assessee has no knowledge as to what was the outcome of such detailed investigation. The A.O. has also not supplied the copy of material, which were adverse to the assessee and used in the assessment against the assessee. The said material has never been confronted. From the reading of the para 11.5(a), it prima facie appears that there was nothing against the assessee because the A.O. simply says with respect to amount of Rs. 81590000 that the donor company has filed the return showing the gross total income....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 13.1. The following amounts of donation have been treated as unexplained and added as income u/s. 68:- A.Y. Donation received from Amount 2014-15 Thakur Educational Trust (AACTT4004F) Thakur House, Ashok Nagar, Kandivili (E), Mumbai - 400101 10000000 2014-15 Thakur Educational Trust (AACTT4004F) Thakur House, Ashok Nagar, Kandivili (E), Mumbai - 400101 6000000 2014-15 Zagdu Singh Charitable Trust (AAATZ0141P) Thakur House, Ashok Nagar, Kandivili (E), Mumbai - 400101 10000000 2014-15 Zagdu Singh Charitable Trust (AAATZ0141P) Thakur House, Ashok Nagar, Kandivili (E), Mumbai - 400101 10000000 2014-15 Udodas Mundhra Seva Santhan (AAATU0983C) 5000000 Total 41000000 13.2. In the course of assessment proceedings in support of the genuineness of the transactions, following documents were furnished (a) With respect to donation from Thakur Educational Trust (AACTT4004F) - Rs. 10000000 + Rs. 6000000 Confirmation letter (Seized document) Certified copy of resolution of the donor giving donation (Seized document) Appeal by the assessee to the donor for giving donation. (Seized docu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of debts etc. It is submitted that in all fairness of the matter, the assessing officer could have made the enquiry from the assessing officer of the donor institutions at Mumbai who issued the notices u/s 133(6) for the purpose of assessment of AY 2014-15 of the said two institutions. In the course of assessments the assessee also requested repeatedly vide letters dt. 26.11.2018 and 28.12.2018 to issue summons to the said two institutions u/s 131 / 133(6) of the Act, but, without the knowledge of the assessee, it appears from page no. 12 of the Order, she had issued a notice u/s 133(6) to the donor. She has not mentioned in the assessment order what was the statement / reply of the donor institutions received by her from the donors and no such material has been confronted to the assessee. From the reading of the order it is apparent that the donors have confirmed giving the donation to the assessee, thus, there is no denial from the donors regarding giving the donation. 13.4. In the course of assessment proceedings, the assessee submitted the profile of the Thakur Educational Trust and Zagdu Singh Charitable Trust. This profile is available on the web site of the Thakur g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the donation to the assessee. Thus, there is no statement of any donor stating that they have not given the donation including Udhodas Mundra Seva Sansthan. The learned AO has also noted that the third party enquiry conducted by ADIT (Inv.)-2(4), Kolkata revealed that the registered office of the said donor was a common address of many companies / firms which is identical to typical jama-kharchi entity. In this respect it is submitted, firstly, that the enquiry was conducted at the branch office of the said donor at Kolkata and not at the Head office at New Delhi. No material has been brought on record to justify why enquiry was not made at Head Office. Secondly, simply observing that the branch office of the donor is typical of jamakharchi entity without having any cogent evidence is suspicion and presumption only which cannot be a part of judicial analysis. In big cities like Delhi, Mumbai etc., common addresses is normal phenomenon. In those cities, even a table is shared by more than one person. Thus, this could not be a ground for raising a suspicion. It is further submitted that in the course of assessment, the Inspector's report was neither shown nor confronted, and, there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iew of the following decisions, the aforesaid allegations that donations are not genuine are neither justified nor lawful and, therefore, be deleted. In support of this reliance was placed on the following decisions; 1. Hon'ble Madhya Pradesh High Court in the case of Ashok Pal Daga(HUF) v/s. CIT reported in 220-ITR-452(MP). 2. Hon'ble M.P. High Court in this case has relied on decision of Bombay High Court in the case of Orient Trading Co. Ltd. v/s. CIT reported in 49-ITR-723. 3. Hon'ble Madhya Pradesh High Court in the case of CIT v/s. Metachem Industries reported in 245-ITR-160 (MP). 4. Hon'ble Supreme Court in the case of Sreelekha Banerjee & Others v/s. CIT reported in 49-ITR-112 (SC). 5. Hon'ble Supreme Court in the case of CIT v/s. Orissa Corporation Pvt. Ltd. reported in 159-ITR-78(SC). 6. The Guahati High Court in the case of Raichand Kothari (HUF) v/s. CIT reported in 223-ITR-250 7. Hon'ble Patna High Court in the case of Addl. CIT v/s. Hanuman Agarwal reported in 151-ITR-150/151 8. Hon'ble Patna High Court in the case of Saraogi Credit Corporation v/s. CIT reporte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts whereas more than 50 seats were vacant. During investigation. the said Medical College has made available to CBI a letter dated 28.09.2012 addressed to DME under the signature of Dean of the college in which it is mentioned that majority of the students who were allotted by DME for admission in this college in the 1st counselling had not reported after making enquiries from the college about the fee, etc. This letter is not available in the records of DME and the Medical College has failed to make available the dispatch register for the relevant period. The earlier letter of the college dated 21.09.2012 to the DME, vide which it had reported vacancy of only 9 seats out of 63, was a false documents and it was sent to DME to ensure that eligible and deserving students were not allotted to the college in 2nd round of counselling. Ill. It is revealed that despite the (act that allotted students of 2nd round of counselling were given 4 days time till 29tll September to get admission, the College Level Admission Committee on 28tll September admitted 19 new students who were not from the allotment list at all. 32 new students were admitted on 29th September and 4 stud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at cancellation in Chirayu Medical College, Bhopal", 8. From the charges levelled as above and in the light of the documentary evidence stated as above, seen that the assessee trust is generating cash by manipulation of admission process by admitting non deserving candidates in lace of meritorious & deserving candidates. The cash so generated is channelized in the books of the assessee trust in the form of donations from paper entities who have no creditworthiness whatsosever as evident from their returns of income in advance in those donations. 9. From all these facts & discussion made as above, it is categorically established that neither the activities of the trust are genuine nor in accordance with the objects of the trust as reproduced above. Therefore provisions of section 12AA 3 of the Income Tax Act 1961 are clear} attracted in the assessee trust's case relevant art of which is reproduced as under for ready reference: Procedure for registration 12AA (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A {IS it stood before its ame....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh the judgments/decisions referred by Senior Ld. Counsel for the assessee. Though the assessee has raised 8 grounds of appeal but the soul issue is that "whether the Ld. PCIT was justified in invoking section 12AA(3) of the Act thereby cancelling the registration of the society granted u/s 12AA of the Act w.e.f. 1.4.2011." 13. We observe that the assessee society registered as charitable society on 26.5.2001 under M.P. Societies Registration Act and granted registration u/s 12AA of the Act w.e.f. 1.4.2002 is established to carry out charitable activities in the field of health and education. The main aims and objects of the Trust are as under :- I. To establish, run, manage, develop, own, acquire, open, purchase, undertake, improve, equip, promote, initiate, encourage, subside, sponsor, maintain, and organize hospital, nursing homes, dispensaries, clinics, polybanks, eye-banks, kidney-banks, physiotherapy centres, investigation centres, health care centres and other clinical experimental diagnostic centres and other similar institutions, centres and establishments for providing services, treatment, care and medical relief and also to co-operate and coordinate with exi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vity for profit within the meaning of Income Tax, 1961. 14. The above stated aims and objects are within the frame work of "charitable purpose" as provided in Section 2(15) of the Income Tax Act which reads that :- (15) " charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest)and the advancement of any other object of general public utility ; 15. To achieve the above aims and objects of the assessee society has established and consistently running colleges and hospitals namely "Chirayu Meical College and Hospital", Bhopal, "Chirayu College of Nursing", "Chirayu College of Para Medical" and "Chirayu Cancer Hospital". These colleges have courses of MBBS, MD, B.Sc Nursing. Post B.Sc. Nursing. GNM, MSc. Nursing, and various courses under paramedical college like DMIT, BMLT and physiotherapy etc. All these colleges and hospitals are educating students and hospitals are providing medical services to public at large. 16. We observe that on 4.11.2016 search warrant was executed by the Central Bur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act. 19. Now before moving further we would like to go through the provisions of Section 12AA of the Act which reads as follows:- 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- ^48[(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,- (i) the genuineness of activities of the trust or institution; and (ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, 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 49[as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause], he- (i) shall pass an order in writing registering the trust or institution; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-section (1) of section 13; or (b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:] Provided that the registration shall not be cancelled under this subsection, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. 20. The power of the PCIT or CIT to cancel the registration is provided in sub section (3) of 12AA of the Act, as per which if the PCIT/CIT is satisfied that (a) the activities of such trust in question are not genuine (b) or are not being carried out in accordance with the objects of the trust or institution, then in this situation PCIT/CIT may pass an order in writing cancelling the registration of such trust or institution after providing reasonable opportunity of being heard....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istration u/s 12AA of the Act is based on following two observations:- (i) The alleged irregularity in admission process at Chirayu Medical College observed by CBI (ii) Genuineness of donation received from various concerns and doubting their creditworthiness as they have nominal or meagre source of income. 23. As regards the first issue referred above we find that Ld. PCIT has not mentioned the same in the show cause notice thus giving no opportunity to the assessee to file its submission thereby violating the provisions of proviso to section 12AA(3) of the Act which provides that reasonable opportunity of being heard should have been provided to the assessee. Ld. PCIT without mentioning this issue in the show cause notice has merely reproduced part of final report of CBI dated 31.7.2015 relating to the assessee trust. This action of Ld. PCIT in our considered view is unjustifiable since the issue is already subjudice before the court and it is merely an allegation which has not reached to its finality and seems no sound basis for cancelling the registration of the assessee trust granted u/s 12AA of the Act. Ld. PCIT ought to have appreciated the fact that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to be bad in law. Our view is supported by the following decisions; (i) D.A. Gadgil v. Securities & Exchange Board of India [(2000) CLC 1873], (ii) Mohinder Singh Gill v. The Chief Election Commissioner [AIR 1978 SC 851], (iii) S.L.Kapoor V Jagmohan [AIR 1981 SC 136] (iv) Anand Rathi v. Securities and Exchange Board of India [(2001) 32 SCL 227], (v) Hindustan Lever Ltd v. Director General (Investigation, Registration) [2001(1) SCALE 219] (vi) Wimco Vs. Union of India 1980 ELT 235, (Bom) (vii) Rapheal Pharmaceuticals Vs Superintendent of Distilleries (1998 (38) ELT 11(AP) (viii) Lubrichem Industries Ltd. Vs. Collector of Customs (1994 (73) ELT 257 (SC)). 26. Even on merits as submitted by Ld. Senior counsel for the assessee that CBI charge sheet cannot form the basis for cancellation of registration u/s 12AA of the Act. He submitted that the Admission and Fee Regulatory Committee (In short 'AFRC') is a statutory body constituted on the directions of Hon'ble Supreme Court and it is an appellate authority headed by retired High Court Judge. AFRC is a body which regulates matters relating to fees and admis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y evidence unearthed during search or subsequent proceedings showing that any money was taken by college management over and above the approved legal fee with regard to the allegation that any extra amount towards fees or otherwise was taken by the college management from students admitted in the year 2011-12. In our view the alleged irregularity in the admission process in one of the colleges noted by the CBI should not have been taken as a basis for cancelling the registration u/s 12AA of the Act granted to the assessee society. 29. As regards the second issue regarding the alleged genuineness of donors and the creditworthiness in doubt, we observe that prime facie this issue has no strength to form a basis for cancellation of registration u/s 12AA(3) of the Act, since such type of issues in the case of charitable societies are to be dealt at the time of regular assessment proceedings wherein the Assessing Officer can make necessary investigation to examine the genuineness of donations as well as the creditworthiness of the donors, but still we would like to deal with the issue since the major thrust of Ld. PCIT is on this issue for cancelling the registration u/s 12AA of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....u/s 132 of the Act. The only reason for which Ld. PCIT was not satisfied with the genuineness of the donation was mainly the income shown by these donors which was not commensurate with the huge donation given by them. Though the assessee had given detailed submission with regard to donation have also submitted that the department was having all information including the address and PAN and they could have conducted necessary enquiry which they have failed to do and reliance was also placed on various judgments wherein it was held that if the assessee submits all relevant information and documents to prove the identity of cash creditor, genuineness of the transaction and creditworthiness of the cash creditor to give the amount which in this case is the donation then the burden to discharge the onus shifts on to the revenue who has to carry out necessary investigation to disprove the evidence placed by the assessee before taking any action for making any addition in the hands of the assessee. 31. As regards the donation of Rs. 8,15,90,000/- received by the assessee from M/s Riviera Infoway Ltd during financial year 2010- 11 sum of Rs. 7,28,90,000/- was received through banking ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng donation. (Seized document) (iv) Copy of the notice u/s.133(6) dated 18.07.2016 issued by assessing officer (Dy. Commissioner of Income Tax (Exemption)- 2(1), Mumbai) of Thakur Educational Trust for confirmation of donation given to the assessee. This letter was issued by the A.O. of the Thakur Educational Trust in connection with the assessment proceedings pending for A.Y. 2014-15 of the said trust. (v) Copy of reply of the assessee in compliance to notice u/s. 133(6) to DCIT (Exemption)-2 (1), Mumbai. (b) With respect to donation from Zagdu Singh Charitable Trust (AAATZ0141P) - Rs. 10000000 + Rs. 10000000 (i) Confirmation letter (Seized document) (ii) Appeal by the assessee to the donor for giving donation. (Seized document) (iii) Copy of the notice u/s. 133(6) dated 18.07.2016 issued by assessing officer (Dy. Commissioner of Income Tax (Exemption)- 2(1), Mumbai) of Zagdu Singh Charitable Trust for confirmation of donation given to the assessee. This letter was issued by the A.O. of the Zagdu Singh Charitable Trust in connection with the assessment proceedings pending for A.Y. 2014-15 of the said trust. (iv) Copy o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... supported by following judgments which are squarely applicable:- (i) Hon'ble Madhya Pradesh High Court in the case of Ashok Pal Daga(HUF) v/s. CIT reported in 220-ITR-452(MP), wherein Hon'ble court referred to the judgment of Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd. v/s. CIT reported in 49-ITR-723. "That as the assessee satisfied the authority as to the identity of the third parties and also supplied relevant evidence showing primafacie that the entries were not fictitious, the initial burden is stood discharged by the assessee." (ii) Hon'ble Madhya Pradesh High Court in the case of CIT v/s. Metachem Industries reported in 245-ITR-160 (MP). "Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee is over. Whether that person is an income-tax payer, or not, and where he had brought this money from, is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged, and in that case that credit entry....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... genuine or are not being carried out in accordance with the objects of the trusts or the reasonable opportunity of being heard is not granted before cancelling the registration. 37. The Co-ordinate Bench of Lucknow in the case of Fateh Chand Charitable Trust v. CIT (Exemptions) v. CIT (Exemptions) [2017] 83 taxmann.com 33 (Lucknow - Trib.) Hon'ble Tribunal while dealing with the issue of Cancellation of registration under Section 12AA (iii) of the I.T Act held that: Para 13. "Having carefully examined the order of the Id. Commissioner of Income Tax (Exemptions) in the light of the rival submissions, we find that on receipt of certain information from the Id. Commissioner of Income Tax (Exemptions), Kolkata; Id. Commissioner of Income Tax (Exemptions) has issued notice under section I2AA(3) of the Act to the assessee on 13.11.2015 for compliance on 24.11.2015. On 24.11.2015 the assessee sought adjournment and hearing was adjourned to 27.11.2015. On 27.11.2015 the assessee has filed a detailed reply to the charges leveled against it in show cause notice. The assessee emphatically denied the allegations leveled against the assessee that it has received a donation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the violation carried out by the assessee would lead to denial of exemption u/s. 11 & 13 of the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the efficacy or otherwi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st cannot be cancelled. If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue. There is no merit in this appeal. (iv)The Hon'ble Allahabad High Court in the case of Red Rose School reported in (2007) 163 Taxman 19 (All.), wherein it is observed that:- "CIT is entitled to see only the genuineness of objects and activities : It has been held that while refusing application under section 12A the Commissioner has to examine only two aspects, i.e., genuineness of the activities of the trust / institution and object of the trust / institution. Once there is no dispute about the genuineness of the activities; the Commissioner cannot take shelter of any other outer source for refusing registration under section 12A. The issue of registration under section 12A and the scope of enquiry at the stage of section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct, 2008 w.e.f. 1.4.2008 regarding excluding organizations where there is profit motive from the definition of charitable purpose applies only to the category of trusts which has as its object, the object of "advancement of any other object of general public utility". It does not apply to the other categories of charitable purpose viz., "relief to poor, education and medical relief". As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assesse, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1) (c ) of the Act which restricts unreasonable and excessive payments to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ithdrawal of registration granted to it w.e.f. 11-2-1998 u/s 12A of the Act are not retrospective and therefore, the impugned order of the CIT passed u/s 12AA(3) is nothing but a review of its earlier order which is impermissible in law. (vii)The decision of Rajasthan Vikas Sansthan Vs. CIT reported in 78 DTR 411 (Raj), wherein it is held as under :- The registration can be cancelled on the ground that the activity of the trust are not genuine or are not being carried out in accordance with the object of the trust. In case there are violations as mentioned in s. 11 and 13 of the Act. Thus the AO while making assessment can deny the exemption to the trust. For getting the exemption u/s 11, registration is pre-requisite. However, registration is not a guarantee for exemption. In case the Trust fails to comply with the requirements as mentioned in s. 11 and 13 of the Act then exemption can be denied. In respect of failure mentioned in s. 11 and 13 in a particular year, it cannot be said that registration is to be cancelled. Surplus in educational activities is not relevant for cancelling the registration. The education itself is charitable object and if the surplus i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... so far as object of trust is concerned, it is nowhere disputed that assessee is engaged in imparting education. Once an institution came within the phrase "exists solely for educational purpose and not for profit" no other condition like application of income was required to be complied with. The mere existence of profit/surplus did not disqualify the institution. Breach of the conditions of the trust deed would not disentitle the institution from getting the benefit which the institution had been granted earlier being a charitable trust. Nowhere in her order, the CIT has taken any objection to the charitable and educational nature of the institution. In fact, the objects of the institution as declared in the trust deed do reflect that all are philanthropic or benevolent in nature, precisely, for the purpose of imparting education. Strange enough, there is no finding recorded by the CIT contrary to this fact.Rather, this is also not the case of the CIT that the institution is doing some other activity of earning profit other than the activity of running educational institutions. The established factual position is that the institution is not doing any other activity except running....