TaxTMI 
TaxTMI 
2017 (9) TMI 1972
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.... to 3400 students are studying in the said schools. One school is imparting education upto Class XII and the other two schools are imparting education upto Class IV. The assessee was claiming exemption u/s 10(22) of the Act upto Asst Year 1998-99 and thereafter pursuant to omission of the said section from the statute, sought to obtain registration u/s 12A of the Act which was duly granted to the assessee with effect from 1.7.1999 from the Director of Income Tax (Exemptions), Calcutta vide Proceedings No. DIT(E)/T-80/8E/340/98-99 dated 6.8.1999 . It was also granted approval u/s 80G(5)(vi) of the Act. Hence from Asst Year 1999-2000 onwards, the assessee society was claiming exemption u/s 11 of the Act to the extent its receipts were applied for charitable purposes. 3. The ld CIT(E) observed that the assessee had indulged in the practice of money laundering through payment of bogus donations. He observed that these facts were confirmed in a survey operation conducted u/s 133A of the Act on 3.9.2015 in the case of M/s Batanagar Education & Research Trust, wherein a statement of Sri Rabindranath Lahiri, Vice Chairman and Trustee, was recorded during the survey operation . In the sa....
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....ed that it had decided to make donations to other educational institutions and trusts for betterment of educational facilities within India out of surplus fund available with the society and in the course of carrying out such activities , the society had given the following donations :- VIDYA BHARATI SOCIETY FOR EDUCATIONAL & SCIENTIFIC ADVANCEMENT DONATION PAID Name PAN Amount CHQ No. FINANCIAL YEAR 2011-12 BATANAGAR EDUCATION AND RESEARCH TRUST AABTB3024G 1000000 648049 -Do- AABTB3024G 1500000 648052 1/1/1, Jodhpur Park, Kolkata-700068 TOTAL 2500000 FINANCIAL YEAR 2012-13 SETH POKHARMAL EDUCATIONAL SOCIETY AADTS0508A 2500000 C/O-RDPS, CD-Block, Pitampura, New Delhi110034 ....
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....Trust to assessee, assessee's letter of donation and money receipts issued by the recipient trust, to prove the genuineness of donations paid by assessee to Batanagar Education and Research Trust supported by proper documentary evidences. It was also stated that the assessee had not received any cash from Batanagar Education and Research Trust out of donations paid to them by account payee cheques. It was also submitted that if there is any misappropriation or siphoning of funds at the end of Batanagar Education and Research Trust, the assessee had no role to play in such act done by the other trust and pleaded that it is in complete darkness about the allegations leveled on it. Apart from stating these facts and objections, the assessee also furnished the following documents before the ld CIT(E) :- a) Balance Sheet, Income & Expenditure Accounts, Receipts and Payments Accounts of the assessee society as well as it schools for the Asst Years 2011-12 to 2015-16. b) Copy of certificate u/s 12A of the Act and copy of society registration certificate under West Bengal Society Registration Act. c) List of Donations received by the assessee society for the peri....
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.... public charitable trust imparting education by running 3 schools as a noble cause and participating in the nation building process. 4.3. On 15.1.2016, the ld CIT(E) directed the assessee to produce the president of the assessee society Mr Mukul Agarwal for personal appearance together with his computation of total income, balance sheet, profit and loss account for Asst Years 2012-13 , 2013-14 , 2014-15 & 2015-16. On 9.2.2016, Mr Mukul Agarwal appeared in person before the ld CIT(E) and was asked to explain about the donations given to (i) Seth Pokharmal Educational Society , Delhi ; (ii) Ballaram Hanumandas Charitable Trust, Kolkata and (iii) Nabadwip Mandal Development Trust and no questions were asked about donations given to Batanagar Education & Research Trust by the ld CIT(E) to Mr Mukul Agarwal. The replies to the questions asked by the ld CIT(E) about the three other different trusts as above were duly filed in writing by Mr Mukul Agarwal on 15.2.2016. On 11.4.2016, the assessee was given opportunity to cross -examine Mr Rabindranath Lahiri of Batanagar Education & Research Trust and date was fixed for the same on 21.4.2016. But on 21.4.2016, Mr Rabindranath Lahiri was p....
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....ling the assessee's registration u/s 12A and that too with retrospective effect from 01.04.2011. (C) For that the CIT erred in holding that' (i) Any donation made by the assessee was bogus, fictitious, accommodation entry or for money laundering or that the assessee received back any cash; (ii) The assessee resorted to any modus operandi or dealt with any entry operator or siphoned off society's money. (iii) The president or members or trustees of the assessee received cash or benefited from the donations or the students were deprived; (iv) Section 13(1) or Section 13(2) or Section 13(3) were applicable; (v) The assessee misused the provisions of Section 12AA or Section 80G(5)(vi); (vi) No charitable work was done by the assessee by giving donations; (vii) The activities of the assessee were not genuine or were not carried out in accordance with or were contrary to its objects or illegal or immoral; And his purported findings invoking sub-sections (3) and (4) of Section 12AA and withdrawing/cancelling the registration u/s 12A are wholly arbitrary, erroneous, unreasonable and perverse. (D) For ....
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....f law. Moreover, the adverse conclusion was reached by the ld CIT(E) from the statement of Sri Rabindranath Lahiri vide Question No. 19 wherein he was asked by the department to inform about the corpus donations received during the period 1.4.2014 to 4.9.2014 (Asst Year 2015-16) only, whereas the assessee had given revenue donations to the said trust during Asst Years 2012-13 & 2013-14. Moreover, nowhere in the entire statement of Sri Rabindranath Lahiri , he had mentioned the name of the assessee or its office bearers and hence there is no reason to draw an adverse inference against the assessee based on a third party statement, which is actually not against the assessee. He alternatively argued that even if the donations paid by the assessee were held to be bogus, then the same should not be treated as application of income u/s 11 of the Act and for this purpose, the registration granted u/s 12AA of the Act need not be withdrawn. He argued that absolutely no evidence had been brought on record by the ld CIT(E) that the officer bearers of the assessee society had indeed received back the cash in lieu of donations given by cheques from Batanagar Education & Research Trust and other....
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.... of Batanagar Education & Research Trust on 3.9.2015 during the course of survey operation conducted in the hands of Batanagar Education & Research Trust, wherein , he had deposed that the said trust had resorted to receipt of certain bogus corpus donations from various other trusts. For the sake of convenience, the relevant portions of the statement recorded from Sri Rabindranath Lahiri are reproduced below:- Q.10. It is seen from the Donor List that you have received Corpus Donation amounting to Rs. 9,17,17,550/- form various persons over a period of six (6) years from financial year 2008-09 to financial year 2013-14. Did you claim exemption under Sec 11(1)(d) for such Corpus Donation? A.10. Yes. Q.11. Please confirm the authenticity of the above mentioned Corpus donation. A.11. A major part of the donations that were claimed exemption u/s 11(1)(d) were not genuine. The donation received in financial years 2008-09, 2009-10 and 2010-11 were genuine Corpus Donation received either from the Trustees or persons who were close to the Trustees. In financial year 2011-12 and 2012-13 a part of the donation were genuine like the earlier years. However, ....
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....7) persons/entities. A.16. It will be provided in due course. Q.17. It is seen that your trust has been taken over by the Techno Group in the year 2013. What was modus operandi and consideration received of such take over? A.17. As per the understanding Six(6) out of the original nine (9) trustees resigned from the Board and they were replaced by Six(6) Trustees by the Techno Group. As a consideration the Techno Group provided unsecured soft loans to this trust which is reflected in the Balance Sheet. Q.18. 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 shown to you to identify the bogus donations along with bogus donors. A.18. 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 subhead "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 mediators. 8.1. Once this s....
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....y to Question No. 19, according to which a list of donors appearing in the ledger copy was shown to the deponent. Whether such list include the name of our Trust which had been termed as bogus by the deponent. In any case before alleging a donation as bogus, appropriate evidence(s) must support such allegation. 4. In question no. 10 &11 the term "Corpus donation" had been used. In reply to question no. 11 the deponent had stated- "In financial year 2011-12 and 2012-13 a part of the donation were genuine like the earlier years." We state that our donation given to the said Batanagar Education and Research Trust falls under this part. Further the deponent had stated in the same reply "however a major part of donation received in this two financial years viz. 2011-12 and 2012-13, 'shown as corpus donation', were in the nature of accommodation entries................". Please note that our Trust had not made any corpus donation to the said Batanagar Education and Research Trust. Rather our donation was simple donation i.e. non-corpus, which is evident from our donation letters as well as receipts granted by the said Batanagar Education and Research Trust, where you wi....
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....ions to other educational institutions within India. In view of the above we request you to drop the proceedings for cancellation of registration certificate granted u/s 12A of the I.T. Act, 1961. Thanking you, Yours Faithfully, For Vidya Bharati Society for Educational & Scientific Advancement (B.N. Jain) Jt. Secretary 8.2. At the outset, we are in agreement with the arguments of the ld AR that there is no need to cross-examine Sri Rabindranath Lahiri by the assessee as no adverse statements / contents were reflected against the assessee in the said statement. In fact there is not even a whisper about the assessee society or its office bearers in any manner whatsoever in the entire statement of Sri Rabindranath Lahiri. Hence the ld CIT(E) deciding against the assessee on the ground that the assessee society had not availed the opportunity of cross-examination is of no relevance for invoking the provisions of section 12AA(3) of the Act. We find that the ld CIT(E) had made a bald allegation that the assessee society was involved in money laundering by receiving cash from various other trusts in lieu of donations paid to them by cheques. This allegati....
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....s 12AA(3) and 12AA(4) of the Act. We find that similar issue had cropped up before the co-ordinate bench of this tribunal with reference to transactions with Batanagar Education & Research Trust in the case of Jha Educational Trust vs CIT(E) in ITA Nos. 931-933/Kol/2016 dated 17.3.2017 wherein it was held as under:- 8. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the cancellation of registration certificate issued u/s 12A/12AA of the Act on the ground that the assessee was involved in providing the bogus donation to the various trust and societies. This fact of bogus transactions in the form of donation was revealed on the basis of the statement of the managing trustee recorded in the course of survey u/s 133A of the Act on BERT. The managing trustee of be BERT admitted that it has received bogus donation through a person namely Shri Gulab Pincha. Thus the Id. CIT(Exemption) cancelled the registration certificate issued U/S 12A of the Act. However on the perusal of the statement given by the managing trustee of the BERT we find that he admitted that the major bogus d....
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....cannot be cancelled as long as the objects of the trust are within the provisions of law. The objects byelaws of the trust are placed on pages 264 to 283 of the paper book and on the basis of same objects the assessee was given registration certificate U/S 12A and 80G and 10(23C) of the Act. While holding so, we find support & guidance from the judgment of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Apeejay Education Society reported in 59 taxmann.com 102 wherein it was held as under: "Under Section 12AA of the Act, the Commissioner, at the relevant time in the year 1999 had called for all documents and information from the respondent-assessee to satisfy himself about the genuineness of the activities of the institution and after making enquires had passed the order registering the said institution and giving it the benefit under Section 12A of the Act, which made the institution eligible for exemption from the provisions of Sections 11 and 12 of the Act. Under Section 12AA(3) of the Act, the Commissioner was to be satisfied about the activities of the said institution and if they were not genuine and the same were not being carried out in accordance with....
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....the certificate granting approval under section 80G is enclosed on pages 6A to 6C of the paper book. It was also observed that no donation whatsoever has been received by Jha Trust (in short) till date. Jha Trust is running schools in two campus since last several years.One is primary and junior High School on VIP Road, Baguiati, Kolkata-159 and another is secondary (ICSE) and Higher Secondary (ISC) School at Aswini Nagar, Baguiati, Kolkata-159. The school is affiliated with Council for the Indian School Certificate Examinations New Delhi (ICSE-X and ISC-XII). The trust has started another school near Ranchi which is situated in remote area mainly with the object of imparting education to general and tribal poor students and providing free tuition and/or charging concessional rate of tuition fees to a large number of students in deserving cases. The school is operational since April 2015. The Roll- strength of students at present is about 3000 in all the schools taken together. At present, more than 200 staff members are involved in the school including teaching and non- teaching staff. Apart from staff several other persons are dependent on schools for their livelihood as they are....
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....own by the Hon'ble High Court of Kamataka in the case of Islamic Academy of Education (Supra), it can be concluded that even the donation to BERT is proved to be bogus then also the registration u1s 12A of the Act cannot be cancelled but the said amount of donation will not be eligible for exemption U/S 11 of the Act. The provisions of section 12A of the Act prescribe conditions for registration of trust and make obligatory to the trust or the institution to seek registration under section 12AA of the Act, if such trust or institution intends to have the benefit of the provisions of section 11 and 12 of the Act. These provisions thus make it clear that if the trust or the institution is not registered under section 12AA of the Act, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable to be excluded under any of the clauses of section 11 of the Act. Thus, in a case where registration is refused, the trust or the institution would not be allowed to claim any such exemption or exclusion of its income from the total income of the previous year. The Income-tax Act through secti....
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....satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the CIT would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they" were not the objects of any charitable purpose, registration cannot be refused ; accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, the CIT is again empowered to make enquiries as he thinks fit. In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the instit....
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....uiry regarding genuineness of the activities cannot be stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 for assessing the income which has not been applied to the purpose of the trust or the institution, the intention of the law maker and the scope and purport of the provision is apparent while considering the question of registration." In view of above precedent, we find that the activities of the trust in relation to its education activities have not been doubted and on the basis of same activities various registrations u/s 12A, 80G and 1O(23C) were awarded to the assessee. Simply the assessee has given donation to a trust which is involved in the bogus transactions cannot be the basis for the denial of the registration certificates as discussed above. 8.3 It is also important to note that the assessee has been giving donation in every year which has been duly accepted by the Revenue as evidenced from the details submitted which is placed on pages 23 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.. In this connection the CBDT has....