TMI Blog2017 (9) TMI 1972X X X X Extracts X X X X X X X X Extracts X X X X ..... 12AA(3) of the Act. 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 allegation is not proven by any material evidence brought on record and is completely without any basis. It could be seen from the statement reproduced supra that Sri Rabindranath Lahiri had in fact deposed that certain corpus donations received by Batanagar Education Research Trust were bogus. But the assessee had not given any corpus donations to the said trust. Infact it had given only revenue donations to the said trust. It is well settled that the person making the allegation has to prove with material evidences that the allegation leveled against any other person is true and correct. In the instant case, except making a bald allegation, no evidences in any manner whatsoever had been brought on record . We find that the assessee trust had been unnecessarily impleaded by the ld CIT(E) in the entire episode, without any basis. Moreover, we find that when the ld CIT(E) examined the President of the assessee society Mr Mukul Agarwal, no questions were posed on him abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 said statement, he accepted the alleged modus operandi of receiving bogus donations from various corporates / individuals / firms and repayment in cash to the donors through web of financial transactions and the assessee was one of such bogus donors. He reproduced certain portions of the said statement recorded from Sri Rabindranath Lahiri in his order and accordingly show caused the assessee for cancellation of registration u/s 12AA(3) of the Act. The copy of the show cause notice issued by the ld CIT(E) on 3.12.2015 is reproduced as below:- 3A. Based on above alleged transactions, a show-cause notice for cancella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 BATANAGAR EDUCATION AND RESEARCH TRUST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee society in the said reply letter dated 17.12.2015 categorically denied that it had received back cash from Batanagar Education and Research Trust out of donations made to them during financial years 2011-12 and 2012-13. The assessee also questioned the basis on which the ld CIT(E) had asserted in the show cause notice that M/s Batanagar Education and Research Trust had returned cash to assessee society. The assessee sought for the copy of statements recorded from Sri Rabindranath Lahiri and such other evidences which were relied upon by the ld CIT(E) for drawing adverse inferences against the assessee society. The assessee also sought for cross-examination of the witness in person on whose statement such adverse conclusion had been reached by the ld CIT(E). The assessee apart from making these objections , produced the appeal letter issued by M/s Batanagar Education and Research 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 19 of the said statement , the bogus donations along with bogus donors had emerged during the period 1.4.2014 to 4.9.2014 , but , whereas the donations given by the assessee trust to Batangar Education Research Trust were during the Asst Years 2012-13 2013-14 only. It was also stated that if there is any misappropriation or siphoning of funds at the end of Batanagar Education Research Trust, then action needs to be taken on that trust and not on the assessee. Moreover, the seven persons to whom Batanagar Education Research Trust had allegedly made payments are not related to the assessee trust in any manner whatsoever and assessee s name does not get reflected in the said list. Based on these replies, the assessee trust categorically denied all the allegations leveled against it in the show cause notice of the ld CIT(E) and stated that it is a genuine 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as created. Accordingly he sought to cancel the registration u/s 12AA(3) of the Act. The ld CIT(E) also invoked the provisions of section 12AA(4) read with section 13 of the Act which was introduced with effect from 1.10.2014 onwards. Based on these observations, he withdrew the registration granted u/s 12A of the Act with effect from 1.4.2011. 5. Aggrieved, the assessee is in appeal before us on the following grounds:- (A) For that the order withdrawing/cancelling registration u/s 12A was passed in gross violation of the principles of natural justice, without disclosing the materials relied upon, without affording reasonable/adequate opportunity to controvert and/or deal with the same including by way of cross-examination and without taking into consideration the submissions of the assessee. (B) For that the CIT erred in withdrawing/cancelling 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not make the activities of the assessee society ingenuine. He argued that absolutely no evidence was brought on record by the ld CIT(E) to prove that the assessee society or its office bearers had indeed received back the cash in lieu of donation cheques given by it, apart from merely making a bald allegation to that effect. Moroever, the questions that were posed to Sri Rabindranath Lahiri while recording statement on 3.9.2015 were only in respect of corpus donations received by Batanagar Education Research Trust as could be evident from various questions in the statement. The assessee had not given any corpus donations to Batanagar Education Research Trust and all the allegations leveled by the ld CIT(E) by placing reliance on the said statement is totally unwarranted and has got no legs to stand in the eyes of 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 Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rival submissions and perused the materials available on record including the detailed paper book filed by the assessee comprising of various correspondences between the ld CIT(E) , replies filed thereon together with the annexures and statement of Sri Rabindranath Lahiri which was heavily relied upon by the ld CIT(E). The facts have been elaborately dealt with in the aforesaid paragraphs and hence the same are not reiterated for the sake of brevity. We find that the triggering factor for the ld CIT(E) for invoking the plenary powers of cancellation of registration u/s 12AA(3) and 12AA(4) of the Act is the statement recorded from Sri Rabindranath Lahiri, Vice Chairman and Trustee of Batanagar Education Research Trust. It is not in dispute that the statement had been recorded from Vice Chairman Trustee 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 Rabindrana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t parties in the guise of payments towards capital expenditure in building. We do not know any details in respect of the donors on behalf of whom Shri Gulab Pincha acted as a middle man. Shri Pincha provided us with the details of the donors, cheque of the donations, letters of the corpus donations etc. He also provided us with the names and bank a/c details of the seven (7) persons, mentioned in Answer 13 to whom money has to be returned back through RTGS. He also collected the money receipts/80G certifications on behalf of the donors. Q.15. Do you know anyone by the name of Shri Ashoke Kumar Roy, Ph No. 9432058699? A.15. No, I do not know any such person. Q.16. What are the Address and PAN No of the above mentioned Seven (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y financial transactions with such persons. A further question arise in this regard that whether these seven persons had given any statement that they or any one of them had given any cash to our Trust? 2. In reply to question No. 14 name of Shri Gulab Pincha appears in the answer. We have not heard this name any time before receipt of this statement, nor we had any financial transaction with him. We would like to know from your honor that whether Shri Gulab Pincha had given statement that he had any financial transaction with our Trust? It is required to be ascertained from Mr. Gulab Pincha that whether he know any of our trustee or its office bearers at any point of time. 3. Clarification is required from reply 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion we once again state that our Trust had made genuine donations and carried out charitable activities which are evident from income and expenditure and balance sheet of three schools runs by our society for different years and further reconfirm that our trust is not engaged in receiving back any donated amount from the donee. By giving donations to other educational institutions our society had been spreading the educational facilities in our nation and these are a noble cause for which our society is functioning for last so many years. We request your honour to not to take any adverse steps which will adversely affect the activities of running our schools and making further donations 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld CIT(E) in the entire episode, without any basis. Moreover, we find that when the ld CIT(E) examined the President of the assessee society Mr Mukul Agarwal, no questions were posed on him about the transactions with Batanagar Education Research Trust. This is evident from the copies of order sheet entries filed by the ld AR. All the details called for by the ld CIT(E) from Mr Mukul Agarwal about the other three trusts were duly filed in writing by him vide letter dated 15.2.2016, which we find had been ignored by the ld CIT(E) in the order of cancellation of registration. Accordingly we hold that there is no case made out by the ld CIT(E) for invoking powers of cancellation of registration u/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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nduit in arranging the bogus donation but no statement was recorded of Shri Gulab Pincha by issuing notice u/ 131 of the Act. In our considered opinion, the statement Shri Gulab Pincha wa: very much important to unveil the fact of the bogus donation but the Id CIT (Exemptions) has miserably failed to do so. It is also important to note that the Revenue faded to prove with supporting evidence that the money has come back to the assessee. Without prejudice to the above even assuming that the donation to BERT is bogus then the amount of bogus donation will not be eligible for exemptions U/S 11 of the Act. Under such circumstances, the registration certificate issued U/S 12A of the Act 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on) in conformity with rule 17 A and submitted Form No. 1OA 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 01.04.2001 vide order No. DIT(E)(f- 3/8E/437/2CCI-02 dated 11.04.2002. A copy of the said registration is enclosed on pages 4-6 of the paper book. The Commissioner of Income Tax (Exemption) granted approval under section 80G, initially from 26.03.2002 to 31.03.2005 and then for assessment year 2006-07 to assessment year 2008-09. Further, on 23.09.2011 it was extended in perpetuity. A copy of 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 Scho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Donation Donation as % of gross receipt 2010-11 42,296,282 2,010,000 5% 2011-12 46,450,797 500,000 1% 2012-13 51,353,957 1,400,000 3% 2013-14 60,157,202 1,000,000 2% 2014-15 67,355,336 11,000 0% 8.2 Similarly, we also rely in the judgment of Hon ble High Court of Karnataka in the case of CIT Vs. Islamic Academy of Education reported in 59 taxmann.com 102 wherein it was held as under:- If trustees were misappropriating funds and were maintaining false accounts, it was open to authorities to dell) benefit under Section 11 of the Income Tax Act, but that could not be ground for cancelation of registration itself. Applying the above ratio laid down by the Hon ble High Court of Kamataka in the case of Islamic Academy of Education (Supra), it can be conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration certificate shall conduct necessary enquiries as he think fit in order to satisfy himself about the genuineness of activities of the trust. Once the Id 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 given by the assessee to BERT. Thus in our view at the most the e emption 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 principles laid down by the Hon ble Allahabad High Court in the case of CIT Vs. Red Rose School (2007) 212 CTR 394 (All). The relevant extract of the judgment is extracted below: A reading of provisions of sub-cls. (a) and (b) of s. 12M makes it clear that the CIT has to satisfy himself about the genuineness of the activities of the trust or institution and also about the objects of the trust or the institution. On being satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the CIT would either grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title 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 about the fact that the activities are genuine and in consonance with the objects of the trust or the institution. In other words, if establishing and running a school is the object of the society, as given in its bye-laws, it has to be satisfied that the society has established the school, where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SGP for short) Mob. No.9831015157 was acting as conduit in providing a large amount of bogus donation received which was immediately returned back to the different parties in the guise of payments towards capital expenditure in building. However, no statement was -SGP was recorded by the Revenue authorities by issuing any notice/summon u/s 133(6) / 131 of the Act. The managing trustee of BERT has accepted in his statement that SGP was involved in the aforesaid bogus donation transaction. Therefore, it was necessary for the Revenue Authorities to cross examine SGP to establish / ascertain how the money has returned back to the assessee-trust. In the instant case, the managing trustee of BERT has highlighted the name of 7 intermediaries used for returning the money of the donation and the name of the assessee trust is not appearing in that list. Similarly, the managing trustee of BERT has not mentioned the name of the assessee that the bogus donation was received. The managing trustee of BERT-has mentioned very vaguely that major part of the donation was bogus without bringing the name of the donors on record. But he mentioned the name of SGP as the middle man for arranging such bog ..... X X X X Extracts X X X X X X X X Extracts X X X X
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