TMI Blog2015 (7) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the learned CIT, Jalandhar-II, Jalandhar, is not justified in cancelling and withdrawing the registration granted under Section 12AA of the Act i.e. w.e.f. the assessment year 2004-05. In the present case, learned CIT, Jalandhar-II, Jalandhar, has not brought on record any materials that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust. Thus, the order of learned CIT, Jalandhar-II, Jalandhar, cancelling the registration is bad in law and, therefore, is set aside. The aforesaid statement recorded by the Department was whether under threat of tax liability of 100 crores is not evidenced by any documentary evidence by learned A.R. In the present issue, the assessee has submitted the explanation vide letter dated 14.09.2012 available at page 8 to 10 of the order of learned CIT, Jalandhar-II, Jalandhar, in which it was stated that the software purchased from Washington Software Limited though debited to various institutions, is installed in the central server at the head office of utmost importance and required secrecy. The software includes various modules and various types of reports which include data of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawing registration u/s 12AA(3) of the Income Tax Act, 1961 is premature, bad in law and void ab-initio. ii. That on facts and in law the assumption of jurisdiction is bad inasmuch as it is based on delegation of power impermissible by law. iii. That on facts and in law the CIT erred in holding that effective opportunity to cross examine was afforded and not availed by the assessee. iv. Without prejudice and in the alternate, the CIT erred on facts and in law in withdrawing registration retrospectively w.e.f. assessment year 2004-05. v. That assessee reserves its right to add alter, amend, modify and/or to withdraw any grounds of appeal or during the course of hearing. 3) Since the issues involved in both the appeals are identical, therefore, we proceed to decide both the appeals by a consolidated order. 4) First of all, we proceed to take up the appeal in the case of M/s Apeejay Education Society in ITA No. 228(Asr)/2013 and since the issues as mentioned hereinabove are identical with that of M/s Rajeshwari Sangeet Academy Trust in ITA No. 227(Asr)/2013, our decision hereinbelow in the case of M/s Apeejay Education Society in ITA No. 228(Asr)/2013 shall identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conducted under Section 133A of the Act by the Department as the premises of various business entities of the Apeejay Education group on 29.03.2011. During the course of the survey operations, genuineness of purchase of software by Apeejay Education group of cases from M/s Washington Software Ltd. was examined from different aspects. At the time of survey operations at different premises of the group, statements of different persons actively involved in the management and running of Apeejay Group of Institutions were recorded. In their statements, they have admitted that no softwares were ever purchased from M/s Washington Software Ltd. Moreover, on physical verification, softwares alleged to have been purchased from M/s Washington Software Ltd. were not found. However, entries of bogus bills from M/s Washington Software Ltd. were found entered in the books of account of different entities of the group during the course of survey operations. It was also admitted that various entities of the group have received only bills for entering in the books of account and no software were ever installed or received by them. Al these enquires indicate and prove beyond doubt that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the registration granted to the assessee society was liable to be cancelled, invoking the provisions of section 12AA(3) of the Act. Accordingly, a notice dated 07.12.2011 was issued to the assessee-society to show cause as to why the registration granted to it under Section 12AA of the Act may not be cancelled. The assessee submitted various replies dated 17.08.2012, 14.09.2012, 18.03.2013 and 25.03.2013 which are reproduced in the order of CIT, Jalandhar-II, Jalandhar, at page nos. 6 to 28. Learned CIT, Jalandhar-II, Jalandhar, listed out the issues that have been raised by the assessee in the various replies mentioned hereinabove at page 29, which for the sake of convenience is reproduced as under: (A) That the registration granted to a trust can be cancelled only when the activities of the trust are not genuine or are not being carried out in accordance with the objective of the trust. (B) That the statement of Sh. Sanjay D. Sonawani of M/s Washington Software Ltd. Pune has got no standing as it has been recorded behind the assessee s back and the assessee has not been provided opportunity to cross examine him. (c) That Sh. Sanjay D. Sonawani is himself a doubtful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2004-05. The relevant findings at page 29 to 35 of the order of learned CIT, Jalandhar- II, Jalandhar, mentioned hereinabove, are reproduced as under:- My issue-wise findings in respect of arguments dated 18.03.2013 are enumerated hereunder: (A) The provisions of section 12AA(3) of the Income Tax Act, 1961 has two limbs viz. (i) genuineness of the activities of the society and (ii) the activities of the society are not in accordance with the aims and objects of the society. In the instant case, the activities of the assessee society are certainly not genuine because the funds of the assessee society are being misappropriated right from the F.Y. 2003-04 to F.Y. 09-10 as mentioned above. Sh. Sanjay D. Sonawani, the Managing Director of M/s Washington Software Ltd., has categorically admitted in his various statements that he has not actually supplied the softwares to the assessee society any only the bills have been raised in the name of assessee society. It was also admitted by him that the payment received from the assessee society through cheques have been got discounted from the financiers of Mumbai, payment has been received in cash in lieu of those chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that he has actually given accommodation entries to the assessee society. (D) I find that the argument of the counsel that the proceedings initiated on the basis of the statements of Sh. Sonawani are not justified because he has changed his stand in his various statements has no force. Sh. Sonawani has nowhere back tracked from his main deposition that his company, namely, M/s Washington Software Limited, Pune has not supplied the actual software to the assessee society and that his company has issued the bogus bills to the assessee company in lieu of that. Thus, the crux of his statement justifies the proceedings initiated by the undersigned u/s 12AA(3) of the Income Tax Act, 1961. (E) In this regard, it is held that the action of the Assessing Officer in the assessments is an independent action which has no bearing on the proceedings initiated u/s 12AA(3) of the Income Tax Act, 1961. (F) As regards the various judicial pronouncements relied upon by the counsel of the assessee society, these are discussed hereunder:- JUDGMENTS RELIED UPON IN ARGUMENTS DATED 18.03.2013 1. CIT Vs. Red Rose School 212 CTR (All) 394: In para No. 20, itself, it is held In re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Income Tax Appellate Tribunal, Amritsar Bench, Amritsar has held that the irregularities committed by members in their individual capacity cannot be held against the society for the purpose of cancellation of registration. Thus, the facts of the case relied upon by the assessee are distinguishable with those of the facts of the present case and hence are not applicable here. 4. Maharashtra Academy of Engineering Educational Research (Maeer) Vs. CIT 36 DTR 321 (Pune) In this case, one of the trustees was a Doctor who was involved in an immoral and illegal act of manufacturing and selling of heroin and the Hon'ble Courts held that the case has to be decided on legal principles and no on one s own moral views. This was a case of charging of capitation fee in the form of donation from the kith and kin of a student. But in the present case there is no case for donation or immoral activities of the trustees. Hence the facts of the case relied upon by the assessee are different and not applicable. 5. Institute of Science and Management Vs. CIT(Central), Patna passed on 12.03.2012 by I.T.A.T., Cochin Bench. In this case also, the Hon'ble Bench has observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cut misappropriation of trust s funds consequently for various years. Hence the facts of the case relied upon by the assessee are distinguishable. (8) Kalinga Institute of Industrial Technology Vs. CIT (2008) 23 SOT 74 (Cuttack Bench of I.T.A.T.): In this case the issue decided by the Hon'ble I.T.A.T. was that whether the CIT can utilize his power under Section 12AA(3) of the Income Tax Act, 1961 after a search and seizure proceedings u/s 132(1) of the Income Tax Act, 1961 before completion of the search and seizure assessment for which the assessment was pending before the concerned Assessing Officer. The assessment pending before the Assessing Officer was merely with regard to the documents and valuables etc., found during the course of the search and seizure and there was only one year which involved some misappropriation of trust s funds. But in the present case, although a survey operation u/s 133A of the Income Tax Act, 1961 was conducted on 29.03.2011 at the premises of the assessee trust but that survey was as a consequence of a statement of a person whose company had issued bills for supply of software and these bills were established to be the bogus bills an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of the assessee society as also the details of cheques issued towards the payment to M/s Washington Software Ltd. It is incorrect to say that the softwares have been purchased and installed in the Central office. The investigation carried out by the Department clearly established that the softwares were never purchased. So the argument that the softwares were purchased and installed in the Central Office has no force in view of the findings as mentioned in the preceding paragraphs. As regards the report dated 11.09.2012 of M/s Trident Information Systems Pvt. Ltd. It is noted that this report is prepared at much later stage and the matter of misappropriation of society s funds, which has come to notice in year 2010-11 relates to a period way back to the year 2003-04 and this report is prepared in the year 2012. The veracity of this report is also not reliable in view of the following reasons: (i) It is not established that M/s Trident Information systems Pvt Ltd. is a duly authorized agency by some competent authority to certify the authenticity of the softwares uploaded on assessee society s computers. (ii) By now, the assessee society could have installed some simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere. Hence, these arguments/submissions will not help the assessee in view of the discussion made in the preceding paragraphs. The counsel for the assessee society has also put forth another argument before me that even if the purchase of the softwares by the assessee from the said company was sham and not real, it is not an act of the society but some official of the society for which the society cannot be punished. In all the above noted written arguments, the assessee society has never adduced any evidence to establish that the management of the society was never involved in the sham transactions of the society with the company of Sh. Sanjay D. Sonawani. Even if some official of the society is pin pointed in all these unreal transactions, the misappropriation which runs into crores of rupees continued for various years cannot be without the knowledge of management. It is pertinent to mention here that all the payments made to WSL have been approved by Sh. Vijay Berlia General Secretary of Society and during survey operation, he couldn t give any satisfactory reply or could not furnish any evidence that software was actually purchased that installed at society premises. WRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atnaik, 190 ITR 396. The case law relied upon by the assessee s counsel in these written arguments is also no applicable to the facts of the present case as in that case no opportunity was allowed to the assessee to cross examine the witness in that case. But in the present case opportunity to cross examine has already been allowed by the Assessing Officer to the assessee society before whom assessments for various years were pending, but the counsel for the assessee has not availed the opportunity provided to him. 7. In view of the above mentioned legal and factual position of this case, I am satisfied that the activities of the assessee society are not genuine, as its funds are being misutilized continuously for many years as mentioned above and hence the registration granted to it u/s 12AA(1) of the Income Tax Act, 1961 is liable to be withdrawn and cancelled. I am also satisfied that the funds of the assessee society are also being utilized for the objects of the society from the past many years. Accordingly, taking recourse of the provisions of section 12AA(3) of the Income Tax Act, 1961, the registration granted to the assessee society on 13.05.1999 is hereby cancelled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under for the sake of convenience: 12AA (3): Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided: that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. 12) Learned counsel for the assessee argued that the activities of the society is to impart education and nothing has been brought on record by learned CIT, Jalandhar-II, Jalandhar, to show that the activities of the institution i.e. imparting education, which are the main object of the institution, are not genuine and therefore, learned CIT, Jalandhar-II, Jalandhar, is not justified in cancelling the registration of the assessee society. Learned counsel for the assessee referred at page 5 of the order of learned CIT, Jalandhar-II, Jalandhar, where the CIT observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, affidavit of Sh. Vijay Kumar Berlia is available at page 103 104 of PB, and the statement of Smt. Anita Paul available at page 365 to 373 of PB. He also invited our attention towards the report of M/s Trident Information Systems Pvt. Ltd. at page 101 102 of PB who after inspection and examination reported that the said software modules were purchased by the assessee and were installed between 2004 to 2011 and the assessee argued that the learned CIT, Jalandhar-II, Jalandhar, has not found any defect in the same. He further filed reports, generated from time to time by the said softwares, which were installed in the Head Office, available at page 106 to 223 of PB. It is argued that the software purchased from M/s Washington Software Pvt. Ltd, though debited to various institutions, is installed in the central server at the head office of utmost importance and requiring secrecy. The software includes various modules and various types of reports are generated. These reports have been mentioned hereinabove and were placed on record at page 106 to 223 of PB. 16) It was argued that it was a concocted story by the vendor only to save his skin and putting onus on others to prove. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. In the same you have directed us to visit Pune on 04.03.2013 and cross examine Mr. Sanjay D. Sonawani in the office of DDIT(Inv.), Pune. In regard to same it is submitted as under: That assessment proceeding in our case is going on before and you are our Assessing Officer. We want to cross examine the witness in your presence as you have to decide our case on the basis of his cross examination. No doubt he is witness of the department and we have right to cross examine him at Jalandhar. However keeping in view your limitations and we being law abiding citizens are ready to bear all the expenditure of Mr. Sanjay D. Sonawani for travelling to Jalandhar as witness. For this purpose we are enclosing herewith demand draft No. 652344 dated 27.03.2013 for drawn on OBC Pune for ₹ 15,000/- in the name of Mr. Sanjay D. Sonawani. You are requested to call me to depose here in Jalandhar before you. In case his expenditure is more than this, we will reimburse the same on his arrival or if you want we can pay in advance. Hence it is prayed that he may please be called to Jalandhar. Thanking you. Yours faithfully For Appejay Education Society Sd/./- (CA Nirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man at any stage and no court can decide on which occasion he was truthful. If Shri Sukla is neutralised as a witness what remains is the accounts, vouchers, challans, bank accounts, etc. But, we would observe here that which way lies the truth in Shri Sukla's depositions, could have been revealed only if he was subjected to a cross-examination by the assessee. As a matter of fact, the right to cross-examine a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by crossexamination and re-examination, if necessary 18) Learned DR, on the other hand, strongly relied upon the order of learned CIT, Jalandhar-II, Jalandhar, as well on the written submission filed by him, which for the sake of convenience is reproduced as under: Regarding:- APJ Education Society, ITA No. 228/Asr/2013 Written Submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT-II cancelled the registration u/s 12AA(3) by giving detailed reasoning in the body of the order and conclusion in para 7 of the order dated 25.03.2013. This decision of the CIT-II is absolutely correct and as per law. At the onset, it is requested that reading of the order u/s 12AA(3) dated 28.03.2013 of IT Act, 1962 ad of the assessment order u/s 143(3) for assessment year 2010-11 passed on 28.03.2013 (page No. 592 to 612 of the Paper Book Volume-2 filed by the assessee) will clear all the doubts and will establish that it was a crystal clear case of claim of bogus/sham expenses on the basis of forged documents (accommodation entries) Back ground of the assessee/Society 1. The society/assessee is managed by one family 5 members out of 7 members are and belong to Sh. Satyapal, the presidentof the society. (Source Page 14 of the Paper Book filed by the assessee) Sr. No. Name Occupation Address Relationship 1. Stya Paul Business S-361, Panch Shilla Park, New Delhi Father 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L) did not have any office or infrastructure for conducting such business as it was working from table space in the premises of Sh. Parag Mehta. 2. The close connection between Sh. Vijay Berlia Sec. of the Society and Sh. Mehta is on record. In his statement dated 29.03.2011. Sh. Berila has admitted that Sh. Parag Mehta -, is son of his old Chartered Accountant. (source page No. 357-364 of the Paper Book filed by the assessee) 3. Sh. Sonawani Director of WSL has categorically stated is all his statements that he provided accommodation entries to the assessee in various years. (Source Page no. 322 to 356 of the Paper Book filed by the assessee) 4. The accommodation entries obtained from Sh. Sonawani has been debited as expenses of various institutes whose key personnel s were not even aware of the payment or software or purchase of any software. (Source Page No. 365 to 412 of the Paper Book filed by the assessee) 5. The assessee is an old society and have been managing its affairs including books of account on computer. The evidence produced during the proceedings in respect of software only relate to regular software which was used in maintenance of details. There i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute to the fact that learned CIT, Jalandhar-II, Jalandhar, who has passed the order under Section 12AA(3) of the Act, has himself observed that the assessee society is running various education institutions under its management and control which are listed out at page nos. 1 and 2 of his order. The said institutions are stated to be engaged in the activities of imparting education to students under various fields. It is also not disputed that the Assessing Officer in the case of assessee, vide his order dated 30.12.2011 passed for the assessment year 2004-05 under Section 143(3)/147 of the Act, which has been passed after the order under Section 12AA(3) of the Act, has observed in para 3, page 534 of PB (Vol. -2), that the main object of the society is to run educational institute and during the year, the assessee was running several schools and colleges. Nowhere, there has been finding in the assessment order that the assessee institute is not imparting education or not carrying out any activity of imparting education which is the main object of the society. It has been held by the Assessing Officer in the said order that the assessee has incurred 91.71% of the receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer in his order passed for the assessment years 2004-05 2009-10, referred hereinabove. The activities of the trust are found to be genuine and according to us the activities of the trust are genuine and cannot be said to be for non-charitable purposes, especially that there is not even a whisper from learned CIT, Jalandhar-II, Jalandhar, with regard to the non-genuineness of the activities of the trust which are found to be in consonance with the objects of the trust and therefore, the learned CIT, Jalandhar-II, Jalandhar, is not justified in cancelling and withdrawing the registration granted under Section 12AA of the Act i.e. w.e.f. the assessment year 2004-05. In the present case, learned CIT, Jalandhar-II, Jalandhar, has not brought on record any materials that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust. Thus, the order of learned CIT, Jalandhar-II, Jalandhar, cancelling the registration is bad in law and, therefore, is set aside. 21) Reliance has been placed by learned counsel for the assessee in the cases of Chaturvedi Har Prasad Education Society (supra), Maharashtra Academy of Engineer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled in the central server at the head office and the said report is available on record as mentioned hereinabove. It was argued that the said software system has generated the reports right from 2004 to 2011. 24) In this regard and keeping in view the facts and circumstances as above, it cannot be a case for withdrawal/cancellation of registration granted under Section 12AA(1) of the Act and therefore, in these facts and circumstances of the present case, our findings as hereinabove. Learned CIT, Jalandhar-II, Jalandhar, is not justified in withdrawing or cancelling the registration under Section 12AA(3) of the Act. Accordingly, all the grounds of the assessee are allowed. 25) In the result, the appeal of the assessee Apeejay Education Society i.e. ITA No. 228(Asr)/2013 is allowed. 26) Now, we take up the appeal of M/s Rajeshwari Sangeet Academy Trust in ITA No. 227(Asr)/2013. The facts in the present appeal are identical to the facts in the appeal of Apeejay Education Society in ITA No. 228(Asr)/2013 as mentioned hereinabove. Accordingly, our order passed in Apeejay Education Society in ITA No. 228(Asr)/2013, mentioned hereinabove, is identically applicable in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
