TMI Blog2021 (2) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... e run by the trust amongst other hospitals and colleges which are undisputedly providing charitable services in the field of medical and education. The issue of irregularity in admission process is not part of the show cause notice dated 6.12.2018 issued to the assessee in connection with the cancellation of registration u/s 12AA(3) of the Act which shows that assessee was not granted reasonable opportunity of being heard on this issue which in itself makes the proceedings bad in law. The issues raised in the show cause notice dated 6.12.2018 issued by Ld. PCIT are not relevant for cancellation of registration u/s 12AA(3) of the Act. Such types of issues can be examined by the Assessing Officer during the course of regular assessment proceedings wherein on the basis of his examination/ investigation necessary view as permissible in law can be taken if violation of Section 11 and Section 13 of the Act by the assessee are observed. Ld. PCIT can only cancel the registration u/s 12AA(3) of the Act if it is found that the activities of the society/trust are either not genuine or are not being carried out in accordance with its object provided in bye laws. Nothing on record has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing 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 entities of Chirayu Group. Cash of ₹ 36,00,000/- and jewellery and valuables amounting approximately ₹ 1.80 crore were found by the CBI at the said premise. 4. Subsequently after the search and seizure operation the Ld. A.O. vide letter F. No. ACIT(Central)/Gwalior /Report/2018-19 dated 5.12.2018, duly recommended by the Addl CIT(Central),Bhopal made the following proposal for cancellation of Registration granted U/S 12A to the assessee Trust which has been referred by Ld. PCIT in the impugned order. During the course of search and seizure operation some documents were found showing donatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income for A. Y. 2014-15 has shown gross total income of ₹ 300/-. Zagdu Singh Charitable Trust in its return 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 ₹ 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 ₹ 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 receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and post search enquires categorically reveal that the assessee has failed to furnish the confirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 Chirayu Medical College, Bhopal came to the conclusion that the registration granted u/s 12AA o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, thirdly the alleged allegation about the education in Chirayu Medical College has still not reached its finality and there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 14,25,90,000. Large donations do not mean that they are not genuine. In any case, it is submitted, that all such donations are genuine and obtained through banking channel o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 arranges the fund. It is only later that other documents of the donors are sought and that is just in order to establish the identity of the donor to the deptt. Just because some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 that section 13 is for assessment and not for registration. There is no concrete material / evidence which may prove that activities are not genuine or the activities are not carrying on in accordance with the obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 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 assessment proceedings, on specific query from the A.O., the assessee had furnished confirmation letter of the donor company confirming the donation of ₹ 81590000 along with the ackd. of return for AY 2012-13. In the said regular assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 81590000 that the donor company has filed the return showing the gross total income of ₹ 2022 and this is the sole reason for not accepting the donation. The genuineness of none of the documents as furnished in the course of post search assessment proceedings and pre-search assessment proceedings has been doubted by the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cational 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) ₹ 10000000 + ₹ 6000000 Confirmation letter (Seized document) Certified copy of resolution of the donor giving donation (Seized document) Appeal by the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lization 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 Thaku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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, therefore, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reported in 103-ITR-344 9. Hon'ble ITAT Cochin Bench in the case of G.G. Films v/s. ITO r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2012 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 students on 30 September without any merit and without following any criteria. All these admissions were made without following the due process. IV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of. such trust or institution are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 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 existing ones. II. To establish, run, manage, develop, own acquire, open, purchase, undertake, improve, equip, promote, initiate, encourage, subsidies, sponsor, maintain an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t :- (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 Bureau of Investigation (In short CBI ) at the premises of the director and promoter of Chirayu group at 11, Professor Colony, Bhopal. Cash and jewellery were found. Income Tax Department was informed. Search and Seizur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 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; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 21. So for cancellation of registration of trust or institution PCIT/CIT needs to be satisfied that the activities of such trust institution or are not being carrying out in accordance with the objects. Going through the show cause notice we find that the only allegation mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal 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 the assessee society is running number of colleges and hospitals and just because one of its college that too for particular course there is an allegation by few students about the irregularity in the admission process, the overall working of the society running for carrying out charitable acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thi 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 admission and in irregularity/illegality. In the case of assessee with regard to the alleged irregularity in admission process AFRC did not cancelled the admission and has only observed that there is an irregularity in granting admission and imposed fine for the similar kind of admission made in the year 2013. This order of AFRC has also been cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act. On going through the various documents placed by the assessee in the paper book running from page 320 to 728 we find that to the best possible extent the assessee trust has filed all relevant information and documents to show that the identity and genuineness of the donors as well as the creditworthiness of them to give donation to the society are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 8,15,90,000/- received by the assessee from M/s Riviera Infoway Ltd during financial year 2010- 11 sum of ₹ 7,28,90,000/- was received through banking channel and this sum was shown as unsecured loan in the balance sheet as on 31.3.2011. Further sum of ₹ 87,00,000/- was received during financial year 2011-12 through banking channel. Thus total sum of ₹ 8,15,90,000/- shown as unsecured loan was transferred to the groups donation account through a journal entry passed on 29.8.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment 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) ₹ 10000000 + ₹ 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 of reply of the assessee in compliance to notice u/s. 133(6) to DCIT (Exemption)-2 (1), Mumbai. (c) With respect to donation from Udhodas Mundhra Seva Santhan (AAATU0983C) ₹ 5000000 (i) Confirmation letter (Seized document) (ii) Appeal by the assessee to the donor for giving donation. (Seized document) 33. We observe that two trusts namely Thakur Educational T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 can not be treated to the income of the firm for the purpose of income-tax. (iii) Hon'ble Supreme Court in the case of CIT v/s. Orissa Corporation Pvt. Ltd. reported in 159-ITR-78(SC) In this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 of Rs.l crore through cheque after making payment of the same in cash to M/s Herbicure Health Care Bio Herbal Research Foundation. The reply filed by the assessee is available at pages 19 to 25 of the compilation of the assessee running into 7 pages and in para 8 of it, the assessee has specifically asked the Id. Commissioner of Income Tax that in case there is any authentic material available with him which could throw some light on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 otherwise of the action of the Commissioner in invoking section 12AA(3) of the Act and we find that the reasons advanced by the Commissioner are not germane. On this point, the learned representative for the assessee has relied on the following decisions to say that section 12AA(3) cannot be invoked by Commissioner for cancellation of registration merely for violation of provisions of section 11 and 13 of the Act by the assessee :- CIT v. Apeejay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 12AA was discussed, it was categorically held in the said decision that section 12AA does not speak anywhere that the CIT, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. Profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 certain category of persons connected with a trust or other institution. In such circumstances, the order u/s 12AA(3) of the Act, cannot be sustained. (vi)The decision of Prabodhan Prasarak Shikshan Santhan Vs. DCIT 152 ITD 473 (Pune), wherein it is held as under :- The Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society v. CIT (Central) 2012) 343 ITR 23 (Bom) has held that Every statutory provision which operates in respect of a trust, which has already been registered in the past is not necessarily retrosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned 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 is utilized for the purpose of charitable activities then it cannot be said that registration is to be disallowed. The ground on which the registration cannot be refused, cannot be considered as a ground for cancelling the registration. (viii) The Co-ordinate Bench of Cochin in the Case of M/s Kunhitharuvai Memorial Charitable Trust, KMCT Corporate office, Malabur Christian College Cross Road, Calicut V CIT (Central), Kochi (Order dated 16/01/2017 in Appeal No. 246/Coch/14) it was held that :- Para 16. Having said so, let us examine the powers of the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 educational institutions. In such circumstances, the action of cancellation of registration cannot be upheld. As far as the object of the assessee is concerned, this is not the case of the Revenue that the assessee was not imparting education. Since the question about the imparting of education has not been doubted or challenged by the Revenue, the impugned order passed by the CIT is unsustainable in law. Strange enough again, there is nothing on record to prove even sightlessly that the purpose of imparting education was not fulfilled by this institute, thus the Revenue Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 12AA(3) of the Act if it is found that the activities of the society/trust are either not genuine or are not being carried out in accordance with its object provided in bye laws. (v) We also find that nothing on record has been brought before us by way of an independent enquiry by Ld. PCIT thereby collecting necessary evidence which can show that the activities of the assessee society are either not genuine or are not being carried out as per the objects of the society which were filed before the registering authority at the time of granting registration u/s 12AA of the Act. It is therefore established that the activities carried out by the appellant assessee society by way of running hospitals and medical colleges for the benefit of public at large and for the students are for charitable purposes only as provided in Section 2(15) of the Act. 39. We therefore in view of our above finding arrived at after examining the facts of the instant case and in the light of judgments referred herein above which are squarely applicable on the facts and issue raised before us are of the considered view that the impugned order of Ld. PCIT cancelling the assessee s registration grante ..... X X X X Extracts X X X X X X X X Extracts X X X X
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