9911796707
TMI Blog2017 (9) TMI 1972X X X X Extracts X X X X X X X X Extracts X X X X ..... chools. 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 said statement, he accepted the alleged modus op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 BATANAGAR EDUCATION AND RESEARCH TRUST AABTB3024G 1500000 648076 -Do- AABTB3024G 2500000 648078 -Do- AABTB3024G 3000000 648080 -Do- AABTB3024G 3000000 997561 1/1/1, Jodhpur Park, Kolkata-700068 TOTAL 12500000 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 period from 1.4.2010 to 31.3.2015. d) List of Donations paid by the assessee society for the period from 1.4.2010 to 31.3.2015. 4.2. The assessee was handed over the copy of statement on 5.1.2016 recorded from Sri Rabindranath Lahiri, Vice Chairman and Trustee of Batanagar Education & Research Trust and was also afforded an opportunity to file its objections, if any, and also cross-examine the said person, if it so desires. Accordingly, the assessee society filed its reply by filing its objections to the statements recorded from Sri Rabindranath Lahiri, vide its letter dated 13.1.2016 filed in person before the ld CIT(E) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta 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 present in the department but none appeared on behalf of the assessee . On 3.5.2016 , the assessee society filed a letter dated 3.5.2016 for non-appearance on 3.5.2016 due to illness of authorized representative of assessee society for undergoing major surgery and accordingly it was pleaded for one more hearing. 4.4. On 10.5.2016, the ld CIT(E) without providing further opportunity to the assessee society, proceeded to pass an order u/s 12AA(3) of the Act cancelling the registration of the trust based on the show cause notice issued by him and without considering the various replies filed by the assessee and by making allegations that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that further and in any event and without prejudice to the aforesaid, the CIT had no power and/or jurisdiction to withdraw/cancel the registration with retrospective effect from April 1,2011. (E) For that the order appealed against is otherwise erroneous on facts and/or in law. The assessee craves leave to add to, alter, amend and/or modify the grounds taken herein. 6. The ld AR apart from reiterating the submissions made by the assessee society before the ld CIT(E) vide various written submissions as stated supra , stated that the assessee need not have cross-examined Sri Rabindranath Lahiri as nothing was stated against the assessee society or its members/ office bearers , by the said person in his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 trusts. Infact when the ld CIT(E) examined the President of the assessee society Mr Mukul Agarwal, no questions whatsoever were even put to him about the transactions with Batanagar Education & Research Trust as could be evident from the order sheet entries filed herewith. 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 has been conveniently ignored by him in the order of cancellation of registration. In any case, he argued that there is no provision in the Act for withdrawal of registration u/s 12AA of the Act with retrospective effect when the said provision itself came into effect only from 1.10.2014. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, a major part of the donations received in these two financial years viz. 2011-12 and 2012-13, shown as Corpus Donation, were in the nature of accommodation entries to facilitate two things- (a) To procure Loans from the Bank we had to show substantial amount of capital Reserve in our Balance Sheet. (b) We required funds for the expansion of our college. The Fees received from the students along with genuine donations from the Trustees and their contacts were not sufficient to run the institution. Q.12. Why are you saying that a major part of the donations received were not genuine? A.12. In those cases, which I admit as accommodation entries, a part of the donation received was returned back to the donors through intermediaries. Q.13. Who were the intermediari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 statement was furnished to the assessee by the ld CIT(E) , the assessee replied vide letter dated 13.1.2016. For the sake of convenience, the entire letter dated 13.1.2016 filed on 14.1.2016 is reproduced below:- January13, 2016 To, The Commissioner of Income Tax (Exemption)-Kolkata 10B, Middleton Row, 6th Floor Kolkata-700071. Dear Sir, Sub: Cancellation of registration granted u/s 12A/12AA of the I.T. Act, 1961- regarding Ref: (1) Your letter No. CIT(E)/Kol/12AA/2015-16/3590 dated 03.12.2015 (2) Our letter dated 17th December, 2015 submitted on 22nd December, 2015 Your honour granted us a hearing on the above subject on 5th January, 2016. During the course of hearing you submitted to us, through our Authorized Representative Shri P.K. Agrawal, FCA, a copy of statement of Shri Rabindranath Lahiri, Vice-Chairman of Batanagar Education and Research Trust recorded on 3rd September, 2015. Your h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 will not find the term 'corpus' used anywhere. 5. In reply to Question No. 12 we state that the case referred in the reply are with reference to corpus donation as mentioned in reply to question no. 11. Therefore, this part of the statement does not relate to our Trust. 6. In the entire statement nowhere the deponent i.e. Shri Rabindranath Lahiri, had mentioned the name of our Trust. 7. We had stated in our letter dated 17th December, 2015 at Paragraph 4 that "we, however, would like to add here that if there is any misappropriation or siphoning of fund at the end of Batanagar Education and Research Trust, our society had no role to play in such act done by the Batanagar Education and Research Trust people and we are in the dark and not aware of such facts." It appears to us after going through the statement of Shri Rabindranath Lahiri that the transfer of funds through RTGS to the seven persons mentioned in reply to question no. 13 are part of misappropriation or siphoning of funds at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Moroever, we find from the statement that some of the corpus donations during the period 1.4.2014 to 4.9.2014 were bogus, but whereas, the assessee had not given any donations to Batanagar Education & Research Trust during the said period. Infact from the details of donations paid by assessee society to other trusts, it is evident that the assessee had given donations to Batanagar Education & Research Trust only in Asst Years 2012-13 & 2013-14. Moreover, in reply to Question No. 13 in the said statement, Sri Rabindranath Lahiri had replied that their trust were instructed to transfer funds through RTGS to seven different persons , out of which, none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the statement given by the managing trustee of the BERT we find that he admitted that the major bogus donation was received from various trust/societies but the Id CIT(Exemption) has not provided any list in its order where the name of the assessee trust is reflecting. We also find as per the statement of managing trustee of BERT that the bogus donation was received from the various trusts/ societies through Shri Gulab Pincha and he has not provided the names of the donors. Similarly, the bogus donation received was shown as incurred for the capital expenditure by issuing cheques in the name of several persons. The names of these persons were very much disclosed by the managing trustee of BERT but the name of the donors was not anywhere shown in the recorded statement. 8.1 In view of above, we find that there is no whisper about the name of the assessee that it has given bogus donation and the same has come back to the assessee in the form of cash through the channel of some persons. Admittedly the assessee has given donation to BERT for Rs. 51acs. The same was treated as bogus donation on the basis of the statement of the managing trustee of BERT but we find that the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and if they were not genuine and the same were not being carried out in accordance with the objects of the institution he could pass the order cancelling the registration. It cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted. The allegation isregarding the alleged supply of the installation of the software and whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in cancelling the registration granted on 13.05.1999 w.e.f. the assessment year 2004-05. The assessee had placed various materials before the Tribunal to show that software modules purchased were installed between 2004 to 2011 and the assessee had incurred as much as 91.71% of the receipts for the assessment year 2004-05. Accordingly, keeping in view the peculiar facts and circumstances as oticed above, High Court are of the opinion that the Commissioner of Income Tax was not justified in passing the impugned order for withdrawing the exemption as admittedly, the respondent-assessee is carrying out educational activities by running a lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aff several other persons are dependent on schools for their livelihood as they are associated with related activities of school such as canteen, transportation etc., the Higher secondary school is imparting good education. The pass result is between 97% t 100% at class X and Class XII levels with highest score touching as high as 9 Cc Further, every year more than 40 students score more than 90% and man meritorious students have come out from this school who have gone for further higher studies in engineering, medical and other professional degrees. Every year a school magazine "Dawn" is published by the students and teachers. Trust also publishes quarterly News bulletins for the benefit of students. A sample copy was also filed during the course of hearing for the purpose of the record. In other co-curricular activities also may students have represented at State and National level The vision of the trust is to impart education where the need is more and as such the schools are being opened in rural areas. Last year, it has acquired land at Rahiki, in Madhubani District of Bihar and it plans to start construction in the next year. However on perusal of the order of the Id. CIT(Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough section 12A has made it obligatory for charitable trusts and institutions to get themselves registered with the income-tax authorities failing which the benefit of exemption from income tax would be denied. The requirement of registration being procedural is prescribed under section 12AA of the Act which reads as under:- "Procedure for registration. 12AA. (1) The [***] [Principal Commissioner of] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (l)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution 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, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion can again be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Sec. 12AA, which lays down the procedure for registration, 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. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean, they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities, may be a ground [or refusing exemption only wait respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein it was clarified that the payment of a sum by one Charitable Trust to another for utilization by the donee-trust towards its charitable objects is proper application of income for a charitable purpose. We also find that the notice for the cancellation of the registration certificate was issued u/s 12AA(3) of the Act as evident from the notice placed on page 12 of the paper book. However, Ld. CIT(Exemption) has also invoked the provisions of section 12AA(4) of the Act for cancelling the registration certificate which in our considered view against the principal of natural justice. The Id. CIT(E) before invoking the provision Section 12AA(4) should have issued the show cause notice. Therefore, we find that the proper opportunity to the assessee has not been furnished. 8.4 We also find that Id. AR has given the detailed profile of the assessee and its activities which are placed in its Annual Magazine with the name 'Dawn'. The transaction for the donation was made through banking channel and the department failed to bring anything on record that the donation given by the assessee has come back to it in the form of the cash. At the most, in our considered view, the Revenue could ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
