TMI Blog2017 (9) TMI 1976X X X X Extracts X X X X X X X X Extracts X X X X ..... t of bogus donation will not be eligible for exemptions u/s 11 - The registration certificate issued u/s 12AA 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 1 to 12 of the paper book and on the basis of same objects the assessee was given registration certificate u/s 12AA 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 [ 2015 (4) TMI 303 - PUNJAB HARYANA HIGH COURT] In the instant case the assessee is a charitable trust duly constituted as Charitable Trust under a Deed of Trust as a Public Charitable Trust for imparting education which is a Charitable Purpose u/s. 2(15) of the Income Tax Act. The trust duly applied for registration u/s. 12AA of the IT Act before the Director of Income Tax (Exemption) in conformity with rule 17A and submitted Form No. 10A 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 activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons), Kolkata erred in arbitrarily alleging that the activities of the Appellant Assessee Trust were not genuine and was not being carried out in accordance with their objective, ignoring the admitted fact that the said trust was involved in the activities of imparting education in accordance with the objectives laid down in its Trust Deed. 3. That the Learned Commissioner of Income Tax (Exemptions), Kolkata erred in cancelling the registration of the Appellant Assessee Trust on the basis of following findings and observations which are arbitrary, perverse and contrary to the facts and evidences on record: (i) the appellant assessee trust had received bogus donations of ₹ 68.50lakhs from M/s School of Human Genetics and Population Health which was allegedly involved in the business of money laundering and providing accommodation entry of donations against commission. (ii) the appellant assessee trust had given pre-arranged accommodation entry by receiving bogus donations of ₹ 20 lakhs from KM/s Quadeye Securities Pvt Ltd in FY 2011-12 relevant to the Assessment Year 2012-13. (iii) the funds of the trust had been mis-utilised and routed for noncharitable acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to ₹68.50 lakh from SHG PH through banking channel against the cash provided to SHG PH during the financial year 2013-14. Accordingly, Ld. CIT(Ex) opined that assessee is engaged in illegal activities which are not certainly as per the objects of the trust. Besides the above, it was also observed that assessee has also accepted bogus donation for ₹ 20 lakh in the financial year 2011-12 from M/s Qadeye Securities Pvt. Ltd. (QSP for short). This fact of bogus donation was ascertained on the basis of the statement recorded u/s. 131 of the Act of the Director of the company, namely, Shri Dinesh Kuma Agarwal vide dated 04.12.2015. The name of the assessee is very much reflecting in Question No. 18 of the statement given by the Director of QSP. The relevant extract of the question no. 18 and its reply stands as under:- Q18. Please furnish details of donation made to various Charitable trust/organisation during F.Y 2009-10 to 2014-15. Ans. Sir, the details of donation made by M/s Quadeye Securities Pvt Ltd. Quadeye Trading are as under: DETAILS OF DONATION PAID BY QUADEYE SECURITIES PVT. LTD QUADEYE TRADING (PARTNERSHIP FIRM) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act, 1961 is as follows:- 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 [as 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 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. Considering the activities of the assessee not genuine and are not being carried out in accordance with the objectives of the society, the registration u/s. 12A of the IT Act 1961 vide order no.T-81/W.B.VII of 1979-80 dated 11.09.979 is hereby cancelled u/s. 12A(3) of the IT Act 1961 w.e.f. 01.04.2011 i.e. FY 2011-12 relevant to A.Y. 2012-13, as the first violation took place in the FY 2011-12. Being aggrieved by this order of Ld. CIT(Ex) assessee came in appeal before us. 5. Before us Ld. AR for the assessee filed paper book which is running from pages 1 to 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of principles of Natural Justice is concerned, the same has been duly complied with in terms of directions contained in the earlier orders of the Tribunal which has been finally settled in several rounds of litigation before this Special Bench. As per the direction of the Tribunal, finally, the Revenue was required to provide certain material and cross-examination of certain witness. In compliance thereof, the Revenue has provided the opportunity to cross-examine in the case of five persons as per the list given by the assessee. The ld. Counsel for the assessee also relied on the judgment of Hon ble Apex Court in the case of State of Kerala Vs. K.T. Shaduli Yusuff etc. reported in 1977 AIR 1627, 1977 SCR (3) 233 wherein it was held as under : .. Such an issue can only be determined after examination of the accounts of both the parties and after affording the assessee the right to cross-examine the wholesale dealers concerned, particularly when the assessee makes a specific prayer to this effect. According to the ld. AR the statement recorded at the time of survey based on which the impugned order was passed was not incriminating, so far the Ballaram Hanumandas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry much required in the presence of assessee and other parties. Thus the ld. CIT(Ex) in the instant case erred in not giving the opportunity of cross examination. Thus the cases laws cited by the ld. AR for the opportunity of cross examination is very much applicable to the instant case. There was a specific request made by the assessee for the opportunity of cross-examination as evident from the reply of assessee vide letter dated 01.02.2016 which is enclosed on the pages 16 to 19 of the paper book. The relevant extract of the reply is reproduced below:- It is apparent from the statement of Shri Dinesh Agarwal that he is in the business of trading in securities as well as real estate with huge turnover. He is also having business abroad. When such a person or his concern makes any donation for philanthropic purposes, such donation should not have been doubted or disputed. May be that the gentleman has given the statement for his pecuniary interest or such statement have been obtained under coercion. It is also apparent from question 21 of the statement of Shri Dinesh Agarwal that donation was allegedly arranged by one Mr. Pradip Agarwal, CA and Mr. Ajay Agarwal. We do not kn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained under coercion. A cross examination opportunity may be given to us for cross examination of Smt. Moumita Raghvan and any other alleged middleman stated in her statement, who are not known to us. It is further submitted that the statement given by Mrs. Raghvan did not contain any names of the parties. Therefore, name of our organization was not mentioned in the statement. Further, Smt. Raghvan had given the statement in respect of the donation taken by school of Hanurnan Genetics and Population Heath, 6A, Malanga Lane, 1st Floor, Kolkata- 700012 and not the donations given by them. We have received donation which is not covered by the statement given during the survey: Without prejudice, the statement of the aforesaid two parties cannot be used against the Assessee Trust without any opportunity of cross examination. 6.2 However the ld. CIT(Ex) despite of the request of the assessee failed to provide the opportunity of cross examination to the assessee which in our considered view is against the principle of natural justice. In this connection we also rely In this connection we rely in the case CIT Vs. S. Khader Khan Son reported in 352 ITR 480 (SC) where the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. There is no evidence brought on record to show any connection between those brokers and the assessee. In the absence of such corroborative evidence, it is not possible to come to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution 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 is regarding 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 noticed 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 large number of educational institutions all over the country and, therefore, the questions of law sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment of students in a Boarding set up, The School affiliated to CBSE, is a member of the Indian Public School Conference (IPSC) and educating students from all over India and abroad. In August 1999, BHCT ventured into the field of providing technical education by establishing BRCM College of Engineering and Technology (BRCM-CET). The college is duly approved by the AICTE Government of Haryana, and permanently affiliated to M.D. University, Rohtak for 4-year B.Tech. Courses in CSE, ME, EEE Civil Engineering 2 year M.Tech courses in ME, EEE, CSE Civil Engineering. For Students and Faculty of all its institutions, BHCT provides aesthetically designed modern and environment friendly classrooms, laboratories. workshop, sports and recreational facilities along with all other essential utilities and well furnished comfortable on accommodation in an eco friendly environment. BHCT further plans to add Law, Architecture and Business Management Entrepreneurial Studies with Post-Graduate Teaching Research facilities, thus enhancing learning possibilities from KG to various UG PG programs. GDC Memorial College, a unit of HKC Foundation (a sister concern of BHCT) was establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es failing which the benefit of exemption from income-tax would be denied. The requirement of registration being procedural is prescribed u/s 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 (1)] 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 the applicant; From the above provisions, it is clear that the ld CIT(Exemption) before granting the registration certificate shall conduct nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. It is significant to mention that registration under s. 12AA does not necessarily entitle the assessee to get the income excl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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