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TMI Blog2022 (5) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... fter recording reasons. In response to notice under section 148 return of income was filed on 05/02/2016. A request was made by the assessee to provide reasons for reopening the assessment proceedings which were communicated to the assessee vide letter dated 30/05/2016. Objections raised by the assessee vide letter dated 31/05/2016 were rejected vide office letter dated 13/06/2016. Notices under section 143(2) dated 11/02/2016 and 142(1) dated 04/05/2016 were issued. 2.2. The assessee society is registered under the Societies Registration Act, 1860 and is also registered under section 12A vide order dated 23/10/2001. The main objects of the assessee society are as under: i. To run educational/professional institutions from Nursery onwards for the promotion of science, technology, literature, management, economics, art and culture etc. for value-based education. ii. To provide vocational/professional education in various disciplines. iii. To provide consultancy and research support to industry, business service organisations, academics and other organisations. iv. To identify and develop various educational aids required at different levels of education for the benefit of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. He noted that the donor, Herbicure Healthcare Bio-Herbal Research Foundation, was found to be an accommodation entry provider during the survey proceedings under section 133A conducted at its premises. It was admitted by the director of the said foundation that accommodation entries had been provided in the garb of donations to various trust/societies including the donation to the assessee society amounting to Rs. 23,00,000/-. The assessee failed to discharge the onus cast on it as per the provisions of section 68 of the I.T. Act, 1961. Further, the director of the donor society had stated on oath that accommodation entry had been given to the assessee. He therefore, held that the corpus donation of Rs. 23,00,000/- reflected by the assessee in its balance sheet was unexplained cash credit within the meaning of the provisions of section 68 to be taxed under section 115BBE of the Act. He accordingly determined the total income of the assessee at Rs. 23,00,000/- 3. Before the ld. CIT(A), the assessee made elaborate arguments challenging the order of the AO in making addition of Rs. 23 Lakhs u/s 68 of the Act. However, the ld. CIT(A) was not satisfied with the arguments adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m)], which has been upheld by the Hon'ble Supreme Court (2017-TIOL-238-SC-IT), the Hon'ble Bombay High Court have held that statement made under section 133A was not bereft of any evidentiary value. It was also held that the same may not be conclusive but in absence of any contrary evidence' or explanation as to why statement made under section 133A of the Act was not credible, it could be acted upon. The Hon'ble Court also distinguished the decision of the Hon'ble Supreme Court in the case of CIT vs. S. Khader Khan (300 ITR 157). It was also held that in absence of assessee offering any explanation as to why statement could not be relied upon, no fault could be found on reliance upon statement of Director. As regards the request tor cross examination was concerned, it was held that the assessee, during first round, of proceedings before Assessing Officer did not raise any such issue. The relevant extracts of the order are reproduced below: 9. We note that a statement made under Section 133A of the Act is not bereft of any evidentary value. The same may not be conclusive but in the absence of any contrary evidence or explanation as to why the statement made un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g made by the said entity and the genuineness of persons / entities with whom the said transactions are being made. Your attention is further been drawn to the computer extracts taken out of the tally which was found in your e-mail. These pages are related to the bank book of Herbicure Healthcare Bio- Herbal Research Foundation wherein it is clearly reflected that the amount ofRs. 25 lakh (in two trenches] received from OCL India Ltd an 15.07.2011, Rs. 251akh received from OCL India Ltd on 11.08.2011 & 17.08-2011 are immediately being transferred to A.S. Enterprises which is a paper company on the same dates. Similar trend is visible in the case of Donations received from other parties where just immediately after the receipt of donation amount the same is being transferred to the account of any paper company. In view of the same you are once again being given an opportunity to speak the truth and explain the transactions reflected from your bank book as above. 4.3.5 From the above it is apparent that the financial condition of Herbicure Healthcare BioHerbal Research Foundation was not very good till 2010-11 and it was poor to such an extent that the institution could not procure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, the Co-ordinate Benches of the Tribunal have accepted the donation from M/s Herbicure Health Care Bio Herbal Research Foundation as genuine and the addition made by the AO and the Ld. CIT(A) have been deleted. i. Fateh Chand Charitable Trust vs Commissioner of Income Tax (Exemption), reported in 83 taxmann.com 33 (Lucknow-Trib.) ii. Sanskriti Sagar vs CIT ITAT Kolkata ITA No.96/Kol/2017 iii. Bioved Research Society vs CIT(Exemption), reported in 91 taxmann.com 268 (Allahabad Tribunal) 6. The Ld. DR on the other hand, heavily relied on the order of the AO and the ld. CIT(A). 7. I have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the AO in the instant case made addition of Rs. 23 lakhs by invoking the provisions of section 68/115BBE of the Act on the ground that the assessee has failed to substantiate with evidence to his satisfaction regarding the corpus donation of Rs. 23 Lakhs received from M/s Herbicure Health Care Bio Herbal Research Foundation. It is his allegation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reference, we extract para 8 as under: "8. That your goodself has, in your notice dated 13/11/2015, alleged that the assessee has received a donation of Rs. 1,00,00,000/- from M/s Herbicure Health Care Bio Herbal Research Foundation in the A/Y 2011- 12 by paying an amount of Rs. 1,00,00,000/- in cash to M/s Herbicure Health Care Bio Herbal Research Foundation itself. This allegation is totally untrue as nothing of this sort has been written or mentioned in the confirmation, given by M/s Herbicure Health Care Bio Herbal Research Foundation. Till date no evidence to the contrary has been made available to the assessee which could substantiate your honour's allegation that the amount of Rs. 1,00,00,000/- was paid by the assessee in cash to the donor in exchange of donation received by cheque. However, in case, there is any authentic material available with your honour which could throw some light on this issue, the same may be given to the assessee so that a specific reply on the same could be submitted on it." 14. It is also evident from record that the report received from the ld. Commissioner of Income Tax (Exemptions), Kolkata and the statement of Shri. Swapan Ranjan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Apex Court has categorically held that not allowing the assessee to cross-examine the witness by the adjudicating authority, though the statement of those witnesses were made basis of the impugned order, is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely effected. Their Lordships have, however, held that it is to be borne in mind that the order of the ld. Commissioner of Income Tax was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statement and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. The Hon'ble Apex Court accordingly held that in 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. 17. We have also examined the arguments of the assessee that even if receipt of donation is to be treated as unexplained receipt under section 68 of the Act, the addition of the same cannot be made because the assessee itself has applied the entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has filed various documents to prove the identity of the donors, these donations cannot be called to be anonymous. So far as applicability of provisions of section 68 of the Act is concerned, it has been held by various High Courts including the jurisdictional High Court that once donation received was taken as income of the assessee which was applied for charitable purposes, provisions of section 68 of the Act cannot be invoked. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm the same as he has adjudicated the issue in the light of various judicial pronouncements. Accordingly we confirm his order." 22. Undisputedly, the assessee has taken receipt of donation as part of its income and the same was applied for charitable purposes and these facts are borne out from the consolidated balance sheet of the assessee available at page 8 of the compilation of the assessee. The Revenue has not made out a case that the donation received by the assessee was not taken as part of income and was applied for non-charitable purposes. The allegation of the Revenue is only that the donation was received by the assessee on making payment in cash to M/s Herbicure H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fact donation was given to the assessee by HHBHRF through cheque dated 03.03.2011 which was admittedly prior to the period in which bogus donations were received by HHBHRF. According to him the statement recorded at the time of survey based on which the impugned order was passed was not incriminating, so far the assessee is concerned. According to him therefore the very basis on which the impugned order has been passed by the Ld. CIT(Ex), Kolkata is unsustainable. His next submission was that there was no other incriminating material on the basis of which it can be concluded that the assessee gave cash and in return got donation of Rs. 85,000/- and it was the assessee who arranged through the brokers for getting bogus donations. It was also his submission that there is no evidence of the assessee having indulged in money launderings. The assessee brought to our notice that assessee has been carrying out charitable activities and the activities carried out by it during the FY 2010-11 are placed on page 90 of the paper book. 13. According to the Ld. AR, the Ld. CIT(Ex), Kolkata has no direct evidence against the assessee warranting cancellation of registration u/s. 12AA (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us donations. The assessee had received the donation from HHBHRF on 03.03.2011. It is therefore not possible to place reliance on the statement recorded at the time of survey and come to a conclusion that the assessee has been indulging in money laundering. 15.1 In answer to question No. 23 Shri Swapan Ranjan Dasgupta founder director of HHBHRF has made reference to certain middle men who are engaged in money laundering using HHBHRF as a medium for money laundering. 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 conclusion that the assessee indulged in money laundering and that the donation received by the assessee from HHBHRF was a bogus donation. In fact on identical facts this Tribunal in the case of Sri Mayapur Dham Pilgrim and Visitors Trust (supra) came to the conclusion that cancellation of registration u/s. 12AA cannot be sustained. In fact in the case of Sri Mayapur Dham Pilgrim and Visitors Trust (supra) the factual position was that the donor had made a reference to the name of that assessee in a list of bogus donations given by it in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 01.02.2008 w.e.f. 01.04.2007 for carrying out scientific research. It is not in dispute that notification dated 01.02.2008 of the Government of India have not been withdrawn or have not been reported to have been withdrawn. Learned Counsel for the Assessee placed on record detailed material to show that assessee has been carrying out scientific research activities till date. Learned Counsel for the Assessee submitted that assessee has not received any donation from any of the party as mentioned in the report of the Investigation and has also not re-donated any amount subject to commission. The copies of the balance sheet from A.Ys. 2013- 2014 to 2017-2018 have been filed on record. In A.Y. 2013-2014 A.O. made additions on account of anonymous donations under section 115BBC of the I.T. Act in the order under section 143(3) which have been set aside and deleted by the ld. CIT(A), Allahabad, vide order dated 16th May, 2017 and benefit under section 11 have been allowed to the assessee. In subsequent year also assessee has received donations which have been applied towards implementation of research and development work. The ld. CIT(E) has issued show cause notice for cancellation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Fateh Chand Charitable Trust (supra), in which the issue was, cancellation of registration under section 12AA(iii) of the I.T. Act. The Tribunal set aside the impugned order of the ld. CIT(E) and restore the registration under section 12AA of the I.T. Act and decided the appeal in favour of the assessee. The findings of the Tribunal in paras 13 to 23 are reproduced as under : 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the objects of the trust or institution, as the case may be. But in the instant case Id. Commissioner of Income Tax (Exemptions) has simply received information from the Id. Commissioner of Income Tax (Exemptions), Kolkata that M/s Herbicure Health Care Bio Herbal Research Foundation was engaged in giving donations on receipt of cash through brokers, but nowhere it has been stated that M/s Herbicure Health Care Bio Herbal Research Foundation has paid donation to the assessee on receipt of cash of the equal amount through brokers. Similar statement of Shri Swapan Ranjan Das Gupta was also made, but in that statement also there was no reference of the assessee. The Id. Commissioner of Income Tax (Exemptions) has simply shown this information to the assessee on 27.11.2015, but did not offer any further opportunity to make his comments in this regard. The assessee has emphatically denied the charges leveled against it in its reply filed on 27.11.2015 that if the Id. Commissioner of Income Tax (Exemptions) has received any authentic material in this regard, the same may be provided to the assessee so that the assessee can make a proper reply. But without affording any further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T.M. Tiruppani Trust v. CIT, 230 ITR 636, in which it was held that section 68 of the Act has no application in such cases where the assessee has disclosed donations as its income. 18. Similarly in the case of Director of Income Tax v. Hans Raj Samarak Society, 35 taxmann.com 642, their Lordships of the Hon'ble Delhi High Court has held that provisions of section 68 of the Act could not be applied as donation had already been shown by the assessee as income. 19. Similar views were also expressed by the Chennai Bench of the Tribunal in the case of Padanilam Welfare Trust v. DCIT (supra) in which it was held that merely because capitation fee was collected by the assessee-trust from students, the same would not constitute the violation of the provisions of granting registration under section 12AA of the Act where there was no valid allegation against the assessee that the income of the trust has not been applied for educational activities. 20. Similar view was also expressed by the Hyderabad Bench of the Tribunal in the case of V. B. Srinivas Rao (supra). 21. A reference was also made to the order of the Lucknow Bench of the Tribunal in the case of Income Tax Officer v. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 68 of the Act. Thus, even on merit, we do not find any force in the allegations raised by the Revenue. The Id. Commissioner of Income Tax (Exemptions) has cancelled the registration under section 12AA of the Act on the basis of conjunctures and surmises, as he has observed in his order that the assessee might have been charging capitation fee from the parents of the students, but in this regard no evidence was brought on record. It is also obvious from the record that the Id. Commissioner of Income Tax (Exemptions) has passed an order on the same day when the assessee has furnished detailed explanation in writing and even without verifying the same. Therefore, we find no merit in the order of the Id. Commissioner of Income Tax (Exemptions). Accordingly, we set aside the order of ld. Commissioner of Income Tax (Exemptions). 23. In the result, appeal of the assessee stands allowed." 6. In this case, similar issue of the material not confronted to the assessee was considered and decided in favour of the assessee. It was also decided in this case when donation have been shown as income and applied the receipts for objects of the Assessee-Trust, no addition could be made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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