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2019 (6) TMI 857 - AT - Income TaxRegistration of trust u/s. 12AA(3) denied - survey operation u/s. 133A - registration of the trust has been cancelled only on the basis of statement of one Anand Agarwal who was Managing Trustee of Govind Ram Goel Charitable Trust GRGCT as recorded u/s 133A - no opportunity of cross examination - HELD THAT - As decided in RADHARAMAN BEHARI VERSUS COMMISSIONER OF INCOME TAX, (EXEMPTIONS) , KOLKATA 2017 (10) TMI 527 - ITAT KOLKATA 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 given by the assessee to GRGCT was a bogus donation. Name of the assessee is not appearing in the statement furnished by the managing trustee of GRGCT. Therefore in such situation the opportunity of cross examination was very much required in the presence of assessee and managing trustee of GRGCT as well as the middle man namely Shri Gaurav Agarwal. CIT(Ex) in the instant case erred in not giving the opportunity of cross examination Also the grounds for cancellation for registration u/s 12AA(3) is that the activities of the trust should not be genuine or the activities of the trust are not being carried out in accordance with the objects of the trust. There is neither an allegation in the impugned order nor finding that any of the aforesaid conditions exist in the case of the assessee. The cancellation of registration granted to the assessee u/s 12A of the Act cannot be sustained and the impugned order is hereby quashed - Decided in favour of assessee.
Issues Involved:
1. Cancellation of registration of the trust under section 12AA(3) of the Income-tax Act, 1961. 2. Alleged involvement in money laundering and providing accommodation entries. 3. Validity and reliance on the statement recorded during the survey under section 133A. 4. Denial of cross-examination opportunity. 5. Compliance with the objectives of the trust. Issue-wise Detailed Analysis: 1. Cancellation of registration of the trust under section 12AA(3) of the Income-tax Act, 1961: The primary issue in this case is the cancellation of the trust's registration under section 12AA(3) of the Income-tax Act, 1961. The Ld. CIT(E) cancelled the registration on the grounds that the trust was involved in money laundering activities, which were not genuine and not in accordance with the objectives of the trust. The cancellation was based on a survey conducted on M/s. Govind Ram Goel Charitable Trust (GRGCT), where it was found that the trust was providing bogus donations and accommodation entries. The appellant trust was alleged to have paid ?5 lakhs as bogus donations to GRGCT. 2. Alleged involvement in money laundering and providing accommodation entries: During the survey, it was alleged that GRGCT was involved in money laundering by accepting donations and returning the same to donors through financial transactions after retaining a commission. The Ld. CIT(E) concluded that the appellant trust was involved in such activities, which were illegal and not in line with the trust's objectives. The Managing Trustee of GRGCT, Shri Anand Agarwal, admitted to providing bogus corpus donations in his sworn statement recorded under section 131 of the Act. 3. Validity and reliance on the statement recorded during the survey under section 133A: The appellant trust argued that the cancellation of registration was based solely on the statement of Anand Agarwal, which was recorded during the survey under section 133A. The trust contended that such statements have no evidentiary value, as held by the Hon’ble Supreme Court in Khader Khan (352 ITR 480 SC). Additionally, the statement was retracted within three days, and no opportunity for cross-examination was provided. The Tribunal noted that the statement recorded during the survey cannot be the sole basis for cancellation, especially when it was retracted and no other evidence was presented to prove the trust's involvement in money laundering. 4. Denial of cross-examination opportunity: The appellant trust requested the cross-examination of Anand Agarwal, which was denied by the Ld. CIT(E). The Tribunal emphasized the importance of cross-examination, citing the Hon’ble Supreme Court's decision in Andaman Timber Industries, which stated that not allowing cross-examination violates the principles of natural justice. The Tribunal found that the denial of cross-examination was a significant flaw, making the order of cancellation unsustainable. 5. Compliance with the objectives of the trust: The Tribunal observed that the appellant trust was engaged in various charitable activities, such as free medical clinics, eye camps, and financial assistance to other charitable institutions. There was no evidence to suggest that the trust's activities were not genuine or not in accordance with its objectives. The only allegation was the single transaction of ?5 lakhs donation to GRGCT, which was insufficient to conclude that the trust was involved in money laundering. Conclusion: The Tribunal concluded that the cancellation of the trust's registration under section 12AA(3) was not justified. The reliance on the retracted statement recorded during the survey, without providing an opportunity for cross-examination, was flawed. Additionally, the trust's activities were found to be genuine and in line with its objectives. Therefore, the Tribunal allowed the appeal and set aside the order of the Ld. CIT(E) canceling the registration of the trust.
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