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2017 (10) TMI 527 - AT - Income TaxCancelling the registration granted to the assessee trust u/s 12AA - registration certificate u/s 12AA cancelled merely on the basis of the statement furnished by the managing trustee of the GRGCT obtained during the course of survey u/s 131 wherein as admitted by the managing trustee of the GRGCT that it is involved in bogus donations - non opportunity to cross examine - Held that - The 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. Thus the ld. CIT(Ex) in the instant case erred in not giving the opportunity of cross examination 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 given by the assessee to GRGCT was a bogus donation. In fact on identical facts this Tribunal in the case of Sri Mayapur Dham Pilgrim and Visitors Trust (2017 (5) TMI 1486 - ITAT KOLKATA) came to the conclusion that cancellation of registration u/s 12AA cannot be sustained. Apart from the above, the grounds for cancellation for registration u/s 12AA(3) of the Act 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. We therefore are of the view that 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. Whether the order of the Commissioner of Income Tax (Exemptions) cancelling the registration of the assessee trust under section 12AA(3) of the Income Tax Act, 1961 was arbitrary, illegal, and bad in law. 2. Whether the statement of the managing trustee of another trust (GRGCT) was admissible as evidence against the assessee trust. 3. Whether the activities of the assessee trust were genuine and in accordance with the objectives of the trust. 4. Whether the assessee trust indulged in money laundering activities through bogus donations. 5. Whether the assessee trust was denied the opportunity of cross-examination, violating principles of natural justice. Detailed Analysis: Issue 1: Legality of the Order The assessee challenged the order of the Commissioner of Income Tax (Exemptions), Kolkata, cancelling the registration of the trust under section 12AA(3) of the Income Tax Act, 1961. The tribunal noted that the Commissioner’s order was based on the statement of the managing trustee of another trust (GRGCT) obtained during a survey operation, which was subsequently retracted. The tribunal found that the order was not sustainable as it failed to provide concrete evidence against the assessee trust and did not follow due process. Issue 2: Admissibility of the Statement The tribunal examined whether the statement of the managing trustee of GRGCT, recorded during a survey operation, was admissible as evidence against the assessee trust. The tribunal referred to the Supreme Court’s ruling in S Khader Khan & Sons, which held that statements recorded under section 133A do not have evidentiary value and cannot be the sole basis for any addition. The tribunal emphasized that the statement was retracted and thus could not be relied upon without corroborative evidence. Issue 3: Genuineness of Activities The tribunal evaluated whether the activities of the assessee trust were genuine and in accordance with its objectives. It was noted that the trust had been engaged in charitable activities and had been enjoying the benefit of registration since 1977. There was no evidence presented to show that the trust’s activities were not in line with its stated objectives. The tribunal concluded that the cancellation of registration on the grounds of non-genuine activities was not justified. Issue 4: Alleged Money Laundering The tribunal scrutinized the allegation that the assessee trust was involved in money laundering through bogus donations. The Commissioner’s order was based on the statement of the managing trustee of GRGCT, which claimed that GRGCT was involved in money laundering activities. However, there was no direct evidence linking the assessee trust to these activities. The tribunal highlighted that the name of the assessee trust did not appear in the statement, and there was no proof that the assessee received cash in exchange for donations. Therefore, the allegation of money laundering was not substantiated. Issue 5: Denial of Cross-Examination The tribunal addressed the issue of whether the assessee trust was denied the opportunity of cross-examination, which would constitute a violation of natural justice. The tribunal noted that the assessee had requested cross-examination of the managing trustee of GRGCT and the intermediary involved in the alleged bogus donations. The Commissioner denied this request, citing various judicial precedents. However, the tribunal referred to the Supreme Court’s decision in Andaman Timber Industries, which held that not allowing cross-examination when statements are the basis of an adverse order is a serious flaw. The tribunal concluded that the denial of cross-examination violated the principles of natural justice. Conclusion: The tribunal found that the order of the Commissioner of Income Tax (Exemptions) cancelling the registration of the assessee trust under section 12AA(3) was not justified. The statement of the managing trustee of GRGCT was not admissible as evidence without corroboration, the activities of the assessee trust were genuine, there was no evidence of money laundering, and the denial of cross-examination violated natural justice. Therefore, the tribunal quashed the impugned order and allowed the appeal of the assessee trust.
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