2021 (8) TMI 421 - AT - Income Tax

Exemption u/s 11 - withdrawal of registration under s.12AA of the Act granted to the assessee earlier and consequent denial of benefits accruing from such registration - information received by the department from its counterpart i.e. CIT(E), Kolkata that the donor to the assessee are indulging in money laundering through receipt of bogus donation from various corporates and non-corporates - Addition as reliance of statement obtained in the course of survey proceedings in the case of the donor - HELD THAT - It is a settled principle of law that the onus lies on the person who alleges untruthfulness against the other persons. In the instant case, the allegation has been made on behalf of the Revenue for adversial conduct of the assessee. It is thus the duty of the Revenue to comply with the sacrosanct principles of natural justice and grant opportunity to the assessee for rebuttal of evidences in possession of the Revenue. The registration already granted cannot be withdrawn arbitrarily and in a light hearted manner giving retrospective effect. All pleas noted above and other arguments and position of law that were canvassed on behalf of the assessee requires proper appraisal and disposal thereof in an objective manner - order of the CIT(E) requires to deal with various pleas of the assessee raised to defend the registration granted. The doctrine of legitimate expectations demands that the assessee should be made privy to the tangible evidences in corroboration of statement sought to be relied upon. Similarly, the cross examination of deponent s statement is incumbent to prevent miscarriage of justice. As told in the open Court, the re-registration application of the assessee has been accepted by the Revenue recently and registration has been granted from a prospective date. All these facts require proper consideration. CIT(E) while cancelling the registration appears to have wrongfully placed the onus of proving bonafides of donations on the assessee without showing reasons/evidence for drawing adverse conclusion on a registered trust. The imperatives of basic procedure have not been adhered while resorting to drastic action of cancellation. We accordingly set aside the impugned cancellation order and restore the issue back to the file of the CIT(E)/competent authority to pass a speaking order in this regard - Appeal of the assessee is allowed for statistical purposes

Summary

Issues Involved:
1. Withdrawal of registration under Section 12AA of the Income Tax Act.
2. Allegation of receiving bogus donations.
3. Violation of principles of natural justice.
4. Burden of proof and onus of evidence.
5. Retrospective cancellation of registration.

Detailed Analysis:

1. Withdrawal of registration under Section 12AA of the Income Tax Act:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (E) [CIT(E)], Bhopal, dated 28.12.2018, which involved the withdrawal of registration under Section 12AA of the Act. The assessee, a public trust running a school, had its registration granted on 07.11.2007. However, a show cause notice dated 13.06.2018 led to the withdrawal of this registration based on an assessment order and subsequent report from the AO to the CIT(E).

2. Allegation of receiving bogus donations:
The CIT(E) alleged that the assessee received ingenuine donations amounting to ?70 Lakhs from Herbicure Healthcare Bioherbal Research Foundation (HHBRF) and Sethi Trust. The basis for this allegation was information received from the CIT(E), Kolkata, suggesting that the donor was involved in money laundering through bogus donations. Despite investigations and survey operations, no evidence was found that the assessee ploughed back unaccounted money by giving cash and receiving it back as donations.

3. Violation of principles of natural justice:
The assessee contended that the statements of donors or brokers recorded during survey operations were never provided, violating the principles of natural justice. The assessee was not given an opportunity to cross-examine the deponent of the statements, which is a serious breach. The Tribunal referred to the decision in Andaman Timber Industries vs. Commissioner of Central Excise, emphasizing the need for cross-examination to uphold natural justice.

4. Burden of proof and onus of evidence:
The Tribunal noted that the CIT(E) relied heavily on the statement of Shri Swapan Ranjan Das Gupta, founder Director of HHBRF, without corroborative evidence. The onus lies on the CIT(E) to dislodge the presumption of bonafides of donations. The assessee argued that the CIT(E) failed to show any connection between the donor trust or broker and the assessee trust. The Tribunal found merit in the assessee's pleas, stating that the Revenue must comply with principles of natural justice and provide the assessee an opportunity for rebuttal.

5. Retrospective cancellation of registration:
The Tribunal found that the CIT(E) wrongfully placed the onus of proving the bonafides of donations on the assessee without providing reasons or evidence for drawing adverse conclusions. The Tribunal emphasized that the registration cannot be withdrawn arbitrarily or in a light-hearted manner with retrospective effect. The Tribunal set aside the cancellation order and restored the issue back to the CIT(E)/competent authority to pass a speaking order after objective analysis and in accordance with law, ensuring the assessee is provided a fair opportunity of being heard.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, emphasizing the need for adherence to principles of natural justice and proper procedural conduct by the CIT(E). The order pronounced on 02/08/2021 highlighted the importance of fair treatment and objective analysis in cases involving the cancellation of registration under Section 12AA of the Act.