2022 (1) TMI 898 - HC - Income Tax

Exemption u/s 11 - cancellation of registration u/s 12AA(3) - CIT(E) concluded that that the activities of the trust are not genuine and they are not being carried out in accordance with the declared objects as contained in the deed of trust - ITAT set aside order for cancellation of registration holding that the assessee trust was not engaged any money laundering activity - HELD THAT - We find that the entire issue involved in this appeal is factual. As rightly pointed out by the Tribunal the CIT(E) has not brought on record any statement made by the said Mr. Lahiri which is adverse to the interest of the assessee trust. That apart, there was no document or material available with the CIT(E) to hold that the assessee had given donation to the Batanagar Education and Research Trust during the relevant year in question, namely, assessment year 2015-2016. Thus, in the absence of any material, the Tribunal rightly concluded that the allegations against the trust based on which registration was cancelled were all bald allegations with nothing specific against the assessee - no question of law much less the substantial question of law arising for consideration in this appeal.- Decided against revenue.

Summary

Issues:
1. Whether the Tribunal was justified in holding that the assessee trust was not engaged in money laundering activity?
2. Whether the Tribunal was justified in setting aside the order for cancellation of registration under Section 12AA(3) of the Income Tax Act, 1961?

Analysis:
1. The appeal before the High Court concerned the cancellation of registration of an assessee trust under Section 12A of the Income Tax Act. The Commissioner of Income Tax (Exemption) canceled the registration based on allegations that the trust's activities were not genuine and not in line with its declared objects. The trust, running three schools recognized by the West Bengal Higher Secondary Board of Education, was accused of being a bogus donor based on a statement from another trust's managing trustee. The CIT(E) canceled the registration without providing adequate opportunity for the trust to defend itself, leading to an appeal by the trust before the Tribunal.

2. The Tribunal found that the CIT(E) did not present any adverse statements from the managing trustee of the other trust against the assessee trust. It also noted the lack of evidence linking the assessee trust to any alleged donations or money laundering activities. The Tribunal concluded that there was no justification for canceling the registration under Section 12AA(3) of the Act. The Tribunal referred to previous cases where similar allegations were dismissed due to lack of substantial evidence, ultimately allowing the appeal of the assessee trust.

3. The High Court upheld the Tribunal's decision, emphasizing the lack of adverse statements or material against the assessee trust. It highlighted the absence of evidence regarding donations to the other trust and dismissed the appeal by the revenue. The Court also noted a previous appeal by the revenue against a similar decision that was dismissed earlier. Consequently, the High Court found no substantial question of law in the appeal and dismissed it, affirming the Tribunal's decision.