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TMI Blog2016 (8) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by the assessee had to be decided with regard to its genuineness. The fact that opportunity of cross-examination of Shri Dinesh Kumar Agrawal and the person who are alleged to have arranged the bogus gifts was not afforded to the assessee cannot be the basis to quash the order under section 12AA(3) of the Act. As rightly contended by the learned Departmental representative if it is found that the assessee was accepting bogus donations, then that fact can only lead to an inference that the activities of the trust are not genuine or are not carried out in accordance with the objects of the trust. We, therefore, are of the view that it would be proper in the interest of justice to set aside the order of the respondent and remand the issue of cancellation of registration to the respondent for fresh consideration. - Decided in favour of assessee for statistical purposes. - I. T. A. No. 366/Kol/2016 - - - Dated:- 20-5-2016 - N. V. Vasudevan (Judicial Member) and M. Balaganesh (Accountant Member) For the Appellant : S. M. Surana, Advocate For the Respondent : Vijay Shankar, Departmental Representative ORDER N. V. Vasudevan (Judicial Member) 1. This is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of M/s. Quadeye Securities Pvt. Ltd. was also given to the assessee and it was informed to the assessee that no further time will be given. 6. On January 9, 2016, the assessee gave another reply to the respondent wherein the assessee drew the attention of the respondent to question No. 21 of the statement of Shri Dinesh Kumar Agrawal in which he had stated that the entry for donation in favour of the assessee was arranged by Shri Pradip Agarwal, chartered accountant and Shri Ajay Agarwal, chartered accountant. The assessee submitted that they do not know any such person as is referred to in the statement of Shri Dinesh Kumar Agrawal. The assessee demanded an opportunity of cross-examination of Shri Dinesh Kumar Agrawal, Shri Pradip Agarwal and Shri Ajay Agarwal simultaneously. The assessee also submitted that it was an educational institution running colleges and schools for needy people. The assessee also maintained that its activities were charitable in nature. 7. The respondent-Commissioner of Income-tax (Exemptions) issued another show-cause notice dated January 12, 2016, in which he again called upon the managing trustee of the assessee to personally attend before h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100,00,000 3. School of Human Genetics and Population Health - - 50,00,000 50,00,000 - - 100,00,000 4. Batanagar Education and Research - - - 100,00,000 - - 100,00,000 5. Singhvi Charitable Trust - 42,00,000 52,00,000 - - - 94,00,000 6. Agarwal Pragati Trust - 20,00,000 10,00,000 45,00,000 - - 75,00,000 7. B.G. Memorial Trust - - - 50,00,000 - - 50,00,000 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73,50,000 21,00,000 867,50,000 Question 19 Please state how did you decide to make such dona tions to various trust/organisation. Answer Sir, it was a prearranged accommodation entry in form of bogus donations. The same was arranged by Mr. Pradeep Kumar Agarwal and Mr. Ajay Agarwal, chartered accountant who is also auditor of my group concern. Sir, donation was made by Quadeye Securities Pvt. Ltd. through cheque/RTGS in turn the abovementioned persons returned the amount in cash after deducting their commission. Question 20 How did you decide to make donation to the above mentioned trust. Answer Sir, as I stated above, to get exemption under section 35(1)(ii) and deduction under section 80G of the Income-tax Act, 1961, the bogus donation was made. Question 21 Please state have you visited the office of the trust ? Answer Sir, I never visited the office of the trust. The trust to whom donation was made was arranged by Mr. Pradeep Kumar Agarwal, chartered accountant and Mr. Ajay Agarwal. Question 22 Please state have you personally seen their work ? If, yes provide the details. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of the aforesaid statement came to the conclusion that the assessee had pumped in unaccounted money through bogus corpus donation claimed under section 11(1)(d) of the Act. The respondent also held that the assessee was pumping in cash through corpus donation and investing the same in fixed deposits and arranging interest income. The respondent Commissioner of Income-tax (Exemptions) thereafter came to the conclusion that he was satisfied that the activities of the trust are not genuine and that the activities are not being carried out in accordance with the declared objects. The respondent accordingly concluded as follows : 6.2. Based on the facts and circumstantial evidences as discussed in paragraphs 1 to 5, it can be informed : (a) The society/trust has grossly misused the provisions of section 12AA and section 80G(5)(vi). (b) They have violated the objects of the society as converting cash in cheque is beyond the objects (c) The activity of converting unaccounted cash available with trustee through corpus donation is illegal, ingenuine and immoral. (d) Donation received is not voluntary, merely an accommodation entry and fictitious. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chartered accountant and Shri Ajay Agarwal, chartered accountant, had arranged bogus donations to various trusts. According to him, the Revenue has not chosen to examine the persons who were stated to have arranged bogus donations and, therefore, the statement of Shri Dinesh Kumar Agrawal is not corroborated by any extrinsic evidences. He pointed out that in the assessment completed under section 143(3) of the Act for the assessment year 2012-13 the Assessing Officer has not drawn any adverse inference in so far as this donation received from M/s. Quadeye Securities P. Ltd. The learned counsel drew our attention to the decision of the Income-tax Appellate Tribunal, Lucknow Bench, in the case of Fateh Chand Charitable Trust v. CIT (Exemptions), vide ITA No. 792/Lkw/2015 order dated March 18, 2016, [2016] 49 ITR (Trib) 276 (Lucknow) wherein on identical facts the Tribunal held that cancellation of registration under section 12AA(3) of the Act was not valid. He brought to our notice the facts in the aforesaid case which were as follows (page 279) : On the basis of the report of the learned Commissioner of Income-tax (Exemptions), Kolkata, vide letter dated October 28, 2015, in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he residential premises of the three of the trustees of a charitable institution. In the course of such search evidence was found regarding collection of fees for admission much higher than recorded in the books of account of the institution. On the basis of the aforesaid finding registration under section 12AA(3) of the Act was cancelled. The Tribunal had set aside the order under section 12AA(3) of the Act and on further appeal by the Revenue the hon'ble Karnataka High Court has held as follows : 8. In the instant case, the material on record shows that the trust has established educational institution and imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the college. The college is recognised by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it cannot be said that the trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus, the object of the constitution of the trust namely imparting of educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the objects of the trust, the learned Departmental representative brought to our notice the fact that the assessment was completed for assessment year 2012-13 in the case of the assessee by the Assessing Officer by order dated March 25, 2015, passed under section 143(3) of the Act. At that time the Assessing Officer had no opportunity to go into this question regarding the activities of the trust being genuine or not as survey under section 133A of the Act in the case of M/s. Quadeye Securities Pvt. Ltd. took place much later, i.e., on December 4, 2015. He pointed out that even in the said order the assessee was not granted exemption under section 11 of the Act. 16. We have given very careful consideration to the rival submissions. From the statement of Shri Dinesh Kumar Agarwal of M/s. Quadeye Securities Pvt. Ltd. it appears that there is prima facie ground to believe that the donation of ₹ 50,00,000 given by M/s. Quadeye Securities Pvt. Ltd was not genuine. Based on this statement alone it cannot be conclusively said that the donation in question was bogus. When the statement of Shri Dinesh Kumar Agarwal was confronted to the assessee and when the assessee was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case of the assessee and that of the case law cited by the learned counsel for the assessee are distinguishable. In the case of Fateh Chand Charitable Trust (supra), in the statement recorded of the donor the name of that assessee was not mentioned as a person to whom bogus donations were given, whereas in the present case the director of Qudeyes Securities Pvt. Ltd., in his statement has clearly mentioned the name of the assessee as a recipient of bogus donations in lieu of cash. The decision in the case of CIT v. Islamic Academy of Education (supra) the facts of the case were that there was misappropriation of funds by the trustee of the trust and it was found that otherwise the trust was carrying on charitable activities. In the present case, the facts are that there are allegations against the trust that it was receiving bogus gifts in lieu of cash. The decision rendered in the case of Queen's Educational Society v. CIT [2015] 372 ITR 699 (SC) is on the question of application of the test of predominant nature of the objects of the trust which should be decisive in granting the exemption under section 10(23C) of the Act and, therefore, of no assistance to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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