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TMI Blog2017 (3) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... h is involved in the bogus transactions cannot be the basis for the denial of the registration certificates as discussed above. It is also important to note that the assessee has been giving donation in every year which has been duly accepted by the Revenue as evidenced from the details submitted which is placed on pages 23 of the paper book. The amount of donation given by the assessee trust over the several years to the other trust is very much charitable activities. In this connection the CBDT has issued instruction No. 1132 date 05.01.1978 wherein it was clarified that the payment of a sum by one Charitable Trust to another for utilization by the donee-trust towards its charitable objects is proper application of income for a charitable purpose. We also find that the notice for the cancellation of the registration certificate was issued u/s 12AA(3). However, Ld. CIT(Exemption) has also invoked the provisions of section 12AA(4) of the Act for cancelling the registration certificate which in our considered view against the principal of natural justice. The ld. CIT(E) before invoking the provisions of Section 12AA(4) should have issued the show cause notice. Therefore, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out in accordance with or were contrary to its objects; and his purported findings invoking sub-sections (3) and (4) of section 12AA and withdrawing/cancelling the registration under section 12A are wholly arbitrary, erroneous, unreasonable and perverse. (D) For that further and in any event and without prejudice to the aforesaid, the CIT had no power and/or jurisdiction to withdraw/cancel the registration with retrospective effect from April 1, 2006. (E) For that the order appealed against is otherwise erroneous on facts and/or in law. 4. The common issue raised by assessee in the grounds of appeal is that learned CIT(Exemption) erred in cancelling the registration certificate granted u/s 12A of the Act. 5. The facts in brief are that the assessee in the present case is a trust and having registration u/s 12A and 80G and 10(23C)(vi) of the Act. The registration u/s 12A of the Act was granted to the assessee on the 11th April 2002 vide No. DIT(E)/8E/437/2001-02 and 80G certificate was renewed on 23.09.2011 vide DIT(E)/2896/8E/43/2001-02 and it was also granted approval under section 10(23C)(vi) of the Act vide No. CCIT-III/Kol/10(23C)(vi)/13-14/246 dated 16.01.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me right now that is Shri Gulab Pincha, Mob. No.9831015157. he was the key person for providing a large apart of bogus donation received which was immediately returned back to the different parties in the guise of payments towards capital expenditure in building. We do not know any details in respect of the donors on behalf of whom Shri Gulab Pincha acted as a middle man. Shri Pincha provided us with the details of the donors, cheque of the donations, letters of corpus donations etc. he also provided us with the names and bank a/c. details of the seven (7) persons, mentioned in Answer 13 to whom money has to be returned back through RTGS. He also collected the money receipts 80G certifications on behalf of the donors. Q. 19. The Ledger copy for the period from 01.04.2014 to 04.09.2014 in respect of General Fund of your trust having details of the donors is being showing to you to identify the bogus donations along with bogus donors. Ans. After going through the list of the donors appeared in such ledger, it is understood that the Donors whose names are written in capital letters under the sub- head Donation-13 , Donation-I and Donation-II having total amount of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 -do- 5,00,000 09-10 1 Vidyapati Smarak Manch 511, Rabindra Sarani, Kolkata-005 25,000 2 Monad Educational Society 66, Shankar Vihar, Delhi-110092 5,00,000 3 -do- 5,00,000 4 Global Cultural and Education Foundation 103, Engineers Enclave, Pitampura, New Delhi- 110034 10,00,000 5 Disha Education Society Disha Tower, New Shanti Nagar, Raipur-492007 10,00,000 10-11 1 Disha Education Society, Disha Tower, New 5,00,000 Shanti Nagar, Raipur-492007 2 Sabita Devi Education Trust, 1050/1, Survey Park, Kolkta-700075, (WB) 5,00,000 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Marine College, MRS Educational Trust? What are their activities? Ans. My answer is same as in Q.1. 6.2 From the above, the ld. CIT(Exemption) opined that the assessee is engaged in the money laundering activities. It was also observed that the trust to which the donation was given, their registration certificate u/s 12A of the Act were either cancelled or they were issued show cause notices for the cancellation of the registration certificate under section 12A of the Act. In view of above the ld. CIT(Exemption) has cancelled the registration certificate granted u/s 12A of the Act by observing as under :- 10. Conclusion:- 10.1 The intention of the legislature to grant registration u/s. 12AA and 80G, to give the benefit u/s. 11 to encourage medical relief to the poor and needy persons, promote education among masses and support to the poor section of the society. But time and again these provisions have been misused for personal need and for benefit of trustees/members of the trusts and societies. The act of misuse sometimes discovers itself so wide that it may confuse the trust purpose and objectives for allowing such benefit in the Act, rather it evaluates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general public utility envisaged by the Income Tax Act as laid down in Section 2(15). 10. Keeping in view the above, provisions of section 12AA(3) and 12AA(4) are invoked and registration granted u/s.12A is withdrawn/cancelled w.e.f. 01.04.2006 from the starting of financial year, in which the Trust was found to be involved in money laundering through payment of bogus donation, ingenuine activities and not carrying out activities as per object of the trust. Being aggrieved by the order of ld CIT(Exemption) the assessee came in appeal before us. 7. Before us Ld. AR of the assessee filed a paper book which is running from pages 1 to 426 and submitted that:- 1. The show cause notice was issued for the cancellation of registration granted under section 12A/ 12AA of the Act by invoking the provisions of section 12AA(3) of the Act vide No. CIT(E)/Kol/12AA/2015-16/3595 on 3.12.2015. But the ld CIT(Exemption) has cancelled the registration vide its order dated 10.03.2016 by invoking the provisions of section 12AA(3) and 12AA(4) of the Act. The assessee has made the submission in the response to the show cause notice issued on dated 3.12.2015 considering the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the learned CIT(exemptions) The ld. DR vehemently supported the order of the ld. CIT (Exemption). 8. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the cancellation of registration certificate issued u/s 12A/12AA of the Act on the ground that the assessee was involved in providing the bogus donation to the various trust and societies. This fact of bogus transactions in the form of donation was revealed on the basis of the statement of the managing trustee recorded in the course of survey u/s 133A of the Act on BERT. The managing trustee of be BERT admitted that it has received bogus donation through a person namely Shri Gulab Pincha. Thus the ld. CIT(Exemption) cancelled the registration certificate issued u/s 12A of the Act. However on the perusal of the statement given by the managing trustee of the BERT we find that he admitted that the major bogus donation was received from various trust/ societies but the ld CIT(Exemption) has not provided any list in its order where the name of the assessee trust is reflecting. We also find as per the statement of managing trustee of BE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration certificate u/s 12A and 80G and 10(23C) of the Act. While holding so, we find support guidance from the judgment of Hon ble High Court of Punjab Haryana in the case of CIT Vs. Apeejay Education Society reported in 59 taxmann.com 102 wherein it was held as under : Under Section 12AA of the Act, the Commissioner, at the relevant time in the year 1999 had called for all documents and information from the respondent-assessee to satisfy himself about the genuineness of the activities of the institution and after making enquires had passed the order registering the said institution and giving it the benefit under Section 12A of the Act, which made the institution eligible for exemption from the provisions of Sections 11 and 12 of the Act. Under Section 12AA(3) of the Act, the Commissioner was to be satisfied about the activities of the said institution and if they were not genuine and the same were not being carried out in accordance with the objects of the institution he could pass the order cancelling the registration. It cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o campus since last several years. One is primary and junior High School on VIP Road, Baguiati, Kolkata-159 and another is secondary (ICSE) and Higher Secondary (ISC) School at Aswini Nagar, Baguiati, Kolkata-159. The school is affiliated with Council for the Indian School Certificate Examinations New Delhi (ICSE-X and ISC-XII). The trust has started another school near Ranchi which is situated in remote area mainly with the object of imparting education to general and tribal poor students and providing free tuition and/or charging concessional rate of tuition fees to a large number of students in deserving cases. The school is operational since April 2015. The Roll strength of students at present is about 3000 in all the schools taken together. At present, more than 200 staff members are involved in the school including teaching and non- teaching staff. Apart from staff several other persons are dependent on schools for their livelihood as they are associated with related activities of school such as canteen, transportation etc., the Higher secondary school is imparting good education. The pass result is between 97% to 100% at class X and Class XII levels with highest score touchi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities to deny benefit under Section 11 of the Income Tax Act, but that could not be ground for cancelation of registration itself. Applying the above ratio laid down by the Hon ble High Court of Karnataka in the case of Islamic Academy of Education (Supra), it can be concluded that even the donation to BERT is proved to be bogus then also the registration u/s 12A of the Act cannot be cancelled but the said amount of donation will not be eligible for exemption u/s 11 of the Act. The provisions of section 12A of the Act prescribe conditions for registration of trust and make obligatory to the trust or the institution to seek registration under section 12AA of the Act, if such trust or institution intends to have the benefit of the provisions of section 11 and 12 of the Act. These provisions thus make it clear that if the trust or the institution is not registered under section 12AA of the Act, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable to be excluded under any of the clauses of section 11 of the Act. Thus, in a case where registration is refused, the trust or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy himself about the genuineness of the activities of the trust or institution and also about the objects of the trust or the institution. On being satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the CIT would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, the CIT is again empowered to make enquiries as he thinks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... school, where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 for assessing the income which has not been applied to the purpose of the trust or the institution, the intention of the law maker and the scope and purport of the provision is apparent while considering the question of registration. In view of above precedent, we find that the activities of the trust in relation to its education activities have not been doubted and on the basis of same activities various registrations u/s 12A, 80G and 10(23C) were awarded to the assessee. Simply the assessee has given donation to a trust which is involved in the bogus transactions cannot be the basis for the denial of the registration certificates as discussed above. 8.3 It is also important to note that the assessee has been giving donation in every year which has been duly accepted by the Revenue as evidenced from the details submitted which is placed on pages 23 of the paper book. The amount of donation given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that the bogus donation was received. The managing trustee of BERT has mentioned very vaguely that major part of the donation was bogus without bringing the name of the donors on record. But he mentioned the name of SGP as the middle man for arranging such bogus donation. Thus in our considered view, the statement of SGP was necessary for establishing the fact that how the money has returned to assessee and whether the money was actually returned to the assessee-trust. As the statement of the SGP has not been recorded, the question of confronting the same to the assessee does not arise. As per question no. 14 of the statement of the managing trustee of BERT, it is clear that SGP was the only party to arrange all the bogus donations but his statement is missing which was crucial to unveil the chain of bogus donation. In view of above, we have no hesitation in reversing the order of ld. CIT(E) and accordingly the appeal of the assessee is allowed. Now coming to the other appeals of the assessee in ITA 932/Kol/2016 and 933/Kol/2016 9. At the outset, we find that we have already adjudicated the issue raised by assessee in ITA No. 931/Kol/2016 in its favour. 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