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TMI Blog2017 (11) TMI 1586X X X X Extracts X X X X X X X X Extracts X X X X ..... ffered to tax under IDS. It is because why a prudent man will convert the accounted money into unaccounted form and thereafter he will offer the same to tax under IDS. There is no documentary evidence available in support of the above finding of the ld. CIT(Ex) which is based on his surmise & conjuncture. - Decided in favour of assessee. - ITA No.516/Kol /2017 - - - Dated:- 15-9-2017 - Shri Aby.T Varkey, Judicial Member And Shri Waseem Ahmed, Accountant Member For The Appellant : Shri S.M Surana, Advocate For The Respondent : Shri G. Hangshing, CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is arising out of order of Commissioner of Income Tax (Exemptions), Kolkata dated 22.02.2016 u/s 12AA(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). Grounds raised by assessee per its appeal are as under:- 1. For that the order of the Ld. Commissioner of Income Tax, Exemption is arbitrary, illegal and bad and is not in accordance with law. 2. For that the order of the Ld. Commissioner of Income Tax (Exemption) cancelling the registration u/s. 12AAA(3) without following the specific directions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure a/c and balance sheet for AYs 2011-12 to 2015-16. b) All certificate of registrations granted by the Income Tax Department. c) List of donations received along with details of donors from 01.04.2010 to 31.03.2015 d) List of donations made along with details of done from 01.04.2010 to 31.03.2015 Ld. CIT(Ex) also provided the copy of the statement of Shri Dinesh Kumar Agarwal in the interest of natural justice and fair play. In compliance thereto, the assessee made following submissions:- 1) Shri Dinesh Kumar Agarwal is a man of means and therefore any donation given out of philanthropic act cannot be disputed. 2) It was ascertained from the statement of Shri Dinesh Kumar Agarwal that the donation was made by assessee through the middleman namely, Pradip Agarwal and Ajay Agarwal but assessee denied to have any connection or interaction with these people. 3) The assessee also requested the Ld. CIT (Ex) for the crossexamination of Shri Dinesh Kumar Agarwal. Subsequently a proposal was received by Ld. CIT(Ex) from the Assessing Officer having jurisdiction over the assessee vide dated 25.01.2016 for the cancellation of registration on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s activities are suggesting as if it is engaged in converting cash into cheque which is illegal in nature. iii) Donation received is merely an accommodation entry and in fact the assessee is converting its own cash in accounting form. The assessee avoided to avail the cross-examination opportunity of Shri Dinesh Kumar Agarwal. 3.3 In view of the above observation, registration certificate of assessee was cancelled by Ld. CIT(Ex) vide order dated. 22.02.2016. Subsequently assessee preferred an appeal before Hon'ble ITAT. During the hearing the Hon ble ITAT made certain observation and thereafter disposed off the appeal. The relevant observation and finding of the Hon ble ITAT is reproduced below :- a) There is pima facie ground to believe that the donation of ₹ 50 lakhs given by M/s Quadeye Securities Private Ltd was not genuine. b) The assessee chose to avoid appearing before the respondent when the opportunity was provided to it. This conduct of the assessee was not justified. c) It is no doubt true that the statement of Sri Dinesh Kumar Agarwal without being subjected to cross-examination by the assessee and further corroborated by the eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again and again on the same matter and therefore an explanation in writing was forwarded to Ld. CIT (Ex). The contents of the letter reproduced below:- To Commissioner of Income Tax (Exemptions) 6th Floor, Middleton Row, Kolkat-700071 Sub: Regarding summon issued u/s. 131 of Income tax Act, in case of B.G. Memorial Trust(PAN Dear Sir, With reference to the above, we wish to inform you that we had attended your office on14.10.2016, when the representative of B..G. Memorial Trust was not present for cross examining us. Subsequently, the date as refixed on 16.12.2016, when also the examination by B G memorial Trust could not take place and the matter was adjourned to 10.01.2017. It is causing hardship to us for appearing again and again on the same matter before yourself and therefore we request you to allow us to submit our explanation on this matter herein writing. The donation to BG. Memorial Trust amounting to ₹ 50,00,000/- was made during the FY 2011-12 by us. This mount was declared by u9s under Income Declaration Scheme, 2016 and appropriate tax was also paid under the said scheme. Since the donation made to B.G. Memo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that QSP has made the donation to the assessee through cheque and received cash from the assessee-trust. The cash which was available with QSP was declared under IDS scheme, 2016. The assessee has received most of its donation in corpus form which has in turn being parked with the bank as fixed deposit. There are no details available for suggesting that assessee has invested a corpus fund in some immovable properties. In view of above Ld. CIT(Ex) concluded that the activities of assessee/trust are not charitable in nature and accordingly cancelled the registration certificate issued u/s 12A of the Act by observing as under:- 5.1. The Hon'ble ITAT, Kolkata had already observed that the facts of the case clearly indicate that the donation received was bogus and therefore the trust had involved itself in ingenuine activities. The order was set aside by the Hou'ble Tribunal for providing the assessee with another opportunity to crossexamine Sri Dinesh Kurnar Agarwal. As narrated in Para 3 of this Order that despite several attempts, the cross-examination could not take place. However, Sri Dinesh Kumar Agarwal had submitted a letter wherein he has stood by his state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thods as is stated by the Hon'ble Supreme Court, mentioned above. In the same judgement the Hon 'ble Supreme Court further observed: A collective, committed and courageous turnaround is thus the present day imperative to free the civil order front the suffocative throttle of this deadly affliction. So it is duty of all concerned to put in their best to eradicate the state from the vices of money laundering and corruption, In this instant case the only issue under consideration was arrangement of cross examination of Shri Dinesh Kumar Agarwal by the Shri Goutam Ghosh managing trustee of the assessee trust. It has already been discussed that such cross examination could not take place but the declaration by M/s. Quadeye Securities Private Ltd. under Income Declaration Scheme. 2016 and its written submission before the undersigned unambiguously proves that the donation received by the assessee trust was bogus. 5.3 In view of all above, I hereby invoke the provision of section 12AA(3) of the Act to cancel the registration u/s 12A that was granted to the assessee vide Memo, NO, DIT(E)/T-, 41/301/02-03 dated) 7.07.2003. Being aggrieved, assessee preferred an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles of natural justice is concerned, the same has been duly complied with in terms of directions contained in the earlier orders of the Tribunal which has been finally settled in several rounds of litigation before this Special Bench. As per the direction of the Tribunal, finally, the Revenue was required to provide certain material and cross-examination of certain witnesses. In Page 11 compliance thereof, the Revenue has provided the opportunity to crossexamine in the case of five persons as per the list given by the assessee. . 6. We have carefully considered the entire gamut of facts, rival contentions raised by the parties before us and also the material referred to during the course of hearing. In the instant case originally Ld. CIT(Ex) cancelled the registration certificate u/s.12A of the Act vide order dated 22-2-2016. Against the order of Ld. CIT(Ex) assessee preferred an appeal who directed the Revenue to provide an opportunity of cross-examination to assessee. Accordingly, appeal was allowed for statistical purpose. Subsequently, it was also observed that in spite of several notices issued by Ld. CIT(Ex) to both the parties but the process of cross-examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of crossexamination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entassessee 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 allegation is regarding the alleged supply of the installation of the software and whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in cancelling the registration granted on 13.05.1999 w.e.f. the assessment year 2004-05. The assessee had placed various materials before the Tribunal to show that software modules purchased were inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the institution would not be allowed to claim any such exemption or exclusion of its income from the total income of the previous year. The Income-tax Act through section 12AA has made it obligatory for charitable trusts and institutions to get themselves registered with the income-tax authorities failing which the benefit of exemption from income-tax would be denied. The requirement of registration being procedural is prescribed u/s 12AA of the Act which reads as under:- Procedure for registration . 12AA. ( 1) The [***] [Principal Commissioner of] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fit. In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, of course, the registration can again be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Sec. 12AA, which lays down the procedure for registration, does not speak anywhere that the CIT, while considering the application for registration, shall also see that the income derived by the trust or the institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12AA of the Act was awarded to the assessee. Simply the assessee has received donation from some parties which are involved in the bogus transactions cannot be the basis for the denial of the registration certificates as discussed above. 9. We also find that the ld. CIT(Ex) has cancelled the registration on the ground of non-genuineness of transaction though the same was routed through banking channel. Thus in our considered view the genuineness of the transaction cannot be doubted in the aforesaid facts circumstances. In this connection we rely on the judgment of Bombay High Court in the case of CIT Vs. Green Infra Limited reported in 397 ITR 7 wherein it was held as under: The identity of the subscribers was confirmed by virtue of the Assessing Officer issuing a notices under section 133(6) to them. Further, it holds that the revenue itself makes no grievance of the identity of the subscribers. So far as the genuineness of the transaction of share subscriber is concerned, it concludes as the entire transaction is recorded in the books of account and reflected in the financial statements of the assessee since the subscription was done through the banking channels as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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