M/s Dr. B. G. Memorial Trust, Kolkata V. CIT(EXEMPTIONS), KOLKATA, Kolkata

ITA 366/KOL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4796 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-05-2016
• Assessment Year: misc
• Appeal Filed On: 07-03-2016
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA
• Keywords: Gift; Charitable institution; Opportunity of cross examination; Question of law; Cancellation of registration
• Section: 143(3); 133A; 80G; 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM] I.T.A NO. 366/KOL/201 6 M/S. DR.B.G.MEMORIAL TRUST -VS.- C.I.T. ( EXEMPTION), KOLKATA KOLKATA [PAN : AAATN4210H) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.M.SURANA, A DVOCATE FOR THE RESPONDENT : SHRI VIJAY SHANKAR, CIT (DR) DATE OF HEARING : 16.05.2016. DATE OF PRONOUNCEMENT : 20.05.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 22.02.2016 OF CIT- (EXEMPTION), KOLKATA PASSED U/S 12AA(3) OF THE INCO ME TAX ACT, 1961 (ACT). 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH ORDER U/S 12AA(3) OF THE ACT WAS PASSED BY CIT(EXEMPTIONS) , KOLKATA ARE AS FOLLOWS :- THE ASSESSEE IS A TRUST CREATED UNDER AN INSTRUMENT OF TRUST DATED 01.03.2013. THE ASSESSEE WAS GRANTED REGISTRATION U/S 12A OF TH E ACT ON 17.07.2003. THE MAIN OBJECTS FOR WHICH THE TRUST WAS CREATED WAS RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. 3. THERE WAS A SURVEY U/S 133A OF THE ACT COND UCTED ON 4.12.2015 IN THE CASE OF ONE M/S. QUADEYE SECURITIES PVT. LTD., BY THE INVESTIGA TION WING, KOLKATA. IN THE COURSE OF THE SURVEY STATEMENT OF SHRI DINESH KUMAR AGRAWAL, DIRECTOR OF M/S. QUADEYE SECURITIES PVT. LTD WAS RECORDED. IN THE SAID STATE MENT HE HAD STATED THAT HE HAD GIVEN DONATION OF RS.50,00,000/- TO THE ASSESSEE IN LIEU OF CASH GIVEN BY THE ASSESSEE. IT WAS 2 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 2 HIS STATEMENT THAT HE WAS TAKING CASH FROM SEVERAL TRUSTS/SOCIETIES AND PROVIDING THEM ENTRIES. 4. THE RESPONDENT HEREIN ON RECEIPT OF THE AFORESAI D INFORMATION ISSUED SHOW CAUSE NOTICE DATED 18.12.2015 U/S 12AA(3) OF THE ACT FOR CANCELLATION OF REGISTRATION ALREADY GRANTED TO THE ASSESSED. THE ACTION WAS PROPOSED ON THE GROUND THAT THE ACTIVITIES OF THE ASSESSEE WERE NOT GENUINE AND THEREFORE THE TRUST D OES NOT DESERVE CONTINUANCE OF REGISTRATION U/S 12A OF THE ACT. 5. IN REPLY TO THE AFORESAID SHOW CAUSE NOTICE THE ASSESSEE VIDE LETTER DATED 26.12.2015 SUBMITTED THAT EVEN IN THE ASSESSMENTS COMPLETED FO R A.Y.2012-13 THE DONATIONS IN QUESTION RECEIVED BY THE ASSESSEE WERE ACCEPTED AS GENUINE BY THE AO. THE ASSESSEE MAINTAINED THAT THE DONATION RECEIVED BY M/S. QUADE YE SECURITIES PVT. LTD WAS GENUINE. THE ASSESSEE DEMANDED A COPY OF THE STATEMENT OF SH RI DINESH KUMAR AGRAWAL, DIRECTOR OF M/S. QUADEYE SECURITIES PVT. LTD. WHEN THIS LETTER WAS HANDED OVER TO THE RESPONDENT THE RESPONDENT DIRECTED THE MANAGING TRU STEE OF THE ASSESSEE ONE MR. GAUTAM GHOSH TO APPEAR BEFORE THE RESPONDENT ON 13. 01.2016. A COPY OF THE STATEMENT OF SHRI DINESH KUMAR AGRAWAL, DIRECTOR OF M/S. QUADEYE SECURITIES PVT. LTD WAS ALSO GIVEN TO THE ASSESSEE AND IT WAS INFORMED TO THE AS SESSEE THAT NO FURTHER TIME WILL BE GIVEN. 6. ON 09.01.2016 THE ASSESSEE GAVE ANOTHER REPLY T O THE RESPONDENT WHEREIN THE ASSESSEE DREW THE ATTENTION OF THE RESPONDENT TO QU ESTION NO.21 OF THE STATEMENT OF SHRI DINESH KUMAR AGRAWAL IN WHICH HE HAD STATED THAT TH E ENTRY FOR DONATION IN FAVOUR OF THE ASSESSEE WAS ARRANGED BY SHRI PRADIP AGARWAL, C A AND SHRI AJAY AGARWAL, CA. THE ASSESSEE SUBMITTED THAT THEY DO NOT KNOW ANY SUCH P ERSON AS IS REFERRED TO IN THE STATEMENT OF SHRI.DINESH KUMAR AGRAWAL. THE ASSESSE E DEMANDED AN OPPORTUNITY OF CROSS EXAMINATION OF SHRI DINESH KUMAR AGRAWAL, SHR I PRADIP AGARWAL AND SHRI AJAY 3 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 3 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 CIT(EXEMPTIONS) ISSUED ANOTHER SHOW CAUSE NOTICE DATED 12.01.2016 IN WHICH HE AGAIN CALLED UPON THE MANAGI NG TRUSTEE OF THE ASSESSEE TO PERSONALLY ATTEND BEFORE HIM ON 1.2.2016 ALONG WITH THE DOCUMENTARY EVIDENCES IN SUPPORT OF THE CLAIM MADE BY THE ASSESSEE ON 01.02. 2016. NONE APPEARED ON BEHALF OF THE ASSESSEE BEFORE THE AO. THE RESPONDENT ISSUED A NOTHER SHOW CAUSE NOTICE ON 02.02.2016 IN WHICH HE AGAIN CALLED UPON THE MANAGI NG TRUSTEE TO APPEAR BEFORE HIM FOR EXAMINATION ON 15.02.2016. IN THIS SHOW CAUSE NOTIC E THE RESPONDENT CIT(EXEMPTIONS) ALSO TOOK THE STAND THAT THE ASSESSEE WAS MERELY PR OVIDING SUPPORT TO FACILITATE DISTANCE LEARNING PROGRAMME OF ALAGAPPA UNIVERSITY, TAMIL NA DU AND DOING SO CANNOT AMOUNT TO IMPARTING EDUCATION AS DEFINED U/S 2(15) OF THE ACT. THE ASSESSEE IN REPLY TO THE AFORESAID SHOW CAUSE NOTICE ADDRESSED ANOTHER LETTE R DATED 12.02.2016 IN WHICH THE ASSESSEE REITERATED ITS STAND AS WAS TAKEN IN ITS L ETTER DATED 09.01.2016. 8. IN THE GIVEN CIRCUMSTANCES THE RESPONDENT PROCE EDED TO PASS AN ORDER U/S 12AA(3) OF THE ACT CANCELLING THE REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT. THE RESPONDENT IN THIS ORDER REFERRED TO THE STATEMENT OF SHRI DINESH KUMAR AGRAWAL, DIRECTOR OF M/S. QUADEYE SECURITIES PVT., LTD.. THE RELEVANT PORTION OF THE STATEMENT IS AS FOLLOWS :- Q.18 PLEASE FURNISH DETAILS OF DONATION MADE TO VA RIOUS CHARITABLE TRUST/ORGANIZATION DURING F.Y. 2009-10 TO 2014-15. ANS. SIR, THE DETAILS OF DONATION MADE BY M/S. QUAD EYE SECURITIES PVT., LTD & QUADEYE TRADING ARE AS UNDER :- DETAILS OF DONATION PAID BY QUADEYE SECURITIES PRIV ATE LIMITED SL. NO. NAME OF TRUST DONATION PAI D DURING THE F.Y. 2014-15 2013-14 2012-13 2011-1 2 2010-11 2009-10 TOTAL 1. VIDYYA JYOTHI TRUST 100,00,00 0.00 - 52,00,000 .00 - - - 152,00,00 0.00 4 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 4 2. GOLDFIELD SIKSHA SANSTHAN - 100,00,00 0.00 - - - - 100,00,00 0.00 3. SCHOOL OF HUMAN GENETICS & POPULATION HEALTH - - 50.00,000 .00 50,00,000 .00 - - 100,00,00 0.00 4. BATANAGAR EDUCATION & RESEARCH - - - 100,00,00 0.00 - - 100,00 ,000.00 5. SINGHVI CHARITABLE TRUST - 42,00,000 .00 52,00,000 .00 - - - 94,00,000 .00 6. AGARWAL PRAGATI TRUST - 20,00,000 .00 10,00,000 .00 45,00,000 .00 - - 75,00,000 .00 7. B.G.MEMORIAL TRUST - - - 50,00,000 .00 - - 50,00,000 .00 8. SANDIPANI CHARITABLE TRUST - - - 20,00,000 .00 20,00,000 .00 - 40,00,000 .00 9. SMT. KATORI DEVI GARG SIKSHA SAMITY - - 30,00,000 .00 - - - 30,00,000 .00 10. DINODIA EDUCATIONAL SOCIETY - - - 25,00,000 .00 - - 25,00,000 .00 11. DHOOT FOUNDATION - - - - 25,00,000 .00 - 25,00,000 .00 12. SOCIETY FOR WELFARE HANDICAP PERSONS - - - - 25,00,000 .00 - 25,00,000 .00 13. PUSHPA DEVI BANSAL CHARITABLE TRUST - - - - - 21,00,000 .00 21,00,000 .00 14. BALLARAM HANUMAN DAS CHARITABLE TRUST - - 20,00,000 .00 - - - 20,00,000 .00 15. BADHIT BAL VIKAS KENDRA - - - 4,00,000. 00 2,50,000. 00 - 6,50,000. 00 16,. ST.ANTHONY PUBLIC CHARITABLE TRUST - - - 3,00,000. 00 - - 3,00,000. 00 17. DHYANA MANDIRAM TRUST - - - - 1,00,000. 00 - 1,00,000. 00 TOTAL 100,00,00 0.00 162,00,00 0.00 214,00,00 00.00 297,00,00 0.00 73,50,000 .00 21,00,000 .00 867,50,00 0 Q.19. PLEASE STATE HOW DID YOU DECIDE TO MAKE SUCH DONATIONS TO VARIOUS TRUST/ ORGANIZATION. ANS. SIR, IT WAS A PREARRANGED ACCOMMODATION ENTRY IN FORM OF BOGUS DONATIONS. THE SAME WAS ARRANGED BY MR. PRADEEP KUMAR AGARWAL & MR. AJA Y AGARWAL, CA WHO IS ALSO AUDITOR OF MY GROUP CONCERN. SIR, DONATION WAS MADE BY QUADEYE SECURITIES PVT. LTD. 5 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 5 THROUGH CHEQUE/RTGS IN TURN THE ABOVE MENTIONED PER SONS RETURNED THE AMOUNT IN CASH AFTER DEDUCTING THEIR COMMISSION. Q.20. HOW DID YOU DECIDE TO MAKE DONATION TO THE AB OVE MENTIONED TRUST. ANS. SIR, AS I STATED ABOVE, TO GET EXEMPTION U/S. 35( 1) (II) AND DEDUCTION U/S 80G OF THE INCOME TAX ACT, 1961 THE BOGUS DONATION WAS MADE. Q.21. PLEASE STATE HAVE YOU VISITED THE OFFICE OF T HE TRUST? ANS. SIR, I NEVER VISITED THE OFFICE OF THE TRUST. THE TRUST TO WHOM DONATION WAS MADE WAS ARRANGED BY MR. PRADEEP KUMAR AGARWAL, CA AND MR. A JAY AGARWAL. Q.22. PLEASE STATE HAVE YOU PERSONALLY SEEN THEIR W ORK? IF, YES PROVIDE THE DETAILS. ANS. I NEVER SEEN THEIR WORK OR NEVER VISITED THEIR OFFICE. I HAVE ALREADY STATED IT WAS PREARRANGED BOGUS DONATION. Q.23. PLEASE STATE DO YOU KNOW ANY MEMBER/TRUSTEE O F TRUST? IF YES, HOW YOU CAME TO KNOW HIM AND PROVIDE THE OTHER DETAILS. ANS. SIR AS I SATED ABOVE THE DONATION WAS PREARRAN GED IN ORDER TO GET EXEMPTION U/S. 35( 1 )(II) AND 80G OF THE INCOME TAX ACT, 1961 IN LIEU OF SUCH ARRANGEMENT COMMISSION WAS PAID TO MR. PRADEEP KUMAR AGARWAL AND MR. AJAY AGAR WAL BOTH BEING CA. Q.24. PLEASE STATE HOW DID YOU GET THE REQUEST LETT ER FOR DONATION ? ANS. SIR, THE SAME WAS ARRANGED BY MR. PRADEEP KUMA R AGARWAL AND MR. AJAY AGARWAL. I DO NOT HAVE CONTACT WITH THE TRUST. Q.25. PLEASE STATE HAD YOU VERIFIED THE GENUINENESS , NATURE OF CHARITABLE ACTIVITY' OF TRUST/ ORGANISATION BEFORE MAKING DONATION? ANS. SIR, I HAVE NEVER VERIFIED THE GENUINENESS, NA TURE OF CHARITABLE ACTIVITY OF TRUST/ ORGANISATION. ACTUALLY IT WAS PREARRANGED BOGUS DON ATION BY QUADEYE SECURITIES PVT. LTD. & QUAEYE TRADING IN ORDER TO GET EXEMPTION U/S. 35( 1 )(II) AND 80G OF THE INCOME TAX ACT, 1961 DURING F.Y. 2009-10 TO 2014-15. Q.26. PLEASE STATE MODUS OPERANDI OF SUCH BOGUS DON ATION AND ALSO FURNISH NAME AND ADDRESS F BROKERS WHO HAS ARRANGED THE SAID BOGUS D ONATION. ANS. SIR, AS I STATED ABOVE, IT WAS A PREARRANGED B OGUS DONATION TO VARIOUS TRUSTS. ALL THIS WAS ARRANGED BY MR. PRADEEP AGARWAL, CA OF 1 BRITIS H INDIA STREET, ROOM NO.503, KOLKATA AND AJAY AGARWAL, CA OF P-1, METROPOLITAN C ITY, SALT LAKE, KOLKATA. IN CONNIVANCE WITH THESE TWO PERSONS I MADE DONATION T HROUGH RTGS/CHEQUES TO VARIOUS TRUST/ORGANISATION WHOSE NAMES WERE GIVEN BY THEM. FURTHER, THEY USED TO ARRANGE DONATION CERTIFICATION BY THE SAID TRUST WHICH WAS ENTITLED FOR EXEMPTION U/S 35( 1) (II) AND 6 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 6 DEDUCTION U/S 8OG OF THE INCOME TAX ACT, 1961 DURIN G F.Y. 2009-10 TO 2014- 15.THEREAFTER, AFTER DEDUCTING COMMISSION OF 20-25% OF DONATION AMOUNT IN RESPECT OF CERTIFICATE U/S 35( 1) (II) AND 10-15% IN RESPECT O F CERTIFICATE U/S SOG BALANCE AMOUNT IN CASH WAS HANDED OVER TO ME BY MR. PRADEEP KUMAR AGA RWAL & AJAY AGARWAL.' 9. THE C.I.T. ON THE BASIS OF THE AFORESAID STAT EMENT CAME TO THE CONCLUSION THAT THE ASSESEE HAD PUMPED IN UNACCOUNTED MONEY THROUGH BOG US CORPUS DONATION CLAIMED U/S 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 F IXED DEPOSITS AND ARRANGING INTEREST INCOME. THE RESPONDENET CIT(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 O BJECTS. THE RESPONDENT ACCORDINGLY CONCLUDED AS FOLLOWS :- 6.2. BASED ON THE FACTS AND CIRCUMSTANTIAL EVIDENC ES AS DISCUSSED IN PARA 1 TO 5, IT CAN BE INFORMED :- A)SOCIETY/TRUST HAS GROSSLY MISUSED THE PROVISION O F SECTION 12AA AND 80%(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 AVAI LABLE WITH TRUSTEE THROUGH CORPUS DONATION IS ILLEGAL, INGENUINE AND IMMORAL. D) DONATION RECEIVED IS NOT VOLUNTARY, MERELY AN AC COMMODATION ENTRY AND FICTITIOUS. THEREFORE, THE CLAIM OF EXEMPTION U/S.L L (1) [D) W AS NOT ABSOLUTELY ENABLE. E) ACTIVITIES OF THE SOCIETY ARE NOT GENUINE AS WEL L AS NOT BEING CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS. F) EVEN INGENUINE AND ILLEGAL ACTIVITIES CARRIED ON BY ASSESSSEE THOROUGH MONEY LAUNDERING DO NOT COME WITHIN THE CONCEPTUAL FRAMEW ORK OF CHARITY VIS-A-VIS ACTIVITY OF GENERAL PUBLIC UTILITY ENVISAGED THE INCOME TAX ACT AS LAID DOWN IN SECTION- 2( 15). G) THEY HAVE ALWAYS AVOIDED TO COME FORWARD TO FILE DETAILS OF DONATIONS, BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT. H) EVEN THEY DID NOT AVAIL CROSS-EXAMINATION AND WE RE WELL DETERMINED THAT THEY WILL NOT ATTEND ANY PROCEEDINGS. THEY FAILED TO PRO OF GENUINENESS OF TRANSACTIONS. I) LOOKING AT THE VOLUME AND DEPTH OF THE ILLEGAL A CTIVITIES PERFORMED AND INDULGED BY THE SOCIETY TO USE THE PROVISIONS OF THE I.T.ACT PROVID ING SUPPORT AND ENCOURAGEMENT TO THE 7 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 7 ORGANIZATIONS FOR DOING THE BENEVOLENT ACTIVITIES, ASSESSEE SOCIETY ONLY OPENED THE PANDORA'S BOX DEFYING THE SOLE BENEVOLENT PURPOSE O F THE PROVISIONS AS PER THE 1.T.ACT, BUT ALSO CHALLENGED THE CAUSE OF THE CONSTITUTIONAL PROVISIONS BY MAINTAINING CERTAIN WELL- NEEDED OBJECTIVES AS PER ACT AND PERFORMING THE REV ERSE IN REALITY. 7.' HENCE PROVISION OF SECTION 12AA(3) IS INVOKED A ND REGISTRATION GRANTED U/S. 12AA IS WIIHDRAWN AND CANCELLED W.E.F. 01.04.2011 FROM T HE STARTING OF THE FINANCIAL YEAR, THE YEAR IN WHICH THE SOCIETY WAS FOUND TO BE INVOLVED IN INGENUINE ACTIVITIES AND NOT CARRYING OUT ACTIVITIES OBJECT OF THE TRUSTS. AGGRIEVED BY THE ORDER OF THE RESPONDENT THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT U/S 12AA(3) OF THE ACT REGISTRATION ALREADY GRANTED U/S 12A OF THE ACT CAN BE CANCELLED ONLY ON THE GROUND THAT THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. ACCORDING TO HIM MERE ALLEGAT ION THAT THE ASSESSEE WAS RECEIVING BOGUS DONATIONS CANNOT BE THE BASIS TO CANCEL THE R EGISTRATION U/S 12AA(3) OF THE ACT. HE DREW OUR ATTENTION TO QUESTION NO.26 OF THE DEPO NENTS OF SHRI DINESH KUMAR AGRAWAL, DIRECTOR OF M/S. QUADEYE SECURITIES PRIVAT E LIMITED AND SUBMITTED THAT ACCORDING TO THE ANSWER ONE MR.PRADIP AGARWAL, CA A ND SHRI AJAY AGARWAL, CA HAD ARRANGED BOGUS DONATIONS TO VARIOUS TRUST. ACCORDIN G TO HIM THE REVENUE HAS NOT CHOSEN TO EXAMINE THE PERSONS WHO WERE STATED TO HAVE ARRA NGED BOGUS DONATIONS AND THEREFORE THE STATEMENT OF SHRI DINESH KUMAR AGRAWAL IS NOT C ORROBORATED BY ANY EXTRINSIC EVIDENCES. HE POINTED OUT THAT IN THE ASSESSMENT CO MPLETED U/S 143(3) OF THE ACT FOR A.Y.2012-13 THE AO HAS NOT DRAWN ANY ADVERSE INFERE NCE IN SO FAR AS THIS DONATION RECEIVED FROM M/S.QUADEYE SECURITIES PRIVATE LIMITE D. THE LD. COUNSEL DREW OUR ATTENTION TO THE DECISION OF THE ITAT, LUCKNOW BENC H IN THE CASE OF M/S. FATEH CHAND CHARITABLE TRUST VS CIT(EXEMPTIONS) VIDE ITA NO.792 /LKW/2015 ORDER DATED 18.03.2016 WHEREIN ON IDENTICAL FACTS THE TRIBUNAL HELD THAT CANCELLATION OF REGISTRATION U/S 12AA(3) OF THE ACT WAS NOT VALID. HE BROUGHT TO OUR NOTICE THE FACTS IN THE AFORESAID CASE WHICH WERE AS FOLLOWS :- ON THE BASIS OF THE REPORT OF THE ID. COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOLKATA VIDE LETTER DATED 28.10.2015, IN WHICH IT WAS MENTI ONED THAT BOGUS DONATIONS WERE 8 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 8 RECEIVED IN LIEU OF CASH BY THE ASSESSEE FROM M/S HERBICURE HEALTH CARE BIO HERBAL RESEARCH FOUNDATION OF KOLKATA IN ASSESSMENT YEAR 2 011-12 AND HAVING RELIED UPON THE STATEMENT OF SHRI. SWAPAN RANJAN DAS GUPTA, THE FOU NDER DIRECTOR OF M/S HERBICURE HEALTH CARE BIO HERBAL RESEARCH FOUNDATION, THE LD. COMMISSIONER OF INCOME TAX (EXEMPTIONS) ISSUED SHOWN CAUSE NOTICE FOR CANCELLA TION OF REGISTRATION UNDER SECTION 12AA(3) OF THE ACT. 11. THE TRIBUNAL WHILE QUASHING THE ORDER U/S 12AA (3) OF THE ACT HELD AS FOLLOWS :- BUT IN THE INSTANT CASE ID. COMMISSIONER OF INCOME TAX (EXEMPTIONS) HAS SIMPLY RECEIVED INFORMATION FROM THE ID. COMMISSIONER OF I NCOME TAX (EXEMPTIONS), KOLKATA THAT M/S HERBICURE HEALTH CARE BIO HERBAL RESEARCH FOUNDATION WAS ENGAGED IN GIVING DONATIONS ON RECEIPT OF CASH THROUGH BROKERS, BUT N OWHERE IT HAS BEEN STATED THAT M/S HERBICURE HEALTH CARE BIO HERBAL RESEARCH FOUNDATIO N HAS PAID DONATION TO THE ASSESSEE ON RECEIPT OF CASH OF THE EQUAL AMOUNT THR OUGH BROKERS. SIMILAR STATEMENT OF SHRI.SWAPAN RANJAN DAS GUPTA WAS ALSO MADE, BUT IN THAT STATEMENT ALSO THERE WAS NO REFERENCE OF THE ASSESSEE. THE ID. COMMISSIONER OF INCOME TAX (EXEMPTIONS) HAS SIMPLY SHOWN THIS INFORMATION TO THE ASSESSEE ON 27.11.201 5, BUT DID NOT OFFER ANY FURTHER OPPORTUNITY TO MAKE HIS COMMENTS IN THIS REGARD. TH E ASSESSEE HAS EMPHATICALLY DENIED THE CHARGES LEVELED AGAINST IT IN ITS REPLY FILED O N 27.11.2015 THAT IF THE ID. COMMISSIONER OF INCOME TAX (EXEMPTIONS) HAS RECEIVED ANY AUTHENT IC MATERIAL IN THIS REGARD, THE SAME MAY BE PROVIDED TO THE ASSESSEE SO THAT THE ASSESSE E CAN MAKE A PROPER REPLY. BUT WITHOUT AFFORDING ANY FURTHER OPPORTUNITY TO THE ASSESSEE, THE ID. COMMISSIONER OF INCOME TAX HAS PASSED AN ORDER OF CANCELLATION ON THE VERY SAME DA Y. 15. IT IS SETTLED POSITION OF LAW THAT ANY EVIDENC E COLLECTED AT THE BACK OF THE ASSESSEE CANNOT BE USED ADVERSELY UNLESS AND UNTIL IT IS CON FRONTED TO THE ASSESSEE AND THE ASSESSEE IS ALLOWED TO CROSS- EXAMINE THE WITNESS, IF ANY. 12. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S.ISLAMIC ACADEMY OF EDUCA TION IN ITA NO.805/2008 ORDER DATED 9 TH SEPTEMBER, 2014. IN THE AFORESAID CASE THE FACTS W ERE THAT A SEARCH WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF THE 3 OF T HE TRUSTEES OF A CHARITABLE INSTITUTION. IN THE COURSE OF SUCH SEARCH EVIDENCE WAS FOUND REG ARDING COLLECTION OF FEES FOR ADMISSION MUCH HIGHER THAN RECORDED IN THE BOOKS OF ACCOUNTS OF THE INSTITUTION. ON THE BASIS OF THE AFORESAID FINDING REGISTRATION U/S 12A A(3) OF THE ACT WAS CANCELLED. THE TRIBUNAL HAD SET ASIDE THE ORDER U/S 12AA(3) OF THE ACT AND ON FURTHER APPEAL BY THE REVENUE THE HONBLE KARNATAKA HIGH COURT HAS HELD A S FOLLOWS :- 8. IN THE INSTANT CASE, THE MATERIAL ON RECORD SHO WS THAT THE TRUST HAS ESTABLISHED EDUCATIONAL INSTITUTION AND IMPARTING MEDICAL EDUCA TION. EVERY YEAR, STUDENTS ARE 9 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 9 ADMITTED. HUGE INVESTMENT IS MADE FOR CONSTRUCTION OF BUILDINGS FOR HOUSING THE COLLEGE, HOSTEL AND TO PROVIDE OTHER FACILITIES TO THE STUDE NTS WHO ARE STUDYING IN THE COLLEGE. THE COLLEGE IS RECOGNIZED BY THE MEDICAL COUNCIL OF IND IA, 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 Y EAR. STUDENTS ARE STUDYING IN ALL COURSES. THUS THE OBJECT OF THE CONSTITUTION OF THE TRUST NAMELY IMPARTING OF EDUCATION IS GOING ON UNINTERRUPTEDLY. THEREFORE, IT CANNOT BE S AID THAT THE ACTIVITIES OF THE TRUST ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE TRUST. WHEN THE AFORESAID TWO CONDITIONS ARE FULLY SATISFIED, ON THE GROUND THAT THE TRUSTEES ARE MISAPPROPRIATING THE FUNDS OF THE TRUST THE REGISTRATION OF THE TRUST C ANNOT BE CANCELLED. IF THE TRUSTEES ARE MISAPPROPRIATING THE FUNDS, IF THEY ARE MAINTAINING FALSE ACCOUNTS, IT IS OPEN TO THE AUTHORITIES TO DENY THE BENEFIT UNDER SECTION 11 O F THE INCOME TAX ACT, BUT THAT IS NOT A GROUND FOR CANCELATION OF REGISTRATION ITSELF. THA T IS PRECISELY WHAT THE TRIBUNAL HAS HELD. THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS ANSWE RED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THEREFORE IS MO MERIT IN THIS APPEAL. 13. THE LD. COUNSEL DREW OUR ATTENTION TO THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. QUEENS EDUCATIONAL SOCIETY VS CIT IN CIVIL NO.5167 OF 2008 ORDER DATED 16.03.2015 WHEREIN THE HONBLE SUPREME COURT TOOK A VIEW THAT SO LONG AS THE FUNDS WERE APPLIED FOR CHARITABLE PURPOSE EXEMPTION CANNOT BE DENIED TO A TRUST. THE LD. COUNSEL FURTHER SUBMITTED THAT AT BEST THE DONATION IN QUESTION COULD BE TREATED AS ANONYMOUS DONATION U/S 115BBC OF THE ACT BUT REGIS TRATION U/S 12AA(3) OF THE ACT CANNOT BE CANCELLED. 14. THE LD. DR SUBMITTED THAT ACCEPTING BOGUS D ONATIONS WOULD BE CLEARLY A CASE WHERE THE ACTIVITIES OF THE TRUST COULD SAID TO BE THAT OF MONEY LAUNDERING AND DOING SO WOULD ONLY MEAN THAT THE ACTIVITIES OF THE TRUST AR E NOT GENUINE OR ARE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST AND THEREF ORE THERE IS EVERY JUSTIFICATION FOR CANCELLATION OF THE REGISTRATION. WITH REGARD TO TH E COMPLAINT OF LACK OF OPPORTUNITY OF CROSS EXAMINATION, THE LD. DR SUBMITTED THAT THE AS SESSEE DID NOT APPEAR BEFORE THE RESPONDENT DESPITE SEVERAL DIRECTIONS AND UNLESS TH E ASSESSEE APPEARS AND COMPLIES WITH THE DIRECTION OF THE RESPONDENT IT WAS NOT POSSIBLE FOR THE RESPONDENT TO GIVE OPPORTUNITY FOR CROSS EXAMINATION. IT WAS ARGUED BY HIM THAT TH E CONDUCT OF THE ASSESSEE IN AVOIDING APPEARANCE BEFORE THE RESPONDENT CLEARLY JUSTIFIES CANCELLATION OF REGISTRATION. 10 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 10 15. WITH REGARD TO THE ACTIVITIES OF THE TRUST NO T BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST, THE LD.DR BROUGHT TO OUR NOTICE THE FACT THAT THE ASSESSMENT WAS COMPLETED FOR A.Y.2012-13 IN THE CASE OF THE ASSESS EE BY THE AO BY ORDER DATED 25.03.2015 PASSED U/S 143(3) OF THE ACT. AT THAT T IME THE AO HAD NO OPPORTUNITY TO GO INTO THIS QUESTION REGARDING ACTIVITIES OF THE TRUS T BEING GENUINE OR NOT AS SURVEY U/S 133A OF THE ACT IN THE CASE OF M/S. QUADEYE SECURIT IES PVT. LTD TOOK PLACE MUCH LATER I.E. ON 04.12.2015. HE POINTED OUT THAT EVEN IN TH E SAID ORDER THE ASSESSEE WAS NOT GRANTED EXEMPTION U/S 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. QUA DEYE SECURITIES PVT. LTD IT APPEARS THAT THERE IS PRIMA FACIE GROUND TO BELIEVE THAT THE DONATION OF RS.50,00,000/- GIVEN BY M/S. QUADEYE SECURITIES PVT. LTD WAS NOT GENUINE. BASED ON THIS STATEMENT ALONE IT CANNOT BE CONCLUSIVE SAID THAT THE DONATIO N IN QUESTION WAS BOGUS. WHEN THE STATEMENT OF SHRI DINESH KUMAR AGARWAL WAS CONFRONT ED TO THE ASSESSEE AND WHEN THE ASSESSEE WAS ASKED TO APPEAR BEFORE THE RESPONDENT, THE ASSESEE CHOSE TO AVOID APPEARING BEFORE THE RESPONDENT. THIS CONDUCT OF TH E ASSESSEE WAS NOT JUSTIFIED. IT IS NO DOUBT TRUE THAT THE STATEMENT OF SHRI DINESH KUMAR AGARWAL WITHOUT BEING SUBJECTED TO CROSS EXAMINATION BY THE ASESSEE AND FURTHER CORROB ORATED BY EVIDENCE OF THE PERSONS WHO ARE STATED TO HAVE ARRANGED FOR BOGUS GIFTS CAN NOT BE BELIEVED IN TOTO. NEVERTHELESS THE FACT REMAINS THAT THERE ARE GROUNDS TO BELIEVE THAT THE DONATIONS RECEIVED BY THE ASSESSEE HAD TO BE DECIDED WITH REGARD TO IS GENUIN ENESS. 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 T HE ASSESSEE CANNOT BE THE BASIS TO QUASH THE ORDER U/S 12AA(3) OF THE ACT. AS RIGHTLY CONTENDED BY THE LD. DR IF IT IS FOUND THAT THE ASSESSEE WAS ACCEPTING BOGUS DONATIONS, TH EN THAT FACT CAN ONLY LEAD TO AN INFERENCE THAT THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR ARE NOT CARRIED OUT IN 11 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 11 ACCORDANCE WITH THE OBJECTS OF THE TRUST. WE THEREF ORE 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 RESPON DENT FOR FRESH CONSIDERATION. 17. THE ASSESSEE WILL PRESENT HIMSELF BEFORE THE R ESPONDENT AND IF THE RESPONDENT DESIRES HE IS AT LIBERTY TO ISSUE SUMMONS U/S.131 O F THE ACT. IF AFTER SUCH INQUIRY BY THE RESPONDENT AND IF THE RESPONDENT SO DESIRES PROCEED FURTHER U/S.12AA(3) OF THE ACT, HE SHALL AFFORD THE RIGHT OF CROSS EXAMINATION OF SHRI DINESH KUMAR AGRAWAL. IF THE RESPONDENT SO DESIRES HE SHALL ALSO EXAMINE SHRI PR ADIP AGARWAL AND SHRI AJAY AGARWAL AND AFFORD RIGHT OF CROSS EXAMINATION TO THE ASSESS EE. IF THE RESPONDENT AFTER SUCH EXERCISE STILL DESIRES TO CANCEL THE REGISTRATION T HEN HE SHALL AFFORD OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND DECIDE THE ISSUE IN ACC ORDANCE WITH LAW. FOR STATISTICAL PURPOSES THE APPEAL OF THE ASSESSEE IS TREATED AS A LLOWED. THE CASE LAWS CITED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US ARE NOT CONSIDER ED AT THIS STAGE AS IN OUR OPINION THE TRUTH OR OTHERWISE OF THE STATEMENT OF SHRI DINESH KUMAR AGRAWAL IS VERY MATERIAL FOR ASCERTAINING THE TRUE POSITION WITH REGARD TO THE G ENUINENESS OF THE DONATION/GIFT. EVEN OTHERWISE THE FACTS OF THE CASE OF THE ASSESSEE AND THAT OF THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABL E. IN THE CASE OF FATECHAND CHARITABLE TRUST (SUPRA), IN THE STATEMENT RECORDED OF THE DONOR THE NAME OF THAT ASSESSEE WAS NOT MENTIONED AS A PERSON TO WHOM BOGU S DONATIONS WERE GIVEN, WHEREAS IN THE PRESENT CASE THE DIRECTOR OF QUDEYES SECURTI ES PVT.LTD., IN HIS STATEMENT HAS CLEARLY MENTIONED THE NAME OF THE ASSESSEE AS A REC IPIENT OF BOGUS DONATIONS IN LIEU OF CASH. THE DECISION IN THE CASE OF ISALMIC 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 CHAR ITABLE ACTIVITIES. IN THE PRESENT CASE, THE FACTS ARE THAT THERE ARE ALLEGATIONS AGAINST TH E TRUST THAT IT WAS RECEIVING BOGUS GIFTS IN LIEU OF CASH. THE DECISION RENDERED IN THE CASE OF QUEENS EDUCATIONAL SOCIETY IS ON THE QUESTION OF APPLICATION OF THE TEST OF PREDOMIN ANT NATURE OF THE OBJECTS OF THE TRUST 12 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 12 WHICH SHOULD BE DECISIVE IN GRANTING EXEMPTION U/S. 10(23C) OF THE ACT AND THEREFORE OF NO ASSISTANCE TO THE FACTS OF THE PRESENT CASE. TH E DECISION RENDERED IN THE CASE OF M/S.SOORYA EDUCATIONAL TRUST VS. ITO ITA NO.579/MS. /2012 BY THE ITAT CHENNAI BENCH WAS A CASE WHERE THE QUESTION WAS WHETHER THE DENIAL OF EXEMPTION U/S.11 OF THE ACT ON THE GROUND THAT THE ASSESSEE WAS ENGAGED IN ACTIVITIES OF COMMERCIAL NATURE WAS CORRECT. THE PARAMETERS FOR DECIDING SUCH CASES WO ULD BE DIFFERENT FROM THE PRESENT CASE. SO ALSO IS THE DECISION OF THE ITAT CHANDIGA RH BENCH RENDERED IN THE CASE OF ITO VS. VIKAS EDUCATION SOCIEITY ITA NO.884/CHD/2010. 18. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE CO URT ON 20.05.2016. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20.05.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. DR.B.G.MEMORIAL TRUST, 6/1, SARAT CHATTERJEE AVENUE, KOLKATA-700029. 2. C.I.T.(EXEMPTION) KOLKATA. 3. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 13 ITA NO.366/KOL/2016 M/S.DR.B.G.MEMORIAL TRUST. 13