Khaitan Foundation, Kolkata V. CIT(Exemption) Kolkata, Kolkata

ITA 9/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1748 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IS FILED AGAINST
• Keywords: Charitable institution; Principle of natural justice
• Section: 133A; 12A; 12AA; 131

Judgement Text

ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A B ENCH KOLKATA BEFORE : SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBE R I.T.A. NO. 09/KOL/2017 KHAITAN FOUNDATION P-38 INDIA EXCHANGE PLACE 3 RD FLOOR, KOLKATA-700001. PAN: AAATK 6308 F . APPELLANT -VS- CIT(E), KOLKATA. 10B, MIDDLETON ROW, 6 TH FLOOR KOLKATA-700071 . RESPONDENT APPEARANCES BY: FOR APPELLANT ASSESSEE: SHRI SUNIL SURANA, FCA FOR RESPONDENT REVENUE: SHRI G. HANGSHING, CIT DR DATE OF HEARING : 25-10- 2017 DATE OF PRONOUNCEMENT : 19-01-2018 SHRI. S.S.VISWANETHRA RAVI, JM: 1. THIS APPEAL BY THE ASSESSEE IS FILED AGAINST THE OR DER DATED 23.12.2016 PASSED BY THE LD. CIT(EXEMPTION) U/S 12A A(D) OF THE INCOME TAX ACT, 1961(THE ACT). ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 2 2. THE ONLY ISSUE TO BE DECIDED IS WHETHER THE LD. CIT(E) IS JUSTIFIED IN CANCELLING THE REGISTRATION GRANTED U/S 12AA OF THE ACT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A TRUST REGISTERED U/S 12A OF THE ACT VIDE ORDER DATED 14.0 5.1997. THE INCOME TAX DEPARTMENT CONDUCTED A SURVEY OPERATION ON 11.09.2015 ON M/S GOVIND RAM GOEL CHARITABLE TRUST U/S 133A OF THE ACT. DURING THE COURSE OF SURVEY OPERATION THE REVENUE ALLEGEDL Y FOUND THAT THE SAID TRUST HAS INDULGED IN MONEY LAUNDERING AND PRO VIDING ACCOMMODATION ENTRY TO DIFFERENT INDIVIDUALS AND OR GANIZATIONS. 4. ON PERUSAL OF THE RECORDS OF THE ASSESSEE RELAT ING TO FY:2013- 14, THE RESPONDENT FOUND THE ASSESSEE PAID BOGUS DO NATIONS AMOUNTING TO RS. 7,00,000/- TO M/S GOVIND RAM GOEL CHARITABLE TRUST. ACCORDING TO THE RESPONDENT, THE MANAGING TRUSTEE I .E. SHRI ANAND AGARWAL IN HIS STATEMENT RECORDED U/S 131 OF THE AC T ACCEPTED THE SAME I.E THAT HE HAD GIVEN A PRE-ARRANGED ACCOMMODA TION ENTRY IN THE FORM OF BOGUS CORPUS DONATION AND ADMITTED THAT THE Y PAID CASH TO ACCOMMODATION ENTRY OPERATORS AND THEY RECEIVED THE SAME AMOUNT BUT BY CHEQUE THROUGH A WEB OF FINANCIAL TRANSACTIO NS. THE RESPONDENT BASING ON SUCH STATEMENT FORMED AN OPINION THAT THE ASSESSEE HAS INDULGED IN MONEY LAUNDERING WHICH IS ILLEGAL. AS T HE SAID ACTIVITY IS NOT GENUINE AND NOT IN CONSONANCE WITH THE OBJECTIVES OF THE TRUST, THE ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 3 CIT(E) WANTED TO CANCEL THE REGISTRATION GRANTED TO THE TRUST U/S 12A OF THE ACT. 5. ACCORDINGLY, THE RESPONDENT ISSUED A SHOW CAUSE NOTICE DATED 03.12.2015 TO THE ASSESSEE SEEKING EXPLANATION AS T O WHY THE REGISTRATION GRANTED U/S 12A SHOULD NOT BE CANCELLE D. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE THE ASSESSEE FILED WRITT EN SUBMISSIONS DATED 07.01.2016, 29.01.2016, 13.04.2016, 27.04.201 6 AND 22.11.2016 STATING THE STATEMENT MADE BY THE THIRD PARTY DURING THE COURSE OF SURVEY OPERATION IS NOT BINDING ON THE AS SESSEE AND THE PROCEEDINGS INITIATED IN PURSUANCE OF WHICH IS NOT TENABLE AND PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF S. KHADER KHAN & SONS REPORTED IN 352 ITR 480. THE SAI D SUBMISSIONS OF THE ASSESSEE WAS FOUND NOT ACCEPTABLE TO THE RESPON DENT AND HELD THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT GENUINE AND NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTIVES OF TH E TRUST. THE CIT(A) CANCELLED THE REGISTRATION GRANTED U/S 12A OF THE A CT WITH EFFECT FROM 01.04.2013 BY HOLDING AS FOLLOWS: THE SUBMISSION OF THE TRUSTEE WAS CAREFULLY PERUSE D BUT NOT FOUND TO BE TENABLE . THE UNDERLYING PRINCIPLE IS THAT FOR MONEY LAUNDERING, THE BENEFICIARY HAS TO ROUTE HIS CHEQUE/RTGS TO VARIOUS LAYERS THROUGH A CONSORTED W EB OF FINANCIAL TRANSACTIONS AND AFTER PAYMENT OF COMMISSION, GETS BACK HIS MONEY IN CASH. THE MODUS OPERANDI OF THIS TYPE OF MONEY LAUNDERING CAN BE BEST UNDERSTOOD BY PICTORI AL REPRESENTATION AS DEPICTED AS FOLLOWS : ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 4 THE AR OF THE SOCIETY ALSO REQUESTED FOR CROSS EXAM INATION OF SHRI ANAND AGARWAL, MANAGING TRUSTEE OF M/S GOVIND RAM GOEL CHARITABLE TRUST. KI ND REFERENCE MAY BE MADE TO THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GT C INDUSTRIES VS. ASSISTANT COMMISSIONER OF INCOME TAX (1998) 60 TTJ (MUM) 308] WHEREIN THE HONBLE HIGH COURT HAS MADE SOME OBSERVATIONS, EXCERPTS OF WHICH ARE AS HEREIN UNDER : IN OUR OPINION, RIGHT TO CROSS-EXAMINE THE WITNESS WHO MADE ADVERSE REPORT, IS NOT AN INVARIABLE ATTRIBUTE OF THE REQUIREMENT OF T HE DICTUM, AUDI ALTERAM PARTEM. THE PRINCIPLES OF NATURAL JUSTICE DO NOT REQUIRE FO RMAL CROSS-EXAMINATION. FORMAL CROSS-EXAMINATION IS A PART OF PROCEDURAL JUSTICE. IT IS GOVERNED BY THE RULES OF EVIDENCE, AND IS THE CREATION OF COURT. IT IS PART OF LEGAL AND STATUTORY JUSTICE, AND NOT A PART OF NATURAL JUSTICE, THEREFORE, IT CANNOT BE LAID DOWN AS GENERAL PROPOSITION OF LAW THAT THE REVENUE CANNOT RELY ON ANY EVIDENCE WHICH HAS NOT BEEN SUBJECTED TO CROSS-EXAMINATION. THE VIEW OF HONBLE CALCUTTTA HIGH COURT IN THE CAS E OF MANINDRA NATH CHATTERJEE VS. COLLECTOR OF CENTRAL EXCISE & ANOTHER (SUPRA) IS W HETHER IN A PARTICULAR CASE THE PARTICULAR PARTY SHOULD HAVE THE RIGHT TO CROSS-EXAMINE OR NOT DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF A PARTICULAR CASE. THIS IS SO, BEC AUSE THE RIGHT TO CROSS-EXAMINE IS NOT NECESSARILY A PART OF REASONABLE OPPORTUNITY. SIMILAR JUDGMENTS WERE ALSO PRONOUNCED BY THE HONB LE KERALA HIGH COURT IN THE CASE OF M.K. THOMAS VS. STATE OF KERALA [40 S.T.C. 278] IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K.T.SHADULI VS. STATE OF KERAL A [39 S.T.C. 478 S.C.]. ALL THESE JUDGMENTS/DECISIONS LEAD TO ONE CONCLUSIO N THAT RIGHT TO CROSS-EXAMINE THE WITNESS, WHO MADE ADVERSE REPORTS, IS NOT AN INVARI ABLE ATTRIBUTE OF THE REQUIREMENT OF THE DICTUM,AUDI ALTERANT PARTEM. IT IS PERTINENT TO MENTION HERE THAT THE CASE LAW M ENTIONED BY THE ASSESSEE TRUST IN THE CASE OF S KHADER KHAN & SONS IS NOT APPLICABLE IN THIS C ASE. INDULGING IN INGENUINE ACTIVITIES WHICH IS NOT AT P AR WITH THE TRUST DEED LEADS TO THE ULTIMATE CONCLUSION THAT THE SOCIETY IS IN THE ACT OF MONEY LAUNDERING WHICH IS ILLEGAL, NOT GENUINE AND NOT AT PAR WITH THE OBJECTIVES OF THE TRUST. ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 5 THE PROVISION OF SECTION 12AA(3) OF THE I.T.ACT, 19 61 IS AS FOLLOWS: WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED R EGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) [OR HAS OBTAINED REGISTRATION AT AN Y TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NON.2) A CT, 1996 (33 OF 1996)] AND SUBSEQUENTLY THE [PRINCIPAL COMMISSIONER OR] COMMI SSIONER OF IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GEN UINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATIO N OF SUCH TRUST OR INSTITUTION. CONSIDERING THE ACTIVITIES OF THE ASSESSEE NOT GENU INE AND ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTIVES OF THE TRUST, THE RE GISTRATION U/S 12A OF THE INCOME TAX ACT, 1961 VIDE ORDER NO. DIT(E)/T-17/8E/175/96-97 DATED 14.05.1997 IS HEREBY CANCELLED U/S 12AA(3) OF THE I.T.ACT, 1961 W.E.F. 01.04.2013 I.E. F.Y 2013-14 RELEVANT TO A.Y 2014-15, AS THE VIOLATION TOOK PLACE IN THE F.Y. 2013-14. 6. AGGRIEVED THE ASSESSEE BEFORE US CHALLENGING THE ORDER OF RESPONDENT. THE LD. AR SUBMITS THE REGISTRATION U/S 12A OF THE ACT WAS CANCELLED BY THE RESPONDENT ONLY ON THE BASIS O F THE STATEMENT RECORDED BY THE RESPONDENT FROM A THIRD PARTY. THE SAID STATEMENT RECORDED IN SURVEY PROCEEDINGS CANNOT BE RELIED UPO N TO CANCEL THE REGISTRATION OF THE ASSESSEE AND THE SAME SUBMISSIO NS WERE MADE BEFORE THE RESPONDENT IN RESPONSE TO THE SHOW CAUSE NOTICE AND PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF S.KHADER KHAN & SONS FOR THE PROPOSITION THAT THE S TATEMENT OF A THIRD PARTY RECORDED IN THE SURVEY PROCEEDINGS IS NOT BIN DING ON THE ASSESSEE AND WITHOUT CONSIDERING THE SAME THE CIT-E ARBITRARILY PASSED THE IMPUGNED ORDER. THE SAID STATEMENT OF TH E THIRD PARTY RECORDED U/S 133(1) OF THE ACT WAS RETRACTED THEREA FTER AND HENCE NO DECISION CAN BE BASED ON SUCH RETRACTED STATEMENT. EVEN OTHERWISE NOWHERE THE SAID STATEMENT IT WAS STATED BY THE THI RD PARTY THE ASSESSEE HAS GIVEN CASH OR TAKEN MONIES FROM I.E. G OVIND RAM GOEL CHARITABLE TRUST. HE SUBMITTED THAT THE CIT(E) HAS CANCELLED THE REGISTRATION BY MAKING GENERAL ALLEGATION WITHOUT A NY EVIDENCE AGAINST ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 6 THE ASSESSEE. NO OPPORTUNITY TO CROSS EXAMINE THE W ITNESS. THE LD. AR SUBMITS THAT THE RESPONDENT HAS NO POWER INVOKE THE JURISDICTION UNDER SUB-SECTION (3) OF SECTION 12A OF THE ACT AS THERE WAS NO ADVERSE FINDING GIVEN BY THE RESPONDENT THAT THE AC TIVITIES OF THE ASSESSEE ARE INGENUINE OR THAT THE ACTIVITIES OF T HE ASSESSEE WERE NOT CONDUCTED IN ACCORDANCE WITH THE OBJECTIVES OF THE TRUST. THUS, HE SUBMITTED THAT THE REQUIREMENTS OF SECTION 12AA(3) ARE NOT SATISFIED. THE LD. AR PRAYED TO ALLOW THE GROUNDS OF APPEAL. 7. THE LD. DR RELIED ON THE ORDER OF THE RESPONDEN T. 8. HEARD BOTH AND PERUSED THE MATERIALS AVAILABLE O N RECORD. IN OUR OPINION, THE RESPONDENT TO INVOICE ITS POWERS U/S 12AA OF THE ACT HAS TO SATISFY THAT THE ACTIVITIES OF SUCH TRUST OR INS TITUTION, ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THE RESPONDENT IS EMPOWERED TO EXAM INE ALL THE DETAILS OF THE TRUST OR INSTITUTION WHICH HAS GOT REGISTRAT ION U/S 12A IN TERMS OF EXERCISING ITS POWER UNDER SUB-SECTION 3 OF SECTION 12AA OF THE ACT AND HAVING DONE SO, WE FIND THAT NO ADVERSE FINDING IS MADE BY THE RESPONDENT REGARDING THE ACTIVITIES OF THE ASSESSEE ARE NOT IN ACCORDANCE WITH THE OBJECTS AND ITS ACTIVITIES OR T HAT THEY ARE NOT GENUINE. THEREFORE, IN OUR OPINION, EXERCISING JURI SDICTION UNDER SUB- SECTION 3 OF SECTION 12AA OF THE ACT IN CANCELLING THE REGISTRATION BY THE RESPONDENT IS NOT MAINTAINABLE AND THUS, IT IS SET ASIDE. EVEN ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 7 OTHERWISE, RELIANCE CANNOT BE PLACED ON RETRACTED S TATEMENT OF A WITNESS WITHOUT GIVING AN OPPORTUNITY TO THE ASSESS EE TO CROSS EXAMINE THE WITNESS. THE NAME OF THE ASSESSEE IS NO T MENTIONED IN THIS STATEMENT. THERE IS NO EVIDENCE TO CORROBORATE THIS STATEMENT. OTHER THAN THIS STATEMENT THERE IS NO OTHER EVIDENC E WITH THE LD. CIT(E). HENCE THE CANCELLATION OF THE REGISTRATION IS BAD IN LAW. GROUND NOS 1 TO 4 RAISED BY ASSESSEE IN THIS REGARD SUCCE EDS AND ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19- 01-2018. SD/- SD/- J.SUDHAKAR REDDY S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 19-01-2018 SB,SR. PS COPIES TO : (1) APPELLANT/DEPARTMENT: KHAITAN FOUNDATION (2) RESPONDENT/ASSESSEE: CIT(E), KOLKATA (3)COMMISSIONER OF INCOME-TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SR.PS/H.O.O ITAT, KOLKATA ITA NO. 09/KOL/2017 KHAITAN FOUNDATION 8