Case Law Details
Jainarayan Hariram Goel Charitable Trust Vs CIT (Exemption) (ITAT Raipur)
We find prima facie merit in the various pleas advanced on behalf of the assessee as narrated above. It is a settled principle of law that the onus lies on the person who alleges untruthfulness against the other persons. In the instant case, the allegation has been made on behalf of the Revenue for adversial conduct of the assessee. It is thus the duty of the Revenue to comply with the sacrosanct principles of natural justice and grant opportunity to the assessee for rebuttal of evidences in possession of the Revenue. The registration already granted cannot be withdrawn arbitrarily and in a light hearted manner giving retrospective effect. All pleas noted above and other arguments and position of law that were canvassed on behalf of the assessee requires proper appraisal and disposal thereof in an objective manner. The order of the CIT(E) requires to deal with various pleas of the assessee raised to defend the registration granted. The doctrine of legitimate expectations demands that the assessee should be made privy to the tangible evidences in corroboration of statement sought to be relied upon. Similarly, the cross examination of deponent’s statement is incumbent to prevent miscarriage of justice.
As told in the open Court, the re-registration application of the assessee has been accepted by the Revenue recently and registration has been granted from a prospective date. All these facts require proper consideration. The CIT(E) while cancelling the registration appears to have wrongfully placed the onus of proving bonafides of donations on the assessee without showing reasons/evidence for drawing adverse conclusion on a registered trust.
The imperatives of basic procedure have not been adhered while resorting to drastic action of cancellation. We accordingly set aside the impugned cancellation order and restore the issue back to the file of the CIT(E)/competent authority to pass a speaking order in this regard after making objective analysis of the facts and circumstances of the case in its entirety and in accordance with law. Needless to say, the assessee shall be provided proper opportunity of being heard to meet out a fair treatment to the assessee trust.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (E), Bhopal [‘CIT(E)’ in short] dated 28.12.2018.
2. As per grounds of appeal, the assessee has essentially challenged the withdrawal of registration under s.12AA of the Act granted to the assessee earlier and consequent denial of benefits accruing from such registration.
3. Briefly stated, the assessee is a public trust engaged in running of school under the name and style of N H Goyal World School at Raipur. The main source of income of assessee trust is receipts from admissions fees, tuition fees, hostel fees, fooding fees and transportation fees which is claimed to be applied on aims and objects of the trusts in revenue and capital account. The registration under s.12AA(1)(b) of the Act was granted to the assessee on 07.11.2007 to enable the assessee to avail the concessions and tax benefits available to charitable trust. However, a show cause notice under s.12AA(3) of the Act dated 13.06.2018 was issued to the assessee seeking to withdraw the registration so granted in the light of the assessment order passed by the AO under s.143(3) r.w.s. 147 of the Act dated 28.12.2017 concerning A.Y. 2011-12 and consequent report of the AO to the CIT(E).
3.1 As per the show cause notice, the CIT(E) alleged receipts of ingenuine donation from Herbicure Healthcare Bioherbal Research Foundation (HHBRF) and Sethi Trust aggregating to Rs.70 Lakhs. Accordingly, the status of the assessee as trust was sought to be revoked to deny the benefits under s.11 of the Act by cancellation of registration of trust granted under s.12AA of the Act.
3.2 Not satisfied with the written and oral submissions made on behalf of the assessee in its defense, the CIT(E) passed an order under s.12AA(3) of the Act whereby it was concluded that the activity of the assessee is not genuine and consequently, the registration granted under s.12AA of the Act to the trust was withdrawn and cancelled w.e.f. 01.04.2010 i.e. from the starting of the financial year in which the irregularities were alleged to have been committed by the trust as pointed out by the AO.
4. Aggrieved, the assessee preferred appeal before the Tribunal.
5. When the matter was called for hearing, the learned counsel for the assessee pointed out that the whole basis of cancellation of registration granted under s.12AA(1)(b) of the Act was a non-descript and unintelligible information received by the department from its counterpart i.e. CIT(E), Kolkata vide letter dated 25.10.2015 that the donor to the assessee are indulging in money laundering through receipt of bogus donation from various corporates and non-corporates whereby the benefits of Section 35(1)(ii) of the Act was illegally made available to them. The donor HHBRF, in turn, has given bogus donations to various trusts/societies by way of accommodation entries and the assessee is one of such beneficiaries.
5.1 In this context, the learned counsel for the assessee pointed out that despite all investigations including survey operations carried under s.133A of the Act on the assessee in January 2016, no evidence has been found that the assessee trust has ploughed back its unaccounted money by giving cash and received it back in the form of donation.
5.2 As contended, the sole reliance of statement obtained in the course of survey proceedings in the case of the donor is not justified without showing any cogent evidence to support the allegations of the deponent of the statement on behalf of the donor. It is further pointed out that the only allegation against the assessee is on impugned donation of Rs.70 Lakhs for A.Y 2011-12 and no anomalies have been found in other succeeding assessment years where the assessments have been also been carried out.
5.3 It was contended that the so called statements of donors or brokers recorded during the course of survey operations were never provided to the assessee trust in gross contravention of principles of natural justice. No opportunity was thus provided to the assessee to cross examine the deponent of statements to unearth the truth in violation of the principles laid down in the judicial precedents including Andaman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC). It was thus contended that the action of the CIT(E) is a nullity and a complete non-starter having regard to the serious breach of violation of principles of natural justice.
5.4 It was further contended that no independent enquiry was made and no evidence was brought on record by the CIT(E) while taking the drastic action against the assessee of cancellation of registration with retrospective effect. No attempt was made to show any connection between the donor trust or so called broker and the assessee trust. No corroborative evidence was brought on record while coming to a harsh conclusion alleging indulgence of assessee trust in money laundering and receiving bogus donation. The CIT(E) further failed to take note of the fact that donor HHBRF was having sufficient creditworthiness showing receipt of Rs.16.01 Crore out of which a donation of Rs.65 Lakhs was parted with the assessee trust to promote pious charitable activities. It was further pointed out that the donor Sethi Trust was having total receipt of Rs.3.59 Crores out of which donation of Rs.5 Lakhs was given to the assessee trust. These facts when taken into account would affirm the bonafides of receipt of donation.
5.5 The learned counsel further vehemently contended that the facts in the present case are peculiar. A survey carried out on assessee in January 2016 has not surfaced any material against the assessee to show that assessee has pumped the unaccounted money by giving cash and receiving it back in the form of donation. The basis of cancellation rests upon bald allegations and unsupportable statement recorded in survey of donor which remained unconfronted. It is not the case where the donor and the assessee trust are ad idem on conceding the bald allegation. The assessee has continued to deny any impropriety in the receipt of donation.
5.6 The learned counsel for the assessee further referred to the decision of the co-ordinate bench of Tribunal in Urmila Devi Charitable Trust vs. CIT(E) ITA No.4136/DEL/2017, order dated 13th June, 2019 and submitted that on the identical set of facts having the same donor, namely, HHBRF as held in para 16 of its order that the statement cannot be used as evidence since the statement was never supplied to the assessee nor the assessee was allowed an opportunity to cross-examine such person whose statement is being sought to be relied upon by the CIT(E). Once these documents are ignored, there remains no material with the department to hold that the assessee received the donation from HHBRF in lieu of cash. Hence merely because genuineness of donation in one year is doubted, the addition, if any, can be made in the assessment of the relevant AY 2011-12 in accordance with law but however that by itself, will not be sufficient to withdraw the registration u/s 12AA(3). Hence, the order passed u/s 12AA(3) cancelling the registration was revoked.
5.7 The learned counsel for the assessee next submitted that on the similar set of facts having same donor, various co-ordinate bench of Tribunal have quashed the cancellation order passed under s.12AA(3) of the Act. A reference was made in this regard to the decision of Vishwaroopa Charity Trust vs. CIT(E) ITA No. 106/Kol/2017 order dated 15.09.2017; Sanskriti Sagar vs. CIT(E) ITA No.96/Kol/2017 order dated 15.09.2017; Fateh Chand Charitable Trust vs. CIT(E) ITA No. 792/LKW/2015 order dated 18.03.2016; DR. B. G. Memorial Trust vs. CIT(E) ITA No.516/Kol/2017 order dated 15.09.2017; & Ajit Education Trust vs. CIT ITA No.2666/Ahd/2008 order dated 24.09.2010.
5.8 As regards the other donor, namely, Sethi Trust, it was submitted that no reference has been made to any trustee of the trust adverse to the assessee.
5.9 The learned counsel accordingly urged for reversal of impugned cancellation order and restoration of registration certificate.
6. The learned DR for the Revenue, on the other hand, submitted that the impugned cancellation order dated 28.12.2018 is self-explanatory and he thus sought to rely thereupon. In furtherance, the learned CIT-DR pointed out that the activities of the assessee trust are clearly not genuine in the light of bogus donation of Rs.65 Lakhs received from HHBRF and Rs.5 Lakhs from Sethi Trust parties totaling to Rs.70 Lakhs in F.Y. 2010-11 relevant to A.Y. 2011-12. The learned DR accordingly submitted that the registration to the assessee trust could not continue in the light of the ingenuine activities detected and consequently, the CIT(E) has rightly withdrawn and cancelled the registration granted under s.12AA of the Act and consequently to deny the tax benefits available under s.11 of the Act.
7. We have carefully considered the rival submissions and perused the materials placed on record and referred to in terms of Rule18(6) of the IT(Appellate Tribunal), Rules 1963. The correctness of invocation of Section 12AA(3) of the Act for cancellation of registration of Trust is in controversy.
7.1 The Act provides that the cancellation under s.12AA(3) of the Act can be done only on two situations i.e. when the Commissioner is satisfied that; (i) the activity of such trust or institution are not genuine, or, (ii) not being carried out in accordance with the objects of the trust or institution. It is the case of the assessee that neither the activity of the trust is proven to be ingenuine nor the activities are shown to have not been carried out in consonance with the objects of the trust or institution to invoke provisions of s.12AA(3) of the Act.
7.2 The CIT(E) has proceeded to cancel the existing registration granted under s.12AA of the Act on the ground that the donation received from above named two parties aggregating to Rs.70Lakhs are orchestrated and bogus to avail wrongful tax benefits by abuse of status of charitable trust. Contextually, the question whether the transaction is proper and regular or bogus is essentially a question of fact. Hence, the totality of evidences are required to be weighed to ascertain as to whether the transactions are contrived and a result of any falsehood or otherwise. In the instant case, the CIT(E) has proceeded to transcend the bonafides of donations based on certain information. Naturally, the primary onus would lie on the CIT(E) to dislodge the ordinary presumption of bonafides and donations received in ordinary course. It is the case of the assessee that the reasonings of CIT(E) for extereme action of cancellation are hollow and devoid of any substance. An unconfronted third party statement against the assessee is the bedrock to discredit the donations so received. In a bid to defend its case and assail the cancellation, the assessee has raised multiple pleas. As per oral and written submissions, the assessee has put forth several contentions to assail the cancellation order which are broadly summarized as under:
i. The CIT(E) has heavily relied upon the statement of one Shri Swapan Ranjan Das Gupta, founder Director of the donor-HHBRF to question the bonafides of the activities of the assessee trust. The only allegation in the show cause notice is that the assessee has received bogus donation of Rs.65 lakhs from HHBRF and Rs.5 Lakhs from Sethi Trust aggregating to Rs.70 Lakhs in AY 2011-12. The solitary allegation labeled by the CIT(E) is primarily based on assessment order dated 28.12.2017 under s.143(3) r.w.s. 147 of the Act passed by the AO.
ii. The allegation of receiving the bogus donation is only and only based on some non-descript and vague information received by the CIT(E), Kolkata vide letter dated 28.10.2015 in respect of donors as evident from the cancellation order. This information received by the department from its counterpart led to reassessment for A.Y. 2011-12 to deny tax benefits available under s.11 of the Act. The addition in the re-assessment proceedings for A.Y. 2011-12 was primarily made on the basis of statement of one of the Directors HHBRF recorded under s.133A of the Act by Investigation Wing, Kolkata in the course of survey proceedings on the donor. Such a vague and non-descript statement and that too recorded under s.133A of the Act does not carry any evidentiary value, in the absence of any tangible evidence to corroborate the assertions made against the deponent in the light of the decision of the Hon’ble Supreme Court in CIT vs. S. Khader Khan Son reported in (2013) 352 ITR 480 (SC).
iii. When such bald statement cannot be used even against the deponent (donor), the assertions made in such statement cannot be obliquely used to the prejudice of a third party i.e. assessee herein without confronting the tangible material collected by the Revenue incriminating the assessee. In the absence of any tangible evidence to implicate the action of the assessee, the satisfaction contemplated under s.12AA(3) of the Act cannot be achieved.
iv The statement recorded by the DDIT (Inv.), Kolkata in the case of a third party and that too without confronting the assessee neither confirms to the ordinary prudence nor to the principles of natural justice. Cross examination of the deponent of the statement is paramount in the light of the judgment of Hon’ble Supreme Court in Andaman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC) and other plethora of judgments.
v. The activity of the trust of running the school was never doubted in the past nor the application or utilization of the fund was ever doubted by the CIT(E) in any of the year since inception.
vi. No single instance was recorded by the CIT(E) or by the AO that assessee trust is generating any unaccounted cash by any means, which has been allegedly transferred to the donor in lieu of receiving the donation. Pertinently in AY 2011-12, the assessee trust was eligible to receive the donation in cash.
vii. In the light of the judicial precedents listed in para 5.7 of this order including Urmila Devi Charitable Trust vs. CIT(E) ITA No.4136/DEL/2017, order dated 13th June, 2019), the additions to the extent of alleged ingenuine donations may, at best, be plausible in law and registration of the charitable trust per se cannot be withdrawn and cancelled on surmises and conjectures.
7.3 We find prima facie merit in the various pleas advanced on behalf of the assessee as narrated above. It is a settled principle of law that the onus lies on the person who alleges untruthfulness against the other persons. In the instant case, the allegation has been made on behalf of the Revenue for adversial conduct of the assessee. It is thus the duty of the Revenue to comply with the sacrosanct principles of natural justice and grant opportunity to the assessee for rebuttal of evidences in possession of the Revenue. The registration already granted cannot be withdrawn arbitrarily and in a light hearted manner giving retrospective effect. All pleas noted above and other arguments and position of law that were canvassed on behalf of the assessee requires proper appraisal and disposal thereof in an objective manner. The order of the CIT(E) requires to deal with various pleas of the assessee raised to defend the registration granted. The doctrine of legitimate expectations demands that the assessee should be made privy to the tangible evidences in corroboration of statement sought to be relied upon. Similarly, the cross examination of deponent’s statement is incumbent to prevent miscarriage of justice.
7.4 As told in the open Court, the re-registration application of the assessee has been accepted by the Revenue recently and registration has been granted from a prospective date. All these facts require proper consideration. The CIT(E) while cancelling the registration appears to have wrongfully placed the onus of proving bonafides of donations on the assessee without showing reasons/evidence for drawing adverse conclusion on a registered trust.
7.5 The imperatives of basic procedure have not been adhered while resorting to drastic action of cancellation. We accordingly set aside the impugned cancellation order and restore the issue back to the file of the CIT(E)/competent authority to pass a speaking order in this regard after making objective analysis of the facts and circumstances of the case in its entirety and in accordance with law. Needless to say, the assessee shall be provided proper opportunity of being heard to meet out a fair treatment to the assessee trust.
8. In the result, appeal of the assessee is allowed for statistical purposes.
This Order pronounced in Open Court on 02/08/2021
