Income Tax Appellate Tribunal - Kolkata
M/S Bhutoria Memorial Trust, Kolkata vs Cit, (Exemptions), Kolkata, Kolkata on 9 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH "B" KOLKATA
Before Shri Waseem Ahmed, Accountant Member and
Shri K.Narsimha Chary, Judicial Member
ITA No.537/Kol/2016
M/s Bhutoria Memorial बनाम Commissioner of
Trust, 8A, Lindsay Street, Income Tax
/
Kolkata-700 087 (Exemptions), 10B,
V/s.
[PAN No.AAATB 5481 G] Middleton Row, 6 t h
Floor, Kolkata-71
अपीलाथ
/Appellant .. यथ
/Respondent
अपीलाथ
क ओर से/By Appellant Shri S.M. Surana, Advocate
यथ
क ओर से/By Respondent Shri Niraj Kumar, CIT-DR
सन
ु वाई क तार ख/Date of Hearing 14-09-2016
घोषणा क तार ख/Date of Pronouncement 09-11-2016
आदे श /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is against the order u/s 12AA(3) & 12AA(4) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') of Commissioner of Income Tax (Exemptions)- Kolkata vide his order dated 29.02.2016. The grounds raised by the assessee per its appeal are as under:-
"1. For that the order of the Ld. CIT(A) is arbitrary, illegal and bad in law.
2. For that the Ld. CIT(Exemption) erred in cancelling the Registration of the Trust U/s. 12AA(3) & 12AA(4) of the I.T. Act, 1961 when the proceedings were initiated only for alleged violation of the provisions of section 12AA(3) as such the order is not in accordance with law.
3. For that the Ld. CIT (Exemption) erred in cancelling the Registration of the Trust U/s. 12AA(3) & 12AA(4) of the I.T. Act, 1961 on surmises and ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 2 conjectures having not been satisfied about the violation of the particular provisions of section 12AA(3) or 12AA(4).
4. For that the Ld. CIT (Exemption) erred in cancelling the Registration of the Trust U/s 12AA(3) & 1AA(4) of the IT Act, 1961 on the assumption that the trust was involved in money laundering through payment of bogus donation, in genuine activities and was not carrying out the activities as per the objects of the trust and acted on surmises and conjectures, when the donation was made to a trust carrying on educational activities and all the activities of the trust were as per objects and in accordance with law.
5. For that the Ld. CIT (Exemption) erred in relying on the statement of Sri Rabindranath Lahiri Managing Trustee of Batanagar Education and Research Trust, when such statement itself was not admissible as evidence and further in spite of specific requests made, the said Sri Rabindranath Lahiri and the intermediaries were not produced for cross examination. In fact the Ld. CIT was not correct in observing that the assessee did not avail cross examination when no such cross examination was ever offered nor the parties to be cross examined were summoned for cross examination.
6. For that the Ld. CIT (Exemption) was not correct in observing that the assessee was allowed opportunity to cross examine when no such cross examination was allowed and there was o evidence to support the observation that the assessee's advocate was not prepared to come forward for cross examination. In fact even after the said date the assessee continuously requested for cross examination of all the parties but the Commissioner of Income Tax never responded to the said request.
7. For that the Ld. CIT (Exemption) erred in cancelling the registration u/s. 12AA(3) & 12AA(4) without any evidence at all of payment of bogus donation and in any case circumstantial evidence is no evidence unless backed by cogent material.
8. For that the Ld. CIT (Exemption) erred in applying the provisions of sec. 12AA(3) ignoring various evidences on assessment records where from it was evident that the assessee Trust was engaged in charitable activities from the date of its inception.
9. For that the Ld. Commissioner of Income tax erred in holding that the trust was carrying on business of dealing in shares and mutual funds when all the investments were made in accordance with law and as permitted by section 11(5) of the Income tax Act 1961 and it was evident from the audited accounts that recurring income was from dividend which was used for charitable purposes.ITA No.537/Kol/2016
M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 3
10. For that the Ld. CIT (Exemption) erred in holding that the assessee did not cooperate when the assessee have again and again requested for cross examination of the parties on the basis of which the Ld. Commissioner of Income Tax (Exemption) issued the show cause notice for cancellation of registration and the Ld. CIT (Exemption) did not respond to the same.
11. For that on the facts and circumstances of the case the order of CIT (Exemption) is bad in law, not maintainable and perverse and as such should be set aside.
12. For that on the facts and circumstances of the case the order of the CIT (Exemption) be modified and the assessee be given the relief prayed for."
Shri S.M.Surana, Ld. Advocate appeared on behalf of assessee and Shri Niraj Kumar, Ld. Departmental Representative appeared on behalf of Revenue.
2. 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.
3. The facts in brief are that the assessee in the present case is a trust and having registration u/s 12A and 80G of the Act. The registration u/s 12A of the Act was granted to the assessee on the 14th May 1985 and 80G certificate was renewed on 17.10.2011. The assessee-trust was established with the objects of providing relief to the poor & needy people, medical relief, education and advancement of any other objects of general public utility.
4. Before coming to the specific issue of the case, a brief history of the case is as followed. A survey operation was conducted u/s 133A of the Act on 03.09.2015 in the case of trust namely Batanagar Education and Research Trust (for short BERT). The statement of the managing trustee i.e. Sri Rabindranath Lahiri of BERT was recorded. The relevant extract of the statement is reproduced below:-
"Q. 11. Please confirm the authenticity of the above mentioned Corpus Donation.
Ans. A major part of the donations that were claimed exemption u/s. 11(1)(d) were not genuine. The donations received in FYs. 2008-09, 2009-10 and 2010- ITA No.537/Kol/2016
M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 4 11 were genuine Corpus Donation received either from the Trustees or persons who were close to the Trustees or persons who were close to the Trustees. In FY 2011-12 and 2012-13 a part of the donation were genuine like the earlier years. However, a major part of the donations received in these two FYs viz. 2011-12 and 2012-13 shown as Corpus Donation, were in the nature of accommodation entries to facilitate two things:-
a) To procure Loans from the Bank we had to show substantial amount of Capital Reserve in our Balance Sheet.
b) We required funds for the expansion of our college. The fees received from the students along with genuine donations from the Trustees and their contracts were not sufficient to run the institution.
Q. 12 Why are you saying that a major part of the donations received were not genuine?
Ans. In those cases, which I admit accommodation entries, a part of the donation received was returned back to the donors through intermediaries.
Q. 13. Who were the intermediaries and what were the modes of returning the money?
Ans. We were instructed to transfer funds through TGS to the following seven [7] persons:-
1. Santwana Syndicate,
2. P.C. Sales Corporation
3. Kalyani Enterprises,
4. Riya Enterprises,
5. Laxmi Narayan Traders
6. Hanuman Traders
7. Rani Sati Trade cum Pvt. Limited.
These payments were booked as capital expenditure under the head Building.
Q. 14. In response to the earlier question you have stated that you were "Instructed". Who gave you the instruction?
Ans. I can remember only one name 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.
ITA No.537/Kol/2016M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 5 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 Rs.6,03,07,550/- is bogus and out of which rs.5,96,28,973/- was returned back through RTGS to the above mentioned seven (7) persons following the instructions of the mediators."
The name of the assessee was reflecting in the list of bogus donors as provided by the Managing trustee of the BERT in his statement. As per the statement, the assessee- trust has given donation of Rs. 20 Lacs in the AY 2012-13 to BERT through the banking Channel. But subsequently the cash was paid back to the assessee through the medium of certain outsiders.
5. On gathering the above information, the ld CIT(Exemption) has also called the other information in the relation to the activities carried on by the assessee in the last 5 AYs which depict as below:-
"Corpus donations and its applications:-
A) Corpus donations AY 11-12 AY 12-13 AY 13-14 AY 14-15 AY 15-16
a) corpus 0.90 cr. 1.48 cr. 0.21 cr. 6.81 cr. 3.33 cr.
donations (during year)
b) corpus 2.89 cr. 4.37 cr. 4.59 cr. 11.41cr. 14.74 cr.
donations (upto)
B) Investment
a) Shares 5.37 cr. 7.70 cr. 3.27. cr. 5.23 cr. 8.18 cr.
b) fixed deposit 0.40 cr. 0.40 cr. 3.56 cr. 5.43 cr. 4.54 cr.
c) MF - - - - -- 2.72 cr. 4.55 cr.
6.2. Source of income of Trust:-
Particulars A.Y 11-12 A.Y 12-13 A.Y. 13-14 A.Y 14-15 A.Y. 15-16
Interest 11.74 lakh 24.27 lakhs 31.08 lakhs` 42.00 lakhs 72.47 lakhs
Dividend 13.23 lakhs 8.30 lakhs 6.50 lakhs 6.84 lakhs 15.04 lakhs
ITA No.537/Kol/2016
M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 6
Profit on sale 89.06 lakhs 36.48 lakhs - - - - 1.99 lakhs
of investment
(short term &
long term)
MF - - - - - - - - 8.37 lakhs
Particulars A.Y 11-12 A.Y 12-13 A.Y. 13-14 A.Y 14-15 A.Y. 15-16
Donations 27 lakhs 30.5 lakhs 54.65 lakhs 67.77 lakhs 70.44 lakhs
Expenses apart from 1 lakh 0.20 lakh 0.20 lakh 0.10 lakh 0.58 lakh
donation paid
From the above, it was found that the corpus fund of the assessee is increasing every year and the same has been utilized in making the investment in shares and mutual funds, fixed deposits etc. Accordingly the learned CIT observed that the trust is not doing any activity for its main objects but has diverted its activities in the trading of share, mutual funds, bonds and earning income in the form of dividend interest etc. The ld CIT has given several opportunities to the assessee to file the reply in contradiction of the statement and come forward for cross examination with the managing trustee of BERT but no positive response was received from the assessee.
In view of above, the ld CIT observed the following facts and cancelled the registration certificate by observing as under:-
"a) Assessee trust has paid a sum of Rs20,00,000/- as bogus donation to M/s Batanagar Education & Research Trust and received in cash.
b) Trustees of the Trust have been benefitted out of the cash so received.
c) They have violated the objects of the trust as covering cheque paid through donation and received in cash.
d) Charity done through paid donation is not voluntary, merely an accommodation entry and fictitious.
e) Moreover, trust was found to be doing business in shares, MFs, bonds, Main source f their income is short term / long term capital gain, dividend, interest income etc. it is pretending to be involved in activities like investment / Finance business beyond its objects.
f) Corpus funds received u/s 11(1)(d) were never utilised for the purpose they were received but used as trading activity in shares, MFs, bonds etc. ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 7
g) In spite of facts that trust is public charitable trust receiving corpus donations from public at large but actually it has been used by trustees as private trust. Assets being investment, expenditure as donation have been managed according to the need of trustees.
h) Society/Trust has grossly misused the provision of Section 12AA and 80G(5)(vi).
i) Activities of the trust are not genuine as well as not being carried out in accordance with its declared objects. Assessee's case is covered within the both limb of Section 12AA(3).
j) Even ingenuine and illegal activities carried on by assessee through money laundering do not come within the conceptual framework of charity vis-à-vis activity of general public utility envisaged by the Income Tax Act as laid down in Section 2(15).
9. 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. 01.04.2011 from the starting of financial year, the year 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 the assessee came in appeal before us.
6. Before us Ld. AR of the assessee filed a paper book which is running from pages 1 to 130 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 on 3.12.2015. But the ld CIT(Exemption) has cancelled the registration vide its order dated 29.02.2016 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 section 12AA(3) of the Act. Therefore the action of the ld CIT (Exemption) u/s 12AA(4) of the Act is not within the provisions of law and against the principle of natural Justice.
2. The ld. AR further submitted that the investments have been made by the assessee in all assessment years beginning from assessment year 2011-12 to ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 8 assessment year 2015-16 within the provisions of sections 13(1)(d) and 11(5)(xii) of the Act. The ld. AR in support of his claim has drawn our attention on pages 91 to 130 of the paper book where the audited accounts with audit report are placed. The ld. AR has submitted the audited accounts for the assessment year 2011-12 along with the audit report separately which are placed on record.
3. The ld. AR also submitted that the ld CIT(Exemption) has no power to cancel the registration granted under section 12A / 12AA of the Act retrospectively as per the provisions of section 12AA(3) of the Act. In this connection the learned AR has relied in the judgment of Hon'ble High Court of Allahabad in the case of OXFORD ACADEMY FOR CAREER DEVELOPMENT vs. CHIEF COMMISSIONER OF INCOME TAX & ORS, 315 ITR 382. The relevant extract of the judgment reads as under :
"Sec. 12AA(3) was incorporated in the Act w.e.f. 1st Oct., 2004 and not applicable retrospectively; registration granted to assessee on 1st April, 1999 could not therefore be cancelled by CIT by invoking powers under s. 12AA(3); even assuming, the CIT has power to rescind the order of registration on the ground that the registration had been obtained by practising fraud or forgery, there was nothing in the show-cause notice or in the impugned order, alleging that the petitioner had obtained the registration by practising fraud or forgery."
Similarly, the ld AR also relied in the case of B.P. AGARWALLA & SONS LTD. vs. COMMISSIONER OF INCOME TAX & ORS 208 ITR 863 where the Hon'ble Jurisdictional High Court has held as under:-
"There is nothing in the language of s. 35 which would justify the Court in coming to the conclusion that the power to rescind an approval of a research association could be withdrawn with retrospective effect. If there were any doubts in the matter, on the authority of the decisions noted earlier, the Central Government could not have withdrawn the approval granted under s. 35(1)(ii) to the research centre with retrospective effect. It also follows that the basis of the CIT's assumption of jurisdiction under s. 263 was wholly illegal. The CIT would not be able to determine the legality and validity of the Notification dt. 2nd Jan., 1986, by which the approval granted to the research centre was withdrawn. There is no statutory provision enabling the Central Government to rescind a notification retrospectively. The CIT can certainly take into ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 9 consideration subsequent information for the purpose of initiating proceedings under s. 263 so that an assessment order which was good when it was made, in the light of such subsequent information may appear erroneous. The question, however, is not whether the retrospective cancellation of the approval could be considered but whether the Central Government could have retrospectively rescinded the approval at all. The impugned notices under s. 263 dt. 16th Feb., 1987, in respect of the asst. yr. 1982-83 and 1983-84, being annexure "G" to the petition, are set aside. Any proceedings taken on the basis of the impugned notices are also quashed.--Indian Cardboard Industries vs. Collector of Central Excise (1992) 58 ELT 508 (Cal) applied; CIT vs. E. Sefton & Co. (P) Ltd. (1989) 80 CTR (Cal) 64 : (1989) 179 ITR 435 (Cal) : TC 53R.384#1 distinguished."
Further, the Ld. AR also relied in the case of Ramdas Maneklal Gandhi vs. Union of India & Anr. 241 ITR 437 where the Hon'ble Jurisdictional High Court has held as under:-
'The law is now well-settled that the assessee is entitled to rely upon the certificate granted by the prescribed authority under s. 35CCA to the institution or association to which it had donated a sum of money for claiming deduction under that section which was valid and subsisting at the time the donation was made. The retrospective withdrawal and/or cancellation of the certificate will have no effect upon the assessee who has acted upon it when it was valid and operative. In the premises, there is no escapement of income of the assessee as a result of the allowance of deduction under s. 35CCA in the previous year relevant to the assessment year under consideration. The impugned notice of the ITO issued under s. 48 is, therefore, quashed and set aside
- State of Maharashtra vs. Suresh Trading Co. (198) 109STC 439 (SC) applied.' The ld. AR further submitted that the name of the assessee is not appearing in the list of the persons to whom the amount of donation was returned by BERT in the form of booking of bogus capital expenditure under the head building. The person acting as conduit between the assessee and BERT has not taken the name of the assessee for returning the amount of donation to the assessee. The Ld. AR has also submitted the request letter from BERT for the donation of a Rs. 20 Lacs which is placed on page 28 of the paper book along with the necessary details of the donee such as donation receipt, 80G certificate, bank statement, profile, details of the trustee, which are placed from pages 29 to 80 of the paper book. There is no evidence that the amount of donation made by the assessee has come back to the assessee or its associate concern in any form.ITA No.537/Kol/2016
M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 10
4. On the other hand the ld. DR submitted that the managing trustee of BERT has clearly stated that the money received from the assessee as donation for Rs. 20 lacs was returned back. The registration granted under section 12A/ 12AA of the Act was cancelled in the back date in the financial year 2011-12 as the transaction of bogus donation took place in the relevant previous year 2011-12. The assessee was given several opportunities for the cross examination but the assessee did not avail any of the opportunity. The facts of the case cited by the ld. AR in the case of Fateh Chand Charitable Trust ITA No.792/LKW/2015 are different from the facts of the instant case. In that case the opportunity for the cross-examination was not provided. The ld.
DR vehemently supported the order of the ld. CIT (Exemption).
4.1 In the rejoinder the ld. AR submitted that no notice was issued to the assessee u/s 131 of the Act. As per the order of ld CIT (Exemption) Shri Gulab Pincha was acting as the conduit in arranging the bogus donation but no statement was recorded of Shri Gulab Pincha by issuing notice u/s 131 of the Act. The Revenue failed to prove with supporting evidence that the money has come back to the assessee.
5. We have heard the rival contentions of both the parties and perused the materials available on record. From the foregoing discussion we find that the registration under section 12A/12AA of the Act was cancelled by the ld CIT (Exemption) on account of two reasons. Firstly the assessee was engaged in providing bogus donation which is against the provisions of law and secondly the activities of the assessee are not in accordance with the objects for which it was established. From the facts we find that the investment made by the assessee is within the mode as specified under section 11(5)(xii) of the Act. At this juncture it is important to reproduce the provisions of Rule 17C of Income Tax Rules 1962 for making the investment as per the provisions of section 11(5)(xii) of the Act which reads as under :
[Forms or modes of investment or deposits by a charitable or religious trust or institution ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 11 17C. The forms and modes of investment or deposits under clause (xii) of sub- section (5) of section 11 shall be the following, namely
(i) Investment in the unit issued under any scheme of the mutual fund referred to in clause (23D) of section 10 of the Income-tax Act, 1961;68
[***]
(ii) Any transfer of deposits to the Public Account of India;] 69 [(iii) deposits made with an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;] 70 [(iv) investment by way of acquiring equity shares of a depository as defined in clause (e) of sub-section (1) of section 271 of the Depositories Act, 1996 (22 of 1996);] 72 [(v) investment made by a recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter referred to as investor) in the equity share capital of a company (hereafter referred to as investee)--
(A) which is engaged in dealing with securities or mainly associated with the securities market;
(B) whose main object is to acquire the membership of another recognised stock exchange for the sole purpose of facilitating the members of the investor to trade on the said stock exchange through the investee in accordance with the directions or guidelines issued under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by the Securities and Exchange Board of India established under section 3 of that Act; and (C) in which at least fifty-one per cent of equity shares are held by the investor and the balance equity shares are held by members of such investor;] 73 [(vi) investment by way of acquiring equity shares of an incubatee by an incubator.
Explanation.--For the purposes of this clause,--
(a) "incubatee" shall mean such incubatee as may be notified by the Government of India in the Ministry of Science and Technology;
(b) "incubator" shall mean such Technology Business Incubator or Science and Technology Entrepreneurship Park as may be notified by the Government of India in the Ministry of Science and Techno-logy;] 74 [(vii) investment by way of acquiring shares of National Skill Development Corporation;] 75 [ (viii) investment in debt instruments issued by any infrastructure Finance Company registered with the Reserve Bank of India; ] 76 [ (ix) investment in "Stock Certificate" as defined in clause (c) of paragraph 2 of the Sovereign Gold Bonds Scheme, 2015, published in the Official Gazette vide notification number G.S.R. 827(E), dated the 30th October, 2015.] From the bare reading of the aforesaid provisions of section, we find that the investment was made by the assessee trust within the mode as specified. The ld. AR has produced the list of investments for the years ending 31.3.2012, 31.3.2013, ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 12 31.3.2014, 31.3.2015 which were not questioned in any of the income tax proceedings and it can be inferred that these were accepted as investment within the specified mode. The ld. DR has also not brought anything contrary to the arguments of ld. AR. Therefore, this cannot be reasons for cancelling the registration certificate u/s 12A of the Act. Besides the above we also find that the ld. CIT(E) has not given any finding that the investment has been made assessee in contravention to the provisions of Section 11(5) of the Act. Merely the money invested in the modes specified u/s 11(5) of the Act and trust carrying no charitable activity cannot be a ground for the cancellation of registration. However we find that the assessee has been giving donation in every year which has been duly accepted by the Revenue as evidenced from the income & expenditure account of the assessee of the financial statements which are placed on pages 91 to 130 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. There is also no adverse remark in the audit report about the investment made by the assessee, which is placed on pages 101 to 103 and 109 to 111 of the paper book.
We also find that the notice for the cancellation of the registration certificate was issued under section 12AA(3) of the Act as evident from the notice placed on page 12 of the paper book. However, Ld. CIT(E) 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 find that the proper opportunity to the assessee has not been furnished.
However, we do not agree with the contention of the assessee that the certificate cannot be cancelled from the retrospective date. If the contention of the AR is allowed then we are confirming the default of the assessee committed in the earlier year.
However, we also find that the lower authority should have issued summon u/s 131 of the Act for the cross examination but from the facts we find that the no such summon ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 13 has been issued. We also find that assessee has given the detailed profile of the donee along with the correspondence which is placed on pages from 27 to 80 of the paper book. The transaction for the donation was made through banking channel and the department failed to bring anything on record that the donation given by the assessee has come back to it in the form of the cash. At the most, in our considered view, the Revenue could have brought the amount of donation to the tax as the evidence collected at the back of the assessee cannot be used adversely until & unless it is confronted to the assessee. In this connection, we rely in the case of CIT vs. Islamic Academy of Education ITA No. 805/ 2008 where the Hon'ble High Court of Karnataka has held as under:-
"8. In the instant case, the material on record shows that the Trust has established educational institution and imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the College. The college is recognized by the Medical Council of India, 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 year. 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 said that the activities of the Trust are not being carried out in accordance with the objects 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 cannot 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 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue. There is no merit in this appeal."
We also find support and guidance from the order of Hon'ble ITAT Lucknow, in the case of Fateh Chand Charitable Trust versus CIT (Exemptions) in ITA No.792/LKW/2015 order dated 18.03.2016 where it was held as under :
"22. Undisputedly, the assessee has taken receipt of donation as part of its income and the same was applied for charitable purposes and these facts are borne out from the consolidated balance sheet of the assessee available at page 8 of the compilation of the assessee. The Revenue has not made out a case that the donation received by the assessee was not taken as part of income and was ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 14 applied for non-charitable purposes. The allegation of the Revenue is only that the donation was received by the assessee on making payment in cash to M/s Herbicure Health Care Bio Herbal Research Foundation, but to substantiate this claim, no evidence was brought on record by the Revenue. It was simply an oral assertion and moreover the assessee was not afforded any opportunity to cross-examine the witness, whose statement was relied on by the ld. Commissioner of Income Tax (Exemptions) for cancellation of registration under section 12AA of the Act earlier granted to the assessee. even assuming, for the sake of argument, that if the assessee has received donation on making payment in cash and it may be his own money which was introduced in the trust through circuitous means, but it was applied for charitable purposes, therefore, it cannot be added under section 68 of the Act. Thus, even on merit, we do not find any force in the allegations raised by the Revenue. The ld. Commissioner of Income Tax (Exemptions) has cancelled the registration under section 12AA of the Act on the basis of conjunctures and surmises, as he has observed in his order that the assessee might have been charging capitation fee from the parents of the students, but in this regard no evidence was brought on record. It is also obvious from the record that the ld. Commissioner of Income Tax (Exemptions) has passed an order on the same day when the assessee has furnished detailed explanation in writing and even without verifying the same. Therefore, we find no merit in the order of the ld. Commissioner of Income Tax Exemptions), Accordingly, we set aside the order of ld. Commissioner of Income Tax (Exemptions.)."
In the instant case, Shree Gulab Pincha (SGP for short), Mob. No.9831015157 was the acting as conduit in providing a large amount of bogus donation received which was immediately returned back to the different parties in the guise of payments towards capital expenditure in building. However no statement was SGP was recorded by the Revenue authorities by issuing any notice/summon u/s 133(6)/ 131 of the Act. The managing trustee of BERT has accepted in his statement that SGP was involved in the aforesaid bogus donation transaction. Therefore it was necessary for the Revenue Authorities to cross examine SGP to establish/ ascertain how the money has returned back to the assessee-trust. In the instant case the assessee the managing trustee of BERT has highlighted the name of 7 intermediaries used for returning the money of the donation and the name of the assessee trust is not appearing in that list. 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 ITA No.537/Kol/2016 M/s Bhutoria Memorial Trust vs. CIT (Exm) Kol. Page 15 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 crack the chain of bogus donation. In view of above we find no merit in the order of ld. CIT(E) and accordingly we set aside the order of ld. CIT(E). This ground of assessee's appeal is allowed.
9. In the result, assessee's appeal stands allowed.
Order pronounced in open court on 09/11/2016
Sd/- Sd/-
(K.Narsimha Chary) (Waseem Ahmed)
Judicial Member Accountant Member
*Dkp, Sr.P.S
दनांकः- 09/11/2016 कोलकाता / Kolkata
आदे श क त
ल प अ े षत / Copy of Order Forwarded to:-
1. अपीलाथ
/Appellant-M/s Bhutoria Memorial Trust, 8A, Lindsay Street, Kol-87
2. यथ /Respondent-CIT(Exem) 10B, Middleton Row, 6 Floor, Kolkata-71 th
3. संबं"धत आयकर आयु%त / Concerned CIT
4. आयकर आयु%त- अपील / CIT (A)
5. &वभागीय )त)न"ध, आयकर अपील य अ"धकरण कोलकाता / DR, ITAT, Kolkata
6. गाड+ फाइल / Guard file.
By order/आदे श से, /True Copy/ उप/सहायक पंजीकार आयकर अपील य अ"धकरण, कोलकाता