C.A.@ SLP(C)No.17428/18 NON-REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1381 OF 2019 [Arising out of S.L.P.(C)No. 17428 of 2018] Commissioner of Income Tax ... Appellant (Exemptions), Kolkata Versus Jagannath Gupta Family Trust ... Respondent JUDGMENT R. Subhash Reddy, J. 1. Leave granted. 2. This civil appeal is filed by appellant, i.e., Commissioner of Income tax (Exemptions), Kolkata, aggrieved by Order dated 18.09.2017 passed by High Court of Calcutta in I.T.A No.7 of 2017. 3. respondent herein, M/s. Jagannath Gupta Family Trust, is registered Trust under Section 12AA of Signature Not Verified Digitally signed by MAHABIR SINGH Date: 2019.02.01 16:27:44 IST Reason: Income Tax Act, 1961, (for short Act ) and also 1 C.A.@ SLP(C)No.17428/18 approved under Section 80G(5)(vi) of Act vide proceedings dated 16.08.2010. trust was created with avowed object of public and charitable purposes, namely, medical relief, education, any other causes of public utility etc. It is stated that respondent-trust is running Engineering College. 4. survey was conducted under Section 133A of Act, in premises of School of Human Genetics and Population Health (SHGPH), Kolkata by Investigation Wing on 27.01.2014. It appears, during said survey appellant has noticed donation entry of Rs.37,00,000/- (Rupees Thirty-Seven Lacs) in two tranches in months of February and March, 2013. It is allegation of appellant that such donation given to respondent-trust is bogus and sham. It is case of appellant that donor did not actually donate such amount, such entry was shown by receiving amount in cash from respondent, by retaining commission. 5. In view of such allegation, appellant herein has initiated proceedings for cancellation of registration and issued show-cause notice to respondent 2 C.A.@ SLP(C)No.17428/18 on 04.12.2015. respondent has replied to same and contested proceedings. main plank of defence was that procedure adopted by appellant was contrary to principles of natural justice. It was also case of respondent, that though statement of representative of donor was recorded and on said basis proceedings were initiated for cancellation of registration, but respondent was not given any opportunity, to cross examine such representative. 6. After receipt of explanation to show-cause notice, alleging that activities of respondent- trust are neither genuine nor as per objects of trust, further alleging that transaction in question was only money laundering, therefore, receipt of donation in lieu of cash was never object of trust and as such it is to be treated as ingenuine and illegal activity. It is also held that such activities are carried out by respondent-assessee not only in one year but in several years. 7. By recording aforesaid findings, primary authority, by order dated 15.03.2016, in exercise of power 3 C.A.@ SLP(C)No.17428/18 under Section 12AA(3) of Act, has cancelled registration of respondent-trust. inference drawn and as mentioned in paragraphs 7.3 and 8 of order reads as under: 7.3 Based on facts and circumstantial evidences as discussed in Para 1 to 6, it can be inferred: a)The assessee trust had allegedly received huge sum over period of seven years starting from A.Y. 2009-10 to A.Y. 2015-16 in garb of corpus/non-corpus donation. In reality donors were returned back money in cash. This was done through web of financial transactions. All evidences show that through these alleged donations assessee trust actively helped in pumping unaccounted money of its group concerns into trust and simultaneously also allowing individual donors to claim benefit u/s.80G on such alleged donation. b) Further, assessee trust has paid commission to agents to lure prospective students to take admission in its college. This is not disallowed as per AICTE rules. Therefore, in this respect also assessee trust has violated law of land. c) By doing these things assessee trust has participated actively in ingenuine activities and also acted beyond stated objectives of trust. d) They have violated objects of trust by channelizing unaccounted cash through bogus donations. 4 C.A.@ SLP(C)No.17428/18 e) Donations received whether corpus or non- corpus are not voluntary, merely accommodation entries and fictitious. f) Society/Trust has grossly misused provision of Section 12AA and 80G(5)(vi). These approvals were not for cash channelizing through donations. g) Activities of trust are not genuine as well as not being carried out in accordance with its declared objects, Assessee s case is covered within both limbs of Section 12AA(3). h) Even ingenuine and illegal activities carried on by assessee through money laundering do not come within conceptual framework of charity vis-a-vis activity of general public utility envisaged by Income Tax Act as laid down in Section-2(15). 8. Keeping in view above, provision of Section 12AA(3) is invoked and registration granted u/s 12AA is withdrawn/cancelled w.e.f 01.04.2008 from starting of financial year, when society was found to be involved in money laundering through receipt of bogus donation, ingenuine activities and not carrying out activities as per object of trust. 8. Aggrieved by order of cancellation dated 15.03.2016, respondent-assessee has filed appeal before Income Tax Appellate Tribunal, at Kolkata B Bench in Income Tax Appeal No.597/KOL/2016. appellate authority, by recording finding that, though statement of donor was made basis for initiating 5 C.A.@ SLP(C)No.17428/18 proceedings for cancellation of registration of respondent-trust, but respondent was not given opportunity to cross-examine representative, has held that opportunity of cross-examination of representative of donor is to be given to respondent. By recording aforesaid finding, appellate-authority has set aside order dated 15.03.2016 and remanded matter for fresh consideration by primary authority. 9. Aggrieved by order of appellate authority dated 10.04.2017, respondent-assessee has filed appeal, i.e., Income Tax Appeal No. 7 of 2017 before High Court of Calcutta. By impugned order, High Court has allowed appeal by order dated 18.09.2017 and quashed order of cancellation of registration. High Court has held that while it is possible that particular donation may be bogus or fictitious and, assessee may be assessed to tax therefor and other steps can be taken but single donation which is allegedly bogus, would not establish that activities of trust are not genuine and not being carried out in 6 C.A.@ SLP(C)No.17428/18 accordance with objects of trust. It is also held that if there are multiple bogus transactions of similar kind, it may lead to reasonable assessment for Competent Authority to hold that trust is engaged in such activities which can be said to be not genuine or not in conformity with objects of trust. 10. In this appeal, we have heard Mr. S.A. Haseeb, learned counsel for appellant and Mr. N.K. Poddar, learned Senior counsel for respondent. 11. It is contended by learned counsel for appellant that there is serious allegation against respondent-assessee in indulging in money laundering. It is submitted that alleged donation from School of Human Genetics and Population Health (SHGPH) is absolutely bogus and it is clear from evidence gathered during survey that said donation is made by collecting amount in cash from respondent- assessee. It is submitted that in view of allegations made by respondent-assessee that it was not given opportunity to cross-examine representative of donor whose statement was relied upon in cancellation 7 C.A.@ SLP(C)No.17428/18 proceedings, only to give opportunity, appellate tribunal has remanded matter to primary authority. Inspite of such order passed by appellate tribunal, respondent has further filed appeal before High Court and High Court has set aside order of cancellation only on ground that one bogus donation would establish that activities of trust are not genuine and finding recorded by High Court is erroneous and High Court has committed error in recording such finding which will run contrary to plain language of Section 12AA(3) of Act. It is submitted by learned counsel that said revolving transaction of money through donor is nothing but money laundering which will run contrary to objects of trust. 12. On other hand, it is contended by learned senior counsel for respondent-assessee that merely based on survey conducted in office of donor, proceedings are initiated for cancellation of registration. It is contended that though there was survey conducted on respondent-assessee, but nothing 8 C.A.@ SLP(C)No.17428/18 adverse was found during such survey. It is submitted, based on ex-parte statement of representative of donor, proceedings were initiated and order cancelling registration was passed. Further, it is contended that reasons, as assigned by High Court, are valid and there are no grounds to interfere with such order passed by High Court. Learned counsel has also brought to our notice various relevant provisions in Income Tax Act, 1961, pleading that every donation is not exempted and respondent- assessee has used all donations for purpose of promoting objects of trust. 13. Having heard learned counsel for parties, we have perused order passed by Commissioner of Income Tax (Exemptions), Kolkata; appellate-authority and order impugned in this appeal. In proceedings initiated for cancellation of registration, mainly it was case of respondent-assessee that proceedings for cancellation were initiated only on ex-parte statement of representative of donor, without giving any opportunity to assessee. It is further 9 C.A.@ SLP(C)No.17428/18 submitted that though survey was also conducted on respondent-assessee, but nothing adverse was found during such survey to support case of appellant, to cancel registration. Learned counsel also brought to our notice various provisions of Act but, at same time, in support of arguments that all donations are not exempted, but having regard to reasons recorded in impugned order, it is not necessary for us to delve deep at this stage. From perusal of order passed by High Court, it is clear that High Court has allowed Writ Petition mainly on one ground, namely, that one bogus donation would not establish that activities of trust are not genuine. 14. We are of view that such reason assigned by High Court is erroneous and runs contrary to plain language of Section 12AA(3) of Act. In view of serious allegations made against respondent trust, it is matter for consideration of issue, after giving opportunity as pleaded by respondent but High Court has committed error in entertaining appeal against remand order passed by appellate- 10 C.A.@ SLP(C)No.17428/18 authority, and in quashing order of cancellation of registration. 15. For aforesaid reasons, we are of view that order impugned is liable to be set aside and same is, accordingly, hereby quashed and set aside. However, it is made clear that we have not expressed any opinion on merits, and it is open to Commissioner of Income Tax (Exemptions), Kolkata to consider all issues on its own merit, uninfluenced by observations made by appellate authority, High Court or in this order by this Court. 16. This appeal is allowed, with directions as indicated above, with no order as to costs. .....................J. [R. Banumathi] .....................J. [R. Subhash Reddy] New Delhi February 01, 2019. 11 Commissioner of Income-tax, (Exemptions), Kolkata v. Jagannath Gupta Family Trust