Commissioner of Income-tax (Exemptions), Kolkata v. Batanagar Education and Research Trust
[Citation -2021-LL-0802]

Citation 2021-LL-0802
Appellant Name Commissioner of Income-tax (Exemptions), Kolkata
Respondent Name Batanagar Education and Research Trust
Relevant Act Income-tax
Date of Order 02/08/2021
Judgment View Judgment
Keyword Tags cancellation of registration • circumstantial evidences • general public utility • accommodation entries • capital expenditure • donations received • grant registration • source of income • course of survey • survey conducted • money laundering • corpus donation • bogus donation • hawala

1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.4451 OF 2021 COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOLKATA APPELLANT(S) VERSUS BATANAGAR EDUCATION AND RESEARCH TRUST RESPONDENT(S) JUDGMENT Uday Umesh Lalit, J. 1. This appeal challenges judgment and order dated 09-10-2018 passed by High Court at Calcutta in ITA No.116 of 2018 setting aside (i) order dated 25.02.2016 passed by Commissioner of Income Tax (Exemption) ( CIT for short) canceling registration of respondent Trust ( Trust , for short) under Section 12AA of Income Tax Act, 1961 ( Act for short); and (ii) order dated 13.09.2017 passed by Income Tax Appellate Tribunal ( Tribunal , for short) dismissing appeals arising therefrom. Signature Not Verified Digitally signed by Dr. Mukesh Nasa Date: 2021.08.02 17:27:55 IST Reason: 2 2. Trust was registered under Section 12AA of Act vide order dated 06.08.2010 and was also accorded approval under Section 80G(vi) of Act. 3. In survey conducted on entity named School of Human Genetics and Population Health, Kolkata under Section 133A of Act, it was prima facie observed that Trust was not carrying out its activities in accordance with objects of Trust. show cause notice was, therefore, issued by CIT on 04.12.2015. 4. In answer to questionnaire issued by Department, Shri Rabindranath Lahiri, Managing Trustee of Trust gave answers to some of questions as under: Q.11. Please confirm authenticity of abovementioned Corpus Donation. Ans. major part of donations that were claimed exemption u/s 11(1)(d) were not-genuine. donation received in F.Ys. 2008-09, 2009-10 and 2010-11 were genuine Corpus Donation received either from Trustees or persons who were close to Trustees or persons who were close to Trustees. In F.Y. 2011-12 and 2012-13 part of donation were genuine like earlier years. However, major part of donations received in these two F.Ys. viz. 2011-12 and 2012-13, shown as Corpus Donation, were in nature of accommodation entries to facilitate two things- a) To procure loans from Bank we had to show substantial amount of Capital Reserve in our Balance Sheet. b) We require funds for expansion of our college. fees received from students along with genuine 3 donations from Trustees and their contacts were not sufficient to run institution. Q.12. Why are you saying that major part of donations received were not genuine? Ans. In those cases, which I admit as accommodation entries, part of donation received was returned back to donors through intermediaries. Q. 13. Who were intermediaries and what were modes of returning money? Ans. We were instructed to transfer funds through RTGS to 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 head Building. Q. 14. In response to earlier question you have stated that you were instructed . Who gave you instruction? Ans. I can remember only one name right now, that is Shri Gulab Pincha, Mob No. 9831015157. He was key person for providing large part of bogus donation received which was immediately returned back to different parties in guise of payments towards capital expenditure in building. We do now know any details in respect of donors on behalf of whom Shri Gulab Pincha acted as middle man. Shri Pincha provided us with details of donors, cheque of donations, letters of corpus donations etc. He also provided us with names and bank a/c. details of seven (7) persons, mentioned in Answer 13 to whom money has to be returned back through RTGS. He also collected money receipts/80G certifications on behalf of donors. Q. 19. ledger copy for period from 01.04.2014 to 04.09.2014 in respect of General Fund of your trust having details of donors is being shown to you to identify bogus donations along with bogus donors. 4 Ans. After going through list of donors appeared in such ledger it is understood that Donors whose names are written in capital letters under sub-head Donation-13 , Donation- I and Donations-II having total amount of Rs.6,03,07,550/- is bogus and out of which Rs.5,96,29,973/- was returned back through RTGS to above mentioned seven (7) persons following instructions of mediators. 5. On basis of material on record, CIT came to following conclusions: 6.1. intention of legislature to grant registration u/s 12AA and 80G, to give benefit u/s 11 to encourage medical relief to poor and needy persons, promote education among masses and support to poor section of society. But time and again these provisions have been misused for personal need and for benefit of trustees/members of trusts and societies. Survey u/s. 133A conducted in case of assessee elaborates nature and volume of transactions in alleged activities. 6.2. Looking at volume and depth of illegal activities performed and indulged by society to use provisions of I.T. Act providing support and encouragement to organizations for doing benevolent activities, assessee society not only opened pandora s box defying sole benevolent purpose of provisions as per I.T. Act, but also challenged cause of constitutional provisions by maintaining certain well-needed objectives as per Act and performing reverse in reality. 6.3 Based on facts and circumstantial evidences as discussed in Para 1 to 5, it can be inferred: - a) Assessee trust has received sum of Rs.1,23,87,550/- as bogus donation from M/s. School of Human Genetics & Population Health and voluntarily offered as income. SHG & PH has admitted their bogus transactions by filing application before Hon ble Settlement Commission, Kolkata and through confirmation filed. b) They have received bogus corpus donation not only from SGHG&PH but also from various parties in different years. 5 c) Society/Trust has grossly misused provision of Section 12AA and 80G(5) (vi). d) They have violated objects of trust as converting cheque received through corpus donation in cash beyond-the- objects. society was found to be involved in hawala activities. e) Corpus donation received is not voluntary, merely accommodation entry and fictitious. f) 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 60th limb of Section 12AA(3). g) 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 Income Tax Act as laid down in Section 2(15). CIT, therefore, invoked provisions of Section 12AA(3) of Act and cancelled registration granted under Section 12AA of Act w.e.f. 01.04.2012. Consequently, approval granted to Trust under Section 80G of Act was also cancelled. 6. matter was carried in appeal by Trust by filing Income Tax Appeal Nos.756 & 912 /Kol/2016 before Tribunal. After considering entire material on record, Tribunal concluded as under: 13. We have given very careful consideration to rival submissions. It is clear from statements of Secretary and Treasurer of SHG and PH that they were accepting cash and giving bogus donations. In statement recorded in survey conducted in case of SHG and PH on 27.1.2015, it was explained that SHG&PH s source of income was money received in form of donations from corporate bodies as well 6 as from individuals. In said statement it was explained that there were about nine brokers who used to bring donations in form of cheque/RTGS to SHG and PH. Donations received would be returned by issue of cheque/RTGS in name of companies or organization specified by nine brokers. SHG and PH would receive 7 or 8% of donations amount. It was also stated in such statement since assessee was entitled to exemption u/s 80G and u/s 35 of Act their organization was chosen by brokers for giving donations to SHG and PH as well as for giving donations by SHG and PH. Till now Assessee s name did not figure in statement recorded on 27.1.2015. However, pursuant to Survey in case of SHG & PH proceedings for cancellation of registration u/s 12A of Act granted to them were initiated. In such proceedings, Smt. Samadrita Mukherjee Sardar (in letter dated 24.8.2015) had given list of donations which were given by them after getting cash of equivalent amount. It is not disputed that name of assessee figures in said list and fact that SHG & PH to Assessee were against cash received from them in Financial Year 2012-13 of sum of Rs.1,23,87,550/-. Even at this stage all admissions were by third parties and same were not binding on Assessee. However, in survey conducted in case of Assessee on 24.8.2015, Managing Trustee of Assessee admitted that it gave cash and got back donations. We have already extracted statement given by Managing Trustee. Even in proceedings for cancellation of registration, Assessee has not taken any stand on all evidence against Assessee. In such circumstances, we are of view that conclusions drawn by CIT(E) in impugned order which we have extracted in earlier part of order are correct and calls for no interference. It is clear from evidence on record that activities of Assessee were not genuine and hence their registration is liable to be cancelled u/s. 12AA(3) of Act, and was rightly cancelled by CIT(E). We therefore, uphold his orders and dismiss both appeals by Assessee. With this view, appeals preferred by Trust were dismissed. 7. Trust being aggrieved, filed Income Tax Appeal No.116 of 2018 before High Court. By its order dated 04.07.2018, following questions were framed as substantial questions of law: 7 (i) Whether Tribunal and Commissioner of Income Tax (Exemptions) were right in law in directing cancellation of registration of Appellant granted under Section 12AA to Appellant Trust on ground that Trust had received bogus donation from School of Human Genetics and Population Health? (ii) Whether statement recorded in course of survey under Section 133A of Act has any probative or evidentiary value? 8. It was submitted on behalf of Trust that it had received donations from various donors and Trust was under no obligation to verify source of funds of donor or whether those funds were acquired by performance of any unlawful activity. It was further submitted that funds were applied for purposes of trust and that there was no evidence to suggest that those funds were applied for any illegal or immoral purposes or that Trust was namesake and some other activities were being carried out. 9. After considering rival submissions, High Court allowed appeal with following observations: On basis of evidence and authorities cited before adjudicating bodies below, we say that respondent revenue has not been able to establish case so as to warrant cancellation of registration of appellant trust under Section 12AA(3) of Act. respondent also has not been able to prove any complicity of appellant trust in any illegal, immoral or irregular activity of donors. In that view of matter, we answer question (i) in order dated 4th July 2018 in negative and in favour of assessee. We have not found it necessary to go into issue raised in question (ii). order of cancellation of registration of trust is set aside. respondent is directed to restore its registration within three weeks of communication of this order. However, 8 this will not bar any action against appellant in respect of any future activities. appeal is hereby allowed to extent above. 10. In this appeal, we have heard Mr. N. Venkataraman, learned ASG in support of appeal and Mr. Rana Mukherjee, learned Senior Advocate for Trust. It is submitted by learned ASG that answers given to questionnaire clearly show definite tendency on part of Trust to return in cash, donation it received from several entities. Mr. Mukherjee, learned Senior Advocate appearing for Trust submitted that conclusions drawn by High Court were quite correct and did not call for any interference. 11. answers given to questionnaire by Managing Trustee of Trust show extent of misuse of status enjoyed by Trust by virtue of registration under Section 12AA of Act. These answers also show that donations were received by way of cheques out of which substantial money was ploughed back or returned to donors in cash. facts thus clearly show that those were bogus donations and that registration conferred upon it under Sections 12AA and 80G of Act was completely being misused by Trust. entity which is misusing status conferred upon it by Section 12AA of Act is not 9 entitled to retain and enjoy said status. authorities were therefore, right and justified in cancelling registration under Sections 12AA and 80G of Act. 12 High Court completely erred in entertaining appeal under Section 260A of Act. It did not even attempt to deal with answers to questions as aforesaid and whether conclusions drawn by CIT and Tribunal were in any way incorrect or invalid. In our view, this appeal, therefore, deserves to be allowed. 13. Setting aside judgment and order presently under challenge, we allow this appeal and restore order passed by CIT and Tribunal. No costs. ...J. (UDAY UMESH LALIT) ...J. (AJAY RASTOGI) NEW DELHI, AUGUST 02, 2021. Commissioner of Income-tax (Exemptions), Kolkata v. Batanagar Education and Research Trust
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