CHIRAYU CHARITABLE FOUNDATION,BHOPAL vs. PCIT (CENTRAL), BHOPAL

आयकर अपील�य अ�धकरण, इंदौर �यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER

ITA No.179/Ind/2019

Chirayu Charitable PCIT (Central), Foundation,Bhopal Indore Bhopal Highway, Bhaisakhedi, Vs. Bhopal (Appellant) (Revenue ) PAN No.AAAAC3656P Revenue by Shri S.S. Mantri, CIT Appellant by S/Shri Sumit Nema, Sr. Advocate, Gagan Tiwari & Piyush Parashar, Advs Date of Hearing 05.01.2021 Date of Pronouncement .02.2021 O R D E R PER MANISH BORAD, AM.

The above captioned appeal filed at the instance of assessee is

directed against the order of Pr. Commissioner of Income Tax

(Central)(in short ‘Ld. PCIT’], Bhopal dated 26.12.2018 which is

arising out of the order u/s 12AA r.w.s. of the Income Tax Act

1961(In short the ‘Act’) dated 29.11.2002 granted by CIT, Bhopal.

Chirayu Charitable Foundation ITA No.179/Ind/2019 2. Brief facts of the case as culled out from the records and as

narrated by Ld. Senior Counsel for the assessee referring to relevant

documents placed in the paper book are that the assessee is a

charitable society registered under M.P. Societies Registration Act,

1973 since 26.05.2001. The main object of the society is to carry

out charitable activities in medical and education field. In order to

run the society for carrying out these objects it has established

various colleges and hospitals namely Chirayu Meical College &

Hospital, Bhopal, Chirayu College of Nursing, Chirayu College of

Para medical and Chirayu Cancer Hospital. These colleges have

courses of MBBS, MD, B.Sc Nursing. Post B.Sc. Nursing. GNM,

MSc. Nursing, and various courses under paramedical college like

DMIT, BMLT and physiotherapy etc. The medical college and

hospital run by the assessee are approved by Medical Council of

India (MCI), New Delhi. Indian Nursing. Council. State Nursing

Council. Director Medical Education (DME). Madhya Pradesh

Medical Science University, Jabalpur and Barkatulah University,

Bhopal.

Income Tax Act on 29.11.2002 effective from 1.4.2002. Search & 2

Chirayu Charitable Foundation ITA No.179/Ind/2019 seizure action u/s 132 of the Act was carried out at various

premises of Chirayu group and its associates on 4.11.2016. This

action was carried out subsequent to the search conducted by

Central Bureau of Investigation (In short `CBI’) on 4.11.2016 at the

residence of family member of Director and promoter of various

entities of Chirayu Group. Cash of Rs.36,00,000/- and jewellery

and valuables amounting approximately Rs.1.80 crore were found

by the CBI at the said premise.

Subsequently after the search and seizure operation the Ld. 4.

A.O. vide letter F. No. ACIT(Central)/Gwalior /Report/2018-19

dated 5.12.2018, duly recommended by the Addl

CIT(Central),Bhopal made the following proposal for cancellation of

Registration granted U/S 12A to the assessee Trust which has been

referred by Ld. PCIT in the impugned order.

During the course of search and seizure operation some documents were found showing donations received by Chirayu Foundation from various entities. Amongst the documents found from premise located at Bhainskhedi, Near Bairagarh, Bhopal-Indore Highway, Bhopal which have been seized and inventorised, donations amounting to Rs.50 lacs and more is as follows:-

Chirayu Charitable Foundation ITA No.179/Ind/2019 S.No. Donation received from Amount Date Thakur Education Trust 1. 1,00,00,000 12.06.2013 (AACTT4004F) Kand Thakur House, Ashok Nagar, ivili (E), Mumbai-400101 Thakur Education Trust 2. 60,00,000 14.06.2013 (AACTT4004F) Ashok Nagar, Kand Thakur House, ivtli (E), Mumbai-400101 3 Zagdu Singh Charitable Trust 1,00,00,000 10.06.2013 .

(AAATZOI41P) Ashok Nagar, Kand Thakur House, ivili (E), Mumbai-400101 4 . Zagdu Singh Charitable Trust 1,00,00,000 17.06.2013

(AAATZOI41P) Ashok Nagar, Kand Thakur House, ivili (E), Mumbai -4 00 101 - --1 5 . UdodasMundhraSevaSansthan 50,00,000 10.05.2013

6 Port Ltd (AADCR6980N) 10 Redi 7, 50,00,000 21.062013 .

Nariman Point, NC Earnest House, PA Marg. Mumbai - 400021 7 Port Ltd (AADCR6980N) 10 Redi 50,00,000 28.06.2013 . 7, House, Nariman Point, NC Earnest PA Marg. Mumbai - 400021 8 . Pacific Exports (AALFP 3826C) 1, DO, 00, 000 08.05.2013

1302, Dheeraj Gourav Heights-I, Adarsh Nagar, Andheri (W), Mumbai-400053

Chirayu Charitable Foundation ITA No.179/Ind/2019 9 9. Riviera Infoway Ltd (AACCR2329G) th 8,15,90,000 01.07.2011 Navjeevan Commercial Floor, Premises, Lamington Road, Mumbai- 400008

Total 14,25,90,000

Further enquiries were made into the large donations on the basis of the seized material which revealed the following:

(i) Thakur Education Trust in its return of income for A. Y. 2014-15 has shown gross total income of Rs. 300/-. Zagdu Singh Charitable Trust in its return for A. Y. 2013-14 has filed NIL gross total income. Further, Zagdu Singh Charitable Trust and Thakur Education Trust have the same registered address as evident from the seized documents. Further, from the documents seized, copies of resolution of both the abovementioned trusts were found which are of the same date i.e. 03.06.2013. All the above circumstances along with the failure of assessee to furnish any details or confirmation of donations received are suggestive of manipulation and show that the donations are suspect.

(ii) Corpus Donation of Rs. 8,15,90,000/- has been received by Chirayu Charitable Foundation from Riviera Infoway Ltd on 01.07.2011. The assessee has not submitted any documents/confirmation of the same. From enquiry conducted, it has been observed that M/s Riviera Infoway Ltd has filed return of A. Y. 2012-13 declaring gross total income of Rs. 2,022/-. This does not justify the huge amount of donation made by the said company. Further, as the assessee has failed to furnish any details or confirmation of donations received, the same remains unexplained.

Chirayu Charitable Foundation ITA No.179/Ind/2019 (iii) Donation of Rs. 50,00,000/- has been received from Udodas Mundhra Seva Sansthan. Since the assessee was reluctant in providing any details of corpus donations received by it, third party enquiry was conducted on test check basis. On a commission sent to ADIT(Inv.)- 2(4) Kolkata it was found that the registered office of Udodas Mundhra Seva Sansthan at 1st Floor, Yamuna Bhawan, 55 Ezra Street, Kolkata is an address of many companies/firms which as per the report of ADIT(Inv.)-2(4) Kolkata is identical to typical jama-kharchi entity. Upon summon of the ADIT (lnv.)- 2(4) Kolkata no one attended nor any reply was filed.

The facts unearthed during the course of search and seizure action under Section 132 of the Act reveal that the - Trust did not act in a fair manner and collected donations from parties who are found to be nonexistent. The eligibility of registration is not only based on objects of the trust, but also on the genuineness of activities of the trust. Though the trust objects are charitable in nature, its activities are not carried out in accordance with its objects which is evident from the facts gathered during search and post search investigation as mentioned above.

From the discussion above, it is apparent that the assessee has not carried out its activities as per the provisions of section 12AA of the Income Tax Act, 1961, hence, it is requested that the registration u/s 12A of the Act of the assessee society be cancelled.

show show cause notice dated 6.12.2018 to the assessee society

confronting the assessee with various information found during the

course of search and also asking the assessee why action should

not be taken to cancel the registration granted u/s 12AA of the Act.

Chirayu Charitable Foundation ITA No.179/Ind/2019 OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) 48, ARERA HILLS, HOSHANGABAD ROAD, BHOPAL - 462011

F.No. PCIT(CentraI/BPL/12A/2018-19/4303 Dated: 06/12/2018 To M/S Chirayu Charitable Foundation, 11, Professor Colony,

BHOPAL - 462 003

Sir, Sub:- Cancellation of registration u/s 12AA of the Income tax Act, 1961 in the case of Chirayu Charitable Foundation, Bhopal- PAN:AAAAC3656P -Show cause - reg.

The Trust, "Chirayu Charitable Foundation" was granted registration u/s 12AA of the Income tax Act, 1961 by Commissioner of Income tax, Bhopal vide order dated 29.11.2002 from Assessment Year 2003-04 onwards. Accordingly the assessee trust is claiming exemption u/s 11 of the Income tax Act, 1961 on account of income applied for charitable and religious purpose in India during every year since its inception. Search and seizure action u/s 132 of the Income tax Act, 1961 was carried out at the various premises of Chirayu Health Group and its associates on 04/11/2016. Search warrant was also executed by the Central Bureau of Investigation (CBI) on 04/11/2016 at House No. 11, Professor Colony, Bhopal which is the residence of family members of Directors and Promoters of various entities of Chirayu Group. During the course of search and seizure operation by the Investigation Unit of Income tax Department on 04/11/2016, various documents were seized from premises located at Bhainskhedi, Near Bairagarh, Bhopal-Indore Highway, Bhopal The seized documents establish that the assessee Trust had received large donations from various entities and post search enquires categorically reveal that the assessee has failed to furnish the confirmation of donations received and the donations remains unexplained and suspect. Further post search enquiries establish that the activities of the assessee trust are against the bylaws and objects of the charitable and religious purposes Hence, the registration of the trust deserves to be cancelled u/s 12A/12AA{3'1 r.w.s. 13 of the Income tax Act, 1961 on the following issues:

Chirayu Charitable Foundation ITA No.179/Ind/2019 As per seized documents, the assessee Trust has received donation from various entities amounting to Rs 14,25,90,000/- which include donation of Rs. 6,10,00,000-/pertains to the F Y 2013-14 and Rs 8,15,90,000/- pertains to the F Y. 2011-12. Enquiries made into the large donations revealed that some entities who had given large donations to the Trust have filed their return of income showing very nominal income and the assessee Trust failed to furnish any details or confirmation of donations received which shows that the donations are suspect. Accordingly, you are hereby given an opportunity of being heard as per section 12AA(31 of the Income tax Act, 1961 to present yourself in person or through an Authorized Representative on 14/12/2018 at 11.00 A.M. before the Pr.Commissioner of Income tax,,(Central), Bhopal to explain as to why registration of the trust for availing exemption u/s 11 of the Income tax Act, 1961 may not be cancelled u/ s 12AA(31 r.w.s. 13 of the Income tax Act, 1961. In case no reply is received by the stipulated date, it will be presumed that you nothing to say in the matter and the case will be decided on the basis documents and information available on record in this office. It is also worthwhile to mention that this opportunity is the first and final opportunity granted to you to explain your case considering the legal fact that the assessment proceedings u/s 153A of the Income tax Act, 1961 of the assessee trust is getting time barred by limitation on 31.12.2018. Sd/- (Vinod Kumar) Pr. Commissioner of Income tax(Central) Bhopal 6. On receiving the above referred show cause notice the assessee

filed detailed reply placed at page 3 to 8 of the paper book dated

17.3.2020 wherein the assessee made submission with regard to

the various colleges and hospitals run by the society and also

referred to the documents and information in order to prove the 8

Chirayu Charitable Foundation ITA No.179/Ind/2019 identity, genuineness and creditworthiness of the donors stating

that the assessee is consistently carrying out the charitable

activities as per the objects and also further placed reliance on

various decisions. It was also submitted by the assesse that

regular assessment proceedings were conducted much prior to the

search and all the documents with regard to the receipt of donation

were furnished before the assessing authority who has accepted the

same and the assessments were duly completed without making

any addition on this issue observing that there is no concrete

material/evidence which may prove that the alleged donation are

not genuine and activities of the trust are not carried out in

accordance with the objects of the society. It was contended before

the Ld. PCIT that the proposal for cancellation of registration u/s

12AA is merely based on suspicion which is neither allowable nor

justifiable.

convince Ld. PCIT as he was of the opinion that firstly the alleged

donations received are not genuine and secondly referring to the

alleged irregularity in admission process observed by CBI at

Chirayu Charitable Foundation ITA No.179/Ind/2019 Chirayu Medical College, Bhopal came to the conclusion that the

registration granted u/s 12AA of the Act deserves to be cancelled

and accordingly invoked the provisions of Section 12AA(3) of the Act

retrospectively with effect from 1.4.2011.

challenging the impugned order of Ld. PCIT cancelling the

registration u/s 12AA of the Act raising following grounds of appeal:

(1 ) That on the facts & in the circumstances of the case and in law. the order u/s.12AA(3) of the learned PCIT cancelling the registration of assessee u/s.12AA is wholly unjustified and unlawful and, therefore, be quashed.

That on the facts & in the circumstances of the case and in law, the (2) findings of the learned PCIT for cancelling the registration of the assessee are wrong opposed to facts, unjustified and unlawful and. therefore, all such findings be quashed and the order passed by the learned PCIT u/s.12AA(3) be kindly cancelled.

That on the facts & in the circumstances of the case and in law, the (3) activities of the assessee are genuine and are being carried out in accordance with the objects of the trust and, therefore, the provisions of section 12AA(3) are not applicable. Hence the order of PCIT is unlawful and, therefore, be quashed.

That on the facts & in the circumstances of the case and in law, the (4) order of learned PCIT u/s.12AA(3) is unlawful because the said order has 10

Chirayu Charitable Foundation ITA No.179/Ind/2019 been passed without confronting the materials collected by the department behind the back of the assessee, hence the order be quashed.

That on the facts & in the circumstances of the case and in law, the (5) findings in para 7 of the order are wholly wrong and opposed to facts. The said findings have been recorded in the order without providing any opportunity to the assessee to submit its explanation in defence and hence the findings be quashed. The said findings of the learned PCI'T are also wrong because the allegations of CBI did not find place in the show cause notice dated 06.12.2018 issued by the learned PCIT.

That on the facts & in the circumstances of the case and in law, it (6) be held that the donation received by the assessee institution are genuine donations and are fully supported by the documentary evidences and, therefore, the findings of the learned PCIT that the donations are not genuine arc wholly wrong, unjustified, opposed to facts and unlawful and. therefore, the findings of the learned PCIT be quashed.

That on the facts & in the circumstances of the case and in law, the (7) findings of the learned PCI'T in para 6, 8, 9 10 & 11 of the order are wholly wrong. unjustified, opposed to facts and unlawful hence all such findings be quashed and order of the learned PCIT u/s.12AA(3) be kindly cancelled.

That on the facts & in the circumstances of the case and in law, the (8) findings of the learned PCIT that the provisions of section 13 are applicable are wholly wrong, opposed to facts and are unlawful and. therefore, such findings be quashed and it be held that the provisions of section 13 are not at all applicable.

Chirayu Charitable Foundation ITA No.179/Ind/2019 9. With regard to the above grounds Ld. Senior Counsel for the

assessee apart from referring to the written submission submitted

that firstly there is no iota of evidence to show that the assessee

society is not carrying out its activities as per the objectives of the

trust, secondly the identity, genuineness and creditworthiness of

the donors has been duly proved at multiple occasions before the

assessing authority, thirdly the alleged allegation about the

education in Chirayu Medical College has still not reached its

finality and there was no justification to cancel the registration u/s

12AA of the Act of the society which is running so many colleges

and hospitals purely for charitable purpose as provided in Section

2(15) of the Act and fourthly that those issues referred by Ld. PCIT

in the impugned notice are to be dealt by the Assessing Officer in

the regular assessment proceedings since these issues have no

bearing on the continuation of the registration granted u/s 12AA of

the Act .

below:-

It is submitted that the assessee society is a registered charitable society under M.P. Societies Registration Act, 1973. The said society was 12

Chirayu Charitable Foundation ITA No.179/Ind/2019 registered on 26.05.2001. The main objects of the society include health and education, the society, therefore, established a college and hospital known as “Chirayu Medical College and Hospital”, Bhopal. Later, the society also established “Chirayu College of Nursing”, “Chirayu College of Paramedical” and “Chirayu Cancer Hospital”. These colleges have courses of MBBS, MD, B.Sc Nursing, Post B.Sc. Nursing, GNM, MSc. Nursing, and various courses under paramedical college like DMLT, BMLT and physiotherapy etc. It is further submitted that the medical college and hospital of the assessee is approved by Medical Council of India (MCI), New Delhi, Indian Nursing Council, State Nursing Council, Director Medical Education (DME), Madhya Pradesh Medical Science University Jabalpur and Barkatullah University Bhopal. The assessee submits that in its various courses, the total number of students i.e. 1705 are studying in the institutions. 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. Apart from this, hospital run by the society is a multi specialty 750 bedded hospital catering to the health of the people of the state. It has ultra modern facilities and is playing a very important role in the health sector of Bhopal and adjoining area. Modern facilities including Kidney transplant, Cochlear implant, Advanced Cath Lab, Open Heart Surgery etc. are available at the hospital, helping the patients in timely treatment and in avoiding the unnecessary trips to metros. Similarly, Chirayu Cancer Hospital houses the ultra modern Vital Beam Linear Escalator, Pet-Scan, Gama Camera, Dual CT-Scan 16 slice etc. The society also organizes free camps for the needy and poor. Treatment is available to patients under the schemes of the govt. at low cost. The hospital is recognized by the Central Govt. as well as State Govt. for treatment of its employees. Similarly, it is recognized by many reputed institutions and corporations etc. All these facilities have helped the people of state in 13

Chirayu Charitable Foundation ITA No.179/Ind/2019 living and enjoying better life. It is, therefore, submitted that the assessee is carrying out the activities genuinely and in accordance with the objects of the society. The assessee submits that such charitable institutions do need the help of rich and affluent as well as philanthropist. These persons contribute to the charitable institutions for the welfare of the society. Thus, donations are received by such societies including the assessee society. Donations may range from very small amounts to very large amounts. That the assessee has obtained large donations totaling Rs. 14,25,90,000. Large donations do not mean that they are not genuine. In any case, it is submitted, that all such donations are genuine and obtained through banking channel only. The claim that the assessee failed to furnish the confirmation of donation received is altogether incorrect. The assessee has been regularly assessed u/s 143(3) of the Income Tax Act, 1961. Not only the confirmations but other documents of the donors including copies of their ITRs, Bank Statements, resolutions, financial statements etc. - wherein the donors have accepted and confirmed having given donations - have been submitted during the regular assessment proceedings and these are available in the records of the deptt. These have been duly considered by the assessing officer and after applying his mind and being satisfied with the explanations furnished, assessment orders have been made. It is therefore reiterated that all the donations are genuine and the confirmations are not only available but have been submitted during the regular assessment proceedings also. There is no corroborative material to show that donations are either not genuine or that confirmations were not available or that these were not furnished. The contention of the assessee is that the conditions envisaged u/s 12A/12AA(3) r.w.s. 13 of the Income Tax Act, 1961 are not fulfilled and therefore cancellation of the registration will be neither justified nor lawful.

Chirayu Charitable Foundation ITA No.179/Ind/2019 In fact, it has been observed by CIT that various documents were seized from the premises of the assessee society and that these documents establish that the assessee has received large donations from various entities. It is submitted that the same seized documents contained all the confirmations and other documents of the donors. In fact, seized material from the said premises marked as LPS-10 contained all such confirmations in original and other documents including ITRs, Bank Statements, Resolutions, Financial Statements of the donors. Thus, it is apparent that all the confirmations were available with the deptt. itself, in fact, in original. It is incomprehensible how the same documents i.e. confirmations etc. show that large donations have been received by the society and at the same time it is claimed that no such detail or confirmations were furnished. It is, therefore, reiterated that the seized material was in custody of the deptt. and it contained all the confirmations and other documents as above said and thus, there is no ground to treat the said donations as unexplained and suspect.

It is further submitted that apart from the above said two occasions reflecting that the detail and confirmations of the donors were available with the deptt., the assessee filed a submission dt. 26.11.2018 on 04.12.2018 enclosing therewith all the details, confirmations and other documents of the donors establishing the genuineness of the donations. Even, this submission of the assessee seems not to have been considered before concluding that the assessee failed to furnish any details or confirmation of donation received hence the same are suspect. It is, therefore, submitted that the assessee furnished the confirmations and other documents thrice and thus, cancellation of registration is unlawful.

It has also been observed that some entities who had given large donations to the assessee have filed their return of income showing very

Chirayu Charitable Foundation ITA No.179/Ind/2019 nominal income. It is apparent that this is not the concern of the assessee. Someone wishing to donate to the assessee society is always welcome and it is up to the donor how he/she or it arranges the fund. It is only later that other documents of the donors are sought and that is just in order to establish the identity of the donor to the deptt. Just because some entities have filed their return of income showing very nominal income doesn’t make the donations unexplained or suspect. Reflecting nominal income in the return of income may be because of the various provisions of the Income Tax Act, 1961 allowing exemptions and deductions of varying sorts including, of course, the case where one charitable society gives donation to another society. Such donor society may have nominal or nil income. Thus, just because nominal income has been reflected doesn’t make the assessee or its donation suspect and therefore, cancellation of registration cannot be proceeded through on such ground. Even otherwise this is an issue to be considered in assessment qua violation of section 11 or 13 and is not an issue relevant for cancellation of registration.

It has also been observed that post search enquiries established that the activities of the trust are against the bye laws and objects of the charitable and religious purposes. But, no specific mention has been made regarding the activity(s) which were against the bye laws and objects of the charitable and religious purposes. The show cause notice or the order does not inform the specific activity which was so found, being against the bye laws and objects of the society. It is vehemently submitted that there is no evidence that the activities of the assessee society are not genuine or that they are not in accordance with the objects and bye laws of the society. Further, just quoting that the activities of the assessee are against the bye laws and objects wouldn’t serve the purpose of justice. Cancellation of registration cannot be done on such flimsy and non-existent grounds. 16

Chirayu Charitable Foundation ITA No.179/Ind/2019

It can be seen from the notice/order that the issue raised to claim that the assessee deserved cancellation is just nothing but suspicion. Twice in the notice it has been brought out that the donations are suspect. Thus, there is only suspicion. There is no establishment of the fact. It is respectfully submitted that cancellation of registration u/s 12AA(3) r.w.s. 13 of the Income Tax Act, 1961 is not possible on suspicion. There is no satisfaction that the activities of the institution are not genuine or are not being carried out in accordance with the objects of the institution.

In the order it is observed that certain post search enquires were made which revealed that the assessee failed to furnish the confirmation of donations received or which established that the activities of the assessee are against the bye laws and objects of the charitable and religious purposes. But, no material regarding the said post search enquiries which has been used against the appellant have been made available to the appellant. In fact there is no such material with the department. In any case, copies of the confirmations and other documents related to the donations were filed with the CIT. These show beyond doubt that the donations are genuine, explained and not suspect. 11. The seized documents contained in LPS 10 fully establish the fact that donations are genuine in view of the provisions of section 292C of the Income Tax Act, 1961. It is reiterated that in the regular assessment proceedings conducted much prior to search, above documents were furnished and receipts of donation were examined and genuineness was accepted and the assessments were completed. It is submitted that section 13 is for assessment and not for registration. There is no concrete material / evidence which may prove that activities are not genuine or the activities are not carrying on in accordance with the objects of the

Chirayu Charitable Foundation ITA No.179/Ind/2019 society. The cancellation is based on suspicion and suspicion alone, which is neither lawful nor justified. The assessee further submits that application of section 13 is for the assessment of income while granting the exemption of deduction u/s. 11 & 12 of the Act and it is not for the purpose of the cancellation of registration u/s.12AA(3) of the Act. In support of it reliance is placed on following decisions:- (i) Hon’ble Karnataka High Court in the case of CIT Vs. Islamic Academic of Education reported in 229 Taxman 274 (Karn). (ii) Hon'ble Allahabad High Court in the case of Red Rose School reported in (2007) 163 Taxman 19 (All) (iii) Krupanidhi Educational Trust Vs. DIT (E) – 152 TTJ 673.

(iv) Prabodhan Prasarak Shikshan Santhan Vs. DCIT – 152 ITD 473 (Pune) (v) Rajasthan Vikas Sansthan Vs. CIT reported in 78 DTR 411 (Raj)

Submissions to contradict the allegation that the donation of Rs. 81590000 is unexplained corpus donation u/s. 68 :

12.1. The addition of Rs. 81590000 is with respect to the donation received by the assessee from the donor M/s. Riviera Infoway Ltd (PAN: AACCR2329G). The assessee filed the copy of ledger account of the aforesaid person in its books of accounts. From the perusal of the ledger account, it would be seen that in F.Y. 2010-11 (relevant A.Y. 2011-12), the assessee had received Rs. 72890000 (all through banking channels) from the said person and this receipt of money in that year in the balance sheet as at 31.03.2011 was shown as unsecured loan. In F.Y. 2011-12 (relevant A.Y. 2012-13), the assessee further received Rs.

Chirayu Charitable Foundation ITA No.179/Ind/2019 8700000 (all through banking channels) from the said donor. Thus, the total amount received from the said person was Rs. 81590000. The assessee submits that thereafter, on the strength of resolutions of the board and of extra ordinary general meetings of members of the said company, the receipt of money Rs. 81590000 was taken as corpus donation (copy of Resolutions were duly filed). The journal entry accordingly was passed in the books of account on 29.08.2011 and then the assessee had issued a receipt to the said company for receiving donations. The copy of receipt was also duly filed.

12.2. It is submitted that the assessment for A.Y. 2011-12 was completed as scrutiny assessment u/s 143(3) on 18.03.2014 in the normal course. It is submitted further that in the course of regular assessment proceedings, on specific query from the A.O., the confirmation of all loan creditors along with all related documents were furnished which, inter alia, included the confirmation letter of the said company giving an amount of Rs. 72890000. The copy of the bank account of the company along with the acknowledgment of return for A.Y. 2009-10 was also furnished in the said regular assessment proceedings. In the said regular assessment, the genuineness of the receipt of money of Rs. 72890000 was accepted and accordingly the assessment order was passed much prior to the search. The assessee submits that all the above documents exist on the assessment record of the assessee of A.Y. 2011-12.

12.3. It is submitted that the assessment for AY 2012-13 was also completed as scrutiny assessment u/s 143(3) on 24.03.2014 in the normal course. It is submitted further that in the course of regular assessment proceedings, on specific query from the A.O., the assessee had furnished confirmation letter of the donor company confirming the donation of Rs. 81590000 along with the ackd. of return for AY 2012-13. 19

Chirayu Charitable Foundation ITA No.179/Ind/2019 In the said regular assessment, the genuineness of the receipt of money from the aforesaid company and the genuineness of transaction of donation was accepted and, accordingly, the scrutiny assessment order was passed much prior to the search. The assessee submits that all the above documents exist on the assessment record of the assessee of AY 12-13.

12.4. Later, a search took place at the assessee’s premises on 04.11.2016. In the course of search, the documents which related to donation were found and seized. The said seized documents are (i) receipt issued by Chirayu Charitable Foundation to M/s. Riviera Infoway Pvt Ltd (hereinafter referred to as “Donor Company”) with respect to the donation of Rs. 81590000 (ii) the copy of audited final accounts & audit report for A.Y. 2012-13 of the donor company (iii) Copy of acknowledgement of return of donor company for A.Y. 2013-14 (iv) the copy of audited final accounts & audit report for A.Y. 2013-14 of the donor company (v) Copy of resolutions passed by the board of the donor company and also the copy of resolutions passed by the members of the donor company in extra ordinary general meeting and also the copy of notice of extra ordinary general meeting along with explanatory statement as per the provisions of the Companies Act. It is submitted that all the documents as referred to in this para, are not incriminating materials but are in fact documents establishing the genuineness of the aforesaid donation.

12.5. The assessee submits that thereafter, pursuant to the provisions of section 153A, the assessment proceedings were conducted for A.Y. 2012-13 and in the course of assessment proceedings, all the above documents referred in para 4 above, and also all other documents referred to in para 2 & 3 above were again furnished before the learned A.O. The assessee had also furnished a detailed reply in support of the 20

Chirayu Charitable Foundation ITA No.179/Ind/2019 genuineness of the donation vide letter dated 26.11.2018. In the said letter, the assessee submitted before the learned A.O. that all the donations of the assessee reflected in the accounts are genuine donation and the assessee has submitted every possible evidence in this regard and further submitted in para-2 of the said letter that in case, she (A.O.) doubts the genuineness of the transactions and the documents furnished, then the assessee made a specific request to kindly get the verification done by issue of summons u/s. 131/133(6) of the Act to the concerned donor person. The request was again repeated vide letter dated 28.12.2018. However, without communicating the outcome of the enquiry, the AO made the addition of the donation of Rs. 81590000. In the assessment order, in para 11.5(a), the A.O. mentions that during the course of post search enquiry, detailed investigation was done by Investigation Wing. The assessee submits that the assessee has no knowledge as to what was the outcome of such detailed investigation. The A.O. has also not supplied the copy of material, which were adverse to the assessee and used in the assessment against the assessee. The said material has never been confronted. From the reading of the para 11.5(a), it prima facie appears that there was nothing against the assessee because the A.O. simply says with respect to amount of Rs. 81590000 that the donor company has filed the return showing the gross total income of Rs. 2022 and this is the sole reason for not accepting the donation. The genuineness of none of the documents as furnished in the course of post search assessment proceedings and pre-search assessment proceedings has been doubted by the A.O. In the search also, no incriminating material was found which showed that it is the assessee’s income which came to the assessee under the garb of donation and, therefore, the addition of Rs. 81590000 is wholly unlawful and unjustified and warrants deletion. The assessee submits that the income is not the sole criteria for doubting the genuineness. The balance sheet itself shows the inflow & outflow of the funds and the profit of the 21

Chirayu Charitable Foundation ITA No.179/Ind/2019 company is not the sole factor for assessing the availability of liquid funds. The donor company was also assessed to tax. The PAN was given and also the acknowledgement of filing of the return. Thus, the assessee has completely discharged its burden in explaining its transactions with the donor company. It is very relevant and important to mention herein that in the regular scrutiny assessment of the assessee completed much before the search for A.Y. 2011-12 & 2012-13, all the transactions were accepted as genuine and in the search, nothing was found to disprove their genuineness.

12.6. The assessee submits that the further findings of the CIT are wholly wrong and false. The assessee submits that all the said findings are wholly false, incorrect, baseless and without any concrete materials/positive evidence. No such evidence legally admissible in law has been referred to in the order. The books of accounts shows the donation receipts have been duly recorded in the books and used wholly and solely for the purposes of the institution. All the findings of the CIT are based on suspicion and suspicion alone and without any cogent material to support his findings, hence the false and baseless findings be quashed. The Apex Court in the case of State of Kerala Vs. M.M. Mathew reported in (1978) 42 STC 348 (SC) held “Strong suspicion, strange coincidence and grave doubts cannot take the place of legal proof.” This decision has been referred to and relied upon by the Jurisdictional Appellate Tribunal, Indore in the case of Asha Devi Goyal & Others Vs. ACIT reported in 32 ITC 386/394 (Ind).

Chirayu Charitable Foundation ITA No.179/Ind/2019 A.Y. Donation received from Amount

2014-15 Thakur Educational Trust (AACTT4004F) 10000000

Thakur House, Ashok Nagar, Kandivili (E),

Mumbai – 400101

2014-15 Thakur Educational Trust (AACTT4004F) 6000000

Thakur House, Ashok Nagar, Kandivili (E),

Mumbai – 400101

2014-15 Zagdu Singh Charitable Trust 10000000

(AAATZ0141P)

Thakur House, Ashok Nagar, Kandivili (E),

Mumbai – 400101

2014-15 Zagdu Singh Charitable Trust 10000000

(AAATZ0141P)

Thakur House, Ashok Nagar, Kandivili (E),

Mumbai – 400101

2014-15 Udodas Mundhra Seva Santhan 5000000

(AAATU0983C)

Total 41000000

13.2. In the course of assessment proceedings in support of the genuineness of the transactions, following documents were furnished (a) With respect to donation from Thakur Educational Trust (AACTT4004F) – Rs. 10000000 + Rs. 6000000

Chirayu Charitable Foundation ITA No.179/Ind/2019 Confirmation letter (Seized document) Certified copy of resolution of the donor giving donation (Seized document) Appeal by the assessee to the donor for giving donation. (Seized document) Copy of the notice u/s.133(6) dated 18.07.2016 issued by assessing officer (Dy. Commissioner of Income Tax (Exemption)-2(1), Mumbai) of Thakur Educational Trust for confirmation of donation given to the assessee. This letter was issued by the A.O. of the Thakur Educational Trust in connection with the assessment proceedings pending for A.Y. 2014-15 of the said trust. Copy of reply of the assessee in compliance to notice u/s. 133(6) to DCIT (Exemption)-2 (1), Mumbai.

(b) With respect to donation from Zagdu Singh Charitable Trust (AAATZ0141P) – Rs.10000000 + Rs.1000000 Confirmation letter (Seized document) Appeal by the assessee to the donor for giving donation. (Seized document) Copy of the notice u/s. 133(6) dated 18.07.2016 issued by assessing officer (Dy. Commissioner of Income Tax (Exemption)-2(1), Mumbai) of Zagdu Singh Charitable Trust for confirmation of donation given to the assessee. This letter was issued by the A.O. of the Zagdu Singh Charitable Trust in connection with the assessment proceedings pending for A.Y. 2014-15 of the said trust. Copy of reply of the assessee in compliance to notice u/s. 133(6) to DCIT (Exemption)-2 (1), Mumbai.

(c) With respect to donation from Udhodas Mundhra Seva Santhan (AAATU0983C) – Rs. 5000000 Confirmation letter (Seized document) 24

Chirayu Charitable Foundation ITA No.179/Ind/2019 Appeal by the assessee to the donor for giving donation. (Seized document) 13.3. It is submitted that with respect to donation received of Rs. 16000000 from Thakur Educational Trust, the CIT/AO doubted the genuineness of donation on the ground that the said trust has shown income of Rs. 300 only. In the case of Zagdu Singh Charitable Trust, the donation of Rs. 20000000 has been doubted on the same reason that the said trust has shown NIL income. Assessee submits that these two institutions are assessed to Income Tax at Mumbai. The assessing officer of the said two institutions of Mumbai issued notice to the assessee to confirm that the assessee has received donation from them. The notices issued u/s 133(6) by the AO of the institutions very much show that the payment of donation was made from the explained resources by the said institutions. It is submitted that the profit / income is not the sole consideration because the availability of funds can be from other sources also i.e. realization of debts etc. It is submitted that in all fairness of the matter, the assessing officer could have made the enquiry from the assessing officer of the donor institutions at Mumbai who issued the notices u/s 133(6) for the purpose of assessment of AY 2014-15 of the said two institutions. In the course of assessments the assessee also requested repeatedly vide letters dt. 26.11.2018 and 28.12.2018 to issue summons to the said two institutions u/s 131 / 133(6) of the Act, but, without the knowledge of the assessee, it appears from page no. 12 of the Order, she had issued a notice u/s 133(6) to the donor. She has not mentioned in the assessment order what was the statement / reply of the donor institutions received by her from the donors and no such material has been confronted to the assessee. From the reading of the order it is apparent that the donors have confirmed giving the donation to the assessee, thus, there is no denial from the donors regarding giving the donation.

Chirayu Charitable Foundation ITA No.179/Ind/2019 13.4. In the course of assessment proceedings, the assessee submitted the profile of the Thakur Educational Trust and Zagdu Singh Charitable Trust. This profile is available on the web site of the Thakur group of institutions. It is submitted that this group is running 16 educational institutions at Kandivali, western suburb of Mumbai wherein over 40000 students are studying, which itself proves the worth of the donor institutions. The copy of institution’s profile as available on the web site was also filed. The assessee submits that the returned income which has been seen by the learned CIT/AO is only after exemptions available u/s 11 / 12 of the Act. It may be appreciated that the assessee had also submitted the notices issued by the assessing officer of the said two institutions. These notices fully establish the fact that the institutions are genuine institutions and are regularly assessed to tax.

13.5. The assessee submits that the further findings of the CIT are wholly wrong and false and without any concrete materials/positive evidence. No such evidence legally admissible in law has been referred to in the order. The books of accounts shows the donation receipts have been duly recorded in the books and used wholly and solely for the purposes of the institution. All the findings of the CIT are based on suspicion and suspicion alone and without any cogent material to support his findings, hence the false and baseless findings be quashed. The Apex Court in the case of State of Kerala Vs. M.M. Mathew reported in (1978) 42 STC 348 (SC) held “Strong suspicion, strange coincidence and grave doubts cannot take the place of legal proof.” This decision has been referred to and relied upon by the Jurisdictional Appellate Tribunal, Indore in the case of Asha Devi Goyal & Others Vs. ACIT reported in 32 ITC 386/394 (Ind).

13.6. In connection with the donation of Rs. 5000000 received from Udhodas Mundra Seva Sansthan, it is submitted that the assessee has 26

Chirayu Charitable Foundation ITA No.179/Ind/2019 already submitted a confirmation letter from the said donor confirming the said donation and in the said confirmation letter the donor has given his Permanent Account No. This confirmation letter forms part of the seized material along with the appeal of the assessee to the said donor to make generous donation. It is also apparent from the assessment order that notices u/s 133(6) of the Act were issued to all the donors mentioned in the Show Cause Notice including Udhodas Mundra Seva Sansthan. From the reading of the assessment order it is apparent that all the donors have confirmed giving the donation to the assessee. Thus, there is no statement of any donor stating that they have not given the donation including Udhodas Mundra Seva Sansthan. The learned AO has also noted that the third party enquiry conducted by ADIT (Inv.)-2(4), Kolkata revealed that the registered office of the said donor was a common address of many companies / firms which is identical to typical jama-kharchi entity. In this respect it is submitted, firstly, that the enquiry was conducted at the branch office of the said donor at Kolkata and not at the Head office at New Delhi. No material has been brought on record to justify why enquiry was not made at Head Office. Secondly, simply observing that the branch office of the donor is typical of jama- kharchi entity without having any cogent evidence is suspicion and presumption only which cannot be a part of judicial analysis. In big cities like Delhi, Mumbai etc., common addresses is normal phenomenon. In those cities, even a table is shared by more than one person. Thus, this could not be a ground for raising a suspicion. It is further submitted that in the course of assessment, the Inspector’s report was neither shown nor confronted, and, therefore, the order is nullity. The Apex Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise CIVIL APPEAL NO. 4228 OF 2006 [2015] 127 DTR (SC) 241, held that “Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which 27

Chirayu Charitable Foundation ITA No.179/Ind/2019 makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.” 13.7. The findings in the order u/s 12A are not justified because the assessee has placed every possible evidence before the learned CIT and the A.O. in support of its contention that the receipt of corpus donation is genuine. The documents found in the search, as mentioned in the foregoing paragraphs in respect of the donation of Rs. 81590000 (in AY 2012-13) and Rs. 41000000 (in AY 2014-15) also support the genuineness and correctness of the assessee’s submission in view of section 292C of the Act which section reads as under:

292C. Presumption as to assets, books of account, etc.—Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132, it may, in any proceeding under this Act, be presumed— (i ) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii ) that the contents of such books of account and other documents are true; and

(iii ) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested

Chirayu Charitable Foundation ITA No.179/Ind/2019 by the person by whom it purports to have been so executed or attested.".

13.8. The assessee submits that with regard to the documents furnished in respect of the genuineness of donation of Rs. 81590000 (in A.Y. 2012- 13) & Rs. 41000000 (in A.Y. 2014-15), it has discharged its burden u/s. 68 of the Act and in view of the following decisions, the aforesaid allegations that donations are not genuine are neither justified nor lawful and, therefore, be deleted. In support of this reliance was placed on the following decisions;

Chirayu Charitable Foundation ITA No.179/Ind/2019 10. Hon'ble ITAT Delhi Bench in the case of Kamal Engineering Works v/s. ITO reported in 52-TTJ (Del) –75. 11. Hon'ble ITAT Rajkot Bench in the case of ACIT v/s. Radhey Shyam Bansal reported in (2000) 68 TTJ (Rajkot) 136 12. Hon'ble ITAT Ahmedabad Bench in the case of ITO v/s. Meghjibhai Virjibhai Patel reported in 11-TTJ-367 13. Hon'ble ITAT Indore Bench in the case of ITO v/s. Pradeep Kumar Badjatya & Co. reported in 25-ITC-147

to the following finding of Ld. PCIT mentioned in the impugned

order:-

“5. Accordingly, a show cause notice was issued to the assessee vide this office letter F.No.PCIT(Central)/BPLl12A/2018-19/4303 dated 06112/2018 and the aforesaid facts were confronted to the assessee. In response, the assessee filed its written submissions which have been perused and are placed on record. The assessee mainly relied on the confirmations of the donors substantiating such donations and filed the same during the proceedings u/s 12AA of the Income Tax Act, 1961.

Chirayu Charitable Foundation ITA No.179/Ind/2019 framed against the Chirayu Medical College, Bhopal at Page no. 78, 79 & 80 which is reproduced as under:

I. "Documents collected from DME and the said Medical College as well as statements of witnesses has established that the management of the said Medical College dishonesty furnished false information to DME about admission of 12 accused candidates ('engines') in the said medical college whereas they had actually not taken admission.

II. Investigation revealed that even on 25.09.2012 when vacancy chart was prepared by DME Counselling Committee in the presence of representatives of each Medical College, the said Medical College only reported 9 vacant seats whereas more than 50 seats were vacant. During investigation. the said Medical College has made available to CBI a letter dated 28.09.2012 addressed to DME under the signature of Dean of the college in which it is mentioned that majority of the students who were allotted by DME for admission in this college in the 1st counselling had not reported after making enquiries from the college about the fee, etc. This letter is not available in the records of DME and the Medical College has failed to make available the dispatch register for the relevant period. The earlier letter of the college dated 21.09.2012 to the DME, vide which it had reported vacancy of only 9 seats out of 63, was a false documents and it was sent to DME to ensure that eligible and deserving students were not allotted to the college in 2nd round of counselling.

Ill. It is revealed that despite the (act that allotted students of 2nd round of counselling were given 4 days time till 29tll September to get admission, the College Level Admission Committee on 28tll September admitted 19 new students who were not from the allotment list at all. 32 new students were admitted on 29th September 31

Chirayu Charitable Foundation ITA No.179/Ind/2019 and 4 students on 30 September without any merit and without following any criteria. All these admissions were made without following the due process.

IV. Investigation revealed that as in the case of Index Medical College, the college forwarded list of admitted students to DME, which was very much different from the Allotment List of DME which was dishonestly countersigned and forwarded by NM Srivastava. the then Joint Director 0/0 DME to the concerned University to which this Pvt. Medical College was affiliated and to MCI and thereby abetted regularization of these illegal admission.

V Investigation further revealed that as in the case of Index Medical College, this Medical College also did not adhere to the rules/regulations of reservations (SC/ST, etc.).

VI. During investigation. it was revealed that most of the students allotted to the medical college in the 1st round of DME counselling had never reported in the college yet the college authorities were directed by Ajay Goenka, the Chairman of the medical college to send a report to DME giving false information that only 9 seats are vacant in the college whereas about 50 seats were vacant. Thereafter, vide a letter dated 21.09.2012, the then Dean of the Medical college submitted this information to the DME. The college Level admission committee comprising of Virendra Mohan. the then Dean, Ravi Saxena, V.H. Bhavgar, A.K. Jain, S.N.Saxena, Vinod Narkhede and Harsh SaLankar, all members o(the College Level admission committee had made these admission without any due process from 28.09.2012 to 30.09.2012.

VII. One of the accused who is among the 12 accused candidates whose admission, was falsely reported by the Medical College of DME, has stated 32

Chirayu Charitable Foundation ITA No.179/Ind/2019 that he was taken by racketeer Sanjiv Shilpkar tothe medical college he was made to sign on blank paper and was given 1.50 lakh for leaving his seat. He never took admission in the medical college as he was afraid an MBBS student in another medical college and his original documents were in the possession o(this medical college where he was studying.

VIII. Accused engine Aksha Kumar who is one 0f the aforesaid 12 candidates whose admission was falsely reported by the said medical college to DME has stated in his disclosure statement u/s 27 IEA recorded by STF on 11.02.2014 that he was paid Rs.50,000/-by middleman Vivek Yadav for seat cancellation in Chirayu Medical College, Bhopal”,

Procedure for registration 12AA

(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A {IS it stood before its amendment by the 33

Chirayu Charitable Foundation ITA No.179/Ind/2019 Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of. such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration o/such trust or institution Provided that no order under this sub-section shall he passed unless such trust or institution has been given a reasonable opportunity q/being heard. V. W. 10. After careful consideration of the facts of the case it is seen that the assessee trust is generating cash by manipulation of admission process by admitting non deserving candidates in place of meritorious & deserving candidates. The cash so generated is channelized in the books of the assessee trust in the form of donations from a er entities who have no creditworthiness. Thakur Education Trust, from whom the assessee Trust has shown a donation of Rs. 1,60,00,000/-, in its return of income for A.Y. 2014-15 has shown gross total income of Rs. 300/-. Zagdu Singh Charitable Trust from whom the assessee Trust has shown a donation of Rs. 2,00,00,000/-, in its return for A.Y. 2013-14 has filed NIL gross total income. M/s Riviera Infoway Ltd from whom the assessee Trust has shown a Corpus Donation of Rs. 8,15,90,000/- on 01.07.2011, has filed return of A.Y. 2012-13 declaring gross total income of Rs. 2,022/-.Third party enquiry conducted by ADIT(Inv.)-2(4) Kolkata revealed that the registered office of Udodas Mundhra Seva Sansthan at 1st Floor, Yamuna Bhawan, 55 Ezra Street, Kolkata-01 is a common address of many companies/firms which as per the reportof ADIT(Inv)-2(4) Kolkata is identical to typical jama-kharchi entity.

Chirayu Charitable Foundation ITA No.179/Ind/2019 tax Act, 1961 with effect from 1.04.2011 that is the period from which violation of the trust provisions are noticed as discussed above.

placed before us and gone through the judgments/decisions

referred by Senior Ld. Counsel for the assessee. Though the

assessee has raised 8 grounds of appeal but the soul issue is that

“whether the Ld. PCIT was justified in invoking section 12AA(3) of the

Act thereby cancelling the registration of the society granted u/s

12AA of the Act w.e.f. 1.4.2011.”

society on 26.5.2001 under M.P. Societies Registration Act and

granted registration u/s 12AA of the Act w.e.f. 1.4.2002 is

established to carry out charitable activities in the field of health

and education. The main aims and objects of the Trust are as

under :-

I. To establish, run, manage, develop, own, acquire, open, purchase, undertake, improve, equip, promote, initiate, encourage, subside, sponsor, maintain, and organize hospital, nursing homes, dispensaries, clinics, polybanks, eye-banks, kidney-banks, physiotherapy centres, investigation centres, health care centres and other clinical experimental diagnostic centres and other similar institutions, centres

Chirayu Charitable Foundation ITA No.179/Ind/2019 and establishments for providing services, treatment, care and medical relief and also to co-operate and coordinate with existing ones.

II. To establish, run, manage, develop, own acquire, open, purchase, undertake, improve, equip, promote, initiate, encourage, subsidies, sponsor, maintain and organize schools, college, diploma courses, computer centres, academics etc. to educate and train the people in vocational, art, culture, religion and technical field as also to impart training, instructions and exercise, give practical exposure and organize seminars, classes, workshops etc.

Ill. To educate and promote general and specialized awareness in the public regarding medical science, hygiene and sanitation for bringing about improvement in the overall health scenario of the country.

IV. To establish and promote Research and technological institutes for the advancement of science and technology specially in the field of medical science and engineering.

V. The promotion of medical science, education, literate and advancement of the various technologies in this field and to use various advanced methods, equipment, machines for the purpose of the society.

VI. To run, organize and manage camps of various nature including Eye Centres, Donation Camp, Dental Camp, Cancer Detection Camp etc. and operation medical check-up centres, training centres relating to various disease dispense drugs, medicines and other related material.

VII. To undertake run and manage projects of alleviating disease, ailments, hunger, undemourishment and such health related problems.

VIII. To undertake, run and manage such other projects of removing social ill like illiteracy, unemployment, poverty, injustice etc. and to 36

Chirayu Charitable Foundation ITA No.179/Ind/2019 promote welfare of the people through religious, spiritual and social service activities.

IX. The society shall work in all fields and run all type of institution in the field of culture, religion, science and technology which are necessary to promote research, education and welfare for the benefit of the citizens of the country.

X. To achieve the objects, the society shall construct buildings, hospitals, clinics diagnostic centres, research centres, colleges etc. and shall raise all other necessary infrastructure, equipment, machines, tools and raise fitting and to do all necessary and incidental there for the beneficiaries.

The object of the society shall not include objects involving the carrying on of activity for profit within the meaning of Income Tax, 1961.

of “charitable purpose” as provided in Section 2(15) of the Income

Tax Act which reads that :-

(15) " charitable purpose" includes relief of the poor, education,

medical relief, [preservation of environment (including watersheds,

forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest)and the advancement of any

other object of general public utility ;

has established and consistently running colleges and hospitals 37

Chirayu Charitable Foundation ITA No.179/Ind/2019 namely “Chirayu Meical College and Hospital”, Bhopal, “Chirayu

College of Nursing”, “Chirayu College of Para Medical” and “Chirayu

Cancer Hospital”. These colleges have courses of MBBS, MD, B.Sc

Nursing. Post B.Sc. Nursing. GNM, MSc. Nursing, and various

courses under paramedical college like DMIT, BMLT and

physiotherapy etc. All these colleges and hospitals are educating

students and hospitals are providing medical services to public at

large.

the Central Bureau of Investigation (In short ‘CBI’) at the premises

of the director and promoter of Chirayu group at 11, Professor

Colony, Bhopal. Cash and jewellery were found. Income Tax

Department was informed. Search and Seizure operation u/s 132 of

the Act was carried out on the very same day i.e. 4.11.2016 at

various premises of Chirayu Health group and certain documents

and other materials were seized. Based on these evidence and

material Addl. CIT (Central), Bhopal made a proposal for

cancellation of registration granted u/s 12AA of the Act and in this

proposal reference was made only with regard to donations received

Chirayu Charitable Foundation ITA No.179/Ind/2019 by Chirayu Charitable Foundation questioning the genuineness of

transaction and creditworthiness of the donors. Ld. PCIT

accordingly issued show cause notice to the assesee asking the

assessee to explain the genuineness of donations from various

entities received during financial year 2011-12 and 2013-14. The

main observation of Ld. PCIT in the show cause notice was that the

donors giving huge donations are having very nominal income

which raises doubt on the creditworthiness of the donors. Apart

from questioning the genuineness of donors there is no allegation

on the assessee society of not carrying out the charitable activities

as per the aims and objects of the society.

the assessee by submitting that the identity of the donors,

genuineness of the donation received and creditworthiness of the

donors has been proved time and again before the Ld. A.O during

the course of assessment proceedings giving relevant documents

including confirmation letters and other related documents with

regard to the donations received through banking channel. All

these documents were again filed with the reply before Ld. PCIT.

Chirayu Charitable Foundation ITA No.179/Ind/2019 18. However Ld. PCIT was not convinced and he was of the

opinion that the confirmation filed by the assessee are nothing but

self serving and the donors are entities having no means and are

merely paper concerns. Along with this observation also Ld. PCIT

gave a reference to the charges framed by CBI against Chirayu

Medical College & Hospitals with regard to alleged irregularity in the

admission process by way of admitting non deserving candidates.

Based on these two observation Ld. PCIT invoked provisions of

section 12AA(3) of the Act cancelling the registration u/s 12AA of

the Act.

provisions of Section 12AA of the Act which reads as follows:-

12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall— 48[(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,— (i) the genuineness of activities of the trust or institution; and (ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also make such inquiries as he may deem necessary in this behalf; and]

Chirayu Charitable Foundation ITA No.179/Ind/2019 (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities 49[as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause], he—

(i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,

and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.

(1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.

(2) Every order granting or refusing registration under clause (b) of sub- section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A.

(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that

Chirayu Charitable Foundation ITA No.179/Ind/2019 50[(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or (b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:] Provided that the registration shall not be cancelled under this sub- section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. 20. The power of the PCIT or CIT to cancel the registration is

provided in sub section (3) of 12AA of the Act, as per which if the

PCIT/CIT is satisfied that (a) the activities of such trust in question

are not genuine (b) or are not being carried out in accordance with

the objects of the trust or institution, then in this situation

PCIT/CIT may pass an order in writing cancelling the registration of

such trust or institution after providing reasonable opportunity of

being heard.

PCIT/CIT needs to be satisfied that the activities of such trust

institution or are not being carrying out in accordance with the

objects. Going through the show cause notice we find that the only 42

Chirayu Charitable Foundation ITA No.179/Ind/2019 allegation mentioned is with regard to genuineness of donation

received by the trust. There is no mention about any charge

against the trust/institution showing that its activities are not

being carried out for charitable purpose or its activities are beyond

the scope provided in the aims and objects provided in the trust. It

is noteworthy that the assessee society is running various hospitals

and colleges namely “Chirayu Meical College and Hospital”, Bhopal,

“Chirayu College of Nursing”, “Chirayu College of Para Medical” and

“Chirayu Cancer Hospital” which apart from running 750 bedded

multi specialty hospital is also imparting education to around 2000

students in various colleges having courses of MBBS, MD, B.Sc

Nursing. Post B.Sc. Nursing. GNM, MSc. Nursing, and various

courses under paramedical college like DMIT, BMLT and

physiotherapy etc. Ld. PCIT has not made any observation nor

any concrete finding with necessary investigation and information

about any of these colleges and hospitals run by the assessee trust

of not carrying out for charitable activities of imparting education

and medical relief. The sole issue raised in the show cause notice is

about the genuineness of donors. Receiving of donation through

banking channel from various entities is the source of income or 43

Chirayu Charitable Foundation ITA No.179/Ind/2019 fund which is subsequently used for application of the same for

achieving the objects of the trust. Once the funds are received then

they are utilised for carrying out charitable activities. Unless and

until there is any evidence to show that the assessee trust is not

carrying out the activities as per its objects which are not charitable

in nature then there remains no scope/reason with Ld. PCIT to

cancel the registration u/s 12AA of the Act. Certainly during the

course of assessment proceedings the additions can be made by the

Ld. A.O if he is of the opinion that the funds received are not

genuine or the funds have been diverted as provided in Section 13

of the Act which can thus give rise to additions to be made in the

hands of the assessee.

cancellation of registration u/s 12AA of the Act is based on

following two observations:-

(i) The alleged irregularity in admission process at Chirayu

Medical College observed by CBI

(ii) Genuineness of donation received from various concerns

Chirayu Charitable Foundation ITA No.179/Ind/2019 and doubting their creditworthiness as they have nominal or

meagre source of income.

has not mentioned the same in the show cause notice thus giving

no opportunity to the assessee to file its submission thereby

violating the provisions of proviso to section 12AA(3) of the Act

which provides that reasonable opportunity of being heard should

have been provided to the assessee. Ld. PCIT without mentioning

this issue in the show cause notice has merely reproduced part of

final report of CBI dated 31.7.2015 relating to the assessee trust.

This action of Ld. PCIT in our considered view is unjustifiable since

the issue is already subjudice before the court and it is merely an

allegation which has not reached to its finality and seems no sound

basis for cancelling the registration of the assessee trust granted

u/s 12AA of the Act. Ld. PCIT ought to have appreciated the fact

that the assessee society is running number of colleges and

hospitals and just because one of its college that too for particular

course there is an allegation by few students about the irregularity

in the admission process, the overall working of the society running

Chirayu Charitable Foundation ITA No.179/Ind/2019 for carrying out charitable activities imparting education and

medical relied cannot be doubted.

PCIT as it does not form part of show cause notice. Since the

alleged charge was beyond the scope of show cause notice and is

also vague and without any detail it cannot form basis to cancel the

registration u/s 12AA of the Act. We observe that Ld. PCIT has not

adhered to the principles of natural justice since the assessee was

not provided with reasonable opportunity to defend its case. The

reply given by the assessee during the course of impugned

proceedings was only with reference to the issue of genuineness of

donations received mentioned in the show cause notice issue. If

any new issue was adopted as a basis to cancel the registration u/s

12AA of the Act Ld. PCIT was duty bound to issue a second show

cause notice to provide opportunity to the assessee to defend itself

as held in the case of UMC Technologies Ltd. v. Food Corporation of

India, 2020 SCC OnLine SC 934, decided on 16.11.2020 wherein

Hon'ble Apex court held that “an order travelling beyond the

bounds of notice is impressible and without jurisdiction to that

extent”. 46

Chirayu Charitable Foundation ITA No.179/Ind/2019 25. It is judicial settled principle that the show cause notice

should clearly indicate the nature of violations if any and should

specifically state the specific provisions violated and should also

release the material relied on against the assessee. It is also well

settled principle that an enquiry cannot go beyond the scope of the

show cause notice and it is also not permissible to rely on

supplementary material in the order and if it is done so then the

officer passing the order is held to have acted beyond the

jurisdiction. In the instant case also we find that Ld. PCIT has gone

far beyond the charges and material stated in the show case notice

and the final outcome of the proceedings seems to be partly relied

on the facts and issues not mentioned in the show cause notice. In

these given facts and circumstances such orders made against a

person without following the rules of natural justice are held to be

bad in law. Our view is supported by the following decisions;

D.A. Gadgil v. Securities & Exchange Board of (i) India [(2000) CLC 1873],

(ii) Mohinder Singh Gill v. The Chief Election Commissioner [AIR 1978 SC 851],

Chirayu Charitable Foundation ITA No.179/Ind/2019 (iii) S.L.Kapoor V Jagmohan [AIR 1981 SC 136]

(iv) Anand Rathi v. Securities and Exchange Board of India [(2001) 32 SCL 227], (v) Hindustan Lever Ltd v. Director General (Investigation, Registration) [2001(1) SCALE 219] (vi) Wimco Vs. Union of India 1980 ELT 235, (Bom) (vii) Rapheal Pharmaceuticals Vs Superintendent of Distilleries (1998 (38) ELT 11(AP) (viii) Lubrichem Industries Ltd. Vs. Collector of Customs (1994 (73) ELT 257 (SC)). 26. Even on merits as submitted by Ld. Senior counsel for the

assessee that CBI charge sheet cannot form the basis for

cancellation of registration u/s 12AA of the Act. He submitted that

the Admission and Fee Regulatory Committee (In short ‘AFRC’) is a

statutory body constituted on the directions of Hon'ble Supreme

Court and it is an appellate authority headed by retired High Court

Judge. AFRC is a body which regulates matters relating to fees and

admission and in irregularity/illegality. In the case of assessee with

regard to the alleged irregularity in admission process AFRC did not

cancelled the admission and has only observed that there is an

irregularity in granting admission and imposed fine for the similar

kind of admission made in the year 2013. This order of AFRC has 48

Chirayu Charitable Foundation ITA No.179/Ind/2019 also been challenged by the college management before the Hon'ble

High Court of M.P at Jabalpur by filing writ petition No.10857/2015

and Hon'ble court had granted stay on 23.7.2015 which is still

continuing. The said stay order is extracted below:-

WP-10857-2015 (CHIRAYU CHARITABLE FOUNDATION FOR CHIRAYU MEDICAL COLLEGE AND HOSPITAL BHOPAL Vs THE STATE OF MADHYA PRADESH) Order dated 23.7.2015 “Shri Ajay V. Gupta, learned counsel for the petitioner. Admit. Issue notice to the respondent on payment of process fee within one week returnable in four weeks. Having heard Shri Gupta on the question of interim relief, we find that imposition of fine in question is contrary to provisions of Section 4(9)(c) and (d) of the M.P. Niji Vyasayik Shikshan Sansthan (Pravesh Ka Viniyaman Avam Shulk Ka Nirdharan) Sansodhan Adhiniyam, 2013. Keeping in view the aforesaid, the recovery of the impugned order of fine from the petitioner institute shall remain stayed till the next date of listing.”

on prime facie has stayed the imposition of fine qua the admission

alleged being contrary to rules. Then in such situation it is too early

to anticipate that there is any illegality or irregularity done by the

assessee society in the admission process. There was no evidence

on record to show that any money was taken by the college

management over and above the approved legal fees since the

Chirayu Charitable Foundation ITA No.179/Ind/2019 alleged irregularity is subjudice and final outcome is awaited, Ld.

PCIT was not justified in taking support of this issue.

enquiry, investigation or collected any evidence through its office to

find that the assessee society is not running for carrying out

charitable activities. In these given facts it is evident that Ld. PCIT

was not justified to observe that any irregularity has been done by

the assessee society in the admission process. Ld. PCIT has also

failed to bring any information with regard to any evidence

unearthed during search or subsequent proceedings showing that

any money was taken by college management over and above the

approved legal fee with regard to the allegation that any extra

amount towards fees or otherwise was taken by the college

management from students admitted in the year 2011-12. In our

view the alleged irregularity in the admission process in one of the

colleges noted by the CBI should not have been taken as a basis for

cancelling the registration u/s 12AA of the Act granted to the

assessee society.

Chirayu Charitable Foundation ITA No.179/Ind/2019 of donors and the creditworthiness in doubt, we observe that prime

facie this issue has no strength to form a basis for cancellation of

registration u/s 12AA(3) of the Act, since such type of issues in the

case of charitable societies are to be dealt at the time of regular

assessment proceedings wherein the Assessing Officer can make

necessary investigation to examine the genuineness of donations as

well as the creditworthiness of the donors, but still we would like to

deal with the issue since the major thrust of Ld. PCIT is on this

issue for cancelling the registration u/s 12AA of the Act. On going

through the various documents placed by the assessee in the paper

book running from page 320 to 728 we find that to the best possible

extent the assessee trust has filed all relevant information and

documents to show that the identity and genuineness of the donors

as well as the creditworthiness of them to give donation to the

society are proved. It is also brought to our notice that regular

books of accounts have been maintained by the society which are

duly audited. The assessment years during which some donations

were received are mentioned in the impugned order have already

been examined by the assessing authorities during the regular

assessment proceedings prior to the search and assessee was 51

Chirayu Charitable Foundation ITA No.179/Ind/2019 successful in satisfying the assessing officer about the identity and

genuineness of the donors and their creditworthiness. Even in the

seized material marked as LPS 10 found during the course of

search, contained confirmations in original and other documents

including Income Tax Returns, Bank statements, Board

resolutions, Financial statements of the alleged donors etc. Again

this information were filed on 26.11.2018 & 4.12.2018. It is also

interesting to note that during the course of search conducted at

the premises of the assessee society various documents were found

regarding to the donation of Rs.8,15,90,000/- and

Rs.4,10,00,000/- received during assessment Year 2012-13 and

2014-15 and all these documents are taken as a basis by the

assessee to prove the genuineness and creditworthiness of the

donors.

who has referred to Section 292C(2) of the Act contending that

“where any books of account or other documents, money, billion,

jewellery or other valuable articles are found in the possession or

control of any persons in the course of search u/s 132 of the Act that

Chirayu Charitable Foundation ITA No.179/Ind/2019 it may be presumed that the contents of such books of accounts and

the documents are true”. On the strength of the submission Ld.

Counsel for the assessee submitted that the assessee has

discharged its burden u/s 68 of the Act since all the relevant

material to prove the identity of donor, genuineness of the

transaction of receiving donation and creditworthiness of the

donors to give donations to the assessee society because all the

relevant evidence were found by the search party itself during the

course of search u/s 132 of the Act. The only reason for which Ld.

PCIT was not satisfied with the genuineness of the donation was

mainly the income shown by these donors which was not

commensurate with the huge donation given by them. Though the

assessee had given detailed submission with regard to donation

have also submitted that the department was having all information

including the address and PAN and they could have conducted

necessary enquiry which they have failed to do and reliance was

also placed on various judgments wherein it was held that if the

assessee submits all relevant information and documents to prove

the identity of cash creditor, genuineness of the transaction and

creditworthiness of the cash creditor to give the amount which in 53

Chirayu Charitable Foundation ITA No.179/Ind/2019 this case is the donation then the burden to discharge the onus

shifts on to the revenue who has to carry out necessary

investigation to disprove the evidence placed by the assessee before

taking any action for making any addition in the hands of the

assessee.

assessee from M/s Riviera Infoway Ltd during financial year 2010-

11 sum of Rs.7,28,90,000/- was received through banking channel

and this sum was shown as unsecured loan in the balance sheet as

on 31.3.2011. Further sum of Rs. 87,00,000/- was received during

financial year 2011-12 through banking channel. Thus total sum

of Rs. 8,15,90,000/- shown as unsecured loan was transferred to

the groups donation account through a journal entry passed on

29.8.2011. The assessment of the assessee was completed u/s

143(3) of the Act for Assessment Year 2011-12 on 18.3.2014 in

normal course and during the course of proceedings confirmation of

loan creditors were filed, copy of bank account of M/s Riviera

Infoway Ltd along with its Income Tax Return for Assessment Year

2009-10 was furnished. On the strength of these documents Ld.

A.O was satisfied with the identity and creditworthiness of the 54

Chirayu Charitable Foundation ITA No.179/Ind/2019 donor company and genuineness of the transaction of loan.

Similarly assessment for Assessment Year 2012-13 was completed

u/s 143(3) of the Act on 24.3.2014 and no addition was made on

the amount received from the alleged donor i.e. M/s Riviera Infoway

Ltd . Subsequently all the documents filed before the Ld. A.O which

form part of the assessment were also found by the search team.

However during the assessment proceedings carried out after issue

of notice u/s 153A of the Act amount of donation was added by the

Ld. A.O to the income of the assessee by giving reference to the

detailed investigation done by Investigation Wing of which no report

or any other document has neither been provided to the assessee

nor placed before us. But there is no dispute to the fact that at no

level any of the lower authorities has controverted or brought any

evidence to disapprove the documentary evidence filed by the

assessee time and again to prove the genuineness of the donation

and creditworthiness of the donors.

Trust, Zagdu Singh Charitable Trust and Udodas Mundra Seva

Sansthan, we find that during the course of assessment

Chirayu Charitable Foundation ITA No.179/Ind/2019 proceedings following documents were filed which coincidently were

found during the course of search at the assessee’s premises. (a) With respect to donation from Thakur Educational Trust (AACTT4004F) – Rs. 10000000 + Rs. 6000000 (i) Confirmation letter (Seized document) (ii) Certified copy of resolution of the donor giving donation (Seized document) (iii)Appeal by the assessee to the donor for giving donation. (Seized document) (iv) Copy of the notice u/s.133(6) dated 18.07.2016 issued by assessing officer (Dy. Commissioner of Income Tax (Exemption)- 2(1), Mumbai) of Thakur Educational Trust for confirmation of donation given to the assessee. This letter was issued by the A.O. of the Thakur Educational Trust in connection with the assessment proceedings pending for A.Y. 2014-15 of the said trust. (v) Copy of reply of the assessee in compliance to notice u/s. 133(6) to DCIT (Exemption)-2 (1), Mumbai. (b) With respect to donation from Zagdu Singh Charitable Trust (AAATZ0141P) – Rs. 10000000 + Rs. 10000000 (i) Confirmation letter (Seized document) (ii) Appeal by the assessee to the donor for giving donation. (Seized document) (iii) Copy of the notice u/s. 133(6) dated 18.07.2016 issued by assessing officer (Dy. Commissioner of Income Tax (Exemption)- 2(1), Mumbai) of Zagdu Singh Charitable Trust for confirmation of donation given to the assessee. This letter was issued by the A.O. of the Zagdu Singh Charitable Trust in connection with the assessment proceedings pending for A.Y. 2014-15 of the said trust.

Chirayu Charitable Foundation ITA No.179/Ind/2019 (iv) Copy of reply of the assessee in compliance to notice u/s. 133(6) to DCIT (Exemption)-2 (1), Mumbai. (c) With respect to donation from Udhodas Mundhra Seva Santhan (AAATU0983C) – Rs. 5000000 (i) Confirmation letter (Seized document) (ii) Appeal by the assessee to the donor for giving donation. (Seized document)

and Zagdu Singh Charitable Trust which have given donation of

Rs.1.60 crores and Rs.2.00 crores during financial year 2013-14 as

submitted by Ld. Senior Counsel for the assessee and now both

these trusts relates to Thakur group of institutions running 16

educational institutions at Kandivili, Mumbai wherein over 40000

students are studying and the institution profile is available at

public platform i.e. on the web site. We fail to understand that how

can Ld. PCIT could remain unsatisfied with the identity and

genuineness of such donation as well as creditworthiness of such

two well established trusts.

Mundhra Seva Sansthan which have given donation of Rs.50 lakhs

on 10.5.2013 was issued notice u/s 133(6) of the Act which was

Chirayu Charitable Foundation ITA No.179/Ind/2019 duly complied that the donor have confirmed to have given donation

to the assessee.

the trust is that the assessee has supplied all necessary

information to prove the identity and genuineness of the donors

and their creditworthiness to give the donation to the assessee trust

which prima facie shows that the donors are not fictitious, secondly

donors are trust or institutions having sufficient funds to give

donations and in some cases the donors have confirmed to have

given donation in reply to the notices u/s 136(6) of the Act and in

such a situation, we in the given facts are of the view that Ld. CIT

was not justified in doubting the genuineness and creditworthiness

of the donations received by the assessee during various years as

mentioned in the impugned order and was further not justified in

adopting a basis for denying the registration u/s 12AA of the Act.

In the given stated facts and circumstances and documentary

evidence filed by the assessee before the lower authorities, we are

satisfied with the identity and creditworthiness of the alleged

donors and genuineness of the transaction. Our view is further

Chirayu Charitable Foundation ITA No.179/Ind/2019 supported by following judgments which are squarely applicable:-

(i) Hon’ble Madhya Pradesh High Court in the case of Ashok Pal Daga(HUF) v/s. CIT reported in 220-ITR-452(MP), wherein Hon'ble court referred to the judgment of Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd. v/s. CIT reported in 49-ITR-723. “That as the assessee satisfied the authority as to the identity of the third parties and also supplied relevant evidence showing prima- facie that the entries were not fictitious, the initial burden is stood discharged by the assessee.” (ii) Hon’ble Madhya Pradesh High Court in the case of CIT v/s. Metachem Industries reported in 245-ITR-160 (MP). “Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee is over. Whether that person is an income-tax payer, or not, and where he had brought this money from, is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged, and in that case that credit entry can not be treated to the income of the firm for the purpose of income-tax.”

(iii) Hon'ble Supreme Court in the case of CIT v/s. Orissa Corporation Pvt. Ltd. reported in 159-ITR-78(SC) “In this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing

Chirayu Charitable Foundation ITA No.179/Ind/2019 notices under s. 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.” (iv) The co-ordinate Bench of Rajkot in the case of ACIT v/s. Radhey Shyam Bansal reported in (2000) 68 TTJ (Rajkot) 136. “The CIT (A) has clearly stated in his order that the confirmatory letters were filed by all the three depositors. The AO did not make any further investigation with the depositors to find out the genuineness of the deposits. When confirmation letters are filed and the identity of the creditors are known, it is the duty of the AO to summon the creditors and to record their statements. The onus is on the Department to prove that the deposits were not genuine. This onus has not been discharged by the AO. In view of the discussions above, the addition has been made by the AO without making any proper enquiries. Therefore, the CIT (A) has rightly deleted the addition.”

Chirayu Charitable Foundation ITA No.179/Ind/2019 36. We further observe that it has been consistently held by the

Hon'ble courts and Co-ordinate benches that registration granted to

charitable societies u/s 12AA of the Act cannot be cancelled by

invoking provisions of Section 12AA(3) of the Act unless and until it

is established by material evidence that the activities of such

trusts/institution are not genuine or are not being carried out in

accordance with the objects of the trusts or the reasonable

opportunity of being heard is not granted before cancelling the

registration.

Charitable Trust v. CIT (Exemptions) v. CIT (Exemptions) [2017] 83

taxmann.com 33 (Lucknow - Trib.) Hon’ble Tribunal while dealing

with the issue of Cancellation of registration under Section 12AA

(iii) of the I.T Act held that:

Para "Having carefully examined the order of the Id. Commissioner of Income Tax (Exemptions) in the light of the rival submissions, we find that on 13. receipt of certain information from the Id. Commissioner of Income Tax (Exemptions), Kolkata; Id. Commissioner of Income Tax (Exemptions) has issued notice under section I2AA(3) of the Act to the assessee on 13.11.2015 for compliance on 24.11.2015. On 24.11.2015 the assessee sought adjournment and hearing was adjourned to 27.11.2015. On 27.11.2015 the assessee has filed a detailed reply to the charges

Chirayu Charitable Foundation ITA No.179/Ind/2019 leveled against it in show cause notice. The assessee emphatically denied the allegations leveled against the assessee that it has received a donation of Rs.l crore through cheque after making payment of the same in cash to M/s Herbicure Health Care Bio Herbal Research Foundation. The reply filed by the assessee is available at pages 19 to 25 of the compilation of the assessee running into 7 pages and in para 8 of it, the assessee has specifically asked the Id. Commissioner of Income Tax that in case there is any authentic material available with him which could throw some light on this issue, the same may be given to the assessee so that specific' reply on the same could be submitted on it, besides denying the allegations leveled against him. For the sake of reference, we extract para 8 as under:-

Till date no evidence to the contrary has been made available to the assessee which could substantiate your honour's allegation that the amount ofRs.1,00,00,000/- was paid by the assessee in cash to the donor in exchange of donation received by cheque. However, in case, there is any authentic material available with your honour which could throw some light on this issue, the same may be given to the assessee so that a specific reply on the same could be submitted on it"

Chirayu Charitable Foundation ITA No.179/Ind/2019 (ii) The Co-ordinate Bench of Mumbai in the Case of Lilavati Kirtilal Mehta Medical Trust, Bandra V. CIT (Central) –I, Mumbai [2019] 108 taxmann.com 272 (Mumbai - Trib.) the Hon’ble ITAT, Mumbai Held that :- Now, we may go back to section 12AA(3) of the Act, which prescribes only two conditions under which the Commissioner is empowered to cancel the registration earlier granted u/s. 12A of the Act. In our view, the points brought out by the Commissioner in the impugned order are not in the context of the conditions prescribed u/s. 12AA(3) of the Act, but are relevant for the purposes of making an assessment of income. 11. In the present case, the case sought to be made out by the Commissioner is that the violation carried out by the assessee would lead to denial of exemption u/s. 11 & 13 of the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the efficacy or otherwise of the action of the Commissioner in invoking section 12AA(3) of the Act and

Chirayu Charitable Foundation ITA No.179/Ind/2019 we find that the reasons advanced by the Commissioner are not germane. On this point, the learned representative for the assessee has relied on the following decisions to say that section 12AA(3) cannot be invoked by Commissioner for cancellation of registration merely for violation of provisions of section 11 and 13 of the Act by the assessee :— ♦ CIT v. Apeejay Education Society [2015] 59 taxmann.com 102 (Punj. & Har.)

♦ Cancer Aid & Research Foundation v. DIT (Exemption) [2014] 66 SOT 86/49 taxmann.com 537 (Mum. - Trib.)

♦ CIT (Exemptions) v. Cancer Aid & Research Foundation Income Tax Appeal No.505 of 2015

♦ Prabodhan Shikshan Prasarak Sanstha v. Dy. CIT [2014] 44 taxmann.com 33/[2015] 152 ITD 473 (Pune - Trib.)

♦ Tamil Nadu Cricket Association v. DIT (Exemption) [2014] 360 ITR 633/221 Taxman 275/[2013] 40 taxmann.com 250 (Mad.)

(iii)The Hon’ble Karnataka High Court in the case of CIT Vs. Islamic Academic of Education reported in 229 Taxman 274 (Karn) held as under :- In the instant case, the material on record shows that the Trust has established educational institution and imparting medical education.

Chirayu Charitable Foundation ITA No.179/Ind/2019 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. (iv)The Hon'ble Allahabad High Court in the case of Red Rose

School reported in (2007) 163 Taxman 19 (All.), wherein it is

observed that:-

"CIT is entitled to see only the genuineness of objects and activities : It has been held that while refusing application under section 12A the Commissioner has to examine only two aspects, i.e., genuineness of the activities of the trust / institution and object of the trust / institution. Once there is no dispute about the

Chirayu Charitable Foundation ITA No.179/Ind/2019 genuineness of the activities; the Commissioner cannot take shelter of any other outer source for refusing registration under section 12A. The issue of registration under section 12A and the scope of enquiry at the stage of section 12AA was discussed, it was categorically held in the said decision that section 12AA does not speak anywhere that the CIT, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. Profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. While considering the registration under section 12AA, the scope of enquiry of the Commissioner would be limited to the aforesaid extent only."

(v)The decision of Krupanidhi Educational Trust Vs. DIT (E) – 152 TTJ 673, wherein it is held as under :- The DIT(E) in the order u/s 12AA(3) of the Act, do not make out any case, which can show the activities of the assessee are not genuine or that the activities of the assessee are not being carried out in accordance with the objects of the trust or institution. The fact that the Assessee was paying commission to persons who solicit students for studying in the Assessee’s institution cannot lead to the conclusion that the Assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, non maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having

Chirayu Charitable Foundation ITA No.179/Ind/2019 norelevance to whether or not the Assessee was pursuing education as its main object. There are no facts brought out in the impugned order regarding the genuineness of the activities of the trust or as to whether the object of education was not pursued by the Assessee as its main and predominant activity. In fact, the order of the DIT(E) does not anywhere show that the assessee is not imparting education. The complaint of the revenue seems to be that education is being imparted but on commercial lines. The definition of Charitable Purpose is given in Sec.2(15) of the Act. The same refers to "relief to poor, medical relief, education and the advancement of any other object of general public utility". The proviso to Sec.2(15) of the Act introduced by the Finance Act, 2008 w.e.f. 1.4.2008 regarding excluding organizations where there is profit motive from the definition of charitable purpose applies only to the category of trusts which has as its object, the object of "advancement of any other object of general public utility". It does not apply to the other categories of charitable purpose viz., "relief to poor, education and medical relief". As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assesse, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of thepersons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1) (c ) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or

Chirayu Charitable Foundation ITA No.179/Ind/2019 other institution. In such circumstances, the order u/s 12AA(3) of the Act, cannot be sustained. (vi)The decision of Prabodhan Prasarak Shikshan Santhan Vs. DCIT–152 ITD 473 (Pune), wherein it is held as under :- The Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society v. CIT (Central) 2012) 343 ITR 23 (Bom) has held that "Every statutory provision which operates in respect of a trust, which has already been registered in the past is not necessarily retrospective. A provision is retrospective when it takes away a right which has vested or accrued in the past. The effect of the provision is to empower the commissioner to cancel the registration of the trust where he is satisfied that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust or Institution. This could not by any stretch of imagination be regarded as retrospective alternation of the law. In the case before us, as per the amendment by the Finance Act, 2010, the Commissioner has claimed to be empowered to initiate steps for the cancellation of the registration of a trust or Institution where the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects thereof even in relation to a trust which was registered under S. 12A as it then stood." So basic requirement for invoking S. 12AA(3) is that the activities of the trust are not genuine and are not being carried out in accordance with the objects of the trust. The CIT has recorded her findings in the order u/s 12AA(3) that the trust is imparting knowledge at cost and therefore, not a charitable Trust within the purview of S. 2(15) of the Act, secondly, the appellant trust has contravened the provisions of Ss. 11(5) and 13(1) (c) of the Act. Thirdly, the trust is treated by the Chairman and family members /relatives as their private property

Chirayu Charitable Foundation ITA No.179/Ind/2019 and enjoyed by them for their benefits only. There is nothing on record to suggest that the Trust is not 'genuine'. In fact, the trust is carrying on Educational activities they are charitable in nature. The activities are carried out as per its objects. There is no infringement of any of the provisions contained in Ss.1 1(5) and 13 of the Act. The provisions of S.12AA(3) for cancellation/withdrawal of registration granted to it w.e.f. 11-2-1998 u/s 12A of the Act are not retrospective and therefore, the impugned order of the CIT passed u/s 12AA(3) is nothing but a review of its earlier order which is impermissible in law. (vii)The decision of Rajasthan Vikas Sansthan Vs. CIT reported in 78 DTR 411 (Raj), wherein it is held as under :-

The registration can be cancelled on the ground that the activity of the trust are not genuine or are not being carried out in accordance with the object of the trust. In case there are violations as mentioned in s. 11 and 13 of the Act. Thus the AO while making assessment can deny the exemption to the trust. For getting the exemption u/s 11, registration is pre-requisite. However, registration is not a guarantee for exemption. In case the Trust fails to comply with the requirements as mentioned in s. 11 and 13 of the Act then exemption can be denied. In respect of failure mentioned in s. 11 and 13 in a particular year, it cannot be said that registration is to be cancelled. Surplus in educational activities is not relevant for cancelling the registration. The education itself is charitable object and if the surplus is utilized for the purpose of charitable activities then it cannot be said that registration is to be disallowed. The ground on which the registration cannot be refused, cannot be considered as a ground for cancelling the registration.

Chirayu Charitable Foundation ITA No.179/Ind/2019

(viii) The Co-ordinate Bench of Cochin in the Case of M/s Kunhitharuvai Memorial Charitable Trust, KMCT Corporate office, Malabur Christian College Cross Road, Calicut V CIT (Central), Kochi (Order dated 16/01/2017 in Appeal No. 246/Coch/14) it was held that :-

Para 16. Having said so, let us examine the powers of the Commissioner to grant registration u/s 12AA and cancellation of registration u/s 12AA (3) of the Act. The power to cancel registration already granted u/s.12AA of the Act is contained in Sec. 12AA(3) of the Act and it reads as follows: "(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." The provisions of section 12AA of the Act, deals with procedure for registration of trust/institutions. As per said section, the Commissioner shall look into the objects of the trust and its activities and satisfy himself about that the objects of the trust are charitable in nature and its activities are genuine and such activities are carried out in accordance with its objects. Sub-section (3) inserted with effect from 1st Oct., 2004 empowers the Commissioner to cancel the registration of a trust or institution granted under clause (b) of sub-section (1) when subsequent to grant of registration the Commissioner is satisfied that activities of trust or institution are not genuine or are not being carried out in accordance 70

Chirayu Charitable Foundation ITA No.179/Ind/2019 with objects of the trust or institution.Basic purpose of s. 12AA(3) is to check misuse of exemption under pretext of carrying out charitable activities when the same are not so. The CIT has to make out clear case for exercising powers u/s. 12AA(3). In this case, so far as object of trust is concerned, it is nowhere disputed that assessee is engaged in imparting education. Once an institution came within the phrase "exists solely for educational purpose and not for profit" no other condition like application of income was required to be complied with. The mere existence of profit/surplus did not disqualify the institution. Breach of the conditions of the trust deed would not disentitle the institution from getting the benefit which the institution had been granted earlier being a charitable trust. Nowhere in her order, the CIT has taken any objection to the charitable and educational nature of the institution. In fact, the objects of the institution as declared in the trust deed do reflect that all are philanthropic or benevolent in nature, precisely, for the purpose of imparting education. Strange enough, there is no finding recorded by the CIT contrary to this fact.Rather, this is also not the case of the CIT that the institution is doing some other activity of earning profit other than the activity of running educational institutions. The established factual position is that the institution is not doing any other activity except running educational institutions. In such circumstances, the action of cancellation of registration cannot be upheld. As far as the object of the assessee is concerned, this is not the case of the Revenue that the assessee was not imparting education. Since the question about the imparting of education has not been doubted or challenged by the Revenue, the impugned order passed by the CIT is unsustainable in law. Strange enough again, there is nothing on record to prove even sightlessly that the purpose of imparting education was not fulfilled by this institute, thus the Revenue Department has failed to establish that there was any illegal activity or infringement of law so as to doubt the genuineness of the activities. 71

Chirayu Charitable Foundation ITA No.179/Ind/2019 38. On perusal of the judgments and decisions referred herein

above, we find that they are squarely applicable on the facts of the

instant appeal and the issue raised before us and thus favours the

assessee. Before concluding we would like to summarise our

findings and observations in following manner:-

(i) As regards the alleged donations received from various

concerns mentioned in the impugned order, we are

satisfied with the identity of the alleged donors,

genuineness of the transaction of giving donatiion to the

assessee trust since most of the alleged donors are

either charitable trusts or known to the Directors/

Promoters and the transactions being carried out

through banking channel and we are also satisfied with

the creditworthiness of the alleged donors as they have

sufficient financial strength to provide the donation to

the assessee trust,

(ii) As regards the alleged irregularity in education

process noted by CBI the matter is still subjudice with

the court and the order of Regulatory Authority namely

Admission Fee Regulatory Committee stand stayed by 72

Chirayu Charitable Foundation ITA No.179/Ind/2019 the Hon'ble jurisdictional High Court vide stay order

dated 23.7.2015 which is effective till date. The alleged

irregularity is for one of the year in only one of the college

run by the trust amongst other hospitals and colleges

which are undisputedly providing charitable services in

the field of medical and education.

(iii) The issue of irregularity in admission process is not

part of the show cause notice dated 6.12.2018 issued to

the assessee in connection with the cancellation of

registration u/s 12AA(3) of the Act which shows that

assessee was not granted reasonable opportunity of being

heard on this issue which in itself makes the proceedings

bad in law.

(iv) The issues raised in the show cause notice dated

6.12.2018 issued by Ld. PCIT are not relevant for

cancellation of registration u/s 12AA(3) of the Act. Such

types of issues can be examined by the Assessing Officer

during the course of regular assessment proceedings

wherein on the basis of his examination/ investigation

necessary view as permissible in law can be taken if 73

Chirayu Charitable Foundation ITA No.179/Ind/2019 violation of Section 11 and Section 13 of the Act by the

assessee are observed. Ld. PCIT can only cancel the

registration u/s 12AA(3) of the Act if it is found that

the activities of the society/trust are either not genuine

or are not being carried out in accordance with its object

provided in bye laws.

(v) We also find that nothing on record has been brought

before us by way of an independent enquiry by Ld. PCIT

thereby collecting necessary evidence which can show

that the activities of the assessee society are either not

genuine or are not being carried out as per the objects of

the society which were filed before the registering

authority at the time of granting registration u/s 12AA of

the Act. It is therefore established that the activities

carried out by the appellant assessee society by way of

running hospitals and medical colleges for the benefit of

public at large and for the students are for charitable

purposes only as provided in Section 2(15) of the Act.

examining the facts of the instant case and in the light of 74

Chirayu Charitable Foundation ITA No.179/Ind/2019 judgments referred herein above which are squarely applicable on

the facts and issue raised before us are of the considered view that

the impugned order of Ld. PCIT cancelling the assessee’s

registration granted u/s 12AA(1) of the Act deserves to be quashed.

We accordingly order so and direct the revenue authorities to

restore the registration u/s 12AA(1) of the Act granted to assessee

society w.e.f. 1.4.2011. Accordingly all the grounds raised by the

assessee are allowed.

The order pronounced in the open Court on 09 .02.2021.

Sd/- Sd/-

(KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 09 February, 2021

/Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file.

By Order, Asstt. Registrar, I.T.A.T., Indore