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Income Tax Appellate Tribunal, C BENCH, MUMBAI
order
: 20.07.2022 O R D E R
Per Rahul Chaudhary, Judicial Member:
The present appeal is directed against the order, dated 05.07.2017, passed by the Ld. Commissioner of Income Tax (Exemptions), Mumbai [hereinafter referred to as „the CIT(E)‟] under Section 12AA(3) of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟].
The Appellant has raised following grounds of appeal:
1. CIT(E) erred in cancelling registration of the appellant u/s 12AA. Assessment Year: 2016-17
2. CIT(E) erred in relying on media reports in concluding that trust is not genuine.
3. CIT(E) erred in relying on various orders from agencies of Government of India in cancellation of registration u/s 12AA.
4. CIT(E) erred in not considering letter dated 03.01.2017 in it‟s proper perspective.
5. CIT(E) erred in giving proper opportunity of hearing.”
3. The brief facts of the case are that the Appellant is a trust registered with office of the Charity Commissioner vide registration No. b/1409/M, dated 21.12.1990 and was granted registration under Section 12A of the Act on 05.03.1991 (Registration No. TR/27949). Further, the Appellant was also registered under the provisions of Foreign Currency Regulation (FCRA) Act, 2010.
4. A proposal regarding cancellation of registration under Section 12A of the Act of the Appellant-Trust was received by the CIT(E) from the Additional Commission of Income-Tax (Exemptions) – Range 1, Mumbai as vide order, dated 13.12.2016, the Government of India, Ministry of Home Affairs had cancelled the registration of the Assessee/trust under the Foreign Contribution (Regulation) Act 2010 [hereinafter referred to as „FCRA‟], for violation of various terms and conditions of the registration under the FCRA which included misappropriation of funds received by the Assessee/trust. In view of the same, the CIT(E) issued show cause notice, dated 03.01.2017, to the Appellant. The relevant extract of the aforesaid show-cause notice reads as under:
2 Assessment Year: 2016-17 “2. The Islamic Research Foundation (IRF) is registered with the office of the Charity Commissioner vide registration No. b/1409/ M dated 21.12 1990 and having its registered office at Mumbai 400 009. The said trust has been granted registration u/s 12A of the IT Act vide Registration No. TRA27947 dated 05.03.1991.
The Government of India, Ministry of Home Affairs has cancelled the registration of the trust under the Foreign (Regulation) Act 2010 vide its order passed u/s 14 of the FCRA Act 2010 dated 13.12.2016 for violation of various terms and conditions of the registration under the FCRA Act which includes misappropriation of foreign funds to sister concerns etc, and presently the Enforcement Directorate is investigating these issues. Further, the Government of India, Ministry of Home Affairs vide its order dated 17.11.2016 passed under the Unlawful Activities (Prevention) Act 1967 has declared the IRF as an unlawful association. The main findings of the order passed under the Unlawful Activities (Prevention) Act 1967 are as under: (a) The President of the Association, Dr Zakir Naik has been encouraging and aiding its followers to promote or attempt to promote on grounds of religion, disharmony or feelings of enmity, hatred or ill-will between different religious communities and groups; (b) Cases have been registered against Dr Zakir Naik and other members of the IRF as under 1 (i) Nagpada Police Station Mumbai vide CR No. 271/16 u/s 10, 13 and 38 of the Unlawful Activities (Prevention) Act 1967 against Arshi Quresht, an employce of the IRF and others on 06.08.2016. (ii) Palrivattam Police station in Kerala vide CR No. 1017/16 dated 16.07.2016 u/s 153A, 34 of Indian Penal Code (IPC) against the above persons. In connection with Shri Arshi Qureshi, an employee of IRF who worked as Guest Relationship Manager for his alleged role in radicalizing and funding 21 people from Kasargod district of Kerala to flee the country and join the Daesh.
3 Assessment Year: 2016-17 (iii) Sawantwadi Police station in Sindhudurg vidle CR No. 73/12 u/s 117, 153A, 295A, 298 and 34 of Indian Penal Code (IPC) against the above persons. (iv) Vengurla Police station in District Sindhudurg vide CR No 51/12 dated 25.10.2012 u/s. 153A, 295A and 298 of Indian Penal Code (IPC) against the above persons. Kuria Police station in Mumbai de CR No 44/2013 dated 23.02.2013 u/s 153A, 295A, 505(2) of Indian Penal Code (IPC) against the above persons for making derogatory statements against Hindu gods. (c) Further, the Government of India has also received information that the statement and speeches made by Dr. Zakir Naik, the President of IPF are objectionable and subversive in nature as he has been extorting the known terrorists like Osama Bin Laden proclaiming that every muslim should be a terrorist etc. and further making the above statements which are derogatory to the other religions The speeches and statements of Dr Zakir Naik has been to promote unity and hatred between different religious groups and inspire the muslim youth and terrorists in India and abroad to commit terrorist acts. Further, it is also noticed from the statements of some terrorists arrested in the terrorist attack incidents or arrested Islamic State of Iraq and Syria (ISIS) sympathizers revealed that they were inspired by the fundamentalist statement of Dr. Zakir Naik which clearly indicates the subversive nature of his preachings and speeches. (d) The Central government is of the opinion that the aforesaid activities of the IRF and its President Dr. Zakir Naik are highly inflammatory in nature and prejudicial to the maintenance of harmony between various religious groups and communities and hence the government of India through its exercise of powers conferred by sub section (3) of section 3 of the Unlawful Activities (Prevention) Act 1967, the Central Government declared the IRF to be an unlawful association.
The registration has been granted to the IRF u/s 12A for carrying out charitable activities within the meaning of section 2(15) of the Act which reads as under:
4 Assessment Year: 2016-17 "charitable purpose" includes relief of the poor, education, yoga, medical relief [preservation of environment (including water sheds, forests and wild life) and preservation of monuments or places or objects of artistic or historic interest) and the advancement of any other object of general public utility.”
5. Therefore, from the foregoing discussions from para 3(a) to (3(d), it is noticed that the foundation or the trust is not at all carrying out the activities for charity purposes within the meaning of section 2015) of the IT Act 1961 The activities carried out by the association is unlawful in view of the action taken by the Government of India vide its orders passed under sub section (3) of section 3 of the Unlawful Activities (Prevention) Act 1967 and u/s 14 of the FCRA Act 2010 dated 13. 12.2016 6. The provisions of section 12AA(3) provides that in case it is found that the activities of the trust which has been granted registration u/s 12AA(1)(b)(i) of the Act and found to be not genuine or are not being carried out in accordance with the objects of the trust, the registration can be cancelled As discussed above, the Government of India has held your trust to be an unlawful association and it is also noted that you are not carrying out the activities in accordance with the objects specified in the trust deed, for which you have been granted registration u/s 12A.”
When the Assessee was confronted with the above facts by way of the aforesaid show-cause notice, dated 03.01.2017, the Assessee responded and filed written submissions vide letter, dated 10.05.2017 (reproduced by the CIT(E) in paragraph 3 of the order impugned). Thereafter, the CIT(E), vide letter dated 30.05.2017, gave another opportunity to the Assessee and fixed the matter for hearing on 12.06.2017. However, the authorized representative of the Assessee vide letter, dated 30.05.2017, submitted that the matter be decided on the basis of submissions already filed.
5 Assessment Year: 2016-17 6. The CIT(E) vide order, dated 05.07.2017, cancelled the registration of the Appellant under Section 12A of the Act holding as under: “6.3 On careful examination submissions given by the noted they have reproduced various replies given to Regulatory Agencies which have been submitted by them during proceedings with those agencies. It has been submitted that the trust due to conduct of Dr. Zakir and Mr. Arshi Qureshi trust not responsible for acts and conducts one trustees or employees of trust. The same cannot accepted trustees acting on behalf the trust evidence shows have utilised the funds of the trust for unlawful activities and therefore it cannot said that the trust is not responsible for the conduct of the trustees and the employees of the trust. As has been discussed in the preceding paras that there have been clear violations of FCRA Act and other Acts, therefore, the activities of the trust cannot be held as to being carried out in accordance with the objects of the trust enumerated in the trust deed and accordingly, the provisions of section 12AA(3) would be applicable.
6.4 It is further noted that the activities of the trust are not genuine and the Government of India, Home Affairs has already cancelled the registration of the trust under the Foreign (Regulation) Act 2010 vide order dated 13.12.2016 for violation of various terms and conditions of the registration under the FCRA Act which includes the following (a) misappropriation of foreign funds to sister concerns; 6 Assessment Year: 2016-17 (b) the Government of India Ministry of Home Affairs vide order, dated 17.11.2016, passed under the Unlawful Activities (Prevention Act) 1967 has declared the IRF as an unlawful association; as per Home Ministry findings, the President of the Association, Dr Zakir Naik has been encouraging and aiding its followers to promote or attempt to promote on grounds of religion, disharmony or feelings of enmity, hatred or ill will between different religious communities and groups;
(c) registration of police case against Shri Arshi Qureshi, an employee of the IRF by Nagpada Police Station, Mumbai Palrivattum Police Station, Kerala, Sawantwadi Police Station in Sindhudurg Maharashtra, Vengurla Police Station again in Maharashtra, Kurla Police station in Mumbai on various dates for Unlawful Activities (Prevention Act) 1967, Indian Penal Code etc.
(d) Diversion of donation received by the IRF to various different entities such as Bishan Rukmani Memorial Foundation - Rs. 2 cr Pravari Medical Trust, Loni - Rs.2 Crs, Karnala Charitable Trust-n Rs 1 Cr. and the subsequent diversion of this money to the account of three trustees of the trust,
(e) Similarly, as per media report, more than Rs 8 crores has been donated by the IRF to several dubious organisation and institutions;
(f) Also as per media report, ISIS person got Rs.80,000/- from Dr. Zakir Naik's NGO; 7 Assessment Year: 2016-17
(g) Based on investigation by two agencies i.e. special branch of Mumbai Police and Economic Offence Wing of Maharashtra Govt it is found that the activities of the trust are not in accordance with the objects of the trust. They were indulging in diversion of funds meant for religious activities to different entities for promoting enemity among different religions.
6.5 In view of the above mentioned facts it is clear that the assessee trust is squarely hit by the provision of section 12AA(3), as the activities of the trust are not genuine and are not being carried out in accordance with the objects of the trust.
7 I am, therefore satisfied that it is a fit case for cancellation of registration as per the provisions of section 12AA(3) of the IT Act, 1961 Accordingly, the registration granted to the assessee u/s: 12AA vide this office Registration No. TR/27947, dated 05.03.1991, is hereby cancelled.”
Being aggrieved the Appellant is in appeal before us and has challenged the order for cancellation of registration under Section 12A of the Act passed by the CIT(E). When the matter was taken up for hearing, none appeared for the Appellant. Perusal of order-sheets shows that, despite notice, none had appeared for the Appellant in majority of the earlier hearing. Accordingly, we proceed to hear the Learned Departmental representative who submitted that the CIT(E) had granted sufficient opportunity to the Appellant to present the case, however, the Appellant chose to rely upon the written submission dated 10.05.2017. Therefore, the ground raised
by 8. Assessment Year: 2016-17 the Appellant that sufficient opportunity was not granted to the Appellant is liable to be rejected. He further submitted that the CIT(E) has after taking into account the various facts on record including the orders passed against the appellant, concluded that the Appellant was not carrying on activities as per the objects of the appellant-trust. It would be incorrect to state that the CIT(E) has decided the issue by merely relying upon the media reports. The Appellant has not placed anything on record to controvert the findings of the CIT(E).
We have considered the contentions of the Revenue and the submissions advanced on behalf of the Appellant before the CIT(E) as reproduced in paragraph 3 of the order of CIT(E) impugned herein and perused the order of CIT(E). We find merit in the contention advanced by the Ld. Departmental Representative. The CIT(E) has cancelled the registration under Section 12A of the Act after considering all the facts and not just the media reports. The Appellant has sought to explain that cancellation of FCRA registration was on account of technical breaches. On examining the summary of replied/justification tabulated by the Appellant, we note that the Appellant has admitted to breaches but has tried to show that there were no mala-fides by either pleading ignorance of law or by trying to state that the Appellant has made efforts to remedy the situation and unwind the transactions undertaken in violation of provisions of FCRA after the same came to the knowledge of the Appellant. Nothing has been placed by the Appellant before the CIT(E) to show that the payments made to other charities and trustees highlighted in the show-cause notice were for the advancement of the objects of the Trust. Moreover, in our view, 9 Assessment Year: 2016-17 once the Appellant has been declared as an unlawful association by the Govt. of India, Ministry of Home Affairs under the provisions of Unlawful Activities (Prevention) Act, 1967 by order dated 17.11.2016, the question of permitting the Appellant to retain registration under Section 12A of the Act does not arise. Thus, the satisfaction/conclusion of the CIT(E) that the activities of the Appellant are not genuine and are not being carried out in accordance with the object of the trust cannot be rejected as erroneous and/or without any basis. In view of the aforesaid, we do not find any infirmity in the order passed by the CIT(E) and Ground No. 1 to 5 raised by the Appellant are dismissed.
In view of the above, the present appeal is dismissed.
Order pronounced on 20.07.2022. ( Om Prakash Kant) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 20.07.2022 Alindra, PS