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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Exemptions), Kolkata dated 18.03.2016 u/s 12AA(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for assessment year 2011-12. The assessee has raised the following grounds:- Learned CIT(Exemption) Kolkata, vide Order passed u/s. 12AA(3) Of the Income Tax Act, 1961, on 18.03.2016 in the case of appellant assessee namely "M/S. D.S. HEALTH & EDUCATION TRUST" had erred in withdrawing/cancelling a registration u/s. 12AA(3) earlier granted on 22.09.2009 on the ground:- (i) that the assessee trust got registration earlier on the deed of trust created and activities of the trust are genuine; A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 2 (ii) that Activities of the assessee trust are carried out in accordance with the objects declared in the deed of trust; (iii) that the assessee trust has received corpus donation of Rs. 25,00,000/- genuinely through cheque on 29.03.2011, which is supported by proper document it was accounted for in the accounts dully audited as per the provisions of the Income Tax Act, 196 I; (iv) that the accounts itself reveal that the said donation had not returned either in cash or through web of financial transactions after retaining commission as alleged in the so called deposition made under the oath by one Shri S.R. Dasgupta, Director of an assessee "M/s. Herbicure HeaIthcare Bio-Herbal Research Foundation" and returned in the course of survey operation conducted on 27.01.2015 by the Investigation wing of the I.T. Department at the office cum research premises of the said Research Foundation. (v) that the statement of the alleged deponent is vague, general and hypothetical without identifying or mentioning any particular donee for acceptance of donation and return thereof through web of financial transaction and acceptance of any money by cash or through web of financial transaction and making donation after retaining commission as alleged in the show cause letter issued by Learned CIT(Exemption) Kolkata. (vi) that no reference to the appellant assessee was made by the deponent in any of his letters submitted before the Learned CIT(Exemption) Kolkata. (vii) that the assessee appellant didn't have any business wherefrom it is alleged by the learned CIT(Exemption), Kol to have pumped in unaccounted money generated in such business through bogus corpus donation. (viii) that having regard with to the facts and circumstances of the case, as well as in law the learned CIT(Exemption), Kol, had erred in withdrawing/cancelling the registration u/s 12AA(3), on the basis of the statement recorded by a third party viz. DIT (Investigation), Kol, and information received therefrom to that effect, without considering the merit of the case. Reliance placed on the decision taken by ITAT - Mumbai in the case of Kamlesh Mundra in ITA.No.6248/muml2012 (A.Y.2003-04), dated 04.03.2016. (ix) that the assessee appellant craves leave to add, amend, modify, alter or omit any ground before or during the course of appeal proceedings. A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 3 Shri Sujoy Sen, Ld. Authorized Representative appeared on behalf of assessee and Shri G. Mallikerjuna, Ld. Departmental Representative appeared on behalf of Revenue.
Ground No. (i) to (ix) are inter related and therefore being taken up together. Solitary issue raised by assessee in this ground of appeal
is that Ld. CIT(Ex) erred in cancelling the registration certificate granted to assessee u/s. 12AA of the Act on the ground that the activities of assessee are not genuine.
3. Before going to the specific issue of this appeal, we find pertinent to make a note in brief about the history of the case which states as under:- A survey operation was conducted u/s. 133A of the Act dated 23.01.2015 on Herbicure Healthcare Bio-Herbal Research Foundation (HHBHRF for short). During the course of survey proceedings statement of Shri Swapan Ranjan Das Gupta, Director of HHBHRF was recorded u/s 133A of the Act wherein it was admitted that HHBHRF was engaged in providing / accepting bogus donation through channel of certain mediators. The donation was provided / accepted from different individuals / organizations by it. It was accepting cheque / cash which were subsequently forwarded in cash / cheque through the web of financial transactions after involving the layer of middleman. Now coming to the case in hand, the assessee was paid a donation of ₹25 lakh from HHBHRF in the previous financial year 2010-11 corresponding to Assessment Year 2011-12. Accordingly, Ld. CIT(Ex) observed that the activities of the assessee are not genuine as it is engaged in money laundering activities. Thus, Ld. CIT(Ex) proposed for cancellation of certificate granted u/s 12AA of the Act and accordingly issued show cause notice dated 02.11.2015. In compliance thereto, assessee submitted that Shri Swapan Ranjan Das Gupta, Director of HHBHRF in his statement furnished u/s 133A of the Act nowhere mentioned that the donation paid to assessee is bogus. There is no evidence found during the survey proceedings u/s 133A of the Act suggesting that the amount of donation for ₹25 lakh received by assessee is bogus / fictitious. Thus, in the absence of any corroborative evidence no A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 4 inference can be drawn against the assessee merely on the basis of the statement. The amount of donation was received by assessee through banking channel and same was duly accounted for in the books of account. The statement recorded u/s 133A of the Act does not specify the name of the persons / organizations through which financial transactions were settled by HHBHRF. Thus, the statement furnished u/s 133A is vague in the absence of any specific name of the parties involved in it. Thus, no reliance can be placed on such statements. The statement of Shri Swapan Ranjan Das Gupta u/s 133A of the Act was confined to the amount of donation received HHBHRF and it is not about the amount of donation donated by HHBHRF to other parties including assessee. Thus, no adverse inference can be drawn against the assessee. Moreover the statement u/s 133A of the Act was recorded by Revenue in the absence of assessee. Therefore, it cannot be used against assessee without giving opportunity of cross-examination. Therefore the registration certificate granted u/s.12AA of the Act cannot be cancelled merely on the basis of single transactions.
4. However, Ld. CIT(Ex) disregarded the contention of assessee and cancelled the registration certificate granted to assessee by observing as under:- “The A/R was given copy of statement of the director of HHBHRF about the modus operandi and reply of HHBHRF for bogus donation paid on 29.12.2015. They were even requested to cross-examine Mr. Swaan Ranjan Das Gupta on 13.01.2016. But A/R did not avail the opportunity to cross- examine Mr. Das Gupta. They did not show intention to proceed further and just closed the matter by mere filing a reply of show-cause 13.01.2016. Merely filing an appeal letter and receiving of donation by cheque is not enough to establish the genuiness of donation received. Assessee trust has failed to discharge the onus that corpus donation is genuine, voluntary end not against cash.
6. Legal provisions Applicability of Section 12AA(3): "Where a trust or on 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 A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 5 be, he shall pass an order in writing cancelling the registration of such trust or institution" The matter being so, the registration already granted under section 12AA con be cancelled only under two specific circumstances. namely: (i) the authority is satisfied that the activities of such trust or institution ore not genuine, and (ii) the authority is satisfied that the activities of the assessee cue not being carried out in accordance with its declared objects. In the instant case of activities of the Society are found to be not genuine and the activities of the Society are not 0$ per objects of the trust. Money laundering trough receipts of research contributions and repaying them in cash through bogus; expense were never the Objects of the trust and hence found to be ingenuine and illegal activity.
7. Conclusion: 7.1 The intention of the legislature to grant registration u/s.12AA and 80G, to give the benefit u/s.11 to encourage medical relief to the poor ad needy persons, promote education among masses and support to the poor section of the society. But time and again these provision have been misused for personal need and for benefit of trustees/members of the trusts and societies. In the instant case, the modus operandi of the trustees and members were to convert their unaccounted money and channelize through route of bogus corpus donations received in lieu of cash in trust/society account. Over the year huge amount has been converted by way of this methodology of accommodation entries and fictitious transactions. In FY 2010-11, they have converted unaccounted cash of Rs.1.97 Cr. and received as corpus donation in trust. 7.2. Looking at the volume and depth of the illegal activities performed and indulged by the society to use the provisions of the IT Act providing support and encouragement to the organizations for doing the benevolent activities, assessee society not only opened pandoa’s box defying the sole benevolent purpose of provisions as per the I.T. Act. but also challenged the cause of the constitutional provisions by maintaining certain well-needed objectives as per the Act and performing the reverse in realty. 7.3. The assessee pumped in unaccounted money generated in business through bogus corpus donation and claimed exemption u/s. 11(1)(d). There is no compulsion on the assessee to apply a single penny from corpus donation. The assessee chose this route to park its unaccounted money in the trust through bogus corpus donation. This activity is squarely ingenuine, illegal and obviously not in accordance with the objectives of the trust. 7.4. Based on the facts and circumstantial evidences as discussed in Para 1 to 6. it can be inferred:- a) Assessee trust has received a um of Rs.25,00,000/- as bogus corpus donation from M/5. Herbicure Healthcare Bio-Herbal Research Foundation in lieu of cash. Merely receiving donation by cheque is not enough. The trustee has to establish the genuineness of the donation. A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 6 b) They have received bogus corpus donation not only from HHBHRF but also from various parties in and out of Kolkata of Rs.1.97Cr. and have channelized their unaccounted cash generated in business. c) Society/Trust has grossly misused the provision of Section12AA and 80G(5)(vi). d) They have violated the objects of the society as converting cash in cheque is beyond the objects. e) The activity of converting unaccounted income of business and pumping them in the Trust as corpus donation is illegal, ingenuine and immoral. f) Corpus donation received is not volu9ntray, merely an accommodation entry and factitious. Therefore, the claim of exemption u/s. 11(1)(d) was not absolutely tenable. g) Activities of the society are not genuine as well as not being carried out in accordance with its objects. h) Even ingenuine and illegal activities carried on by assessee through money laundering do not come within the conceptual framework of charity vis-à-vis activity of general public utility envisaged the Income Tax Act as laid down in Section 2(15).
8. Keeping in view the above, provision of Section 12AA(3) is invoked and registration granted u/s. 12AA is withdrawn/cancelled w.e.f. 01.04.2010 from the starting of financial year, the year the society was found to be involved in money laundering through receipt of bogus donation, ingenuine activities and not carrying out activities as per object of the trust. Aggrieved by this, the assessee has come up in appeal before us.
5. Ld. AR for the assessee filed paper book which is running from pages 1 to 51 and cited a few Tribunal’s order and stated that managing trustee of HHBHRE has clearly admitted in his statement furnished u/s 133A of the Act that it received no bogus donation till the financial year 2010-11. Thus, HHBHRE started taking the bogus donation after financial year 2010-11 but the impugned donation received by assessee pertaining to financial year 2010-11 corresponding to Assessment Year 2011-12. Thus, it cannot be held that assessee has received bogus donation from HHBHRE. Ld AR drew our attention on page 48 of the paper book where the details of the corpus donation received by assessee during the year under consideration placed.
ITA No.1209/Kol/2016 A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 7 The Ld. AR further submitted that amount of donation of ₹ 25 lakh was received through banking channel. Therefore the amount of donation cannot be held as bogus. Ld. AR in support of assessee’s claim also relied on the order of Co-ordinate Bench of this Tribunal in the case of Vishwaroopa Charity Trust vs. CIT(Ex) in dated 15.09.2017 and lastly requested the Bench to cancel the order of Ld. CIT(Ex) and grant registration certificate. On the other hand, Ld. DR submitted that assessee is engaged in the activity of money laundering and therefore the certificate granted u/s 12AA(3) was liable for cancellation. Ld. DR in support of his arguments relied on the order of co-ordinate Bench in the case of Batanagar Education And Research vs. CIT(Ex) in ITA No. 756 & 912/Kol/2016 date 13.09.2017. He requested the Bench to confirm the order of Ld. CIT(Ex).
We have heard the submissions made by the rival parties. We have also examined the orders passed by the Authorities Below and the judgments/orders cited by the representatives of both the parties. At the threshold, it was observed that in the identical facts & circumstances this Tribunal has decided the identical issue in favour of the assessee in the case of Vishwaroopa Charity Trust Vs. CIT (Exemption) in ITA 106/Kol/2017. As the issue & the facts are exactly identical of the present case, therefore we are inclined to follow the same principles & reasoning provided in the case of Vishwaroopa Charity (Supra) by this Tribunal. The relevant extract of the order is reproduced below : “12. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. Counsel for the assessee firstly drew our attention to the answer given by founder and director of HHBHRF to question no. 22 recorded at the time of survey carried out in the business premises of HHBHRF. He drew our attention to the fact that in the said statement the founder director had specifically referred to a period from which bogus donations were received by HHBHRF viz., after A.Y.2010-11.He drew our attention to the fact donation was given to the assessee by HHBHRF through cheque dated 03.03.2011 which was admittedly prior to the period in which bogus donations were received by HHBHRF. According to him the statement recorded at the time of survey based on which the impugned order was passed was not incriminating, so far the assessee is concerned. According to him therefore the very basis on which the impugned order has been passed ITA No.1209/Kol/2016 A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 8 by the Ld. CIT(Ex), Kolkata is unsustainable. His next submission was that there was no other incriminating material on the basis of which it can be concluded that the assessee gave cash and in return got donation of Rs.5 lakhs and it was the assessee who arranged through the brokers for getting bogus donations. It was also his submission that there is no evidence of the assessee having indulged in money launderings. The assessee brought to our notice that assessee has been carrying out charitable activities.
According to the ld. AR, the ld. CIT(Ex), Kolkata has no direct evidence against the assessee warranting cancellation of registration u/s 12AA (3) of the Act. It was submitted by him that registration granted to the assessee can be cancelled u/s 12AA(3) only on conditions being satisfied (a) that the activities of the trust of institution are not genuine (b) that the activities of the trust or institution are not being carried out in accordance with the objects of the trust or institution. There is no evidence brought on record whatsoever to show either of the aforesaid conditions have been satisfied to warrant cancellation of registration u/s 12AA(3) of the Act. The ld. counsel for the assessee placed strong reliance on the decision of ITAT, Kolkata Bench rendered in the case of Sri Mayapur Dham Pilgrim and Visitors Trust Nadia vs C.I.T.(Exemptions), Kolkata in order dated 03.05.2017.
The ld. DR placed reliance on the order of Ld. CIT(Ex), Kolkata. According to him, the answer given at the time of survey in reply to question no.22 is sufficient to come to a conclusion that the assessee has indulged in money laundering. Alternatively it was his submission that the assessee should be afforded an opportunity of cross examination of Shri Swapan Ranjan Dasgupta, the founder / director of HHBHRF.
We have given a very careful consideration to the rival submissions. From the answer to question no.22 given by ShriSwapan Ranjan Dasgupta, founder director of HHBHRF at the time of survey in the business premises of HHBHRF, it is possible to entertain a doubt with regard to genuineness of the donations given by HHBHRF. It can be a money launderings indulged by a third party, who gave donations to the assessee by using the middlemen connected with HHBHRF. So far as the assessee is concerned it received donation from HHBHRF a sum of Rs.5 lakh duly accounted the same in profit and loss account as corpus donation. There is no evidence whatsoever brought on record to show that the cash was paid by the assessee which in turn reached the hands of HHBHRF which was returned in the form of donation to the assessee after retaining the commission. As we have already observed that the answer to question no.22 given by Shri Swapan Ranjan Dasgupta referred to donations given in the financial year 2011-12 as bogus donations. With regard to the donations received/given prior to 31.03.2011 there is no reference to such donations given or received by HHBHRF being in the nature of bogus donations. The assessee had received the donation from HHBHRF on 03.03.2011. It is therefore not possible to place reliance on the statement recorded at the time of survey and come to a conclusion that the assessee has been indulging in money laundering.
In answer to question no.23 Shri Swapan Ranjan Dasgupta founder director of HHBHRF has made reference to certain middle men who are A.Y. 2011-12 M/s d.S. Health & Education Trust vs. CIT(Ex) Kol. Page 9 engaged in money laundering using HHBHRF as a medium for money laundering. There is no evidence brought on record to show any connection between those brokers and the assessee. In the absence of such corroborative evidence, it is not possible to come to any conclusion that the assessee indulged in money laundering and that the donation received by the assessee from HHBHRF was a bogus donation. In fact on identical facts this Tribunal in the case of Sri Mayapur Dham Pilgrim and Visitors Trust (supra) came to the conclusion that cancellation of registration u/s 12AA cannot be sustained. In fact in the case of Sri Mayapur Dham Pilgrim and Visitors Trust (supra) the factual position was that the donor had made a reference to the name of that assessee in a list of bogus donations given by it in an application filed before the Settlement Commission of Income Tax. Still the Tribunal came to the conclusion that there was absence of material to show that the concerned trust had indulged in money laundering. We are of the view that in the case of the assessee in this appeal stands on a much better footing than in the case of the assessee of Sri Mayapur Dham Pilgrim and Visitors Trust (supra).
Apart from the above, the grounds for cancellation for registration u/s 12AA(3) is that the activities of the trust should not be genuine or the activities of the trust are not being carried out in accordance with the objects of the trust. There is neither an allegation in the impugned order nor finding that any of the aforesaid conditions exist in the case of the assessee. We therefore are of the view that the cancellation of registration granted to the assessee u/s 12A of the Act cannot be sustained and the impugned order is hereby quashed. The appeal of the assessee is accordingly allowed.” Thus after considering the above order we refrain ourselves from taking any contrary view in the case on hand.
6.1 Similarly we also observe that the facts of the case i.e. Batanagar Education & Research Trust (Supra)) as relied by the ld. DR are not applicable in the instant case. In the case relied by the Ld. DR, that there was a survey on the assessee on 03.09.2015 and accordingly statement u/s. 133A of the Act was recorded of Shri Rabindra Nath Lahari, Managing Trustee of Batanagar Education and Research Trust wherein it was admitted that the trust has paid cash and got donation in the return. Thus, the Hon’ble Tribunal confirmed the cancellation order of Ld. CIT(Ex). But the in the case on hand, no such admission was made by the assessee that it got donation against the cash. Thus, we hold that the case law relied by the Ld. DR cannot be applicable to the instant facts of the case.