BALLARAM HANUMANDAS CHARITABLE TRUST,KOLKATA vs. CIT(EXEMPTIONS), KOL., KOLKATA

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 22.12.2016 u/s 12AA(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). Shri A.K. Tibrewal and Shri Amit Agarwal, Ld. Authorized Representative appeared on behalf of assessee and Shri G. Hangshing, Ld. Departmental Representative represented on behalf of Revenue. 2. Grounds raised by assessee per its appeal as under:- “1.That, on the facts and circumstances of the case, the order dated 22.12.2016 passed by the Learned Commissioner of Income Tax

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 2 (Exemptions), Kolkata cancelling the registration of the Appellant assessee trust under section 12AA(3) of the Income Tax Act, 1961 is without jurisdictional, illegal, invalid, bad-in-law, unreasonable and/or otherwise perverse. 2.That the Learned Commissioner of Income Tax (Exemptions), Kolkata erred in arbitrarily alleging that the activities of the Appellant Assessee Trust were not genuine and was not being carried out in accordance with their objective, ignoring the admitted fact that the said trust was involved in the activities of imparting education in accordance with the objectives laid down in its Trust Deed. 3. That the Learned Commissioner of Income Tax (Exemptions), Kolkata erred in cancelling the registration of the Appellant Assessee Trust on the basis of following findings and observations which are arbitrary, perverse and contrary to the facts and evidences on record: (i) the appellant assessee trust had received bogus donations of Rs.68.50lakhs from M/s School of Human Genetics and Population Health which was allegedly involved in the business of money laundering and providing accommodation entry of donations against commission. (ii) the appellant assessee trust had given pre-arranged accommodation entry by receiving bogus donations of Rs.20 lakhs from KM/s Quadeye Securities Pvt Ltd in FY 2011-12 relevant to the Assessment Year 2012-13. (iii) the funds of the trust had been mis-utilised and routed for non- charitable activities by web of financial transactions involving group companies in which the trustees and relatives are directors. (iv) the appellant assessee trust was involved in money laundering by accepting bogus donations and returning the same to donors. 4. That the Learned Commissioner of Income Tax (Exemptions),Kolkata misdirected himself in law in cancelling the registration of the Appellant Assessee Trust on the basis of the statement of third parties without allowing opportunity of cross-examination. 5. That the Learned Commissioner of Income Tax (Exemptions), Kolkata erred in cancelling the registration of the Appellant Assessee Trust on the alleged ground that bogus donations were received from M/s School of Human Genetics and Population Health whose approval under section 35(1)(ii) of the Income Tax Act, 1961 was subsequently withdrawn with effect from 15th September, 2016.”

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 3 of 1979-80 dated 11.09.1979. The assessee engaged in providing education in village Bahal under District Bhiwani in State of Haryana since 1987. A survey operation was conducted u/s 133 of the Act by Investigation Wing of Kolkata dated 27.01.2015 on M/s School of Human Genetics & Population Health (SHG & PH for short). During the course of survey operation, it was revealed that SHG & PH engaged in the activity of money laundering and providing accommodating entries to different organizations in the manner as detailed under:- i) It was accepting bogus donations from various organizations and same was returned back through the web of financial transactions involving various mediators and organizations. ii) It was accepting cash and transferring the same in the form of donation through the web of financial transactions. In either case, SHG & PH was charging commission for providing the above stated accommodation entries. During survey at SHG & PH it was ascertained that assessee-trust has received donation amounting to ₹68.50 lakh from SHG & PH through banking channel against the cash provided to SHG & PH during the financial year 2013-14. Accordingly, Ld. CIT(Ex) opined that assessee is engaged in illegal activities which are not certainly as per the objects of the trust. Besides the above, it was also observed that assessee has also accepted bogus donation for ₹ 20 lakh in the financial year 2011-12 from M/s Qadeye Securities Pvt. Ltd. (QSP for short). This fact of bogus donation was ascertained on the basis of the statement recorded u/s. 131 of the Act of the Director of the company, namely, Shri Dinesh Kuma Agarwal vide dated 04.12.2015. The name of the assessee is very much reflecting in Question No. 18 of the statement given by the Director of QSP. The relevant extract of the question no. 18 and its reply stands as under:- “Q18. Please furnish details of donation made to various Charitable trust/organisation during F.Y 2009-10 to 2014-15. Ans. Sir, the details of donation made by M/s Quadeye Securities Pvt Ltd. & Quadeye Trading are as under:

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 4 DETAILS OF DONATION PAID BY QUADEYE SECURITIES PVT. LTD & QUADEYE TRADING (PARTNERSHIP FIRM) Donation paid during the F.Y Total Sl.No. Name of Trust 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10 14 BALLARAM - - - - 20,00,000 - - - - - - 2000000/- HANUMANDAS CHARITABLE TRUST

The Director of QSP described the modus operandi for the impugned bogus donation in question No. 19. The relevant extract of the question no. 19 and its reply stands as under:- Q.19. Please state how did you decide to make such donations to various trust/organization.

Ans. Sir, it was a prearranged accommodation entry in form of bogus donation. The same was arranged by Mr. Pradeep Kumar Agarwal & Mr. Ajay Agarwal, CA who is also Auditor of my group concern. Sir, donation was made by Quadeye Securities Pvt Lt through Cheque/RTCG in turn the above mentioned persons returned the amount in cash after deducting their commission.”

As per the statement of the Director of QSP, Chartered Accountant, Pradip Kumar Agarwal and CA, Shri Ajoy Agarwal were acting as conduit in the above bogus transactions. In view of the above, assessee was show caused by Ld. CIT(Ex) for cancelling the registration u/s.12AA(3) of the Act on the ground of illegal activities.

In compliance thereto, assessee submitted that it has received no bogus donation and no money of whatsoever was returned back. All the money of donations was received through banking channel. However, Ld. CIT (Ex) disregarded the submission made by assessee and cancelled the registration certificate of assessee by observing as under:- “It is pertinent to mention here that the Central Board of Direct Taxes vide its notification no. 82/2016/F.No.203/64/2009/ITA.II dated 15th September 2016 has withdrawn the approval u/s. 35(1)(ii) of the IT Act 1961 in respect of M/s School of Human Genetics and Population Health for indulging in money laundering and providing accommodation entries. Indulging in ingenuine activities which is not at par with the trust deed leads to the ultimate conclusion that the society is in the act of money laundering. The provisions of Section 12AA(3) of the IT Act, 1961 is as follows:-

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 5 ‘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.’ Considering the activities of the assessee not genuine and are not being carried out in accordance with the objectives of the society, the registration u/s. 12A of the IT Act 1961 vide order no.T-81/W.B.VII of 1979-80 dated 11.09.979 is hereby cancelled u/s. 12A(3) of the IT Act 1961 w.e.f. 01.04.2011 i.e. FY 2011-12 relevant to A.Y. 2012-13, as the first violation took place in the FY 2011-12.”

Being aggrieved by this order of Ld. CIT(Ex) assessee came in appeal before us. 5. Before us Ld. AR for the assessee filed paper book which is running from pages 1 to 65 and submitted that registration u/s.12A of the Act was cancelled by Ld. CIT (Ex) on the ground that assessee was engaged in illegal activities. The view of the Ld.CIT(Ex) that assessee is engaged in illegal activities is based on the statement given by two parties as detailed below:- 1) Authorized Representative of SGH & PH 2) Director of QSP However, Ld. CIT(Ex) never provided any opportunity to assessee for cross- examined of the statements of the aforesaid parties. Therefore, impugned order of Ld. CIT (Ex) for cancelling the registration certificate is not sustainable in eyes of law. Ld. AR in this connection relied on the order of co- ordinate Bench of this Tribunal in the case of Sri Mayapur Dham Pilgrim and Visitors Trust vs. CIT (Ex) in ITA No.1165/Kol/2016 dated 03.05.2017. Ld. AR further submitted that whatever donation was received by assessee- trust during the financial year 2013-14 has been utilized in making the addition to the fixed asset of the assessee-trust. During the year total addition in fixed assets was made for ₹38.02 crores. Ld. AR further submitted that director of QSP has given contradictory statement in Question No. 37 of the statement

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 6 wherein it was stated that Pushpa Devi Bansal Charitable Trust is actively engaged for upliftment of poor people. Therefore the donation made to it was a genuine donation. The relevant extract of the question no. 37 and its reply stands as under:- Q37. It is seen from loose sheet inventorised vide ID Marked QSPL/o1 that various donations was received by Pushpa Devi Bansal Charitable Trust. Please explain nature of charitable activity being done by the said trust and also furnish name of the trustee. Ans. Sri, Pushpa Devi Bansal Charitable trust is actively involved in social welfare activities and upliftment of poor people and also donate to “Rajasthan Go Kalyan” a trust to save helpless cows. The Goshala is situated at Barasat, Kolkata. Sir, me and my father Sri Sant Lal Bansal are trustee.”

It was also submitted that the learned CIT(ex) failed to provide the opportunity of cross examination as desired by the assessee. The learned AR in support of his claim has relied on the order of special bench of Hon’ble Bombay Tribunal in the case of GTC Industries Ltd versus ACIT in ITA No. 5996/Mum/1993 & 1055 & 1056/Bom/1994 where it was held as under:- “… … So far as the issue of violation of principles of Natural Justice is concerned, the same has been duly complied with in terms of directions contained in the earlier orders of the Tribunal which has been finally settled in several rounds of litigation before this Special Bench. As per the direction of the Tribunal, finally, the Revenue was required to provide certain material and cross-examination of certain witness. In compliance thereof, the Revenue has provided the opportunity to cross-examine in the case of five persons as per the list given by the assessee.”

The ld. Counsel for the assessee also relied on the judgment of Hon’ble Apex Court in the case of State of Kerala Vs. K.T. Shaduli Yusuff etc. reported in 1977 AIR 1627, 1977 SCR (3) 233 wherein it was held as under : “… .. Such an issue can only be determined after examination of the accounts of both the parties and after affording the assessee the right to cross-examine the wholesale dealers concerned, particularly when the assessee makes a specific prayer to this effect.”

According to the ld. AR the statement recorded at the time of survey based on which the impugned order was passed was not incriminating, so far the

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 7 assessee is concerned. According to him therefore the very basis on which the impugned order has been passed by the C.I.T.(Exemptions), 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 received bogus donation. It was also in his submission that there is no evidence of the assessee having indulge in money launderings. 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) of the Act 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. On the other hand, Ld. DR vehemently relied on the order of Ld. CIT (Ex) and he requested the Bench to restore the matter to the file of Ld. CIT(Ex) for the purpose of cross-examination opportunity to assessee.

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 8 The argument of the ld. AR is that it has not received any bogus donation from the above parties. All donations were received through banking channel. The ld. AR also submitted that donation from QSP was received only for Rs.10 lacs only. The figure of donation of Rs. 20 lacs from QSP is incorrect.

6.1 We also observe in the instant case the opportunity of cross examination was very much required in the presence of assessee and other parties. Thus the ld. CIT(Ex) in the instant case erred in not giving the opportunity of cross examination. Thus the cases laws cited by the ld. AR for the opportunity of cross examination is very much applicable to the instant case. There was a specific request made by the assessee for the opportunity of cross-examination as evident from the reply of assessee vide letter dated 01.02.2016 which is enclosed on the pages 16 to 19 of the paper book. The relevant extract of the reply is reproduced below:- It is apparent from the statement of Shri Dinesh Agarwal that he is in the business of trading in securities as well as real estate with huge turnover. He is also having business abroad. When such a person or his concern makes any donation for philanthropic purposes, such donation should not have been doubted or disputed. May be that the gentleman has given the statement for his pecuniary interest or such statement have been obtained under coercion. It is also apparent from question 21 of the statement of Shri Dinesh Agarwal that donation was allegedly arranged by one Mr. Pradip Agarwal, CA and Mr. Ajay Agarwal. We do not know such persons. Therefore, the donation given to us cannot be treated to be not genuine. It also appears from the statement of Shri Dinesh Agarwal that he was giving genuine donation as appears from later part of the reply to question No. 26 & 37. It also appears from the statement that the companies under the management of Shri Dinesh Agarwal were genuine companies taking and giving loans. Therefore the nature of entries in the books of the said concerns cannot be denied or disputed. In view of the above, it is necessary that the deponent Shri Dinesh Kumar Agarwal and the two persons named by him namely, Shri Pradip Agarwal, CA and Mr. Ajay Agarwal are allowed to be cross examined in the presence of each other to bring home the truth behind the donations. We, therefore, request you to kindly arrange cross examination of Shri Dinesh Agarwal, Shri Ajay Kumar Agarwal and Shri Pradip Agarwal at the same time. We are ready to cross examine them on any day as may be fixed up by your honour. Unless such cross examination is allowed. it will be difficult to make compliance to the show cause notice issued u/s 12AA(3). The principle of audi alteram partem is one of the most essential principles of natural justice. The right to cross- examine witnesses therefore is a prerequisite to the witness's statement being used as evidence. Reference may be made to the judgement of the Hon'ble

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 9 Supreme Court in the case of State of Kerala vs. Shadui Yusuff AIR 1977 SC 1627. We assure you that we shall file all the evidences as required and shall also comply with all the requisitions as may be made by your honour, But unless the cross examination as asked for is allowed and the doubts in your mind are made clear, all our compliances will be premature. Further regarding the receipt of donation of Rs.68,50,000/- from school of Hanuman Genetics and Population Health of 6A, Malanga Lane, 11 Floor, Kolkata-700012 ,in the Financial year 2013-2014, it is submitted that the said donation is genuine and we have neither returned the figure of donation and nor paid any commission for the same. As far as the statement of Smt. Moumita Raghvan of School of Human Genetic Population Health in course of survey operation U/s. 133A of the Income Tax Act, 1961 on 27.01.2015 a concerned, she might have given the statement for her pecuniary interest or such statement might have been obtained under coercion. A cross examination opportunity may be given to us for cross examination of Smt. Moumita Raghvan and any other alleged middleman stated in her statement, who are not known to us. It is further submitted that the statement given by Mrs. Raghvan did not contain any names of the parties. Therefore, name of our organization was not mentioned in the statement. Further, Smt. Raghvan had given the statement in respect of the donation taken by school of Hanurnan Genetics and Population Heath, 6A, Malanga Lane, 1st Floor, Kolkata- 700012 and not the donations given by them. We have received donation which is not covered by the statement given during the survey: Without prejudice, the statement of the aforesaid two parties cannot be used against the Assessee Trust without any opportunity of cross examination.”

6.2 However the ld. CIT(Ex) despite of the request of the assessee failed to provide the opportunity of cross examination to the assessee which in our considered view is against the principle of natural justice. In this connection we also rely In this connection we rely in the case CIT Vs. S. Khader Khan Son reported in 352 ITR 480 (SC) where the Hon’ble Supreme Court has held that : “Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition”

In the absence of the cross examination of the statement the impugned addition cannot stand as held by the Hon’ble Supreme Court in the case of

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 10 Anadaman Timber Industries in civil appeal no. 4228 of 2006. The relevant extract of the judgment reads as under: "According to us, 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 makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross- examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal."

There is no evidence brought on record to show any connection between those brokers and the assessee. In the absence of such corroborative

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 11 evidence, it is not possible to come to any conclusion that the assessee indulged in money laundering and that the donation received by it 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 of the Act cannot be sustained.

6.3 Apart from the above, the grounds for cancellation for registration u/s 12AA(3) of the Act 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.

“Under Section 12AA of the Act, the Commissioner, at the relevant time in the year 1999 had called for all documents and information from the respondent- assessee to satisfy himself about the genuineness of the activities of the institution and after making enquires had passed the order registering the said institution and giving it the benefit under Section 12A of the Act, which made the institution eligible for exemption from the provisions of Sections 11 and 12 of the Act. Under Section 12AA(3) of the Act, the Commissioner was to be

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 12 satisfied about the activities of the said institution and if they were not genuine and the same were not being carried out in accordance with the objects of the institution he could pass the order cancelling the registration. It cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted. The allegation is regarding the alleged supply of the installation of the software and whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in cancelling the registration granted on 13.05.1999 w.e.f. the assessment year 2004-05. The assessee had placed various materials before the Tribunal to show that software modules purchased were installed between 2004 to 2011 and the assessee had incurred as much as 91.71% of the receipts for the assessment year 2004-05. Accordingly, keeping in view the peculiar facts and circumstances as noticed above, High Court are of the opinion that the Commissioner of Income Tax was not justified in passing the impugned order for withdrawing the exemption as admittedly, the respondent-assessee is carrying out educational activities by running a large number of educational institutions all over the country and, therefore, the questions of law sought to be raised do not arise.”

The facts of the above case are similar to the instant case before us. In the instant case the assessee is a charitable trust duly constituted as Charitable Trust under a Deed of Trust as a Public Charitable Trust for imparting education which is a “Charitable Purpose” u/s. 2(15) of the Income Tax Act. The trust duly applied for registration u/s. 12AA of the IT Act before the Director of Income Tax (Exemption) in conformity with rule 17A and submitted Form No. 10A together with other requisite documents. The Director of Income Tax (Exemption) after verification of documents and after being satisfied about the object of the trust and genuineness of its activities granted registration effective from 11.09.1979 vide order No. T-81/WB.VII of 1979-80 dated 11.09.1979. A copy of the said registration is enclosed on pages 20 of the paper book.

Besides the above we find that there were certain facts which were not challenged by the ld. CIT(Ex). These facts are detailed as under :

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 13 2. The assessee during the year 2013-14 has received donation worth of Rs. 7,71,02,000.00 only from 172 parties as evident from the details enclosed on pages 21 to 32 of the paper book. The ld. CIT(ex) has not doubted on the genuineness of other donation except from two parties as discussed above. 3. It is also important to note that the assessee has been receiving donation in every year which has been duly accepted by the Revenue as evident from assessment orders framed under section 143(3)of the Act for the AYs 2010-11, 2011-12 & 2012-13 which are enclosed on pages 49 to 60 of the paper book. 4. Ballaram Hanumandas Charitable Trust, Kolkata (BHCT) founded in the year 1977, headed by Shri Hari Krishna Chaudhary, is a CSR project of Vikram-Pratibha Group of Industries. The Trust has been set up with an objective of transforming the much deprived rural area surrounding the Chaudhary Family's ancestral village Bahal (District Bhiwani) in Haryana, 30 km north of Pilani (Rajasthan). BHCT catering to the need for high-quality English-medium schooling, for around 100 villages surrounding Bahal. Subsequently, BRCM Public School, Vidyagram, a premier Residential School, from class IV to XII, was added to provide for all round development of students in a Boarding set up, The School affiliated to CBSE, is a member of the Indian Public School Conference (IPSC) and educating students from all over India and abroad. In August 1999, BHCT ventured into the field of providing technical education by establishing BRCM College of Engineering and Technology (BRCM-CET). The college is duly approved by the AICTE & Government of Haryana, and permanently affiliated to M.D. University, Rohtak for 4-year B.Tech. Courses in CSE, ME, EEE & Civil Engineering & 2 year M.Tech courses in ME, EEE, CSE & Civil Engineering. For Students and Faculty of all its institutions, BHCT provides aesthetically designed modern and environment friendly

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 14 classrooms, laboratories. workshop, sports and recreational facilities along with all other essential utilities and well furnished & comfortable on accommodation in an eco friendly environment. BHCT further plans to add Law, Architecture and Business Management & Entrepreneurial Studies with Post-Graduate Teaching & Research facilities, thus enhancing learning possibilities from KG to various UG & PG programs. GDC Memorial College, a unit of HKC Foundation (a sister concern of BHCT) was established in the year 2011 to provide quality UG and PG level education to the youth of this remote & rural area, specifically for the girl students. An absolutely free School, in the name of "Nanhe Kadam" is functional since 2010, where underprivileged students of the society are getting free education. BHCT is also managing RDNL Vidya Mandir, an exclusive Kindergarten and a 30 Bed fully functional Many Kalyan Trust Hospital at Bahal. At present BHCT is providing Education to more than 5000 students altogether for enhancing learning possibilities from KG to various UG & PG programs through it educational ventures.

7.1 Similarly, we also rely in the judgment of Hon’ble High Court of Karnataka in the case of CIT Vs. Islamic Academy of Education reported in 59 taxmann.com 102 wherein it was held as under:-

“If trustees were misappropriating funds and were maintaining false accounts, it was open to authorities to deny benefit under Section 11 of the Income Tax Act, but that could not be ground for cancelation of registration itself.” Applying the above ratio laid down by the Hon’ble High Court of Karnataka in the case of Islamic Academy of Education (Supra), it can be concluded that even the donation is proved to be bogus then also the registration u/s 12AA of the Act cannot be cancelled but the said amount of donation will not be eligible for exemption u/s 11 of the Act.

7.2 The provisions of section 12AA of the Act prescribe conditions for registration of trust and make obligatory to the trust or the institution to seek

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 15 registration under section 12AA of the Act, if such trust or institution intends to have the benefit of the provisions of section 11 and 12 of the Act. These provisions thus make it clear that if the trust or the institution is not registered under section 12AA of the Act, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable to be excluded under any of the clauses of section 11 of the Act. Thus, in a case where registration is refused, the trust or the institution would not be allowed to claim any such exemption or exclusion of its income from the total income of the previous year. The Income-tax Act through section 12AA has made it obligatory for charitable trusts and institutions to get themselves registered with the income-tax authorities failing which the benefit of exemption from income-tax would be denied. The requirement of registration being procedural is prescribed u/s 12AA of the Act which reads as under:-

“Procedure for registration. 12AA. (1) The [***] [Principal Commissioner of] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, 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;” From the above provisions, it is clear that the ld CIT(Exemption) before granting the registration certificate shall conduct necessary enquiries as he thinks fit in order to satisfy himself about the genuineness of activities of the trust. Once the ld CIT(Ex) is satisfied with the genuineness of the activities then he will grant the registration certificate. In the instant case before us, we find that the activities of the trust have not been doubted except the donation received by the assessee from two parties. Thus in our view at the most the

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 16 exemption u/s 11 of the Act will be denied to such donation. Thus, in such circumstances the registration u/s 12A of the Act cannot be cancelled. In this regard, we rely in the principles laid down by the Hon’ble Allahabad High Court in the case of CIT Vs. Red Rose School (2007) 212 CTR 394 (All). The relevant extract of the judgment is extracted below:-

“A reading of provisions of sub-cls. (a) and (b) of s. 12AA makes it clear that the CIT has to satisfy himself about the genuineness of the activities of the trust or institution and also about the objects of the trust or the institution. On being satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the CIT would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, the CIT is again empowered to make enquiries as he thinks fit. In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, of course, the registration can again be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Sec. 12AA, which lays down the procedure for registration, 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. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean, they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The 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. It is significant to mention that registration under s. 12AA does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purpose of determination of tax liability but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry by the CIT shall remain restricted to the examination, as to whether the assessee, who has moved the application for registration under s. 12A, is

ITA No.431/Kol/2017 A.Y. 2012-13 Ballaram Hanumandas Charitable Trust Vs. CIT(Ex) Kol. Page 17 actually in the activities which are genuine. Genuineness of the activities of the trust or the institution has to be seen, keeping in mind the objects thereof, which necessarily means that the CIT shall satisfy himself about the fact that the activities are genuine and in consonance with the objects of the trust or the institution. In other words, if establishing and running a school is the object of the society, as given in its bye-laws, it has to be satisfied that the society has established the school, where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 for assessing the income which has not been applied to the purpose of the trust or the institution, the intention of the law maker and the scope and purport of the provision is apparent while considering the question of registration.”

In view of above precedent, we find that the activities of the trust in relation to its education activities have not been doubted and on the basis of same activities registration u/s 12AA of the Act was awarded to the assessee. Simply the assessee has received donation from some parties which are involved in the bogus transactions cannot be the basis for the denial of the registration certificates as discussed above.

In view of above, we have no hesitation in reversing the order of ld. CIT(E) and accordingly the appeal of the assessee is allowed. 8. In the result, appeal of assessee stands allowed. Order pronounced in the open court 15/09/2017

Sd/- Sd/- (Aby. T. Varkey) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 15/09/2017 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-Ballaram Hanumandas Charitable Trust, 1 Old Court House, Corner, 4th Floor, Tobacco House, Kolkata-001 2. ��यथ�/Respondent-CIT(Ex),Kolkata, 10B, Middleton Row, 6th Floor, Kolkata-71 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ�धकरण, कोलकाता ।