Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
1 ITA No.2434/Kol/2016 Mitra Parishad, AY --
आयकर अपील�य अधीकरण, �यायपीठ – “A” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA (सम�)Before �ी ऐ. ट�. वक�, �यायीक सद�य एवं/and �ी एम .बालागणेश, लेखा सद�य) [Before Shri A. T. Varkey, JM & Shri M. Balaganesh, AM]
I.T.A. No. 2434/Kol/2016 Assessment Year: --
M/s. Mitra Parishad Vs. Commissioner of Income-tax (PAN:AAATM4876C) (Exemption), Kolkata. Appellant Respondent
Date of Hearing 14.06.2017 Date of Pronouncement 06.09.2017 For the Appellant Shri S. M. Surana, Advocate For the Respondent Shri R. S. Biswas, CIT, DR
ORDER Per Shri A.T.Varkey, JM This is an appeal filed by the assessee society against the order of Ld. CIT(E), Kolkata dated 16.12.2016 wherein the Ld. CIT(E) was pleased to cancel the registration granted u/s. 12A of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) exercising his powers u/s. 12AA(3) of the Act w.e.f. 01.04.2010 relevant to AY 2011-12. 2. Brief facts of the case are that the assessee society was formed in the year 1965 and had certificate of registration of societies dated 28.01.1966 (paper book page 1). The assessee society, thereafter, received certificate of registration u/s. 12A of the Act vide No. 83-S/WB.VI of 1973-74 dated 19.12.1973 (paper book page 2). The assessee was also enjoying exemption granted u/s. 80G(5)(vi) of the Act, which is placed at page 3 and 4 of the paper book, wherein vide letter dated 26.06.2012, the AO stated that the exemption shall be deemed to be extended in perpetuity unless specifically withdrawn. The Memorandum of Association has been seen kept at page nos. 32 to 40 of the paper book wherein the main objects of the society were for education, health for the poor and needy people and other social cultural activities.
2 ITA No.2434/Kol/2016 Mitra Parishad, AY --
The Ld. CIT(E) took note of the survey operation carried out u/s. 133A of the Act on 27.01.2015 at the premises of M/s. Herbicure Healthcare Bio-Herbal Research Foundation (in short “M/s. Herbicure”) wherein the statement of the founder Director Shri Swapan Ranjan Dasgupta was recorded on oath, wherein he has stated that they had been accepting donations on behalf of M/s. Herbicure and returned the same to the donor after retaining the commission and likewise, M/s. Herbicure accepts money by cash and thereafter disburse the donation through cheque after retaining the commission. The Ld. CIT(E) noted that the assessee society in AY 2011-12 had received a donation of Rs. 50 lacs from M/s. Herbicure, therefore, he issued notice to the society on 02.12.2015 to explain as to why the registration granted u/s. 12A of the Act shall not be cancelled/withdrawn u/s. 12AA(3) of the Act for indulging in fake activities. Pursuant to the said notice of the Ld. CIT(E), the assessee filed submission on 21.12.2015 excerpts of the same was reproduced by the Ld. CIT(E) and thereafter, he after reproducing another submission of the assessee dated 13.10.2016 was of the opinion that the assessee was involved in money laundering. The plea of the assessee to cross examine Shri Swapan Ranjan Dasgupta and Shri Kishen Bhawshingka was repelled by the Ld. CIT(E) and found that assessee is “indulged 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.” After recording the said finding, Ld. CIT(E) was pleased to cancel the registration granted w.e.f. 01.04.2010. Aggrieved by the said decision of the Ld. CIT(E) the assessee society is in appeal before us.
We have heard rival submissions and have gone through the case records carefully and the judicial precedents cited before us. We note that the assessee is a society registered u/s. 12A of the Act vide No. 83-S/WB.VI of 1973-74 dated 19.12.1973, which is available at paper book page 2. The assessee was also enjoying exemption granted u/s. 80G(5)(vi) of the Act, which is placed at page 3 and 4 of the paper book. A perusal of pages 32 to 40 of the paper book, wherein the assessee has placed its activities and the main objects of the society, which is established for philanthropic activities for encouraging education by helping deserving students by giving scholarship and also runs self employment training centre imparting training in cutting, stitching, knitting and embroidery to the poor girls and
3 ITA No.2434/Kol/2016 Mitra Parishad, AY --
widows. The assessee society is also providing financial help by depositing fee and providing books to poor and needy students. The assessee also runs library for higher classes and post graduate students. The assessee society has also set up Homeopathy and Child care clinic and serves to the poor and needy people. It has also set up dental treatment and care unit for the service of the people and also conducted heart check up and ECG free of cost. Acupuncture treatment has also been done. Besides it also organizes different free health check up, eye check up and blood donation camps. The assessee has also done free distribution of spectacles and free eye operation of the poor and needy people. The assessee is also providing free treatment, medicine and financial help to needy persons and distributing free calipers, artificial limbs and cycles for the handicapped persons. Assessee also organizes cultural programs, symposium, seminars, debates etc. Meanwhile, the Ld. CIT(E) had stumbled across a statement given by Shri Swapan Ranjan Dasgupta, the founder Director of M/s. Herbicure which was recorded on oath during survey carried out u/s. 133A of the Act wherein Shri Swapan Ranjan Dasgupta has stated that they provide donation in lieu of cash; and also they indulged in accepting donation which is returned back in cash to the donor. The Ld. CIT(E) found that the assessee society in AY 2011-12 had received a donation of Rs. 50 lacs from M/s. Herbicure, therefore, he issued notice dated 02.12.2015 asking the assessee why the registration granted u/s. 12A of the Act should not be cancelled. The assessee society replied that the amount of Rs.50 lacs donated by M/s. Herbicure was received and found utilized for purchase of building and stoutly refused that it was a bogus donation. There was series of letters written by the assessee to the Ld. CIT(E) which were dated 31.05.2016, 03.10.2016 and 13.10.2016 wherein the assessee society has pleaded to the Ld. CIT(E) its keen interest to cross examine Shri Swapan Ranjan Dasgupta and Shri Kishan Bhavshinka so that truth can be brought to light. The assessee society pointed out to the Ld. CIT(E) that it requires to cross examine these two individuals because the foundation of the whole case of Ld. CIT(E) rest on the survey statement recorded on oath of Shri Swapan Ranjan Dasgupta which, according to the assessee, cannot be the sole basis for cancelling the registration granted u/s. 12AA(3) of the Act. According to assessee society, as per decision of Hon’ble Supreme Court in the case of CIT Vs. S. Kader Khan Son (2013) 352 ITR 480 (SC) the statement given on oath u/s. 133A
4 ITA No.2434/Kol/2016 Mitra Parishad, AY --
of the Act cannot be the sole basis for the impugned action. Therefore, the assessee society requested the Ld. CIT(E) to grant opportunity to cross examine Shri Swapan Ranjan Dasgupta and Shri Kishan Bhavsihinka. We note that the Ld. CIT(E) in order to cancel the registration has taken the statement of Shri Swapan Ranjan Dasgupta recorded on oath during survey conducted u/s. 133A of the Act and mainly the answer to the question nos. 22 and 23 which we have perused at page nos. 172 and 173 of the paper book are reproduced below:
“Q. 23. Please explain in detail the modus operandi of giving the accommodation entries by way of accepting donations to different beneficiaries, Also state who is the/are the broker/brokers (while giving his mobile no. and address) through which you have given accommodation entries in the form of bogus donations on commission? Please also state what are the commission charged by you and broker concerned for providing accommodation entries to different beneficiaries. Ans. The entire accommodation entries of bogus donations are facilitated by Mr. Kishan Bhawasingka having his mobile nos. 9830087866&9883051515 who lives somewhere in Bhawanipore near Netaji Subhas Metro Station. The modus is like this. The information is given to us by Mr. Kishan Bhawsingka as to bogus donation entry is needed by a particular party. Sometimes we come to know about the accommodation entry being given to a party when we directly receive communication from the concerned bank that the amount has been credited. Thus, the accommodation entry is completely controlled and managed by Mr. Kishan Bhawasingka. The bogus donations are received vide cheque/RTGS into any of the bank accounts mentioned by me in response to question no.7 of this statement. After this, payment is made to any of the paper/bogus companies on account of bogus purchase/expense on the advice of Mr. Kishan Bhawasingka. The remaining transaction is also managed on paper by him only which happens in the form of routing of the donation amount through his bogus/paper companies in 2 to 3 layers. Finally, cheque of the donation amount (after deducting the cut of commission charged by us and broker Mr. Kishan Bhawasingka) is given back to the original beneficiary who gave donation to us. Sometimes, the amount is withdrawn at 3rd or 4th level and cash is given back to the original beneficiary (after deducting the cut of commission charged by us and broker Mr. Kishan Bhawasingka) who gave donation to us. In this entire process of providing entry in the form of bogus Donation to different beneficiary companies/individuals a commission of 5% approx is charged by us which is the actual donation we receive from that particular donor in reality. The commission of almost 5 to 8% is charged by Mr. Kishan Bhawasingka for facilitating the said accommodation entry. Subsequently, a sanction letter is received from the donor reflecting the amount of donation and mode of payment. The particulars are then verified with the amount credited in our bank accounts after which an exemption u/s. 35(1)(ii) of the I.T.Act, 1961 which qualifies him/her to claim one and three fourth of the said donation as tax exempt u/s. 35(1)(ii) of the I. T. Act, 1961.”
5 ITA No.2434/Kol/2016 Mitra Parishad, AY --
As stated above and armed with the aforesaid sworn statement of Shri Swapan Ranjan Dasgupta, the Ld. CIT(E) issued notice dated 02.12.2015 (Page 156 of paper book) for cancellation of registration granted u/s. 12A of the Act. The assessee society was asked to produce the Income and Expenditure Account and Balance Sheet for AYs 2011-12 to 2015-16, the list of corpus donation received by the society along with their PAN, names and addresses from 01.04.2010 to 31.03.2015, list of corpus donation/non corpus donated by the assessee with the donees’ PANs, names and addresses from 01.04.2010 to 31.03.2015. The assessee society had furnished reply and produced the documents sought by the Ld. CIT(E) vide letter 19.12.2015 wherein the assessee has clearly refuted the allegation of accepting donation and returning the same in lieu of cash; and also have clearly explained with documents that Rs.50 lacs which was donated by M/s. Herbicure has been applied for purchasing a building and the entire amount thus had been utilized for the objective for which it was established. The assessee society stoutly denied the allegation of money laundering and asked the Ld. CIT(E) to provide to it any material/document for making such allegation against the assessee society; and also asked for a copy of the statement of Shri Swapan Ranjan Dasgupta. Later, we note that the statement of Shri Swapan Ranjan Dasgupta was handed over to the assessee society. After perusal of the same, the assessee society pointed out to Ld. CIT(E) that nowhere in the statement recorded that is to question nos. 1 to 24, the assessee society’s name never surfaced or any allegation has been alleged against the assessee society. The assessee society also pointed out to the Ld. CIT(E) that since the entire case of the ld. CIT(E) was based on the sworn statement of Shri Swapan Ranjan Dasgupta recorded during survey cannot be the sole basis for the impugned action as well as requested for cross examination of Shri Swapan Ranjan Dasgupta and Shri Kishan Bhawasingka. We note that the Ld. CIT(A) repelled the plea of the assessee for cross examination and passed the impugned order holding that the assessee has taken donation in lieu of cash and, therefore, has indulged in ingenuine activity of money laundering and, therefore, as per section 12AA(3) of the Act he was of the opinion that the activities of the assessee are not genuine and it was not being carried out in accordance with the objectives of the society. Therefore, registration granted u/s. 12A of the Act dated 19.12.1973 was cancelled w.e.f. 01.04.2010 vide impugned order dated
6 ITA No.2434/Kol/2016 Mitra Parishad, AY --
16.12.2016. It is an undisputed fact that the assessee is a charitable organization which is indulged in various philanthropic activities including in the field of education and health for the poor and needy section of the people and has been provided with certificate of registration u/s. 12A of the Act as early as that of 19.12.1973. The sheet anchor of the entire exercise emanates from a statement recorded during survey which was recorded on oath on 27.01.2015 at the premises of M/s. Herbicure. The statement of the founder Director states that it was involved in giving accommodation entries like giving donations in lieu of cash and accepting donations and giving it back for a commission thus, providing accommodation entries. It was also stated by the founder-director that one Mr. Kishan Bhawasingka who lives somewhere in Bhawanipore near Netaji Subhash Metro Station was the main facilitator. Further, it was stated that bogus donations are received by cheque/RTGS which is deposited in the accounts of M/s. Herbicure and on the advice of Mr. Kishan Bhawasingka bogus purchases are booked and amounts are disbursed through 2/3 layers and finally the donor receives cash after deducting the commission. Thereafter, a sanction letter is received from the donor reflecting the amount of donation and mode of payment which M/s. Herbicure verifies from the bank account and then certificate of exemption u/s. 35(1)(2) of the Act given to the donor wherein the donor qualifies for deduction 175% of the donated amount. We note that there was another letter dated 12.10.2015 issued by M/s. Herbicure to the Ld. CIT(E) which has been reproduced by the Ld. CIT(E) in the impugned order at page 15 wherein M/s. Herbicure has explained the fate of the donation made by it to the donees. It was stated that few brokers had arranged donation for it and asked M/s. Herbicure to return the donation to some other Trusts. It was stated in the letter that M/s. Herbicure made donation from the donation received from brokers. It was stated that the brokers collected the cash from whom the donations were made by M/s. Herbicure and it was certified that the donations to the Trusts were made as per the direction of the broker which letter also has been signed by the Director of M/s. Herbicure Shri Swapan Ranjan Dasgupta. After perusal of the statement recorded on oath as well as the letter, the ld. CIT(E) was of the opinion that since the assessee society has received donation to the tune of Rs. 50 lacs from M/s. Herbicure in AY 2011-12, the assessee had received donation in lieu of cash and, therefore, it was engaged in the money
7 ITA No.2434/Kol/2016 Mitra Parishad, AY --
laundering which, according to him, is an ingenuine activity and so the said activity is not in consonance with the objects of the society, therefore, he cancelled the 12A registration. The plea of assessee for cross examination of Shri Swapan Ranjan Dasgupta and Shri Kishan Bhawasingka was not heeded to by citing observation from few judgments. We do not uphold the impugned action of the Ld. CIT(E). Right from the notice given by the ld. CIT(E) the assessee pleaded that the assessee had utilized Rs. 50 lacs donated by M/s. Herbicure for purchase of property and is not involved in money laundering or has not given any cash in lieu of the donation it received. We note that the statement of Shri Swapan Ranjan Dasgupta does not specify as to whether the assessee society has indulged in receiving donation in lieu of cash. The statement of Shri Swapan Ranjan Dasgupta is general in nature and we note that from the answer to question no. 9 that M/s. Herbicure is engaged in the basic and fundamental bio-medical research in the field of microbiology and analytical chemistry (molecular biology and cell culture) and it was involved in research to come out with the solution in respect of resistance to various levels of drug resistance and there were eight full time researchers, which we find from a perusal of paper book page 168. It has been stated by Shri Swapan Ranjan Dasgupta that since they had financial crunch, M/s. Herbicure got involved in giving accommodation entries. For answer to Question no. 23 (supra), we note that Shri Swapan Ranjan Dasgupta has explained in respect to donations it received and the modus operandi by which it has returned back whereas it does not say anything about the donations it has given to anyone including that of the assessee society. We note that from letter dated 12.10.2015 Shri Swapan Ranjan Dasgupta has stated about some brokers who were involved with M/s. Herbicure for giving donation and collecting the cash. Other than the general statement we note that there is no other material on record to suggest that the assessee society was engaged in receiving donation in lieu of cash or was practicing money laundering. Only piece of material was statement recorded on oath u/s. 133A (during survey) of the Act. As per the Hon’ble Supreme Court in S. Kader Khan Sons, (supra), has clearly laid out that section 133A of the Act does not empower any Income-tax Authorities to examine any person on oath. Hence, any such statement does not have any evidentiary value and any admission made during survey cannot by itself be made the sole basis of addition. In such a scenario, the statement of Shri Swapan Ranjan Dasgupta alone
8 ITA No.2434/Kol/2016 Mitra Parishad, AY --
cannot be the basis for the impugned action of the Ld. CIT(E). The Hon’ble Supreme Court in Andaman Timber Industries Vs. Commissioner of Central Excise 62 Taxman.com 3 wherein their Lordships has categorically held that not allowing the assessee to cross examine the third party though the statement 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. Their Lordships noted that in that case the impugned order of the ld. CIT(E) was based upon the statement given by two witnesses and even when the assessee disputed the correctness of the statement and wanted the cross examine, the adjudicating authority did not grant this opportunity to the assessee. In such a scenario, the Hon’ble Apex Court held that when the testimony of these two witnesses got discarded there was no material with the department on the basis of which it could justify this action and the additions were deleted. We note that in the present case, the fervent plea of the assessee to cross-examine Shri Swapan Ranjan Dasgupta and Shri Kishan Bhawasingka was not heeded to by the ld. CIT(E) which makes the order fragile for violation of natural justice and, therefore, the sole basis for the impugned action is infirm and not legally sustainable.
Moreover, we note that the donation it received from M/s. Herbicure to the tune of Rs. 50 lacs has been utilized for purchase of property, therefore, even if the receipt of donation has to be treated as unexplained receipt of the assessee as per section 68 of the Act, addition cannot be made because the assessee itself has applied the entire receipt for the objects of the assessee society. For the aforesaid proposition of law, we rely on the Hon’ble Allahabad High Court’s order in the case of CIT Vs. Uttaranchal Welfare Society 42 taxman.com 361 wherein their Lordships held that section 68 of the Act has no application where the assessee has disclosed donations as its income. The Hon’ble Allhabad High Court has followed the view taken by the Hon’ble Delhi High Court in the case of DIT (Exemption) Vs. Keshav Social & Charitable Foundation, 278 ITR 152 and the decision of the Hon’ble Apex Court in the case of S.R.M.M.C.T.M. Tiruppani Trust Vs. CIT 230 ITR 636. We note that the assessee has shown the donation as corpus donation and had applied the same for advancing money for land and building as is evident from the balance sheet as
9 ITA No.2434/Kol/2016 Mitra Parishad, AY --
at 31.03.2011 placed at page 73 of the paper book. This application is admittedly for charitable purpose. It is not the case of the revenue that donations received by the assessee were not applied for charitable purposes. The allegation of the revenue is that the assessee received donation in lieu of cash from M/s. Herbicure but in order to substantiate this allegation no material which is legally sustainable has been brought on record, therefore, the sole material which is sworn statement of Shri Swapan Ranjan Dasgupta recorded during survey cannot be the sole material as held by Hon’ble Supreme Court in Kader Khan, (supra) and moreover, we note that this statement of Shri Swapan Ranjan Dasgupta has not been tested by cross examination cannot be the basis for the impugned action of the Ld. CIT(E) and, therefore, the assessee society which is carrying out philanthropic activities is a charitable organization. So its registration granted u/s. 12A of the Act cannot be cancelled without infraction of law as contemplated u/s. 12AA(3) of the Act. As per the requirement of section 12AA(3) of the Act, the Ld. CIT(E) has to be satisfied that the activities of the trust or institution are ingenuine or are not being carried out in accordance with the object of the trust or institution. When the assessee is carrying out the object of the trust for which it was created and has applied the donation it received from M/s. Herbicure for the objects for which it has been created, the assessee society cannot be termed to be ingenuine or cannot be held to be not carrying out its activity in accordance with the object of the trust. Therefore, we set aside the order of the Ld. CIT(E) and allow the appeal of the assessee.
In the result, appeal of assessee is allowed.
Order is pronounced in the open court on 06.09.2017
Sd/- Sd/- (M. Balaganesh) (Aby. T. Varkey) Accountant Member Judicial Member
Dated : 6th September, 2017
Jd.(Sr.P.S.)
10 ITA No.2434/Kol/2016 Mitra Parishad, AY --
Copy of the order forwarded to: Appellant – M/s. Mitra Parishad, 115A, Chittaranjan Avenue, Kolkata- 1. 700 073. Respondent – CIT(Exemption), Kolkata. 2 The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,
Sr. Pvt. Secretary