TULSI GRAMODYOG SEWA SAMITI,,LUCKNOW vs. THE COMMISSIONER OF INCOME TAX(EXEMPTIONS), LUCKNOW

These are appeals preferred by the assessee Trust against the action of the Ld. Commissioner of Income Tax (Exemptions), Lucknow dated 04.11.2022, wherein he was pleased to reject the applications filed by the assessee for registration u/s 80G(vi) of the Income Tax Act, 1961 (hereinafter “the Act”) as well as u/s 12AA(3) of the Act. These appeals were heard together and are disposed off by this common order for the sake of convenience.

2. The grounds of appeal

of the assessee for are as under: -

01. Because the CIT(Exemption) has erred on facts and in law in withdrawing the approval granted to the society under section 80G(5) of the Income-tax Act, 1961, the order passed is contrary to the & 224/LKW/2022 Page 2 of 12 provisions of law, based on incorrect facts, without consideration of submissions and against the principles of natural justice, be quashed.

2. Because the CIT(Exemption) has failed to appreciate that the objects of the said assessee society, are all charitable in nature and the activities carried on by it are in accordance with its objects, the twin conditions i.e. the “objects being charitable” and “activities being in accordance with the objects”, not being in dispute, the CIT (Exemption) has erred in withdrawing the approval’ granted u/s.80G(5) of the Act, such order being contrary to the provisions of law be set-aside.

3. Because the CIT (Exemption) has erred in law in Passing the order on grounds/issues falling beyond the instructions of the order of Hon’ble ITAT dated 07.12.2018 which is outside the scope and powers of CIT(E), the order should have been confined to the issues as per the ITAT Order, as such, the order passed by CIT(E) withdrawing the approval u/s.80G is bad in law.

4. Because on a proper consideration of facts and circumstances of the case, the evidences as filed by the assessee society, none of them has been found to be false or untrue, the CIT (Exemption) was not justified in withdrawing the approval as granted to the assessee society.

5. Because in any case and in all circumstances of the case, the conditions as laid down for grant of approval under section 80G having all been fulfilled and there being no violation of the same, the withdrawal of approval as granted under section 80G(5) to the assessee society and as withdrawn be restored.”

3. The grounds of appeal

of the assessee for are as under: -

01. Because the CIT(Exemption) has erred on facts and in law in cancelling the registration granted to the society by applying the provisions of section 12AA(3) of the Income-tax Act, 1961, the order passed is contrary to the provisions of law, based on incorrect facts, without consideration of submissions and against the principles of natural justice, be quashed.

2. Because the CIT(Exemption) has failed to appreciate that the objects of the said assessee society are purely charitable and the activities carried on by it are in accordance with its objects, the twin conditions i.e. the “objects being charitable” and “activities being in accordance with the objects”, not being in dispute, the CIT (Exemption) has travelled beyond the provisions of the Act by questioning the source of income, which is not relevant for the purpose of registration and is a subject matter for determination of income by the Assessing Officer as per section 11 and 13, the order passed by the CIT (Exemption) cancelling registration is bad in law and be quashed.

3. Because the CIT (Exemption) has erred in law in passing the order cancelling the registration on grounds/issues not arising out of the earlier order of Hon’ble ITAT, which being beyond the scope and powers of CIT(E), the impugned order should have been confined to the & 224/LKW/2022 Page 3 of 12 issue as directed by the ITAT, in its order dated 07.12.2018 thus the order passed by CIT(E) is bad in law and be set aside.

4. Because ona proper appraisal of the facts and circumstances of the case and on a proper reading of the statements of Parasmal Daga as recorded and the cross examination thereof, it would be found that Parasmal Daga is not related to the assessee society in any manner whatsoever, and no-where in the statement he has accepted any transaction having taken place through him regarding the assessee society, reliance on his statements being out of context, based on pure suspicion and surmises, the order passed by CIT (Exemption) is totally unwarranted, unjustified, bad in law and be quashed.

6. Because on a proper consideration of facts and circumstances of the case, the evidences as filed by the assessee society, none of them has been found to be false or untrue, the CIT (Exemption) was not justified in cancelling the registration as granted to the assessee society.

7. Because in any case and in all circumstances of the case, the conditions as laid down for grant of registration under section 12AA having all been fulfilled and there being no violation of the same, the registration as sought for and as granted under section 12AA to the assessee society and as cancelled on a wrong premise, be withdrawn and the registration as granted earlier be restored.

8. Because without prejudice to the aforesaid grounds of appeal

there is nothing on record, not even in the statement recorded at the time of survey; and also, not even the reports of the DCIT(Inv.), Kolkata, suggesting that the donations received by the assessee society from the said donors is bogus, or non-genuine, the cancellation of registration granted u/s.12AA is totally misplaced, unwarranted, unjustified and thereby be restored.”

4. None was present on behalf of the assessee when the appeal was called out for hearing nor was any adjournment application received. However, looking into the facts of the case, we deem it appropriate to hear the appeal on merits ex-parte qua the assessee.

5. The ld. CIT (D.R.), on the other hand, has contended that the objections raised by the ld. CIT (E) in the impugned & 224/LKW/2022 Page 4 of 12 order do not stand rebutted. It has been contended that since the books of account and vouchers and land ownership documents were not made available for verification and also the applicant has failed to produce any material to prove the activities of the assessee/trust, the ld. CIT (E) has correctly rejected the application for registration.

6. The Ld. CIT(E) passed this order with observation that the material submitted by the assessee are not enough to arrive at a satisfaction about of objects of the trust and the genuineness of the trust and its activities, which are essential conditions before granting of registration. Ld. CIT(E) further observed that assessee has failed to furnish the required information despite giving opportunities. He further observed that in order to grant registration u/s 12AA(3) as well as 80G(5) of the Act, only when the Commissioner is satisfied about the objects of the Trust and the genuineness of its activities. Both these requirements are cumulative and not alternative. Further he observed that the onus is on the assessee to produce all relevant documents/information so as to enable the Commissioner to arrive at the requisite satisfaction about the objects of the trust and the genuineness of its activities. Further, he observed that it is not possible to ascertain the nature of objects for which the trust has been created and whether the same are charitable u/s. 2(15) or not and also its genuineness. Accordingly, he rejected registration 12AA(3) by passing this order by holding as under: - “1. Ms Tulsi Gramodyog Sewa Samiti, the assessee, challenged the orders dated 29.04.2022 and 04.05.2022 passed by the Commissioner of Income Tax(Exemption), Lucknow, wherein registration granted to assessee u/s 12AA of the I.T. Act, and approval for acceptance of donation u/s 80G of the I.T. Act, were cancelled, respectively. 2. Hon'ble High Court Lucknow Bench vide judgment letter dated 18.05.2022 issued a direction to the Commissioner of Income Tax(Exemption), Kolkata to give opportunity to the petitioner, to cross examine Shri Paras Mal Daga on 14.06.2022. The relevant portion of the order is being reproduced as under: ‘Further, we direct that the Commissioner of Income Tax (Exemption), Kolkata shall give opportunity to the petitioner to cross 6xamine Shri Paras Mal Daga. To avoid any ambiguity, we provide that the matter shall be fixed before the Commissioner of Income Tax (Exemption), Kolkata on 14.06.2022 on which date the petitioner shall be Permitted to cross examine Shri Paras Mal Daga. For the said purpose notice will be required to be served upon the petitioner by the Commissioner Of Income Tax (Exemption), shall take requisite steps to ensure the presence of Shri Paras Mal Daga on the said date So that the petitioner may be given the opportunity to cross examine him. On being cross examined if any proceedings are to be drawn further, the same shall also be drawn and thereafter the final order may be passed by the competent authority within next four weeks thereafter.”

5. Shri Paras Mal Saga appeared before the Commissioner of Income Tax (Exemption), Kolkata’ on 14.06. 2022 and his statement on oath was recorded. Furthers Shri ‘Pradeep Agatwal, President of M/s Tulsi Gramodyog Sewa Samiti, also appeared the said date to cross-examine Shri Paras Mal Daga in the presence of Commissioner of Income Tax(Exemption), Kolkata.

Petitioner's adjournment request was considered & adjournment was granted for 08.08.2022 which was communicated vide letter dated 07.07.2022.

8. In its response petitioner has stated that: - “kindly refer above subjected notices thanks for providing date of hearing/compliance of Notice your kind self has provided date of 09.08.2022. It is brought to notice that myself on dated 12.07.2022 my wife on dated 09.07.2022 and my mother on dated 06.07.2022 reflecting positive Covid report. Report of same enclose herewith for your kind consideration. Due to positive Covid report my family has remain in Covid quarantine and being senior citizen feeling not well yet. | am the only person look after my old mother and self. It is worth to mention that as the no activity of Ms. Tulsi Gramodyog Sewa Samiti is in existence at presents hence no staff available. Due to above circumstances could not collect records in response to submitting the explanation against notices serve by your kind self. Hence your good Self is requested to provide a further one month time extension for reply/explanation to be submitted before your good-self.” Again on 09.08.2022 an adjournment application dated 08.08.2022 was received on ITBA portal with request to adjourn the date for one month. Considering the application, date of hearing/compliance has been refixed on 24.08.2022, vide this office letter dated 10.08.2022. On 22.08.2022 reply has been received vide letter dated 20.08.2022. Reply of the assessee has been duly considered. In the reply filed by the assesse, it is stated that registration u/s 12A & 80G was cancelled only on the basis of Statement of Sri Paras Mall Daga, and he has never confirmed to manage the bogus donation. However, from the statement of Sh Paras Mal Daga, following points are clear: (i). In his statement Sh Paras Mal Daga has reiterated and reaffirmed his earlier statement dated 11.8.2015 & 28.04.2022. (ii). From the content the statement, it is clear that Shri Paras Mal Daga is the person who made the arrangements for accommodation entries and derived the income from brokerage. The modus operandi for arranging bogus donations through M/s. Matravani Institute of Experimental Research and Education has been explained by Shri Paras Mal Daga in his statement recorded on 14.06.2022, 11.08.2015 & 28.04.2022. (iii). Further in answer to Query no 4 Shri Paras Mal Daga has made following statement: “Matravani Institute of Experimental Research and Education did not have any work of its own.... they use to work for bogus donations only” This statement truly explains the actual reason of existence of M/s Matravani Institute of Experimental Research and Education and the nature of receipts of Rs. 1,36,00,250/- received as donations from this entity by Tulsi Gramodyog.

To substantiate the aforesaid fact it is reiterated that a survey operation was conducted on Matravani Institute of Experimental Research and Education and its ally Mr. Suman Verma. Mr. Suman Verma admitted that he has facilitated bogus donations to various entities in lieu of commission through various NGOs. Further, the documents impounded from the premises of Mr. Suman Verma contains the name of M/s Tulsi Gramodyog Sewa Samiti. (iv). It would be pertinent to mention that in query number 11, Sh Pradeep Agrawal tried to cross question Sh Paras Mal Daga and even tried to threaten him to reconsider his statement but despite all this Mr Daga has reaffirmed his original statement. (v). Furthermore, the statement of Sh Paras Mal Daga recorded on oath reaffirms the fact that the donations received by M/s Tulsi Gramodyog are bogus and the activities of the trust are non-genuine and non- charitable in nature. It is further stated that from various incriminating documents found during Survey operation conducted on M/s Matrivani Institute of Experimental Research & Education and assesse M/s Tulsi gramodyog Sewa Samiti, and also from the conclusion drawn in the assessment order it is clear that assessee has obtained donations which are not genuine and the activity carried out by the assessee are not charitable in nature, and accordingly after considering the submissions of the assessee along with the enclosures, registration granted u/s 12AA to the assessee is liable to be cancelled.

1.During the course of assessment proceedings for A.Y. 2018-19, it was noticed that assessee trust received credits in its bank accounts amounting to Rs. 1,00,34,998/-. As no explanation was offered by the assessee, total credits amounting to Rs. 1,00,34,998/- were added u/s 68 of the J.T. Act, as unexplained income.

Regarding Question No. 9, there are some change in my directorship during the course of time, viz. presently I am not a director in Shri Chaturbhuj Real Estates Private Limited and Bhansri Abasan Private Limited. In the remaining matters, I will stick to what I have already stated. The statement of Shri Paras Mal Daga proves that the trustees of M/s Matrivani Institute of Experimental Research & Education have given bogus donations in lieu of cash to the assessee trust. It has been clearly indicated in the statement and report sent by the Ld. CIT (E), Kolkata that the assessee has paid cash of Rs. 1,34,00,00.00/- in addition to commission to manage this donation of Rs. 1,34,00,000.00/- by cheque from M/s Matrivani Institute of Experimental Research & Education. The claim of the assessee that no cash was paid to M/s Matrivani Institute of Experimental Research & Education in lieu of donation by cheque is not acceptable as he has failed to corroborate his claim with the cogent evidences despite numerous opportunities being given to him from time to time. The assessee is having its business of producing handicraft item and is apparently running its business on commercial lines. Apparently the assessee is generating huge amount of cash by suppressing its sales or by inflating its expenditure. This cash so generated has been used to obtain or manage the donation from M/s Matrivani Institute of Experimental Research & Education by way of cheque after paying commission to M/s Matrivani Institute of Experimental Research @ Education. It is further relevant to note that during assessment proceedings in AY. 2018-19 and 2019-20 also the assessee has failed to establish the genuineness of the donations-taken during the aforesaid years.

6. Neither side has brought any material for our consideration to persuade us to take a view different from view taken by the Ld.CIT(E), therefore, the impugned order of Ld. CIT(A) is upheld and the assessee’s appeal is dismissed. However, the assessee will be at liberty to approach this Tribunal, in accordance with law, for restoration of the appeal for disposal on merits, if the assessee advances reasonable cause for non-appearance when the appeal was called out for hearing on 20/08/2024.

Order pronounced in the open Court on 22/08/2024.