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SUPREME COURT OF INDIA
UDAY UMESH LALIT, AJAY RASTOGI, JJ.
COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOLKATA APPELLANT(S)
VERSUS
BATANAGAR EDUCATION AND RESEARCH TRUST RESPONDENT(S)
CIVIL APPEAL NO. 4451 OF 2021
Decided On : 02-08-2021
Income Tax Act, 1961 – Sections 12AA and 80G – Cancellation of registration of Trust – Trust was registered under Section 12AA of Act and was also accorded approval under Section 80G(vi) of Act – Trust was not carrying out its activities in accordance with objects of Trust – Answers given to questionnaire by Managing Trustee of Trust show extent of misuse of status enjoyed by Trust by virtue of registration under Section 12AA of Act – Donations were received by way of cheques out of which substantial money was ploughed back or returned to donors in cash – Facts clearly show that those were bogus donations and registration conferred upon it under Sections 12AA and 80G of Act was completely being misused by Trust – An entity which is misusing status conferred upon it by Section 12AA of Act is not entitled to retain and enjoy said status – Authorities were right and justified in cancelling registration under Sections 12AA and 80G of Act – Impugned judgment and order passed by High Court set aside and orders passed by CIT and Tribunal restored. (Paras 2, 3, 11 and 13)
Facts of the case:
Present appeal challenges the judgment and order dated 09-10-2018 passed by the High Court at Calcutta in ITA No.116 of 2018 setting aside order dated 25.02.2016 passed by Commissioner of Income Tax (Exemption) cancelling registration of the respondent Trust under Section 12AA of the Income Tax Act, 1961and order dated 13.09.2017 passed by Income Tax Appellate Tribunal dismissing appeals arising therefrom.
Findings of Court:
High Court completely erred in entertaining the appeal under Section 260A of the Act. It did not even attempt to deal with the answers to the questions as aforesaid and whether conclusions drawn by the CIT and the Tribunal were in any way incorrect or invalid.
Result : Appeal allowed.
JUDGMENT
Uday Umesh Lalit, J.
1. This appeal challenges the judgment and order dated 09-10-2018 passed by the High Court at Calcutta in ITA No.116 of 2018 setting aside (i) the order dated 25.02.2016 passed by Commissioner of Income Tax (Exemption) (“CIT” for short) canceling registration of the respondent Trust (“Trust”, for short) under Section 12AA of the Income Tax Act, 1961 (“the Act” for short); and (ii) the order dated 13.09.2017 passed by the Income Tax Appellate Tribunal (“the Tribunal”, for short) dismissing appeals arising therefrom.
2. The Trust was registered under Section 12AA of the Act vide order dated 06.08.2010 and was also accorded approval under Section 80G(vi) of the Act.
3. In a survey conducted on an entity named School of Human Genetics and Population Health, Kolkata under Section 133A of the Act, it was prima facie observed that the Trust was not carrying out its activities in accordance with the objects of the Trust. A show cause notice was, therefore, issued by the CIT on 04.12.2015.
4. In answer to the questionnaire issued by the Department, Shri Rabindranath Lahiri, Managing Trustee of the Trust gave answers to some of the questions as under:
“Q.11. Please confirm the authenticity of the abovementioned Corpus Donation.
Ans. A major part of the donations that were claimed exemption u/s 11(1)(d) were not-genuine. The donation received in F.Ys. 2008-09, 2009-10 and 2010-11 were genuine Corpus Donation received either from the Trustees or persons who were close to the Trustees or persons who were close to the Trustees. In F.Y. 2011-12 and 2012-13 a part of the donation were genuine like the earlier years. However, a major part of the donations received in these two F.Ys. viz. 2011-12 and 2012-13, shown as Corpus Donation, were in the nature of accommodation entries to facilitate two things-
a) To procure loans from the Bank we had to show substantial amount of Capital Reserve in our Balance Sheet.
b) We require funds for the expansion of our college. The fees received from the students along with genuine donations from the Trustees and their contacts were not sufficient to run the institution.
Q.12. Why are you saying that a major part of the donations received were not genuine?
Ans. In those cases, which I admit as accommodation entries, a part of the donation received was returned back to the donors through intermediaries.
Q. 13. Who were the intermediaries and what were the modes of returning the money?
Ans. We were instructed to transfer funds through RTGS to the following seven (7) persons:
1. Santwana Syndicate
2. P.C. Sales Corporation
3. Kalyani Enterprises
4. Riya Enterprises
5. Laxmi Narayan Traders
6. Hanuman Traders
7. Rani Sati Trade cum Pvt. Limited
These payments were booked as capital expenditure under the head Building.
Q. 14. In response to the earlier question you have stated that you were “instructed”. Who gave you the instruction?
Ans. I can remember only one name right now, that is Shri Gulab Pincha, Mob No. 9831015157. He was the key person for providing a large part of bogus donation received which was immediately returned back to the different parties in the guise of payments towards capital expenditure in building. We do now know any details in respect of the donors on behalf of whom Shri Gulab Pincha acted as a middle man. Shri Pincha provided us with the details of the donors, cheque of the donations, letters of corpus donations etc. He also provided us with the names and bank a/c. details of the seven (7) persons, mentioned in Answer 13 to whom money has to be returned back through RTGS. He also collected the money receipts/80G certifications on behalf of the donors.
Q. 19. The ledger copy for the period from 01.04.2014 to 04.09.2014 in respect of “General Fund” of your trust having details of the donors is being shown to you to identify the bogus donations along with bogus donors.
Ans. After going through the list of the donors appeared in such ledger it is understood that the Donors whos
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