The cancellation of registration under Section 12aa(3) of the Income Tax act must be based on findings regarding the genuineness of the activities of the assessee and whether they are being carried out in accordance with the objects of the Trust. The principles of natural justice must be adhered to, including providing an opportunity for cross-examination.

JUDGMENT

1. This appeal filed by the revenue under Section 260 a of the Income Tax act 1961(the act for brevity), is directed against the order dated 15.09.2017 passed by the Income Tax appellate Tribunal, 'C' Bench, Kolkata (Tribunal), in ITa No. 96/Kol/2017 for the assessment year 2011-12. The revenue has raised the following substantial questions of law for consideration:-

1) 'Whether on the facts and circumstances of the case and in law, the Learned Tribunal is right in quashing the order for cancellation of registration under Section 12aa(3) of the Income Tax act, 1961 based on money laundering activities carried out by the assessee trust with Herbicure Health Care Bio Herbal Research Foundation ignoring that such activities have been established in other similar basis'?

2) 'Whether on the facts and circumstances of the case and in law, the Learned Tribunal is perverse in law in holding that there is no allegations in the order of the Commissioner of Income Tax (Exemption), that the activities of the trust are not genuine or that activities are not carried out in accordance with the Commissioner of Income Tax (Exemption) has already given a finding that the activities of the trust are non-genuine'?

2. We have heard Mr. Vipul Kundalia, Learned Senior Standing Counsel for the appellant assisted by Mr. anurag Roy, Learned advocate and Mr. ashim Chowdhury and Mr. Soham Sen, Learned advocates for the respondent.

3. The respondent assessee is a society registered under Section 12a of the act, such registration having been granted on 20.02.1989. Survey operation under Section 133a of the act was conducted on M/s. Herbicure Health Care Bio-Herbal Research Foundation (Herbicure) and during the course of survey, it came to light that Herbicure was engaged in money laundering and providing accommodation entries to different individuals and organizations, by way of accepting donations and returning the same to the donors through web of financial transactions after retaining the commission and by accepting money by cash or through web of financial transaction and giving donations after retaining the commission. a sworn statement was recorded from the founder Director of Herbicure. By relying upon the said sworn statement and certain answers given by the Director of Herbicure, the Commissioner of Income Tax, (Exemptions), Kolkata [CIT(E)] was of the opinion that from the records in the financial year 2010-2011, the assessee received donations amounting to Rs. 85,000/- from Herbicure, which led to issuance of show cause notice dated 02.12.2015 calling upon the assessee to show cause as to why the registration granted under Section 12a should not be withdrawn/cancelled under Section 12aa(3) of the act for alleged fake activities and indulging in money laundering. The respondent assessee by reply dated 21.12.2015 stated that the donations of Rs. 85,000/- from Herbicure was received by cheque, it was credited to their bank account and it was applied for the objects of the trust. Further it was stated that the activities of the trust and application of income to the charities are genuine and they are in accordance with the objects of the trust. The assessee emphatically denied the allegations that they have made payment in cash to Herbicure. after receipt of the reply, the CIT(E) by order dated 06.01.2017 cancelled the registration granted to the assessee under Section 12a of the act. aggrieved by such order, the assessee preferred appeal before the Tribunal, contending that the cancellation of the registration by order dated 06.01.2017 with retrospective effect from 01.04.2010 is bad in law; the reasons given by the CIT(E) for cancellation of the registration are contrary to law and on facts. Further it was contended that the registration was cancelled without examining the genuineness of the activities of the assessee and without any evidence whatsoever, the CIT erred in holding that the activities of the assessee are not being carried out in