Cancellation of registration under Section 12a of the act must be supported by specific and substantiated allegations, and the principles of natural justice must be adhered to.

JUDGMENT

T.S. Sivagnanamm, J. - This appeal of the revenue filed under Section 260a of the Income Tax act (the 'act' in brevity) is directed against the composite order dated 6th September, 2017 passed by the Income Tax appellate Tribunal, B-Bench, Kolkata (the 'Tribunal') in ITa No.1456/Kol/2016.

2. The revenue has raised the following substantial questions of law for consideration:

(i) Whether in the facts and in the circumstances of the case, the Learned Tribunal is justified in law and on facts by holding that the assessee trust was not engaged any money laundering activity?

(ii) Whether in the facts and circumstances of the case, the Learned Tribunal is justified in law and on facts in setting aside the order for cancellation of registration under Section 12aa(3) of the Income Tax act, 1961?

3. We have heard Mr. Tilak Mitra, learned standing counsel appearing for the appellant/revenue and Mr. J.P. Khaitan, learned senior counsel appearing for the respondent/assessee.

4. The short question which falls for consideration is whether the Commissioner of Income Tax (Exemption) [CIT(E)] was justified in cancelling the registration granted to the assessee trust under Section 12a of the act dated 6th September, 2017 by its order dated 6th May, 2016. The CIT(E) concluded that that the activities of the trust are not genuine and they are not being carried out in accordance with the declared objects as contained in the deed of trust. The assessee trust is running three schools and the first of such schools was established in the year 1965 and the three schools are stated to have on their roll more than 3,400 students and the schools are recognised by the West Bengal Higher Secondary Board of Education, Government of West Bengal. The allegation based on which the proceedings were initiated for cancellation was that the name of the assessee trust appeared in the list of bogus donor as culled out from the statement recorded from one Sri Rabindranath Lahiri, managing trustee of Batanagar Education and Research Trust. Based on such allegation, show cause notice dated 3rd December, 2015 was issued to the assessee proposing cancellation of registration by invoking the provisions under Section 12aa(3) of the act. The CIT(E) placed heavy reliance on the statement recorded by Sri Rabindranath Lahiri on 5th January, 2016 and that despite opportunity being granted to the assessee trust to cross-examine the said Mr. Lahiri, such opportunity was not availed by the assessee and, therefore, drew adverse inference and cancelled the registration. The assessee preferred appeal before the Tribunal contending that the order of cancellation of registration granted under Section 12a was in gross violation of the principles of natural justice without disclosing the materials relied upon and without affording reasonable/adequate opportunity to controvert or deal with the same including by way of cross-examination. It was further contended that the cancellation of registration with retrospective effect from 1st april, 2011 was bad in law.

5. Further, it was contended that no adverse inference could have been drawn against the assessee trust solely for the reason that the assessee had not cross-examined said Mr. Lahiri as a need to cross-examine him did not arise as the said Mr. Lahiri has not made any adverse comment against the assessee trust or its managing trustee or the other trustees. Further, the assessee submitted that they have not given any corpus donation to Batanagar Education and Research Trust and there was no material available on record to show that the donation was given by the assessee trust to the said trust and such amounts were returned back to the assessee and without any material, the CIT(E) has made a bald allegation against the assessee and has also made an observation to the effect that the assessee trust is engaged in money laundering. Further, it was argued that the CIT(E) examined the president of the society Mr. Mukul agarwal. However,