COMMISSIONER OF INCOME TAX Vs. SANSKRITI SAGAR

JUDGEMENT

(1.) This appeal filed by the revenue under Sec. 260 A of the Income Tax Act 1961(the Act for brevity), is directed against the order dtd. 15/9/2017 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:-

(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 Sec. 12A of the Act, such registration having been granted on 20/2/1989. Survey operation under Sec. 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.85,000.00 from Herbicure, which led to issuance of show cause notice dtd. 2/12/2015 calling upon the assessee to show cause as to why the registration granted under Sec. 12A should not be withdrawn/cancelled under Sec. 12AA(3) of the Act for alleged fake activities and indulging in money laundering. The respondent assessee by reply dtd. 21/12/2015 stated that the donations of Rs.85,000.00 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 dtd. 6/1/2017 cancelled the registration granted to the assessee under Sec. 12A of the Act. Aggrieved by such order, the assessee preferred appeal before the Tribunal, contending that the cancellation of the registration by order dtd. 6/1/2017 with retrospective effect from 1/4/2010 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 accordance with the objects of the assessee. Further it was contended that the CIT(E) erred in cancelling the registration even though the genuineness of the donations was confirmed by herbicure subsequently. Further it was contended that the CIT(E) cancelled the registration without affording an opportunity to the assessee to cross examine the Director of Herbicure and therefore the order is in violation of the principles of natural justice. Further, the CIT(E) failed to record any satisfaction with regard to the conditions prescribed in Sec. 12AA (3) of the Act and therefore exceeded its jurisdiction. Further the CIT ignored the fact that there is no iota of evidence that the activities of the assessees are not genuine and the cancellation of the registration based upon a non-verified statement of the third party is illegal. Retrospective cancellation of the registration with effect from 1/4/2010 is not provided under the provisions of the Act. The tribunal considered the contentions raised by the assessee, examined the entire facts, took note of the statement recorded from the Director of Herbicure, kept in mind the parameters to be fulfilled under Sec. 12AA (3) of the Act and found that the donations received by the assessee from Herbicure for a sum of Rs.85,000.00 was duly accounted for in the profit and loss account as Corpus Donation and there was no evidence on record to show that cash was paid by the assessee which in turn reached the hands of the Herbicure which was returned in the form of donation to the assessee after retaining the commission. The tribunal also analysed the answers given by the Director of Herbicure to various questions which were posed to him when the statement was recorded from him and found that there is absolutely no evidence to show any connection between the brokers and the assessee and there was nothing to indicate that the assessee indulged in money laundering. The assessee placed reliance on the decision of the Kolkata Tribunal in Shri Mayapur Dham Pilgrim and Visitors Trust, Nadia Versus Commissioner of Income Tax (Exemption), Kolkata in ITA No. 1165/Kol/2016 dtd. 3/5/2017. The tribunal after taking note of the decisions observed that the facts in the case of Shri Mayapur Dham Pilgrim and Visitors Trust was also identical but observed that the facts of the assessee's case stand on a much better footing than the case of the assessee in Shri Mayapur. Further the tribunal held that there is neither any allegation in the order passed by the CIT nor any findings that any of the conditions as stipulated under Sec. 12AA (3) of the Act were attracted and consequently the cancellation of the registration was held to be bad in law and accordingly quashed. Aggrieved by such order, the revenue is before us by way of this appeal.