The legal case surrounding the cancellation of a Trust’s registration under Section 12AA delves into the critical aspects of evidential value and procedural considerations. The Court’s analysis emphasizes the need for thorough examination of evidence and adherence to legal procedures in matters pertaining to trust registrations. Stay tuned for more insights into this significant legal development.
Facts
- A major part of the donations received in F.Ys. 2011-12 and 2012-13 were shown as Corpus Donations, but were actually accommodation entries.
- The purpose of these entries was to show a substantial amount of Capital Reserve in the Balance Sheet to procure loans from the Bank and to acquire funds for the college’s expansion.
- An entity named School of Human Genetics and Population Health, Kolkata was surveyed under Section 133A of the Act, revealing that the Trust was not operating in line with its stated objectives.
- A show cause notice was issued by the CIT on 04.12.2015 based on the findings of the survey.
- The Managing Trustee confirmed that a major portion of the donations claimed as exemption were not genuine in F.Ys. 2011-12 and 2012-13.
Also Read: Electoral Malpractices in Mayor Election
Issue
- The issue in question revolves around the cancellation of registration of the Trust under Section 12AA due to alleged receipt of bogus donation.
- The Tribunal and the Commissioner of Income Tax (Exemptions) directed the cancellation of registration based on the mentioned grounds.
- One key point is whether the Trust had indeed received a bogus donation from the School of Human Genetics and Population Health.
- Another crucial aspect is the probative or evidentiary value of statements recorded during survey under Section 133A of the Income Tax Act.
- The Trust argued that it had received donations from various donors and was not obligated to verify the source of funds or check for any unlawful activity by donors.
Also Read: Balancing Power and Transparency: Electoral Bonds Struck Down, Disclosure Mandated
Analysis
- The activities of the Assessee were found to be not genuine, leading to the cancellation of registration under Section 12AA(3) of the Act.
- The trust was involved in illegal activities, misusing the provisions of the Income Tax Act for personal gain.
- Various statements and surveys revealed the extent of misuse of the trust’s status under Section 12AA of the Act.
- The trust received bogus donations, which were promptly returned in cash, indicating fraudulent practices.
- The High Court allowed the appeal, stating that the Revenue failed to establish grounds for cancellation of registration under Section 12AA(3) of the Act.
- An entity misusing the status conferred by Section 12AA is not entitled to retain it.
- The cancellation of registration under Sections 12AA and 80G was justified.
- The High Court’s decision to entertain the appeal under Section 260A was erroneous.
Also Read: Recall of Resolution Plan Approval: Legal Analysis
Decision
- The judgment did not address the answers to the questions raised
- The conclusions drawn by the CIT and the Tribunal were not discussed
- The appeal is deemed to be allowed
- The order passed by the CIT and the Tribunal is restored
- No costs to be borne
Case Title: COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOLKATA Vs. BATANAGAR EDUCATION AND RESEARCH TRUST (2021 INSC 369)
Case Number: C.A. No.-004451-004451 / 2021
