Commissioner Of Income Tax ... vs Mayapur Dham Pilgrim And Visitors ...
2022 Latest Caselaw 506 Cal/2

Form No.(J2)

                           IN THE HIGH COURT AT CALCUTTA
                         SPECIAL JURISDICTION (INCOME TAX)
                                   ORIGINAL SIDE


Present :

THE HON'BLE JUSTICE T.S. SIVAGNANAM

                        A N D

THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA


                                    IA NO.GA/1/2017
                                 (Old No.GA/2864/2017)
                                      ITAT/312/2017

                COMMISSIONER OF INCOME TAX (EXEMPTION) KOLKATA
                                      -Versus-
                     MAYAPUR DHAM PILGRIM AND VISITORS TRUST


For the Appellant:       Mr. P. K. Bhowmick, Adv.


For the Respondent: Mr. J. P. Khaitan, Sr. Adv.

Mr. Ananda Sen, Adv.

Heard on : 16.02.2022

Judgment on : 16.02.2022

T. S. SIVAGANANAM, J. : This appeal filed by the revenue

under Section 260A of the Income Tax Act, 1961 (the 'Act' in

brevity) is directed against the order dated 3rd May, 2017 passed

by the Income Tax Appellate Tribunal, Kolkata "C" Bench (the

'Tribunal' in short) in ITA No.1165/Kol/2016.

The revenue has raised for the following substantial

questions of law for consideration:

"(1) Whether on the facts and in the circumstances of the case, the Learned Tribunal is justified in law in quashing the order of cancellation of registration under section 12AA(3) of the Income Tax Act, 1961 ignoring the money laundering activities conducted by the assessee trust with school of Human Genetics and Population Health and such activities has been established in other instances?

(2) Whether on the facts and in the circumstances of the case, the Learned Tribunal is justified in law in quashing the order of the commissioner of Income Tax (Exemption) on the basis of perceived procedural lapses ignoring the truthfulness of facts? (3) Whether on the facts and circumstances of the case, the Learned Tribunal is justified in law to pronounce an order to be quashed whereas orders have been set aside for fresh adjudication in several cases by the higher Courts including apex court in similar instances.?"

We have heard Mr. P.K. Bhowmick, learned standing counsel

appearing for the appellant/revenue and Mr. J.P. Khaitan, learned

senior counsel assisted by Mr. Ananda Sen, learned advocate

appearing for the respondent/assessee.

The assessee is a trust registered under Section 12A of

the Act, by order dated 23rd March, 1991 an approval under Section

80G(VI) was also granted by order dated 31st August, 2010. The

objects of the trust were charitable in nature and in particular

to build, maintain and operate guest house for the comfortable

stay of pilgrims and visitors to Sreedham Mayapur amongst other

objects. The Commissioner of Income Tax (Exemptions), Kolkata

(CIT(E) issued show cause notice dated 4th December, 2015 based

upon a survey conducted under Section 133A of the Act on School of

Human Genetics & Population Health, Kolkata during January, 2015.

It was stated that during the survey, statement of the treasurer

of the said school was recorded and in that statement they had

admitted that they have been providing entries to different

individuals and organisations. The entries were provided in two

ways: (i) accepting donations and returning the same through web

of financial transactions after retaining the commission; and,

(ii) accepting money by cash or through web of financial

transactions and making donations after retaining the commission.

The show cause notice further stated that the assessee had

received donation amounting to Rs.18,00,000/- in the assessment

year 2013-14 from the said organisation and therefore, it was

evident that by accepting donation and then returning the money

the assessee had indulged in money laundering which is illegal,

not genuine or not in accordance with the objects of the assessee

trust. With this allegation, the assessee was requested to

explain why the registration granted under Section 12A should not

be cancelled by invoking Section 12AA(3) of the Act. The assessee

submitted their reply dated 4th December, 2015 stating that they

are a public charitable trust engaged in providing accommodation

facilities to the visitors and pilgrims at Sreedham Mayapur that

they had sent a letter to the organisation on 5th December, 2012

seeking their help and support for expansion of the accommodation

facilities at Sreedham Mayapur and they received donation of

Rs.18,00,000/- on 22nd December, 2012 by way of bank transfer. The

assessee specifically denied the allegation that they had given

cash to the donor and subsequently received donation by RTGS as

being false, incorrect, malicious and vexatious.

The CIT(E) by order dated 17th March, 2016 cancelled the

registration granted in favour of the assessee. Aggrieved by the

same, the assessee filed appeal before the Tribunal. The tribunal

by the impugned order has allowed the appeal and aggrieved by such

order the revenue is before us by way of this appeal raising the

above-mentioned substantial questions of law.

After elaborately hearing learned counsel for the parties

and carefully perusing the materials placed on record, we are of

the considered view that the tribunal was fully justified in

allowing the assessee's appeal. We support such conclusion with

the following reasons.

At the first instance, we note that the allegation in the

show cause notice was that the assessee was accepting bogus

donation and returning the money to the organisation (donor) by

cash thereby indulging in money laundering. However, while

passing the order dated 17th March, 2016, the CIT(E) has rendered a

totally different finding from that of the allegation contained in

the show cause notice. The CIT(E) held that the assessee paid

cash and took donation from the said organisation. Such was not

the allegation made against the assessee in the show cause notice.

Apart from that, there was no material available with the CIT(E)

to come to such conclusion. The CIT(E) heavily placed reliance on

the statements which were recorded during investigation made

pursuant to the survey operations conducted on the School of Human

Genetics & Population Health. The CIT(E) has also extensively

referred to the statement given by the treasurer of the said

organisation before the Investigation Wing and also referred to

the post survey developments noting that the said organisation had

filed an application before the Income Tax Settlement Commission

and accepted that they had been indulging in certain activities by

which certain entries were made in the books of accounts and they

were returning the donations so received from third parties by way

of cash. The CIT(E) would place reliance on the order passed in

proceedings before the Settlement Commission to come to the

conclusion that the said organisation had accepted the allegations

against them and offered the entire income to tax and also agreed

before the Commission that they will, in future, continue various

research and welfare activities and they will not indulge in any

such activity for which proceedings have been initiated against

them. It could be seen that in the statements recorded from the

Treasurer and Secretary of the said organisation before the

Settlement Commission there is no whisper about the assessee trust

and that the assessee trust either received donation and returned

the same in cash or the assessee trust paid cash and received

donation from the said organisation. In paragraph 5.2 the CIT(E)

mentions the list of donations which were paid by the said

organisation during the financial year 2012-13 to 2014-15 in which

the name of the assessee figures and the amount of donation is

shown as Rs.18,00,000/-. It is not clear as to wherefrom such

details were culled out by the CIT(E) because we find that the

said details do not form part of the application filed by the

organisation before the Settlement Commission though during the

course of argument before the Tribunal, the revenue took such a

stand. Be that as it may, the fact that the assessee trust

received donation of Rs.18,00,000/- from the organisation is not

in dispute. No illegality can be attributed on the part of the

assessee towards receiving a donation from a third party

especially when their activities have been found to be charitable.

As mentioned earlier, the initial allegation in the show

cause notice is that donation was received by the assessee and the

same was returned in cash to the organisation. However, in the

order of adjudication passed by the CIT(E) the allegation was

totally different in the sense that the assessee paid cash to

receive donation from the organisation. Even assuming that the

name of the assessee trust figures in the list of donations given

by the organisation, that by itself would not establish the

allegation that the assessee was engaged in money laundering

activities. The CIT(E) has used the expression 'money laundering'

without noting the serious implications which flow from use of

such expression. On a perusal of Section 3 of the Prevention of

Money Laundering Act, 2002 assuming that such activity was being

done by a person, it is rather doubtful to bring it under the

definition of "money laundering". Apart from that, the CIT(E) in

paragraph 6.1 of the order dated 17th March, 2016 mentioned that

the Treasurer and Secretary of the organisation were permitted to

be cross-examined but the assessee trust did not avail the

opportunity but merely filed their declaration on 13th January,

2016. The correctness of this finding was considered by the

Tribunal and on going through the order-sheet maintained by the

CIT(E) it was found that such finding was factually incorrect.

Furthermore, the Treasurer and Secretary of the organisation were

never presented for cross-examination and the assessee has clearly

brought out that none were available in the office of the CIT(E)

on 13th January, 2016 and the assessee was directed to come on 14th

January, 2016 and it is on the said date the declaration was

filed. Therefore, the finding rendered by the CIT(E) in paragraph

6.1 is false. The CIT(E) in its order has relied upon two letters

alleged to have been written by the Secretary of the said

organisation and would state that there is certain imputation

against the assessee. The tribunal found that copies of those two

letters were not furnished to the assessee and the Secretary of

the organisation was not made available for cross-examination.

When the revenue was confronted with these facts, the learned

department-representative submitted before the Tribunal that the

case should be remanded to the CIT(E) for fresh consideration.

This aspect was also taken note of by the Tribunal and after

noting the decision of the Hon'ble Supreme Court in the case of

Kishinchand Chellaram -vs- Commissioner of Income-Tax, Bombay

City-II reported in (1980)125 ITR 713(SC) and the decision in the

case of Andaman Timber Industries -vs- Commissioner of Central

Excise, Kolkata-II reported in (2015) 62 taxmann.com 3(SC)

rejected such a prayer made on behalf of the revenue. That apart,

the tribunal upon re-examination of the facts found that there is

nothing incriminating as against the assessee and except for a

statement recorded at the time of survey from the Treasurer of the

organisation in which also there is no specific allegation against

the assessee, could not have been the basis for cancellation of

the registration enjoyed by the assessee ever since 1991.

Further, the tribunal also faulted the CIT(E) by mentioning that

the question as to whose money was being laundered and by whom has

not been spelt out by the CIT(E) in its order. Above all, we find

that the CIT(E) has not doubted the genuineness of the activities

of the trust nor there is any allegation that the activities are

not in accordance with the objects of the trust. Unless and until

such finding is rendered, cancellation of registration by invoking

the power under Section 12AA(3) of the Act cannot be made. Thus,

if the alleged two letters which were referred to by the CIT(E)

and not furnished to the assessee are eschewed, there is nothing

on record to indicate that the assessee's activities were

amounting to money laundering. This conclusion is duly supported

by the decision of the Hon'ble Supreme Court in Andaman Timber

Industries (supra) before us.

The learned senior standing counsel for the revenue

submitted that the matter may be remanded to the CIT(E) for fresh

consideration. We are not inclined to do so for more than one

reason. Firstly, the documents which were the basis of the finding

of the CIT(E) were not furnished to the assessee/trust. Secondly,

the persons from whom statements were recorded, namely, the

treasurer and secretary of the said organisation, were not

presented for cross-examination. Therefore, the revenue cannot be

heard to say that they should be given one more opportunity to

rectify the defects. This procedure is unknown to law. The leaned

senior standing counsel placed reliance on the decision of the

Hon'ble Supreme Court in Tin Box Company Vs. Commissioner of

Income-Tax reported in(2001) 249 ITR 216. The case involved in the

said decision was challenge to an order of assessment on the

ground that the assessee was not provided with fair and reasonable

opportunity of furnishing an explanation with regard to the

alleged discrepancy and, therefore, the additions made by the

assessing officer were not justified. The argument of the revenue

was that the assessee could have placed evidence before the first

appellate authority or before the tribunal. This submission was

rejected by the Hon'ble Supreme Court as an opportunity before the

appellate tribunal cannot be a substitute to that of an

opportunity before the original adjudicating authority. The

learned senior standing counsel also placed reliance on the

decision in the case of Income Tax Officer Vs. M. Pirai Choody

reported in(2011) 334 ITR 262(SC). In the said case the order of

assessment was set aside on the ground that no opportunity to

cross-examine was granted as sought by the assessee.

Considering the facts of the case, the Hon'ble Supreme

Court held that the High Court should have directed the assessing

officer to grant an opportunity to the assessee to cross-examine

the concerned witness. The said decision is clearly

distinguishable on facts as the case of the assessee before us is

that the documents which were the basis for concluding that the

registration granted in favour of the assessee should be cancelled

were not furnished to the assessee. Therefore, the CIT(E) having

committed a fundamental error cannot be granted for one more

opportunity. Therefore, the tribunal was right in rejecting the

prayer for remanding the proceedings and we are also of the view

that the question of granting a further opportunity to the CIT(E)

on the facts of the case on hand does not arise. Thus, for all the

above reasons, we find no grounds to interfere with the order

passed by the tribunal.

                       In   the     result,   the    appeal   stands     dismissed    and,

consequently,                 the    substantial    questions   of     law   are   answered

against the revenue.

With the dismissal of this appeal, the stay application

also stands closed.

(T.S. SIVAGNANAM, J.)

I agree.

(HIRANMAY BHATTACHARYYA, J.)

S.pal/A/s./S.Das/Pa.