Case Note & Summary
The case involves an appeal by the Commissioner of Income Tax (Exemptions), Kolkata against an order of the Calcutta High Court which quashed the cancellation of registration of the respondent trust, Jagannath Gupta Family Trust, under Section 12AA(3) of the Income Tax Act, 1961. The trust was registered under Section 12AA and approved under Section 80G(5)(vi). During a survey conducted under Section 133A at the premises of a donor, School of Human Genetics and Population Health (SHGPH), a donation entry of Rs. 37,00,000 in two tranches was noticed. The revenue alleged that the donation was bogus and that the trust was involved in money laundering by receiving cash and giving accommodation entries. A show-cause notice was issued, and the trust responded, contending that the procedure violated natural justice as it was not given an opportunity to cross-examine the donor's representative. The primary authority cancelled the registration w.e.f. 01.04.2008, finding that the trust's activities were not genuine and not in accordance with its objects. On appeal, the Income Tax Appellate Tribunal set aside the cancellation and remanded the matter for fresh consideration after giving an opportunity of cross-examination. The trust then appealed to the High Court, which allowed the appeal and quashed the cancellation order, holding that a single bogus donation would not establish that the trust's activities are not genuine. The Supreme Court found this reasoning erroneous and contrary to Section 12AA(3). It set aside the High Court's order and restored the matter to the Commissioner for fresh consideration, without expressing any opinion on merits.
Headnote
A) Income Tax - Cancellation of Registration under Section 12AA(3) - Single Bogus Donation - The High Court erred in holding that one bogus donation would not establish that the activities of the trust are not genuine; such reasoning runs contrary to the plain language of Section 12AA(3) of the Income Tax Act, 1961. The matter was remanded for fresh consideration after giving opportunity of cross-examination. (Paras 13-15) B) Income Tax - Natural Justice - Opportunity of Cross-Examination - The appellate authority had set aside the cancellation order and remanded the matter to give the assessee an opportunity to cross-examine the donor's representative whose statement was relied upon. The High Court's interference with this remand order was erroneous. (Paras 8-9, 14)
Issue of Consideration
Whether the High Court was correct in holding that a single bogus donation cannot establish that the activities of a trust are not genuine for the purpose of cancellation of registration under Section 12AA(3) of the Income Tax Act, 1961.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court order dated 18.09.2017, and restored the matter to the Commissioner of Income Tax (Exemptions), Kolkata for fresh consideration in accordance with law, without expressing any opinion on merits.
Law Points
- Section 12AA(3) of the Income Tax Act
- 1961
- cancellation of registration
- bogus donation
- money laundering
- natural justice
- cross-examination
- remand
