ITAT quashed cancellation of registration based on conjunctures and surmises

1. The assessee-trust was formed on 26.10.1980 to impart education in medical, dental, paramedical sciences, etc. and also running a hospital for providing medical aid beside other charitable objects. The assessee was running a Medical College with 150 seats for MBBS. The assessee-trust was granted registration under section 12A as charitable institution by the ld. Commissioner of Income Tax, Meerut. Consequently, its income had been exempted under section 11 of the Act from its inception till date, until its withdrawal. CIT(E) issued issued show cause notice for cancellation of registration under section 12AA(3). The assessee denied that it had received a donation of Rs.1 crore through cheque after making payment of the same in cash to M/s Herbicure Health Care Bio Herbal Research Foundation. CIT(E) cancelled the registration under section 12A.

2. On appeal, the ITAT held as under:

"Undisputedly, the assessee has taken receipt of donation as part of its income and the same was applied for charitable purposes and these facts are borne out from the consolidated balance sheet of the assessee available at page 8 of the compilation of the assessee. The Revenue has not made out a case that the donation received by the assessee was not taken as part of income and was applied for non- charitable purposes. The allegation of the Revenue is only that the donation was received by the assessee on making payment in cash to M/s Herbicure Health Care Bio Herbal Research Foundation, but to substantiate this claim, no evidence was brought on record by the Revenue. It was simply an oral assertion and moreover the assessee was not afforded any opportunity to cross-examine the witness, whose statement was relied on by the ld. Commissioner of Income Tax (Exemptions) for cancellation of registration under section 12AA of the Act earlier granted to the assessee. Even assuming, for the sake of argument, that if the assessee has received donation on making payment in cash and it may be his own money which was introduced in the trust through circuitous means, but it was applied for charitable purposes, therefore, it cannot be added under section 68 of the Act. Thus, even on merit, we do not find any force in the allegations raised by the Revenue. The ld. Commissioner of Income Tax (Exemptions) has cancelled the registration under section 12AA of the Act on the basis of conjunctures and surmises, as he has observed in his order that the assessee might have been charging capitation fee from the parents of the students, but in this regard no evidence was brought on record. It is also obvious from the record that the ld. Commissioner of Income Tax (Exemptions)has passed an order on the same day when the assessee has furnished detailed explanation in writing and even without verifying the same. Therefore, we find no merit in the order of the ld. Commissioner of Income Tax (Exemptions). Accordingly, we set aside the order of ld. Commissioner of Income Tax (Exemptions).

3. In the result, appeal of the assessee stands allowed.”

Case Reference- M/s Fateh Chand Charitable Trust vs. CIT (Exemptions)

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH "A", LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA No.792/LKW/2015 Assessment Year:2011-12