1.   CIT Vs. M/s. Apeejay Education Society, I.T.A. No. 402 of 2014 (O&M), Date of Decision: 10.03.2015, Punjab & Haryana High Court

Whether the revenue was justified in withdrawing the registration granted under Section 12AA(3) to the assessee on mere presumptions and on surmises that income derived by the trust or the institution would not be used in the proper manner and for the  purposes relating to any  charitable  purpose?

Held_No

Brief Facts:
The assessee-society was granted registration under Section 12AA w.e.f.  01.04.1998. The society was running around 21 institutes which were spread over the country. A search and seizure operation under Section 132(1) was conducted by the Directorate of Income Tax at the premises of one Parag V. Mehta on 22.03.2011. It was accordingly found that one M/s. Washington Softwares Ltd. (M/s. WSL) being run by Sanjay D. Sonawani, was a bogus company and engaged in providing accommodation entries. Further, the statement of the said person was recorded on 12.05.2011 who also admitted that he had provided accommodation entries to the assessee. Accordingly, survey operations were also conducted on the business entities of the educational group of the assessee to consider the genuineness of purchase of software from M/s. WSL. The bogus bills were found entered in the books of accounts of asessee. Accordingly, after providing an opportunity, the CIT concluded that the activities of the society were not genuine and its funds were misutilized for many years after the registration was granted and accordingly the registration was withdrawn and cancelled. On appeal before ITAT, the withdrawal of registration was set aside on the basis that no finding had been recorded that the institute was not imparting education or not carrying out any activity which was the main object and the genuineness of the activities of the trust was held to be in consonance with the objects of the trust. Aggrieved revenue filed appeal before Hon’ble High Court.

Held:

“Section 12AA, which lays down the procedure for registration, does not speak anywhere that the CIT, while considering the application for registration, shall also  see  that  the  income  derived  by  the  trust  or  the institution  is  either  not  being  spent  for  charitable purpose  or  such  institution  is  earning  profit.  The language used in the section only requires that activities of the trust or the institution must be genuine. The profit  earning or  misuse of the  income  derived  by  charitable  institution  from  its charitable  activities,  may  be  a  ground  for  refusing exemption only with respect  to that part  of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. Accordingly,  keeping  in  view  the  peculiar  facts  and circumstances  as  noticed  above,  we  are  of  the  opinion  that  the CIT was  not  justified in  passing the impugned order for withdrawing the exemption as admittedly, the assessee is  carrying  out  educational  activities  by  running  a  large  number  of educational institutions all over the country and, therefore, both the income tax appeals were dismissed.”

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2.  ACIT Vs. Ajoy Bakli, I.T.A No. 312/Kol/2013, Date of Pronouncement: 06.05.2015, ITAT - Kolkata

Whether any disclosure of income by the assessee in the statement recorded u/s 133A during survey, could be taken as evidence to make addition of income by AO?

Held_No

Brief facts:
The assessee was engaged in the business of running a petrol pump and rice trading. A survey u/s. 133A was carried out at the business premises of the assessee on 24-03-2009. During the survey, statement of the assessee was recorded u/s.133A as well as u/s.131 in which he had disclosed an income of Rs. 23 lakhs. Assesee has filed his return of income for AY 2009-10 on 30-09-2009 declaring total income of Rs.22,24,550/- along with regular books of accounts duly audited u/s. 44AB and the entries therein were duly supported by evidence. The AO made an addition of Rs. 23 lakhs in the total income of the assessee for AY 2009-10 on the contention that during the course of survey, the assessee had disclosed an income of Rs. 23 lakhs, but failed to include this income in the return. However, the AO while framing the assessment was satisfied with the books of the assessee. Being aggrieved, assessee filed appeal before Ld. CIT(A) who reversed the order of AO by stating that in the absence of any other evidence, apart from the specious admission of disclosure obtained during survey, the impugned addition made to the total income of assessee was in disregard of law.

Held:

“Hon’ble Madras High Court in the case of CIT Vs. S.Khader Khan Son (2008) 300 ITR 157 (Mad.) has considered the evidentiary value of the statement recorded during the survey and held that on the basis of the statement  addition cannot be made. This judgment has been upheld by the Hon’ble Supreme Court. Similarly, the Hon’ble Kerala High Court in the case of Paul Mathews & Sons Vs. CIT reported in (2003) 263 ITR 101 (Ker.) has held that section 133A  empowers the authority to record the statement of  any person, which may be useful for, or  relevant to any proceeding under the Act. This section only enables the authority to record any statement of any person, which may be useful, but does not authorise for taking any sworn statement. The statement recorded by an officer on oath will be used as evidence in any proceeding, whereas statement recorded u/s. 133A has not given any evidentiary value. Respectfully, following the judgments of the Hon’ble Madras High Court, Kerala High and Hon’ble Supreme Court, we are of the view that the 1st appellate authority has not committed any error while deleting the addition. The ld. DR was also unable to point out any other corroborative evidence. In view of the above discussion, we dismiss the appeal of the revenue.” 

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