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| The Tax Publishers2020 TaxPub(DT) 0116 (Mad-HC) INCOME TAX ACT, 1961
Section 11
The stand of Assessing Authority as revealed from a perusal of orders was that donations by two individuals to VRF have been received back by them through assessee by way of a circular transaction which amounts to money laundering. Consciously refraining from adverting to the merits of assessments in the light of conclusion that assessments have been completed in violation of principles of natural justice and all contentions are left open to be appreciated and adjudicated upon de novo and by way of speaking orders.
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Charitable trust - Exemption under section 11 - Assessment completed in violation of principles of natural justice -
Assessee was engaged in research in Opthalmology and establishment of hospitals, schools, and was registered in terms of section 12A(a) and also holds an exemption under section 80G. Another society VRF was constituted with specified objects of furthering research in Opthalmology and eye diseases specifically the incidence of short sight and increased prevalence of cataract, among others. It is registered under section 12A(a) and holds an 80G exemption. In addition, VRF was also approved under section 35(1)(ii). The two Societies were stated to be independent and distinct entities, assessed to tax separately, over years. Orders were identical and were wholly based upon a letter received from CIT(E) on the subject of 'money laundering through receipt of bogus donation and repayment in cash'. The provisions of section 13(3) were invoked, since Officer noted that there was some commonality in office bearers of assessee and VRF. Thus, according to Officer, exemption claimed in terms of section 11 was liable to be rejected. Held: The stand of Assessing Authority as revealed from a perusal of orders was that donations by two individuals to VRF have been received back by them through assessee by way of a circular transaction which amounts to money laundering. However, such a conclusion has to be arrived at only after soliciting an explanation for proposed assessment from assessee as well as a proper consideration of the explanations furnished as well as materials filed, if any, by assessees. Consciously refraining from adverting to the merits of assessments in light of conclusion that assessments have been completed in violation of principles of natural justice and all contentions are left open to be appreciated and adjudicated upon de novo and by way of speaking orders.
REFERRED :
FAVOUR : Matter remanded
A.Y. :
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