Fateh Chand Charitable Trust v. CIT

INCOME TAX ACT, 1961

--Charitable purpose--Registration of trustsCancellation of registration on basis of surmises----Registration could not be denied to assessee simply on an oral assertion and moreover assessee was not afforded any opportunity to cross-examine the witness, whose statement was relied on by Commissioner for cancellation of registration under section 12AA earlier granted to the assessee.--Assessee-trust was formed for charitable purposes. On the basis of the report of CIT Kolkata to the effect that bogus donations were received in cash by assessee from a research foundation in Kolkata in the previous year and the statement of the founder director of the foundation, CIT issued a show-cause notice for cancellation of registration of assessee under section 12AA(3). Assessee denied the factum of payment of cash to the foundation in lieu of the donation of the cheque made by the foundation. CIT, however, cancelled the registration under section 12A holding that assessee was running a medical college with 150 seats being filled up every year and was generating huge amount of cash by charging the capitation fees from the parents of the students and this cash had been used to obtain or manage the donation from the foundation by way of cheque after paying commission to the foundation. Held: The allegation of the Department was only that the donation was received by assessee on making payment in cash to the foundation but to substantiate this claim, no evidence was brought on record by Department. 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 Commissioner for cancellation of registration under section 12AA earlier granted to the assessee. Even assuming that the assessee had received donation on making payment in cash and it may be its own money which was introduced in the trust through circuitous means but the money having been applied for charitable purposes, therefore, it could not be added under section 68. Therefore, the order of CIT was liable to be set aside.