An entity which is misusing the status conferred upon it by Section 12AA of the Act is not entitled to retain and enjoy said status: The Supreme Court of India
If a trust misuses it registration under section 12AA and 80G of IT Act,1961 by way of making bogus donations is not entitled to retain and enjoy its status. The aforesaid has been held by the Supreme Court of India while adjudicating the case of Commissioner of Income Tax (Exemptions), Kolkata v. Batanagar Education and Research Trust [CIVIL APPEAL NO.4451 OF 2021] which was decided upon by a single judge bench comprising Justice Uday Umesh Lalit on 2nd August 2021.
The facts of the case are as follows. In a survey conducted on an entity named School of Human Genetics and Population Health, Kolkata under Section 133A of the Act, it was prima facie observed that the Trust was not carrying out its activities in accordance with the objects of the Trust. A show cause notice was, therefore, issued by the CIT. after filling a questionnaire, the CIT invoked the provisions of Section 12AA(3) of the Act and cancelled the registration granted under Section 12AA of the Act w.e.f. 01.04.2012. Consequently, the approval granted to the Trust under Section 80G of the Act was also cancelled. This cancellation was upheld by the trial court but was rejected by the High Court. The High Court allowed the appeal made by the trust.
The court perused the facts and arguments presented. It was hence of the opinion that “The answers given to the questionnaire by the Managing Trustee of the Trust show the extent of misuse of the status enjoyed by the Trust by virtue of registration under Section 12AA of the Act. These answers also show that donations were received by way of cheques out of which substantial money was ploughed back or returned to the donors in cash. The facts thus clearly show that those were bogus donations and that the registration conferred upon it under Sections 12AA and 80G of the Act was completely being misused by the Trust. An entity which is misusing the status conferred upon it by Section 12AA of the Act is not entitled to retain and enjoy said status. The authorities were therefore, right and justified in cancelling the registration under Sections 12AA and 80G of the Act. The High Court completely erred in entertaining the appeal under Section 260A of the Act. It did not even attempt to deal with the answers to the questions as aforesaid and whether the conclusions drawn by the CIT and the Tribunal were in any way incorrect or invalid. In our view, this appeal, therefore, deserves to be allowed. Setting aside the judgment and order presently under challenge, we allow this appeal and restore the order passed by the CIT and the Tribunal.”