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II. Direct Taxes Case Laws:
1. CIT
(Exemptions) Vs. Jagannath Gupta Family Trust, Civil Appeal No. 1381 of
2019, Date of Pronouncement: 01.02.2019, Supreme Court of India
Issue:
Whether a trust registration can be cancelled if it is found engaged in a money laundering transaction?
Answer: Yes
Brief Facts:
The assessee is a registered trust u/s 12AA of the Act. The trust was
created with the object of public and charitable purposes. A survey was
conducted u/s 133A of the Act,in the premises of School of Human
Genetics and Population Health, Kolkata by the Investigation Wing and it
was found that a donation is given to the respondent of Rs.37,00,000/-.
It is the case of the appellant that the donor did not actually donate
such amount and such entry was shown by receiving the amount in cash
from the respondent,by retaining commission and therefore, initiated the
proceedings for cancellation of registration and issued a show cause
notice. The assessee replied to the same accordingly and took a defence
statement that the procedure is against the principle of natural
justice. And, the order is passed against the assessee on the ground
that the statement of the representative of the donor was recorded and
also it is found that the trust is involved in money laundering from
several previous years.
Being
aggrieved, the assessee filed an appeal before the Hon’ble ITAT stating
that the opportunity to cross-examine the representative is not provided
to the assessee. Thus, The Hon’ble Tribunal remanded the matter for
fresh consideration by primary authority.
Further,
not satisfied with the judgement, the assessee filed an appeal before
the Hon’ble High Court and it has allowed the appeal and quashed the
order of cancellation of registration. And, held that it is possible
that a particular donation may be bogus or fictitious and, the assessee
may be assessed to tax. But the single donation which is allegedly
bogus, would not establish that the activities of the trust are not
genuine and not being carried out in accordance with the objects of the
trust. Further, being aggrieved the revenue authority file an appeal
before the Hon’ble Supreme Court.
Held,
that the reason assigned by the High Court is erroneous and runs
contrary to the plain language of Section 12AA(3) of the Act. In view of
the serious allegations made against the respondent trust, it is a
matter for consideration of the issue, after giving opportunity as
pleaded by the respondent, but the High Court has committed error in
entertaining the authority, and in quashing the order of cancellation of
registration. However,it is made clear that we have not expressed any
opinion on merits, and it is open to the CIT (Exemptions)to consider all
the issues on its own merit, uninfluenced by the observations made by
the appellate authority, the High Court or in this order by this Court.
Hence, the appeal is allowed.
The appeal is in favour of revenue and against the assessee.
(Please click here for judgment)
2. Nitin Agarwal (HUF) Vs. ITO, I.T.A. No. 7309/Del/2018, Date of Pronouncement: 11.01.2019, ITAT - Delhi
Issue:
Whether AO is justified in invoking Section 68 of the Act where no
books of accounts are maintained by the assessee during the ordinary
course of business?
Held: No
Brief facts:
The assessee has e-filed his return of income on 30.07.2014 declaring
total income at ₹5,72,720/- which was assessed u/s 143(3) of the Act.
AO observed that assessee has shown income from business, capital gain
and othersources and vide Schedule EI has not disclosed any long-term
capital gain.During the assessment proceedings, assessee was asked about
purchase and sale of shares of M/s Kailash Auto Finance. The assessee
filed a revised computation of income declared longer capital gain
amounting to Rs. 20,94,300/-, which was claimed as exempt. The Ld. AO
made an addition u/s 68 of the Act alleging that the generation of LT CG
through the process from purchase to receipt of cheque is totally
arranged and actually no capital gain arose, but assessee’s own cash has
been routed through different entities and ultimately reached to his
hand by cheque in the disguise of sale proceeds of listed security. The
hon’ble CIT (A)dismissed the appeal of the assessee. Being aggrieved,
the assessee filed an appeal before Hon’ble ITAT.
Held:
It was held that the Ld. AO has invoked the Section 68 of the Act on
cash deposits found in the bank accounts. Since no books of account are
maintained in the ordinary course of business of the assessee, it is
held that no addition u/s 68 of the Act is tenable in law as section is
applicable only where creditsare found in books of accounts maintained
by assessee. Therefore, the addition should be deleted.
Hence, the appeal was held in favour of theassessee and against therevenue.
Cases cited:
Inder Singh vs. ITO, Telecommunications (2011)ITA No. 1931/Del/2016 (Delhi- ITAT)
Vijay Kumar Prop. V.K. Medical Hall vs. ITO. (2012) ITA No. 2483/Del/2015 (Delhi- ITAT)
(Please click here for judgment)
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