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Judgment
PER SATBEER SINGH GODARA, JM
These assessee’s twin appeals ITA No. 4263 & 4262/Del/2025 arise against the Commissioner of Income Tax (Exemption) [in short, the “CIT(E)”], Delhi’s orders, both dated 19.05.2025, having DINs and Notices nos. ITBA/EXM/F /EXM45/2025-26/1076274637(1) and ITBA/EXM/F/EXM45/ 2025-26/1076274818(1), involving proceedings under section 12AA and 80G and of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively.
Heard both the parties. Case file perused.
It emerges during the course of hearing that the assessee is aggrieved against the learned CIT(E)’s action rejecting its section 12AA registration application dated 13.11.2024 vide the following detailed discussion: -
“2.In order to examine and verify whether the activities of the applicant society are in accordance with its objects, the genuineness of its activities and compliance with such requirements of any other law for the time being in force as are material for the purpose of achieving its objects, a questionnaire was issued electronically on 15.01.2025 requesting the applicant to furnish the following documents/details online through e-proceedings on e-filing portal along with the supporting documents/evidence, point wise in the sequence by 30.01.2025.
3.In response there to, the applicant has filed its response on 10.02.2025 which was considered but not found tenable for the reasons as discussed in forthcoming paras.
3.1The perusal of the bank account statement of the applicant as shown below, reflects multiple cash deposits and withdrawals. There is cash deposit of Rs. 1,34,69,600/- within 4 days in FY 2023-2024 and cash deposit of Rs. 1,72,60,000/-within two days in FY 2024-2025. The money has been debited with narration "sweep" which further casts doubts on transparency and traceability of the movement of funds. The volume of the cash deposits is almost at the same time for two successive years and the manner in which these cash transactions are carried out raises serious concerns about the genuineness of the activity of the society. The income receipts submitted by the applicant as evidence of its claim are not even the one-day cash deposit in the bank account of the assessee. The cash deposit extends to every account the applicant is maintaining. Even if they are considered to be current assests, the declaration regarding the same in the financials are much less than the actual amount debited from the bank account.
BANK OF BARODA Date 15-07-2024 FARUKH NAGAR, HARYANA Time 16:53:55 ADDRESS: HELPLINE NO. : 1800223344/18001024455/18002534455 BRANCH PHONE NO. MICR CODE: 110012215 IFSC CODE: BARBOFARUKH Page No: 31 A/C Number : 01070100014707 Account Open Date :04-09-2007 Statement of account for the period of 01-04-2023 to 31-03-2024 DATE PARTICULARS CHG.NO. WITHDRAWALS DEPOSITS BALANCE 11-01-24 BY CASH 12,69,600.00 14,31,574.52 BY CASH 15-01-24 BY CASH 1,22,00,000.00 1,36,31,574.52 BY CASH 15-01-24 DIGITA-MUMBAI/ 1,51,000.00 1,37,82,574.52 NEFT-PUNBB24015000126-SATISH KUMAR SO RANDHIR SING 15-01-24 SERMAE-CHENNAI 194458 70,000.00 1,38,52,574.52 BY INST 194458 : MICR CLG (CTS) 15-01-24 SERMAE-CHENNAI 194459 30,000.00 1,38,82,574.52 BY INST 194459 : MICR CLG (CTS) 15-01-24 DIGITA-MUMBAI/ 61,000.00 1,39,43,574.52 NEFT-FDRLH24015315842-LARHPAT 15-01-24 SHEEP 1,38,90,000.00 53,574.52 SHEEP TRANSFER T# [5381030002671] 17-01-24 Changes for 75.00 53,545.52
BANK OF BARODA Date 24-01-2025 FARUKH NAGAR, HARYANA Time 15:17:56 ADDRESS: HELPLINE NO. : 1800223344/18001024455/18002534455 BRANCH PHONE NO. MICR CODE: 110012215 IFSC CODE: BARBOFARUKH Page No: 27 SHEEP TRANSFER TO [5381030002671]
A/C Number : 01070100014707 Account Open Date :04-09-2007 Statement of account for the period of 01-04-2024 to 24-01-2025
DATE PARTICULARS CHG.NO. WITHDRAWALS DEPOSITS BALANCE 14-01-25 DIGITA-MUMBAI/ 61,000.00 1,15,540.36Cr NEFT-HDFCH00005299333-JIZENDRA TOUR AND TRAVELS 14-01-25 BY CASH 45,93,500.00 47,09,040.36Cr BY CASH 14-01-25 BY CASH 43,20,000.00 90,29,040.36Cr BY CASH 15-01-25 BY CASH 30,31,900.00 1,20,60,940.36Cr BY CASH 15-01-25 BY CASH 10,540.00 1,20,71,500.36Cr BY CASH 15-01-25 DF AMUT TR 500.00 1,20,72,500.36Cr DF AMUT TR 00547560 15-01-25 DIGITA-MUMBAI/ 21,000.00 1,20,93,300.36Cr
IMPS/PZA/501518848695/VIJAY PAL SINGH/Donation58A 16-01-25 BY CASH 17,50,000.00 1,35,43,300.36Cr BY CASH 16-01-25 RTGS-SBINRS202 35,64,600.00 1,74,07,900.36Cr
RTGS-SBINRS20250116122533625-Deputy Direct contingen 17-01-25 DIGITA-MUMBAI/ 79,002.00 1,74,86,902.36Cr NEFT-PUNBB25017005077-SATISH KUMAR SO RANDHIR SING 17-01-25 RTGS-HDFCRS202 3,00,000.00 1,77,86,902.36Cr
RTGS-HDFCRS20250117815415399-RELIANCEFOUNDATION 18-01-25 Changes for 29.00 1,77,86,873.36Cr Changes for FORD Customer Payment :002526707055 18-01-25 RTGS-BARBRS202 2206 1,00,000.00 1,78,86,873.36Cr
RTGS-BARBRS20250118001511572-NAILASH CHAND KAMAL CH 18-01-25 DIGITA-MUMBAI/ 1,51,000.00 1,77,37,873.36Cr
IMPS/PZA/501015755579/CHETAN PARTAP/IMPS Transact 20-01-25 DINESH-FARUKH 2204 40,000.00 1,76,97,873.36Cr DINESH-FARUKH 20-01-25 DINESH-FARUKH 2205 24,800.00 1,76,73,073.36Cr DINESH-FARUKH 20-01-25 BY CASH 10,15,000.00 1,86,85,073.36Cr BY CASH 20-01-25 SHEEP 1,86,30,000.00 88,073.36Cr
From the perusal of the above, it is clear that the applicant has not purchased any current asset lying with Bank of Baroda-at least not for the amount as evident from the bank statement. In these circumstances, the manner of cash deposits and their subsequent debit in other accounts raise a huge doubt about the financial propriety and transparency in the conduct of charitable activities.
3.2Further, the income and expenditure account for the year ending March 2024 shows salary payable to the tune of 1.04 Cr. However, the scale of expenses of other activities such as Electricity and water expenses are not commensurate with the salary expenses to maintain the cattle shelter. The bills and evidences provided in support of its expenses miserably failed to substantiate the expenditure recorded.
3.3Further, the applicant has shown a website in its assets. When searched on internet no such website was available. From public domain, the activity of the applicant was searched. It was gathered that the expenditure claimed and the deposits received in the bank account do not match the scale on which the activity is claimed to be conducted.
3.4The case of the applicant is driven by huge unexplained deposits and opaque withdrawals, non-verifiable expenses and income receipts. This has totally weakened the claim of the applicant of conducting genuine activity. In this digital era, the need to deposit and withdraw cash, unless they are petty cases only indicate that these transactions are intended to be carried out in an untraceable manner leading to the possibility of accounts being used for money laundering. There is not a single voucher of income receipts showing the donation to the extent in which the cash was deposited in the bank account of the applicant. In that scenario, it is difficult for the undersigned to believe the activities to be genuine.
4.In view of the above discussions, the present application of the applicant filed in Form 10AB under ITEM-B of clause (vi) of sub-section (1) of section 12A is rejected as the activity of the applicant are not found to be genuine. Accordingly, the application filed by the applicant for approval u/s 12AB of the Act is hereby disposed of as rejected, which rejection and consequent lack of approval shall supersede any approval granted u/s 12AB of the Act by any authority at any earlier time.”
We have given our thoughtful consideration to the assessee’s and the Revenue’s vehement submissions. Learned CIT(DR), more particularly, strongly submits that the assessee has been rightly declined section 12AA registration as it had failed to explain the cash deposits made in its bank account maintained with Bank of Baroda. The Revenue could hardly dispute that the learned CIT(E)’s impugned order has nowhere questioned either the assessee’s object clauses or it’s Gaushala’s principle activity all along. We reiterate that what all the learned CIT(A)’s exemption has done is to doubt the assessee’s cash deposits by finding fault in its explanation as well as after allegedly searching for some material to this effect on internet. We are of the considered view in this factual backdrop that their lordships’ recent landmark decisions i.e. CIT Vs. International Hardware and Research Institute (2025) 171 taxmann.com 579(SC) and Anand Social and Educational Trust Vs. CIT (2020) 426 ITR 340 (SC) have already settled the issue that the CIT(E) is required to examine the objects of the trust and the “proposed” activities only. We thus find merit in the assessee’s instant sole substantive ground to hold it eligible for section 12AA registration which is hereby granted in very terms subject to the condition that it shall indeed be open for the learned Assessing Officer to examine and verify the very issue in appropriate proceedings as per law. Same order to follow in its section 80G appeal ITA No. 4262/Del/2025 as well being consequential in nature.
These assessee’s twin appeals ITA Nos.4262/Del/2025 and 4263/Del/2025 are allowed in above terms. A copy of this common order be placed in the respective case files.