COMMISSIONER OF INCOME TAX, EXEMPTION, vs. PACIFIC MEDICAL UNIVERSITY

Judgment 29/09/2018 BY THE COURT (PER HON’BLE DINESH MEHTA, J) :- The above captioned appeals, filed under Section 260A of Income Tax Act, 1961 arise out of the common judgment and order dated 06.09.2017, passed by Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur (hereinafter referred to as “the Tribunal”)

(2 of 10) [ITA-32/2018] in appeal No.97/2016 and 275/2016 filed by the respondent assessee. The first one being appeal No.32/2018 emanates from the order of the Tribunal passed in appeal No.97/JODH/2016, concerning the assessee’s right to claim exemption under Section 80G of the Income Tax Act, 1961 (hereinafter referred to as “the Act of 1961”) whereas the other appeal being appeal No.94/2018 arises from ITA No. 275/JODH/2016, relating to rejection of respondent’s application for registration under Section 10(23C)(vi) of the Act of 1961. Though there were two separate applications and correspondingly two orders by the Commissioner, Income Tax (Exemption), which led to filing of two appeals before the Tribunal, but the facts in essence are common, relevant facts are being set out hereinbelow. The respondent assessee – Pacific Medical University is a creation of an Act of the State legislature, known as Pacific Medical University, Udaipur Act, 2014, which received the assent of the Governor on 3rd day of March, 2015. Tirupati Balaji Education Trust (hereinafter referred as “the Trust” or “the TBET”) is its promoter, which was created by deed of declaration dated 11.08.2006 as a public charitable trust with the object to manage, administer, own and carry on the work of hospital, clinic, dispensary, maternity home etc. The said trust is duly registered under Section 12AA of the Act of 1961 and has also obtained a certificate under Section 80G(5)(vi) of the Act of 1961, read with Rule 11AA of the Rules of 1962. According to the provisions of the (3 of 10) [ITA-32/2018] Pacific Medical University Act, 2014, the TBET has been given the status of sponsor / promoter of the respondent assessee. Both the Trust and respondent - University are separate assesses under the Act of 1961 and having separate Permanent Account Numbers. The respondent filed an application dated 7.7.2015 in the prescribed form, seeking approval of the Commissioner, Income Tax as required by Section 80G(5)(vi) of the Act of 1961. On 07.12.2015, respondent – University applied for registration under Section 12 AA of the Act of 1961 and was granted registration vide letter dated 5.6.2015. The respondent having a separate Permanent Account Number, claimed that it is a separate and independent entity than TBET, its sponsor Trust. Facts relating to application under Section 80G(vi): The respondent’s application seeking approval under Section 80-G of the Act of 1961 came to be rejected by the Commissioner vide his order dated 28.1.2016. While rejecting the application, the learned Commissioner recorded a finding that there was a discrepancy in the number of Doctors on roll. Such finding was recorded as salary payment vis a vis their attendance shown in the data relating to bio attendance system did not telly. Learned Commissioner (Exemption) noted that Dr. Rohilla Gorach had made statement on the basis of salary sheet that salary has been paid to 205 doctors, whereas the books of accounts of the assessee showed payment of salary to 217 doctors. This being the situation, the learned Commissioner held that the assessee has wrongly claimed salary of 12 doctors than the actual payment.

(4 of 10) [ITA-32/2018] The Commissioner also placed strong reliance upon the statement of one Sh. D.K. Gupta, who had given statements that the accounts of TBET for the financial year 2014-15 and 2015-16 have been maintained in his Office and receipts of the donations received by M/s. Tirupati Balaji Medical Stores and M/s. Venkteshwar Enterprises have not been issued, while also admitting that they had not received any letter(s) from the donors, offering the donation in the corpus funds. Essentially on the basis of these two statements of Dr. Rohilla Gorach and Mr. D.K. Gupta, Accountant, the Commissioner (Exemption) concluded that though on papers, the Trust and PMU, the assessee were distinct entities, but the same were directly or indirectly working for running of the Hospitals and as such they were one. These discrepancies, led him to a conclusion that the respondent PMU has not maintained the accounts in regular course of activities. Having recorded such finding, the Commissioner (Exemption) rejected the request, seeking approval under Section 80G of the Act of 1961. Being aggrieved with the said order, the assessee preferred an appeal before the Income Tax Appellate Tribunal, Jodhpur (hereinafter referred to as “the Tribunal) being appeal No.97/JODH/2016. Facts relating to application u/s 10(23C)(vi)

:- The respondent assessee had filed another application on 07.07.2015, in prescribed form for grant of exemption under (5 of 10) [ITA-32/2018] Section 10(23C)(vi) of the Act of 1961. The said application filed by the assessee came to be rejected by the Commissioner (Exemption) on two counts, firstly because the assessee had failed to reach the requisite parameters of aggregate annual receipt for financial year 2014-15 and 2015-16, and secondly because the respondent has not maintained proper books of account. While rejecting the application, the Commissioner relied upon the statement of Dr. Rohilla and Mr. D.K. Gupta and reiterated the views, which he had expressed while passing the order dated 27.1.2016 in relation to assessee’s application under Section 80G(5) of the Act of 1961. The Commissioner passed an order dated 28.07.2016, on the basis of inconsistencies and discrepancies seen in the books of accounts stated by Mr. D.K. Gupta and Dr. Rohilla Gorach and held that the assessee has not maintained accounts in regular course of activities. The assessee preferred a separate appeal before the Tribunal against the aforesaid order dated 28.07.2016, which was registered as appeal No.277/JODH/2016. Findings of the Tribunal :- The learned Tribunal considered the facts of the case along with the material available on record and held that the order of the Commissioner(Exemption) is non-speaking and unreasoned. The Tribunal was of the view that the Commissioner(Exemption) has erred in placing heavy reliance upon the solitary statement of Dr. Rohilla Gorach and Mr. D.K. Gupta, while side-tracking and ignoring the explanation furnished by the assessee during the course of the proceedings. Learned Members of the Tribunal held

(6 of 10) [ITA-32/2018] that Mr. D.K. Gupta was not even an Accountant of the assessee and he was Accountant of the Trust, and hence his statements could not be taken as gospel truth to be used against the assessee, more particularly without a fair opportunity of cross examination being allowed to the assessee. In relation to the statement of Dr. Rohilla Gorach, learned Members of the Tribunal have made observation that the assessee has put forth sufficient explanation regarding the discrepancies in the record relating to bio-attendance and the payments made by the assessee. The Tribunal after due deliberation and appreciation of evidence, concluded that the finding regarding non maintenance of the books of accounts in regular manner was based on conjectures and surmises, as there was hardly any discrepancy, if the matter was examined in its correct perspective. The Tribunal after detailed scrutiny has held that the assessee is entitled to grant of approval under Section 80G of the Act of 1961 and so also entitled for certificate of registration under Section 10(23C)(vi) of the Act of 1961 while allowing the appeals filed by the respondent assessee, vide its impugned order dated 06.09.2017. Mr. Bissa, learned counsel for the appellant – Income Tax Department, challenging the common order dated 6.9.2017 urged that learned Members of the Tribunal have not appreciated the facts involved in the present case in true perspective. He submitted that the Commissioner was right and justified in relying upon the statement of Dr. Rohilla Gorach and Mr. D.K. Gupta for the purpose of concluding that the assessee has not maintained the books of accounts in regular manner. He emphasized that (7 of 10) [ITA-32/2018] these two persons namely Mr. D.K. Gupta and Dr. Rohilla Gorach gave their statement during the course of search and no retraction thereto had been made by them. He contended that both of them were assessee’s own employees and as such, the assesse could have itself brought them for cross-examination or for confrontation, if so desired. Mr. Bissa further submitted that the appellant and the Trust may be two separate entities, yet for all practical purposes, they were one, which is evident from the fact that TBET is promoter and sponsor of the respondent assessee having undertaken to take all assets and liabilities in case of dissolution of the respondent University. Learned counsel further submitted that there were serious discrepancies and lacunae in the books of accounts of the respondent and the same did not depict true and correct picture, for which the Commissioner(Exemption) was justified in rejecting its application under Section 80G5(vi) as well as the application filed under Section 10(23C)(vi) of the Act of 1961. Mr. Vikas Balia, appearing for the respondent assessee supported the order under challenge passed by the Tribunal by submitting that the Tribunal has recorded a clear and categorical finding in favour of the assessee that there is no discrepancy in maintaining the books of accounts. He argued that the findings recorded by the Tribunal are based on proper appreciation of evidence available on record and such a detailed and reasoned order passed by the Tribunal, after taking into consideration all the ocular and oral evidence as well as the arguments of both the sides, do not call for any interference. He contended that the (8 of 10) [ITA-32/2018] findings recorded by the Tribunal are findings of fact, which have not even been alleged to be perverse, much less being proved to be perverse. He added that until and unless such findings of fact recorded by the Tribunal are shown to be perverse, this Court would not reappreciate the evidence to unsettle these findings. Learned counsel for the respondent rested his arguments by submitting that no question of law, much less any substantial question of law arises for consideration of this Court, for which the appeals are liable to be dismissed at the stage of admission itself. Having heard rival counsels and after perusal of the material available on record, we are of the considered opinion that the Tribunal has committed no error of law in concluding that the Commissioner(Exemption) has wrongly rejected assessee’s applications on the ground of not maintaining the books of accounts in regular course. A perusal of the orders dated 28.1.2016 and 28.07.2016 passed by the Commissioner under Section 80G and 10(23C)(vi) of the Act of 1961 reveals that he has given much credence to the statements of Mr. D.K. Gupta and Dr. Rohilla Gorach. A reading of the statement of Mr. D.K. Gupta reproduced in the order of the Commissioner reveals that he has simply stated that the books of accounts of Tirupati Balaji Medical Stores and M/s Venkteshwar Enterprises, who used to sell medicines in the Hospital, have been maintained in their Office, while also informing that for the donations received towards corpus in the financial year 2014-15 and 2015-16 neither any receipts have been issued, nor have they

(9 of 10) [ITA-32/2018] received any letter from the donors, who had sent their contribution towards the corpus. In considered opinion of this Court even if the said statement is taken to be at its face value, the same is not sufficient to infer that the assessee has not maintained books of accounts in regular course. Given the fact that the respondent assessee is a separate assessee having a separate Permanent Account Number, the statement made with regard to Medical stores at the hospital are not relevant and the same cannot be taken into consideration for the purpose of ascertaining the fact whether the books of accounts of the respondent – assessee have been maintained properly and in regular course. Similarly, the discrepancy arising from the statement of Dr. Rohilla Gorach; record of bio-attendance; and consequent difference in number of doctors actually worked and payments made as per the books, has been satisfactorily explained by the assessee. The Tribunal has satisfied itself that all the doctors had actually attended the classes and payment had been appropriately made to them by the assessee. The explanation put forth by the assessee prima-facie appears to be plausible; and even if, the same is treated to be doubtful, then also, such discrepancy is not fatal to grant the requisite approval to an assessee. Such discrepancies can be duly examined and brought to book, while framing regular assessment of the assessee for the relevant period. Similar has been the issue regarding document AS/4, which was found from Ms. Mayuri Jain, P.A. to Mr. Rahul Aggarwal, the (10 of 10) [ITA-32/2018] Chairman of the respondent assessee. The Commissioner has wrongly rejected the request of opportunity of cross-examination of Ms. Mayuri Jain on the ground that such request of cross- examination of witness was not made before the Dy. Director of Income Tax. In our opinion, the Commissioner has erred in not allowing the assessee, an opportunity of cross-examination. In absence of the requisite cross-examination, her statement cannot form a basis of arriving at a conclusion against the respondent. Upon overall appraisal of the facts and the material available on record, we are of the view that the findings recorded and conclusions drawn by the Tribunal are correct and there is no perversity. No substantial question of law, requiring adjudication or answer by this Court arises in these appeals. Hence they are being dismissed hereby. No orders as to costs. (DINESH MEHTA),J Arun/PS (SANGEET LODHA),J