Commissioner Of Income Tax (Exemption) vs. Sarvajanik Jankalyan Parmarthk Nyas

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ITA/190/2024HC Madhya Pradesh10 January 2025Bench: HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI9 pages
For Petitioner: Siddharth Sharma
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal did not involve any substantial question of law, which is a prerequisite for admission under Section 260A of the Income Tax Act, 1961. The Court referred to various Supreme Court judgments, including Santosh Hazari and Hero Vinoth (Minor), to define what constitutes a substantial question of law. It emphasized that appeals under Section 260A are not for re-appreciating facts or challenging concurrent findings of fact unless perversity is demonstrated. The Court found that the appellant had raised questions of fact and disputed the fact-finding of the ITAT under the guise of substantial questions of law. The ITAT was deemed to be the final fact-finding authority, and its order was considered well-reasoned and based on available material. The Court concluded that there was no perversity in the ITAT's order, and therefore, interference was not warranted. The appeal was dismissed in limine as it did not meet the criteria for admitting an appeal under Section 260A.

What were the facts?

The appellant, Commissioner of Income Tax (Exemption), filed an appeal under Section 260A of the Income Tax Act, 1961, against the order dated January 31, 2024, passed by the Income Tax Appellate Tribunal (ITAT), Indore Bench. The ITAT had allowed the appeal of the respondent assessee, Sarvajanik Jankalyan Parmarthk Nyas, for Assessment Year 2013-14. The assessee, a trust registered under Section 12A since October 17, 2000, had its registration cancelled under Section 12AA(3) on June 25, 2024. The Assessing Officer (AO) disallowed the assessee's claim for exemption under Section 11 and denied the carry forward of losses, assessing total income as Nil for seven years. The CIT(A) upheld the AO's order. The ITAT's decision in favor of the assessee is now under challenge.

What were the issues?

1. Whether the ITAT erred by overlooking AO's observations and holding the assessment order to be in violation of natural justice, specifically regarding the opportunity to cross-examine Shri Rajesh Bhalla. - Assessee's contention: The ITAT correctly found a violation of natural justice. The revenue's contention: The ITAT overlooked the AO's observations and the fact that the assessee did not seek cross-examination. 2. Whether the ITAT's decision contravenes Section 143 of the Bhartiya Sakshya Adhiniyam, 2023 (erstwhile Section 138 of the Indian Evidence Act, 1872), considering the assessee did not desire cross-examination. - Assessee's contention: The ITAT's decision is in line with the law. The revenue's contention: The ITAT's decision is contrary to the provisions concerning evidence and cross-examination. 3. Whether the ITAT erred in treating the guideline value as market value for land exchanged between the assessee and Shri S. N. Vijaywargiya, citing R. Sai Bharathi and Jawa Ajee Naganatham. - Assessee's contention: The ITAT correctly applied the law regarding valuation. The revenue's contention: The ITAT erred in its valuation approach, citing Supreme Court decisions. 4. Whether the ITAT should have referred the matter to the DVO for property evaluation in case of disagreement on land value. - Assessee's contention: The ITAT's decision on valuation was appropriate. The revenue's contention: The ITAT should have followed the procedure of referring to the DVO. 5. Whether the ITAT misinterpreted Section 12AA(3) and the decision in CIT vs. Sarvodaya Lakkiya Pannai by holding that activities considered charitable at the time of registration cannot subsequently be deemed non-genuine. - Assessee's contention: The ITAT's interpretation of Section 12AA(3) is correct. The revenue's contention: The ITAT misinterpreted the section and case law, as activities can be found non-genuine post-registration. 6. Whether the ITAT justified illicit activities by the assessee, considering a prior MP High Court decision against the assessee regarding arbitrary denial of admissions. - Assessee's contention: The ITAT correctly assessed the activities. The revenue's contention: The ITAT ignored prior High Court findings that indicated non-charitable and illicit activities. 7. Whether the ITAT justified illicit activities by the assessee, despite MCI finding no infirmity, ignoring the High Court's directions to undo irregularities and the applicability of Section 12AA(3). - Assessee's contention: The ITAT's reasoning was sound. The revenue's contention: The ITAT wrongly justified the assessee's actions, overlooking the High Court's directions and Section 12AA(3). 8. Whether the ITAT was justified in adjudicating additions of Rs. 8.65 crores and Rs. 30 lacs while these matters were pending before the CIT(A). - Assessee's contention: The ITAT's adjudication was proper. The revenue's contention: The ITAT prematurely decided issues pending before the CIT(A).

Which sections of the Income-tax Act were involved?

Section 260A,Section 143,Section 138,Section 12AA(3),Section 12A,Section 11,Section 2(15)

AI-generated summary — verify with the full judgment below

Before: HONBLE SHRI JUSTICE SUSHRUT ARVIND & HONBLE SMT. JUSTICE ANURADHA SHUKLA

NEUTRAL CITATION NO. 2025:MPHC-JBP:1328 IN THE HIGH COURT OF MADHYA PRADES H A T J A B A L PU R BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SMT. JUSTICE ANURADHA SHUKLA ON THE 10th OF JANUARY, 2025 INCOME TAX APPEAL No. 190 of 2024 COMMISSIONER OF INCOME TAX (EXEMPTION) Versus SARVAJANIK JANKALYAN PARMARTHK NYAS

Appearance: Shri Siddharth Sharma – Advocate for the appellant. Shri Sumit Nema – Senior Advocate with Shri Ayush Gupta – Advocate for the respondent.

This appeal coming on for admission this day, Justice Sushrut Arvind Dharmadhikari passed the following order : ORDER Heard on the question of admission. 2. This appeal under section 260A of the Income Tax Act, 1961, has been filed by the appellant being aggrieved by the order dated 31.1.2024 passed by the Income Tax Appellate Tribunal, Indore, in I.T.A.No.539/Ind/2014 for the Assessment Year 2013-14. The following substantial question of law has been proposed in this appeal : “1. Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT overlooked and observations by the AO in para 6.5 (point no.4) and observed that the assessee was never given opportunity to cross-examine Shri Rajesh Bhalla and held that assessement order in violation of principle of natural justice. 2

2.

Whether on the facts and circumstances of the case and in law, the decision of the Hon'ble ITAT is in contravention to Section 143 of the Bhartiya Sakshya Adhiniyam, 2023; erstwhile section 138 of the Indian Evidence Act, 1872 particularly considering that the assessee did not express a desire to cross-examine the witnesses during the assessment proceedings. 3. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in treating the guideline value as the market value of the land exchanged between Sarvajanik Jankalyan Parmarthik Nyas, Bhopal and Shri S. N. Vijaywargiya in light of decisions of Hon'ble Supreme Court in the case of R. Sai Bharathi vs. J. Jayalalitha & Ors. On 24 November, 2003 (SLP 477 of 2002) and Jaw Ajee Naganatham vs Revenue Divisional Officer on 25 January, 1994 [1994 SCR

(1) 368]. 4. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT should have referred the matter back to the file of the AO for evaluation of property by DVO (Departmental Valuation Officer) in case of any disagreement on the value of land. 5. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has grossly misinterpreted the decision of the Hon'ble Madras High Court in case of CIT vs. Sarvodaya Lakkiya Pannai 20 taxmann.com 546 and the Section 12AA(3) of the Income Tax Act, 1961 by observing that when the registration was granted u/s 12A the activities was considered as charitable in nature and therefore, subsequently those activities cannot be referred as not charity and brought under the provisions of Section 12AA(3) of the Act as the wordings of the Section 12AA(3) explicitly provides for cancellation of registration granted under Section 12A if subsequent to such registration, the Commissioner is satisfied that the activities of such trust or institution are not genuine. 6. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has justified the illicit activities done by the assessee, when the Hon'ble M.P. High Court in order dated 24.02.2006 (Writ Petition No. 12623, 12694 & 12946/2005) decided against the assessee and observed that the college had acted arbitrarily in denying the admissions to the students of state quota in MBBS/BDS Course, they have been wrongfully deprived of the admissions in the aforesaid case. There were many such observations made by the Hon'ble 3

High Court after conducting a thorough enquiry. Thus, the activities of the assessee cannot be said to be charitable within the meaning of Section 2(15) of the Income Tax Act. Further, it attracts Section 12AA(3) of the Income Tax Act as the activities of the assessee are found to be not genuine. 7. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has justified the illicit activities done by the assessee while being registered as charitable trust u/s 12A of the Income Tax Act, 1961 merely on the grounds that the Medical Council of India (MCI) found no infirmity or irregularity regarding functioning of the medical institutions run by the assessee and the Hon'ble High Court has passed the directions to undo the irregularities ignoring the fact that the assessee had actually done certain illicit activities and attracted provisions of Section 12AA(3) of the Income Tax Act, 1961. 8. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in adjudicating the addition of Rs. 8.65 crores pertaining to admissions at Peoples Medical College and addition of Rs. 30 lacs pertaining to on- money payment, while the matter is currently pending before the Ld.Commissioner of Income Tax (Appeals).

3.

In short, the question that arises for consideration in this appeal is, whether this appeal involves any substantial question of law, as is required to be made out under Section 260A of the Act of 1961, that being the prerequisite of admission of the appeal. 4. The brief facts of the case are that the assessee/respondent is a Sarvajanik Jankalyan Parmarthk Nyas and was granted registration under section 12A of the Income Tax Act, 1961 on 17.10.2000 w.e.f. 7.6.1999. Further, on being found that the assessee had done many violations, the registration under section 12AA was cancelled vide order under section 12AA(3) dated 25.6.2024 w.e.f. 7.6.1999. 5. The A.O. disallowed the claim of the assessee for exemption under section 11 of the Act and also denied the loss claimed by the assessee to be carried forward and assessed the total income of the assessee for 4

all the 7 years at Nil, as against the loss declared by the assessee. Being aggrieved, the respondent assessee challenged the action of the A.O. before the C.I.T.(A) Bhopal. The C.I.T.(A) Bhopal vide order dated 25.6.2014 dismissed the appeal of the assessee. 6. Being aggrieved by the order of the C.I.T.(A), the respondent/assessee had approached the I.T.A.T. Indore Bench by filing I.T.A.No.539/Ind/2014. The said appeal was allowed vide impugned order dated 31.1.2024. 7. Now, being aggrieved by the order dated 31.1.2024 passed by the learned I.T.A.T. Indore, the revenue is before this Court in the present appeal. 8. Learned counsel for the appellant contended that the learned I.T.A.T. has erred in allowing the appeal filed by the respondent/assessee and has formulated the aforesaid substantial questions of law. On the aforesaid ground, it is a fit case to be entertained. 9. Per contra, learned counsel for the respondent/ assessee contended that no substantial question of law is made out so as to entertain this appeal. He further brought to the notice of this Court the order passed by the Rajasthan High Court in Civil Special Appeal (W) No.128/2012 – Chief Commissioner of Income Tax and another Vs. Geetanjali University Trust, which came to be dismissed vide order dated 21.2.2013 wherein identical substantial questions of law were considered and rejected. The issue in the present appeal is squarely covered by the decision in the case of Geetanjali University Trust (supra), therefore, this appeal deserves to be dismissed. 10. Heard learned counsel for the parties and perused the substantial questions of law. 5

11.

Before dealing with the aforesaid controversy, it would be expedient to refer to Section 260-A of the Act of 1961. The provisions, relevant for our purpose, read thus: 260-A. Appeal to High Court - (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law.

(2) The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commission or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be

(a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner;

(b) xxx

(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved. (2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause

(a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question : Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question,

(5) The High Court shall decide the question of law so formulated and deliver such a judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which-

(a) has not been determined by the Appellate Tribunal; or 6

(b) has been wrongly determined by the Appellate Tribunal, by reasons of a decision on such question of law as is referred to in sub-Section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.

12.

From a bare reading of the Section, it is apparent that an appeal to the High Court from a decision of the Tribunal lies only when a substantial question of law is involved, and where the High Court comes to the conclusion that a substantial question of law arises from the said order, it is mandatory that such question(s) must be formulated. The expression "substantial question of law" is not defined in the Act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements. 13. While explaining the import of the said expression, the Apex Court in case of Sir Chunilal V. Mehta and Sons, Ltd. Vs. Century Spinning and Manufacturing Co. Ltd., AIR 1962 SC 1314, observed that: "6. The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest Court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law."

14.

Similarly, in Santosh Hazari Vs. Purushottam Tiwari, (2001) 3 SCC 179 it was observed that: 7

"A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be "substantial" a question of law must be debatable, not previously settled by law of the land or a binding precedent, AIR 1962 SC 1314 (2001) 3 SCC 179 and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law "involving in the case" there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis."

15.

In Hero Vinoth (Minor) Vs. Seshamma, (2006) 5 SCC 545, the Apex Court has observed that: "The general rule is that High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. When we refer to "decision based on no evidence", it not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding."

16.

A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken 8

into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See: Madan Lal Vs. Mst. Gopi and Anr. (1980) 4 SCC 255; Narendra Gopal Vidyarthi Vs. Rajat Vidyarthi, (2009) 3 SCC 287; Commissioner of Customs (Preventive) Vs. Vijay Dasharath Patel (2007) 4 SCC 118; Metroark Ltd. Vs. Commissioner of Central Excise, Calcutta (2004) 12 SCC 505; West Bengal Electricity Regulatory Commission Vs. CESC Ltd. (2002) 8 SCC 715). 17. The Apex Court in case of K.Ravindranathan Nair vs. CIT, (2001) 1 SCC 135 has observed as under : ''The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact finding authority. A decision on fact of the Tribunal can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense that it is such as could not reasonably have been arrived at on the material placed before the Tribunal. In this case, there was no such question before the High Court. Unless and until a finding of fact reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it. 18. When tested on the anvil of the afore-noted legal principles, we are of the opinion that in the instant case no substantial question of law arises from the order of the Tribunal as the appellant has raised all the question of facts and have disputed the fact findings of the ITAT in the garb of substantial questions of law which is not permitted by the statute itself. This Court refrains from entertaining this appeal as there is no perversity in the order passed by the ITAT since the ITAT has dealt with all the grounds raised by the appellant in the order impugned and has passed a well reasoned and speaking order taking into consideration all the material available on record. The Tribunal being a final fact finding authority, in the absence of demonstrated perversity in its finding, interference with the concurrent findings of the CIT (A) as well as the ITAT therewith by this Court is not warranted. 9

19.

For the aforesaid reasons, we have no hesitation in holding that no question of law, much less any substantial question of law arises from the order of the Tribunal requiring consideration of this court. There is no merit in the appeal as making addition/deletion cannot be said to be erroneous and prejudicial to the interest of revenue. Thus, in our opinion, the present case does not involve any substantial question of law so as to meet the provisions of Section 260(A) of the Act for admitting the appeal. 20. In view of the aforesaid discussion, we do not find any merit in this appeal, which in our opinion deserves to be and is hereby dismissed in limine. (SUSHRUT ARVIND DHARMADHIKARI) (ANURADHA SHUKLA) JUDGE JUDGE HS

HEMANT SARAF 2025.01.17 17:49:23 +05'30'

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