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

PDF · subscribers
ITA/192/2024HC 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 no substantial question of law arose from the ITAT's order. The Court extensively discussed the principles for admitting an appeal under Section 260A, referencing Supreme Court judgments like Santosh Hazari and Hero Vinoth (Minor). It emphasized that a substantial question of law must be debatable, not previously settled, and have a material bearing on the case. The Court found that the Revenue had raised questions that were essentially disputes of fact and challenged the factual findings of the ITAT, which is not permissible under Section 260A. The Court noted that the ITAT had dealt with all grounds raised by the Revenue, passed a well-reasoned order, and considered all available material. As the ITAT is the final fact-finding authority, and no perversity in its findings was demonstrated, the High Court refrained from interfering. The Court concluded that the additions/deletions made by the ITAT were not erroneous or prejudicial to the revenue, and therefore, the appeal did not meet the criteria for admission under Section 260A. The appeal was dismissed in limine.

What were the facts?

The Revenue, Commissioner of Income Tax (Exemption), Bhopal, is appealing against an order dated January 31, 2024, passed by the Income Tax Appellate Tribunal (ITAT), Indore. The appeal concerns the Assessment Year 2007-08. The assessee, Sarvajanik Jankalyan Parmarthk Nyas, is a charitable trust registered under Section 12A of the Income Tax Act, 1961. A search and seizure action under Section 132 led to composite orders under Section 153A for various assessment years and an order under Section 143(3) for AY 2010-11. The Assessing Officer (AO) found violations of Section 13, disallowing exemptions under Sections 11 and 12 and denying carry forward of losses. The CIT(A) dismissed the assessee's appeals. The ITAT, however, allowed the assessee's appeals, leading to the present appeal by the Revenue.

What were the issues?

The High Court had to decide whether the appeal filed by the Revenue involved any substantial question of law, as required by Section 260A of the Income Tax Act, 1961. The Revenue proposed nine substantial questions of law, including: 1. Whether the ITAT overlooked AO's observations and held the assessment order in violation of natural justice by not allowing cross-examination of Shri Rajesh Bhalla. 2. Whether the ITAT's decision contravened Section 143 of the Bhartiya Sakshya Adhiniyam, 2023 (erstwhile Section 138 of the Indian Evidence Act, 1872), given the assessee did not seek cross-examination. 3. Whether the ITAT justified the assessee's alleged illicit activities, rendering them not charitable under Section 2(15), considering a previous MP High Court order against the assessee regarding admissions. 4. Whether the ITAT overlooked events demonstrating the assessee group's commercial intentions, substantiated by TDS survey findings. 5. Whether the ITAT justified the assessee's alleged illicit activities while registered as a charitable trust, despite MCI finding no infirmity and the High Court directing rectification. 6. Whether the ITAT erred in treating guideline value as market value for land exchanged between the assessee and Shri S. N. Vijaywargiya. 7. Whether the ITAT was justified in allowing benefits of Sections 11 & 12 and deleting additions totaling Rs. 4,06,24,367/- (AY 2005-06), Rs. 14,08,66,035/- (AY 2007-08), Rs. 16,15,09,294/- (AY 2008-09), and Rs. 12,25,29,221/- (AY 2010-11). 8. Whether the ITAT erred in allowing carry forward of losses, implying the assessee is a business entity rather than a charitable trust. 9. Whether the ITAT was justified in adjudicating additions of Rs. 8.65 crores (capitation fees, AY 2006-07) and Rs. 30 lacs (on-money payment, AY 2009-10) when these issues were pending before the CIT(A). The Revenue argued that these questions warranted admission of the appeal. The assessee contended that no substantial question of law arose and cited a Rajasthan High Court order dismissing an identical appeal.

Which sections of the Income-tax Act were involved?

Section 260A,Section 132,Section 153A,Section 143(3),Section 13,Section 11,Section 12,Section 2(15),Section 12A,Section 138,Section 143

AI-generated summary — verify with the full judgment below

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

1 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SMT. JUSTICE ANURADHA SHUKLA ON THE 10th OF JANUARY, 2025 INCOME TAX APPEAL No. 192 of 2024 COMMISSIONER OF INCOME TAX (EXEMPTION), BHOPAL, Versus SARVAJANIK JANKALYAN PARMARTHK NYAS,

Appearance: Shri Siddharth Sharma – learned counsel for the appellant. Shri Sumit Nema – learned Senior counsel with Shri Ayush Gupta – counsel for the respohndent.

This appeal coming on for admission this day, Justice Sushrut Arvind Dharmadhikari passed the following order : ORDER Per: Justice Sushrut Arvind Dharmadhikari Heard on I.A.No.21043/2024, which is an application for exemption from filing certified copy of the impugned order. For the reasons mentioned in the application, the same is allowed. Also heard on the question of admission. 2. This appeal under section 260A of the Income Tax Act, 1961, (hereinafter referred to as ‘the 1961 Act’) 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.(SS).A.No.154/Ind/2018 for the Assessment Year 2007-08. 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 the 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 the assessment order in violation of principle of natural justice?

2 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

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 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 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?

4.

Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT overlooked the chronology of events leading to the decision of the Hon'ble High Court. These events clearly demonstrate the commercial intentions of the assessee group, which are further conclusively substantiated by the findings from the TDS Survey?

5.

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 cannot be said to be charitable within the meaning of Section 2(15) of the Income Tax Act?

6.

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 3 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

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]?

7.

Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in allowing the benefits of Section 11 & 12 to the assessee in the concerned Assessment Years and thus deleting the addition of Rs. 4,06,24,367/- Rs. 14,08,66,035/-, Rs. 16,15,09,294/- and Rs. 12,25,29,221/- for AY 2005-06, AY 2007-08, AY 2008-09 and AY 2010-11 respectively?

8.

Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT erred in allowing the carry forward of losses in spite of the fact that the assessee is claiming to be a trust and not a business concern and claiming of losses infers self- admitted fact that the assessee proclaims itself as a business entity rather than a charitable trust?

9.

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 on account of capitation fees received in lieu of providing admissions at Peoples Medical College pertaining to AY 2006-07 and addition of Rs. 30 lacs pertaining to on-money payment for purchase of immovable property pertaining to AY 2009-10 while the issues are 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. A search and seizure action under section 132 of the 1961 Act was carried out in the case of the assessee. Consequently, composite order under section 153A of the Act was passed for AY 2004-05, 2005-06, 2006-07, 2008-09, 2009-10 and order under section 143(3) for AY 2010-11 were passed by the AO on 26.12.2011. Further, 4 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

during the course of assessment proceedings the AO found that the assessee trust has violated the provisions of Section 13 of the Act and hence was not eligible for the benefits of section 11 and 12 of the Act. 5. The A.O. disallowed the claim of the assessee for exemption under section 11 and 12 of the Act and also denied the losses claimed by the assessee to be carried forward and assessed the total income of the assessee for all the 7 years at Nil, as against the loss declared by the assessee. Being aggrieved, the respondent assessee preferred appeals before the C.I.T. (A) against the orders passed under section 153A of the Act for the AYs. 2004-05, 2005-06, 2007-08, 2008-09 and under section 143(3) for A.Y. 2010-11 by the A.O. on 26.12.2011. The C.I.T.(A) after elaborate discussion in the composite appellate order relying upon the findings and discussions made in the assessment order, dismissed the appeals of the assessee in all the assessment years involved vide order dated 30.10.2018. 6. Being aggrieved by the order of the C.I.T.(A), the respondent/assessee preferred appeals before the ITAT for the A.Ys. 2004-05, 2005-06, 2007-08, 2008-09 and 2010-11. The I.T.A.T. allowed the appeals of the assessee 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 preferred this appeal by formulating 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 5 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

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. 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, 6 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

(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 (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: "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 7 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

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 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 8 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

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. 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 9 NEUTRAL CITATION NO. 2025:MPHC-JBP:1483

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 17:52:44 +05'30'

More judgments on Section 132

All 14,598 judgments and leading authorities on Section 132 →

Recent GST High Court judgments

Search GST case law →