Commissioner Of Income Tax-Exemption, Jaipur v. Pacific Medical University, Village Otto Ka Gura And Bhilo Kabedla, Tehsil Girwa, District - Udaipur, Udaipur Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR 1. D.B. Income Tax Appeal No. 32/2018 Commissioner Of Income Tax-Exemption, Jaipur. ----Appellant Versus Pacific Medical University, Village Otto Ka Gura And Bhilo KaBedla, Tehsil Girwa, District - Udaipur, Udaipur Rajasthan ----Respondent Connected With 2. D.B. Income Tax Appeal No. 94/2018 Commissioner Of Income Tax-Exemption, Jaipur ----Appellant Versus Pacific Medical University, Araji No 34 -35, Village Auto Ka Gudaand Araji No. 529, 866/528, 526 Vill Bhilo Ka Bedla, Tehsil Girva,Udaipur.----RespondentFor Appellant(s) : Mr. K.K. BissaFor Respondent(s): Mr. Vikas BaliaMr. Pramod Vyas HON'BLE MR. JUSTICE SANGEET LODHA HON'BLE MR. JUSTICE DINESH MEHTA 29/09/2018 Judgment ’-BY THE COURT (PER HONBLE DINESH MEHTA, J) : The above captioned appeals, filed under Section 260A ofIncome Tax Act, 1961 arise out of the common judgment andorder dated 06.09.2017, passed by Income Tax Appellate Tribunal,Jodhpur Bench, Jodhpur (hereinafter referred to as “the Tribunal”) in appeal No.97/2016 and 275/2016 filed by the respondentassessee. The first one being appeal No.32/2018 emanates from theorder of the Tribunal passed in appeal No.97/JODH/2016,concerning the assessee’s right to claim exemption under Section80G of the Income Tax Act, 1961 (hereinafter referred to as “theAct of 1961”) whereas the other appeal being appeal No.94/2018arises from ITA No. 275/JODH/2016, relating to rejection ofrespondent’s application for registration under Section 10(23C)(vi)of the Act of 1961. Though there were two separate applications andcorrespondingly 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 setout hereinbelow. The respondent assessee – Pacific Medical University is acreation of an Act of the State legislature, known as PacificMedical University, Udaipur Act, 2014, which received the assentof the Governor on 3[rd] day of March, 2015. Tirupati BalajiEducation Trust (hereinafter referred as “the Trust” or “the TBET”)is its promoter, which was created by deed of declaration dated11.08.2006 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 registeredunder Section 12AA of the Act of 1961 and has also obtained acertificate under Section 80G(5)(vi) of the Act of 1961, read withRule 11AA of the Rules of 1962. According to the provisions of the (3 of 10) Pacific Medical University Act, 2014, the TBET has been given thestatus of sponsor / promoter of the respondent assessee. Both theTrust and respondent - University are separate assesses under theAct of 1961 and having separate Permanent Account Numbers. The respondent filed an application dated 7.7.2015 in theprescribed form, seeking approval of the Commissioner, IncomeTax as required by Section 80G(5)(vi) of the Act of 1961. On 07.12.2015, respondent – University applied forregistration under Section 12 AA of the Act of 1961 and wasgranted registration vide letter dated 5.6.2015. The respondenthaving a separate Permanent Account Number, claimed that it is aseparate and independent entity than TBET, its sponsor Trust. Facts relating to application under Section 80G(vi): Pacific Medical University Act, 2014, the TBET has been given thestatus of sponsor / promoter of the respondent assessee. Both theTrust and respondent - University are separate assesses under theAct of 1961 and having separate Permanent Account Numbers. The respondent filed an application dated 7.7.2015 in theprescribed form, seeking approval of the Commissioner, IncomeTax as required by Section 80G(5)(vi) of the Act of 1961. On 07.12.2015, respondent – University applied forregistration under Section 12 AA of the Act of 1961 and wasgranted registration vide letter dated 5.6.2015. The respondenthaving a separate Permanent Account Number, claimed that it is aseparate and independent entity than TBET, its sponsor Trust. Facts relating to application under Section 80G(vi): The respondent’s application seeking approval under Section80-G of the Act of 1961 came to be rejected by the Commissionervide his order dated 28.1.2016. While rejecting the application,the learned Commissioner recorded a finding that there was adiscrepancy in the number of Doctors on roll. Such finding wasrecorded as salary payment vis a vis their attendance shown inthe data relating to bio attendance system did not telly. LearnedCommissioner (Exemption) noted that Dr. Rohilla Gorach hadmade statement on the basis of salary sheet that salary has beenpaid to 205 doctors, whereas the books of accounts of theassessee showed payment of salary to 217 doctors. This being thesituation, the learned Commissioner held that the assessee haswrongly claimed salary of 12 doctors than the actual payment. The Commissioner also placed strong reliance upon thestatement of one Sh. D.K. Gupta, who had given statements thatthe accounts of TBET for the financial year 2014-15 and 2015-16have been maintained in his Office and receipts of the donationsreceived by M/s. Tirupati Balaji Medical Stores and M/s.Venkteshwar Enterprises have not been issued, while alsoadmitting that they had not received any letter(s) from thedonors, 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 orindirectly working for running of the Hospitals and as such theywere one. These discrepancies, led him to a conclusion that therespondent PMU has not maintained the accounts in regularcourse of activities. Having recorded such finding, the Commissioner(Exemption) rejected the request, seeking approval under Section80G of the Act of 1961. Being aggrieved with the said order, the assessee preferredan appeal before the Income Tax Appellate Tribunal, Jodhpur(hereinafter referred to as “the Tribunal) being appealNo.97/JODH/2016. Facts relating to application u/s 10(23C)(vi) :- The respondent assessee had filed another application on07.07.2015, in prescribed form for grant of exemption under Section 10(23C)(vi) of the Act of 1961. The said application filedby the assessee came to be rejected by the Commissioner(Exemption) on two counts, firstly because the assessee had failedto reach the requisite parameters of aggregate annual receipt forfinancial year 2014-15 and 2015-16, and secondly because therespondent has not maintained proper books of account. Whilerejecting the application, the Commissioner relied upon thestatement of Dr. Rohilla and Mr. D.K. Gupta and reiterated theviews, which he had expressed while passing the order dated27.1.2016 in relation to assessee’s application under Section80G(5) of the Act of 1961. The Commissioner passed an orderdated 28.07.2016, on the basis of inconsistencies anddiscrepancies seen in the books of accounts stated by Mr. D.K.Gupta and Dr. Rohilla Gorach and held that the assessee has notmaintained accounts in regular course of activities. The assessee preferred a separate appeal before the Tribunalagainst the aforesaid order dated 28.07.2016, which wasregistered as appeal No.277/JODH/2016. Findings of the Tribunal:- The learned Tribunal considered the facts of the case alongwith the material available on record and held that the order ofthe 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 ofDr. Rohilla Gorach and Mr. D.K. Gupta, while side-tracking andignoring the explanation furnished by the assessee during thecourse of the proceedings. Learned Members of the Tribunal held that Mr. D.K. Gupta was not even an Accountant of the assesseeand he was Accountant of the Trust, and hence his statementscould not be taken as gospel truth to be used against theassessee, more particularly without a fair opportunity of crossexamination being allowed to the assessee. In relation to thestatement of Dr. Rohilla Gorach, learned Members of the Tribunalhave made observation that the assessee has put forth sufficientexplanation regarding the discrepancies in the record relating tobio-attendance and the payments made by the assessee. TheTribunal after due deliberation and appreciation of evidence,concluded that the finding regarding non maintenance of thebooks of accounts in regular manner was based on conjecturesand surmises, as there was hardly any discrepancy, if the matterwas examined in its correct perspective. The Tribunal afterdetailed scrutiny has held that the assessee is entitled to grant ofapproval under Section 80G of the Act of 1961 and so also entitledfor certificate of registration under Section 10(23C)(vi) of the Actof 1961 while allowing the appeals filed by the respondentassessee, vide its impugned order dated 06.09.2017. Mr. Bissa, learned counsel for the appellant – Income TaxDepartment, challenging the common order dated 6.9.2017 urgedthat learned Members of the Tribunal have not appreciated thefacts involved in the present case in true perspective. Hesubmitted that the Commissioner was right and justified in relyingupon the statement of Dr. Rohilla Gorach and Mr. D.K. Gupta forthe purpose of concluding that the assessee has not maintainedthe books of accounts in regular manner. He emphasized that these two persons namely Mr. D.K. Gupta and Dr. Rohilla Gorachgave their statement during the course of search and no retractionthereto had been made by them. He contended that both of themwere assessee’s own employees and as such, the assesse couldhave itself brought them for cross-examination or forconfrontation, if so desired. Mr. Bissa further submitted that theappellant and the Trust may be two separate entities, yet for allpractical purposes, they were one, which is evident from the factthat TBET is promoter and sponsor of the respondent assesseehaving undertaken to take all assets and liabilities in case ofdissolution of the respondent University. Learned counsel further submitted that there were seriousdiscrepancies and lacunae in the books of accounts of therespondent and the same did not depict true and correct picture,for which the Commissioner(Exemption) was justified in rejectingits application under Section 80G5(vi) as well as the applicationfiled under Section 10(23C)(vi) of the Act of 1961. Learned counsel further submitted that there were seriousdiscrepancies and lacunae in the books of accounts of therespondent and the same did not depict true and correct picture,for which the Commissioner(Exemption) was justified in rejectingits application under Section 80G5(vi) as well as the applicationfiled under Section 10(23C)(vi) of the Act of 1961. Mr. Vikas Balia, appearing for the respondent assesseesupported the order under challenge passed by the Tribunal bysubmitting that the Tribunal has recorded a clear and categoricalfinding in favour of the assessee that there is no discrepancy inmaintaining the books of accounts. He argued that the findingsrecorded by the Tribunal are based on proper appreciation ofevidence available on record and such a detailed and reasonedorder passed by the Tribunal, after taking into consideration all theocular and oral evidence as well as the arguments of both thesides, do not call for any interference. He contended that the findings recorded by the Tribunal are findings of fact, which havenot even been alleged to be perverse, much less being proved tobe perverse. He added that until and unless such findings of factrecorded by the Tribunal are shown to be perverse, this Courtwould not reappreciate the evidence to unsettle these findings.Learned counsel for the respondent rested his arguments bysubmitting that no question of law, much less any substantialquestion of law arises for consideration of this Court, for which theappeals are liable to be dismissed at the stage of admission itself. Having heard rival counsels and after perusal of the materialavailable on record, we are of the considered opinion that theTribunal has committed no error of law in concluding that theCommissioner(Exemption) has wrongly rejected assessee’sapplications on the ground of not maintaining the books ofaccounts in regular course. A perusal of the orders dated 28.1.2016 and 28.07.2016passed by the Commissioner under Section 80G and 10(23C)(vi)of the Act of 1961 reveals that he has given much credence to thestatements of Mr. D.K. Gupta and Dr. Rohilla Gorach. A reading ofthe statement of Mr. D.K. Gupta reproduced in the order of theCommissioner reveals that he has simply stated that the books ofaccounts of Tirupati Balaji Medical Stores and M/s VenkteshwarEnterprises, who used to sell medicines in the Hospital, have beenmaintained in their Office, while also informing that for thedonations received towards corpus in the financial year 2014-15and 2015-16 neither any receipts have been issued, nor have they (9 of 10) received any letter from the donors, who had sent theircontribution towards the corpus. In considered opinion of this Court even if the said statementis taken to be at its face value, the same is not sufficient to inferthat the assessee has not maintained books of accounts in regularcourse. Given the fact that the respondent assessee is a separateassessee having a separate Permanent Account Number, thestatement made with regard to Medical stores at the hospital arenot relevant and the same cannot be taken into consideration forthe purpose of ascertaining the fact whether the books of accountsof the respondent – assessee have been maintained properly andin regular course. Similarly, the discrepancy arising from the statement of Dr.Rohilla Gorach; record of bio-attendance; and consequentdifference in number of doctors actually worked and paymentsmade as per the books, has been satisfactorily explained by theassessee. The Tribunal has satisfied itself that all the doctors hadactually attended the classes and payment had been appropriatelymade to them by the assessee. Similarly, the discrepancy arising from the statement of Dr.Rohilla Gorach; record of bio-attendance; and consequentdifference in number of doctors actually worked and paymentsmade as per the books, has been satisfactorily explained by theassessee. The Tribunal has satisfied itself that all the doctors hadactually attended the classes and payment had been appropriatelymade to them by the assessee. The explanation put forth by the assessee prima-facieappears to be plausible; and even if, the same is treated to bedoubtful, then also, such discrepancy is not fatal to grant therequisite approval to an assessee. Such discrepancies can be dulyexamined and brought to book, while framing regular assessmentof the assessee for the relevant period. Similar has been the issue regarding document AS/4, whichwas found from Ms. Mayuri Jain, P.A. to Mr. Rahul Aggarwal, the Chairman of the respondent assessee. The Commissioner haswrongly rejected the request of opportunity of cross-examinationof Ms. Mayuri Jain on the ground that such request of cross-examination of witness was not made before the Dy. Director ofIncome Tax. In our opinion, the Commissioner has erred in notallowing the assessee, an opportunity of cross-examination. Inabsence of the requisite cross-examination, her statement cannotform a basis of arriving at a conclusion against the respondent. Upon overall appraisal of the facts and the material availableon record, we are of the view that the findings recorded andconclusions drawn by the Tribunal are correct and there is noperversity. No substantial question of law, requiring adjudication oranswer by this Court arises in these appeals. Hence they are beingdismissed hereby. No orders as to costs. (DINESH MEHTA),J(SANGEET LODHA),J Arun/PS