2025 (1) TMI 974 - HC - Income Tax

Admission of the appeal in High Court - substantial question of law as is required to be made out under Section 260A or not? - Denial of benefits of section 11 and 12 and denial of 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 - ITAT allowed claim HELD THAT - 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. 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. 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 - Appeal dismissed as No substantial question of law arises.

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses several core legal questions:

Whether the ITAT overlooked the principle of natural justice by not allowing cross-examination of a key witness.
Whether the ITAT's decision contravenes the provisions of the Bhartiya Sakshya Adhiniyam, 2023, regarding cross-examination.
Whether the ITAT justified illicit activities by the assessee, given prior adverse findings by the High Court.
Whether the ITAT overlooked evidence demonstrating commercial intentions of the assessee.
Whether the ITAT erred in its treatment of the guideline value as the market value in a land exchange case.
Whether the ITAT was justified in allowing tax benefits to the assessee under Sections 11 and 12 of the Income Tax Act.
Whether the ITAT erred in allowing the carry forward of losses by the assessee.
Whether the ITAT was justified in adjudicating certain financial additions while issues were pending before the CIT (Appeals).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Principle of Natural Justice

Legal Framework: The principle of natural justice requires that parties have the opportunity to cross-examine witnesses.
Court's Interpretation: The court considered whether the ITAT's omission to allow cross-examination constituted a breach of natural justice.
Evidence and Findings: The ITAT had ruled without providing the opportunity for cross-examination.
Application of Law: The court examined if this oversight affected the fairness of the proceedings.
Competing Arguments: The appellant argued a breach of natural justice, while the respondent contended no substantial question of law arose.
Conclusions: The court found no substantial question of law on this issue.

Issue 2: Contravention of Evidence Act

Legal Framework: Section 143 of the Bhartiya Sakshya Adhiniyam, 2023, governs cross-examination rights.
Court's Interpretation: The court assessed whether the ITAT's decision violated these provisions.
Evidence and Findings: The court noted the absence of a request for cross-examination during assessment.
Application of Law: The court evaluated if this omission was critical to the case outcome.
Competing Arguments: The appellant claimed a legal contravention, while the respondent cited lack of substantial legal question.
Conclusions: The court dismissed the issue as not raising a substantial question of law.

Issue 3: Justification of Illicit Activities

Legal Framework: Section 2(15) of the Income Tax Act defines charitable activities.
Court's Interpretation: The court analyzed whether the ITAT justified illicit activities under the guise of charitable status.
Evidence and Findings: Prior High Court findings indicated non-charitable activities by the assessee.
Application of Law: The court reviewed the ITAT's rationale for its decision.
Competing Arguments: The appellant pointed to previous adverse findings, while the respondent argued for dismissal based on precedent.
Conclusions: The court found no substantial question of law, referencing similar case dismissals.

Issue 4: Commercial Intentions and Evidence

Legal Framework: The court considered the evidentiary requirements to establish commercial intent.
Court's Interpretation: The court examined whether the ITAT overlooked evidence of commercial activities.
Evidence and Findings: The chronology of events suggested commercial intent, supported by TDS survey findings.
Application of Law: The court evaluated if these findings were adequately addressed by the ITAT.
Competing Arguments: The appellant cited overlooked evidence, while the respondent maintained no substantial legal question existed.
Conclusions: The court concluded no substantial question of law was present.

Issue 5: Market Value of Land Exchange

Legal Framework: Relevant Supreme Court precedents on land valuation were considered.
Court's Interpretation: The court assessed the ITAT's treatment of guideline value as market value.
Evidence and Findings: The ITAT's decision was based on established precedents.
Application of Law: The court reviewed the application of legal principles to the facts.
Competing Arguments: The appellant argued misapplication of law, while the respondent defended the ITAT's approach.
Conclusions: The court found no substantial question of law, upholding the ITAT's decision.

Issue 6: Tax Benefits Under Sections 11 and 12

Legal Framework: Sections 11 and 12 of the Income Tax Act provide tax exemptions for charitable trusts.
Court's Interpretation: The court considered if the ITAT correctly applied these provisions.
Evidence and Findings: The ITAT allowed benefits based on compliance with statutory requirements.
Application of Law: The court evaluated the ITAT's interpretation of charitable activities.
Competing Arguments: The appellant challenged the charitable status, while the respondent cited statutory compliance.
Conclusions: The court upheld the ITAT's decision, finding no substantial question of law.

Issue 7: Carry Forward of Losses

Legal Framework: The Income Tax Act provisions on loss carry forward were analyzed.
Court's Interpretation: The court reviewed the ITAT's rationale for permitting loss carry forward.
Evidence and Findings: The ITAT's decision was based on the trust's financial status.
Application of Law: The court assessed the legal basis for the ITAT's decision.
Competing Arguments: The appellant argued against the allowance, while the respondent supported the ITAT's interpretation.
Conclusions: The court found no substantial question of law, affirming the ITAT's ruling.

Issue 8: Adjudication of Financial Additions

Legal Framework: The court considered the procedural appropriateness of the ITAT's adjudication.
Court's Interpretation: The court examined whether the ITAT prematurely adjudicated pending issues.
Evidence and Findings: The ITAT addressed additions pending before the CIT (Appeals).
Application of Law: The court evaluated the procedural correctness of the ITAT's actions.
Competing Arguments: The appellant challenged the timing, while the respondent defended the ITAT's jurisdiction.
Conclusions: The court found no substantial question of law, supporting the ITAT's decision.

3. SIGNIFICANT HOLDINGS

Core Principles: The judgment reiterates the principle that substantial questions of law must be clearly identified and demonstrated for appeal under Section 260A of the Income Tax Act.
Final Determinations: The court dismissed the appeal, finding no substantial question of law across the issues presented.
Verbatim Legal Reasoning: "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."

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