2018 (11) TMI 1009 - HC - Income Tax

Approval u/s 80G - eligibility for grant of exemption u/s 10(23C)(vi) - not maintaining the books of accounts in regular course - assessee is a creation of an Act of the State legislature, known as Pacific Medical University, Udaipur Act, 2014 - Held that - 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 u/s 80G and 10(23C)(vi)reveals that he has given much credence to the statements of Mr. D.K. Gupta and Dr. Rohilla Gorac which 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 received any letter from the donors, who had sent their contribution towards the corpus. 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. Similar has been the issue regarding document AS/4, which was found from Ms. Mayuri Jain, P.A. to Mr. Rahul Aggarwal, the 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 crossexamination of witness was not made before the Dy. Director of Income Tax. In absence of the requisite cross-examination, her statement cannot form a basis of arriving at a conclusion against the respondent. - Decided against revenue

Summary

Issues:
1. Appeal regarding exemption under Section 80G of the Income Tax Act, 1961
2. Appeal regarding registration under Section 10(23C)(vi) of the Income Tax Act, 1961

Exemption under Section 80G:
The respondent, a university, sought approval under Section 80G but faced rejection due to discrepancies in the number of doctors on payroll and alleged irregularities in accounts. The Commissioner concluded that the university and the trust were interconnected entities. However, the Tribunal found the Commissioner's order non-speaking and unreasoned. It highlighted flaws in relying solely on statements without allowing cross-examination. The Tribunal determined that the university maintained accounts appropriately and granted approval under Section 80G.

Registration under Section 10(23C)(vi):
Another application by the university for exemption under Section 10(23C)(vi) was rejected based on financial parameters and alleged accounting irregularities. The Commissioner relied on earlier statements and rejected the application. The Tribunal disagreed, stating the Commissioner's reliance was misplaced and lacked proper reasoning. It noted discrepancies were explained satisfactorily and allowed the university's appeal, granting registration under Section 10(23C)(vi).

Court's Decision:
The Court upheld the Tribunal's decision, finding no error in granting approvals to the university. It criticized the Commissioner's heavy reliance on specific statements without proper examination. The Court highlighted the lack of cross-examination opportunities and deemed the discrepancies not fatal to the university's applications. It emphasized the need for a thorough assessment rather than immediate rejection based on alleged irregularities. The Court dismissed the appeals, stating no substantial legal questions warranted further consideration.