IMPORTANT POINT
The necessity for specific findings on the educational purpose of institutions is essential for approval under Section 10(23C)(vi) of the Income Tax Act.

ORDER :

Sanjay K. Agrawal, J.

1. This tax case has been preferred under Section 260A of the Income Tax, 1961 calling in question legality, validity and correctness of the order dated 31-5-2024 passed by the Income Tax Appellate Tribunal (ITAT), Raipur Bench, Raipur in ITA No.171/RPR/2023 affirming the order dated 15-3-2023 passed by the Commissioner of Income Tax, Exemption, Bhopal.

2. This tax case was admitted for hearing on 30-8-2024 by framing the following substantial question of law: -

Whether both the Commissioner of Income Tax, Exemption, Bhopal and the Income Tax Appellate Tribunal, Raipur Bench, Raipur are justified in rejecting the application preferred by the appellant herein under Section 10(23C)(vi) of the Income Tax Act, 1961 by recording a finding perverse to the record and further justified in rejecting the application without recording a finding that the appellant University is not existing solely for educational purposes and without recording the satisfaction required under Section 10(23C)(vi) of the Income Tax Act, 1961 read with the second proviso appended to it by recording a finding perverse to the record?

3. The appellant / assessee filed an application under Section 10(23C) (iii) in Form 10AB for registration / approval under the new provisions of the IT Act on 30-9-2022 and in order to process the said application and to verify the objects and activities of the assessee, opportunity letters were issued to the appellant / assessee and various documents/details were also called for. In order to verify the objects and activities of the assessee, various notices were issued to the appellant on 22-12-2022, 3-1-2023 & 18-1-2023 to submit relevant documents / information for registration under Section 10(23C)(iii) of the new provisions of the IT Act, which was replied by the appellant herein / assessee. The Commissioner of Income Tax, Exemption, Bhopal after considering the documents submitted by the assessee issued authorisation letter on 30-1-2023 for the purpose of physical verification and to conduct enquiries into the case of the assessee and accordingly, physical verification report was submitted by the Income Tax Officer (E), Bilaspur. After perusal of the verification report and other records submitted by the appellant / assessee, the appellant / assessee was required to explain (i) whether accounts of the financial year 2020-21 were not audited; (ii) the details of vehicle expenses and TDS thereon, if any, for the financial year 2021-22; (iii) details of examination expenses and TDS thereon for the financial year 2021-22; and (iv) nature and details of Corpus Fund, Endowment Fund and RUSA fund shown directly in balance sheets, for which a show cause notice was issued to the appellant on 1-3-2023. The appellant replied the show cause notice, but ultimately, the Commissioner of Income Tax, Exemption not finding the reply satisfactory, rejected the application against which the assessee preferred an appeal before the ITAT which was also dismissed holding that the appellant was unable to furnish necessary information / details before the CIT(E) which was well within the jurisdiction of the CIT(E) to call for such details/documents/ information against which the appellant preferred this tax case.

4. Mr. Nikhilesh Begani, learned counsel appearing for the appellant / assessee, would submit that both the authorities i.e. the Commissioner of Income Tax, Exemption – CIT(E) and the Income Tax Appellate Tribunal (ITAT) have misdirected themselves in rejecting the application overlooking the provisions contained in Section 10(23C)(iii) of the IT Act, which mandates the consideration as to whether the appellant University being the educational institution existing solely for educational purposes and not for purposes of profit as contained in sub-clause (iii-ab) or sub-clause (iii-ad) by recording a finding which is perverse to the record, which requires to be set aside in light of the decision of the Supreme Court in