2006-VIL-365-ITAT-
Equivalent Citation: ITD 100, 87, TTJ 104, 467, ITR - SUPP 296, 36,
Income Tax Appellate Tribunal MADRAS
I.T.A. Nos. 1757, 1758 to 1761 (Mad.) of 2004
Date: 12.01.2006
PEOPLE EDUCATION ECONOMIC DEVELOPMENT SOCIETY (PEEDS).
Vs
INCOME-TAX OFFICER, WARD-II (4).
BENCH
Member(s) : M. K. CHATURVEDI., N. R. S. GANESAN., CHANDRA POOJARI.
JUDGMENT
Per N.R.S. Ganesan, Judicial Member. - I.T.A. Nos. 1757 & 1758 (Mds.)/2004 are filed by the assessee against the order passed by the Commissioner of Income-tax under section 12AA of the Income-tax Act. The other appeals are filed against the order of the Commissioner of Income-tax (Appeals) CIT(A) for the assessment years 1993-94, 1995-96 and 1997-98. We heard all the appeals together and disposing of the same by this common order.
2. Let us first take I.T.A. Nos. 1757 & 1758 (Mds.)/2004 relating to registration. Mr. N. Quadir Hoseyn, the learned counsel for the assessee submitted that the assessee filed an application for grant of registration under section 12A of the Income-tax Act on 4-11-1993. A similar application was also filed for grant of recognition under section 80G of the Income-tax Act. The learned counsel submitted that the Commissioner of Income-tax by an order dated 4-9-2002 rejected the application of the assessee. The learned counsel submitted that the assessee filed an application on 20-9-2002 before the Commissioner of Income-tax saying that the assessee's representative met with an accident and hence he could not appear before the Commissioner of Income-tax on the date of hearing. Therefore, the assessee requested to reconsider the order passed by the Commissioner of Income-tax on 4-9-2002. The assessee's application was rejected on 25-10-2002. Thereafter the assessee filed another application for registration on 9-12-2002. The very same Commissioner of Income-tax granted registration under section 12A with effect from 1-4-1997. According to the learned counsel for the assessee, the Commissioner of Income-tax observed that the application was filed belatedly by 12 years, 7 months and 18 days. According to the learned counsel, the application was filed on 4-11-1993. Therefore, granting registration with effect from 1-4-1997 on the ground that there was a delay of 12 years, 7 months and 18 days in filing the application is without any basis. The assessee has also filed a petition on 18-6-2004 before the Commissioner of Income-tax to review the order dated 19-5-2003. In the meantime, the assessee received order of the first Appellate Authority on 22-6-2004 for the assessment years 1993-94, 1995-96 and 1997-98. Thereafter, the appeals were preferred. During the course of preparation of the appeals, the counsel advised the assessee that an appeal has to be prepared under section 253(1)(c) before the Tribunal against the Commissioner of Income-tax's order rejecting the application for registration under section 12AA. Thereafter, the appeal was preferred. Therefore, the learned counsel submitted that there was delay of 617 days in filing the appeal before this Tribunal in I.T.A. No. 1757 (Mds.)/2004 and 359 days in filing the appeal before this Tribunal in I.T.A. No. 1758(Mds.)/ 2004. According to the learned counsel, the delay was beyond the control of the assessee. The learned counsel submitted that the assessee could not appear before the Commissioner of Income-tax since its representative met with an accident. This was also brought to the notice of the Commissioner of Income-tax. The learned counsel submitted that when there is a conflict between the technicality and substantial justice, in the interest of justice substantial justice has to be preferred rather than rejecting the application on technicality. Therefore, the learned counsel submitted that even though admittedly the application in forms 10A and 10G was filed on 4-11-1993, no action was taken till 2002. Therefore, in view of sub-clause (ii) of section 12AA, the registration is deemed to be granted. The learned counsel submitted that there was sufficient cause on the part of the assessee for not filing the appeal within the specified period, therefore, he prayed that the delay may be condoned and the appeal may be admitted.
3. On the contrary, the Departmental Representative (D.R.) Mr. K. Anangapal submitted that the application was admittedly filed on 4-11-1993 and it was rejected on 4-9-2002. The learned D.R. submitted that there was no sufficient cause for not filing the appeal within the period of limitation.
4. We have considered the rival submissions on either side, and also perused the material available on record. Admittedly, the application under section 12A(a) and under section 80G for registration was filed on 4-11-1993. This was rejected only on 4-9-2002. The assessee admittedly filed an application to reconsider the order of the Commissioner of Income-tax dated 4-9-2002 on the ground that they could not be represented due to the accident of the representative of the assessee. Another application was also filed for registration. The Commissioner of Income-tax granted registration with effect from 1-4-1997. The Commissioner of Income-tax has noted in his order dated 19-5-2003 that there was a delay of 12 years, 7 months and 18 days in filing the application. The fact remains that the assessee's application dated 4-11-1993 was kept unattended till 2002. Therefore, we find no justification in the order of the Commissioner of Income-tax dated 4-9-2002 stating that there was a delay of 12 years, 7 months and 18 days in filing the application for registration. The assessee also filed an application on 18-6-2004 to review its earlier order. A similar application was also filed by the assessee on 20-9-2002 also. By taking into consideration of the factual situation and also the facts that the assessee's representative met with an accident, in our view, there was sufficient cause on the part of the assessee for not filing the appeal within the prescribed time. Moreover, when there is a conflict between substantial cause and technicality, in our view, substantial cause has to be preferred rather than the technicality. Therefore, even on that ground, the delay in filing the appeal is required to be condoned. Accordingly, we condone the delay in filing the appeal in I.T.A. Nos. 1757 and 1758 (Mds.)/2004 and admit the appeals.
5. Now coming to the merit of the appeal, the learned counsel for the assessee submitted that sub-clause (2) of section 12AA says that the Commissioner of Income-tax has to pass an order either granting or refusing the registration before expiry of six months before the end of the month in which the application is received. Therefore, when the Commissioner of Income-tax fails to pass an order either granting or refusing to grant the registration, in view of the specific clause contained in section 12AA(2) of the Income-tax Act, the registration shall be deemed to be granted immediately after expiry of six months from the end of the month in which the application was filed. The learned counsel for the assessee further submitted that by an order dated 19-5-2003, the Commissioner of Income-tax granted registration with effect from 1-4-1997. However, he observed that there was a delay of 12 years, 7 months and 18 days ignoring the fact that the assessee has filed the application on 4-11-1993. The learned counsel further submitted that the main reason for rejecting the registration by an order dated 4-9-2002 is that there was a violation of provisions of section 11 of the Income-tax Act. The learned counsel for the assessee invited our attention to section 12A of the Income-tax Act and submitted that the Assessing Officer expected to consider two conditions which are provided for grant of registration. According to the learned counsel, the first condition is that the assessee should have made an application for registration in the prescribed form and the prescribed manner before the expiry of period of one year from the date of creation of the trust or establishing of institution. The proviso to section 12A empowers the Commissioner to grant registration after the expiry of the one year period provided the assessee was prevented from making an application before the expiry of the period for sufficient reasons. If the Commissioner is not satisfied about the reason for not filing the application within the expiry of one year period, then the Commissioner shall grant registration from the first day of financial year in which the application was made. In this case, the application was made on 4-11-1993, therefore, if at all there is a delay and the Commissioner is not satisfied with the reason, he ought to have granted registration at least from 1-4-1993. The second condition provided under the provisions of section 12A is that the assessee has to keep the accounts in a particular manner and the accounts should be audited. In this case, admittedly the assessee is maintaining proper accounts in a particular manner and it was also audited. The learned counsel further submitted that beyond the above-said two conditions, the Commissioner cannot make any enquiry at all. Therefore, the reasons for rejecting the application by the Commissioner that there was a violation of section 11 is beyond the jurisdiction of the Commissioner.
6. On the contrary, Mr. K Anangapal, the learned D.R. submitted that the income of the assessee exceeded the expenditure for the assessment years 1993-94, 1995-96 and 1997-98. Therefore, there was a violation of section 11 of the Income-tax Act. The learned D.R. further submitted that even though a notice was issued calling for explanation why the request for registration should not be rejected, no explanation was offered by the assessee. However, by way of a subsequent application, the Commissioner granted registration with effect from 1-4-1997.
7. We have considered the rival submissions on either side, and also perused the material available on record. Admittedly the assessee made an application on 4-11-1993 in Forms 10A and 10G of the Income-tax Act. This fact is not disputed by the revenue. By a letter dated 10-8-1999, it appears that the Income-tax Officer called for clarification regarding application of 75 per cent of the funds required under rule 11(1)(a) relating to assessment year 1994-95. Thereafter by a letter dated 18-7-2001, the assessee was asked to file return of income for the assessment years 1993-94 to 2000-01. Thereafter on 12-3-2002, the Commissioner of Income-tax called for an explanation on the ground that the income exceeded the expenditure, therefore, why the request for registration under section 12A should not be rejected. The assessee could not reply to the Commissioner of Income-tax's letter dated 12-3-2002 since, admittedly, the assessee's representative met with an accident. Thereafter on 4-9-2002, the assessee's request was rejected.
8. We have also carefully gone through the provisions of sections 12A and 12AA of the Income-tax Act. Section 12AA was introduced by Finance Act, 1996 with effect from 1-4-1997. Originally application for registration under section 12A has to be made before the Chief Commissioner of Income-tax. In view of section 12AA(1A), all applications pending before the Chief Commissioner of Income-tax as on 1-6-1999 shall stand transferred to the Commissioner and the Commissioner has to dispose of the application from the stage at which they were transferred to him. Sub-clause (2) of section 12AA says that an order granting or refusing registration shall be passed before expiry of six months from the end of the month in which the application was received. In this case, the application was admittedly filed on 4-11-1993 and in view of the operation of law in sub-section (1A) of section 12AA, the application shall stand transferred to Commissioner of Income-tax on 1-6-1999. Therefore, the Commissioner ought to have disposed of the application on or before 31-12-1999. In view of the above, the contention of the assessee is that the application of the assessee is deemed to be allowed by granting registration under section 12A.
9. We have also carefully gone through the order of the Commissioner of Income-tax dated 4-9-2002. The application of the assessee was rejected only on the ground that the income was more than the expenditure. Section 12A provides for two conditions for grant of registration. The first condition is that the assessee has to file an application; the second condition is that the assessee has to maintain the accounts in a prescribed manner. There is no scope for the Commissioner of Income-tax to go beyond these two conditions. Whether there was a violation of section 11 or not is not a condition precedent for grant of registration under section 12A. We find that the Madras High Court in the case of New Life In Christ Evangelistic Association v. CIT [2000] 246 ITR 532 had an occasion to consider a similar issue. The Madras High Court found that at any stage of grant of certification under section 12A of the Income-tax Act, the only enquiry that could be possibly made would be whether the society has actually made an application in time and whether the accounts of the society are maintained in a manner prescribed in the Act. Beyond that, the scope of enquiry would not go. In view of this judgment of the Madras High Court, the investigation done by the Commissioner with respect to expenditure incurred by the assessee for grant of registration under section 12A, is beyond the scope of statutory provision. Therefore, we do not find any justification on the part of the Commissioner of Income-tax in rejecting the application of the assessee. The only purpose for which the registration is granted is for establishing the identity of the institution to claim benefit under sections 11 and 12 of the Income-tax Act. The question whether the assessee is entitled for exemption under sections 11 and 12 of the Income-tax Act or under section 80G would be decided in a later stage. At the stage of grant of registration, the Commissioner of Income-tax cannot insist the assessee to explain the nature of expenditure.
10. It appears from the records that the Society was formed on 20-1-1989. The application was admittedly made in Forms 10A and 10G on 4-11-1993. It is nobody's case that the assessee has made any application to condone the delay in making the application. It is also not the case of the assessee that the assessee was prevented from making an application before the expiry of one year period. Therefore, in view of section 12AA(2), the registration has to be granted only from the first day of the year in which the application was made. In this case, the application was admittedly made on 4-11-1993. Therefore, in our view, the Commissioner ought to have granted registration with effect from 1-4-1993 instead of 1-4-1997.
11. In view of the above discussion, we set aside the orders of the Commissioner dated 4-9-2002 and dated 19-5-2003 and direct the Commissioner to grant registration under section 12A(a) and under section 80G of the Income-tax Act with effect from 1-4-1993. We make it very clear that the grant of registration would not automatically exempt the income under sections 11, 12 and 80G of the Income-tax Act. The Assessing Officer shall examine the application of the provisions of sections 11,12 and 80G in the light of judgment of the Madras High Court in the case of New Life In Christ Evangelistic Association.
12. In the result, I.T.A. Nos. 1757 and 1758(Mds.)/2004 are allowed.
13. Now let us take I.T.A. Nos. 1759, 1760 and 1761(Mds.)/2004. The Assessing Officer assessed the income since the application of the assessee under sections 12A and 80G was rejected. Now we have directed the Commissioner of Income-tax to grant registration under sections 12A and 80G of the Income-tax Act with effect from 1-4-1993. Therefore, the application of sections 11,12 and 80G has to be independently examined in respect of the source of income received by the assessee as contemplated in the respective provisions of law. Therefore, we set aside the order of the lower authorities and remand back the issue to the file of the Assessing Officer. The Assessing Officer shall reconsider the whole issue afresh and find out whether the assessee is entitled for exemption under sections 11,12 and 80G in respect of income received by them as a society registered under sections 12A and 80G of the Income-tax Act.
14. In the result, all the appeals filed by the assessee stand allowed as indicated above.
15. After going through the proposed order of the ld. Brother, Hon'ble Judicial Member, I find it difficult to agree with the conclusions as recorded by him. However, I have the benefit to go through the proposed order of the ld. Brother, but I am recording my reasons hereunder for deferring with the view taken by the ld. Brother.
16. First, I will take up appeals in ITA Nos. 1757 & 1758/Mds./2004, which are relating to the issue of grant of registration under section 12A of Income-tax Act, 1961. The briefly enumerated facts borne out of the records are that the assessee-society made an application for grant of registration under section 12A of Income-tax Act, with CIT, Madurai. It is apparent from the letter of CIT, Madurai dated 1-7-1998 that the office of CIT, Madurai, has written letter to the assessee on 20-7-1994 for which the assessee has not replied. Even the office of CIT, Madurai has written a letter to the assessee vide dated 1-7-1998 in which certain clarification was asked for. Subsequently also, the CIT has written letter on 10-8-1999, 18-7-2001 and 12-3-2002 calling for certain clarifications regarding application of funds and information regarding filing of return of income from assessment years 1993-94 to 2000-01. Finally, the case was fixed for hearing on 16-8-2002 vide letter dated 12-8-2002 for confronting the Assessing Officer's report with regard to registrations under section 12A of the assessee. The assessee did not comply with this notice and the letter dated 13-8-2002 was received from the Auditor of the assessee by the CIT, Madurai, requesting for adjournment of the hearing as the Auditor met with accident on 7-8-2002 without any supporting evidence. The case was reposted vide letter dated 19-8-2002 for hearing on 3-9-2002 but the assessee choose not to avail of this opportunity. The CIT finally passed the order dated 4-9-2002 rejecting the assessee's application for grant of registration under section 12A and consequently the registration under section 80G was also refused. The assessee sought to review the order passed by the CIT by way of review petition vide its letter dated 20-9-2002 by explaining the reason that the assessee's representative has met with an accident and could not represent on the date of hearing and in view of this, it sought the revision of the order of rejection of section 12A registration passed on 4-9-2002. The review petition was posted for hearing on 4-10-2002 vide CIT, Madurai letter No. 464/110/93-94/CIT-I dated 23-9-2002 and heard on 4-10-2002 and same was rejected by CIT on 25-10-2002. The assessee again moved a fresh application for registration under section 12A vide letter dated nil which was filed with CIT on 29-11-2002. For this letter, the CIT asked for various clarifications vide letter No. C. No. 464/114/2002-03/CIT-I/MDUD dated 9-12 2002. Subsequently the CIT has granted section 12A registration w.e.f. 1-4-1997 vide order C. No. 464/114/2002-03/CIT-I dated 19-5-2003 on the basis of amended Memorandum of association which was registered with Registrar of Societies, Madurai, in consonance with the provisions of sections 11 to 13 of Income-tax Act, 1961.
17. In the meanwhile vide assessment orders dated 17-3-2003 the assessments were framed for assessment years 1993-94, 1995-96 and 1997-98 under section 144 read with section 164 of the Income-tax Act and thereby created demand of Rs. 1,07,720, Rs. 3,02,610 and Rs. 6,51,930 for the respective assessment years.
18. The assessee preferred appeals against the assessment orders for the above years before CIT(A), Madurai, who dismissed the appeals on merits vide order dated 22-6-2004 by holding that assessee has no case and not entitle for exemption under section 11 of Income-tax Act as the assessee's claim for grant of registration under section 12A of the Act was already rejected by the CIT, Madurai.
19. The assessee has preferred appeals before Tribunal in ITA No. 1757/2004 against order of CIT, Madurai dated 4-9-2002 with regard to rejection of application for grant registration under sections 12A and 80G of the Act on 12-7-2004.
20. The assessee has also preferred another appeal before Tribunal in ITA. No. 1758/2004 on 12-7-2004 against the order of CIT, Madurai dated 19-5-2003 in which registration was granted w.e.f. 1-4-1997 and the registration was not granted w.e.f. 11-4-1989 as sought by the assessee. There was a delay in filing of both the appeals by 617 days and 359 days respectively. The assessee has filed the condonation petitions along with these appeals, supported by affidavits.
21. Against the common appellate orders of the CIT (Appeals) for the above three assessment years, the assessee preferred appeals before Tribunal on 12-7-2004 in ITA/Nos. 1759-1761/2004.
22. The assessee moved one more review petition for grant of registration under section 12A vide letter dated 18-6-2004 along with fresh Form-10A which was rejected by CIT, Madurai vide letter dated 6-8-2004. This review petition was moved after not only receipt of the assessment order for the above assessment years but also after receipt of the first appellate order against the said assessment orders.
23. Before us, both the parties argued vehemently. I have heard both the sides and gone through the materials available on record. I have also carefully gone through the reasons cited in the petitions filed for condonation of delay which are common. The reason cited are reproduced as it is which reads as under:-
"The petitioner submits that the order of the Commissioner of Income-tax by order dated 4-9-2002 rejected the application for registration under section 12A and the same was received by the assessee. The appeal to the Appellate Tribunal ought to have been filed on or before 3-11-2002. Instead, the appeal was filed on 12-7-2004 resulting in a delay of 617 days.
It is submitted that after receiving the order rejecting the registration under section 12A, the assessee filed a review petition before the CIT. The Assessee explained in his letter dated 20-9-2002 that the representative met with an accident and hence could not be represented on the hearing date and sought for review of the order passed on 4-9-2002. This review petition was rejected on 25-10-2002. Thereafter, the Assessee filed a fresh application for registration under section 12A on 9-12-2002. The authorities took this on record, called for various details and after perusing the papers filed, an order was passed on 19-5-2003 by the CIT. In this order, the CIT observed that the assessee had filed the application belatedly by 12 years, 7 months and 18 days and that the delay was not explained with sufficient reasons. In any case, no opportunity was afforded to the assessee to explain the delay. Hereas, the assessee had applied for registration as early as 4-11-1993. The CIT in his order allowed registration under section 12A with effect from 1-4-1997 and not from the date of inception as prayed for in the petition. The assessee has filed a review petition against this order of the CIT on 18-6-2004. In the meantime, the assessee received the order of the CIT(A) on 22-6-2004 for the assessment years 1993-94, 1995-96 and 1997-98.
The common order of the CIT(A) referred to the Advocate in Madras for preparation and filing of appeal before the Appellate Tribunal. The counsel then called for all the papers relating to the registration of the trust since it was explained by the counsel that the appeals against the addition in assessment and the registration of the trust were inter-linked and have to be viewed in unison. Further on a perusal of the papers, the counsel also pointed out that the Assessee had been pursuing the wrong remedy by way of filing review petition and fresh application before the authorities. The counsel pointed out that section 253(1)(c) provided for an appeal to the Tribunal against the order of the CIT rejecting the application for registration under section 12AA, which was not noticed earlier. Immediately thereafter, steps were taken to prepare and file the appeal before the Tribunal. It was also advised by the counsel that the question of registration and the assessment for the respective years have to be considered together. Hence, the appeals against the order of the CIT(A) from the assessment were also prepared and filed at the same time, even though the Assessee had time till 6-9-2004 to file the appeals before the Tribunal. The petitioner submits that the delay was neither wilful nor wanton but due to circumstances beyond the control of the Assessee. If the delay is not condoned and the appeal disposed of on merits, the assessee would be put to irreparable hardship and injury.
It is, therefore, prayed that the Hon'ble Tribunal may be pleased to condone the delay of 617 days in filing the appeal, admit the same, dispose it of on merits and thus render justice."
24. I have also gone through the assessee's paper book and found at page 3, that there is a letter from the office of the CIT, Madurai, dated 1-7-1998 vide NOC No. 46A/110/93-94 addressed to the Secretary of the assessee-society.
This letter is reproduced herein below:-
"Sub: Application for registration under section 12A and recognition under section 80G of the Income-tax Act - your own - reg.
Ref:(i) This office letter dated 20-7-1994.
(ii) Your letter dated nil filed in this office on 6-2-1998.
Please refer to the above.
2. Regarding the points raised in paras 2 and 5 of this office letter dated 10-7-1994, you have not filed any reply.
3. In your letter cited, you have stated that a copy of order of registration with the Ministry of Home Affairs for receipt of foreign contributions under MCRA, 1976 has been enclosed. No such copy has been received in this office. Please send a copy of the same.
4. Your request for registration under section 12A and recognition under section 80G of the Income-tax Act will be considered on receipt of reply from your end."
25. It is seen from the above letter that the assessee filed application for registration under section 12A and under section 80G of the Act and the Income-tax Department has asked for certain clarifications vide letter dated 20-7-1994 and the Assessee filed another letter in the office of CIT, Madurai on 6-2-1998 and in reference to Assessee's letter, the CIT has asked for clarification vide above letter. Subsequently, also the CIT, Madurai, asked for certain clarification with regard to grant of registration vide letter No. 464/110/93-94 dated 10-8-1999 which reads as under:-
"Sub: Registration under section 12AA and recognition under section 80G of the Income-tax Act - reg.
Ref:(i) This office letter dated 20-7-1994.
(ii) Trust's reply received on 6-2-1998. Please refer to the above.
2. There are certain clarifications to be sought regarding the 75 per cent of application of funds as required under rule II(1)(a) relating to assessment year 1994-95. You are requested to bring all the books of account and other documents for verification. For this purpose, your case is posted for hearing on 25-8-1999."
26. The assessee vide letter dated 16-11-2000 filed the details of income and expenditure which is evident from the letter NOC No. 464/10/93-94 dated 18-7-2001. Again the CIT vide letter dated 18-7-2001 and dated 12-8-2002 asked the assessee to file the return of income for the assessment years 1993-94 to 2000-01 and asked for explanation of excess of income over expenditure. The assessee did not responded to any of the above letters. The CIT, Madurai finally fixed the hearing on 16-8-2002 vide letter dated 12-8-2002 to explain why the application for registration be rejected in given circumstances. However, on 13-8-2002, a letter from assessee's auditor was received requesting for adjournment of hearing as the authorized representative has met with an accident on 7-8-2002. The case was reposted on 3-9-2002 for hearing vide letter served on the Assessee on 19-8-2002. The CIT, Madurai rejected the application for grant of registration under sections 12A and 80G of the Income-tax Act on 4-9-2002 as the information was not forthcoming in spite of numerous opportunities given to the Assessee from very beginning from submission of application on 4-11-1993 till the last hearing on 16-8-2002. The reasons stated by the CIT, Madurai for rejecting the grant of registration in his order read as under:-
"The above society filed Form Nos. 10A and 10G on 4-11-1993 seeking registration under section 12A(a) and grant of recognition under section 80G of the Income-tax Act. The society was formed on 20-1-1989. A report on the assessee's applications for registration under section 12A(a) and grant of exemption under section 80G was called for from the Assessing Officer. After obtaining the relevant receipts and payment accounts for the assessment year 1990-91 onwards, it was reported by the Assessing Officer that there was excess income over expenditure in respect of the assessment years shown below:-
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Asst. Year Income (Rs.) Expenditure (Rs.) Excess (Rs.)
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1993-94 2,04,049 96,331 1,07,781
1995-96 5,94,833 2,92,224 3,02,609
1997-98 12,36,236 5,84,307 6,51,929
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It was also reported that the society had not filed any returns of income in time. As this was in violation of the provisions of section 11 of the Income-tax Act, 1961, a notice was issued to the society on 12-8-2002 to explain why the request for registration of the society under section 12A of the Act cannot be rejected. The society was allowed time till 16-8-2002 to file its objections in this regard. On 13-8-2002 a letter was received from Rodriguez & Co., Chartered Accountants, Madurai requesting postponement of the hearing to another date, as the authorized representative of the society met with an accident on 7-8-2002. The case was therefore reposted for hearing on 3-9-2002 and this letter was served on the society on 19-8-2002. However, on the date of hearing there was no response.
2. In spite of the opportunities given to the society, the required information has not been furnished. In the above circumstances I have no other option except to hold that the facts set out above are not substantiated and reject the applicant's request for registration under section 12A(a) and the recognition under section 80G of the Act. Accordingly, the applications are rejected."
27. Against the above order, the Assessee filed an appeal before the Tribunal on 12-7-2004, though the Assessee was required to file the appeal on or before 3-11-2002 and there was a delay of 617 days in filing this appeal in ITA No. 1757/Mds./2004. I have gone through the reasons stated by the Assessee in its condonation petition, wherein it is stated that an appeal was prepared by an Advocate in Chennai against the common order of CIT(A) as regards the quantum appeals and the Counsel pointed out that the assessee had been perusing wrong remedy by way of Review petitions and fresh application before the authorities and he advised to file an appeal before Tribunal under section 253(1)(c) against the order of CIT, Madurai, rejecting the application for grant of registration under section 12A of the Act as which was not noticed earlier and in view of this reason, the Assessee's appeal was delayed by 617 days.
28. The Assessee also contended that there is reasonable cause in filing the appeal belatedly and the delay was neither wilful nor wanton but due to the circumstance beyond the control of the assessee. In this connection, I have gathered from records that the Assessee was represented by a firm of Auditors, viz., Rodriguez & Co., Chartered Accountants, Madurai, which is very much evident from the order of CIT, Madurai dated 4-9-2002 (the impugned order). The assessee has filed the appeals against the order of rejection of registration only in the eventuality of creation of huge demand through the assessment orders and subsequently, the appeals were dismissed and demands were confirmed by the CIT(A). There is a delay in filing appeal of about 617 days. They only reason stated by the assessee is that the wrong remedies were perused by the Assessee by filing review petitions and fresh applications. Now, I am examining whether the reasons stated by the assessee in the condonation petition are sufficient for condonation for delay or not and further there exist sufficient cause for not presenting this appeal within the period allowed under statute. The assessee must show that it was diligent all along in taking appropriate steps and the delay was caused notwithstanding its due diligence. If it appears to be guilty of latches or negligence and does not take appropriate steps to peruse its remedy till about the close of the period prescribed for filing of appeal, it must be prepared to have its remedy barred without expecting condonation. Still it is for the party concerned to explain the reasons for delay and it is not the function of concerned authorities to find the cause for delay. The Appellate authority has to examine whether the sufficient cause has been shown by the party for condoning the delay and whether such cause is acceptable or not. In the present case in hand the assessee could not show any reasons for not filing of appeal within due time allowed under the provisions of the Act. In this case the order rejecting the application for grant of registration under sections 12A and 80G was passed on 4-9-2002 and appeal was filed on 12-7-2004 when Assessing Officer raised huge demand against the assessee and appeals were rejected by the CIT(A). In between this period, the assessee has not explained the reason for delay. However, the assessee was pursuing the remedies before the same authority by filing review petitions and fresh application, although it was represented by well qualified firm of Chartered Accountants. The assessee herein wants to take the benefits of its own wrong doings which is evident from the above narrated facts in detail. The assessee, in the present circumstances, appears to be guilty of latches and negligence and it does not take appropriate action for filing of appeal within the prescribed time. Even the substantial justice should not be defeated by technicalities and liberal approach has to be adopted but that does not mean that any plea without any possible or acceptable basis and even without hearing, semblance or rationality has to be accepted and delay has to be condoned. That shall be against the very spirit of law. The time prescribed for filing of appeal will become meaningless in such an event. Merely because substantial justice to be done, we cannot ignore law of limitation and that also when there is no sufficient and reasonable cause.
29. It is abundantly clear and an admitted fact that the Department has properly attended the application made by the assessee for registration under section 12A, vide letter dated 20-7-1994, 1-7-1998, 10-8-1999, 18-7-2001, 12-8-2002 & 12-3-2002 (these letters are reproduced in above para or cited) but the assessee has not cooperated with Department and now the assessee cannot take the benefit of its own mistake and it appears that it is guilty of latches and negligence and it has not taken appropriate steps in pursuing the registration application. The Department, in view of the above cited letters has not kept the assessee's application for grant of registration dated 4-11-1993 unattended. Hence, the assessee cannot take shelter under section 12AA(2). In view of the facts and reasons narrated above, I am of the view that the delay of 617 days in filing appeal without sufficient cause cannot be condoned. Moreover, in the absence of sufficient cause, delay cannot be condoned merely on equitable grounds. A close scrutiny of the petition for condonation of delay reveals that no proper reason was mentioned therein or as to why the appeal could not be filed within the statutory period from the date of service of the order of the CIT merely on the reason that the assessee was pursuing wrong remedy. It is the primary duty of the assessee to establish sufficient cause for not filing the appeal in time. The reasons advanced by the assessee are very vague and cannot be said that proper advice was not readily available. I fail to understand why the assessee could not file its appeal in time.
The Tribunal has no power to extend the period of limitation on equitable grounds and it is well established principle that the Court helps the vigilant and not indolent and in the case before us, the assessee has not been vigilant and the Tribunal cannot find ways and means to give relief and in this case the delay is inordinate and calls for more cautious approach and there is no question of exercising liberal approach with the intention of advancing justice. Accordingly, the delay is not condoned and the appeal cannot be admitted. However, without prejudice to the above findings, even on merit, the assessee has no case. As per conditions stipulated in section 12A(b) of the Income-tax Act, the assessee is bound to file a return of income for the relevant assessment year along with audit report in the prescribed form duly signed and verified by the Chartered Accountant when the total income of the Trust computed under the Act without giving effect to the provisions of sections 11 & 12 exceeds Rs. 25,000 in any previous year.
30. In the present case, as seen from records, the income of the assessee for the assessment years 1993-94, 1995-96 and 1997-98 is in excess of Rs. 25,000. Further, the CIT has every power to enquire into the documents and information for the purpose of verifying the genuineness of the activities of the Trust and he is also empowered to make enquiries which are necessary for this purpose. Only after satisfying the genuineness of the activities of the Trust, the CIT(A) can grant registration. This can be verified only by scrutinizing the records. The assessee, by merely making an application for registration under section 12A and maintaining the accounts does not become entitled for getting the registration. The registration is not automatic. The assessee is required to fully satisfy the authorities with all the informations required by them. In the present case, the assessee has failed to furnish the required information called for by the CIT as is evident from the order of CIT, Madurai. Therefore, on this count also, the assessee becomes disentitled for registration under section 12A.
31. Now coming to ITA No. 1758/Mds./2004, the facts are exactly identical as in ITA No. 1757/Mds./2004 as decided above except that registration under section 12AA of the Act was granted in terms of fresh application filed by the assessee on 29-11-2002 retrospectively with effect from 1-4-1997 on the basis of amended Memorandum of Association and Bye Laws registered as Society No. 80 of 1989 with the Registrar of Societies/Madurai on 11-4-1999 under the Tamilnadu Societies Registration Act, 1975 and amendments to the Memorandum of Association/Bye Law Registered No. 5/2002 on 13-11-2002 with the Registrar of Societies, Madurai South as the registration was not granted with effect from 11-4-1989 as sought by the assessee.
32. This registration was granted vide Order NOC No. 464/114/2002-03/CIT-I dated 19-5-2003 by CIT, Madurai. The assessee preferred appeal against this order on 12-7-2004 and there was a delay of 359 days in filing of this appeal. The facts and circumstances are exactly identical. Hence, in this appeal I am taking similar view. Accordingly, the delay in this appeal is not condoned and appeal is not admitted. Here also, without prejudice to the above findings, the assessee has no case on merit. The assessee applied for registration under section 12A on 29-11-2002 with amended bye law of the association dated 13-11-2002. The Registration was granted with effect from 1-4-1997 instead of 1-4-1993. The CIT has noted in the Registration Certificate that there was a delay of 12 years, 7 months and 18 days in making the application for registration under section 12A of the Act. There was no sufficient cause for this inordinate delay in filing the application under section 12A of the Act. The CIT gave enough opportunity to explain the delay vide letter dated 9-12-2002. However, the assessee has not made use of this opportunity. The application made on 29-11-2002 for registration was independent application. The CIT has considered only this application on merit and granted registration with effect from 1-4-1997. The earlier application dated 4-11-1993 cannot be mixed with this application. Hence, the CIT(A) is justified in granting registration with effect from 1-4-1997 and the abnormal delay of 12 years, 7 months and 18 days was not satisfactorily explained. On this account itself, the appeal deserves to be dismissed.
33. As far as the argument regarding applicability of section 12AA sub-section (2) of the Act, I am of the opinion that this section has no application as I am not inclined to condone the delay and admit the appeal and this section comes to play only after admitting the appeals.
34. Now coming to ITA Nos. 1759,1760 & 1761 of Madras of 2004, wherein the assessee has raised primarily issue with regard to assessment under section 144 of the Income-tax Act, without hearing the assessee and not granting exemption under section 11, though the issue regarding registration of the Society under section 12A was pending before the CIT, Madurai. As the assessee claimed exemption under section 11 of the Act and the primarily the registration of society was rejected by the CIT, and the Appeal has not been admitted as regards grant of registration under section 12A of the Act as there was delay which has not been explained with sufficient and reasonable cause and accordingly not condoned. Hence, the assessee is not entitled for exemption under section 11 of the Act and accordingly these appeals are dismissed without going into the merits of the case.
35. In the result, all the five appeals of the assessee are dismissed.
ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961
Since there is a difference of opinion, the following questions are framed and referred to Hon'ble President for nominating Third Member.
"(1) Whether in the facts and circumstances of the case, the registration under section 12A is to be granted with effect from 1-4-1993 instead of 1-4-1997?
(2) Whether in the facts and circumstances, there was reasonable cause in not filing the appeal in ITA Nos. 1757 and 1758 (Mds.)/2004 in time? And whether the cause of justice requires a liberal view should be taken?
(3) Whether the Commissioner has exceeded his jurisdiction in making an investigation beyond the condition prescribed under section 12A."
We direct the registry to place the appeal file before the Hon'ble President for nominating Third Member.
THIRD MEMBER ORDER
Per Shri M.K. Chaturvedi, Vice President. - These appeals came before me as Third Member to express my opinion on the following three questions:
"1. Whether in the facts and circumstances of the case, the registration under section 12A is to be granted with effect from 1-4-1993 instead of 1-4-1997?
2. Whether in the facts and circumstances, there was reasonable cause in not filing the appeal in ITA Nos. 1757 and 1758/Mds./2004 in time? And whether the cause of justice requires a liberal view should be taken?
3. Whether the Commissioner has exceeded his jurisdiction in making an investigation beyond the condition prescribed under section 12A?"
2. Question No. 2 relates to the condonation of delay. As such it is to be decided first.
3. I have heard the rival submissions in the light of material placed before me and precedents relied upon. Assessee was stated to be prosecuting bona fide remedy though under a wrong belief. As such delay was caused in filing the appeals. This according to learned counsel constitutes a sufficient cause for condonation of delay. In explaining the factual details it was submitted that an application for registration under section 12A of the Income-tax Act, 1961 (hereinafter called as 'the Act') was submitted on 4-11-1993. It was rejected on 4-9-2002. Against the said rejection assessee filed a review petition on 20-9-2002 before the Commissioner of Income-tax. This review petition was rejected on 25-10-2002. Thereafter the assessee filed another application on 9-12-2002. CIT granted registration under section 12A with effect from 1-4-1997. Assessee was aggrieved against the grant of registration with effect from 1-4-1997. It was alleged that since the application was filed on 4-11-1993 registration should be granted with effect from 1-4-1997 (sic). Petition for the review of the order was filed on 18-6-2004 before the CIT. Meanwhile, Assessee received order of the first appellate authority on 26-6-2004 for the assessment years 1993-94, 1995-96 and 1997-98. During the course of the preparation of appeals assessee was advised that the proper remedy against the refusal of registration was appeal before the Tribunal and not review petition before the CIT. Accordingly, assessee did prefer appeal before the Tribunal. It was submitted that on this factual backdrop delay was caused of 617 days in filing appeal before Tribunal in ITA No. 1757/Mds./04 and 359 days in filing the appeal in ITA No. 1758/Mds./04. Delay was unintentional and resulted due to wrong advice.
4. Reliance was placed on the decision of the jurisdictional High Court rendered in the case of CIT v. K.S.P. Shanmugavel Nadar [1985] 153 ITR 596(Mad.). In this case assessee filed a petition for condoning the delay on the ground that he had been pro-secuting other remedies and hence the time taken bona fide for prosecuting other remedies should be taken into consideration for condoning the delay. Hon'ble High Court has held that there existed a reasonable cause for filing the belated appeal.
5. In the case of Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 Hon'ble Supreme Court has held that the Legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression "sufficient cause" in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice - that being the life-purpose of the existence of the institution of courts. A justifiably liberal approach has to be adopted on principle. "Every day's delay must be explained" does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay.
6. It is pertinent to note that an order passed by the CIT under section 12AA granting or refusing registration to the trust was made appealable under section 253(1)(c) by the Finance Act, 1999 w.e.f. 1-6-1999. Prior to that right to appeal was not available in this regard. The delay was caused due to ignorance of law. The dictum of common law ignorantia legis non excusat, prescribes that ignorance of law is no excuse. Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 118 ITR 326,339 has held: "... it must be rememberd that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement: there is no such maxim known to the law." Over a hundred and thirty years ago, Maula, J. pointed out in Martindale v. Falkner (1846) 2 CB 706: "There is no presumption in this country that every person knows the law: it would be contrary to commons sense and reason it if were so." Scrutton L.J. also once said: "It is impossible to know all the statutory law, and not very possible to know all the common law." But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlam [1937] AC 473: "...the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application".
7. It is, therefore, not possible to presume, that assessee had full knowledge as to the remedy available. Various applications made before the CIT proves this fact. Assessee was prosecuting remedies under a wrong belief. This as per the decision of the jurisdictional High Court in the case of CIT v. K.S.P. Shanmughavel Nadar [1985] 153 ITR 596 (Mad.) constitutes a sufficient cause for filing the belated appeal. In view of this, there existed a reasonable cause in filing the belated appeal. I concur with the decision of the learned Judicial Member that in such circumstances to meet the ends of justice delay should be condoned.
8. Adverting now to the question No. 1 I find that the assessee-trust was created on 20-1-1989. As per the prescription of section 12A of the Act assessee was required to make application before 19-1-1990. Assessee did make application on 4-11-1993. This application was found to be belated. As such rejected by the CIT.
9. It was contended before me that the case of the assessee comes within the ken of proviso to section 12A(a)(ii). Relevant portion of the section is reproduced here as under:
"12A. The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:-
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA:
Provided that where an application for registration of the trust or institution is made after the expiry of the period of aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,-
(i) from the date of the creation of the trust or the establishment of the institution the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;
(ii) from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied,"
The aforesaid proviso to section 12A was substituted by the Finance (No. 2) Act, 1991 with effect from 1-10-1991. This provides that where an application for registration of the trust or institution is made belatedly, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the date of the creation of the trust or the establishment of the institution if the Commissioner, for reasons to be recorded in writing, is satisfied that the person in receipt of the income was prevented from making the application within time for sufficient reasons. However, if CIT is not so satisfied about the reasons for filing the belated application, registration shall be granted from the first day of the financial year in which the application is made.
10. In the present case the CIT was not satisfied with the reasons adduced by the assessee for making the belated application. As such the case of the assessee falls within the ambit of section 12A(a)(ii) of the Act. Ex consequent it was obligatory on the part of the CIT to grant registration from 1-4-1993 whereas the CIT granted registration w.e.f. 1-4-1997. In my opinion, the order of the CIT is not in consonance with the tenet of law.
11. The application for registration was pending before the Chief Commissioner since 4-11-1993. On 1-6-1999 it stood transferred to CIT by virtue of clause (1A) of section 12AA of the Act. Section (1A) was inserted by Finance Act, 1999 w.e.f. 1-6-1999. This reads as under:
"(1A) All applications, pending before the Chief Commissioner of on which no order has been passed under clause (b) of subsection (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day."
12. As per the mandate of section 12AA(2) every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) of section 12A. This was not done. CIT decided the issue of registration on 4-9-2002. As such it is beyond time. I have perused the reasonings adduced by the learned Judicial Member in this regard. In my opinion, he took a correct view in the matter. I agree with his decision on this count.
13. Last issue relates to the question whether CIT exceeded his jurisdiction in making an investigation beyond the condition prescribed under section 12A.
14. I have heard the rival submissions. Hon'ble jurisdictional High Court in the case of New Life In Christ Evangelistic Association v. CIT [2000] 246 ITR 532 (Mad.) has held that enquiry into the objects of institution cannot be made under section 12A. Delhi Bench of the Tribunal in the case of Asstt. CIT v. Peare Lal Sharma Memorial Trust Society [2001] 77 ITD 50 has held that at the stage of filing an application for registration under section 12A CIT is not supposed to examine the application of income aspect. All that he may examine is whether the application is made in accordance with the requirements of section 12A read with rule 17A and whether Form No. 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this stage, it is not a sine qua non to examine the application aspect of income. No contrary decision was brought before me. In view of the aforesaid precedents, I am inclined to agree with the view taken by the learned Judicial Member on this aspect.
15. The matter will now go back to the regular Bench for deciding the appeal in accordance with the majority.
ORDER
Per Shri N.R.S. Ganesan, Judicial Member. - On a difference of opinion, the matter was referred to the Hon'ble Vice President as a Third Member. The Hon'ble Vice President agreed with the view expressed by the Judicial Member for all the questions. The appeal is posted today for passing conformity order as per the majority opinion.
2. We heard the learned counsel for the assessee and the learned Departmental Representative (D.R.). In conformity with the majority opinion, the delay of 617 days in ITA No. 1757 (Mds.)/ 2004 and 359 days in ITA No. 1758(Mds.)/2004 are condoned and the appeals are admitted.
3. In conformity with the majority opinion, we set aside the order of the Commissioner of Income Tax dated 4-9-2002 and 19-5-2003 and direct the Commissioner to grant registration under section 12A(a) and under section 80G of the Income Tax Act with effect from 1-4-1993.
4. In the result ITA Nos. 1757 and 1758(Mds.)/2004 are allowed. However, there will be no order as to costs.
5. Now coming to ITA Nos. 1759, 1760 and 1761 (Mds.)/2004, in conformity with the majority opinion, we set aside the orders of the lower authorities and remand back the issue to the file of the Assessing Officer. The Assessing Officer shall examine the whole issue afresh and find out whether the assessee is entitled to exemption under sections 11,12 and 80G in respect of income received by them as a society registered under sections 12A and 80G of the Income-tax Act.
6. In the result, ITA Nos. 1759, 1760 and 1761(Mds.)/2004 stand allowed. However, there will be no order as to costs.
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