2016 (2) TMI 1277 - AT - Income Tax

Condonation of delay - registration 12AA denied - delay of 1868 days in filing the appeal - HELD THAT - If we apply the test of a prudent litigant, it cannot be held that once the applicant came to know about the dismissal of the application for registration it will remain silent for a long period of more than 5 years. If we accept the contention of the appellant on the basis of the factually incorrect affidavit, an unsettling situation will emerge and the proceedings will be taken casually by the statutory bodies. The legislative mandate in stipulating a limitation to file an appeal within the period of limitation and the provision for condonation of delay cannot be permitted to be mis-used by statutory agencies like the appellant before us. The appellant being a statutory body is required to be more careful and prudent in pursuing a legal remedy. Non-filing of the appeal in time before the Tribunal shows total lack of coordination and sluggishness by the officials of the appellant. We deprecate the same. Assessee is required to explain the delay in filing the appeal. The assessee has failed to satisfy the conscious of this Tribunal that the assessee was bonafidely pursuing its legal remedies, and not filing the appeal in time was beyond its control. There is a huge delay of 1868 days in filing the appeal before us. We deem it inappropriate to condone the delay. Accordingly, we hereby dismiss the application for condonation of delay and accordingly the appeal preferred by the appellant is also dismissed.

Summary

Issues:
1. Denial of registration under section 12AA of the Income Tax Act, 1961.
2. Consideration of statutory objects for which the Appellant Trust functions.
3. Condonation of delay in filing application for registration under section 12AA of the Income Tax Act, 1961.

Analysis:

Issue 1: Denial of registration under section 12AA
The appellant, an improvement trust, sought registration under section 12A of the IT Act, 1961. However, the AO disallowed the claim under section 10(20) of the Act, stating that the trust did not fall within the scope of the exemption. The CIT (A) allowed the appeal, considering the trust as a local authority. The Tribunal, in a separate judgment concerning the Rajasthan Housing Board, disagreed with the CIT (A)'s decision, leading to the restoration of the appeals back to the CIT (A) for reconsideration. Subsequently, the High Court admitted the appeal. The CIT later dismissed the trust's application for registration under section 12AA, citing a delay in seeking registration and lack of charitable nature. The Tribunal, after hearing both parties, found the trust's explanation for the delay lacking and dismissed the appeal, emphasizing the need for diligence and adherence to legal timelines, especially for a statutory body.

Issue 2: Consideration of statutory objects
The CIT's denial of registration was based on the perceived non-charitable nature of the trust's activities and its alleged profit orientation. The trust argued that its objects were charitable and the denial was unjustified. The Tribunal, however, focused on the delay in seeking registration rather than the nature of the trust's activities, ultimately dismissing the appeal due to the significant delay of 1868 days in filing the appeal, deeming it inappropriate to condone the delay. The Tribunal highlighted the trust's failure to adequately explain the delay and criticized its lack of coordination and sluggishness in pursuing legal remedies, emphasizing the need for statutory bodies to act diligently in legal matters.

Issue 3: Condonation of delay
The trust sought condonation of the delay in filing the appeal, attributing it to administrative changes and vacant positions within the organization. The Tribunal, after considering the arguments from both sides, found the trust's explanation for the delay unconvincing. It noted that the trust had legal advisors and ample opportunities to pursue legal remedies promptly. The Tribunal emphasized that the trust's decision not to file the appeal in time was a conscious choice rather than a result of circumstances beyond its control. Consequently, the Tribunal dismissed the application for condonation of delay and the appeal itself, highlighting the importance of adhering to legal timelines and the need for statutory bodies to act prudently and diligently in legal matters.

In conclusion, the Tribunal upheld the denial of registration under section 12AA, emphasizing the significance of timely legal actions and diligent pursuit of legal remedies, especially for statutory bodies.