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2013 (1) TMI 157 - HC - Income TaxDelay in filing registration under Section 12A/ 12AA and 80G - whether ITAT erred in condoning delay - order passed by the DGIT (Exemption) u/s 263 set aside by ITAT - A.K. Sikri, its erstwhile treasurer responsible for the forgery of the certificate u/s 80G - Held that - The evidence in the form of statement of A.K. Sikri, complaint to the police authorities (both by the assessee and also by the income tax department), investigation by the police and their reports, proceedings before the criminal courts, the bail application of Sikri are all evidence to show the complicity or involvement of Sikri in the alleged forgery or irregularities in the issue of the certificates of registration/ approval under sections 12A and 80G. The evidence contained Court proceedings and were complementary to each other and cannot be brushed aside as the DIT (Exemptions) has done, as having no evidentiary value. The Tribunal, therefore, held that the DIT (Exemptions) was not justified in refusing to take cognizance of those vital documents in coming to the conclusion that the assessee society or its trustees/ governing body members connived or colluded with Sikri. Order of the Tribunal states that the assessee society took the action immediately on receipt of the complaint from M. P. Mansinghka Trust of Mumbai referring to the confession of Sikri in the meeting of the governing body owning up responsibility for having misled the assessee society by representing that the necessary application for registration were made in time, it has also referred to the action taken by the assessee society against Sikri when it found that Sikri was not taking adequate steps to remedy the situation, police complaints filed by the assessee society & income tax authorities against Sikri which indicated that they also viewed Sikri to be responsible for the mis-representation, fake certificates of registration, etc. Moreover, the Tribunal has taken note of the fact that the Metropolitan Magistrate, acting on the police complaint, remanded Sikri to custody and also referred to the fact that in the bail application, Sikri had again owned up responsibility for the fake certificates of registration. Thus Tribunal came to hold the view that it was because of the irregularities, illegalities and mis-representations of Sikri that the assessee society was led to believe that appropriate applications were already filed with the income tax authorities for registration. The assessee society was thus under the belief, though mistaken but honest, that there was no delay and once it came to know on 06.12.2005 about the irregularities on a complaint from M. P. Mansinghka Trust of Mumbai and on further enquiry conducted on 14.12.2005 by the governing body, it hastened to take remedial action by filing applications for registration both under section 12A and 80G, which were followed up by another set of applications filed directly with the DIT (Exemptions) on 21.12.2005; these applications were obviously delayed and the condonation application was filed on 14.03.2006 narrating the events that led to the delay. Thus the Tribunal has, in making its decision, kept in mind the principles adumbrated in Esthuri Aswathiah v. CIT 1967 (4) TMI 14 - SUPREME COURT that the Tribunal cannot make arbitrary decisions cannot found its judgment on conjectures, surmises or speculation. Between the claims of the public revenue and of the taxpayers, the Tribunal must maintain a judicial balance. Its order cannot, therefore, be branded as perverse or unreasonable or irrational - In Ram Nath Sao @ Ram Nath Sahu and Ors Vs. Gobardhan Sao and Ors., (2002 (2) TMI 1280 - SUPREME COURT) it was observed that acceptance of the explanation furnished should be the rule and refusal, an exception, more so when no negligence or inaction or want of bona fides can be imputed to the defaulting party. In the present case, the Tribunal has found that the assessee society has taken prompt remedial action and put Sikri on the dock and he also admitted his fault, though he tried to shift the blame to his employee whose whereabouts were never known. Even in his bail application he had confessed to his role in the alleged irregularities and illegalities. There has been no want of bonafides on the part of the assessee, nor did it fail to take immediate action once it was apprised of the irregularities in its affairs by M. P. Mansinghka Trust of Mumbai. In these circumstances, the Tribunal committed no error in condoning the delay - in favour of the assessee.
Issues Involved:
1. Whether the Income Tax Appellate Tribunal has erred in condoning delay in filing of the application for registration under Section 12A/12AA of the Income Tax Act, 1961? 2. Whether the order passed by the Tribunal is perverse? 3. Whether the Income Tax Appellate Tribunal was right in setting aside the order passed by the Director General of the Income Tax (Exemption) under Section 263 of the Income Tax Act, 1961? Issue-Wise Analysis: 1. Condonation of Delay in Filing Application for Registration under Section 12A/12AA: The assessee, a society incorporated on 10.05.1993, filed an application for registration under section 12A(a) of the Income Tax Act on 19.12.2005, accompanied by audited balance sheets and accounts for the financial years ending on 31.03.2004 and 31.03.2005. The application for condonation of delay was filed on 14.03.2006. The DIT (Exemptions) found irregularities in the receipts issued by the assessee, including forged certificates under section 80G. The assessee attributed the irregularities to its erstwhile treasurer, A.K. Sikri, and took remedial actions, including filing police complaints against him. The DIT (Exemptions) refused to grant registration, citing the lack of genuineness in the assessee's activities and the involvement of other members in the forgery. The Tribunal, however, found that the trustees or governing body members were not involved in the illegality committed by A.K. Sikri and that the trust itself was a victim of his mishandling. The Tribunal held that there was sufficient cause for the delay and directed the DIT (Exemptions) to grant registration from inception. 2. Perverse Order by the Tribunal: The Tribunal's order was challenged on the grounds of being perverse. The Tribunal had examined the facts and submissions in detail and concluded that the trust and the trustees were independent entities, and the acts of the trustee cannot be attributed to the trust unless there was collusion. The Tribunal found no evidence of involvement of other members in the forgery and held that the trust was a victim of A.K. Sikri's actions. The Tribunal also noted that the income tax authorities had implicated only A.K. Sikri in their complaint. The Tribunal's findings were based on a thorough examination of the evidence, including police reports, court proceedings, and statements by A.K. Sikri. The High Court held that the Tribunal had acted judicially and its order could not be branded as perverse or unreasonable. 3. Setting Aside the Order under Section 263: The Tribunal set aside the order passed by the Director General of Income Tax (Exemption) under section 263, which had refused to grant registration to the assessee. The Tribunal held that the DIT (Exemptions) had failed to establish that the governing body members or other trustees were acting in collusion with A.K. Sikri. The Tribunal found that the trust's activities were genuine and that the delay in filing the application for registration was due to the irregularities committed by A.K. Sikri. The High Court upheld the Tribunal's decision, stating that the Tribunal had valid materials before it to conclude that the assessee was prevented by sufficient cause from applying for registration in time. Conclusion: The High Court dismissed the appeals of the Revenue, holding that the Tribunal had acted judicially and its order was neither perverse nor unreasonable. The Tribunal's decision to condone the delay in filing the application for registration under section 12A/12AA and to set aside the order under section 263 was upheld. The substantial questions of law were answered in favor of the assessee and against the Revenue.
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