IN THE ITAT CHANDIGARH BENCH ‘B’
Punjab Heritage & Tourism Promotion Board
versus
Income-tax Officer, Ward 4(3), Chandigarh
IT Appeal Nos. 257, 258, 1094 & 1095 (Chd.) of 2011
[Assessment years 2007-08 & 2008-09]
August 22, 2012
ORDER
ITA No. 257/Chd/2011
1. This appeal filed by the appellant has been directed against the order dated 30.6.2008/2.7.2008 passed by the ld. CIT-II u/s 250(6) of the Act (in short ‘the Act’).
2. In this appeal the assessee has raised following grounds:
“1. That on the facts and in the circumstances of the case and in law, ld. CIT in F No. CIT-II/CHG/Tech/2008-09/1361 dated 2.7.2008 has erred in passing that order in contravention of the provisions of section 12AA of the Income-tax Act, 1961 to the extent of allowing registration w.e.f A.Y 2009-10 instead of A.Y 2007-08.
2. That on the facts and circumstances of the case and the propositions of law, ld. CIT is not justified in granting registration u/s 12AA of the Act to the appellant Board w.e.f. A.Y 2009-10 instead of A.Y 2007-08.
3. That on the facts and circumstances of the case and the propositions of law, ld. CIT was not justified in granting registration w.e.f. A.Y 2009-10 though no order refusing registration was passed on application dated 18.12.2006 till limitation date of 30.6.2007. The ld. CIT has erred in ignoring the fact that the proceedings which continued beyond prescribed period of 6 months allow deemed registration to the assessee.”
ITA No. 258/CHD/2011
3. In this appeal the assessee has raised the following grounds of appeal:
“1. That on the facts and in the circumstances of the case and in law, the order dated 4.12.2009 passed by ld. CIT is bad in law and needs to be quashed.
2. That on the facts and circumstances of the case and the propositions of law, the grant of registration by ld. CIT in his original order w.e.f A.Y 2009-10 instead of A.Y 2007-08 is a mistake apparent from record and the respondent has erred in not allowing the application moved by the appellant u/s 154 of the Act.
3. That on the facts and circumstances of the case and the propositions of law, ld. CIT has erred in not allowing the application of the appellant, moved u/s 154 of the Act, wherein the appellant requested for amendment of original order for grant of registration w.e.f. A.Y 2007-08 as against originally granted w.e.f. A.Y 2009-10.
4. That on the facts and circumstances of the case and the propositions of law, ld. CIT has erred in not issuing any show cause for rejection of application of appellant moved u/s 154 of the Act and thereby passing an order without allowing the appellant an opportunity to be heard and this action is against the principles of natural justice.
5. That on the facts and circumstances of the case and the propositions of law, ld. CIT has erred in not treating the application of the appellant filed on 1.12.2009 u/s 154 of the Act, as allowed as no order on that application was served on the appellant till 30.6.2010 and hence the application has to be treated as deemed allowed.”
ITA No. 1094/CHD/2011 for the A.Y 2007-08
4. In this appeal the assessee has raised the following grounds:
“1. That the ld. CIT(A) has erred in law as well as on facts of the case in upholding the addition to the tune of Rs. 1,54,47,570.00 on account of interest on FDR and disallowance of expenditure incurred on 400th year Martyrdom which is illegal, arbitrary and unjustified.
2. That the Assessing Officer has erred in law by not allowing deduction u/s 11 of the Income-tax Act, 1961 on account of interest earned on FDR to the tune of Rs. 1,49,01,570.00. The appellant has applied for Registration u/s 12AA on 18.12.2006 the order for granting/refusing registration should have been passed on/before 30.6.2007. In the absence of any such orders passed within the stipulated time, the appellant will be deemed to be registered u/s 12AA with effect from A.Y 2007-08 and was eligible for exemption u/s 11 and the interest was not taxable.
3. That the addition made on account of disallowance of 400th Year Martyrdom Expenses to the tune of Rs. 5,46,000.00 is illegal, arbitrary and unjustified.”
ITA No. 1095/CHD/2011 for the A.Y 2008-09
5. In this appeal the assessee has raised the following grounds:
“1. That the ld. CIT(A) has erred in law as well as on facts of the case in upholding the addition to the tune of Rs. 4,62,40,874.00 on account of interest on FDR and Saving Bank Account Interest which is illegal, arbitrary and unjustified.
2. That the Assessing Officer has erred in law by not allowing deduction u/s 11 of the Income-tax Act, 1961 on account of interest earned on FDR/Saving Bank Account Interest to the tune of Rs. 4,62,40,874.00. The appellant has applied for Registration u/s 12AA on 18.12.2006, the order for granting/refusing registration should have been passed on/before 30.6.2007. In the absence of any such orders passed within the stipulated time, the appellant will be deemed to be registered u/s 12AA with effect from A.Y 2007-08 and was eligible for exemption u/s 11 during the A.Y 2008-09 and the interest was not taxable.”
6. The assessee filed an application dated 14.3.2011 u/s 253(5) of the Act, for condonation of delay in filing the appeal against the order dated 2.7.2008 of the ld. CIT. The assessee filed appeal before the Bench, on 15.3.2011, against the order dated 2.7.2008, which was served on the appellant, on 7.7.2008. There is a delay of 921 days, as mentioned by the appellant, in the application for condonation of delay. The assessee stated in the application for condonation of delay that there is sufficient cause for not presenting the appeal in time as contemplated u/s 253(3) of the Act.
7. The ld. ‘AR’ for the assessee narrated the brief factual history of the case and stated that the delay of 921 days occurred as the appellant could not immediately understood the period of grant of registration u/s 12AA of the Act. The ld. ‘AR’ for the assessee argued that such non-understanding constitutes sufficient cause u/s 253(5) of the Act. The ld. ‘AR’ for the assessee stated that application u/s 154 of the Act, was filed, before the ld. CIT. The ld. ‘AR’ for the assessee also argued that rectification application dated 30.11.2009, pertains to the issue of granting registration u/s 12AA of the Act w.e.f. A.Y 2009-10 and not from A.Y 2007-08. The said rectification application was rejected by the ld. CIT vide order dated 4.12.2009. The ld. AR for the assessee referred to the facts as narrated in the said application for condonation of delay and placed reliance on the following decisions:
1. Suresh Shet v. Asstt. CIT [IT Appeal Nos. 1032 to 1034 of 2009, dated 28-7-2010]
2. Dr. (Mrs) Sudha S. Trivedi v. ITO [2009] 31 SOT 38 (Mum.)
3. Subhash Malik v. CIT [2010] 325 ITR 243
4. People Education & Economic Development Society (PEEDS) v. ITO [2006] 100 ITD 87 (Chennai)(TM)
8. On the other hand, the ld. DR for the revenue vehemently contended that there is no existence of sufficient cause for condonation of inordinate delay, in filing the appeal after a delay of 921 days. It was contended that the ld. CIT has passed valid order u/s12AA of the Act, in consonance with the relevant provisions of the Act and the facts of the case. He pleaded that delay of 921 days, in filing the appeal is purely attributable to the negligence, complete inaction and indifferent attitude of the assessee, to pursue the remedy for an appeal under the Act. He was of the opinion that such inordinate delay of 921 days in filing an appeal deserves to be dismissed in view of time latches and not-existence of ‘sufficient cause’.
9. We have carefully perused the rival submissions, facts of the case, the said application for condonation of delay and the case laws relied upon by the parties. We deem it fit to reproduce the contents of the said application, for the purpose of proper appreciation of the existence or otherwise the sufficient cause for such a delay.
“Sub: Application u/s 253(5) of Income-tax Act, 1961 praying for condonation of delay in filing of the appeal in the case of Punjab Heritage and Tourism Promotion Board V. CIT-II in ITA No,. 257/CHD/2011
Hon’ble Bench,
The appellant cited as subject above has filed an appeal before the Hon’ble Bench on 15.3.2011. This appeal is against the order dated 2.7.2008 of the respondent served on the appellant on 7.7.2008. There is delay of 921 days in filing of the present appeal. However, on facts of the case and situation, there is sufficient cause for not presenting the appeal in time and therefore, the present application/prayer for condonation of delay in filing of appeal may be allowed u/s 253(5) of the Act.
Facts of the Case
1. The appellant is Board created as a Trust by State Government of Punjab.
2. The appellant applied for registration u/s 12AA of the Act vide application filed with respondent on 18.12.2006. The respondent issued a letter dated 22.6.2007 through which it objected to the dissolution clause in the trust deed of the appellant. However, no order granting or refusing registration was passed till 30.6.2007. The proceedings were continued even thereafter and the appellant duly participated and cooperated in the continued proceedings. During the course of these continued proceedings, the appellant filed draft amended dissolution clause, thereafter final amended dissolution clause, followed by amended trust deed and thereafter notified deed. After this the respondent directed the appellant to file amended trust deed along with Form No. 10A. This was duly done by the appellant.
3. Finally vide order dated 2.7.2008, registration was granted. But the same was granted w.e.f. A.Y 2009-10.
4. Since the registration had already been granted, the appellant could not immediately understood and appreciate the issue of difference of year of grant of registration w.e.f. A.Y 2009-10 as against allowable w.e.f. A.Y 2007-08.
On the above facts, the application of the appellant for condonation of delay in filing of the present appeal deserves to be allowed and the appeal of the appellant may be admitted. For this, the appellant submits as under:
1. That the appellant was advised by professionals that the grant of registration w.e.f. A.Y 2009-10 instead of A.Y 2007-08 is a mistake apparent from record rectifiable u/s 154 of the Act and application thereon was also filed on 1.12.2009. However order on that application was served only on 7.2.2011. Thereafter the appellant has filed the appeal within 60 days of service of order u/s 154. This was sufficient cause for not presenting the present appeal in time.
2. That on the facts, circumstances and legal position of the case, the application of the appellant for condonation of delay in filing of appeal deserves to be allowed.
It is therefore, respectfully prayed that, in the interest of justice, the above mentioned prayer of the appellant towards condonation of delay in filing of appeal and thereby admittance of appeal by invoking provisions of section 253(5) of the Act be allowed.
Thanking you,
Yours faithfully,
For PUNJAB HERITAGE & TOURISM PROMOTION BOARD “
10. (i) A bare perusal of the facts of the case reveals that the appellant applied for registration u/s 12A of the Act, in Form No. 10A, dated 18.12.2006. The ld. CIT issued a letter darted 22.6.2007 to the trustee of the appellant on the issue of registration u/s 12A of the Act and the contents of the said letter are reproduced hereunder:
“Subject: Application for registration u/s 12A(a) of the Income-tax Act, 1961 – Regarding
Please refer to your application for registration u/s 12A(a) of the Income-tax Act, 1961 filed with office on 18.12.2006.
2. A perusal of the deed of declaration of the Board reveals that clause 26 dealing with the “Dissolution” is in violation of Section 11 of the Income-tax Act, 1961. Therefore, your application for registration u/s 12AA of the Income-tax Act, 1961 may not be considered favourably. It can only be considered on amendment of this clause and receipt of amended Rules and Regulations.”
(ii) The ld. CIT categorically pointed out to the assessee-appellant that a perusal of the deed of declaration of the Board reveals that Clause 26 dealing with the “Dissolution” is in violation of Section 11 of the Act. Therefore, the application for registration u/s 12A of the Act cannot be considered favourably. It can be considered on amendment of this clause and receipt of amendment of Rules and Regulations. Thus, it is evident that the ld. CIT has brought to the notice of the appellant, the fate of application made by the assessee u/s 12A of the Act. In view of this specific communication emanating from the office of ld. CIT(A), addressed to the appellant about the conditional consideration of the said application, on submissions of the requisite documents along with clear indication by the ld. CIT that such application cannot be considered favourably, is an eloquent manifestation of the administrative intent of the ld. CIT. Therefore, contention of the appellant that no order granting or refusing registration was passed by the ld. CIT till 30.6.2007, is not wholly reflecting true state of affairs, in the light of specific communication dated 22.6.2007 addressed to the Trustee by the ld. CIT. The appellant participated and cooperated in the subsequent proceedings. The appellant filed a letter dated 1.1.2008 received in the office of the ld. CIT dated 3.1.2008 enclosing a copy of the minutes of the meeting of the appellant as in evident from letter at page 3 of the paper book. The appellant vide letter dated 19.3.2008, filed amended coy of bye-laws as is evident from letter at page 4 of the paper book. Further, in continuation of letter dated 19.3.2008 the appellant filed notified copy of bye-laws of PHTB, as is evident from letter addressed to the ld. CIT as per page 5 of the paper book. The appellant filed another application for registration u/s 12A(a) of the Act at page 6 of the paper book and the same is reproduced hereunder:
“Subject: Application for registration u/s 12A(a) of Income-tax Act, 1961.
Sir,
This is with reference to letter No. CIT/Chd-II/Tech/12A/194/1298 dated 22.6.2007 regarding the subject cited.
Vide this letter, the only objection raised was regarding the dissolution clause in the bye-laws of the Trust. Meetings were held by our authorized representatives with you and necessary amendments were carried out in the dissolution clause, as desired by you. After amendments, a draft copy was also submitted to you.
Amended draft copy duly signed and approved from the Principal Secretary Tourism vide Memo. No.10/17/27-TA/738 has been received from Government of Punjab in the Department of Tourism. This copy has been furnished to your office. As the only objection raised already stand been removed, it is requested that Registration u/s 12A be granted to us.
In case any additional information is required at our end, you may write to us and we will be more than happy to provide the requisite information. “
(iii) The provisions of section 253(5) of the Act are reproduced hereunder:-
“253(5) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period.”
11. In this context it is pertinent to ascertain the meaning of expression ‘sufficient cause’ appearing in section 253(5) of the Act, as reproduced above. The proposition in the matter is well settled. The Hon’ble Delhi High Court in the case of Sudhir Kumar Anand v. Dr.Vijay Kumar Anand AIR 2012 Delhi 97 has held as under:
“Limitation Act (36 of 1963) S.5 – Condonation of delay – “Sufficient cause” – Suit for declaration, partition and possession filed relying upon probate case filed earlier -After dismissal of probate case for non prosecution, plaintiff lost interest in matter – No valid explanation gives as to why no steps were taken for its restoration – Mere statement that relevant file was lost in some office or some confusion about Advocates appearing in matter, can not be treated as sufficient cause -Delay not condoned.”
12 (i) The words “sufficient cause” for not making the application within the period of limitation no doubt is to be applied in a reasonable manner but depending upon the facts and circumstances of each case. Party has to give satisfactory explanation. Unless sufficient cause is explained for condonation of delay, prayer may not be granted. In addition to this, the Court must take into account the conduct of the party and its bona fide. The Court has to see whether substantial justice would be done by condoning the delay. It cannot be overlooked that on expiry of the period of limitation prescribed for seeking legal remedy rights accrue in favour of other side.
(ii) Similarly the Hon’ble Supreme Court, in case of Balwant Singh v. Jagdish Singh AIR 2010 SC 3043 held as under –
“We may state that even if the ‘sufficient cause’ has to receive liberal construction, it must squarely fall within the concept of reasonable time and proper conduct of the concerned party. The purpose of introducing liberal construction normally is to introduce the concept of ‘reasonableness’ as it is understood in its general connotation. The law of limitation is a substantive law and has definite consequences on the right and obligation of a party to arise. These principles “should be adhered to and applied appropriately depending on the facts and circumstances of a given case, Once a valuable right, as accrued in favour of one party as a result of the failure of the other party to explain the delay by showing sufficient cause and its own conduct, it will be unreasonable to, take away that right on the mere asking of the applicant, particularly when the delay is directly a result of negligence, default or inaction of that party. Justice must be done to both parties equally. Then alone the end of justice can be achieved. If a party has been thoroughly negligent in implementing its rights and remedies, it will be equally unfair to deprive the other party of a valuable right that has accrued to it in law as a result of his acting vigilantly. The application filed by the applicants lack in details. Even the averments made are not correct and ex facie lack bona fide. The explanation has to be reasonable or plausible, so as to persuade the Court to believe that the explanation rendered is not only true, but is worthy of exercising judicial discretion in favour of the applicant. If it does not specify any of the enunciated ingredients of judicial pronounce then the application should be dismissed. On the other hand, if the application is bona fide and based upon true and plausible explanations, as well as reflect normal behaviour of a common prudent, person on the part of the applicant, the Court would normally tilt the judicial discretion in favour of such an applicant.
(iii) In the case of Ram Lal, Motilal & Chhotelal v. Rewa Coalfields Ltd. AIR 1962 SC 361 this Court took the view:
“7. In construing Section 5 it is relevant to bear in mind two important considerations. The first consideration is that the expiration of the period of limitation prescribed for making an appeal gives rise to a right in favour of the decree holder to treat the decree as binding between the parties. In other words, when the period of limitation prescribed has expired the decree-holder has obtained a benefit under the law of limitation to treat the decree as beyond challenge, and this legal right which has accrued to the decree holder by lapse of time should not be light heartedly disturbed. The other consideration which cannot be ignored is that if sufficient cause for excusing delay is shown discretion is given to the Court to condone delay and admit the appeal. This discretion has been deliberately conferred on the Court in order that judicial power and discretion in that behalf should be exercised to advance substantial justice. As has been observed by the Madras High Court in Krishna v. Chathappan, ILR 13 Mad 269. It is however, necessary to emphasize that even after sufficient cause has been shown a party is not entitled to the condonation of delay in question as a matter of right. The proof of a sufficient cause is a condition precedent for the exercise of the discretionary jurisdiction vested in the court by Section 5. If sufficient cause is not proved nothing further has to be done; the application for condoning delay has to be dismissed on that ground alone. If sufficient cause is shown then the Court has to enquire whether in its discretion it should condone the delay. This aspect of the matter naturally introduces the consideration of all relevant facts and it is at this stage that diligence of the party or its bona fides may fall for consideration.”
(iv) The Hon’ble Supreme Court in the judgment Union of India v. Nripen Sarma AIR 2011 SC 1237 held –
“We have gone through the contents of the petition. The delay occurred because of the respondents took their own sweet time to reach the conclusion whether the judgment should be appealed or not. It is not that they were prevented by any reason which is beyond their control to take such a decision in time. Even otherwise, on merits of the case also it does not appear to have any tenable ground of appeal. In the circumstances, we do not see any merits in this petition.”
13. The case relied upon by the assessee are not applicable to the facts of the present case as discussed herein above.
(i) In Suresh Shet (supra) – In this case delay in filing the appeal was condoned on specific facts. The delay on account of high hopes of the assessee in rectification proceedings resulted in delay in filing the appeal. Failure on the part of the assessee to file appeal was not on account of wilful omission or commission on the part of the assessee. The assessee was constrained by the force of circumstances to keep away from regular business activities which has caused among other things, the delay in filing the appeal. In this case while making addition on account of on-money for Assessment Year 1997-98, the Assessing Officer had granted deduction by way of expenses to the extent of Rs. 18,36,602/-. Thus the net amount of addition for the Assessment Year 1997-98 was Rs. 27,54,903/-. The ld. CIT(A) has confirmed the addition of Rs. 45,91,505/- for the impugned Assessment Year, the Assessing Officer favourably acted upon the rectification petition filed by the assessee and excluded the amount of Rs. 27,53,903/- from the assessable income for the Assessment Year 1997-98. In the same scenario the assessee has further moved a rectification petition before the assessing authority in respect of impugned Assessment Year 1998-99 to give deduction by way or expenses to the extent of Rs. 18,36,602/- which was granted in the original ex-parte assessment. This rectification application was dismissed by the Assessing Officer. This order of rectification was upheld by the ld. CIT(A). The matter was taken to the Tribunal as well. Meanwhile the assessee filed an appeal against the order of ld. CIT(A) on the quantum proceeding itself. The said quantum appeal was dismissed. The assessee filed appeal before the Tribunal. It is in this context that the Tribunal condoned the delay in filing the appeal as the assessee had high hopes of success in the petition filed u/s 154 of the Act. The fact situation in the present case is clearly different and distinguishable as in the present case even the application for rectification u/s 154 was filed by the letter dated 30.11.2009 against the order u/s 12AA of the Act passed on 30.6.2008/2.7.2008 contrary to the provisions of section 253(3) of the Act wherein 60 days time has been prescribed for filing of appeal from the date of receipt of the order sought to be in appealed against. A bare perusal of the order dated 4.12.2009 passed by the CIT u/s 154 reveals that there was hardly any hope in success in the matter. The ld. CIT granted registration u/s 12AA of the Act, A.Y 2009-10, in terms of relevant provisions of Section 12A(2) of the Act which reads as under:
“where application has been made on or after first day of June 2007 the provisions of section 11 & 12 shall apply in relation to the income of such person or institution from Assessment Year immediately following Financial Year in which such application is made. The provisions were inserted by the Finance Act, 2007 w.e.f. 1.6.2007.”
The assessee made original application on 18.12.2006 which was further substituted by another application in form No. 10 dated 15.4.2008, as is evident from relevant record in the case. In view of such a fact situation, the appellant construed that provisions of section 12A(2) of the Act are not applicable, to its case, as the application was filed originally for registration u/s 12A on 18.12.2006. However, the ld. CIT granted registration u/s 12AA of the Act in terms if new application filed for registration, on 15.4.2008. Therefore, the issue is highly debatable and the assessee cannot reasonably entertain high hope of succeeding in rectificatory proceedings. Having regard to the fact situation of the present case, it can be clearly said that the decision relied on by the assessee is not application to the fact situation of the case.
(ii) Dr. (Mrs.) Sudha S. Trivedi (Supra) – We have carefully considered the fact situation of the case relied upon and found that the same is not applicable to the facts of the present case, in view of the different factual matrix of the case. In the case relied upon by the assessee, the contention of appellant for filing the appeal was allowed, in view of the existence of sufficient cause, as the appellant was advised by her counsel to file rectification application. The assessee had bonafide belief that relief would be allowed in the rectification proceedings. The fact situation of the case is different and distinguishable as discussed in detail in the preceding paragraphs. Therefore, the decision cited and relied upon by the appellant is not applicable to the facts of the present case. The appellant has not adduced any evidence that the appellant was wrongly advised by the counsel.
(iii) Subhash Malik (supra) – The assessee placed reliance on the decision in the case of Subhash Malik (supra) wherein it was stated that the assessee exercised due diligence and was not lethargic in filing the appeal against the order dated 25.9.2002. Record of the case shows that the assessee had taken the matter with this counsel and the proceedings taken for rectification of CIT(A)’s order on his advice took a long time which resulted the delay in filing the appeal. It is under such circumstances the delay was condoned. The fact situation of the present case are entirely different and distinguishable and, hence, the case relied upon is not applicable to the facts of the present case. Sequence of events of the case relied upon proves the factum that the appellant exercised due diligence and acted promptly. Sequence of events are as under:
