Case Law Details
Saraswati Trust Vs CIT-Exemption (ITAT Ahmedabad)
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Ahmedabad condoned the late filing of an appeal by Saraswati Trust against the Commissioner of Income Tax (Exemption). This has significant implications for legal practitioners and taxpayers. The delay was attributed to a mistake by the Trust’s consultant, and the case was remanded for fresh consideration under Section 12A of the Income Tax Act.
Saraswati Trust had raised several legal issues in its appeal, primarily focusing on the violation of the principle of natural justice and improper appreciation of facts and law by the CIT (Exemption). The appeal was initially time-barred by 671 days but later reduced to 226 days, accounting for the Covid pandemic.
The ITAT applied various case laws to justify the condonation of delay in filing the appeal. Notably, the Supreme Court’s ruling in Collector, Land Acquisition v. Mst. Katiji set a precedent for a liberal approach to delays, emphasizing that “substantial justice” should be the primary focus.
Similarly, N. Balakrishnan v. M. Krishnamurthy supported the condonation, stating that the purpose of law is not to destroy rights but to repair legal injuries.
The court also cited other rulings like Senior Bhosale Estate (HUF) v. ACIT and Smt. Samanthapudi Lavanya v. ACIT, emphasizing the principle that the judiciary should not focus on technicalities but should aim to remove injustices.
On merits, the ITAT found that the Trust was engaged in charitable activities and had been erroneously deprived of its Section 12A registration due to a consultant’s mistake. The case was remanded for a de novo consideration, offering the Trust another opportunity to present its case.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Exemption), (in short “Ld. CIT(E)”), Ahmedabad vide order dated 11.01.2021 passed for Assessment Year 2021-22.
2. The assessee has taken the following grounds of appeal:-
“1. Order passed u/s 12A(1)(b)(ii) of the Act rejecting application for registration u/s 12A is bad in law as it was passed in complete breach of principle of natural justice.
2. The Ld. Commissioner of Income Tax Exemption- Ahmedabaderred in law and on facts in rejecting application seeking approval/registration u/s 12AA of the Act, without appreciating facts and law of the case properly.
3. The appellant craves leave to add, amend or alter the grounds of appeal at the time of hearing, if need arise.”
3. At the outset, we observe that the appeal is time-barred by 671 days. The counsel for the assessee has filed an application for condonation of delay, in which it was submitted that if one were to exclude the Covid pandemic period, then the effective delay is only of 226 days i.e. the period between 01-06-2022 to 12-01-2023. In the said application, the assessee submitted that assessee is a Trust running a blood bank and the activity of the assessee falls within the definition of charitable purposes since it has to be considered as providing medical relief with the object of providing general public utility. The assessee trust had applied for registration under Section 12A on 28-07-2020, which was rejected by CIT Exemption vide order dated 11-01-2021 on the ground that the applicant had not submitted the necessary details for granting registration. The assessee submitted that the grant of obtaining registration was entrusted to a consultant, who had failed to comply with the notices issued by CIT-Exemptions. It was submitted that the notices issued by CIT-Exemptions were not sent on the registered e-mail ID of the assessee and the assessee was not aware of the aforesaid notices. The CIT-Exemptions rejected the application vide order dated 11-01-2021 and the assessee was also not aware about the rejection of the application filed by the assessee. This is further supported by the fact that the assessee had obtained registration for Assessment Year 2022-23 and therefore, the assessee was under the bona fide belief that the assessee trust had got the registration for Assessment Year 202 1-22. It was only much later and on receipt of show cause notice dated 15-11-2022 that the assessee realised that it did not have a valid registration under Section 12A of the Act for Assessment Year 2021-22. It was only then that the assessee, in consultation with another counsel, filed an appeal before ITAT. Accordingly, it was submitted that the delay in filing of the present appeal was due to genuine bona-fide reasons since assessee was under the belief that it had been granted registration under Section 12A of the Act for the impugned Assessment Year.
Application for condonation of delay
4. On going to the application for condonation of delay, we are of the considered view that leaving aside the period of limitation owing to the Covid pandemic, there is a delay of 226 days in filing of the present appeal. However, on going to the application for condonation of delay, it is observed that the delay in filing of the present appeal is due to mistake of the consultant appointed by the assessee and the bona fide mistaken belief of the assessee that it was already in possession of the approval of registration under Section 12A of the Act for the impugned Assessment Year.
4.1 The Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji 1987 taxmann.com 1072, analyzed the provisions of law qua limitation Act and held that the expression ‘sufficient cause’ employed by the legislature in the Limitation Act is adequately elastic to enable the Courts to apply the law in a meaningful manner which sub-serves the ends of justice-that being the life purpose for the existence of the institution of Courts. It was further observed that a liberal approach is requires to be adopted on principle as ordinarily a litigant does not stand to benefit by lodging an appeal late. Further refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. The Apex Court further held that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
4.2 The Supreme Court in N. Balakrishnan v. M. Krishnamurthy 2008 (228) ELT 162, while condoning the delay of 883 days in filing an application for setting aside the ex parte decree held “That the purpose of Limitation Act was not to destroy the rights. It is founded on public policy fixing a life span for the legal remedy for the general welfare. The primary function of a Court is to adjudicate disputes between the parties and to advance substantial justice. The time limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. The object of providing legal remedy is to repair the damage caused by reason of legal injury. If the explanation given does not smack mala fides or is not shown to have been put forth as a part of a dilatory strategy, the Court must show utmost consideration to the suitor.”
4.3 The Supreme Court in the case of Senior Bhosale Estate (HUF) v. ACIT [2019] 112 taxmann.com 134 (SC) held that where revenue did not expressly refute stand taken by assessee that they had no knowledge about passing of order of Tribunal, dated 29-12-2003, until June, 2008, assessee’s delay of 1754 days in filing appeal before Bombay High Court against Tribunal order was to be condoned. The brief facts of the case were that assessee sought condonation of delay of 1754 days in filing appeals against order, dated 29-12-2003, passed by Tribunal. The assessee pleaded that it had no knowledge about passing of Tribunal’s order, until it was confronted with auction notices in June, 2008, issued by competent authority, immediately upon which, assessee filed appeal with High Court. The High Court dismissed assessee’ s appeals holding that these were not fit cases in which inordinate delay of 1754 days in filing appeals deserved to be condoned. However, it was found that respondent revenue did not expressly refute stand taken by assessee that they had no knowledge about passing of order, dated 29-12-2003, until June, 2008.The Supreme Court held that unless that fact was to be refuted by the Revenue, question of disbelieving stand taken by assessee on affidavit, could not arise and for which reason, High Court should have shown sympathy to assessee by condoning delay in filing concerned appeal(s).
4.4 The Vishakhapatnam ITAT in the case of Smt. Samanthapudi Lavanya v. ACIT [2021] 127 taxmann.com 188 (Visakhapatnam – Trib.) held that where assessee was under bona fide impression that its appeal had been filed by accountant, but came to know fact of not having filed appeal when there was pressure from department for payment of demand, delay of 492 days in filing appeal was to be condoned, in the interests of justice.
5. In view of the foregoing circumstances, in interest of justice, we are hereby condoning the delay in filing of the present appeal.
On Merits:-
6. On merits, the counsel for the assessee submitted that it was purely owing to the omission on the part of the consultant of the assessee trust, that the application for approval for grant of registration was rejected for the impugned Assessment Year, since the consultant did not file the requisite documents before the CIT-Exemptions. Further, it was submitted that the assessee is engaged in the activity of organising blood donation camp at various places, which is a charitable activity and hence entitled to grant of registration under Section 12A. Further, the genuineness of the activities of the assessee trust is also supported by the fact that in the subsequent years, the CIT-Exemptions has granted approval under Section 12A of the Act to the assessee trust. Accordingly, it was submitted before us that if given an opportunity the assessee shall furnish all requisite documents before the CIT-Exemptions so as to enable him to grant the necessary registration under Section 12A of the Act, to which the assessee is legally entitled to, looking into the activities carried out by the assessee trust. Accordingly, it was submitted that in the interest of justice, the matter may be restored to the file of CIT-Exemptions, for de novo consideration.
6.1 On going to the facts of the instant case, in interest of justice, the matter is being restored to the file of CIT-Exemptions for de novo consideration after giving due opportunity of hearing to the assessee.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
This Order pronounced in Open Court on 26/07/2023
