2013 (1) TMI 157 - HC - Income Tax

High Court affirms Tribunal's decision on registration application delay and sets aside order under section 263

DIRECTOR OF INCOME TAX (EXEMPTION) Versus VISHWA JAGRITI MISSION

DIRECTOR OF INCOME TAX (EXEMPTION) Versus VISHWA JAGRITI MISSION - TMI 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, 1961Rs.2. Whether the order passed by the Tribunal is perverseRs.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, 1961Rs.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.