2023 (7) TMI 1331 - AT - Income Tax

Section 12A registration rejection overturned after consultant's filing error caused 226-day appeal delay

The ITAT Ahmedabad condoned a 226-day delay in filing an appeal, finding the delay resulted from the assessee's consultant's mistake and bona fide belief ... Condonation of delay - leaving aside the period of limitation owing to the Covid pandemic, there is a delay of 226 days in filing of the present appeal - HELD THAT:- As 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. Vishakhapatnam ITAT in the case of Smt. Samanthapudi Lavanya [2021 (5) TMI 26 - ITAT VISAKHAPATNAM] 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.Thus in interest of justice, we are hereby condoning the delay in filing of the present appeal. Rejecting application u/s 12A - As 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. and 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 - as 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 u/s 12A - HELD THAT:- 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. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay of 671 days in filing the appeal should be condoned where, excluding the COVID-19 period, the effective delay is 226 days and the delay is attributed to bona fide mistake by the assessee and its consultant regarding registration under Section 12A. 2. Whether rejection of an application for registration under Section 12A(1)(b)(ii) for failure to submit requisite documents (and consequent alleged breach of principle of natural justice) is sustainable where the assessee contends it was unaware of notices and was under bona fide belief that registration had been granted. 3. Whether, on the facts that the assessee carries out blood-donation/blood-bank activities claimed to be charitable, the matter should be remitted to the Commissioner of Income Tax (Exemption) for de novo consideration with opportunity of hearing. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of Delay Legal framework: The Limitation Act concept of 'sufficient cause' governs applications for condonation of delay; appellate discretion to condone delay exists to sub-serve substantial justice rather than to enforce technical bars. Precedent Treatment: The Tribunal relied on and followed the principles articulated in authorities emphasizing a liberal approach to condonation where delay lacks mala fides and substantial justice would otherwise be defeated (cases analogous to Collector, Land Acquisition v. Katiji; N. Balakrishnan v. M. Krishnamurthy; Senior Bhosale Estate (HUF) v. ACIT; and a Visakhapatnam ITAT decision regarding bona fide belief caused by agent/consultant conduct). Interpretation and reasoning: The Court examined the explanation for delay: (a) omission by consultant to comply with notices; (b) notices not sent to assessee's registered e-mail; (c) bona fide belief that registration was obtained (supported by subsequent grant for later AY); and (d) lack of mala fide or dilatory strategy. The Tribunal applied the principle that denial of condonation may extinguish substantive rights and that where delay arises from non-deliberate mistakes by agents and genuine belief of compliance, the balance favors substantial justice. Analogous authorities were used to show that unexplained ignorance caused by receipt failures or agent omission can justify condonation unless refuted by Revenue. Ratio vs. Obiter: Ratio - delay condoned where explanation shows bona fide mistake by consultant and reasonable belief of valid registration, absent mala fides; judicial precedents requiring a liberal approach to sufficient cause were applied. Obiter - detailed citations of multiple precedents were used illustratively to reinforce the approach but the operative principle is the application of the 'sufficient cause' elasticity to the facts. Conclusion: The Tribunal condoned the delay (despite 226 days effective delay excluding COVID period) in the interests of justice and permitted the appeal to proceed on merits. Issue 2 - Validity of Rejection under Section 12A(1)(b)(ii) and Alleged Breach of Natural Justice Legal framework: Section 12A (and references to Section 12AA) govern registration of trusts for charitable purposes; administrative rejection for non-submission of requisite documents is permissible but must respect principles of natural justice, including notice and opportunity to comply/ be heard. Precedent Treatment: The Tribunal did not overrule prior law; it applied established administrative law norms that where an applicant is denied registration for procedural non-compliance, the authorities must ensure due opportunity and not act in a manner defeating substantive rights without hearing. The decision references the Tribunal's and courts' supportive approach where procedural lapses caused by agents result in remediable injustice. Interpretation and reasoning: The Tribunal noted facts: the Commissioner rejected the application on ground of non-submission of details; assessee's consultant failed to respond; notices allegedly not sent to registered e-mail and assessee unaware of notices and of rejection; assessee later obtained registration for subsequent years establishing genuineness of activities. Given these factual findings, the Tribunal reasoned that rejection without ensuring that the assessee had effective notice and opportunity would be inequitable. The Tribunal emphasized that where procedural irregularity or agent omission causes non-compliance, the remedy lies in giving the assessee an opportunity to cure defects rather than sustaining rejection outright. Ratio vs. Obiter: Ratio - where registration is rejected for non-submission of documents attributable to consultant's omission and where the assessee lacked actual knowledge of notices/rejection, the appropriate relief is to remit the matter for de novo consideration after affording opportunity of hearing; this upholds natural justice and preserves substantive rights. Obiter - observations about e-mail delivery practices and administrative expectations are explanatory but not central to the operative mandate. Conclusion: The Tribunal found the rejection to be amenable to corrective action and directed restoration for fresh consideration rather than endorsing the denial; natural justice considerations and factual bona fides weighed in favour of remittal. Issue 3 - Merits: Characterisation of Activities as Charitable and Remand for De Novo Consideration Legal framework: Registration under Section 12A/12AA depends on the nature of activities - charitable purposes include medical relief and activities for general public utility; procedural compliance and factual satisfaction of the Commissioner are preconditions to registration. Precedent Treatment: The Tribunal accepted that subsequent grant of registration for later assessment years is a relevant indicium of genuineness, though not determinative; question of whether activities qualify as charitable is a matter for the Commissioner to examine on evidence during the registration process. Interpretation and reasoning: On facts, the assessee conducts blood-donation camps and operates a blood bank - activities falling within 'medical relief' and 'general public utility.' The Tribunal accepted submissions that the assessee would produce requisite documents if an opportunity were afforded. Given the procedural failure traceable to the consultant and the later grant of registration, the Tribunal concluded fairness requires de novo consideration by the Commissioner with an opportunity to be heard and to file documents. The Tribunal restored the matter to the file of the Commissioner for such fresh consideration, thus avoiding pre-judgment on the substantive eligibility for registration. Ratio vs. Obiter: Ratio - where administrative rejection prevents the applicant from furnishing material and the factual record suggests bona fide charitable activity (supported by subsequent registration), the appellate forum may remit the matter for de novo consideration rather than decide the substantive question; this preserves fact-finding role of the Commissioner and secures procedural fairness. Obiter - endorsement that blood-bank activities are charitable under general principles is persuasive but the Tribunal did not finally determine entitlement to registration. Conclusion: The Tribunal remitted the matter to the Commissioner of Income Tax (Exemption) for de novo consideration after giving due opportunity of hearing to the assessee; the appeal allowed for statistical purposes and adjudication on substantive registration to follow on remand. Cross-references 1. Issue 1 and Issue 2 are interlinked: the finding of bona fide mistake and lack of knowledge (Issue 1) informed the Tribunal's view that rejection without further opportunity would be unjust (Issue 2), leading to remand. 2. Issue 3 follows from Issues 1-2: condonation of delay allowed appellate review and procedural remediation, but substantive entitlement under Section 12A remains to be examined afresh by the Commissioner in light of documents and hearing.