2017 (3) TMI 1387 - HC - Income Tax

High Court overturns Tribunal's rejection of appeal on Section 12AA registration citing justified delay & trust deed compliance issues.

The High Court set aside the Tribunal's rejection of the appeal regarding registration under Section 12AA of the Income Tax Act due to delay and ... Registration of assessee's entity under section 12AA denied - Held that:- In so far as the genuinity and functioning of the assessee's institution as trust is concerned, the learned counsel appearing for the assessee has produced documents to show that the assessee's institute in the name and style of that Hosanna Children's home (Girls) had been functioning with proper registration in the Directorate of Social Defence, State of Tamil Nadu, especially after the coming into effect of Juvenile Justice (Care and Protection of Children) Act 2015 (for short Juvenile Act). Every such children home had necessarily to be registered under the said Act and without such registration, no institute or home dealing with children can function.Therefore, from the said proceedings, it becomes obvious that the assessee institution is run under the provisions of the Juvenile Act after having been duly registered under the said Act. Therefore, the additional reason given by the Tribunal in the order impugned to say that the assessee was not engaging in activities in accordance with the objects specified in the trust deed, may not be backed by any materials. Delay in filling appeal by assessee against rejection - Held that:- No doubt, the delay of 1902 days is a huge and enormous delay. But, when we look at the reasons given by the assessee for such a delay, it shows that it is not attributable to any lame excuses on medical grounds or otherwise. But, it is only the reason of either non advise on the part of the professional, who has been engaged by the assessee or the ignorance of law by the assessee itself. Assessee knew well that if a plea of ignorance of law is taken, that would be, on the face of it, rejected by the court/Tribunal, nevertheless, such a plea alone had been taken by the assessee and that itself would show the inherent genuineness attached with the reason cited by the assessee for such huge delay. The order impugned of the Tribunal rejecting the appeal of the assessee mainly on the ground of delay, is liable to be interfered with. In addition, we also feel that the further reason given by the Tribunal for arriving at such a conclusion that the assessee was not engaging in activities in accordance with the objects specified in the trust deed also is not supported by materials as we are satisfied that the assessee has been functioning after proper registration with the authorities concerned under the Juvenile Act and a recent certification issued dated 14.12.2016 of the authorities concerned as referred to above would be valid for next five years. Therefore, the genuineness or otherwise of the functioning of the assessee cannot be easily doubted, in view of the certification issued by the Directorate of Social Defence, Government of Tamil Nadu. Therefore, even that reason given by the Tribunal for its conclusion in the order impugned cannot stand in the legal scrutiny. Therefore in our view, both the reasons cited in the impugned order of the Tribunal are liable to be interfered with and accordingly, the impugned Judgment is set aside. We allow the appeal remitting the matter to the Tribunal for taking decision on merits on the issue raised by the assessee. Issues Involved:1. Registration under Section 12AA of the Income Tax Act.2. Delay in filing the appeal before the Tribunal.3. Genuineness and functioning of the assessee's institution.4. Tribunal's rejection of the appeal based on delay and non-compliance with the trust deed.Issue-wise Detailed Analysis:1. Registration under Section 12AA of the Income Tax Act:The assessee, a charitable trust, applied for registration under Section 12AA of the Income Tax Act on 11.01.2010. The Commissioner of Income Tax (CIT) rejected this application on 16.08.2010. The assessee did not take any further action until it received a recovery notice from the Revenue in December 2015. Upon professional advice, the assessee learned about the provision for appeal under Section 253(1)(c) of the Act, which was introduced with effect from 01.06.1999. Subsequently, an appeal was filed on 30.12.2015.2. Delay in filing the appeal before the Tribunal:The appeal was filed 1902 days after the CIT's order, leading to a significant delay. The Tribunal rejected the appeal, citing the assessee's lack of vigilance and seriousness in complying with the Act's provisions. The assessee argued that the delay was due to ignorance of the appeal provision and the failure of their Chartered Accountant to provide proper advice.3. Genuineness and functioning of the assessee's institution:The Tribunal also questioned the genuineness of the assessee's activities, stating that they were not in line with the objects specified in the trust deed. However, the assessee provided documentation showing that their children's home, Hosanna Children's Home (Girls), was duly registered under the Juvenile Justice (Care and Protection of Children) Act, 2015. The High Court found that the institution was functioning legitimately, as evidenced by the registration certificate issued by the Directorate of Social Defence, Government of Tamil Nadu.4. Tribunal's rejection of the appeal based on delay and non-compliance with the trust deed:The High Court noted that the delay, although substantial, was due to genuine reasons such as the lack of proper advice from the Chartered Accountant and the assessee's ignorance of the law. The Court emphasized that a pragmatic view should be taken when considering reasons for delay and cited the Supreme Court's decision in Collector, Land Acquisition vs. M.S.T. Katiji, which advocates for a liberal approach in condoning delays to ensure substantial justice.Conclusion:The High Court found that both reasons cited by the Tribunal for rejecting the appeal were not supported by sufficient evidence. The Court set aside the Tribunal's judgment and remitted the matter for a decision on merits, emphasizing that the assessee's institution was functioning in accordance with the law and the delay in filing the appeal was due to genuine reasons. The appeal was allowed, and the Tribunal was directed to reconsider the case on its merits.