2024 (5) TMI 643 - AT - Income Tax

Condonation of delay denied; direct AO to treat 11.09.2018 returns as rectification under s.154 read with s.139C, decide promptly

Kathikode Charitable Trust Versus Income Tax Officer Ward - 2 (1), Thrissur

ITAT dismissed the claim for condonation of delay, finding no satisfactory proof of absence of negligence or diligence and confirmed the impugned order on ... Condonation of delay - assessee’s appeal/s before the ld. CIT(A), being delayed by 3 years (2 years) and 2 months (2 months) - HELD THAT:- The two ingredients necessary for condoning the delay, which could only be the result of a positive, affirmative action, i.e., (a) proof of absence of negligence, and (b) proof of satisfactory level of diligence, are found completely missing in the instant case. It is apparent that the assessee is merely raising multiple pleas, de hors the facts of the case and law in the matter, in the hope that any one may ‘work’. It is only a plea made per Form 35, supported by affidavits, i.e., where so required by the first appellate authority, that can be taken cognizance by us as the second appellate authority reviewing his decision qua non-condonation of delay in further appellate proceedings. The delay, which extends to 26 months and 36 months for the two years respectively, is wholly unexplained and is a clear case of gross negligence. We find no reason to interfere in the matter and, accordingly, confirm the impugned order on this aspect. As assessee not registered u/s. 12AA was in furnishing the return per a wrong Form, i.e., ITR-7, applicable, inter alia, to a person in receipt of income from property held under trust - True, the assessee has not invoked the appropriate proceedings under the Act or moved the Hon'ble High Court under it’s extraordinary jurisdiction, seeking issue of writ of prohibition or any other, restraining processing it’s deficit return at a huge income, or being acted upon by the Revenue. Nevertheless, having not done so, we do not think that it is left without any remedy in law, i.e., under the Act. Why, even as observed by the Bench during hearing, could not it’s representation before the AO, stated to be in August/September, 2018, or if undocumented, it’s return/s filed of 11/9/2018, be regarded as a petition u/s. 154 of the Act, and the assessee’s grievance sought to be addressed on that basis? No tax can be levied except by the authority of law (Article 265 of the Constitution of India), which we find as having been seriously violated in the instant case, and which explains our reference earlier to the jurisdiction of the Hon'ble High Court. The law cannot be a one-way street, i.e., operating only for the benefit of the Revenue; rather, is a hand maiden of justice. Filing a return in a wrong form, or filing the form incorrectly, could not lead to a charge of tax u/s. 4 of the Act? The premise of the foregoing is that the assessee should get a fair deal and, two, only tax exigible under law is to be levied/collected. The assessee, in our view, has filed the return u/s. 139(4A) in the correct form, i.e., Form-7. It is a charitable trust, even if, prior to it’s registration on 10.12.2019, a private discretionary trust. Being a charitable institution, it’s income is to be computed in the manner applicable therefor, and it returning income in Form 5, which is for returning business income, is surely incorrect, unless, perhaps, it is a case of business undertaking itself being the property held under trust, and the business incidental to the attainment of it’s objects. Could, in any case, as afore-questioned, returning income in a wrong Form, or incorrectly, result in converting a loss into income? Clearly not, inasmuch as the same can only be in terms of provisions of the Act. We only consider it fit and proper under the circumstances to direct the ld. CIT(A) to, taking cognizance of the assessee’s claim in the appeal before him, direct the AO to consider the assessee’s returns of income filed on 11.09.2018 for the relevant years as rectification petitions. The AO shall, for the purpose, exercising his power u/s. 154 r/w s. 139C, call for the assessee’s audited final accounts, or any material he deems proper, which constitutes a part of a return. The assessee shall be heard before disposing it’s applications, per a speaking order, and in accordance with law, and which shall be in a time bound manner. Assessee’s appeals are allowed for statistical purposes. Issues Involved:1. Maintainability of the appeals before the CIT(A) due to delay.2. Correctness of the return form used by the assessee.3. Consideration of returns as rectification petitions u/s 154.Summary:1. Maintainability of the Appeals:The primary issue was whether the appeals filed by the assessee before the CIT(A), delayed by 3 years and 2 months (for AY 2014-15) and 2 years and 2 months (for AY 2015-16), were maintainable. The Tribunal held that the appeals were not maintainable due to gross negligence and lack of sufficient cause for the delay. The assessee's claim of receiving demand notices on 29.05.2019 was found to be false, as intimations were received in March 2016 and March 2017. The assessee's explanation of 'awaiting' assessment orders u/s 143(3) was deemed ludicrous and misconceived since no such assessments were made.2. Correctness of the Return Form:The assessee, a charitable trust, initially filed returns in Form ITR-7 instead of ITR-5, leading to demands due to the denial of application of income u/s 11(1)(a). The Tribunal noted that the returns filed subsequently in ITR-5 on 11.09.2018 were not processed and were considered non est. The Tribunal emphasized that filing returns in the wrong form should not convert a loss into income and that the returns in Form 7 were valid and proper.3. Consideration of Returns as Rectification Petitions u/s 154:The Tribunal directed the CIT(A) to treat the returns filed on 11.09.2018 as rectification petitions u/s 154. The AO was instructed to call for the assessee's audited final accounts and other relevant material, and to dispose of the applications per a speaking order in accordance with the law. The Tribunal underscored the principle that no tax can be levied except by the authority of law and that the assessee should get a fair deal.Conclusion:The appeals were allowed for statistical purposes, with directions to treat the returns as rectification petitions u/s 154. The stay petitions were dismissed as infructuous. The Tribunal emphasized the duty of the appellate authority to correct errors and issue appropriate directions, ensuring that only tax exigible under law is levied.