2025 (8) TMI 1315 - AT - Income Tax

Delay in filing regularisation application under s.10(23C) condoned where no mala fide conduct or gross negligence

Chetana Versus CIT (Exemptions), Mumbai

Chetana Versus CIT (Exemptions), Mumbai - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether an application for regularisation of provisional approval under Section 10(23C) (Form 10AB/10AC regime) filed after the prescribed/extended due date is maintainable, and whether the delay can be condoned. 2. Whether the learned Commissioner (Exemptions) was justified in rejecting the application as non-maintainable solely on the ground of delayed filing without considering condonation and merits. 3. The relevance and effect of CBDT Circular No. 7/2024 (extension of due date to 30.06.2024 subject to conditions) in determining maintainability and condonation of delay. 4. The applicability of established principles on condonation of delay (including those distilled in Vishwa Jagriti Mission) to registration/regularisation applications under Section 10(23C)/12AB regime and the extent to which Tribunal precedents (coordinate bench) should be followed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability and condonation of delay in filing application for regularisation under Section 10(23C) Legal framework: The proviso to sub-section (5) of Section 10(23C) prescribes time-limits for filing application for regularisation of provisional approval; Form No. 10AC/10AB is the statutory form for provisional approval and regularisation. CBDT Circular No. 7/2024 extended the operative due date for filing to 30.06.2024 subject to conditions. Precedent treatment: Tribunal and High Court authorities (noted in the judgment) have adopted a liberal approach to condoning delay in filing registration/regularisation applications, applying principles set out in Vishwa Jagriti Mission. A coordinate bench decision addressing substantially similar facts condoned a short delay beyond the extended date and directed treatement of the application on merits. Interpretation and reasoning: The Court applied the principle that procedural/technical delay should not defeat substantive justice where there is no mala fide, deliberate default, or gross negligence. The CBDT circular evidences administrative intent to provide a further opportunity; technical non-compliance with the strict statutory timeline should be weighed against the interest of substantial justice. The Tribunal found parity of facts with the coordinate bench decision and followed its ratio. Ratio vs. Obiter: The holding that delay in filing the regularisation application (where facts show absence of mala fide/gross negligence) is condonable and that the application should be treated as filed within time is ratio; observations on the rationale behind the CBDT circular and general policy preference for substantial justice over technical dismissal are ratio insofar as they underpin the decision to condone. General statements about the desirability of liberal approach are supportive reasoning but partly obiter where not strictly necessary to the specific result. Conclusions: Delay in filing the application for regularisation under Section 10(23C) was condoned. The application is to be treated as if filed within the prescribed time and considered on merits. Issue 2 - Whether rejection as non-maintainable solely on delayed filing was justified Legal framework: Administrative authority (CIT(E)) has discretion to examine preliminary maintainability and merits; however, exercise of that discretion must account for established legal principles on condonation and, where applicable, administrative extensions. Precedent treatment: Coordinate Tribunal authority and High Court jurisprudence emphasize that courts/tribunals should prefer deciding matters on merits where delay is technical and not tainted by mala fide-thus implying rejection as non-maintainable solely for delay is not invariably appropriate. Interpretation and reasoning: The Tribunal held that the CIT(E)'s summary rejection on the sole ground of late filing was not appropriate where (i) a CBDT circular had extended the due date in the circumstances and (ii) no mala fide or gross negligence was shown. The Tribunal applied the established condonation principles and found that the preliminary rejection prevented adjudication on merits and would contravene the aim of substantial justice. Ratio vs. Obiter: The direction that a preliminary non-maintainability rejection based solely on delay should not be sustained where delay is condonable and merits remain undecided is ratio. Any ancillary comments about the adequacy of documentary proof are obiter to the extent they were not finally adjudicated but left for the CIT(E) to examine on remand. Conclusions: The CIT(E)'s order rejecting the application as non-maintainable on the ground of late filing was set aside; the matter is remitted for fresh consideration on merits after treating the application as timely filed. Issue 3 - Effect of CBDT Circular No. 7/2024 on time-limits and condonation analysis Legal framework: Administrative circulars extending compliance timelines are relevant to the equitable assessment of whether delay is excusable and indicate administrative intent to afford additional opportunity to applicants. Precedent treatment: Tribunal decisions have taken into account such circulars as reflecting a facilitative approach and as a factor in condoning delay where applicants filed shortly after the original or extended cutoff. Interpretation and reasoning: The Tribunal treated the circular as evidence that the board intended a liberal/facilitative regime for filing regularisation applications. Where an applicant files after the statutory but within or shortly after the extended administrative window, the circular is a material consideration favoring condonation unless countervailing facts (mala fide/gross neglect) exist. Ratio vs. Obiter: The use of the CBDT circular as a factor in condoning the delay and directing fresh adjudication is ratio for the result reached. Broader policy comments about administrative intent are supportive reasoning. Conclusions: The CBDT circular materially supported the exercise of the Tribunal's discretion to condone the delay and to remit the application for fresh consideration. Issue 4 - Application of condonation principles (Vishwa Jagriti Mission) to registration/regularisation under Section 10(23C) Legal framework: Principles guiding condonation include: preferment of substantial justice over technicalities; no presumption of mala fide in a mere delay; rational/pragmatic application of the 'every day's delay must be explained' maxim; and balancing technical compliance against merits. Precedent treatment: The Tribunal followed the distilled principles from Vishwa Jagriti Mission and related authorities; coordinate bench jurisprudence applying those principles to Form 10AB/10AC matters was followed as binding for like facts. Interpretation and reasoning: The Tribunal held that, applying these principles, a short or non-deliberate delay in filing a regularisation application should not result in ouster from statutory consideration. The absence of mala fide, the presence of an administrative extension, and the importance of deciding on merits weighed in favor of condonation. Ratio vs. Obiter: The application of those established condonation principles to the facts and the consequent direction to treat the application as timely and decide on merits constitutes the operative ratio. Conclusions: Established condonation principles apply to Section 10(23C)/12AB regularisation applications; where facts are analogous and no mala fide is shown, delay can and should be condoned to enable adjudication on merits. Final Disposition (as derived from the Court's conclusions) The delay in filing the regularisation application under Section 10(23C) was condoned; the order rejecting the application as non-maintainable solely for late filing was set aside; the file was remitted to the Commissioner (Exemptions) with directions to treat the application as having been filed within time and to decide the application afresh on merits and in accordance with law. The appeal was allowed for statistical purposes.