The Commissioner Of Income Tax Salem v. M/S. Indian Gospel Fellowship Trust

IN THE HIGH COURT OF JUDICATURE AT MADRAS The Commissioner of Income TaxSalem... Appellant/Respondentvs. M/s. Indian Gospel Fellowship TrustNo.48, Chairman Chinnaiah RoadNorth, Maravaneri Extension, Salem... Respondent/Appellent Tax Case Appeal filed under Section 260A of the Income Tax Act,1961, against the order of the Income Tax Appellate Tribunal, Madras'A' Bench, dated 27.11.2009 passed in I.T.A.No.1417/Mds/2009 againstthe order of the Commissioner of Income Tax Sales dated 20.8.2009 inC.No.9755(10) SLM/2007-2008. For Appellant : Mr.K.Subramaniam The Revenue has filed this appeal challenging the order of theIncome-tax Appellate Tribunal dated 27.11.2009 passed inITA.No.1417/Mds/2009, whereby the order of the Commissioner ofIncome-tax, dated 20.08.2009 passed under Section 12AA of the Income-tax Act, 1961, was set aside. Challenging the said order, byraising the following substantial questions of law, the presentappeal has been filed: "1. Whether on the facts and in the circumstancesof the case, the Income-tax Appellate Tribunal was rightin quashing the order of the Commissioner of Income Taxrefusing registration u/s.12AA of the Income-tax Act,rejecting the petition for condoning the delay of 6 https://hcservices.ecourts.gov.in/hcservices/ years and 2 months, accepting the plea of ignorance oflaw on the part of the Managing Trustee? 2. Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was right inaccepting the reason given that the delay wasattributable to the fact that there was no activities ofthe Trust till 31.03.2005, overlooking the statutoryprovisions prescribing a time limit for filing theapplication for registration from the date of formationof the trust? and 3. Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was right inholding that the same Managing Trustee pleaded ignoranceof law in filing the application of another trust ofwhich he was the trustee seeking condonation of delayfor 10 months on 10.03.1999 could again raise the sameplea in the year 2007?" 2.1. The facts in brief: The assessee is a Charitable Trust. In pursuance of the trustdeed executed on 14.02.2000, the assessee has filed an application on19.04.2007 in Form No.10A seeking registration under Section 12AA ofthe Income-tax Act. It is seen from the records that the applicationin Form No.10A was actually signed by the assessee on 29.03.2007.The assessee has also filed its return on 29.03.2007. 2.2. The assessee has stated in its application seekingcondonation of delay that the assessee has started receiving donationand its activities only with effect from 01.04.2005 onwards.Therefore, as per the advice given by the Chartered Accountant of theassessee-trust, the application was made belatedly. It was alsostated that the assessee was in the habit of travelling abroad forthe purpose of collecting donations and therefore for those reasons,the application could not be made within the time prescribed. Hencethe assessee has sought for the condonation of delay of six years andtwo months in making the application seeking for registration underSection 12AA of the Act. 2.3. The Commissioner of Income-tax, Salem has rejected theassessee's request for registration from the date of the inception ofthe trust, but granted the same with effect from 01.04.2007 inaccordance with the proviso to Section 12A(a)(i) of the Act, therebyrestricting the registration with effect from the financial year inwhich the application was made. 2.4. Challenging the said order, the assessee has preferred anappeal to the Tribunal and the Tribunal in and by its order dated https://hcservices.ecourts.gov.in/hcservices/ 12.05.2009 in ITA.No.2428/Mds/2007 has remanded the matter to theCommissioner of Income-tax, Salem to decide the matter afresh afterconsidering the materials to be produced by the assessee. 2.3. The Commissioner of Income-tax, Salem has rejected theassessee's request for registration from the date of the inception ofthe trust, but granted the same with effect from 01.04.2007 inaccordance with the proviso to Section 12A(a)(i) of the Act, therebyrestricting the registration with effect from the financial year inwhich the application was made. 2.4. Challenging the said order, the assessee has preferred anappeal to the Tribunal and the Tribunal in and by its order dated https://hcservices.ecourts.gov.in/hcservices/ 12.05.2009 in ITA.No.2428/Mds/2007 has remanded the matter to theCommissioner of Income-tax, Salem to decide the matter afresh afterconsidering the materials to be produced by the assessee. 2.5. Thereafter, the assessee produced documents including theletter given by the Auditor, who advised the assessee to file theapplication belatedly in view of the fact that there was noactivities in the trust till 31.03.2005. It was further stated inthe said letter dated 21.07.2009 issued by the Chartered Accountantthat he has advised the assessee to seek registration under Section12AA of the Act, only when the return of income for the assessmentyear 2006-2007 was finalised on 29.03.2007. The assessee alsoproduced the documents showing the returns filed from the year 2001onwards indicating that from 31.03.2001 to 31.03.2005, no donationwas received. 2.6. Apart from the above said materials, the assessee alsofiled affidavits before the appellant stating that the donations havebeen received only after 01.04.2005 and as per the advice of theChartered Accountant, steps have been taken for the registration ofthe trust by signing the Form under Rule 10A on 29.03.2007 andthereafter, by compiling all the annexures, it was filed on19.04.2007. However, the appellant has rejected the said contentionon the ground that ignorance of law cannot be a ground for thecondonation of delay and the assessee has registered a trust earlier,in which he was a trustee by name New Life World Mission Trust on30.05.1997. It was also held that the very same Chartered Accountantwas representing the assessee for the above mentioned trust. 2.7. The contention of the assessee that he was travellingfrequently was also rejected by holding that it cannot be said thatthe assessee was always living in aboard and inasmuch as the assesseehas filed the returns for the earlier years, the assessee cannotplead his frequent trips to foreign countries as a ground for non-filing the application within the prescribed time. 2.8. Being aggrieved against the order passed by the appellant,the assessee filed a further appeal to the Tribunal. The Tribunal,in turn, after accepting the contentions of the assessee, has allowedthe appeal. The Tribunal has also taken into consideration of theletter given by the Chartered Accountant. However, the Tribunal hasfurther observed that ignorance of law can also be a ground forcondonation of delay. Therefore, the Tribunal on a consideration ofthe materials placed before it, has allowed the appeal. Challengingthe said order, the Revenue has come forward with this appeal. 3. Heard K.Subramaniam, learned senior standing counselappearing for the appellant and Mrs.Pushya Sitaraman, learned seniorcounsel appearing for the respondent-assessee. 2.8. Being aggrieved against the order passed by the appellant,the assessee filed a further appeal to the Tribunal. The Tribunal,in turn, after accepting the contentions of the assessee, has allowedthe appeal. The Tribunal has also taken into consideration of theletter given by the Chartered Accountant. However, the Tribunal hasfurther observed that ignorance of law can also be a ground forcondonation of delay. Therefore, the Tribunal on a consideration ofthe materials placed before it, has allowed the appeal. Challengingthe said order, the Revenue has come forward with this appeal. 3. Heard K.Subramaniam, learned senior standing counselappearing for the appellant and Mrs.Pushya Sitaraman, learned seniorcounsel appearing for the respondent-assessee. 4. Mr.K.Subramaniam, learned senior standing counsel appearingfor the Revenue submitted that the appellant being the competentauthority to consider the application for condonation of delay hasconsidered the entire materials available on record and rejected thesame. The Tribunal has committed an error in holding that ignoranceof law can be a ground for condonation of delay. It is furthersubmitted by the learned counsel that inasmuch as the assessee hasregistered a trust similar to the present trust already with the sameChartered Accountant, he cannot plead ignorance. Learned counselalso submitted that the taxing statute will have to be interpretedstrictly. 5. In support of his contention, the learned counsel has alsorelied upon the following decisions: Therefore, the learned counsel submitted that the order passed by theTribunal will have to be set aside by answering the questions of lawraised in favour of the Revenue. 6. Per contra, Mrs.Pushya Sitaraman, learned senior counselappearing for the assessee submitted that the object of the provisioncontained in Section 12AA of the Act is to benefit the charitabletrust. Considering the object, the provision contained in Section12A of the Act will have to be considered in favour of the assesseewhen sufficient reasons have been given with documentary evidence toshow that the assessee was prevented from making the applicationbefore the expiry of the period prescribed. Learned senior counselfurther submitted that in the present case on hand the appellant hassatisfied with the genuineness of the object of the trust andtherefore granted the registration under Section 12AA of the Act.Therefore, when such an order is passed and when the assessee hasgiven proper explanation for the delay in making the application, thesame cannot be rejected. Learned senior counsel further submittedthat when the Tribunal being the final fact finding authority hasgiven a decision based upon facts, the same cannot be interfered withby exercising the power conferred under Section 260A of the Act bythis Hon'ble Court. 7. In support of her contention, the learned senior counselrelied upon the following decisions: 1. Sri Vasu Pujiya Jain Derasar Pedhiv vs. ITO(1991 (39) TTJ 337); 2. All India Primary Teachers Federation vs. DIT[(2004) 140 TAXMAN 50]; 3. Edith Wilkins Hope Foundation vs. DIT [2008(111) ITD 97 (Kolkata); 4. Chennai People Education and EconomicDevelopment Society vs. ITO [(2008) 296 ITR 36]; 5. Church of Ourlady of Grace vs. Commissioner ofIncome-tax [(2009) 34 SOT 315]; 6. National Law School of India vs. Director ofIncome-tax [(2009) TIOL 118]; and 7. Commissioner of Income-tax vs. Sanmark MotorsFinance Ltd. [(2010) 322 ITR 309]. 8. Learned senior counsel also relied upon the recent decisionof a Division Bench of Punjab and Haryana High Court in Commissionerof Income-tax v. Village Life Improvement Foundation (2010) (320 ITR188) wherein after finding that there was reasonable cause for thedelay, the Hon'ble High Court has dismissed the appeal filed by theRevenue. Hence, the learned senior counsel submitted that the appealwill have to be dismissed. 4. Chennai People Education and EconomicDevelopment Society vs. ITO [(2008) 296 ITR 36]; 5. Church of Ourlady of Grace vs. Commissioner ofIncome-tax [(2009) 34 SOT 315]; 6. National Law School of India vs. Director ofIncome-tax [(2009) TIOL 118]; and 7. Commissioner of Income-tax vs. Sanmark MotorsFinance Ltd. [(2010) 322 ITR 309]. 8. Learned senior counsel also relied upon the recent decisionof a Division Bench of Punjab and Haryana High Court in Commissionerof Income-tax v. Village Life Improvement Foundation (2010) (320 ITR188) wherein after finding that there was reasonable cause for thedelay, the Hon'ble High Court has dismissed the appeal filed by theRevenue. Hence, the learned senior counsel submitted that the appealwill have to be dismissed. 9. In order to appreciate the submissions made by the learnedsenior counsel for both sides, it is useful to refer to the provisioncontained in Section 12A of the Act. "Provided that where an application forregistration of the trust or institution is made afterthe expiry of the period aforesaid, the provisions ofsections 11 and 12 shall apply in relation to theincome of such trust or institution; (i) from the date of the creation of the trust orthe establishment of the institution if theCommissioner is, for reasons to be recorded in writing,satisfied that the person in receipt of the income wasprevented from making the application before the expiryof the period aforesaid for sufficient reasons; (ii) from the 1[st] day of the financial year inwhich the application is made, if the Commissioner isnot so satisfied." 10. A reading of the above said provision would show that if theCommissioner for the reason to be recorded in writing is satisfiedthat an assessee was prevented from making the application before theexpiry of the period, he shall condone the delay for sufficientreasons. 11. Similarly, Section 264 of the Act deals with the revisionsof the other orders and the proviso to Section 264(3) of the Actprovides that the Commissioner may, if he is satisfied that theassessee was prevented by sufficient cause from making theapplication within that period, admit an application made after theexpiry of that period. 12. A combined reading of the above said sections would clearlyshow that a difference is sought to be made between showing'sufficient reason' as provided in proviso to Section 12A of the Actand 'sufficient cause' in proviso to Section 264(3) of the Act. Theword 'cause' has been defined in Black's Law Dictionary as follows: "Cause : 1. Something that produces an effect orresult, the cause of the accident, but-for-cause. Thecause without which the event could not haveoccurred." Similarly the word 'reasonable' has been defined in Black's LawDictionary as follows: "reasonable : 1. fair, proper or moderate underthe circumstances, reasonable pay. 2. According toreason, your argument is reasonable but notconvincing." Therefore, what is 'sufficient reason' in proviso to Section 12Ais 'sufficient reason', which cannot be 'sufficient cause'. 13. Admittedly, in the present case on hand, the assessee hasstarted receiving donation only after 01.04.2005. As seen from therecitals filed by the assessee as well as the letter of the CharteredAccountant, it is clear that there was no donation received prior to01.04.2005 and the return was filed showing 'nil' income. Theassessee has offered explanation that is the reason why it wasadvised by the Chartered Accountant to file the applicationbelatedly. It is also seen from the records that the assessee hasfiled the return on 29.03.2007. It also signed the application inForm 10A on 29.03.2007. However, due to the mistake of the CharteredAccountant, the same was presented only on 19.04.2007. Had it beenfiled the application on or before 31.03.2007, the assessee wouldhave got the relief for the year 2005-2006. 14. Be that as it may, it is not in dispute that the letter ofthe Chartered Accountant is genuine. The said letter has not beendisputed. It is also not in dispute that the very same CharteredAccountant was representing the other firm, in which the Director ofthe present trust was also a Director. Therefore, in view of thefact that the very Chartered Accountant has been the auditor forseveral years, the assessee naturally went by his advise.Explaining the said fact, the assessee has also filed affidavits insupport of the same. It is also the specific case of the assesseethat it only seeks registration from 01.04.2005 onwards. The delayhas been considered from the date of the inception of the trust inview of the provisions contained in Section 12A of the Act. In otherwords, what the assessee wants is only from 01.04.2005 onwards, butby the operation of law, if the delay is condoned, the assessee wouldautomatically get the registration from the date of the inception ofthe trust. 15. The Tribunal has taken into consideration all the materialsplaced before it while coming to the conclusion. The said finding ofthe Tribunal based upon facts cannot be interfered with by exercisingthe power conferred under Section 260A of the Act. It is wellestablished that in normal practice, every assessee would be guidedby the advise of the Chartered Accountant. Therefore, the said factthat the assessee went by the advise of the Chartered Accountant,which resulted in the delay in making the application would besufficient enough to condone the same, as the assessee was preventedby the said 'sufficient reason'. 16. It is also to be seen that the power under Section 12A hasto be exercised by the appellant keeping in view the object ofSection 12AA of the Act. Admittedly, the assessee is a charitabletrust. The genuineness of the trust has also been verified to thesatisfaction of the appellant. Therefore, in view of the saidadmitted factual position, the appellant ought to have exercised thediscretion based upon the materials placed before him by condoningthe delay. 17. However, we find considerable force in the contention madeby the learned senior counsel appearing for the Revenue inasmuch asthe Tribunal has wrongly observed that ignorance of law can be aground to condone the delay. It is rather a well settled principleof law that ignorance of law cannot be a ground. Every assessee isduty bound to know the provisions of law. The Act presupposes anassessee to know its provisions. However, considering the facts ofthe case, we are of the opinion that the assessee was prevented fromsufficient reason from making the application within the timeprescribed. 18. The judgments relied upon by the learned counsel for theRevenue, in our considered opinion, are not applicable to the present https://hcservices.ecourts.gov.in/hcservices/ case on hand. It is well settled principle of law that anapplication for condonation of delay will have to be considered onthe facts of each case. We are satisfied that the order passed bythe Tribunal is based upon the materials available on record, whichcannot be interfered with. As contended by the learned seniorcounsel appearing for the assessee, the Revenue has not chosen tofile appeals in cases where the Tribunal has condoned the delay ofnearly forty years. Therefore, considering the above said facts, wedo not find any reason to interfere wit the orders passed by theTribunal. 19. For the reasons stated above, the order passed by theTribunal cannot be set aside and the appeal is dismissed. Thesubstantial questions of law raised are answered against the Revenueand in favour of the assessee. No costs. Sd/-Asst.Registrar/True Copy/Sub.Asst.RegistrarATRTo 1. The Assistant Registrar, Income Tax Appellate Tribunal Madras 'A' Bench Madras.2. The Commissioner of Income Tax No.3, Gandhi Road, Salem 636 007. 19. For the reasons stated above, the order passed by theTribunal cannot be set aside and the appeal is dismissed. Thesubstantial questions of law raised are answered against the Revenueand in favour of the assessee. No costs. Sd/-Asst.Registrar/True Copy/Sub.Asst.RegistrarATRTo 1. The Assistant Registrar, Income Tax Appellate Tribunal Madras 'A' Bench Madras.2. The Commissioner of Income Tax No.3, Gandhi Road, Salem 636 007. + 1 cc to Mr.K. Subramaninam, Advocate SR.60998+ 1 cc to Mr.b. Rabu Manohar, Advocate SR.60559 TC (A) No.477 of 2010BV(CO)Eu 27.08.2010.