Income Tax Appellate Tribunal - Kolkata
Edith Wilkins Hope Foundation (Now ... vs Director Of Income-Tax (Exemption) on 28 September, 2006
Equivalent citations: [2008]111ITD97(KOL), [2008]296ITR60(KOL), (2007)110TTJ(KOL)349
ORDER
M.V. Nayar, Accountant Member ITA No. - 1121/K/06
1. This appeal is directed against an order dated November 12, 2001 passed by the Director of Income Tax (Exemptions), Kolkata ["DI(E)"] Under Section 12AA of the Income Tax Act, 1961 ("the Act"). The assessee, a society registered under the West Bengal Societies Registration Act, 1961 on October 4, 1999, in its application dated November 5, 2001 had requested for registration Under Section 12AA from its inception but the DI(E) granted such registration with effect from April 1, 2001.
2. There is a delay of 4 years 4 months and 12 days in preferring this appeal. A duly sworn affidavit of the assessee's Director has been filed explaining the reasons for the delay. The material contents of the said affidavit may be summarised thus:
(a) The assessee was registered as a society with the mission to improve the quality of life of the underprivileged women and children living in difficult circumstances, particularly the families and children living on the pavements of Kolkata.
(b) Most of the funds for the assessee's activities are received from the Hope Foundation, Ireland. The assessee was registered on February 24, 2003 under the Foreign Contribution (Regulation) Act, 1976. Prior to such registration, in accordance with the provisions of Section 6(1A) of the said Act, the assesses applied for prior permission of the Central Government for receiving the contributions from the Hope Foundation, Ireland for its objects. The Central Government granted such permission. The assessee also submitted to the Central Government full details about the utilization of the foreign contribution received by it.
(c) In the year 1999 itself, the assessee set up a Home in Kolkata for street and abandoned children.
(d) Due to unprecedented floods in the city of Kolkata in the year 1999, there was a serious outbreak of Malaria. In November, 1999, the assessee set up a clinic for treatment of malaria patients and the more serious cases were referred to Hospitals and Nursing Homes. The said clinic continued till June, 2000.
(e) Mrs. Sheila Banerjee was the Secretary of the assessee. She went abroad in November, 2000. After her departure, the assessee did not have any Secretary.
(f) After the earthquake in Bhuj, Gujarat, the office bearers and members of the assessee, with the permission of the Central Government, got fully involved in earthquake relief work from January 28, 2001. Such relief work continued till March 31, 2002.
(g) All the office bearers and members of the assessee were fully involved in charitable work since the inception of the assessee. They bona fide proceeded on the basis that there was no income tax implication since the assessee merely received funds and spent them for charitable purposes. They had no idea about the need to obtain registration Under Section 12AA.
(h) In or about June, 2001, the then Vice President of the assessee Sri Anil Kumar Bhunia was requested to perform the functions of the Secretary.
(i) In or about October, 2001, Shri Anil Kumar Bhunia came to learn from similar organisations engaged in charitable work that it was necessary to obtain registration Under Section 12AA of the Act and comply with formalities under the Act by way of filing returns etc. Accordingly, he prepared an application for obtaining registration and on November 5, 2001 submitted it in the office of the DI(E) with a request for condonation of the delay and grant of registration from the assessee's inception.
(j) By an order dated November 12,. 2001 the DI(E) granted registration with effect from April 1, 2001. However, the implication of such registration instead of from inception could not be immediately ascertained because the office bearers and members of the assessee were heavily involved in the earthquake relief work at Bhuj.
(k) The matter could be addressed only after the office bearers and members of the assessee returned from Bhuj. The assessee consulted Sri K.B. Roy, Advocate who advised the making of an application to the DI(E) for correction of the date of registration. On December 26, 2002 Sri K.B. Roy, Advocate also made such application on behalf of the assessee. The assessee expected favourable disposal of the said application and waited for the same.
(l) When the Assessing Officer issued notices Under Section 148 of the Act for the assessment years 2000-01 and 2001-02 and in course of such proceedings took the stand that exemption Under Section 11 was not available for the said two years in the absence of registration Under Section 12AA, the assessee on February 1, 2006 made another application to the DI(E) referring to its previous application dated December 26, 2002 and prayed for rectification of the order dated November 12, 2001 and grant of registration with effect from October 4, 1999. No orders were received either on the application dated December 26, 2002 or the application dated February 1, 2006.
(m) After receipt of the assessment orders for the assessment years 2000-01 and 2001-02 denying exemption Under Section 11 for lack of registration Under Section 12AA, the assessee sought advice from Sri K.V. Singh, Advocate who pointed out to the assessee for the first time that the provisions of Section 253(1)(c) of the Act were amended with effect from June 1, 1999 to provide for an appeal before the Tribunal against an order passed Under Section 12AA. Sri K.V. Singh, Advocate advised that the filing of the rectification application and pursuing the same was not the appropriate remedy and the proper course was to file an appeal before the Tribunal along with an application for condonation of the delay.
(n) The office bearers and members of the assessee are not conversant with the provisions of the Act and were not aware about the appeal provision introduced in the Act with effect from June 1, 1999. Even Shri K.B. Roy, Advocate, whom the assessee had consulted in the year 2002, was not aware of the appeal provision since he did not mention about it and advised the assessee to apply for rectification before the DI(E). The assessee bona fide accepted the advice of Sri K.B. Roy and instructed him to file the application before the DI(E) which he did and waited for its disposal. The assessee again pursued the DI(E) when the issue of registration arose in course of the proceedings Under Section 147. The assessee being unaware of the appeal procedure could not avail of it earlier. Upon coming to know of the same in the first week of May, 2006 from Sri K.V. Singh, Advocate the assessee took expeditious steps for filing the appeal along with the application for condonation of appeal and the same were filed on May 23, 2006.
3. On behalf of the assessee, reliance was placed on the aforesaid factual explanation. It was submitted that the assessee had bona fide acted according to the advice received by it by filing the rectification application and pursuing it. The assessee filed the appeal before the Tribunal within the shortest possible time after coming to know that an appeal lay before the Tribunal. Reliance was placed on the judgment of the Hon'ble Supreme Court in N. Balakrishnan v. M. Krishnamurthy . Reliance was also placed on a Third Member decision in People Education & Economic Development Society v. Income Tax Officer (2006) 100 ITD 87 (Chennai) (TM).
4. On behalf of the revenue, the prayer for condonation of delay was opposed.
5. There is no dispute about the fact that the assessee is doing good charitable work. The assessee has been granted exemption Under Section 11 from the assessment year 2002-03 and onwards. Most of the funds are received from Ireland and the Government of India has permitted the assessee to receive foreign contributions because of its genuine work. The office bearers and members of the assessee are fully occupied in its charitable activities. The order under appeal was received at a time when they were all involved in the earthquake relief work at Bhuj. After that project was over, a lawyer was consulted and according to his advice a rectification application was made to the DI(E). The rectification application is on the lawyer's letterhead and signed by him on behalf of the assessee. The lawyer did not advise the assessee to prefer an appeal before the Tribunal. The assessee having filed the rectification application as per advice received, pursued the same. It is the assessee's case that it was not aware about the amendment in the law providing for appeal before the Tribunal against an order Under Section 12AA nor did the lawyer whom it had consulted in the year 2002 apprise it of the appellate procedure resulting in its inability to avail the same at that time.
6. In The State of West Bengal v. The Administrator, Howrah Municipality it was held by the Hon'ble Supreme Court that if a party had acted in a particular manner on a wrong advice given by his legal advisor, he cannot be held guilty of negligence so as to disentitle the party to plead sufficient cause. In N. Balakrishnan v, M, Krishnamurthy (supra) it was held by the Hon'ble Supreme Court that the rules of limitation were not meant to destroy the rights of parties. They were meant to see that parties did not resort to dilatory tactics but sought their remedy promptly. Condonation of delay was a matter of discretion of the Court. Length of delay was no matter, acceptability of explanation was the only criterion. In every case of delay, there would be some lapse on the part of the litigant concerned. That alone was not enough to turn down his plea and shut the door against him. If the explanation did not smack of mala fides or it was not put forth as part of a dilatory strategy, the Court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time, then the Court should lean against acceptance of the explanation There was no presumption that delay in approaching the Court was always deliberate, The words "sufficient cause" should receive a liberal construction so as to advance substantial justice.
7. Examining the facts of the instant case in the light of the aforesaid principles laid down by the Hon'ble Supreme Court, it has to be held that the assesses was prevented by sufficient cause from preferring the appeal and the delay has to be condoned. The assessee cannot be faulted for having bona fide acted on the advice received by it for filing the rectification application before the DI(E) and pursuing it. It is not implausible that the amendment providing for appeal which was fairly recent at the time when the decision was rendered by the DI(E) may not have come to the notice of the assessee or even its lawyer as claimed by it. Even if it is taken that the lawyer knew of the appeal provision and yet did not advise the assessee to avail it, the assessee cannot be faulted. The assessee had nothing to gain from delaying the filing of the appeal. The assessee's explanation is bona fide and the facts do not show that the assessee deliberately delayed the filing of the appeal. In People Education and Economic Development Society v. Income Tax Officer (supra), on almost similar facts, the Tribunal condoned the delay. For these reasons, the delay in this case has also to be condoned.
8. The short ground involved in the appeal is whether the DI (E) was justified in not granting registration with effect from October 4, 1999. According to Section 12A(a), the application for registration should have been made before the expiry of one year from October 4, 1999 when the assessee was registered as a society. The proviso takes in a situation where the application for registration is made after the expiry of one year. The Commissioner is empowered to condone the delay in the making of the application if he is so satisfied and grant registration from the date of establishment of the institution. If he is not so satisfied, registration is to be granted from the first day of the financial year in which the application is made. In the instant case, the application was made on November 5, 2001 and registration has been granted from April 1, 2001. Therefore, the DI(E) did not consider it a fit case for condoning the delay, though his reasons for not accepting the assessee's explanation are not stated in his order dated November 12, 2001.
9. On behalf of the assesses it was submitted that the reasons which prevented the assessee from making the application within the period of one year have also been given in the affidavit to which reference has been made earlier. It was submitted that there was no dispute about the assessee's entitlement to registration Under Section 12AA and that it had fulfilled ail the conditions in that behalf. Registration has in fact been granted with effect from April 1, 2001 and the assessee is only claiming that it should be granted from October 4, 1999 since there were sufficient reasons which prevented it from making the application within the period of one year. Reliance was placed on an unreported decision of the Tribunal in St, Stephens School v. Director of Income Tax (Exemptions) -ITA No. 2137/Kol/2003 decided on April 7, 2004.
10. On behalf of the revenue, the learned Departmental Representative supported the order of the DI(E).
11. In N. Balakrishnan v. M. Krishnamurthy (supra) it was held by the Hon'ble Supreme Court that in a case where the first court refused to condone the delay, the superior court would be free to consider the cause shown for the delay afresh and it is open to such superior court to come to its own finding untrammeled by the conclusion of the lower court.
12. It is, therefore, to be seen as to whether there were sufficient reasons which prevented the assessee from making the application for registration before the expiry of one year. The acceptability of the assessee's explanation has to be tested on the same principles which have been adverted to earlier. It is the assessee's case that its office bearers and members were completely involved in charitable work since its inception and bona fide proceeded on the basis that there was no income tax implication because the assessee merely received funds and spent them for charitable purposes. For about seven months during 2000-01 the assessee did not have a Secretary. The assessee came to know about the need for registration only in October 2001 when the person entrusted to perform the functions of Secretary learnt of it from other organisations in the field and immediately thereafter it applied for registration with a prayer for condonation of delay. There is no reason to disbelieve the said explanation. The commitment and involvement of the assessee's office bearers and members in charitable work since Inception cannot be disputed. The assessee did not even have a Secretary during a large part of the financial year 2000-01. It is not implausible that all the persons who were heavily involved in the charitable work may not have addressed themselves to taxation aspects and bona fide proceeded on the commonsense point of view that there was no tax obligation since no income was being earned and the assessee was only spending contributions received for charitable purposes. There is nothing to suggest any deliberate or intentional delay in filing the application for registration. The assessee had nothing to gain by delaying the application. The assessee applied for registration as soon as it became aware of its obligation. This is a fit case where the delay should have been condoned and registration should have been granted from October 4, 1999 particularly since there is no dispute that the assessee had fulfilled ail the conditions for grant of registration and is indisputably a public charitable institution. In St. Stephens School v. Director of Income Tax (Exemptions) (supra) the Tribunal held that the benefit provided in the statute for exemption of certain income should not be denied to the assessee on mere technicalities provided the other conditions, for grant thereof are satisfied and the conduct of the assessee is a bona fide one. In the facts of the instant case it has to be held that the delay in filing the application for registration was for sufficient reasons and is therefore to be condoned. The assessee has to be granted registration Under Section 12AA with effect from October 4, 1999 and the DI(E) is directed accordingly.
13. Since the appeal itself has been allowed, the stay petition has become infructuous and no order needs to be passed thereon.
Order pronounced in the Open Court on 28.9.06