Income Tax Appellate Tribunal - Bangalore
Karnataka Golf Association vs The Director Of Income-Tax (Exe.) on 31 July, 2003
Equivalent citations: [2005]272ITR123(BANG)
ORDER
G.E. Veerabhadrappa, Accountant Member
1. This is an appeal by the assessee arising out of the order dated 17.12.2002 of the Director of Income-tax (Exemption) ["DIT(Ex.)" for short], Bangalore in respect of registration of the assessee Under Section 12A of the Income-tax Act, 1961 [hereinafter referred to as "the Act"].
2. The assessee M/S. Karnataka Golf Association was registered as a society under the Mysore Societies Registration Act on 3.9.1973 and made an application in Form No. 10A seeking registration Under Section 12A of the Act. The DIT(Ex.), Bangalore, before whom the application was made, called for certain information as to the nature of assessee's activity. The DIT(Ex.) went through the several details furnished by the assessee and has come to a conclusion that there is absence of element of charity and therefore, the assessee's case is not a fit case for grant of registration Under Section 12A of the Act. The application of the assessee was rejected by the impugned order.
3. The assessee, apart from reiterating the contentions it had taken before the DIT(Ex.), has pointed out that the impugned order is hopelessly beyond the time prescribed Under Section 12AA(2) of the Act and the DIT(Ex.) had become functus officio on the expiry of limitation and could not have passed the impugned order, which is liable to be quashed. The assessee, in the present appeal, also seeks remedy by way of grant of registration on the principles of equity and justice.
4. We have heard the parties mainly on the question of limitation. We have not heard the parties on the merits of the case. We, therefore, proceed to dispose of the preliminary issue as regards the validity of the impugned order.
5. The learned Departmental Representative Shri Amitabhkumar, on the other hand, has questioned the very validity of the appeals filed. The learned Departmental Representative pointed out that the appeals filed are defective inasmuch as the same were not signed in the manner laid down by Section 140 of the Act and, therefore, the appeal should be dismissed on this preliminary ground. The learned counsel for the assessee Shri K.R. Prasad, on the other hand, pointed out that the Tribunal has pointed out these defects and week's time was granted to rectify the same and the appeal papers are now signed by the Honorary Secretary. The defect pointed out by the Tribunal has since been cured and the appeal should be entertained an merits. Our attention was drawn to the decision of the ITAT in the case of Wipro Information Technology Ltd. in ITA No. 651/Bang/94 wherein an identical issue has been decided in favour of the assessee.
6. We have gone through the entire records. The assessee is an association of persons and in the case of association of persons, Under Section 40(e), the appeal may be signed by any member of the association or principal officer thereof. It is not in dispute that the treasurer who originally signed the appeal was not a member of the association. Now, in any case, the defect pointed out by the Tribunal has since been rectified and the rectification has the effect of curing the defect from the date of its inception. The Tribunal has, in the case of M/s. Wipro Information Technology Ltd. (supra) has extensively dealt with the similar contentions of the department and rejected these contentions by following the principle laid down by the Hon'ble Supreme Court in the case of Union Bank of India v. Naresh Kumar and Ors. Reported in 1997 AIR(SC)3. Following the same principles, we proced to entertain this appeal and dispose of the same on the basis of grounds of appeal.
7. Now coming to the validity of the impugned order, the assessee made application for registration Under Section 12A of the Act on 23-1-1998. Copy of the acknowledgement for having filed the said application is on record. The provisions of Section 12AA(2) provide that every order granting or refusing registration under Clause (b) of Sub-section (1) of Section 12AA shall be passed before the expiry of six months from the end of the month in which the application was received. In other words, the said application of the assessee for registration should have been disposed of by the DIT(Ex.) by 31-7-1998. The impugned order has been passed on 17-12-2002, which is glaringly, or hopelessly beyond the time prescribed under Section 12AA(2). The order, which is barred by limitation, is non est in law and is liable to be vacated. We, therefore, are left with no other alternative but to quash the impugned order. We, therefore, agree with the assessee that the DIT has become functus officio on the expiry of limitation and could not have passed the impugned order.
8. Now, the assessee wants us, on the principle of equity and justice, to order the grant of registration. The main contention of the assessee in this regard is that the Department cannot pass an order refusing to grant registration under Section 12AA beyond the expiry of six months. Therefore, the Department could have either granted registration within a period of 6 months or should have refused registration within that period. It has refused registration after the period of limitation, which it could not do in the eye of law. Therefore, it follows that the assessee should be held to be entitled to registration on the basis of application submitted by it and the principles of equity and justice should come to the rescue of the assessee and the Tribunal should direct for grant of registration. The learned counsel further pleaded that the Department cannot take advantage of its own latches and negligence to pass order within the prescribed time limit. In other words, the Department cannot be allowed to refuse registration by not acting within the prescribed time limit. The learned counsel pleaded that what it, cannot do directly, cannot be allowed to be done indirectly by implication or by lapse of action.
9. The learned Departmental Representative, on the other hand, vehemently opposed these contentions of the learned counsel and pointed out that the Tribunal cannot direct the Department to grant registration. Even the act of granting registration has to be done within the prescribed time limit. The DIT(Ex.) could not even have granted registration beyond the time limit and therefore, the Tribunal: cannot direct department to grant registration without going into the merits of the assessee's claim for grant of registration. The learned DR further vehemently pleaded that the provisions of Section 12AA are purely procedural in nature and the words "shall" in Section 12AA(2) should be taken to be directory and not mandatory. The order passed by the DIT(Ex.) even after expiry of six months can only be set at naught by going into the merits of the case.
10. We have carefully considered the rival submissions and gone through the records. Section 12A was inserted by the Finance Act, 1972 with effect from 1-4- 1973. It was omitted by the Direct Tax Laws (Amendment) Act, 1987 with effect from the same date and these provisions were re-introduced by the Direct Tax Laws (Amendment) Act, 1989 with effect from 1-4-1989. The provision of Section 12A provided that the provisions of Sections 11 and 12 relating to exemption of income from property held for charitable or religious purposes or from voluntary contributions received by the trust created for such purposes, shall not apply in relation to income of any trust or institution unless the person in receipt of income has made an application for registration of the trust or institution in the prescribed form to the Commissioner before certain specified date. It also provided for audit of accounts where income of the trust or institution exceeded certain limits. Up to 31.3.1997 the requisite condition contemplated under Section 12A(a) was mere filing of application for registration within the prescribed time. Where such an application was properly filed, exemption was to follow whether or not the trust or institution was, following such application, accorded registration. In other words, the Act did not provide for procedure for registration till such procedures were prescribed by introduction of Section 12AA by the Finance (No. 2) Act, 1996 with effect from 1/4/1997. The provisions of Section 12AA, which are the bone of contention in the present appeal, are reproduced below:-
"Section 12AA. Procedure for registration - (1) The Chief Commissioner or Commissioner, an receipt of an application for registration of a trust or institution made under Clause (a) of Section 12A, shall-
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant.
Provided that no order under Sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(2) Every order granting or refusing registration under Clause (b) of Sub-section (1) shall be passed before the expiry of Six months from the end of the month in which the applicant was Received under Clause (a) of Section 12A".
11. As already stated, there was no specific provision for processing application for registration under Section 12A of the Act up to 31.3.1997. For granting or refusal of registration to the concerned trust or institution, to fill up such gap, with effect from 1.4.1997 the Finance (No. 2) Act, 1996 has laid down the procedure to be followed for grant or refusal of registration new Section 12AA was inserted. Section 12AA(1)(a) empowers registering authority to call for such documents or information from the assessee it thinks necessary in order to satisfy itself about the genuineness of activities of the trust or institution. Further, the authority has also been empowered to make such enquiries as it may deem necessary in this behalf. The provisions of Section 12AA(1)(b) provide for Passing of an order on the basis of the application for registration. Under the aforesaid provisions, the registering authority shall pass an order in writing registering trust or institution if it is satisfied about the genuineness about the objects of the trust or institution and the genuineness of its activities and also requires such authority, where it is not so satisfied, pass order in writing refusing to grant registration. In the case of an order, refusing to grant registration, the law provides that the same shall not be passed unless application has been given a reasonable opportunity of being heard in the matter. The provisions of Sub- section (2) of Section 12AA prescribe the time limit for grant or refusing registration. As already pointed out, the impugned order is clearly bad and is outside the time limit prescribed. There is no specific provision prescribing consequences for non- passing of the order for grant or refusal of registration within the aforesaid statutory period of limitation. Where the authority does not pass an order within the prescribed time limit, whether it follows that the application for registration should be taken to be granted or not. The assessee wants us to lay down this principle, which the learned Departmental Representative is vehemently opposing. The assessee has made an application within the prescribed time. The authority before whom such an application is made should have acted diligently within the time limit prescribed by the Act. Beyond the prescribed time limit, the said authority cannot act so as to deprive the assessee the benefit of registration. Even if the authority had granted registration after the prescribed time limit, although it is barred by limitation, the assessee would have accepted it since it is to its benefit and the Department would have accepted the said order as there is no right of appeal to the Department against the order granting registration to the assessee. In other words, the order granting registration to the assessee would have survived to the benefit of the assessee had said order been passed, although in the eyes of law, even such an order is liable to be questioned on the basis of principles of law of limitation. The department, by failing to pass an order within the prescribed time limit, cannot be seen to be refusing to grant registration just by its own lapse. In other words, the latches and the lapse on the part of the Department cannot be to its advantage. In other words, wherever application is made, the authorities must act within the time frame. If they fail to act within the time frame, the application should have been treated as has been acted upon in favour of the applicant. In other words, failure on the part of the authority concerned to pass order within the statutorily laid down period of limitation will give rise to a presumption that registration, as applied for by the assessee, has been granted. This is the natural and legal consequence of an action on the part of the Department not to have acted within the prescribed time frame. Otherwise, the executives who are supposed to carry on the intentions of the Legislature will only be thriving by their own lapses and latches. If the assessee files a return and the Department does not pass an order, the return of income is deemed to have been accepted. While dealing with the provisions of Section 139, where assessee applied for extension of time and the officer did not reply, Several courts have taken a view that the time as prayed for by the assessee is deemed to have been granted and the assessee was justified in assuming that his application has been granted by the officer. Reference may be made, among other decisions to Lachman Bhaturbhuj Java v. R.G. Nitsure and Ors. (132 ITR 631 (Bom), Harmanjit Trust v. CIT (148 ITR 214) (P & H) and CIT v. Surinder Kumar Pramod Kumar and Ors. (193 ITR 71) (P & H). The Hon'ble Supreme Court has dismissed Special Leave Petition by the Department against the judgment in the case of Surinder Kumar Pramod Kumar and Ors. Reported in (1993) 204 ITR (St.) 9). Applying these principles and in the interests of justice, we observe that the assessee had done what is expected of him under the law i.e. to seek registration by making an application. The Department should have acted vigilantly in refusing to register, if it is so satisfied, within the period of limitation prescribed by the provisions of Section 12AA(2) of the Act. Having not done, it loses the benefit of legally refusing to grant registration. The department, by its latches cannot be said to have taken the same position by not acting within the time limit prescribed. We, therefore, grant registration to the assessee on the basis of its application dated 23-01-1998 and to that extent, the assessee should be taken to have satisfied the conditions as to registration of the trust/institution etc., required Under Section 12A of the Act. The Assessing Officer is directed to proceed as if registration has been granted by the DIT(Ex.) under Section 12A of the Act.
12. In the light of the discussion, we feel that it is not necessary to go into the merits of the claim of the assessee. The impugned order of the DIT(Ex.) is quashed and for the purpose of assessment, registration is deemed to have been granted under Section 12A of the Act. The Assessing Officer is directed to revise the assessments framed in the case of the assessee to fall in line with this order.
The appeal is to be treated as allowed.