Income Tax Appellate Tribunal - Bangalore
Kadur Vidhya Pratishtana vs Cit on 4 May, 2006
ORDER
N.L. Kalra, Accountant Member
1. The assessee has filed appeal against order of the learned CIT, Mysore dated 30-9-2004.
2. The only grievance of the appellant is that the learned CIT has erred in not condoning the delay in filing the application of registration and not granting registration to the trust from inception.
3. The appellant filed application for registration of trust under Section 12A of the Income Tax Act on 9-11 -2001. The Trust was created as back as on 21-9-1988 and as per provisions of Section 12A of the Income Tax Act, application for registration was to be made within one year of inception. The assessee gave the following reason for filing belated application:
We were under the genuine impression that out Institutions were covered under Section 10(22) being an Educational Institution. Later we came to know that Section 10(22) was omitted with effect from 1 -4-1999.
We had been advised that till that time, registration under Section 12 A and filing of the return of income was not compulsory.
We were not aware of the said amendment for quite a long time. Even one among us is an advocate, yet it was not possible to keep tract of the amendment of the Income-tax Law, since. We never practice on income-tax side. As soon as we came to know of the amendment during the year2001, we have filed the application. We respectfully submit that delay in filing the application was not intentional, but due to unavoidable circumstances. The delay is bona fide. Ours being a purely social service and charitable institution, we kindly request you to condone the delay and grant us the Registration from the date of inception and oblige.
4. Vide letter dated 25-4-2003, the assessee further explained the reasons for the delay as under :
(1) As we were under bona fide impression as our trust was formed for only education purpose and, therefore, the trust was for the educational purpose and charitable purpose and we were under the bona fide impression that it is exempt from tax under Section 10(22) of the Income Tax Act and, therefore, registration under the provisions of Section 12A was not required.
(2) Being a small place, it was very difficult for us to know the intricacies, technicalities and time limits prescribed under the law. There are innumerable legislations prevailing and a person of our caliber could not keep track of the same.
(3) We are running the trust only for the public and charitable purpose andnot for the purpose of any profit.
(4) We were under the bona fide impression that the trust is to be registered with the Registrar of Firms only.
(5) The said non-registration in time with the Income Tax Act was not intentional, but due to inadvertence which was a bona fide mistake.
We were advised that we are required to register ourselves under Section 12A of the Income Tax Act, we have applied for the same We kindly request you to register our trust under Section 12A of the Act and grant us registration from the date of inception.
5. The learned CIT was not convinced with the reasons given above. As per learned Commissioner (Appeals), the explanation for condoning the delay must cover the whole period of delay. Ram Narain Joshiv. Parmeshwar Navab Mehta (1903) ITR 30 Cal. 309, J.B. Advani & Co. (P.) Ltd, v. R.D. Shah, CIT Delhi High Court in the case of M.S. Nulon India Ltd. v. CIT , held that rejection of application for condonation of delay was held justified because the plea that the petitioner could not get proper legal guidance was, on facts, was not valid in view of the finding that the assessee had services of a chartered accountant and also of a tax consultant. An illegal action even if done in bona fide intentions cannot become u legal. It was stated that a couple of trustees were advocates and they are presumed to possess definite knowledge about the necessity to register a deed in time to claim recognition under Section 12A. It was held by Madras High Court that ignorance of law cannot be a sufficient reason. In the case of Vishwanathan Silk Centre v. CIT the learned CIT further observed as under :
It may further be seen that acceptance of ignorance of law or legislative amendments as a sufficient reason for non-compliance of legal obligations will have an adverse impact on the implementation of any act since every failure of any legal requirements or defiance of law can be easily explained as caused due to ignorance and hence not punishable will make the administration of any law as impossible and this cannot be the intention behind any legislation.
6. Before us, the learned A.R. submitted that the income of the trust was exempt under Section 10(22) of the Income Tax Act till the assessment year 1998-99. Section 10(22) was omitted with effect from 1-4-1999. The appellant was not aware of the omission of Section 10(22). As and when the appellant became aware, it applied for registration of trust. The delay in this case is not of 12 years but is of 1 year and 7 months. The learned A.R. stated that the trust be granted registration with effect from 1-4-1999. The learned A.R. relied on the judgment of the Allahabad High Court in the case of All India Primary Teachers Federation v. CIT (1983) 140 ITR 50 (sic) where it was held that when there was no reason to disbelieve plausible explanation of assessee that its office bearers could not have had any reason to see applicability of provisions of taxability aspect of assessee, there was genuine and bona fide grounds for delay in filing application for registration and such delay is required to be condoned.
7. On the other hand, the learned D.R. supported the order of CIT. It was stated that advocates were also trustees of the trust and they must have been aware of the provisions of the Act. The decision of Allahabad High Court is not applicable as in that case the trust was of primary teachers and such teachers may not be aware of the provisions of the Act.
8. We have heard both the parties. The relevant section is reproduced as under:
12 A. The provisions of Section 11 and Section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:
(a) the person in receipt of the income has made an application forregistration of the trust or institution in the prescribed form and inthe prescribed manner to the (* * *) Commissioner before the 1-71973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under Section 12AA:
Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of Sections 11 and 12 shall apply in relation to the income of such trust or institution,
(i) from the date of the creation of the trust or the establishment of the institution if the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;
(ii) from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied;
9. If the assessee is able to show that there were sufficient reasons for not being able to file the application for registration in time, then the provisions of Sections 11 and 12 will not be applicable.
10. The word sufficient means 'adequate', 'enough', 'as much as may be necessary' to answer the purposes intended. The expression should receive liberal construction so as to advance substantial justice Sarpanch, Lonand Grant Panchayat v. Ramgiri Gosavi .
11. The next question to be seen is to ascertain as to whether the person in receipt of the income was prevented from making application before the expiry of the period aforesaid for sufficient reasons.
12. The expression "before the expiry of the period" in proviso (i) of Clause (a) of Section 12A requires sufficiency of reasons which prevented the person from making the application within one year as required and not the reasons for the period beyond the prescribed period of one year. Hence, total period of delay is not to be explained and the authority is required to examine whether sufficient reasons existed for not making the application within the pi-escribed period of one year. Reliance is placed on the decision of Madhya Pradesh High Court in the case of Society of Divine Providence v. Union of India .
13. The jurisdictional High Court in the case of CWT v. Chikmagalur Club had an occasion to consider the levy of penalty under Section 18(1)(a). In this case, the assessee contended that it was a club registered under Karnataka Societies Registration Act and is an assessing officer and, therefore, not susceptible to wealth tax. This was bona fide belief of the assessee. The learned High Court held that a cause could be said a reasonable cause, if it is not actuated by bad faith or false grounds. In the instant case, the society was existing for educational purposes and income was exempt under Section 10(22) of the Income Tax Act. Such belief is true and no proceedings were ever taken against the assessee by the revenue department. Section 10(22) was omitted with effect from 1-4-1999 and such educational institution in order to civil benefit of exemption was required to apply for registration under Section 12A of the Act. It has been contended on behalf of the assessee that persons managing the society were not aware of Section 12A of the Income Tax Act. After becoming aware, the society applied for registration. The learned CIT has heavily relied on the fact that some of the trustees were advocates. It has not been established that g such advocates were dealing with income-tax matters and were also in charge of the management of the society.
14. In the case of M.S. Nulon India Ltd. (supra), the learned Delhi High Court rejected the application for condonation of delay because of the fact that the assessee was not only having services of a Chartered Accountant but also of a tax consultant who was a former Indian revenue Service person working in the Income-tax department. In view of this f act it was held that the plea of not getting proper legal guidance is not valid. However in the instant case it has not been established as a fact that the advocates who were trustees of the society were aware of the provisions of the Income-tax Act and the plea of the assessee that it was unaware of Section 12A of the Income Tax Act cannot be out rightly rejected without ascertaining the facts. It is true that the learned Madras High Court in the case of Vishwanathan Silk Centre (supra) held that ignorance of law is no excuse. In that case the request was for condonation of delay for claiming exemption under Section 80HH. In such a case the assessee was getting assistance in filing of the return and it cannot be said that the persons who were assisting the assessee in filing the return were not aware of the provisions of law.
15. The learned Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. had occasion to deal with the maxim that everybody is presumed to know the law. The learned Supreme Court held that it is not a correct statement that everyone is presumed to know the law. It will be relevant to quote the following observations at page 339 of the above judgment.
Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement: there is no such maxim known the law. Over a hundred and thirty years ago, Maula, J. pointed out in Martindale v. Falkner (1846) 2 CB 706: "There is no presumption in this country that every person knows the law: it would be contrary to common sense and reason if it were so". Scrutton L.J. also once said: "It is impossible to know all the statutory laws and not very possible to know all the common laws". But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlam ( 193 7) AC 473 "...the fact is that there is not and never has been a presumption that every one knows that law. There is a rule that ignorance of law does not excuse, a maxim of every different scope and application". It is, therefore, not possible to presume, in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dated 25-6-1970.
Hence to apply the maxim that ignorance of law is no excuse, one should establish as a fact that persons were having knowledge or were being assisted by persons, who were having such knowledge. In the instant case, this aspect has not been established.
16. The learned Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji observed that the expression 'sufficient cause' employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice.
In respect of condonation of delay, the learned Supreme Court held on the following guidelines:
1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.
3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay. The doctrine must be applied in a rational, common sense and pragmatic manner.
4. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to the preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
6. It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
17. The Society receives voluntary contributions from the persons for a charitable cause. The payments are not received by the Society for diverting towards payment of taxes. The spirit with which the payments are made are also to be considered and if there is a bona fide reason for filing; the application for registration belatedly then the delay should be condoned so that the purposes for which contributions have been received is achieved. If the Society knowingly ignores the provisions of law then necessarily it has to bear the burden. In the instant case it has not been established as a matter of fact that the trustees or the persons who are managing the affairs of the Society were aware of filing the application under Section 12A. Under such circumstances we feel that the learned CIT should have condoned the delay. Accordingly we feel that it is a fit case where the delay should be condoned and provisions of Sections 11 and 12 should not be made applicable in respect of the Society from its inception.
In the result the appeal is allowed.