Betsy Elizebeth Trust, CHENNAI V. CIT, Trichy

ITA 72/CHNY/2011

• Counselvise Citation: 7221714 RSA 2011
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 14-01-2011

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, AM AND SHRI GEORGE MATHAN, JM ITA. NO. 72//MDS/2011 BETSY ELIZABETH TRUST 39, MISSION TRUST PORAYAR NAGAPATTINAM DISTRICT 609 307 (PAN NO. AAACN 1121C) VS. THE C.I.T TRICHY (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR DEPARTMENT BY : SHRI SHAJI P. JACOB O R D E R PER ABRAHAM P. GEORGE, AM IN THIS APPEAL FILED BY THE ASSESSEE, ITS SOLE GRI EVANCE IS THAT THE LD. CIT(A) REFUSED TO CONDONE THE DELAY IN FILI NG THE APPLICATION FOR REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 19 61 [IN SHORT, THE ACT], AND GAVE IT REGISTRATION ONLY W.E.F. 1.4.2007 . PAGE 2 OF 12 ITA NO.72/MDS/2011 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, A TRUST, CREATED THROUGH AN INSTRUMENT DATED 13.5.1999 FILED AN APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT FOR THE FIRST TIME ON 4.8.2004. IT SEEMS THAT CERTAIN CLARIFICATIONS WERE SOUGHT BY THE LD. CIT, BUT NEVERTHELESS NOTHING CAME OUT OF THIS APPLICATION WHICH WAS FINA LLY LODGED BY THE DEPARTMENT. THEREAFTER, ASSESSEE FILED A FRESH APPL ICATION ON 10.4.2006 FOR WHICH AGAIN DETAILS WERE CALLED FOR B Y THE LD. CIT INCLUDING NOTES ON ACTIVITIES FOR VARIOUS YEARS. FR OM THE REPLY FILED BY THE ASSESSEE, IT WAS NOTED BY THE LD. CIT THAT A SSESSEE HAD SURPLUS FROM ITS ACTIVITIES FOR THE F.Y. 2002-03 TO F.Y. 2004-05 AND HE, THEREFORE, REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY SUCH SURPLUS SHOULD NOT BE TAXED. THEREAFTER, DURING TH E COURSE OF HEARING ON SUCH APPLICATION, IT SEEMS ASSESSEE WITH DREW SUCH APPLICATION. AS PER THE IMPUGNED ORDER OF THE LD. CIT, SUCH EARLIER APPLICATION WAS WITHDRAWN FOR A REASON THAT BOOKS O F ACCOUNT FOR VARIOUS YEARS WERE WRITTEN NOT CONTEMPORANEOUSLY, B UT ON A LATER DATE. SINCE THE ASSESSEE BY ITSELF HAD WITHDRAWN I TS APPLICATION DATED 10.4.2006, IT SEEMS NO ORDERS WERE ISSUED BY THE LD. CIT ON SUCH APPLICATION. AGAIN, ANOTHER APPLICATION WAS F ILED BY THE ASSESSEE ON 29.5.2007 AND THIS APPLICATION WAS DULY PROCESSED AND PAGE 3 OF 12 ITA NO.72/MDS/2011 REGISTRATION GRANTED TO THE ASSESSEE VIDE ORDER OF THE LD. CIT(A) DATED 20.11.2007 W.E.F 1.4.2007. ALONGWITH THE SAI D APPLICATION, ASSESSEE HAD ALSO REQUESTED FOR CONDONATION OF DELA Y. THIS WAS NOT ACCEPTED BY THE LD. CIT FOR A REASON THAT THE BOOKS OF ACCOUNT FOR F.YS. 2002-03 T0 2005-06 WERE WRITTEN NOT CONTEMPOR ANEOUSLY BUT WERE WRITTEN SUBSEQUENTLY WHEN REQUIRED BY THE DEPA RTMENT. 3. AGAINST THE DENIAL OF CONDONATION, ASSESSEE MOV ED IN APPEAL BEFORE THIS TRIBUNAL THIS TRIBUNAL, VIDE ORDER DA TED 13.1.2009 IN ITA NO. 343/MDS/2008 REMITTED THE MATTER BACK TO TH E LD. CIT WITH THE FOLLOWING DIRECTIONS: 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RELEVAN T RECORDS AVAILABLE WITH US. WE HAVE GONE THROUGH THE IMPUGNED ORDER DATED 20.11.2007 AS WELL AS THE LETT ER DATED 12.11.2007 REPRODUCED ABOVE. WE ARE OF THE CONSIDER ED OPINION THAT THERE IS NO DOUBT THAT THERE WAS A DELA Y OF MORE THAN 7 YEARS [SEVEN YEARS] IN FILING THE APPLICATIO N FOR REGISTRATION U/S 12AA OF THE ACT, BUT THE ASSESSEE HA S A RIGHT TO SUBSTANTIATE ITS CLAIM BEFORE THE LD. CIT. AFTER PERUSING THE IMPUGNED ORDER DATED 20.11.2007, WE FIND THAT N O SUFFICIENT OPPORTUNITY WAS GIVEN TO THE ASSESSEE BE FORE PASSING THE ORDER DATED 20.11.2007 AND HENCE WE ARE NOT PAGE 4 OF 12 ITA NO.72/MDS/2011 COMMENTING ON THE MERIT OF THE CASE BECAUSE IT WILL PREJUDICE TO THE MIND OF THE AUTHORITY CONCERNED IN T HE INTEREST OF JUSTICE. WE ARE SETTING ASIDE THE MATTE R TO THE LD. CIT(A) TO AFFORD AN OPPORTUNITY OF HEARING TO THE A SSESSEE OF BEING HEARD FOR EXPLAINING THE DELAY FROM THE DATE OF CREATION OF TRUST AND CONSIDER THE APPLICATION FILED BY THE ASSESSEE IN FORM NO. 10A WHICH IS FILED ON 29.9.200 7 AND DECIDE THE SAME ON ME RIT. 5. PURSUANT TO THE ABOVE DIRECTIONS, THE LD. CIT RE QUIRED THE ASSESSEE TO EXPLAIN THE DELAY IN FILING THE APPLICA TION FOR REGISTRATION. ASSESSEE REPLIED TO THE LD. CIT AS U NDER: 1 'ON ITS FIRST APPLICATION FOR REGISTRATION UNDER SECTION 12A IN NO.2004 A PERSONAL HEARING WAS CALLED BY THE DEPARTMENT AND WAS DIRECTED TO PRODUCE THE BOOKS OF ACCOUNT. ON PRODUCTION OF NECESSARY BOOKS OF ACCOUNT THE DEPARTMENT WAS OF THE OPINION THAT THE BOOKS PERTAINING TO THE YEARS 2002-03 TO 2005-06 WERE NOT WRITTEN CONTEMPORANEOUSLY AND WERE WRITTEN LATER. THOUGH IT WAS EXPLAINED THAT IT WAS NOT SO ; AND IT WAS ONLY TO MAKE A NEAT PRESENTATION TO THE DEPARTMENT A FRESH COPY WAS MADE AND WAS GIVEN PAGE 5 OF 12 ITA NO.72/MDS/2011 TO THE DEPARTMENT FOR SCRUTINY, THIS ARGUMENT WAS NOT ACCEPTED. IN THIS: JUNCTURE, THE TRUSTEES WERE WRONGLY ADVISED BY THEIR AUDITOR WHO REPRESENTED THE CASE ALONG WITH THE TRUSTEES BEFORE THE DEPARTMENT TO WITHDRAW THE APPLICATION FOR REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT AND REAPPLY AFRESH. PLACING FULL RELIANCE ON THEIR AUDITOR, THE TRUSTEES HAD WITHDRAWN THEIR FIRST APPLICATION. IT WAS NOT THEN KNOWN TO THE TRUSTEES THAT WITHDRAWAL OF THE APPLICATION WILL FORECLOSE THE DOORS FOR CONDONATION OF THE DELAY IN THE APPLICATION AND CONSEQUENTLY IT COULD BRING DIFFICULTY IN PROCURING THE REGISTRATION U/ S 12A FROM THE DATE OF INCORPORATION OF THE TRUST. THE APPROPRIATE ADVICE SHOULD HAVE BEEN TO FIGHT OUT THE CASE IN THE APPELLATE FORUMS, SHOULD THE DEPARTMENT REJECT THE APPLICATION ON THE ABOVE MENTIONED GROUND OF OBJECTION OR OTHERWISE. INSTEAD THE THEN AUDITOR HAD GIVEN A WRONG ADVICE TO WITHDRAW THE APPLICATION AND ACCORDINGLY THE TRUST HAD IMMENSELY SUFFERED BY WAY OF HUGE INCOME TAX DEMANDS (TO THE TUNE OF RS.2 LAKHS) BEEN RAISED ON THE TRUST WHICH IS ESSENTIALLY A CHARITABLE ENTITY. PAGE 6 OF 12 ITA NO.72/MDS/2011 WE MAY DRAW THE ATTENTION OF THE HONBLE COMMISSIONER TO THE FINANCIAL STATEMENTS WHEREIN THE AMOUNT LEFT OVER AS BANK BALANCE OF RS.30001-. THUS THE TRUST NEVER HAD THE SOURCE TO PAY HUGE TAX DEMANDS AND INSISTING THE TRUST TO PAY SUCH DEMANDS WOULD FATALLY AFFECT THE TRUST AND AFFECT THE CHARITABLE NATURE OF THE TRUST. HENCE DENYING THE CONDONATION OF DELAY WOULD RESULT IN THE TRUST BEING FORCED TO PAY THE HUGE DEMANDS RAISED BY THE DEPARTMENT, IN WHICH CASE, THE TRUST WOULD HAVE TO BE CLOSED LEAVING THE BENEFICIARIES, WHO ARE THE PUBLIC AT LARGE, TO SUFFER IMMENSELY. FURTHER THE TRUSTEES WERE GENUINELY NOT AWARE OF THE PROVISIONS OF THE INCOME TAX ACT. THE MAIN OBJECTIVE OF THE TRUST WAS TO RUN CRECHES FOR MAINTAINING ORPHAN CHILDREN AND FOR THIS PURPOSE IT NEEDED TO HAVE BUILDING, VESSELS, FURNITURE ETC AND THIS WAS BASICALLY CONCENTRATING AND DEVELOPING THE SOURCES OF FUNDS FOR SUCH ACTIVITIES IN THE INITIAL YEARS IN THE RIGHT EARNEST. IT WAS ALSO NOT ADVISED BY THE THEN AUDITOR OF THE TRUST TO APPLY FOR REGISTRATION U/S 12A IMMEDIATELY ON THE INCORPORATION OF THE TRUST. ONCE THE ACTIVITIES OF THE TRUST IMPROVED, IT HAD COME TO KNOW THROUGH OTHER ORGANIZATIONS OF SIMILAR NATURE THAT PAGE 7 OF 12 ITA NO.72/MDS/2011 REGISTRATION IS REQUIRED UNDER 12A OF THE INCOME TAX ACT WAS COMPULSORY. ACCORDINGLY, THE TRUST HAD APPLIED FOR REGISTRATION. AS STATED EARLIER, BEING A CHARITABLE TRUST, THE TRUSTEES GENUINELY BELIEVED THAT THE DONATION MEANT FOR CHARITABLE ACTIVITIES WERE NOT TAXABLE AS THE ULTIMATE BENEFICIARIES IS THE SOCIETY AT LARGE. THE TRUST FEELS, IT IS NOT JUSTIFIED TO TAX THE DONATION IT HAS RECEIVED FOR PURSUING CHARITABLE OBJECTS AS THE ULTIMATE LOSERS WILL BE THE SOCIETY AT LARGE WHICH HAS BEEN IMMENSELY BENEFITED BECAUSE OF THE ACTIVITIES OF THE TRUST'. 6. LD. CIT, AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE, REFUSED TO CONDONE DELAY. ACCORDING TO HIM, ASSESS EE HAVING FILED AN APPLICATION IN 2004 INITIALLY WHICH WAS LODGED B Y THE DEPARTMENT AND THERE BEING NO APPEAL FILED BY THE ASSESSEE, IT CLEARLY PROVED ASSESSEES INTENTION NOT TO PURSUE THE APPLICATION FOR REGISTRATION. ACCORDING TO THE LD. CIT, ASSESSEE HAD FILED FRESH APPLICATIONS THEREAFTER AND SUCH FRESH APPLICATION WAS ALSO LATE R WITHDRAWN FOR DEFAULT ON THE PART OF THE ASSESSEE. THEREFORE, AC CORDING TO LD. CIT, ASSESSEE WAS HAVING SUFFICIENT KNOWLEDGE WITH REGARD TO THE POSITION OF LAW ON CONDONATION OF DELAY. AS FOR IT S CONTENTION THAT PAGE 8 OF 12 ITA NO.72/MDS/2011 NO PROPER ADVICE WAS GIVEN, LD. CIT(A) WAS OF THE O PINION THAT ASSESSEE ALL ALONG WENT BY THE ADVICE OF CHARTERED ACCOUNTANT. THUS HE CAME TO THE CONCLUSION THAT ASSESSEE FAILED TO DISCHARGE ONUS CAST UPON IT FOR PROVING EXISTENCE OF SUFFICIE NT CAUSE FOR CONDONATION. THEREFORE, HE TURNED DOWN THE REQUEST FOR CONDONATION OF DELAY. 7. LD. A.R. STRONGLY ASSAILING THE ORDER OF THE LD. CIT SUBMITTED THAT OBVIOUSLY THE ASSESSEE WAS MISLED BY THE ADVIC E OF THE CHARTERED ACCOUNTANT. ASSESSEE WAS CONSTRAINED TO RELY ON THE PROFESSIONAL ADVICE GIVEN BY THE CHARTERED ACCOUNTA NT AND IF SUCH ADVICE LANDED IT IN DIFFICULTIES, THEN IT WAS GOOD ENOUGH REASON FOR CONDONATION OF DELAY. 8. PER CONTRA, THE LD. D.R. SUBMITTED THAT THE ASSE SSEE COULD NOT PLEAD IGNORANCE OF LAW AS A REASON FOR DELAY. ACCO RDING TO HIM, ANY WRONG ADVICE GIVEN BY A CHARTERED ACCOUNTANT ALSO C OULD NOT BE CONSIDERED AS SUFFICIENT REASON SINCE AVERMENT OF T HE ASSESSEE IN THIS REGARD WAS NOT ALL SUBSTANTIATED. PAGE 9 OF 12 ITA NO.72/MDS/2011 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS. ASSESSEE HAD, NO DOUBT, FILED INITIAL APPLICATION F OR REGISTRATION ON 4.8.2004. AS PER THE LD. CIT, SUCH APPLICATION WAS LODGED FOR WANT OF COMPLIANCE FROM THE ASSESSEE ON DETAILS CALLED F OR. ASSESSEE HAD THEN FILED FRESH APPLICATION ON 10.4.2006 AND THIS APPLICATION WAS WITHDRAWN BY IT DURING THE COURSE OF HEARING, WHEN IT WAS POINTED OUT THAT ITS BOOKS OF ACCOUNT FOR F.Y. 2002-03 TO 2 005-06 WERE NOT WRITTEN CONTEMPORANEOUSLY BUT ON A LATER DATE FOR P RODUCTION BEFORE THE LD. CIT. ASSESSEE AGAIN FILED AN APPLICA TION FOR A THIRD TIME ON 29.5.2007 WHICH RESULTED IN GRANT OF REGIST RATION, EFFECTIVE FROM 1.4.2007. IT A WAS NOT GRANTED CONDONATION OF DELAY WHICH IS THE ISSUE RAISED IN THIS APPEAL. REFUSAL TO CONDON E THE DELAY WAS AGITATED IN APPEAL BY THE ASSESSEE BEFORE THIS TRIB UNAL, WHICH DIRECTED THE LD. CIT TO GIVE AN OPPORTUNITY TO THE ASSESSEE FOR EXPLAINING DELAY AND REQUIRED HIM TO CONSIDER SUCH EXPLANATIONS. LD. CIT(A) CONSIDERED SUCH EXPLANATION AND WAS OF T HE OPINION THAT ASSESSEE TRUST COULD NOT TAKE REFUGE UNDER IGNORANC E OF LAW AND ALSO COULD NOT CLAIM THAT PROPER ADVICE WAS NOT GIVEN TO IT. ACCORDING TO HIM, THIS COULD BE INFERRED FROM THE ABOVE PROCEEDI NGS RUNNING OVER VARIOUS YEARS. IN OUR OPINION, THE CONCLUSION OF T HE LD. CIT CANNOT PAGE 10 OF 12 ITA NO.72/MDS/2011 BE ACCEPTED. NO DOUBT, ASSESSEE CAN NEVER PLEAD IG NORANCE OF LAW AS A REASON FOR NOT FILING ITS APPLICATION IN TIME AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. INDIAN GOSPEL FELLOWSHIP 331 ITR 283. THE TRIBUNAL HAD IN THAT C ASE HELD THAT IGNORANCE OF LAW COULD BE A REASON WHICH COULD BE CONSIDERED FOR CONDONATION OF DELAY. THIS WAS NOT ACCEPTED BY TH E HON'BLE JURISDICTIONAL HIGH COURT. NEVERTHELESS, ORDER OF T HE TRIBUNAL WAS UPHELD FOR A REASON THAT ASSESSEE HAD WENT BY THE A DVICE OF ITS CHARTERED ACCOUNTANT WHICH GAVE RISE TO THE DELAY. HON'BLE JURISDICTIONAL HIGH COURT HELD THAT IT WAS WELL EST ABLISHED THAT IN NORMAL PRACTICE, EVERY ASSESSEE WOULD BE GUIDED BY THE ADVICE OF ITS CHARTERED ACCOUNTANT. IT WAS ALSO MENTIONED BY THEIR LORDSHIPS THAT WHERE THE ASSESSEE WENT BY THE ADVICE OF THE C HARTERED ACCOUNTANT, WHICH RESULTED IN DELAY IN MAKING AN AP PLICATION, IT WOULD BE A SUFFICIENT REASON TO CONDONE SUCH DELAY. IN THE LIGHT OF THE ABOVE DECISION OF THE HON'BLE JURISDICTIONAL HI GH COURT, IF WE LOOK AT THE CASE IN HAND BEFORE US, STEPS TAKEN BY THE ASSESSEE OVER VARIOUS YEARS STARTING FROM AUGUST 2004 WOULD SHOW THAT IT WAS GUIDED BY A CHARTERED ACCOUNTANT. LD. CIT HAS HIMS ELF HAS NOTED IN HIS ORDER THAT ASSESSEE HAD WITHDRAWN ITS APPLICATI ON DATED PAGE 11 OF 12 ITA NO.72/MDS/2011 10.4.2006 IN THE PRESENCE OF ITS CHARTERED ACCOUNTA NT, VIDE ORDER SHEET ENTRY DATED 16.10.2006 SIGNED BY THE MANAGING TRUSTEE OF THE ASSESSEE AS WELL AS ITS CHARTERED ACCOUNTANT. REAS ONS CITED FOR NOT CONDONING DELAY AND FOR NOT CONSIDERING ITS APPLICA TION AT THAT POINT OF TIME WAS THAT ASSESSEE HAD NOT WRITTEN ITS BOOKS OF ACCOUNT CONTEMPORANEOUSLY BUT HAD WRITTEN IT IN THE PRESENC E OF CHARTERED ACCOUNTANT. THUS, ADMITTEDLY ALL ALONG, ASSESSEE W AS BEING ADVISED BY CHARTERED ACCOUNTANT. IT LOGICALLY FOLLOWS THAT WITHDRAWAL OF APPLICATION AND ALSO FURTHER FILING OF FRESH APPLIC ATION WOULD ALL HAVE BEEN DONE BY IT BASED ON SUCH PROFESSIONAL ADV ICE ONLY. ASSESSEE ITSELF HAD CLEARLY STATED THAT IT HAD PLAC ED FULL RELIANCE ON ITS AUDITORS WHILE WITHDRAWING ITS EARLIER APPLICAT ION AND IT WAS NOT AWARE THAT SUCH WITHDRAWAL WOULD EFFECT ITS CONDONA TION PETITION. IN OUR OPINION, THE PRINCIPLES LAID DOWN HELD BY TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDIAN GOS PEL FELLOWSHIP TRUST [SUPRA], IS CLEARLY APPLICABLE HERE. ASSESSE E HERE HAD GONE BY THE ADVICE OF THE CHARTERED ACCOUNTANT AND THIS HAD RESULTED IN DELAY IN SEEKING REGISTRATION. THOUGH IGNORANCE OF LAW CANNOT BE CITED AS REASON AS HELD BY THE HON'BLE JURISDICTION AL HIGH COURT, WHERE THE ASSESSEE WENT BY THE ADVICE OF THE CHARTE RED PAGE 12 OF 12 ITA NO.72/MDS/2011 ACCOUNTANT, WHICH RESULTED IN DELAY IN MAKING APPLI CATION, IT WOULD BE SUFFICIENT ENOUGH REASON TO CONDONE DELAY. FACT S AND CIRCUMSTANCES AS MENTIONED ABOVE WOULD CLEARLY SHOW THAT ASSESSEE WAS MISLED BY CHARTERED ACCOUNTANT AND THIS WAS REA SON FOR THE DELAY. LD. CIT OUGHT HAVE GRANTED CONDONATION OF DE LAY SOUGHT BY THE ASSESSEE. WE, THEREFORE, QUASH THE ORDER OF THE LD. CIT(A) AND DIRECT HIM TO CONDONE THE DELAY AND GRANT REGISTRAT ION FROM THE DATE OF CREATION OF THE TRUST. 10. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS A LLOWED. PRONOUNCED IN THE OPEN COURT ON 30.3.2011. SD/- SD/- (GEORGE MATHAN ) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH MARCH, 2011. VL/ COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE