M/s Wainganga Bahuuddeshiya Vikas Sanstha, Nagpur V. Commissioner of Income tax-I, Nagpur

ITA 160/NAG/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9625 (ITAT-NAGPUR)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 11-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Assessee Lawyers: S C THAKAR; C J THAKAR
• Keywords: Depreciation; Income from undisclosed sources; Charitable institution; Principle of natural justice; Bonafide belief; Retrospective amendment; Reasonable cause; Condonation of delay; Ignorance of law
• Section: 12A; 12AA; 148; 12; 11; 139

Judgement Text

- 1 - ITA 160/NAG/2012, A.Y. 12AA IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 160/NAG/2012 (ASST. YEAR: 12AA) M/S WAINGANGA BAHUUDDESHIYA VIKAS SANSTHA APPELLANT 10, CORPORATION COLONY, NORTH AMBAZARI ROAD, NAGPUR. PAN : AAAAW0875E VS COMMISSIONER OF INCOME TAX - I, RESPONDENT NAGPUR . APPELLANT BY : SHRI C J THAKAR & SC THAKAR (ADV) RESPONDENT BY : SHRI DR. MILIND BHUSARI (DR ) DATE OF HEARING: 18/10/2012 DATE OF ORDER : 09/11/2012 O R D E R PER D. T. GARASIA JM THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER CIT I, NAGPUR. THE FOLLOWING GROUNDS IN THIS APPEAL WHICH READS AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE THERETO THE IMPUGNED ORDER OF CIT REFUSING TO GRANT REGISTRATION U/S 12AA FROM RETROSPECTIVE EFFECT FROM THE INCEPTION OF THE TRUST IS WHOLLY ERRONEOUS ON FACTS AND ON LAW AND IS SERIOUSLY VIOLATIVE OF PRINCIPLES OF NATURAL JUSTICE. - 2 - ITA 160/NAG/2012, A.Y. 12AA 2. THE ORDER OF LD. CIT IS VITIATED BY UNILATERALLY CONSIDERING VARIOUS ISSUES IRRELEVANT TO THE SUBJECT MATTER OF APPEAL AND SPECIFIC DIRECTION OF HONBLE I.T.A.T. AND DECIDING THEM AGAINST THE ASSESSEE WITHOUT INVITING THE SAY OF THE ASSESSEE. 3. LD. CIT INSTEAD OF FOLLOWING THE DIRECTION OF HONBLE I.T.A.T. TO CONSIDER WHETHER THERE WAS A REASONABLE CAUSE FOR DELAY IN FILING THE APPLICATION UNDER SECTION 12 AA OF I.T. ACT 1961, INDIRECTLY WENT INTO FINDING FAULT WITH THE I.T.A.TS ORDER AND JUSTIFYING THE ACTION OF PREDECESSOR CIT IN GRANTING REGISTRATION PROSPECTIVELY. 4. LD. CIT FAILED TO CONSIDER VARIOUS CASE LAWS CITED BY THE ASSESSEE AND RATIOS LAID DOWN THEREIN. 5. FOR THE FACTS, REASONS AND LEGAL POSITION STATED IN ANNEXURE TO THE GROUNDS OF APPEAL, THE ORDER OF CIT IS ERRONEOUS. ON TOTALITY OF FACTS AND CIRCUMSTANCES HE SHOULD HAVE HELD THAT THERE WAS A REASONABLE CAUSE FOR MAKING THE APPLICATION UNDER SECTION 12AA AND SHOULD HAVE CONDONED THE DELAY AND SHOULD HAVE GRANTED REGISTRATION RETROSPECTIVELY FROM THE INCEPTION OF THE TRUST. THE SHORT FACTS OF THE CASE ARE AS UNDER: - 2. THE ASSESSEE IS PUBLIC CHARITABLE EDUCATIONAL INSTITUTION CONSTITUTED BY TEACHERS, FARMERS AND SOCIAL WORKERS FROM VILLAGE SAKOLI, BHANDARA, NAGPUR. THE OBJECTS ARE PURELY EDUCATIONAL AND RELATED TO EDUCATION. THE SAID PUBLIC CHARITABLE EDUCATIONAL INSTITUTION IS REGISTERED WITH CHARITY COMMISSIONER, NAGPUR ON 28/02/1991 UNDER BOMBAY PUBLIC TRUST ACT 1950 ALSO UNDER SOCIETIES REGISTRATION ACT 1860. ASSESSEE TRUST RUNS ARTS AND SCIENCE COLLEGE AND SCHOOL. THE ASSESSEE TRUST HAS APPLIED FOR REGISTRATION UNDER SECTION 12AA OF I.T. ACT 1961 TO REGISTER THE TRUST EFFECTIVE FROM 01/04/2007 BY THE APPLICATION DT. 30/05/2007. THE COMMISSIONER HAS GRANTED REGISTRATION U/S 12AA FROM 01/04/2007. THE COMMISSIONER HAS NOT CONDONED THE DELAY IN FILING THE APPLICATION U/S 12AA AND NOT GRANTED REGISTRATION WITH RETROSPECTIVE EFFECT FROM INCEPTION OF TRUST IN 1990. THE ASSESSEE THEREAFTER MOVED AN APPEAL IN ITA NO. 232/NAG/2009 TO I.T.A.T FOR GRANTING REGISTRATION - 3 - ITA 160/NAG/2012, A.Y. 12AA PROSPECTIVELY W.E.F. 01/04/2007 AND MOREOVER THE ORDER OF CIT IS NON SPEAKING. I.T.A.T. HAS REMITTED THE MATTER TO THE FILE OF CIT WITH A DIRECTION TO CONSIDER ON MERITS THE EXPLANATION OF THE ASSESSEE IN RESPECT OF DELAY IN MAKING APPLICATION FOR REGISTRATION. IN THE CASE COMMISSIONER IS SATISFIED THAT THE ASSESSEE WAS PREVENTED FROM MAKING APPLICATION BEFORE STIPULATED PERIOD FOR SUFFICIENT REASON HE SHALL GRANT REGISTRATION FROM THE DATE OF INCEPTION. AS A COROLLARY REGISTRATION IS TO BE REFUSED FROM THE DATE OF INCEPTION IF THE COMMISSIONER IS NOT SATISFIED WITH THE ASSESSEES EXPLANATION FOR DELAY IN MAKING APPLICATION SEEKING REGISTRATION. THE CIT HAS RAISED FOLLOWING QUESTIONS AND GOT ANSWERS AND REFUSED THE REGISTRATION. THE QUESTIONS AND ANSWERS WHICH READ AS UNDER:- Q. 1: WAS THERE ANY PLEA IN THE ORIGINAL APPLICATION THAT THE TRUST BE ACCORDED REGISTRATION FROM THE DATE OF INCEPTION? ANS: IN THE APPLICATION DATED 25/05/2007 AND THE ENCLOSURES THERETO COMPRISING THE INSTRUMENT FOR CREATION OF THE TRUST AND COPIES OF FINAL ACCOUNTS FOR THE YEAR ENDED 31/03/2004 AND 31/03/2005, THERE IS NO MENTION THAT THE TRUST HAS SOUGHT FOR REGISTRATION FROM THE DATE OF INCEPTION. Q. 2: WAS THERE ANY EXPLANATION IN THE ORIGINAL APPLICATION FOR CONDONING DELAY IN MAKING THE 10A APPLICATION? ANS: THE TRIBUNAL WAS INFORMED BY THE ASSESSEE AND A LINE HAS BEEN RECORDED IN THE TRIBUNALS ORDER (PARAGRAPH 6) TOWARDS THAT END THAT THE REASONS FOR THE DELAY WERE EXPLAINED ALONG WITH THE APPLICATION FILED BEFORE THE CIT. NOTHING COULD BE FARTHER FROM TRUTH. ASSESSEES LETTER DATED 30/05/2007 APPENDED TO ITS 10A APPLICATION READS AS FOLLOWS: ENCLOSED PLEASE FIND HEREWITH APPLICATION U/S 12A OF THE I. T. ACT IN THE PRESCRIBED FORM (NO 10A) IN RESPECT OF OUR INSTITUTION. THERE IS A DELAY IN FILING OF THE APPLICATION FROM OUR END. I, THEREFORE, SINCERELY REQUEST YOU ON BEHALF OF OUR INSTITUTION TO KINDLY CONDONE THE DELAY AND OBLIGE. UNDER THE IST PROVISO TO SECTION 12A, THE CIT IS STATUTORILY EMPOWERED TO CONDONE THE DELAY IN MAKING THE APPLICATION FOR REGISTRATION IF THE DELAY WAS FOR SUFFICIENT REASONS. IT IS SELF - 4 - ITA 160/NAG/2012, A.Y. 12AA EVIDENT FROM READING OF THIS LETTER DATED 30/05/2007 THAT NO REASONS EITHER GENERAL OR SPECIFIC WERE ADDUCED THEREIN. FOR THE CIT TO DECIPHER THE REASONS FOR DELAY FROM THE LETTER REFERRED SUPRA AND THEN WEIGHING IN THE FACTORS TO HOLD THE REASONS AS REASONABLE OR OTHER WISE WOULD BE ASKING FOR THE IMPOSSIBLE. Q.3: IS THE ALIBI THAT THE CA CONCERNED IS RESPONSIBLE FOR WITHHOLDING FROM THE TRUST THE TRUE IMPORT OF THE CITS ORDER DATED 30/11/2007 JUSTIFIED? ANS: IT HAS BEEN STATED BEFORE THE TRIBUNAL, QUOTED AT PARAGRAPH 2 OF THE TRIBUNALS ORDER THAT IT WAS THE CA WHO KEPT THE ASSESSEE IN THE DARK ABOUT THE FURTHER IMPLICATIONS OF THE CITS ORDER AND HOW THE CITS ORDER WOULD HAVE IMPACTED ITS FUTURE TAXABILITY. IN THIS PROCEEDING, THE CONCERNED CA A. B. SAHASRABHOJANEE IN TURN HAS EXPLAINED HIS ROLE VIS-A-VIS THE TRUST AS FOLLOWS: THIS IS TO STATE THAT I WAS THE AUDITOR OF WAINGANGA BAHU UDDESHIYA VIKAS SANSTHA. THIS SOCIETY IS RUNNING VARIOUS EDUCATIONAL INSTITUTIONS AND IT WAS WHOLLY DEVOTED IN EDUCATIONAL ACTIVITIES. MY ROLE WAS IN THE CAPACITY OF AUDIT OF ACCOUNTS I WAS NOT ASKED ON ANY OCCASIONS BY THE SOCIETY TO ADVICE THE TRUSTEES ON INCOME TAX RELATED MATTER. I DID NOT HAVE MUCH INTERACTION WITH THE TRUSTEES AS ACCOUNTS STAFF OF THE SOCIETY USED TO VISIT MY OFFICE IN THE COURSE OF AUDIT. IT WAS IN MAY 2007 SHRI BRAHMANAND BAJIRAO KARANJEKAR THE MANAGING TRUSTEE OF THE SOCIETY APPROACHED ME WITH A PRESS RELEASE ISSUED BY THE CBDT. THEREUPON I ADVISED THEM TO IMMEDIATELY FILE APPLICATION FOR REGISTRATION U/S 12A AND APPLY FOR CONDONATION OF DELAY. I HELPED THEM TO PREPARE AND FILE THE SAID APPLICATION. AN ALIBI THIRD PARTY EVIDENCE IS CONSIDERED GOOD, TIMELY OR SUFFICIENT IF WHAT THE ASSESSEE SAYS IS SUPPORTED BY WHAT THE THIRD PARTY CORROBORATES OR SUBSTANTIATES. NOWHERE IN THE LETTER OF THE CA THAT HE SAYS THAT THERE WAS ANY LAXITY ON HIS PART TO COMMUNICATE - 5 - ITA 160/NAG/2012, A.Y. 12AA THE IMPORT OF THE CITS ORDER DATED 31/11/2007. ON THE CONTRARY, THE CA AS PER HIS VERSION WAS NEVER CONSULTED BY THE TRUST ON THE EMERGING TAX ISSUES. Q. 4: WHETHER DELAY IN MAKING APPLICATION IS A TECHNICAL BREACH? ANS: THE TRUST HAD ITS INCEPTION IN 1990. IT MADE ITS APPLICATION FOR REGISTRATION ;UNDER SECTION 12A OF THE I.T. ACT IN 2007, AFTER A DELAY OF 17 YEARS. WHEN FINALLY REGISTRATION WAS ACCORDED IN 2007, IT PREFERRED AN APPEAL TO THE TRIBUNAL AGAINST THE CITS ORDER AFTER A DELAY OF 2 YEARS. IGNORANCE OF LAW IS NOT A GOOD DEFENCE, IF NOT CORROBORATED WITH OTHER EXTENUATING FACTORS. STATUTORILY, ANY ONE IN RECEIPT OF INCOME FROM PROPERTY HELD UNDER TRUST OR LEGAL OBLIGATION IS OBLIGED TO FILE A RETURN OF INCOME IF THE TOTAL INCOME BEFORE GIVING EFFECT TO THE PROVISIONS OF SECTION 11 AND 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO TAX. THIS PROVISION UNDER SECTION 139 (4A) HAS BEEN THERE SINCE 1972. THE TRUST CAME INTO BEING IN 1990. TOTAL SURPLUS YEAR WISE AS PER RETURNS SUBMITTED THEREAFTER ARE AS FOLLOWS: ASSESSMENT YEAR TOTAL SURPLUS 2003-04 2,98,000 2004-05 51,71,500 2005-06 30,49,555 2006-07 55,96,333 2007-08 1,73,85,879 2008-09 42,06,214 THERE WAS NO REASON WHY RETURNS WERE NOT FILED ON TIME, WHICH IS STATUTORILY MANDATED, SINCE THE CA HIMSELF HAS EXONERATED HIMSELF OF THE TRUSTS LIABILITY. ONLY WHEN NOTICES UNDER SECTION 148 WERE ISSUED THAT THE ASSESSEE ROSE TO CONSIDER FILING OF RETURNS. AND EVEN WHEN NOTICES UNDER SECTION 148 WERE ISSUED, THE FILING THERETO OF RETURNS WERE IN ACCORDANCE TO THE ASSESSEES OWN ACCORD AND NOT WITHIN THE TIME ALLOWED UNDER THE ACT. - 6 - ITA 160/NAG/2012, A.Y. 12AA DELAY IN FILING OF APPLICATION FOR REGISTRATION IS THEREFORE NOT A ONE OFF CASE OF NEGLIGENCE, BUT IN A SERIES OF CONTINUOUS DEFAULTS, ALL OF THOSE INVITING STATUTORY AND PENAL CONSEQUENCES. Q. 5 WITHOUT PREJUDICE TO THE ABOVE GROUNDS, WHETHER THE ACCOUNTS OF INCOME AND EXPENDITURE APPENDED WITH THE 10A APPLICATIONS REFLECT THE TRUE STATE OF AFFAIRS OF THE TRUST? ANS: THE CASE OF REGISTRATION IS NECESSARILY TO BE READ IN CONJUNCTION WITH WHAT THE AO AND THE CIT(A) IN THE ASSESSEES CASE HAVE HELD TO BE THE TRUE STATE OF ITS ACCOUNTS. IT IS NOTED THAT FOR A.Y. 2003-04, 2004-05, 2005-06 AND 2006-07, THE AO DID PURSUE IN TO MATTERS OF GENUINENESS OF ITS DONATIONS, AND LOANS AND ADVANCES, AND AFTER VERIFICATIONS ON FIELD AND THIRD PARTY SOURCES CAME WITH FINDINGS AS FOLLOWS: FOR A.Y. 2003-04, LOANS OF RS. 19.4 LAKHS IS ASSESSEES UNEXPLAINED INCOME . FOR A.Y. 2004- 05, LOANS OF RS. 17.64 LAKHS IS ASSESSEES UNEXPLAINED INCOME. FOR A.Y. 2005-06, DONATIONS IN CASH OF RS. 11.14 LAKHS IS ASSESSEES UNACCOUNTED INCOME. FOR A.Y. 2006-7, DONATIONS OF RS. 28.31 LAKHS IS ASSESSEES UNACCOUNTED INCOME. THE UNEQUIVOCAL FINDING OF THE AO IS THAT THE ASSESSEE IS SYSTEMATICALLY PUTTING ITS OWN UNACCOUNTED INCOME IN THE ACCOUNTS IN THE GARB OF DONATIONS. THAT THE ASSESSEE HAD CLAIMED RECEIPT OF DONATIONS/LOANS FROM PERSONS, WHO HAVE BEEN DEAD FOR AS LONG AS 9 YEARS IN SOME CASE, OR DENIED TO HAVE MADE SUCH PAYMENTS ETC. FOR A.YRS 2007- 08, MOREOVER IT WAS THE FINDING OF THE AO AFTER DETAILED INVESTIGATION THAT THE TRUST HAD SUBMITTED BOGUS BILLS IN EXCESS OF RS. 80 LAKHS TOWARDS CONSTRUCTION OF THE BUILDING AND ALSO CLAIMED DEPRECIATION ON THE SAME. ALL THE FINDINGS OF THE AO FOR A.YRS 2003- 04 TO 2007-08 HAVE BEEN SUSTAINED IN FULL BY THE CIT (A) PER HER ORDERS OF JANUARY/FEBRUARY 2012. THUS THE MANIPULATION IN THE ACCOUNTS, FIRST FOUND BY THE AO, IS NOW SUSTAINED BY THE FIRST APPELLATE AUTHORITY. THEREFORE, THE AUDITED ACCOUNTS AND THE CAS CERTIFICATE UNDER SECTIONS 32,33,34 AND RULE 19 OF THE BOMBAY PUBLIC TRUSTS ACT 1950 OR THE AUDIT REPORT UNDER SECTION 12A(1)(B) OF THE I.T. ACT, - 7 - ITA 160/NAG/2012, A.Y. 12AA ON THE BASIS OF WHICH THE TRUST IS CLAIMING REGISTRATION ARE UNRELIABLE, AND NO CREDENCE CAN BE ATTACHED TO THOSE ACCOUNTS. 3. IN TERMS OF THE DISCUSSION SUPRA, I HOLD THAT THE GROUNDS CITED BY THE ASSESSEE TO EXPLAIN THE DELAY IN FILING OF THE APPLICATION FOR REGISTRATION DO NOT CONSTITUTE SUFFICIENT REASONS IN ORDER THAT THE REGISTRATION IS GRANTED RETROSPECTIVELY FROM THE YEAR OF INCEPTION. 3. LD. AR HAS ARGUED AND HE HAS ALSO FILED THE WRITTEN SUBMISSION IN WHICH HE HAS SUBMITTED AS UNDER: - ASSESSEE IS A PUBLIC CHARITABLE EDUCATION INSTITUTION CONSTITUTED BY TEACHERS, FARMERS AND SOCIAL WORKERS FROM VILLAGE SAKOLI, BHANDARA AND NAGPUR BY MEMORANDUM OF ASSOCIATION DT.27.05.1990 . SAME IS PLACED ON PAGE 6 OF THE PAPERBOOK. THE OBJECTS ARE PURELY EDUCATIONAL AND RELATED TO EDUCATION. THE SAID PUBLIC CHARITABLE EDUCATIONAL INSTITUTION IS REGISTERED WITH THE CHARITY COMMISSIONER NAGPUR ON 28.02.1991 UNDER BOMBAY PUBLIC TRUST ACT, 1950 ALSO UNDER SOCIETIES REGISTRATION ACT, 1860 VIDE CERTIFICATE DT.07.08.1990 . ASSESSEE-TRUST STARTED ARTS AND SCIENCE COLLEGE IN VILLAGE LAKHANI, DIST. : BHANDARA IN THE YEAR 1991 WHICH IS GOVT. AIDED COLLEGE. IN 1991 IT STARTED SCHOOL IN VILLAGE EKODI, DIST. : BULDHANA WHICH IS ALSO GOVT. AIDED. IT STARTED FEW MORE SCHOOLS IN VILLAGES IN DIST. BHANDARA IN 1993, 1998 AND 2000 WHICH ARE GOVT. AIDED. IN COURSE OF TIME IT STARTED SCHOOLS AND COLLEGES MOSTLY IN VILLAGES IN DIST. BHANDARA WHICH ARE ON NO GRANT BASIS. LIST OF EDUCATIONAL INSTITUTION RUN BY THE ASSESSEE IS GIVEN ON PAGE 69 OF THE PAPERBOOK. IN SHORT THE ACTIVITY OF THE ASSESSEE-TRUST IS PURELY EDUCATION RELATED. ASSESSEE TRUST IS REGULARLY GETTING ITS ACCOUNT AUDITED AND IS REGULARY SUBMITTING - 8 - ITA 160/NAG/2012, A.Y. 12AA THEM TO CHARITY COMMISSIONER AND VARIOUS EDUCATIONAL DEPT. OF GOVT. OF MAHARASHTRA. THE TRUSTEES OF THE ASSESSEE-TRUST BEING MOSTLY TEACHERS, FARMERS AND SOCIAL WORKERS AND MOSTLY DOING THEIR EDUCATIONAL ACTIVITIES IN RURAL AREA HAD NOT MUCH EXPOSURE TO VARIOUS LAWS. THEY BONAFIDE BELIEVED THAT THEY BEING PURELY EDUCATIONAL TRUST RUNNING EDUCATIONAL INSTITUTION BOTH GOVT. AIDED AND NON-AIDED AND HAVING GOT THEMSELVES REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT IMMEDIATELY ON FORMATION OF THE TRUST ITSELF AND THEY GETTING THEIR ACCOUNTS REGULARLY AUDITED AND SUBMITTING THE SAME TO CHARITY COMMISSIONER AND OTHER EDUCATIONAL DEPARTMENT EVERY YEAR AND THEY GETTING GOVT. GRANTS, HAD ABSOLUTELY NO IDEA THAT THEY WERE ALSO REQUIRED TO GET THEMSELVES REGISTERED UNDER THE INCOMETAX ACT NOR THEY HAD THE SLIGHTEST IDEA THAT IN ABSENCE OF REGISTRATION THEY WILL BE TAXED ON THEIR INCOME AND RECEIPTS. IF THEY HAD THE SLIGHTEST IDEA ABOUT THE SAME THEY WOULD HAVE ALSO APPLIED FOR REGISTRATION OF TRUST UNDER I.T.ACT SIMULTANEOUSLY WHEN THEY APPLIED FOR REGISTRATION BEFORE CHARITY COMMISSIONER AND ALSO WOULD HAVE SUBMITTED AUDITED ACCOUNTS TO INCOMETAX DEPARTMENT EVERY YEAR WHEN THEY SUBMITTED THE SAME TO CHARITY COMMISSIONER AND OTHER EDUCATION DEPARTMENT. THERE WAS NO DIFFICULTY ABOUT THE SAME. BUT THE TRUSTEES BEING TEACHERS, FARMERS, AND SOCIAL WORKERS AND FROM RURAL AREA BACK GROUND THEY HAD NO EXPOSURE TO THEIR OBLIGATIONS UNDER I.T.ACT. THEY WERE ALSO NOT ADVISED BY THEIR C.A., WHO WAS MOSTLY CONCERNED WITH AUDIT, ABOUT THE OBLIGATION OF TRUST TO GET ITSELF REGISTERED UNDER I.T. ACT, NOR THE ASSESSEE HAD ANY OCCASION TO SEEK ANY ADVISE AS THERE WAS NO ISSUE OR AWARENESS ABOUT THEIR OBLIGATION. IT WAS UNDER THESE - 9 - ITA 160/NAG/2012, A.Y. 12AA CIRCUMSTANCES THEY OMITTED APPLY FOR REGISTRATION UNDER THE INCOMETAX ACT IN TIME AND ALSO OMITTED TO FILE I.T. RETURN AS THEY WERE UNDER THE IMPRESSION THAT EDUCATIONAL INSTITUTIONS ARE NOT LIABLE TO INCOMETAX. IT WAS ONLY WHEN THEY CAME ACROSS PRESS NOTE DT.15.05.2007 PUBLISHED IN NEWS PAPERS SOMEWHERE ON 17 OR 18 MAY 2007 THAT THEY REALIZED THAT THEY WERE ALSO LIABLE TO GET THEMSELVES REGISTERED UNDER THE INCOMETAX ACT. EVEN THE REVENUE DEPARTMENT ITSELF WAS AWARE THAT MANY EDUCATIONAL INSTITUTIONS AND PUBLIC CHARITABLE TRUSTS WERE NOT AWARE OF THEIR OBLIGATIONS UNDER I.T.ACT AND HENCE WHEN THE LAW WAS BEING AMENDED FROM 01.06.2007 THAT THEY GAVE VIDE PUBLICITY BY PRESS NOTE AND NEWS PAPER ADVERTISEMENTS CALLING UPON THE TRUSTS THAT IF THEY HAVE NOT FILED AN APPLICATION FOR REGISTRATION WITHIN ONE YEAR OF ITS CREATION AND WANT TO AVAIL OF EXEMPTION OF EARLIER YEARS, THEY MAY FILE THE APPLICATION BEFORE 01.06.2007 . COPY OF PRESS RELEASE DT.15.05.2007, (2007) 2009 CTR (ST) 448 IS FILED HEREWITH FOR READY REFERENCE. AS SOON AS THE ASSESSEE CAME ACROSS THE ABOVE PRESS NOTE AND REALIZED THEIR LIABILITY TO GET ITSELF REGISTERED UNDER THE ACT THEY IMMEDIATELY APPROACHED THE C.A. AND GOT APPLICATION FOR REGISTRATION PREPARED ON 25.05.2007 ALONG WITH REQUEST FOR CONDONATION OF DELAY AND GRANT OF REGISTRATION WITH RETROSPECTIVE EFFECT, CERTIFICATE OF REGISTRATION, MEMORANDUM OF ASSOCIATION, BALANCESHEET FOR YEAR ENDING 31.03.2003, 31.03.2004, 31.03.2005 AND 31.03.2006 AND FILED THE SAME ALONG WITH FORWARDING LETTER DT.30.05.2007 AGAIN REQUESTING FOR CONDONATION OF DELAY. THESE PAPERS ARE FILED ON PAGES 1 TO 48 OF THE PAPERBOOK. - 10 - ITA 160/NAG/2012, A.Y. 12AA THEREAFTER THERE WAS NO COMMUNICATION BETWEEN C.I.T. AND THE ASSESSEE TRUST NOR WAS THERE ANY HEARING GRANTED TO THE ASSESSEE. HOWEVER THE HON. C.I.T. ON THE BASIS OF THE REPORT OF ADDL. C.I.T. DT.19.11.2007 RECOMMENDING GRANT OF REGISTRATION WAS PLEASED TO ISSUE REGISTRATION CERTIFICATE DT.30.11.2007 GRANTING REGISTRATION U/S.12A FROM 01.04.2007. ASSESSEE THUS BELIEVED THAT WHATEVER WAS REQUIRED TO BE DONE WAS DONE AND THAT THEIR INCOME WOULD BE EXEMPT FROM INCOMETAX FOR ALL THE YEARS. IT WAS ONLY WHEN THE ASSESSEE RECEIVED NOTICE FROM I.T. DEPT. CALLING UPON THE ASSESSEE TO FILE RETURN FOR EARLIER YEARS THAT THE ASSESSEE REALIZED THE IMPLICATION OF 12A CERTIFICATE FROM 01.04.2007, THAT SUCH CERTIFICATE WOULD ENTITLE THE ASSESSEE TO GET EXEMPTION FROM 01.04.2007 ONWARD AND NOT FOR EARLIER YEARS. THEY WERE ALSO NOT INSTRUCTED BY THEIR C.A. ABOUT REGISTRATION GRANTED FROM 01.04.2007 AND ITS IMPACT THAT IT WILL NOT EXEMPT THE INCOME FOR EARLIER YEARS. ASSESSEE REALIZED THE IMPACT ONLY WHEN IT RECEIVED NOTICE FROM I.T. DEPT. TO FILE RETURNS FOR EARLIER YEARS. BUT BY THAT TIME, THE TIME TO FILE APPEAL BEFORE ITAT HAD EXPIRED. HENCE THE ASSESSEE BELATEDLY FILED APPEAL ALONG WITH APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPEAL AND PRAYED THAT DELAY IN FILING THE APPEAL BE KINDLY CONDONED AND THE ASSESSEE BE GRANTED REGISTRATION U/S.12A FROM RETROSPECTIVE EFFECT. THE HON. TRIBUNAL BEING SATISFIED WITH THE REASONS FOR DELAY IN FILING THE APPEAL AND ABOUT THE BONAFIDES OF THE ASSESSEE TRUST CONDONED THE DELAY. AFTER CONSIDERING THE MATTER IN TOTALLITY THE HON. ITAT WAS PLEASED TO SEND BACK THE MATTER TO C.I.T. WITH A DIRECTION TO CONSIDER THE EXPLANATION OF THE ASSESSEE FOR THE DELAY IN MAKING THE APPLICATION SEEKING REGISTRATION AND FURTHER DIRECTED THAT IF HE WAS SATISFIED ABOUT THE - 11 - ITA 160/NAG/2012, A.Y. 12AA CAUSE FOR DELAY THEN HE WOULD GRANT REGISTRATION FROM INCEPTION. SAID ORDER OF HON. ITAT DT.20.04.2011 IS AT PAGES 56 TO 61 OF THE PAPERBOOK. WHEN THE MATTER CAME BACK TO HON.C.I.T. HE ISSUED NOTICE DT.19.05.2011 CALLING UPON THE ASSESSEE TO FILE ORIGINAL CERTIFICATE OF REGISTRATION UNDER PUBLIC TRUST ACT AND SOCIETIES REGISTRATION ACT, MEMORANDUM OF ASSOCIATION WITH ENGLISH TRANSLATION, BOOKS OF ACCOUNT FOR F.Y.2007-08 TO 2009-10. COPY OF AUDITED ACCOUNTS FOR 2007-08 TO 2009-10, NOTES ON CHARITABLE ACTIVITY ETC. ACCORDINGLY THE ASSESSEE FILED THE SAID DOCUMENTS AND MADE DETAILED SUBMISSIONS DT.23.06.2011 AS TO THE ACTIVITIES OF THE INSTITUTION, CIRCUMSTANCES UNDER WHICH THERE WAS A DELAY IN FILING APPLICATION U/S.12-A, HOW THEY BECAME AWARE OF THEIR OBLIGATION TO GET ITSELF REGISTERED UNDER I.T.ACT BY PRESS NOTE ISSUED BY CBDT IN MAY 2007 INVITING THE TRUSTS THAT THOSE TRUSTS WHO HAVE FAILED TO APPLY SO FAR AND WANTS TO GET ADVANTAGE OF REGISTRATION FOR PAST YEARS ALSO SHOULD APPLY BEFORE 31.05.2007 AND THAT THERE WAS A REASONABLE CAUSE FOR THE DELAY AND THAT THEY MAY BE GRANTED REGISTRATION U/S.12-A FROM INCEPTION ETC. ON 23.06.2011. THE SAID SUBMISSION DT.23.06.2011 IS PLACED IN THE PAPERBOOK AT PAGES 63 TO 68. AFTER THE MATTER WAS SENT BACK BY ITAT TO THE HON. C.I.T., THE ONLY ISSUE TO BE CONSIDERED BY C.I.T. WAS WHETHER THERE WAS A REASONABLE CAUSE FOR DELAY ON THE PART OF THE ASSESSEE TRUST IN MAKING THE APPLICATION U/S.12-A LATE AND IF THERE WAS A REASONABLE CAUSE FOR THE DELAY THEN THE REGISTRATION MAY BE GRANTED U/S.12AA FROM INCEPTION OF THE TRUST. AS SAID ABOVE THE ASSESSEE FILED DETAILED SUBMISSION DT.23.06.2011 POINTING OUT THE REASONABLE CAUSE FOR DELAY IN FILING APPLICATION U/S.12A. IT WAS POINTED OUT THAT - 12 - ITA 160/NAG/2012, A.Y. 12AA THE ASSESSEE WAS PURELY AN EDUCATIONAL CHARITABLE TRUST AND WAS A GENUINE TRUST. IT IS REGISTERED WITH CHARITY COMMISSIONER. IT IS GETTING ITS ACCOUNTS AUDITED EVERY YEAR RIGHT FROM INCEPTION IN 1990 AND IS SUBMITTING THE SAME REGULARLY TO CHARITY COMMISSIONER AND EDUCATIONAL DEPARTMENT FROM WHERE IT IS GETTING GRANT. THUS THE FACT THAT THE ASSESSEE IS GENUINE TRUST AND CARRYING OUT EDUCATIONAL AND CHARITABLE ACTIVITIES IS ACCEPTED BY THE DEPT. AND ACCORDINGLY THE DEPT. HAS GRANTED REGISTRATION TO THE TRUST. THE FACT THAT THE ASSESSEE TRUST WAS CONSTITUTED BY TEACHERS, FARMER AND SOCIAL WORKERS AND THEIR MAIN FIELD OF OPERATION WAS RURAL AREA AND THAT THEY HAD NO MUCH EXPOSURE TO OTHER LAWS INCLUDING INCOMETAX AND THEIR OBLIGATION THEREUNDER IS ALSO NOT DISPUTED BY THE DEPARTMENT. THE FACT THAT THE ASSESSEE TRUST IMMEDIATELY ON ITS FORMATION IN 1990 GOT ITSELF REGISTERED WITH CHARITY COMMISSIONER AND THEY HAVE BEEN GETTING THEIR ACCOUNTS REGULARLY AUDITED AND IS SUBMITTING BEFORE THE CHARITY COMMISSIONER AND EDUCATION DEPARTMENT IS ALSO NOT DISPUTED BY THE DEPT. THE FACT THAT THE EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE TRUST ARE RECOGNIZED BY THE EDUCATION DEPARTMENT AND MANY OF THE INSTITUTIONS ARE GETTING GRANT FROM GOVT. IS ALSO NOT DISPUTED BY THE DEPARTMENT. SINCE THE ASSESSEE TRUST GOT ITSELF REGISTERED UNDER BOMBAY PUBLIC TRUST ACT SINCE INCEPTION AND IS FULFILLING THEIR OBLIGATION UNDER THE SAID ACT AND IS ALREADY GETTING THEIR ACCOUNTS AUDITED AND SUBMITTING THEM TO VARIOUS GOVT. DEPARTMENT THERE WAS NO DIFFICULTY FOR THEM TO APPLY FOR REGISTRATION UNDER THE INCOMETAX ACT AND SUBMIT ACCOUNTS TO I.T. DEPARTMENT ALSO HAD THEY THE SLIGHTEST IDEA ABOUT THEIR REQUIREMENT TO GET ITSELF REGISTERED UNDER I.T. ACT ALSO. IT WAS ONLY BECAUSE THEY BONAFIDE BELIEVED THAT EDUCATIONAL - 13 - ITA 160/NAG/2012, A.Y. 12AA INSTITUTION RUN BY PUBLIC CHARITABLE TRUST ARE NOT LIABLE TO INCOMETAX THAT THEY DID NOT APPLY FOR REGISTRATION. IT WAS ALSO POINTED OUT THAT THE CHARTERED ACCOUNTANT WHO WAS AUDITING THE ACCOUNT ALSO DID NOT ON ITS OWN ADVISE THE ASSESSEE TRUST ABOUT REQUIREMENT OF REGISTRATION UNDER I.T.ACT. IN FACT THERE WAS NOT MUCH INTERACTION BETWEEN THE TRUSTEES AND THE C.A. AS THE C.A. WAS MAINLY CONCERNED WITH AUDIT. IT WAS ONLY WHEN THE MANAGING TRUSTEES CAME ACROSS THE PRESS RELEASE OF CBDT IN MAY 2007 REFERRED TO ABOVE THAT HE APPROACHED THE C.A. WHEREUPON HE ADVISED THE ASSESSEE TRUST TO APPLY FOR REGISTRATION U/S.12-A AND APPLY FOR CONDONATION OF DELAY AND ACCORDINGLY HE GOT THE APPLICATION U/S.12A PREPARED AND GOT IT FILED ON 30.05.2007 WITH REQUEST TO CONDONE DELAY IN FILING APPLICATION. IT IS IN SUPPORT OF THE ABOVE FACT THE ASSESSEE FILED THE LETTER OF C.A. DT.14.02.2012 BEFORE THE HON. C.I.T. WHICH HE HAS QUOTED IN HIS ORDER. THE SAID LETTER WAS FILED IN SUPPORT OF THE FACT THAT THERE WAS A REASONABLE CAUSE IN FILING THE APPLICATION FOR REGISTRATION U/S.12A WHICH WAS FILED ON 30.05.2007 AFTER THE PRESS RELEASE BY CBDT. THE SAID LETTER WAS FILED IN SUPPORT OF THE FACT THAT THERE WAS NOT MUCH INTERACTION BETWEEN THE ASSESSEE TRUST AND C.A. BECAUSE HE WAS MAINLY CONCERNED WITH THE AUDIT. THE SAID LETTER WAS FILED IN SUPPORT OF THE FACT THE HE HAD NO OCCASION TO ADVISE THE TRUST ABOUT INCOMETAX MATTERS BECAUSE HE WAS NOT ASKED ABOUT I.T. MATTER AND THAT HIS CONCERN WAS MAINLY OF AUDIT AND THAT THERE WAS NOT MUCH OF INTERACTION. THUS THE LETTER OF C.A. WAS FILED IN SUPPORT OF THE FACT THAT ON HIS OWN HE DID NOT ADVISE HIS CLIENT, THE ASSESSEE TRUST TO GET ITSELF REGISTERED U/S. I.T. ACT AND THAT THE ASSESSEE CAME TO KNOW OF ITS LIABILITY FOR THE FIRST TIME TO GET ITSELF REGISTERED UNDER I.T. ACT ONLY WHEN IT - 14 - ITA 160/NAG/2012, A.Y. 12AA CAME ACROSS PRESS RELEASE BY CBDT IN MAY 2007 AND AS SOON AS HE CAME TO KNOW OF IT HE PROMPTLY APPLIED FOR REGISTRATION ON 30.05.2007 AND REQUESTED FOR REGISTRATION U/S.12A FROM THE BEGINNING AND REQUESTED FOR CONDONATION OF DELAY IN MAKING THE APPLICATION. THE LETTER OF C.A. WAS NOT FILED TO SHOW ANY LAXITY ON ITS PART TO COMMUNICATE THE IMPORT OF C.I.T.S ORDER DT.30.11.2007 GRANTING REGISTRATION PROSPECTIVELY. THAT MATTER IS ALREADY OVER. THE ASSESSEE FILED AN APPEAL BEFORE ITAT AGAINST THE ORDER OF C.I.T. DT.30.11.2007 ON 09.11.2009 WHICH WAS LATE BY 22 MONTHS AND THE HON. ITAT HAD ALREADY CONDONED THE SAID DELAY AND DECIDED THE APPEAL ON MERIT DIRECTING THE C.I.T. TO CONSIDER THE CASE OF REASONABLE CAUSE IN FILING 12-A APPLICATION LATE. THUS THE LETTER OF C.A. DT.14.02.2012 HAD NO RELEVANCE REGARDING C.I.T.S ORDER DT.30.11.2007 AND DELAY IN FILING APPEAL BEFORE ITAT. LEARNED C.I.T. HAS THUS MISCONCEIVED THE IMPORT OF C.A.S LETTER. BE THAT AS IT MAY. THE FACT REMAINS THAT AS ALREADY SUBMITTED IN DETAILS ABOVE THERE WAS A REASONABLE CAUSE FOR DELAY IN FILING AN APPLICATION U/S.12A ON 30.05.2007 INSTEAD OF FILING IT DURING THE INCEPTION OF TRUST IN 1990. IT MAY BE NOTED THAT ASSESSEE WAS HEARD ON 23.06.2011 AFTER MATTER CAME BACK FROM ITAT. ASSESSEE SUBMITTED DETAILED REPLY AS SAID ABOVE AND SUBMITTED VARIOUS CASE LAWS. C.I.T. DID NOT PASS ANY ORDER FOR A LONG. HENCE ASSESSEE REMINDED HON. C.I.T. ON 11.11.2011 TO PASS ORDER. STILL NO ORDER WAS PASSED NOR ANY FURTHER HEARING TOOK PLACE. THEN THE C.I.T. CAME TO PASS ORDER AS LATE AS ON 27.03.2012 I.E. MORE THAN NINE MONTHS AFTER THE DATE OF HEARING. HE FAILED TO CONSIDER THE VARIOUS CASE LAWS ON THE POINT. HE FAILED TO PROPERLY CONSIDER ASSESSEES SUBMISSIONS (P.63 - 15 - ITA 160/NAG/2012, A.Y. 12AA TO 68) REGARDING THE REASONS FOR DELAY IN FILING APPLICATION UNDER SEC.12-A. INSTEAD HE UNILATERALLY FRAMED SOME NEW QUESTIONS IN HIS ORDER WITHOUT PUTTING THEM TO THE ASSESSEE AND THEN UNILATERALLY ADJUDICATED THEM ARBITRARILY WITHOUT INVITING ASSESSEES SAY THEREON. THUS THE ORDER OF HON. C.I.T. IS TOTALLY VITIATED. PLEASE SEE ANNEXURE TO GROUND OF APPEAL BEFORE HON. ITAT . C.I.T. UNILATERALLY FRAMED Q.NO.4 SAYING WHETHER DELAY IN MAKING APPLICATION IS A TECHNICAL BREACH? IT WAS NOBODYS CASE THAT THE BREACH IS TECHNICAL. THE CASE OF THE ASSESSEE WAS THAT THERE WAS A REASONABLE CAUSE FOR THE DELAY IN FILING THE APPLICATION U/S.12A AND LAW ENJOINED THE POWER, BEFORE 01.06.2007, ON C.I.T. TO CONDONE DELAY IN FILING APPLICATION U/S.12A AND GRANT REGISTRATION FROM INCEPTION IF THERE WAS A REASONABLE CAUSE FOR DELAY. C.I.T. DID NOT CONSIDER THE SUBMISSION OF THE ASSESSEE AS DETAILED ABOVE AND WENT INTO ALTOGETHER ANOTHER ASPECT SAYING THAT THE ASSESSEE HAD SURPLUS IN A.Y.2003-04 TO 2008-09 AND THERE WAS NO REASON FOR NOT FILING THE RETURN. HE FAILED TO CONSIDER THAT FIRSTLY AS ALREADY STATED ABOVE THE ASSESSEE TRUST BONAFIDE BELIEVED THAT EDUCATIONAL TRUST ARE NOT LIABLE TO INCOMETAX AND THERE WAS NO LIABILITY OF REGISTRATION UNDER I.T.ACT AND IT WAS BECAUSE OF SUCH BONAFIDE BELIEF THAT THE ASSESSEE HAD NEITHER APPLIED FOR REGISTRATION NOR HAD FILED THE RETURN. IF THE ASSESSEE HAD THE SLIGHTEST IDEA THAT THE EDUCATIONAL TRUST ARE LIABLE TO INCOMETAX AND THAT THEY HAD SOME OBLIGATION UNDER I.T. ACT THEN IT WOULD HAVE NOT ONLY FILED I.T. RETURN BUT ALSO WOULD HAVE APPLIED FOR REGISTRATION ALSO IN TIME. IT WAS ONLY BECAUSE OF THE BONAFIDE BELIEF THAT THE ASSESSEE TRUST IS NOT LIABLE UNDER I.T.ACT IT DID NOT FILE RETURN NOR APPLIED FOR REGISTRATION THOUGH IT HAD ALWAYS GOT ITS ACCOUNT AUDITED AND HAD SUBMITTED BEFORE - 16 - ITA 160/NAG/2012, A.Y. 12AA CHARITY COMMISSIONER AND EDUCATION DEPT. REGULARLY. SECONDLY THERE IS NO SURPLUS AS ALLEGED BY C.I.T. BECAUSE HE HAS NOT CONSIDERED THE EXPENSES OF CAPITAL NATURE BEING ADDITION OF FIXED ASSET. THESE DETAILS ARE FILED WITH THE SYNOPSIS WHICH SHOWS THERE WAS NO SURPLUS AS ASSUMED BY HON. C.I.T. THIRDLY THE ASSESSEE WAS NEVER QUESTIONED ABOUT THE SO CALLED ISSUE UNILATERALLY FRAMED BY HIM AND UNILATERALLY ANSWERED BY HIM. FOURTHLY THIS ASPECT IS NOT GERMANE THE ISSUE OF CONSIDERATION WHETHER THERE WAS A REASONABLE CAUSE FOR DELAY IN FILING THE APPLICATION U/S.12A FOR WHICH THE MATTER WAS REMANDED BY HON. ITAT TO C.I.T. LEARNED C.I.T. HAS AGAIN UNILATERALLY FRAMED QUESTION NO.5 STATING WHETHER THE ACCOUNTS OF INCOME AND EXPENDITURE APPENDED WITH 10A APPLICATION REFLECT TRUE STATE OF AFFAIR WITHOUT PUTTING TO THE ASSESSEE. IN FACT THE PREDECESSOR OF C.I.T. HAD HIMSELF GRANTED REGISTRATION U/S.12AA TO THE ASSESSEE RELYING ON THOSE VERY ACCOUNTS. THAT APART THE ISSUE OF ASSESSIBILITY OR OTHERWISE ETC. IS NOT RELEVANT AT THE TIME OF CONSIDERATION OF ISSUE OF GRANTING REGISTRATION U/S.12A. LEARNED C.I.T. HAS UNNECESSARY GONE INTO IRRELEVANT CONSIDERATION OF ASSESSMENT WHICH NOT GERMANE TO THE ISSUE OF GRANTING REGISTRATION HON. KARANATAKA H.C. IN THE CASE OF DIRECTOR OF INCOMETAX VS. GARDEN CITY EDUCATION TRUST REPORTED IN (2011) 330 ITR P.480 HAS HELD THAT THE MANNER OF APPLICATION OF FUND AND ALLOWABILITY OF EXEMPTION UNDER SECTION 11 AND 12 ARE MATTERS TO BE EXAMINED BY THE A.O. AT THE TIME OF ASSESSMENT AND NOT BY C.I.T. FURTHER THE ASSESSMENT ORDERS ARE ALREADY UNDER CHALLENGE BEFORE THE APPELLATE COURT. - 17 - ITA 160/NAG/2012, A.Y. 12AA LEARNED C.I.T. INSTEAD OF DECIDING THE ISSUE WHETHER THERE WAS A REASONABLE CAUSE FOR DELAY IN FILING THE APPLICATION AND WHETHER IT WAS ENTITLED TO REGISTRATION FROM INCEPTION OF TRUST FOR WHICH THE MATTER WAS REMANDED BY ITAT, C.I.T. HAS TOTALLY GONE ASTRAY IN UNILATERALLY FRAMING QUESTION NOT GERMANE TO THE ISSUE, NOT INVITING ASSESSEES SAY THEREON AND THEN UNILATERALLY DECIDING THE SAME AGAINST THE ASSESSEE ARBITARILY AFTER SITTING TIGHT OVER THE MATTER FOR ABOUT NINE TO TEN MONTHS. HE FAILED TO CONSIDER THE RELEVANT FACTS CONSTITUTING REASONABLE CAUSE FOR DELAY IN FILING THE APPLICATION FOR REGISTRATION U/S.12A IN PURSUANCE OF PRESS NOTE BY CBDT IN MAY 2007. HE FAILED TO TAKE NOTE OF THE FACT THAT THE CBDT ITSELF HAD TAKEN NOTE OF THE FACT THAT MANY CHARITABLE TRUST HAD FAILED TO APPLY FOR REGISTRATION UNDER I.T. ACT AND HENCE SPECIFICALLY INVITED THE PUBLIC TRUSTS BY VIDE PUBLICITY GIVEN IN NEWS PAPER THAT IF THEY HAVE SO FAR FAILED TO APPLY FOR REGISTRATION AND THAT IF THEY WANT TO AVAIL EXEMPTION FOR EARLIER YEARS THEY MAY FILE SUCH APPLICATION BEFORE 01.06.2007. RELEVANT PORTION OF PRESS NOTE READ AS UNDER :- IF YOU HAVE NOT FILED YOUR APPLICATION FOR REGISTRATION WITHIN ONE YEAR OF YOUR CREATION OR ESTABLISHMENT AND WANT TO AVAIL OF EXEMPTION OF EARLIER YEARS, YOU MAY FILE SUCH APPLICATION BEFORE 01.06.2007 . IT WAS IN PURSUANCE OF THE SAID PRESS RELEASE THE ASSESSEE, LIKE MANY OTHER TRUSTS IN INDIA, APPLIED FOR REGISTRATION BEFORE 01.06.2007 AND ALL THOSE TRUST WHO APPLIED FOR REGISTRATION BEFORE 01.06.2007 WERE GIVEN BENEFIT OR REGISTRATION FOR EARLIER YEARS AS PROMISED IN SAID PRESS NOTE. C.I.T. FAILED TO CONSIDER THE FACT THAT WHEN THE CBDT HAS INVITED PUBLIC TRUSTS WHO HAVE SO FAR NOT - 18 - ITA 160/NAG/2012, A.Y. 12AA APPLIED FOR REGISTRATION TO APPLY FOR THE SAME BEFORE 01.06.2007 AND GET BENEFIT OF EARLIER YEARS AND WHEN VARIOUS TRUSTS HAVE AVAILED OF SUCH BENEFIT AND DEPARTMENT HAS GRANTED REGISTRATION TO THEM FOR EARLIER YEARS RELYING ON CBDT PRESS NOTE WHY THE ASSESSEE TRUST CANNOT BE GIVEN SUCH BENEFIT. C.I.T. HAS FAILED TO CONSIDER VARIOUS CASE LAWS CITED BEFORE HIM WHERE THE HON. TRIBUNAL AND COURT RELYING ON SAID PRESS NOTE HAVE GRANTED REGISTRATION TO TRUST FOR EARLIER YEARS ALSO. C.I.T. HAS FAILED TO TAKE PRAGMATIC AND LIBERAL VIEW WHILE DEALING WITH THE APPLICATION SEEKING CONDONATION OF DELAY. PLEASE SEE COMM. OF I.T. VS. SHRIMANTA SANKAR ACADEMY REPORTED IN (2010) 325 I.T.R. P.261 (GAUHATI H.C.) . C.I.T. ALSO FAILED TO CONSIDER RELEVANT CASE LAWS AND PRINCIPLES ENUNCIATED BY COURTS AND TRIBUNAL WHILE CONSIDERING THE ISSUE OF CONDONATION OF DELAY ESPECIALLY WHEN LARGE SECTION OF PUBLIC OR BENEFICIARY ARE AFFECTED. PLEASE SEE KADAYANALLUR CHOLIA BRAHMANA MAHAJAN TRUST VS. INCOMETAX OFFICER, CHENNAI BENCH, REPORTED IN (2010) 2 ITR (TRIBUNAL) P.14 (CHENNAI) COPY ATTACHED AT PAGE 6 OF PAPERBOOK OF CASE LAWS. C.I.T. FAILED TO CONSIDER THE DECISION OF MUMBAI BENCH IN THE CASE OF CHURCH OF OUR LADY OF GRACE VS. COMMISSIONER OF INCOMETAX REPORTED IN (2010) 134 TTJ (MUMBAI) P.690 . (COPY ATTACHED AT PAGE 1 OF PAPERBOOK OF CASE LAW), WHERE THE HON. TRIBUNAL RELYING ON THE ABOVE SAID PRESS NOTE OF CBDT CONDONED THE DELAY AND GRANTED REGISTRATION TO THE SAID TRUST FROM 01.07.1973. IN THE PRESENT CASE THE ASSESSEE TRUST IS RUNNING VARIOUS EDUCATIONAL INSTITUTION MOSTLY IN RURAL AREAS WHERE THOUSANDS OF STUDENTS ARE BENEFITED BY THE NOBLE SERVICES RENDERED BY THE ASSESSEE TRUST SINCE LAST TWO DECADES. AS ALREADY STATED ABOVE - 19 - ITA 160/NAG/2012, A.Y. 12AA THERE WAS A REASONABLE CAUSE FOR THE DELAY IN MAKING APPLICATION FOR REGISTRATION AND HENCE TAKING A PRAGMATIC AND LIBERAL VIEW IT IS NECESSARY TO GRANT REGISTRATION TO THE TRUST FROM INCEPTION OR ATLEAST FROM 01.04.2002. IF THE DELAY IN MAKING THE APPLICATION IS NOT CONDONED AND BENEFIT OF REGISTRATION IS NOT GRANTED FOR EARLIER YEARS AND PROMISED BY HON. CBDT IN ABOVE REFERRED PRESS RELEASE THEN THOUSANDS OF STUDENTS AND TEACHERS WILL BE AFFECTED AND THEIR FUTURE WILL BE PUT IN JEOPARDY FOR NO FAULT OF THEIRS. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, VARIOUS CASE LAWS AND PRINCIPLES OF LAW ENUNCIATED THEREIN AND IN VIEW CBDTS PROMISE TO GIVE BENEFIT OF REGISTRATION FOR EARLIER YEARS TO THOSE TRUSTS WHO APPLY BEFORE 01.06.2007 IT IS ONE OF THE MOST FIT CASE TO CONDONE THE DELAY IN MAKING THE APPLICATION FOR REGISTRATION U/S.12A AND GRANT REGISTRATION FROM INCEPTION OF TRUST IN 1990 OR AT LEAST FROM 01.04.2002 AND NOT MERELY PROSPECTIVELY FROM 01.04.2007. IT IS MOST HUMBLY PRAYED THAT ASSESSEES APPEAL BE KINDLY ALLOWED AND REGISTRATION U/S.12AA BE KINDLY GRANTED TO THE ASSESSEE TRUST FROM INCEPTION OR AT LEAST FROM 01.04.2002. 4. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER OF CIT. 5. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ASSESSEE TRUST IS PURELY EDUCATIONAL TRUST. THE SAID PUBLIC CHARITABLE EDUCATIONAL INSTITUTION IS REGISTERED WITH CHARITY COMMISSIONER, NAGPUR ON 28/02/1991 UNDER BOMBAY PUBLIC TRUST ACT 1950 AND ALSO UNDER SOCIETIES REGISTRATION ACT 1860 VIDE CERTIFICATE DT. 07/08/1990. IT IS ADMITTED FACT THAT ASSESSEE TRUST HAS NOT APPLIED FOR REGISTRATION BEFORE REVENUE DEPARTMENT. THE ASSESSEE TRUST GETTING THEIR ACCOUNTS REGULARLY AUDITED AND SUBMITTED THE SAME TO THE - 20 - ITA 160/NAG/2012, A.Y. 12AA CHARITY COMMISSIONER. THE TRUSTEES OF THE ASSESSEE TRUST BEING MOSTLY TEACHERS, FARMERS AND SOCIAL WORKERS AND MOSTLY DOING THEIR EDUCATIONAL ACTIVITIES IN RURAL AREA HAD NOT MUCH EXPOSER TO THEIR OBLIGATION UNDER I. T. ACT. THE ASSESSEE TRUST HAS APPLIED FOR REGISTRATION BEFORE REVENUE DEPARTMENT BY THE PRESS NOTE DT. 15/05/2007 IN THE NEWS PAPER THAT THEY REALISE THAT THEY WERE LIABLE TO GET THEMSELVES REGISTERED UNDER I.T. ACT. THE REVENUE DEPARTMENT HAS ALSO GAVE VIDE PUBLICITY BY PRESS NOTE AND NEWS PAPER ADVERTISEMENT CALLING UPON THE TRUST THAT IF THEY HAVE NOT FILED THE APPLICATION FOR REGISTRATION WITHIN 1 YEAR OF ITS CREATION AND WANT TO AVAIL EXEMPTIONS OF EARLIER YEARS THEY MAY FILE THE APPLICATION BEFORE 01/06/2007. AS SOON AS THE ASSESSEE CAME ACROSS THE ABOVE PRESS NOTE AND REALISE THE LIABILITY TO GET IT REGISTERED UNDER THE ACT THEY APPROACH TO CA AND GOT APPLICATION FOR REGISTRATION PREPARED ON 25/05/2007 ALONG WITH THE REQUEST FOR CONDONATION OF DELAY AND GRANT OF REGISTRATION WITH RETROSPECTIVE EFFECT, CERTIFICATE OF REGISTRATION, MEMORANDUM OF ASSOCIATION, BALANCE SHEET FOR ENDING 31 ST MARCH 2003, 31 ST MARCH 2004, 31 ST MARCH 2005 AND 31 ST MARCH 2006 AND FILED ALONG WITH FORWARDING LETTER REQUESTING TO CONDONATION OF DELAY. THE ASSESSEE GOT REGISTRATION FROM 01/04/2007 THEREFORE THE MATTER WAS TRAVELLED TO I.T.A.T. AND I.T.A.T. HAS SENT BACK THIS MATTER TO CIT WITH THE DIRECTION TO CONSIDER THE EXPLANATION OF THE ASSESSEE FOR DELAY IN MAKING THE APPLICATION SEEKING REGISTRATION AND IF HE IS SATISFIES ABOUT CAUSE OF DELAY THAN REGISTRATION SHOULD BE GRANTED FROM INCEPTION. WE FIND THAT CIT FIRSTLY CONSIDERED WHETHER THE DELAY IN MAKING THE APPLICATION IS TECHNICAL BREACH. THE ASSESSEES CASE THAT ASSESSEE TRUST HAS BONAFIED BELIEF THAT EDUCATIONAL TRUST ARE NOT LIABLE TO INCOME TAX AND THERE WAS NO LIABILITY FOR REGISTRATION UNDER I.T. ACT AND BECAUSE OF SUCH BONAFIDE BELIEF ASSESSEE HAS NEITHER APPLIED FOR REGISTRATION NOR FILED THE RETURN. ASSESSEE TRUST HAS NO SURPLUS - 21 - ITA 160/NAG/2012, A.Y. 12AA FUND. ASSESSEE TRUST HAS REASONABLE CAUSE FOR DELAY IN FILING THE APPLICATION UNDER SECTION 12A OF THE ACT. 6. WE FIND THAT THE CIT HAS GRANTED REGISTRATION U/S 12AA RELYING UPON THE SAME ACCOUNT. WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF DIRECTOR OF INCOME TAX V/S GARDEN CITY EDUCATION TRUST, 330 ITR 480. WHEREIN IT IS HELD THAT MANNER OF APPLICATION OF FUND AND ALLOWABILITY OF EXEMPTION U/S 11 & 12 ARE TO BE EXAMINED BY THE AO AT THE TIME ASSESSMENT AND NOT BY CIT WHILE GRANTING REGISTRATION U/S 12A. WE FIND THAT CIT HAS FAILED TO CONSIDER THE REASONABLE CAUSE FOR DELAY IN FILLING APPLICATION FOR REGISTRATION U/S 12A IN PURSUANCE OF PRESS NOTE BY CBDT IN MAY 2007. THE CIT DID NOT TAKE THE NOTE OF FACT THAT CBDT HAS TAKEN THE NOTE OF FACT THAT MANY CHARITABLE TRUST FAILED TO APPLY REGISTRATION UNDER I. T. ACT HENCE SPECIFICALLY INVITED TO APPLY FOR REGISTRATION AND IF THEY WANT TO AVAIL EXEMPTIONS FOR EARLIER YEARS. IN PURSUANCE OF THE SAID PRESS RELEASE ASSESSEE HAS APPLIED FOR REGISTRATION, THEREFORE, ASSESSEE HAD REASONABLE CAUSE FOR APPLYING FOR REGISTRATION UNDER THE I. T. ACT AND THE ASSESSEE IS ENTITLE FOR BENEFIT UNDER I. T. ACT. 7. IN SOCIETY OF DIVINE PROVIDENCE VS. UNION OF INDIA (1998) 146 CTR (MP) 417: (1999) 235 ITR 339 (MP) IT HAS BEEN OBSERVED: THE EXPRESSION BEFORE THE EXPIRY OF THE PERIOD IN PROVISO (I) OF CL. (A) OF S. 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. WHAT THE AUTHORITY HAS TO SEE IS WHETHER OR NOT THERE WERE SUFFICIENT REASONS WHICH PREVENTED THE PERSON FROM MAKING THE APPLICATION WITHIN THE PRESCRIBED PERIOD AND NOT THE TOTAL PERIOD AFTER WHICH THE APPLICATION WAS MADE. THE LEARNED CIT WAS, THEREFORE, REQUIRED TO EXAMINE WHETHER SUFFICIENT - 22 - ITA 160/NAG/2012, A.Y. 12AA REASONS EXISTED FOR NOT MAKING THE APPLICATION IN THE PRESCRIBED PROFORMA WITHIN THE PRESCRIBED PERIOD AND NOT THE TOTAL PERIOD AFTER WHICH THE APPLICATION WAS MADE. THE LEARNED CIT WAS, THEREFORE, REQUIRED TO EXAMINE WHETHER SUFFICIENT REASONS EXISTED FOR NOT MAKING THE APPLICATION WITHIN THE PRESCRIBED PERIOD AND NOT THE TOTAL PERIOD AFTER WHICH THE APPLICATION WAS MADE. THE LEARNED CIT WAS, THEREFORE, REQUIRED TO EXAMINE WHETHER SUFFICIENT REASONS EXISTED FOR NOT MAKING THE APPLICATION IN THE PRESCRIBED PROFORMA WITHIN THE PRESCRIBED PERIOD OF ONE YEAR AND NOT WITH REFERENCE TO THE TOTAL PERIOD THAT ELAPSED BEFORE MAKING THE APPLICATION. IT IS, THUS, CLEAR THAT THE LEARNED CIT HAS NOT APPROACHED THE MATTER FROM ITS CORRECT PERSPECTIVE. THE LEARNED CIT HAS RECORDED THAT THE REASONS FURNISHED WERE NOT SATISFACTORY. NOT SATISFACTORY IS A CONCLUSION AND CANNOT BE A REASON BY ITSELF AND IT WAS NECESSARY FOR THE LEARNED CIT TO HAVE GIVEN REASONS WHY THE EXPLANATION FOR NOT MAKING THE APPLICATION IN TIME WAS NOT SATISFACTORY. IT IS CLEAR FROM THE IMPUGNED ORDER THAT INSOFAR AS THE ENTITLEMENT TO REGISTRATION UNDER S. 12A IS CONCERNED, THE SAME HAS BEEN GRANTED THOUGH WITH PROSPECTIVE EFFECT FROM 1 ST APRIL, 1993. THE ELIGIBILITY OF THE PETITIONER HAVING THUS BEEN CONCLUDED, IT WAS NECESSARY THAT COGENT REASONS WERE ASSIGNED TO INDICATE WHY THE REASONS FURNISHED BY THE PETITIONER WERE NOT SATISFACTORY. IN SURYA GENERAL TRADERS VS.CTO (2003) 133 STC 388, 389 (AP), IT HAS BEEN OBSERVED AND HELD THAT: - WHEN AN APPELLANT HAS A GOOD CASE ON MERITS, DEFEAT OF HIS CLAIM ON TECHNICAL PLEA OF LIMITATION WOULD ULTIMATELY LEAD TO INJUSTICE. STATE SHOULD NOT STAND BY A TECHNICAL PLEA OF LIMITATION OF THE CITIZENS CASE WAS OTHERWISE MERITORIOUS. IN KADUR VIDHYA PRATISHTANA VS CIT (2007) 15 SOT 75 (BANG), THE TRIBUNAL AFTER CONSIDERING THE VARIOUS DECISIONS INCLUDING THE DECISION IN SOCIETY OF DIVINE PROVIDENCES CASE (SUPRA), MOTILAL PADAMPAT SUGAR MILLS CO. LTD. VS STATE OF UP (1979) 118 ITR 326 (SC) AND COLLECTOR, LAND ACQUISITION VS MST. - 23 - ITA 160/NAG/2012, A.Y. 12AA KATIJI & ORS. (1987) 62 CTR (SC) 23: (1987) 167 ITR 471 (SC) HAS HELD AS UNDER: - THE SOCIETY RECEIVES VOLUNTARY CONTRIBUTION 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 S. 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 SS. 11 AND 12 SHOULD NOT BE MADE APPLICABLE IN RESPECT OF THE SOCIETY FROM ITS INCEPTION. 8. IN THE PRESENT CASE THE ASSESSEE TRUST IS RUNNING VARIOUS EDUCATIONAL INSTITUTIONS MOSTLY IN RURAL AREAS WHERE THOUSANDS OF STUDENTS ARE BENEFITED BY THE NOBLE SERVICES RENDERED BY THE ASSESSEE TRUST SINCE LAST TWO DECADES. THERE WAS A REASONABLE CAUSE FOR THE DELAY IN MAKING APPLICATION FOR REGISTRATION AND HENCE TAKING A PRAGMATIC AND LIBERAL VIEW IT IS NECESSARY TO GRANT REGISTRATION TO THE TRUST FROM INCEPTION. IF THE DELAY IN MAKING THE APPLICATION IS NOT CONDONED AND BENEFIT OF REGISTRATION IS NOT GRANTED FOR EARLIER YEARS AND PROMISED BY HON. CBDT IN ABOVE REFERRED PRESS RELEASE THEN THOUSANDS OF STUDENTS AND TEACHERS WILL BE AFFECTED AND THEIR FUTURE WILL BE PUT IN JEOPARDY FOR NO FAULT OF THEIRS. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, VARIOUS CASE LAWS AND PRINCIPLES OF LAW ENUNCIATED THEREIN AND IN VIEW CBDTS PROMISE TO GIVE BENEFIT OF REGISTRATION FOR EARLIER YEARS TO THOSE TRUSTS - 24 - ITA 160/NAG/2012, A.Y. 12AA WHO APPLY BEFORE 01.06.2007 IT IS ONE OF THE FIT CASE TO CONDONE THE DELAY IN MAKING THE APPLICATION FOR REGISTRATION U/S.12A AND GRANT REGISTRATION FROM INCEPTION AND NOT MERELY PROSPECTIVELY FROM 01.04.2007. ASSESSEE TRUST GRANTED REGISTRATION U/S.12AA FROM INCEPTION. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. JUDGMENT PRONOUNCED IN OPEN COURT ON 09/11/2012. SD/- SD/- (P. K. BANSAL) (D. T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PANAJI / GOA DATED: - 09.11.2012 *NANU* COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT, NAGPAUR 4. CIT(A), NAGPUR 5. D.R 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR I.T.A.T., NAGPUR BENCH, NAGPUR. - 25 - ITA 160/NAG/2012, A.Y. 12AA