2004 (6) TMI 277 - AT - Income Tax

Condonation of delay - filing an application for registration u/s 12A of the Income Tax Act - HELD THAT - We are of the considered view that it is a case where appellant-society deserves to succeed. The appellant was registered in the year 1957 i.e. at a time when IT Act 1961 and its ss. 11 and 12 were not there. Therefore there is no reason to disbelieve the plausible explanation of the appellant that the office bearers of the appellant-society could not have had any reason to see the applicability of the provisions of such non-existing enactment or its sections or otherwise take into account taxability aspect of the appellant-society. Requirement of registration was however brought by Finance Act 1972 w.e.f1st April 1973. Explanation of the appellant-society that when the office bearers and their successors were not conscious as to the application of taxability aspect under the IT Act 1961 there was possibility and plausibility for them to have skipped the requirement of registration brought in by the amendment to the sections dealing with taxability aspect. This factor cannot be brushed aside that this situation of ignorance remained there well over 15 years. We have seen the memorandum of association of the appellant-society placed in the paper book and it is seen that the objective of the appellant-society is national integration and to improve social economical and educational status of primary teachers. DIT himself has granted the registration to the appellant-society which means that its aims and objects have been found charitable by the DIT. The receipts in the hands of the appellant-society are by way of grants and contributions and the receipts have substantially been spent on administration and holding seminars and workshops and related material in furtherance of aims and objectives. These facts are evident from the copies of audited P L a/c filed in the paper book. Though it is commonly understood that everybody knows the law but Hon ble Supreme Court has held in the case reported 1978 (12) TMI 45 - SUPREME COURT that there is no such maxim known to law. Therefore the office bearers of the society which keep on changing every two three years can be believed to have ignored the provision of law and entertained bona fide belief as to the compliance of all required statutory formalities by their predecessors. This situation and such explanation of the appellant is not something which is improbable. This aspect of the matter also cannot be lost sight of that there was no profit motive of the appellant-society and office bearers of the society are out of the primary teachers only with no knowledge of the nuances of IT law. Therefore we find that there existed sufficient reasons for not filing application of registration in time and therefore there was genuine and bona fide ground for delay in filing the application for registration from 1st April 1973 till 31st March 2000 which DIT ought to have condoned and hence his order is reversed and delay is hereby condoned from 1st April 1973. In the result appeal of the assessee is allowed.

Summary

Issues involved:
The appeal concerns the condonation of delay in filing an application for registration under section 12A of the Income Tax Act.

Summary:

Issue 1: Condonation of Delay
The appellant, a society, sought registration under section 12A(a) of the IT Act, with a delay of 43 years, 8 months, and 14 days. The Director of IT (Exemption) (DIT) granted registration but from a backdated period, not condoning the delay. The appellant argued that sufficient reasons existed for the delay, citing ignorance of the law due to the society's formation before the enactment of the IT Act, 1961. The appellant contended that the office bearers, primarily teachers, lacked awareness of IT law requirements, believing their exemption akin to educational institutions. The appellant emphasized the societal objectives and the genuine nature of its activities. The counsel urged for a liberal exercise of jurisdiction in condoning the delay, citing relevant legal precedents.

Issue 2: Department's Position
The Departmental Representative contested the appellant's claim, asserting no reasonable cause for the delay in filing the registration application. Emphasizing compliance regardless of the society's non-profit and non-political nature, the representative argued against condoning the delay. Legal precedents were cited to support the Department's position, highlighting the need for the appellant to establish exemption conditions and the real character of receipts.

Judgment
After considering the arguments and legal precedents, the Tribunal found in favor of the appellant society. Recognizing the society's registration before the relevant provisions, the Tribunal accepted the explanation for the delay, attributing it to ignorance and lack of awareness among successive office bearers. The Tribunal noted the charitable nature of the society's aims and the genuine utilization of funds. Concluding that sufficient reasons existed for the delay, the Tribunal reversed the DIT's decision and condoned the delay from April 1, 1973. The appeal of the assessee was allowed.