2025 (6) TMI 1416 - AT - Income Tax

Rejection of registration u/s. 12A(1)(ac) - as per AO assessee failed to offer any explanation or furnish requisite details in response to the discrepancies communicated despite having been afforded adequate opportunities - HELD THAT - Taking cognizance of the fact that the management of the assessee got changed and the trustee whose email id was given for receiving the notices also got retired without informing the assessee about the hearing notices and passing of the impugned order we are of the considered view that in the interest of justice and to ensure fairness to both parties the assessee deserves one more opportunity to present its case. Accordingly the matter is remanded to the file of the ld. CIT(E) for denovo adjudication on merits. Assessee is directed to provide its updated email address and contact details to the Department to facilitate effective communication of notices through the ITBA portal. Appeal of the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the delay of 302 days in filing the appeal before the Tribunal can be condoned under the principles governing limitation and sufficient cause.
• Whether the rejection of the application for registration under section 12A(1)(ac) of the Income Tax Act, 1961, by the learned Commissioner of Income Tax (Exemptions) was justified on the ground of non-compliance and failure to furnish explanations against discrepancies communicated.
• Whether the assessee should be granted an opportunity for fresh adjudication on merits in light of changed management and communication failures.

2. ISSUE-WISE DETAILED ANALYSIS

Delay in Filing the Appeal and Condonation Thereof

Relevant Legal Framework and Precedents: The Tribunal considered the provisions of section 5 of the Limitation Act, which governs the condonation of delay in filing appeals. The principle that courts adopt a liberal approach in condoning delays when there is a plausible cause and the merits of the case are significant was emphasized. The Tribunal relied heavily on the Supreme Court judgment in Inder Singh v. State of Madhya Pradesh, where a delay of 1537 days was condoned on the ground that the delay was unintentional, not due to deliberate laches, and the cause of justice was served by hearing the appeal on merits.

Court's Interpretation and Reasoning: The Tribunal noted that the delay was caused due to a change in the management committee of the assessee and the retirement of the trustee whose email ID was registered for communication. This resulted in the assessee not receiving notices or being aware of the rejection order passed by the CIT (Exemptions). The Tribunal found this to be a reasonable and genuine cause for delay.

Key Evidence and Findings: The affidavit filed by the assessee explained the circumstances leading to the delay, including the change in management and communication failures. The Tribunal found no evidence of deliberate delay or mala fide intent.

Application of Law to Facts: Applying the principles laid down by the Supreme Court and considering the reasonable cause demonstrated, the Tribunal adopted a liberal approach and condoned the delay of 302 days, admitting the appeal for adjudication on merits.

Treatment of Competing Arguments: The Tribunal balanced the technical bar of limitation against the interest of justice and the assessee's right to have its case heard on merits, favoring the latter.

Conclusion: The delay in filing the appeal was condoned, and the appeal was admitted for consideration on merits.

Rejection of Registration Application under Section 12A(1)(ac)

Relevant Legal Framework and Precedents: Section 12A(1)(ac) of the Income Tax Act governs the registration of charitable or religious trusts and institutions for exemption purposes. The CIT (Exemptions) has the authority to grant or reject registration based on compliance and disclosures. The principles of natural justice and fair opportunity to be heard are implicit in such proceedings.

Court's Interpretation and Reasoning: The Tribunal observed that the rejection was primarily based on the assessee's failure to offer explanations or furnish details in response to discrepancies communicated by the CIT (Exemptions), despite opportunities afforded. However, the Tribunal took note of the changed management and communication breakdown that prevented the assessee from effectively responding.

Key Evidence and Findings: The record showed that notices were sent to the email ID of a trustee who had retired and no longer represented the assessee, leading to non-receipt of communications. The assessee's partial compliance was acknowledged, but the absence of explanations was the main ground for rejection.

Application of Law to Facts: The Tribunal emphasized the need for fairness and justice, concluding that the assessee should be granted one more opportunity to present its case before the CIT (Exemptions). The Tribunal directed that the assessee provide updated contact details to ensure effective communication.

Treatment of Competing Arguments: The Departmental Representative did not oppose the request for an opportunity to be heard, indicating acceptance of the fairness principle. The Tribunal balanced the Department's interest in compliance against the assessee's right to be heard.

Conclusion: The matter was remanded to the CIT (Exemptions) for fresh adjudication on merits with a direction to grant a reasonable opportunity of hearing and pass a reasoned order after considering the assessee's explanations.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"When consideration of an appeal on merits is pitted against the rejection of a meritorious claim on the technical ground of the bar of limitation, the Courts lean towards consideration on merits by adopting a liberal approach towards 'sufficient cause' to condone the delay."

"In cases where the merits are significant, a more liberal approach may be adopted to allow for the examination of the case on its merits."

"There was 'reasonable cause' which prevented the assessee in filing the appeal within the stipulated time."

"In the interest of justice and to ensure fairness to both parties, the assessee deserves one more opportunity to present its case."

"It is imperative that the ld. CIT(E) grants a reasonable opportunity of being heard to the assessee and pass a reasoned and speaking order after duly considering the explanation to be furnished by the assessee."

Core principles established include the liberal approach to condoning delay where genuine cause is shown, the primacy of adjudication on merits over technical bars of limitation, and the fundamental right of the assessee to be heard, particularly when communication failures have occurred due to changed management.

Final determinations on each issue were:

• The delay of 302 days in filing the appeal was condoned.
• The appeal was admitted for adjudication on merits.
• The impugned order rejecting registration was set aside.
• The matter was remanded to the CIT (Exemptions) for fresh adjudication after affording the assessee a reasonable opportunity to explain the discrepancies.
• The assessee was directed to update contact details to avoid future communication failures.