TMI Blog2013 (1) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or its trustees/ governing body members connived or colluded with Sikri. Order of the Tribunal states that the assessee – society took the action immediately on receipt of the complaint from M. P. Mansinghka Trust of Mumbai referring to the confession of Sikri in the meeting of the governing body owning up responsibility for having misled the assessee – society by representing that the necessary application for registration were made in time, it has also referred to the action taken by the assessee – society against Sikri when it found that Sikri was not taking adequate steps to remedy the situation, police complaints filed by the assessee – society & income tax authorities against Sikri which indicated that they also viewed Sikri to be responsible for the mis-representation, fake certificates of registration, etc. Moreover, the Tribunal has taken note of the fact that the Metropolitan Magistrate, acting on the police complaint, remanded Sikri to custody and also referred to the fact that in the bail application, Sikri had again owned up responsibility for the fake certificates of registration. Thus Tribunal came to hold the view that it was because of the irregularities, il ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MR. S. RAVINDRA BHAT MR. R.V. EASWAR, JJ. Appellant: Mr. Sanjeev Rajpal, Sr. Standing Counsel with Mr. Karan Chauhan, Advocate. Respondent: Mr. N. K. Poddar, Sr. Adv. with Mr. Rajender Singhvi, Mr. Amit Aggarwal and Mr. Anurag Dubey, Advocate for applicant/ interveners. R.V. EASWAR, J. These are nine appeals, all filed by Commissioner of Income Tax (CIT) under section 260A of the Income Tax Act, 1961 ( Act‟, for short). Two substantial questions of law were framed by this Court on 21.11.2011 in ITA Nos.754/2010, 773/2010 and 775/2010, which are as follows: - " (1) Whether the Income Tax Appellate Tribunal has erred in condoning delay in filing of the application for registration under Section 12A/ 12AA of the Income Tax Act, 1961? (2) Whether the order passed by the Tribunal is perverse? " 2. In the other appeals, the following common substantial question of law was framed on the same day: - " Whether the Income Tax Appellate Tribunal was right in setting aside the order passed by the Director General of the Income Tax (Exemption) under Section 263 of the Income Tax Act, 1961? " 3. Two separate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A for the assessment years 2003-04, 2004-05 and 2005-06; 6. The applications were scrutinized by the DIT (Exemptions) and suffice to note that he found certain irregularities in the receipts issued by the assessee. According to him, the receipts contained a reference to a certificate said to have been issued on 31.03.2003 under section 80G to the effect that donations to the assessee were entitled to the exemption for the period from 01.04.2003 to 31.03.2005. He had the receipts verified by the assessing officer having jurisdiction over the assessee. The assessing officer reported that the assessee had never filed any returns of income since inception. It would appear that thereafter an application for registration under section 80G was submitted by the assessee on 21.12.2005 and an application for condonation of the delay in submitting the application was also filed. The returns of income would also appear to have been filed claiming exemption under section 11 of the Act in respect of the entire income of the assessee society on the ground that it had applied for registration under section 12A. 7. Subsequently, the DIT (Exemptions) seems to have found that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee further pointed out that it had lodged a complaint with the police against Sikri in December, 2005 and in support of the fact, a copy of the complaint was enclosed with the assessee‟s letter. It was further submitted that the executive committee normally entrusts different functions to different office bearers/ executive members and relies upon them for the proper discharge of those functions, as would happen in any organisation. It was submitted further that all the donations were properly accounted for. As regards the non-submission of the returns of income, it was pointed out that for the assessment years 2001-02 and 2002-03 the returns were sent through speed post while those relating to the assessment years 2003-04 to 2005-06 were filed on 21.02.2006. It was explained that as soon as the assessee came to know of the lapse it realised that the erstwhile treasurer (A.K. Sikri) had failed to discharge his functions properly and also did not apprise the executive committee members about the lapse and, therefore, his services were terminated and steps were taken to comply with the filing of the returns. The assessee also explained that these developments constituted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the detailed discussions in the foregoing paragraphs and in the totality of the circumstances, I am not satisfied about the genuineness of the activities of the applicant society. Therefore, the applicant society s request for registration u/s 12A is rejected. 6. Since I have refused to grant registration to the applicant society within the meaning of 12AA(1)(b)(ii) of the Income-tax Act, 1961, I do not consider it appropriate to adjudicate on its request for condonation for delay in filing application in form No.10A for grant of registration u/s 12A of the Income-tax Act, 1961. " 10. Against the aforesaid order of the DIT (Exemptions), the assessee filed an appeal before the Tribunal and raised several contentions which were all considered by the Tribunal which upheld in principle the right of the DIT (Exemptions) to look into the activities of the trust including the forged certificates while granting registration. It held that the trust and the trustees were independent and the acts of the trustee cannot be that of the trust unless they are enacted with the involvement of other trustees. Eventually, the Tribunal by order dated 15.5.2007 held as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the certificate under section 80G; (b) The statement of Sikri recorded on 20.10.2005 does not match with the subsequent police complaint and confession of Sikri to the Chairman of the society. (c) There is no evidence to show the exclusive involvement of Sikri in the forgery or to show that the other members of the society were not involved. There is circumstantial evidence to suggest that other members of the society were also involved. (d) Because of the involvement of several members of the society in the forgery of the certificates, the assessee cannot be considered to be carrying on a charitable activity; it was actually carrying on a criminal activity. (e) The delay in filing the application for registration under sections 12A and 80G cannot be condoned because it was only after being cornered that the assessee came up with the defence that the responsibility for the alleged forgery of the certificates lay at the doors of A.K. Sikri, which was not an acceptable or reasonable explanation; the assessee was also involved in the forgery and, therefore, its plea for condonation of the delay cannot be accepted. 12. In fine, the DIT (Exemptions) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the trust could be liable to answer for the irregularities or illegalities allegedly committed by A.K. Sikri since all these are attributable to him in his individual capacity. (g) The DIT (Exemptions) has failed to establish that the governing body members or other trustees were acting in collusion with A.K. Sikri. It was an individual act of Sikri, not attributable to the assessee. For the above reasons the Tribunal held that the Society was entitled to get registration under sections 12A and 80G; however, it was held that the authorities would be free to examine the application of funds in conformity with the objects of the trust in the assessment to be made under the Act. Since there were sufficient reasons for the delay in filing the applications for registration, it was held that the delay was condoned and the trust should be granted registration from inception. 14. While narrating the sequence of the events leading to the arrest of A.K. Sikri, the Tribunal took note of the genesis of the entire affair which started from the complaint lodged by M.P. Mansinghka Charities Trust of Mumbai. Immediately on receipt of the complaint, the assessee convened a me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kri both from the trust and from the police and he was forced to file another complaint under section 156(3) of the Criminal Procedure Code on 29.04.2006 before the Chief Metropolitan Magistrate, Rohini District Court. The complaint was accompanied by evidence in support thereof. He pointed out that the police had not registered his complaints though they disclosed cognizable offenses and prayed for a direction that the police should register the FIRs and proceed with the investigation against his employee. The police authorities then carried out an investigation and submitted a report on 28.05.2007 that the particulars of the employee, as given by Sikri were incomplete and that in the absence of any evidence regarding employment of the absconding person, Sikri himself was responsible for the alleged irregularities. On 31.05.2007 Sikri himself was examined by the Kirti Nagar Police Station, Delhi in relation to FIR No.605/2006 filed by the income tax authorities on 31.12.2006 reporting forgery of the certificates of registration under sections 12A and 80G. In the statement given to the police on 31.05.2007, Sikri gave the same explanation, namely, the entrustment of the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dibility cannot be impeached, according to the Tribunal. The Tribunal, therefore, held that the DIT (Exemptions) was not justified in refusing to take cognizance of those vital documents in coming to the conclusion that the assessee society or its trustees/ governing body members connived or colluded with Sikri. The retraction of A.K. Sikri on which reliance was placed by the DIT (Exemptions) has been held by the Tribunal in paragraphs 111 and 112 of its order as having been "suddenly made that too when he was removed from the trust and the police had already implicated him alleging that he was fabricating stories". The Tribunal has also held that Sikri did not succeed in demolishing his earlier statements given not only to the trust but also to the police and the Courts and also in his bail application on the basis of which he was released from police custody. 16. Questioning the correctness of the view taken by the Tribunal it is contended by the learned standing counsel for the Revenue that the Tribunal went wrong in its appreciation of the evidence and in exonerating the assessee society and the members of the governing body from any guilt or culpability. It is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or governing body members of the assessee society by name. From this it is submitted by the learned counsel for the assessee, that it was clear that the income tax authorities themselves looked upon the A.K. Sikri only as the person responsible for the false/ forged certificate and all other irregularities/ illegalities. Quite apart from the above, submitted the learned counsel for the assessee, the question of condonation of delay on the ground of sufficient cause for the delay was a discretion conferred upon the Court and it can be interfered with only if it was shown to have been exercised in a perverse manner and so long as the discretion is shown to have been exercised properly and having regard to the entire conspectus of the facts and circumstances of the case and on the application of the relevant principles of law, and so long as the relevant facts have not been ignored or irrelevant facts have not influenced the discretion, the appellate court acting under section 260A of the Act should not interfere with the decision of the lower court. It is further pointed out that the question of perversity was not even raised by the Revenue in the memorandum of appeal and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tan Magistrate, acting on the police complaint, remanded Sikri to custody and also referred to the fact that in the bail application, Sikri had again owned up responsibility for the fake certificates of registration. Taking an overall view of the facts and going by the preponderance of probabilities, the Tribunal came to hold the view that it was because of the irregularities, illegalities and mis-representations of Sikri that the assessee society was led to believe that appropriate applications under the Act were already filed with the income tax authorities for registration. The assessee society was thus under the belief, though mistaken but honest, that there was no delay and once it came to know on 06.12.2005 about the irregularities on a complaint from M. P. Mansinghka Trust of Mumbai and on further enquiry conducted on 14.12.2005 by the governing body, it hastened to take remedial action by filing applications for registration both under section 12A and 80G of the Act, which were followed up by another set of applications filed directly with the DIT (Exemptions) on 21.12.2005; these applications were obviously delayed and the condonation application was filed on 14.03.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. 21. That takes us to the question as to whether in condoning the delay the Tribunal committed any error of law or illegality. There is a wealth of judicial literature on the subject of condonation of delay and most of the cases have arisen under section 5 of the Limitation Act, 1963. The principles that are to be applied are, however, no different whenever the question of condonation of delay comes up for consideration under other statutes. In the oft quoted judgment of the Supreme Court in Collector, Land Acquisition v. MST. Katiji Ors. , (1987) 167 ITR 471 it was observed as follows: - " The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits". 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 that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il application he had confessed to his role in the alleged irregularities and illegalities. There has been no want of bona fides on the part of the assessee, nor did it fail to take immediate action once it was apprised of the irregularities in its affairs by M. P. Mansinghka Trust of Mumbai. In these circumstances, we are unable to say that the Tribunal committed an error in condoning the delay. 24. On the question of perversity of the decision of the Tribunal we may also refer to the judgment of the Supreme Court in Sree Meenakshi Mills Ltd. v. CIT , (1957) 31 ITR 28. In that judgment, it was noted that only a question of law can be referred for decision of the Court and the decision of the Tribunal on a question of fact can be challenged only if it is not supported by any evidence, or is unreasonable or perverse. The following pithy observations of T.L. Venkatarama Aiyar, J. speaking for the Court are relevant: - "................... The point for decision is whether there arises out of the order of the Tribunal any question which can be the subject of reference under section 66 (1) of the Act Under that section, it is only a question of law that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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