If a meritorious action for locks is filed without proper consideration, the court may dismiss it

Fact and issue of the case

The assessee has raised following grounds of appeal:

“1. Whether, on facts and circumstances of the case and in law, Ld. Assessing officer has erred in making adjustment of Rs. 182,025/- u/s. 143(1) of the act.

2. Whether, on facts and circumstances of the case and in law, Ld. Assessing officer has erred in disallowing expenditure of Rs. 182,025/- without having any basis for such disallowance?

3. Whether, on facts and circumstances of the case and in law, Ld. Assessing officer has erred by not applying slab rate of tax, available to AOP, on Income of charitable trust?

4. Whether, on facts and in circumstances of the case and in law, Ld. Assessing officer has erred by not allowing basic exemption of Rs.200,000/- available to Charitable Trust as Association of person?

5. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in not condoning delay in filing first appeal?

Further, appellant craves leave to add, amend, alter or withdraw all or any ground o f appeal.

The only effective issue raised by the assessee is that the learned CIT-Aerred in confirming the adjustment made by the AO under the provisions of section 143(1) of the Act without allowing the basic exemption of Rs. 2 lakhs.

In the present case, the assessee is a trust engaged in imparting education. The return was processed under section 143(1) of the Act. The assessee has filed the return of income treating itself as an association of person (trust)and claimed the basic exemption of Rs. 1,82,025/- only. It was observed by the AO that the assessee is not registered under section 12AA of the Act. Thus, the AO treated the assessee as a private discretionary trust and applied the rate of taxation at the maximum marginal rate. The AO has also disallowed the exemption claimed by the assessee and added back to the total income of it.

The assessee has filed the appeal before Ld. CIT(A) with the delay of 561 days. The assessee submitted before the Ld. CIT(A) that the appellant trust is now registered under section 12AA of the Act as on 30-07-2018 and so the second proviso to section 12A(2) of the Act will be applicable to it and the benefit of section 11 and 12 shall also be granted for earlier years in dispute.

For the delay in filing the appeal, the assessee submitted that it was advised by the chartered accountant to “wait and watch” like many other assesseeare facing the same issue. But when the department started recovery of the demand, then another chartered Accountant advised the assessee to file the appeal before the Ld. CIT(A).

Observation of the court

We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that there was a delay in filing the appeal before the learned CIT(A) for 561 days. This delay was not condoned by the learned CIT(A) on the reasoning that there was negligent and casual behavior of the assessee in pursuing the income tax litigation whereas it was contended by the learned AR that the assessee was advised by the chartered accountant to wait and watch like the other assessee who were also facing the same problems. The assessee to this effect has also filed the affidavit of the chartered accountant as observed by the learned CIT(A) in his order. The observation of the learned CIT(A) reads as under:

“Further, as the appellant is being represented by a qualified chartered accountant who filed an affidavit also who is expected to know the procedure in such matters ”

From the above observation of the learned CIT(A), it is transpired that the assessee has acted and reacted on the advice of the chartered accountant who is a professional person for tax matters. This fact has nowhere been doubted by the learned CIT(A) in his order. Now the controversy arises to resolve whether the assessee acting on behalf of the professional advice can be held guilty for defiance of any provision of law. The answer certainly goes in favour of the assessee. It is for the reason that the assessee, who was under the bona fide belief upon the advice of the professional, did not prefer any appeal before the learned CIT(A). However, at the same time the assessee upon the initiation of the recovery by the Department immediately approached to another consultant who advised to file the appeal before the learned CIT(A).

Before parting, we also note that the demand was raised upon the assessee in the intimation generated under section 143(1) of the Act which was challenged before the learned CIT-A who did not condone the delay in filing the appeal by the assessee. As such, we note that none of the authorities below has looked into the merit of the case, therefore in the interest of justice and fair play, we are setting aside this issue to the file of the AO for fresh adjudication as per the provisions of law. Hence the ground of appeal filed by the assessee is allowed for the statistical purposes.

In the result, the appeal filed by the assessee is allowed for the statistical purposes.