Non-profit organization’s section 11 exemption shall not be taken away due to technical errors
Fact and issue of the case
The captioned appeal has been filed at the instance of the assessee against the order of the Learned Principal Commissioner of Income Tax (Exemption), Ahmedabad, (in short “Ld. PCIT”) arising in the matter of the order passed under s. 12AA of the Income Tax Act 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year N.A.
The assessee has raised the following grounds of appeal:
Learned Pr. Commissioner of Income Tax (Exemption) has erred in rejecting application for grant of approval of registration u/s.12AA of the act on the ground that the applicant failed to file documentary evidences to satisfy about the genuineness of activities and to verify their activities in consonance with its objects thought other evidences on record were enough to justify the same.
The appellant contest all the findings of fact and law given against the appellant.
The appellant therefore prays that learned Pr.Commissioner of Income Tax (Exemptions) may be directed to cancel the order of rejection and to grant registration u/s.12AA of the IT Act.
The Appellant crave leave to amend alter or delete any of above grounds of appeal.
The only effective issue raised by the assessee is that the Ld. CIT (Exemptions) erred in rejecting the registration application made u/s 12AA of the Act.
At the outset, it was noticed that there was a delay in filing the appeal by the assessee for 1098 days. The assessee has filed the affidavit explaining the reason for the delay which is placed on record. In the affidavit it was submitted that the assessee is located in remote area where the advice from the tax practitioner was not available. Therefore, the order u/s 12AA of the Act remained unattended. Besides this, the trustees of the assessee were not aware of English language. Furthermore, the assessee has filed fresh application for registration u/s 12AA of the Act, in the subsequent year which was duly approved by the Ld. CIT(Exemptions) u/s 12AA of the Act. However, later the benefit of Exemption u/s 11 of the Act was denied in the assessment framed u/s 143(3) of the Act, on account of non-availability of registration for the AY 2018-19. As a result, the tax demand was raised by the assessee. Thereafter, the assessee approached the tax consultant with respect to the demand raised by the assessee on account of non-exemptions u/s 11 of the Act. At that point of time, it was advised to prefer an appeal before the ITAT against the rejection order passed u/s 12AA of the Act. However, in this process, the delay occurred for 1098 days for filing the appeal before the ITAT.
The Ld. AR at the time of hearing also contended that the case of the assessee on merit is quite strong in its favour as the registration application for the subsequent year u/s 12AA of the Act was approved by the Ld. CIT(Exemptions). Thus, it was submitted that a meritorious case should not be dismissed on account of technical lapses. Thus, it was prayed by the Ld. AR to condone the delay and take the issue on merit.
The Ld. AR on merit of the case contended that the application for registration u/s 12AA of the Act, was rejected on account of non-submission of the relevant documents before the Ld. CIT (Exemption). Accordingly, the Ld. AR assured that the assessee shall furnish necessary documents if one more opportunity is extended. On the contrary the Ld. DR opposed for the condonation of delay as there was in-ordinate delay in filing the appeal by the assessee. However, on merit of the case, the Ld. DR left the issue at the discretion of the Bench.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there is inordinate delay in filing the appeal by the assessee but considering the merit of the case of the assessee, we are inclined to condone the delay in filing the appeal of the assessee. In holding so, we draw support and guidance from the judgment of the Hon’ble Gujarat High Court in the case of S.R. Koshti Vs. CIT reported in 276 ITR 165 wherein it was held as under:
A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This Court, in an unreported decision in case of Vinay Chandulal Satia v. N.O. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8-1981], has laid down the approach that the authorities must adopt in such matters in the following terms: “The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt. “
From the above it is revealed that the income of the assessee should not be over assessed even there is a mistake on the part of the assessee. As such the legitimate deduction/ exemption for which the assessee is entitled should be allowed while determining the taxable income.
We also note that the Hon’ble Gujarat High Court in the case of Vareli textile industry versus CIT reported in 154 Taxman 33 wherein it was held as under: One of the propositions of settled legal position is to ensure that a meritorious case is not thrown out on the ground of limitation. Therefore, it is necessary to examine, at least prima facie, whether the assessee has or has not a case on merits.
In view of the above and after considering the facts in totality, we are of the view that it is a fit case where the delay in filing the appeal by the assessee before the learned CIT(Exemptions) deserves to be condoned. Accordingly, we condone the delay and proceed to adjudicate the issue on merit.
On merit of the case, we note that the assessee being a charitable organization should not be deprived of the benefit of exemption available to it u/s 11 of the Act, merely on the technical lapses, therefore we are setting aside the issue to the file of the Ld. CIT(Exemption) for de-novo adjudication. It is needless to mention that the assessee shall co-operate during the assessment proceedings before the Ld. CIT (Exemptions) and furnish necessary details without delay. In view of the above, the ground of appeal of the assessee is allowed for the statistical purposes.
In the result, the appeal of the assessee is allowed for the statistical purposes.
Order pronounced in the Court on 14/06/2023 at Ahmedabad.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee