A LITTLE FLOWER EDUCATIONAL SOCIETY,MACHILIPATNAM vs. THE COMMISSIONER OF INCOME TAX(EXEMPTIONS), HYDERABAD

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ITA 159/VIZ/2020Status: DisposedITAT Visakhapatnam27 September 20216 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal condoned the delay of 228 days in filing the appeal, finding the reasons provided by the assessee to be bonafide and unintentional, also considering the COVID-19 lockdown period. On the merits, the Tribunal noted that while an opportunity for verification of the MOA and submission of a detailed reply was given for 13/09/2019, and the assessee's representative attended, the assessee claimed to have also appeared on 19/09/2019 with amendments. The Tribunal observed that the impugned order did not advert to the facts of the appearance on 19/09/2019 and the amendment to the MOA. Crucially, the Tribunal highlighted that the proviso to Section 12AA(1) mandates a reasonable opportunity of being heard before passing a rejection order. It concluded that, based on the facts, an adequate and reasonable opportunity of being heard was not given to the appellant before refusing registration. Therefore, the Tribunal did not delve into the controversy of whether the representative appeared on 19/09/2019. The case was remanded to the CIT(E) for a fresh decision after affording reasonable opportunities of being heard to the assessee. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, A Little Flower Educational Society, filed an appeal against the order dated 27/09/2019 passed by the Commissioner of Income Tax (Exemptions) [CIT(E)], Hyderabad, rejecting its application for registration under Section 12AA of the Income Tax Act, 1961. The appeal was filed with a delay of 228 days. The assessee explained the delay due to the President's accident and subsequent recovery period, and the COVID-19 lockdown. The Tribunal condoned the delay. On merits, the assessee contended that its representative appeared before the CIT(E) on 13/09/2019 and 19/09/2019, providing explanations and submitting an amendment to its Memorandum of Association (MOA) to remove the expression "commercial coaching". The assessee argued that the CIT(E) failed to consider these submissions and amendments before passing the rejection order.

What were the issues?

1. Whether the delay of 228 days in filing the appeal should be condoned, considering the reasons provided by the assessee (Section 253 of the Income Tax Act, 1961, and general principles of condonation of delay). 2. Whether the Commissioner of Income Tax (Exemptions) provided a reasonable opportunity of being heard to the assessee before rejecting its application for registration under Section 12AA of the Income Tax Act, 1961, as mandated by the proviso to Section 12AA(1)(b)(ii). Assessee's Arguments: The assessee argued that the delay was bonafide and unintentional, caused by the President's accident and the COVID-19 lockdown. Regarding the merits, the assessee contended that it had appeared before the CIT(E) on 13/09/2019 and 19/09/2019, submitted explanations, and amended its MOA to remove the objectionable clause. It claimed the CIT(E) failed to consider these submissions and amendments, thus not providing a reasonable opportunity of being heard. Revenue's Arguments: The learned DR refuted the claim for condonation of delay. While supporting the order of the CIT(E), the learned DR did not specifically refute the assessee's claim regarding the appearances and submissions made on 19/09/2019.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 12AA(1),Section 12AA(1)(b)(ii),Section 253

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

Before: SHRI N.K. CHOUDHRY, HON’BLE & SHRI D.S. SUNDER SINGH, HONBLE

For Appellant: Shri C.Subrahmanyam, FCA
For Respondent: Shri D.K. Sonawal, CIT DR
Hearing: 16/09/2021Pronounced: 27/09/2021

O R D E R PER BENCH

This appeal has been preferred against the order dated 27/09/2019 impugned herein passed by the ld.Commissioner of Income Tax (Exemptions) [for short, “ld. CIT(E)”], Hyderabad u/sec. 12AAof the Income Tax Act, 1961 (hereinafter referred to as "Act") whereby Assessee’s application for registration u/sec. 12AA was rejected.

2.

At the outset, it is observed that there is a delay of 228 days in filing the instant appeal. The Assessee appellant has filed an application for condonation of delay along with affidavit of its President wherein it is submitted as under:

“That rejection of order u/sec. 12AA of the Act dated 27/09/2019 was served upon the appellant society on 03/10/2019. Thereafter, the Managing Committee of the appellant society in its regular meeting held on 20/11/2019, after due deliberations, though it is fit to file another fresh application for registration while considering the fact that since the ld.CIT(E) has mainly rejected the ground of registration on the ground that clause 9 of MoA is commercial in nature, which was amended by the appellant society on dated 10/09/2019 and the same was acknowledged by the Registrar of Societies on dated 18/09/2021. Subsequently, the appellant society contacted a senior counsel Shri C. Subrahmanyam, CA at Visakhapatnam who gave appointment on dated 30/11/2019 but due to misfortune the deponent (President of the society) met with an accident wherein his left leg got fractured and was hospitalized for 02 weeks till 14th Dec., 2019 and he was advised for bed rest for 02 months, however could not recover as expected and filing the appeal as slipped out of his mind, however, while realizing in the second week of March, 2020 and thereafter the appellant society was able to file the appeal only on 15/07/2020 which resulted into delay of 228 days. The said delay was neither intentional nor deliberate/ malafide.’’

3.

On the contrary Ld. DR refuted the claim of the appellant.

4.

We have considered the facts and circumstances of the case and affidavit and medical certificate filed by the President of the appellant society and also considered the Covid-19 lockdown period. We are of the considered view that reasons given by the Assessee for delay, seems to be bonafide and unintentional and non-malafide and therefore we deem it appropriate to condone the delay of 228 days. Hence, the delay of 228 days in filing the instant appeal is condoned accordingly.

5.

Coming to the merits of the case, Ld. A R drawn our attention to the affidavit of Shri G.V. Bramchari, filed before the tribunal wherein it is submitted that the Authorised Representative of the appellant society personally appeared in the office of the ld. Commissioner, Hyderabad on 13/09/2019 and filed its explanation, in response to the information vide covering letter dated 12/09/2019 and also explained to the ld. Commissioner that no non-charitable objective was ever pursued by the society since its formation and the society has been running Government recognised school for many years, on non-profit basis. Ld.AR also promised to get the objects duly amended to drop the expression “commercial coaching”. Ld.AR was asked to appear again within a week and in the meantime has carried out the amendment to its objects clause by dropping the expression “Commercial coaching”. Thereafter, the ld.AR visited the office of ld. Commissioner, Hyderabad on 19/09/2019 and physically filed a letter with a copy of amendment with MOA in order to get the registration u/sec. 12AA of the Act. Ld.AR further submitted that he personally filed a covering letter along with the enclosures as mentioned in the said letter dated 19/09/2019 enclosed to the paper book filed before the Hon'ble Tribunal. The ld. AR claimed that while passing order of refusal of registration vide order dated 27/09/2019, ld. Commissioner has not adverted to the aforementioned facts of his appearance, representation made and the fact of effecting amendment to the MOA of the appellant society. 5.1 While coming to the order of the ld. Commissioner, where is mentioned that a notice dated 14/08/2019 was issued to the appellant society for verification of the MOA/trust deed and to furnish a detailed reply on specific points on or before 05/09/2019. In response thereto, the Assessee vide letter dated 05/09/2019 has requested for adjournment of the case for one week, therefore on consideration of the request the case was adjourned to 13/09/2019 and the same was intimated to the Assessee through e-mail on dated 05/09/2019. In response thereto Shri G.V. Bramchari CA/AR of the appellant society attended the hearing. 5.2 We have considered the factual position as it appears from the affidavit filed by the CA of the appellant society and the impugned order. In the impugned order it is mentioned by the ld. Commissioner that the case was adjourned to 13/09/2019 and on that date, ld. CA Shri G.V. Bramchari attended the hearing. Whereas by filing affidavit, Mr. G.V. Bramchari CA/AR submitted that he also appeared on 19/09/2019 and filed the relevant documents with regard to amendment of the objects and explained the case, however while passing the order on dated 27/09/2019 the ld. Commissioner has not adverted to the aforementioned facts of his appearance, representation made and the fact of effecting amendment to the MOA of the appellant society.

5.3 Ld. DR, though, supported the order of the ld.CIT(E), however, did not refute the claim of the Assessee specifically.

5.4 More or less the claim of the appellant society is that the ld. Commissioner failed to consider the relevant documents filed before him on dated 19/09/2019 and directly passed the order on 27/09/2019 without giving reasonable opportunity of being heard. The proviso to section 12AA (1) of the act clearly provides that no order under sub clause (ii) of clause (b) of section 12AA(1) shall be passed unless the applicant has been given reasonable opportunity of being heard. In simple meaning the provisions of section 12AA(1) of the Act mandates that if the ld. Commissioner is not satisfied, then he can pass an order in writing refusing to register the trust or institution, provided before passing the rejection order, a reasonable opportunity of being heard is required to be given to the applicant. As it appears from the impugned order that though opportunity was given for verification of the MOA/trust deed and to furnish a detailed reply on specific points on 13/09/2019, however before refusing to register the appellant herein u/s 12AA of the ACT, no adequate and reasonable opportunity of being heard was given to the Appellant hence we are not going into the controversy as to whether the appellant’s representative appeared before the Commissioner on 19/09/2019 or not. Hence, considering the peculiar facts and circumstances we deem it appropriate to remand the case to the file of the ld. Commissioner for decision afresh, suffice to say while affording reasonable opportunity(s) of being heard to the appellant society.

6.

In the result, appeal filed by the Assessee stands allowed for statistical purpose.

Order Pronounced in open Court on this 27th day of Sep., 2021.

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