AATMAN EDUCATIONAL SOCIETY,THANE vs. INCOME TAX OFFICER, EXEMPTION WARD, THANE, THANE

The assessee is a charitable society registered under the Societies Registration Act, 1960 and the Bombay Public Trust Act, 1950, and is also registered under section 12AA of the Act. It is engaged in providing specialised educational services for students with learning disabilities and operates on a non-profit basis. It is further brought out that during the relevant period, the Trust was in its formative years, had limited administrative infrastructure, and the trustees, being primarily engaged in charitable activities, were not conversant with income-tax procedures and compliances. The Trust was dependent on a part- time accountant for handling tax matters.

The assessee filed its return of income on 10.03.2015 declaring a loss of Rs. 5,92,257/-. The return was processed by CPC under section 143(1) on 27.08.2015, wherein the claim of 3 Aatman Educational Society application of income of Rs. 28,48,321/- was not allowed and total income was determined at Rs. 22,56,064/-, resulting in demand of Rs. 10,43,580/-. The appeal against the said intimation was required to be filed before the learned CIT(A) on or before 25.09.2015. However, the assessee filed the appeal on 22.02.2018, resulting in delay of about 879 days.

The delay before the learned CIT(A), as explained in the affidavits, occurred on account of the following circumstances: - the trustees did not have expert or qualified personnel conversant with tax proceedings and were dependent on a part-time accountant, - during the relevant period, the school premises had to be vacated and the administrative setup was disturbed, - the intimation issued by CPC was not received on the working email id and remained unnoticed, - the trustees were unaware of the processing of return and came to know about the demand only subsequently upon communication from the Department, and - in the meantime, a rectification application under section 154 of the Act was filed on 28.01.2016 against the said intimation, which was transferred to the jurisdictional Assessing Officer and is stated to be still pending, indicating that the assessee was pursuing an alternate statutory remedy.

It is further deposed in the additional affidavits that the trustees, being engaged in charitable and educational activities

The learned CIT(A), however, did not condone the delay and dismissed the appeal in limine without adjudicating the issue on merits.

Thereafter, as explained in the additional affidavit of the Administrative Head, upon receipt of the order of the learned CIT(A), the matter was entrusted to the then accountant, who assured that necessary steps would be taken for filing appeal before the Tribunal. The trustees, lacking technical knowledge and acting on such assurance in good faith, did not independently verify the status of the appeal. It has been further stated that the accountant who was handling the matter subsequently ceased to be associated with the Trust, and due to such reliance and lack of follow-up, the appeal could not be filed within the prescribed time.

It was only upon subsequent review and receipt of communication regarding outstanding demand that the assessee realised that no appeal had been filed against the order of the learned CIT(A). Immediately thereafter, necessary steps were taken and the present appeal was filed before us, resulting in delay of about 403 days. The assessee has consistently

Assessee has raised following grounds of appeal: i. The learned CIT(A) erred in dismissing the appeal in the absence of sufficient reason being found for the delay in filing the appeal before the CIT(A). ii. The learned CIT(A) erred in not directing the CPC to allow deduction in respect of amount applied for charitable purpose while determining the taxable income. iii. Each one of the above grounds of appeal is without prejudice to the above. iv. The appellant reserves the right to add, alter or amend to the above grounds of appeal.”

The learned Authorised Representative (AR) reiterated the facts and submitted that the delay both before the learned CIT(A) and before the Tribunal was neither deliberate nor intentional. It was submitted that the assessee is a charitable educational society and due to lack of professional assistance and peculiar circumstances such as shifting of premises, the CPC intimation could not be attended in time. The learned AR further submitted that the assessee had a bona fide belief that the appeal before the learned CIT(A) would be decided on merits and, therefore, no follow-up was made. It was only later that the assessee came to know about dismissal of the appeal. It was contended that if delay is not condoned, the assessee would be deprived of adjudication on merits, particularly when the issue pertains to 6 Aatman Educational Society denial of deduction of application of income for charitable purposes. It was further submitted that the assessee has also filed an application under section 154 of the Act before the CPC seeking rectification of the intimation under section 143(1), which is still pending for disposal. It was contended that the assessee was pursuing alternate statutory remedy and, therefore, there was no deliberate inaction on its part. The learned AR submitted that the issue pertains to denial of deduction of application of income for charitable purposes and deserves to be adjudicated on merits.

The learned Departmental Representative (DR), on the other hand, strongly opposed the condonation of delay. It was submitted that the delay is inordinate and the assessee has failed to demonstrate sufficient cause. It was argued that the assessee was negligent in pursuing the appellate remedy and, therefore, the order of the learned CIT(A) should be upheld.

We have given thoughtful consideration to the rival submissions.

The law relating to condonation of delay is well settled.

The Hon’ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji&Ors. [1987 (2) SCC 107] has held that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

Further, in PerumonBhagvathyDevaswom vs. BhargaviAmma (2008) 8 SCC 321, it has been held that the words ‘sufficient cause’ should receive a liberal construction so as to advance substantial justice when the delay is not on account of deliberate inaction or negligence.

In the present case, the reasons advanced by the assessee for delay include lack of professional assistance, shifting of premises, non-noticing of CPC intimation, subsequent knowledge upon receipt of demand communication, and bona fide belief regarding pendency of appeal. In addition, the assessee has also placed on record that it has pursued an alternate remedy by filing a rectification application under section 154 of the Act against the intimation under section 143(1), which is still pending.

The fact that the assessee has invoked the remedy under section 154 indicates that the assessee has not remained completely inactive but has been pursuing its grievance through available statutory channels. This circumstance lends further support to the bona fides of the assessee’s conduct.

In our considered view, the cumulative effect of the above factors establishes that the delay is not deliberate or contumacious but is attributable to procedural lapses and bona fide circumstances.

It is also pertinent to note that the issue involved relates to denial of deduction in respect of application of income by a charitable institution. Denial of condonation would result in dismissal of the matter at threshold without adjudication on merits, which would cause prejudice to the assessee.

Therefore, notwithstanding the objection of the learned DR, and in order to advance substantial justice, we condone the delay in filing the present appeal before us.

We find that the learned CIT(A) has dismissed the appeal solely on the ground of limitation without adjudicating the grounds on merits. In the peculiar facts of the present case, the learned CIT(A) ought to have exercised discretion under section 249(3) in a liberal manner. The refusal to condone the delay has resulted in denial of effective appellate remedy. The existence of pending rectification proceedings under section 154 further

In view of the above discussion: i. The delay in filing the present appeal before us is condoned. ii. The impugned order of the learned CIT(A) is set aside. iii. The matter is restored to the file of the learned CIT(A) with a direction to condone the delay in filing the appeal before him and to adjudicate the issues on merits in accordance with law. iv. The learned CIT(A) shall provide reasonable opportunity of being heard to the assessee. v. The assessee is directed to cooperate and not to seek unnecessary adjournments.

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