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Facts
The assessee, a trust registered u/s.12AA, filed its return for AY 2014-15. Due to a lack of response to notices, the AO completed the assessment u/s.144 as a best judgment assessment, raising a demand. The assessee filed an appeal before the CIT(A) with a significant delay of over 7 years, citing change in management and lack of awareness of the assessment order.
Held
The Tribunal found that the delay in filing the appeal before the CIT(A) was due to a change in management without proper handover. Considering the assessee initiated the appeal within one month of receiving the demand letter, the Tribunal viewed this as a reasonable cause for the delay. Therefore, the Tribunal directed the CIT(A) to condone the delay and decide the case on merits.
Key Issues
Whether the CIT(A) erred in refusing to condone the significant delay in filing the appeal, and whether the change in management constitutes a reasonable cause for such delay.
Sections Cited
144, 11, 12AA, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K, HON’BLE & SHRI S.R. RAGHUNATHA, HON’BLE
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 12.11.2024 for the assessment year 2014-15.
2. The assessee has raised the following grounds:-
:-2-: ITA. No:313/CHNY/2025 1. For that the order of the National Faceless Appeal Centre is contrary to law, facts and circumstances of the case and at any rate against the principles of equity, natural justice and fair play.
For that the National Faceless Appeal Centre failed to appreciate that the order of the Assessing Officer is without jurisdiction.
3. For that the National Faceless Appeal Centre erred in disposing off the appeal ex parte.
For that the National Faceless Appeal Centre failed to appreciate that the appellant could have derived no benefit by not appearing before him for the hearing and that the same could not have been the intent of the appellant.
For that the appellant had reasonable cause for not appearing before the National Faceless Appeal Centre when the case was posted for hearing before him.
For that the order passed by the National Appeal Faceless Centre is blatant violation of Principles of Natural Justice as the appellant was not provided with an opportunity to explain the delay in fling the appeal.
For that the National Faceless Appeal Centre ought to have condoned the delay in filing the appeal considering the facts and circumstances of the case.
For that the National Faceless Appeal Centre failed to appreciate that the appellant could have derived no benefit by delaying to file an appeal against the order of the Assessing Officer, as such delay will put the appellant in a disadvantageous position and that the same could not have been the intent of the appellant.
For that the National Faceless Appeal Centre failed to consider that the appellant had reasonable cause for not filing an appeal within the prescribed limitation of time.
For that the National Faceless Appeal Centre disregarded the fact that appellant was unaware of the assessment order, owing to the fact that the members of the trust as well as the authorized representatives were changed. The appellant had no knowledge of the assessment order, when it was passed.
11. For that National Faceless Appeal Centre failed to appreciate that the appellant took the required steps to file an appeal immediately after learning about the assessment order.
For that the National Faceless Appeal Centre did not appreciate the reasons cited by the appellant for condoning the delay in filing the appeal.
The National Faceless Appeal Centre rejected the condonation of delay in filing the appeal on unconnected grounds.
:-3-: ITA. No:313/CHNY/2025 14. For that the assessment completed u/s. 144 is bad in law and hence liable to be quashed.
15. For that the National Faceless Appeal Centre failed to appreciate that the Assessing Officer has erred in denying exemption u/s. 11 of the Income Tax Act, 1961 (hereinafter referred to as the Act), to the appellant.
16. For that the National Faceless Appeal Centre failed to appreciate that the Assessing Officer has erred in invoking the provisions of Section 11(6)the Act, given the facts and circumstances of the appellant's case.
17. For that the National Faceless Appeal Centre failed to appreciate that the Assessing Officer erred in invoking the amended provisions of section 11(6) of the Act for the impugned Assessment Year, 2014-15, while the amendment would be applicable only with effect from Assessment Year 2015-16.
18. For that the National Faceless Appeal Centre did not consider that the Assessing Officer failed to appreciate that the income of trust is computed on commercial basis.
19. For that National Faceless Appeal Centre failed to appreciate that the Assessing Officer has erred in concluding that allowing depreciation, after the appellant had claimed cost of additions to asset as application of income towards the objects of the trust, would amount to double deduction.
The above grounds are taken without prejudice to one another. For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that this Hon'ble Income Tax Appellate Tribunal may be pleased to (a) Allow depreciation to the tune of Rs.34,60,474/ - as originally claimed by the appellant. (b) Delete the demand to the tune of Rs.7,87,102/- raised against the appellant. (c) Pass such other orders as this Hon'ble Income Tax Appellate Tribunal may deem fit.
Brief facts of the case are that the assessee is a trust registered u/s.12AA of the Income Tax Act, 1961 (hereinafter the ‘Act’). The assessee filed its return of income for the assessment year 2014-15 on 24.11.2014 declaring gross receipts of Rs.2,13,23,115/- and ‘nil’
:-4-: ITA. No:313/CHNY/2025 income after claiming exemption u/s.11 of the Act. The case was selected for scrutiny under CASS and notice and statutory notices were issued along with questionnaire. Since, there was no response from assessee even after issuing several notices and requesting to furnish the details, the AO completed the assessment u/s.144 of the Act by passing an order dated 21.12.2016 as best judgment assessment with the material available on record. Aggrieved, assessee filed an appeal before the CIT(A) with a delay of 7 years 7 months and 16 days.
3.1 Before the Ld.CIT(A), the assessee submitted the reason for delay in filing the appeal before him. However, the Ld.CIT(A) dismissed the appeal of the assessee by not accepting the reason for delay. Aggrieved, the assessee is in appeal before us.
4. Before us, the Ld.AR stated that the assessee filed an appeal before CIT(A) on 06.09.2024 with a delay of 7 years 7 months and 16 days, after noticing the order passed by the AO through demand letter dated 05.08.2024 served on the assessee physically. The Ld.AR stated that the reason for delay in filling the appeal before the CIT(A) is as detailed below:-
:-5-: ITA. No:313/CHNY/2025 I, Rev.Sr.Arokia Mary Flora, Managing Trustee, aged about 80 years, and residing at Nirmala Nagar, Thanjavur, do hereby solemnly affirm and sincerely state on oath as under:
1. 1. That I am competent to swear to this affidavit and well acquainted with the facts and circumstances of the case.
2. That an assessment order under Section 143(3) was passed in the case of Deva Educational Trust for the Assessment Year 2014-15, raising a demand of Rs.7,87,102/-.
3. That during the financial year relevant to the impugned assessment year, the trust was managed by laypersons. The present management, consisting of Catholic Fathers and Sisters (nuns), took charge only in the year 2019.
4. That the present management was unaware of the administrative and auditing system prevailing during the Assessment Year 2014-15 and the period of filing the income tax returns as well as the assessments that took place.
5. That the assessment and related matters were previously handled by the then-auditor, Mr. Senthil Kumar, who was in charge during the relevant period. However, he ceased to be the statutory auditor on 31.03.2019, and a new audit firm, M/s. SAMI AND RAJHU, Chartered Accountants, Trichy, took over from 01.04.2019.
6. That after the trust was taken over by the Catholic Fathers and Sisters (nuns), the new management was not aware of the pending assessment order and tax demand due to the transition in administration and the absence of proper handover of records. Also, the assessment was passed physically and not through faceless mode.
7. That the present management and statutory auditors came to know about the assessment order and demand for the Assessment Year 2014-15 only upon receipt of a letter from the Income Tax Department dated 05.08.2024, regarding tax arrears.
8. That upon becoming aware of the said assessment order, the present management with the guidance of the present auditors, promptly filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)] 9. That there was an unavoidable delay in filing the appeal before the CT(A) due to the lack of knowledge about the assessment proceedings by the present management.
:-6-: ITA. No:313/CHNY/2025 10. That the CIT(A) refused to condone the delay and dismissed the appeal solely on the ground of limitation without considering the merits of the case.
That the present appeal before the Hon'ble Income Tax Appellate Tribunal (ITAT) has been filed within the prescribed time limit.
12. That this affidavit is being submitted to impress upon this Hon'ble ITAT on the bona fide reasons for the delay in filing the appeal before the CIT(A) and to seek appropriate relief.
13. That the delay in filing the appeal before the CIT(A) was neither deliberate nor intentional but was solely due to the reasons stated above.
That immediately upon discovering the assessment order and demand, the present management took all possible steps to rectify the situation, including consulting tax professionals and gathering relevant documents for filing the appeal before the CIT(A).
That the delay was also caused due to the non-availability of previous financial and tax records, which had to be retrieved and verified before filing the appeal. The change in management led to difficulties in accessing critical documents.
That the delay was not due to any negligence or lack of diligence on the part of the present management but due to circumstances beyond their control. The appeal was filed at the earliest possible opportunity, upon discovering the issue.
That the trust is engaged in educational and charitable activities, and any adverse order may impact its ability to continue its noble work. Hence, the appeal deserves to be heard on merits rather than being dismissed on technical grounds.
That due to the transition in trusteeship from laypersons to responsible religious people, there was a period of administrative reorganization, making it difficult for the present management to immediately trace past compliance lapses.
That no prejudice would be caused to the Income Tax Department if the reasons for the delay are considered and consequently the delay being condoned. On the other hand, irreparable injury would be caused to the appellant, if the appeal is not heard on merits.
That I pray for justice and appropriate relief in the interest of fairness.
:-7-: ITA. No:313/CHNY/2025 4.1 Further the ld.AR prayed that the delay is unintentional and hence prayed for giving one more opportunity before the ld.CIT(A) in the interest of justice.
5. Per contra, the Ld.DR stated that the abnormal delay of 7 years and 7 months cannot be considered and hence supported the orders of the Ld.CIT(A).
6. We have heard the rival contentions and perused the material available on record. We find that the delay in filing the appeal before the ld.CIT(A) is due to change in management abruptly carried out without proper handing over of administration of the Trust. It is noticed that the assessee has initiated to file appeal within one month from the date of demand letter and hence, we are of the view that the assessee had ‘reasonable cause’ for delayed filing of appeal. Since, the AO also has passed order u/s.144 of the Act, to meet the ends of justice, we deem fit to give one more opportunity to the assessee before the ld.CIT(A), we direct the CIT(A) to condone the delay and remit the matter back to the file of the CIT(A) to decide the case on merits.
:-8-: ITA. No:313/CHNY/2025 7. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 17th April, 2025 at Chennai.