All India Primary Teachers ... vs Dit
2004 Latest Caselaw 583 Del

ORDER

M.V. Nayar, A.M.

The only ground in this appeal of the assessed preferred against the order dated 23-8-2001 passed by Director of Income Tax (Exemption) (hereinafter referred to as the "DIT") under section 12A of the Income Tax Act is against the action of Director of Income Tax in not condoning the delay in filing the application for registration.

2. Facts of the present case are that the appellant is a Society which has sought registration under section 12A(a) of the Income Tax Act vide application dated 6-2-2001 which was though allowed by Director of Income Tax but it was allowed with effect from 1-4-2000. In its application for registration and in its application for condensation of delay dated 6-2-2001, it was admitted by the appellant society that there was delay in filing the application on account of several reasons and therefore it was requested to Director of Income Tax that the delay in filing the application for registration be condoned. Director of Income Tax in his order dated 23-8-2001 though granted the registration but granted the same with effect from 1-4-2000. Delay involved, as per Director of Income Tax, was 43 years 8 months and 14 days which was however not condoned as, according to the Director of Income Tax, nothing was bona fide in law which was not done with due diligence. It is against this order of Director of Income Tax refusing the condensation of delay, the appellant society felt aggrieved and has come tip in appeal before us.

2. Facts of the present case are that the appellant is a Society which has sought registration under section 12A(a) of the Income Tax Act vide application dated 6-2-2001 which was though allowed by Director of Income Tax but it was allowed with effect from 1-4-2000. In its application for registration and in its application for condensation of delay dated 6-2-2001, it was admitted by the appellant society that there was delay in filing the application on account of several reasons and therefore it was requested to Director of Income Tax that the delay in filing the application for registration be condoned. Director of Income Tax in his order dated 23-8-2001 though granted the registration but granted the same with effect from 1-4-2000. Delay involved, as per Director of Income Tax, was 43 years 8 months and 14 days which was however not condoned as, according to the Director of Income Tax, nothing was bona fide in law which was not done with due diligence. It is against this order of Director of Income Tax refusing the condensation of delay, the appellant society felt aggrieved and has come tip in appeal before us.

3. On the date of hearing Mr. Rakesh Gupta, counsel for the appellant Society filed a brief synopsis of his submissions. It was submitted by him that the Director of Income Tax is empowered to condone the delay if there was sufficient reason for the delay and his power to condone delay is mentioned under section 12A(a)(t) itself and in CBDT Circular No. 108 dated 20-3-1973. According to him, this power of Director of Income Tax is further recognized by the Board in paras 15. 10 and 15.11 of its Circular No. 621 dated 19-12-1991. According to him, Director of Income Tax was however required to consider the reasonable cause for the delay in filing the application for registration with judicial mind and since in the case of the appellant Society, there existed sufficient reasons for the delay, Director of Income Tax ought to have condoned the delay. It was pointed out by counsel that the appellant Society was incorporated on 22-5-1957 with no profit motive and with no political affiliation. It was pleaded by him that assessed is an all India body of Primary School Teachers with no profit motive and with no political affiliation. It was inaugurated by the first Prime Minister of India in the year 1957. The society was incorporated under Societies Registration Act in Patria on 22-5-1957 as per the certification of registration which was appended at the back of PB 19. It was further submitted that the appellant aims at national integration and to improve the social, economical and educational status of primary teachers and the detailed submissions on its objects and nature were made in the application for condensation of delay filed at PB 44-45 and its memorandum of association (PB 4 to 7) and in the application of registration at PB 2. It was further argued by Mr. Gupta that there were sufficient reasons for making the application for registration under section 12A in February 2001 i.e., belatedly. The society was registered in year 1957 i.e., much before the enactment of Income Tax Act, 1961. Therefore, the society could not make itself aware to file any application for registration under the 1961 Act. Voluntary contributions received by a trust or society were also exempt under the old Act of 1922. further submitting, learned Counsel pleaded that Office bearers of the society change after every 2-3 years and successor office bearers remained under the bona fide belief that no statutory formality under the Income Tax Act, 1961 remained to be complied with. Thus, bona fide belief and ignorance on the part of the successive office bearers of the society constituted sufficient cause for the impugned delay. Ignorance of law can happen there and there was no such maxim that every body knows the law as approved by Supreme Court in the case Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh (1979) 118 ITR 326 (SC) was the submission of the counsel. It was further argued that Office bearers of the society are primary teachers who are of ordinary background and awareness, who did not know the intricacies of the income-tax law and the statutory requirement there under. Their simple background without any knowledge of income-tax law constituted sufficient reason for the impugned delay. The society being the society for primary teachers remained under the bona fide belief that since educational institutions have always been exempt under the Income Tax Act, the body of the teachers of the primary school would also be similarly exempt from the Income Tax Act. This natural impression and belief entertained by the society constituted sufficient reason. The society of the primary teachers remained under the bona fide belief that it enjoys exemption like the one enjoyed by the trade unions and their society is also like that. This belief also constituted the sufficient reason for not moving application for registration. Since there was no profit motive of the society and all the grants received were the specific grants to be used for the specific purpose, the society remained under the bona fide belief that nothing under the Income Tax Act concerns them. When notice under section 148 was issued, the society went into tizzy and tried to dig past records of number of years to verify in Bihar whether any such statutory formality was ever complied with. When nothing of this sort was found, it applied for registration under section 12A on 6-2-2001. It was argued that the registration had been granted by Director of Income Tax but with effect from 1-4-2000 meaning thereby that its aims and objectives were found charitable and its activities were found genuine but delay in filing the application which was for sufficient reasons was not condoned. Thus, chain of facts according to the counsel. would prove that there were sufficient reasons for not making application before the specified period and Director of Income Tax ought to have condoned the delay for the delayed period. It was lastly argued by the counsel that jurisdiction to condon delay should be exercised liberally and matter relating to condensation of delay should be judged broadly and not in pedantic manner in view of decisions in the cases of Ashok Automobiles Ranchi (P) Ltd. v. State of Bihar (1988) 174 ITR 566 (Pat) and in the case of Collector of Land Acquisition v. Mst. Katiji (1987) 167 ITR 471 (SC).

3. On the date of hearing Mr. Rakesh Gupta, counsel for the appellant Society filed a brief synopsis of his submissions. It was submitted by him that the Director of Income Tax is empowered to condone the delay if there was sufficient reason for the delay and his power to condone delay is mentioned under section 12A(a)(t) itself and in CBDT Circular No. 108 dated 20-3-1973. According to him, this power of Director of Income Tax is further recognized by the Board in paras 15. 10 and 15.11 of its Circular No. 621 dated 19-12-1991. According to him, Director of Income Tax was however required to consider the reasonable cause for the delay in filing the application for registration with judicial mind and since in the case of the appellant Society, there existed sufficient reasons for the delay, Director of Income Tax ought to have condoned the delay. It was pointed out by counsel that the appellant Society was incorporated on 22-5-1957 with no profit motive and with no political affiliation. It was pleaded by him that assessed is an all India body of Primary School Teachers with no profit motive and with no political affiliation. It was inaugurated by the first Prime Minister of India in the year 1957. The society was incorporated under Societies Registration Act in Patria on 22-5-1957 as per the certification of registration which was appended at the back of PB 19. It was further submitted that the appellant aims at national integration and to improve the social, economical and educational status of primary teachers and the detailed submissions on its objects and nature were made in the application for condensation of delay filed at PB 44-45 and its memorandum of association (PB 4 to 7) and in the application of registration at PB 2. It was further argued by Mr. Gupta that there were sufficient reasons for making the application for registration under section 12A in February 2001 i.e., belatedly. The society was registered in year 1957 i.e., much before the enactment of Income Tax Act, 1961. Therefore, the society could not make itself aware to file any application for registration under the 1961 Act. Voluntary contributions received by a trust or society were also exempt under the old Act of 1922. further submitting, learned Counsel pleaded that Office bearers of the society change after every 2-3 years and successor office bearers remained under the bona fide belief that no statutory formality under the Income Tax Act, 1961 remained to be complied with. Thus, bona fide belief and ignorance on the part of the successive office bearers of the society constituted sufficient cause for the impugned delay. Ignorance of law can happen there and there was no such maxim that every body knows the law as approved by Supreme Court in the case Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh (1979) 118 ITR 326 (SC) was the submission of the counsel. It was further argued that Office bearers of the society are primary teachers who are of ordinary background and awareness, who did not know the intricacies of the income-tax law and the statutory requirement there under. Their simple background without any knowledge of income-tax law constituted sufficient reason for the impugned delay. The society being the society for primary teachers remained under the bona fide belief that since educational institutions have always been exempt under the Income Tax Act, the body of the teachers of the primary school would also be similarly exempt from the Income Tax Act. This natural impression and belief entertained by the society constituted sufficient reason. The society of the primary teachers remained under the bona fide belief that it enjoys exemption like the one enjoyed by the trade unions and their society is also like that. This belief also constituted the sufficient reason for not moving application for registration. Since there was no profit motive of the society and all the grants received were the specific grants to be used for the specific purpose, the society remained under the bona fide belief that nothing under the Income Tax Act concerns them. When notice under section 148 was issued, the society went into tizzy and tried to dig past records of number of years to verify in Bihar whether any such statutory formality was ever complied with. When nothing of this sort was found, it applied for registration under section 12A on 6-2-2001. It was argued that the registration had been granted by Director of Income Tax but with effect from 1-4-2000 meaning thereby that its aims and objectives were found charitable and its activities were found genuine but delay in filing the application which was for sufficient reasons was not condoned. Thus, chain of facts according to the counsel. would prove that there were sufficient reasons for not making application before the specified period and Director of Income Tax ought to have condoned the delay for the delayed period. It was lastly argued by the counsel that jurisdiction to condon delay should be exercised liberally and matter relating to condensation of delay should be judged broadly and not in pedantic manner in view of decisions in the cases of Ashok Automobiles Ranchi (P) Ltd. v. State of Bihar (1988) 174 ITR 566 (Pat) and in the case of Collector of Land Acquisition v. Mst. Katiji (1987) 167 ITR 471 (SC).

4. Thus, learned Counsel concluded his arguments that it was thus a case where there were sufficient and good reasons due to which default occurred in filing the application for registration belatedly and action of Director of Income Tax in not condoning the delay was not in accordance with law and judicial discretion was not exercised by the Director of Income Tax judiciously.

4. Thus, learned Counsel concluded his arguments that it was thus a case where there were sufficient and good reasons due to which default occurred in filing the application for registration belatedly and action of Director of Income Tax in not condoning the delay was not in accordance with law and judicial discretion was not exercised by the Director of Income Tax judiciously.

5. On the other hand, Mr. Salil Gupta Ltd. Senior Departmental Representative Vehemently contested the claim of the assessed and according to him there was no reasonable cause for the delay in filing the application for registration. According to him, there is no special treatment to be given if the society is non-profit motive and is a non-political organization and compliance of law has to be done unscrupulously by such society. According to him, appellant society does not have any explanation for filing the application for registration so belatedly. However, he accepted that the delay, in filing the application was not 43 years 8 months and 14 days as mentioned by Director of Income Tax in his order but the delay has to be computed from 1-4-1973. According to him, if the appellant did not comply with requirement of law by filing the application for registration in time, it does not have any option but not to get registration from the back date. He relied upon the decision of Supreme Court Aditanar Educational Institution v. Addl. CIT (1997) 224 ITR 310 (SC) for the proposition that overall view has to be taken. He further relied upon the decision of Supreme Court in the case of Dr. K. George Thomas v. CIT (1985) 156 ITR 412 for the proposition that once the receipt is found to be revenue character, it is for the assessed to establish to claim exemption that all conditions were met. He further relied upon the decision of Supreme Court Maharaja Chintamani Saran Nath Sah Deo v. CIT (1971) 82 ITR 464 (SC) to the effect that merely because certain amount was termed in a particular manner, it does not mean that no inquiry can be made to determine the real character of that amount. He further relied upon on the decision of Kerala High Court in the case of K. T Thomas v. CWT (1992) 197 ITR 53 (Ker) and argued that explanation given by the assessed for the delay in presenting the application for registration was not convincing and therefore should not be accepted. He relied upon Circular No. 551 and on the case of P.K. Ramachandran v. State of Kerala AIR 1998 (SC) 2276 to press his submissions that delay be not condoned. According to him, Director of Income Tax has passed a legal and valid order refusing to condone the delay as there was no reasonable cause or sufficient reason for condensation of delay and thus he made a prayer for upholding the order of Director of Income Tax.

5. On the other hand, Mr. Salil Gupta Ltd. Senior Departmental Representative Vehemently contested the claim of the assessed and according to him there was no reasonable cause for the delay in filing the application for registration. According to him, there is no special treatment to be given if the society is non-profit motive and is a non-political organization and compliance of law has to be done unscrupulously by such society. According to him, appellant society does not have any explanation for filing the application for registration so belatedly. However, he accepted that the delay, in filing the application was not 43 years 8 months and 14 days as mentioned by Director of Income Tax in his order but the delay has to be computed from 1-4-1973. According to him, if the appellant did not comply with requirement of law by filing the application for registration in time, it does not have any option but not to get registration from the back date. He relied upon the decision of Supreme Court Aditanar Educational Institution v. Addl. CIT (1997) 224 ITR 310 (SC) for the proposition that overall view has to be taken. He further relied upon the decision of Supreme Court in the case of Dr. K. George Thomas v. CIT (1985) 156 ITR 412 for the proposition that once the receipt is found to be revenue character, it is for the assessed to establish to claim exemption that all conditions were met. He further relied upon the decision of Supreme Court Maharaja Chintamani Saran Nath Sah Deo v. CIT (1971) 82 ITR 464 (SC) to the effect that merely because certain amount was termed in a particular manner, it does not mean that no inquiry can be made to determine the real character of that amount. He further relied upon on the decision of Kerala High Court in the case of K. T Thomas v. CWT (1992) 197 ITR 53 (Ker) and argued that explanation given by the assessed for the delay in presenting the application for registration was not convincing and therefore should not be accepted. He relied upon Circular No. 551 and on the case of P.K. Ramachandran v. State of Kerala AIR 1998 (SC) 2276 to press his submissions that delay be not condoned. According to him, Director of Income Tax has passed a legal and valid order refusing to condone the delay as there was no reasonable cause or sufficient reason for condensation of delay and thus he made a prayer for upholding the order of Director of Income Tax.

6. Having heard the rival submissions and having deliberated the judicial decisions cited at the bar before us, we are of the considered view that it is a case where appellant Society deserves the succeed. The appellant was registered in the year 1957, i.e., at a time when Income Tax Act, 1961 and its sections 11 and 12 were not there. Therefore, there is no reason to disbelieve the plausible explanation of the appellant that the office bearers of the appellant. Society could not have had any reason to see the applicability of the provisions of such non-existing enactment or its sections or otherwise take into account taxability aspect of the appellant-society. Requirement of registration was however brought by Finance Act, 1972 with effect from 1-4-1973. Explanation of the appellant society that when the office bearers and their successors were not conscious as to the application of taxability aspect under the Income Tax Act, 1961, there was possibility and plausibility for them to have skipped the requirement of registration brought in by the amendment to that sections dealing with taxability aspect. This factor can not be brushed aside that this situation of ignorance remained there well over 15 years. We have seen the Memorandum of Association of the appellant Society placed in the paper book and it is seen that the objective of the appellant Society is national integration and to improve Social, Economical arid Educational status of Primary Teachers. Director of Income Tax himself has granted the registration to the appellant society which means that its aims and objects have been found charitable by the Director of Income Tax. The receipts in the hands of the appellant Society are by way of grants and contributions and the receipts have substantially been spent on Administration and holding seminars and workshops and related material in furtherance of aims and objectives. These facts are evident from the copies of audited Profit & Loss Account filed in the Paper book. Though it is commonly understood that every body knows the law bi it the Honble Supreme Court has held in the case of Motilal Padampat Sugar Mills Co. Ltd.s (supra) that there is no such maxim known to law. Therefore, the office bearers of the Society which keep on changing every two three years can be believed to have ignored the provision of law and entertained bona fide belief as to the compliance of all required statutory formalities by their predecessors. This situation and such explanation of the appellant is not something which is improbable. This aspect of the matter also cannot be lost sight of that there was no profit motive of the appellant Society and office bearers of the Society are out of the primary teachers only with no knowledge of the nuances of Income Tax Law. Case laws cited by the learned Sr. Departmental Representative have been considered by us and none of them applies to the f acts of the present case. Legal propositions emanating from these decisions cannot be differed with but what is important in the present case is whether explanation of the delay in filing the registration application was for good and sufficient reasons which is a matter of fact to be deduced from the facts and circumstances of the present case and which we find that these exist in this case. Therefore, having regard to the all facts and circumstances of the case of the appellant Society, we find that there existed sufficient reasons for not filing application of registration in time arid therefore, there was genuine and bona fide ground for delay in filing the application for registration from 1-4-1973 till 31-3-2000 with Director of Income Tax ought to have condoned and hence his order is reversed and delay is hereby condoned from 1-4-1973.

6. Having heard the rival submissions and having deliberated the judicial decisions cited at the bar before us, we are of the considered view that it is a case where appellant Society deserves the succeed. The appellant was registered in the year 1957, i.e., at a time when Income Tax Act, 1961 and its sections 11 and 12 were not there. Therefore, there is no reason to disbelieve the plausible explanation of the appellant that the office bearers of the appellant. Society could not have had any reason to see the applicability of the provisions of such non-existing enactment or its sections or otherwise take into account taxability aspect of the appellant-society. Requirement of registration was however brought by Finance Act, 1972 with effect from 1-4-1973. Explanation of the appellant society that when the office bearers and their successors were not conscious as to the application of taxability aspect under the Income Tax Act, 1961, there was possibility and plausibility for them to have skipped the requirement of registration brought in by the amendment to that sections dealing with taxability aspect. This factor can not be brushed aside that this situation of ignorance remained there well over 15 years. We have seen the Memorandum of Association of the appellant Society placed in the paper book and it is seen that the objective of the appellant Society is national integration and to improve Social, Economical arid Educational status of Primary Teachers. Director of Income Tax himself has granted the registration to the appellant society which means that its aims and objects have been found charitable by the Director of Income Tax. The receipts in the hands of the appellant Society are by way of grants and contributions and the receipts have substantially been spent on Administration and holding seminars and workshops and related material in furtherance of aims and objectives. These facts are evident from the copies of audited Profit & Loss Account filed in the Paper book. Though it is commonly understood that every body knows the law bi it the Honble Supreme Court has held in the case of Motilal Padampat Sugar Mills Co. Ltd.s (supra) that there is no such maxim known to law. Therefore, the office bearers of the Society which keep on changing every two three years can be believed to have ignored the provision of law and entertained bona fide belief as to the compliance of all required statutory formalities by their predecessors. This situation and such explanation of the appellant is not something which is improbable. This aspect of the matter also cannot be lost sight of that there was no profit motive of the appellant Society and office bearers of the Society are out of the primary teachers only with no knowledge of the nuances of Income Tax Law. Case laws cited by the learned Sr. Departmental Representative have been considered by us and none of them applies to the f acts of the present case. Legal propositions emanating from these decisions cannot be differed with but what is important in the present case is whether explanation of the delay in filing the registration application was for good and sufficient reasons which is a matter of fact to be deduced from the facts and circumstances of the present case and which we find that these exist in this case. Therefore, having regard to the all facts and circumstances of the case of the appellant Society, we find that there existed sufficient reasons for not filing application of registration in time arid therefore, there was genuine and bona fide ground for delay in filing the application for registration from 1-4-1973 till 31-3-2000 with Director of Income Tax ought to have condoned and hence his order is reversed and delay is hereby condoned from 1-4-1973.

7. In the result appeal of the assessed is allowed.

7. In the result appeal of the assessed is allowed.