Registration application restored to CIT(E) after condoning delay attributed to counsel’s negligence

Registration application restored to CIT(E) after condoning delay attributed to counsel’s negligence

Issue

Whether the delay of 424 days in filing the appeal against the rejection of Section 12A registration should be condoned, and if the matter requires fresh adjudication by the CIT(E).

Facts

• Application for Registration: The assessee filed an application seeking registration under Section 12A(1)(ac)(iii) of the Income Tax Act.

• Rejection by CIT(E): The Commissioner of Income Tax (Exemptions) [CIT(E)], Chandigarh, rejected the application vide order dated 26-03-2024.

• Reason for Rejection: The CIT(E) denied registration primarily because the assessee had filed only partial details and failed to provide complete information required for verification.

• Delayed Appeal: The assessee filed an appeal before the Tribunal with a significant delay of 424 days.

• Reason for Delay: The assessee sought condonation of delay through a petition supported by an affidavit from the trust’s secretary, attributing the delay to a lapse on the part of the assessee’s legal counsel.

Decision

• Condonation of Delay: The Tribunal admitted the appeal despite the 424-day delay. The Bench accepted the reasoning regarding the counsel’s lapse and prioritized the principles of natural justice and the background of the assessee-trust.

• Restoration of Matter: The Tribunal set aside the impugned order and restored the issue of registration back to the file of the Ld. CIT(E) for fresh consideration.

• Direction to Assessee: The assessee was directed to plead and prove its case “forthwith” (immediately) during the fresh proceedings and provide the necessary substantiation that was previously missing.

• Result: The appeal was allowed for statistical purposes.

Key Takeaways

• Liberal Approach to Condonation: Tribunals often adopt a lenient approach towards condoning delays, even significant ones (like 424 days), if the delay is attributed to professional negligence (counsel’s lapse) rather than the assessee’s own fault, especially for charitable trusts.

• Natural Justice: The decision underscores that technical breaches (like partial details or delay) should not permanently bar a genuine entity from seeking tax exemptions if they can substantiate their case in a second round.

• “Statistical Purposes”: When a case is remanded back to the lower authority without a decision on the merits by the Tribunal, it is technically termed as “allowed for statistical purposes.”

• Importance of Compliance: While the assessee got a second chance, the rejection initially occurred due to filing “partial details,” highlighting the importance of submitting comprehensive documentation during 12A proceedings.