By TIOL News Service

CHENNAI, AUGUST 12, 2016: THE ISSUE IS - Whether where the authority takes a decision to reject the application u/s 10(23C) on the ground of limitation, it is but proper for the authority to refrain from rendering finding on the merits of the matter? Yes is the answer.

Facts of the case:

The assessee is a Society registered under the Societies Registration Act, which has established and administering an Educational Institution under the name and style of All Angels Matriculation Higher Secondary School. During A.Y 2012-2013, the assessee filed an application in Form No.56D seeking exemption u/s 10(23C)(vi). The Chief CIT called upon the assessee to show cause as to why their application should not be rejected on two grounds; (a) it was not filed within the time period specified in the 14th Proviso to Section 10(23C)(vi); and (b) the assessee society could not be said to be existing solely for educational purpose, since the objects of the Society include other charitable object clauses. After considering assessee's submissions, the CIT rejected the assessee's application on the ground that it was filed beyond the time prescribed under 14th Proviso to Section 10(23C)(vi) and also on the ground that the assessee did not fulfill the requirements of Section 10(23C)(vi).

High Court's holding:

1. The issue to be considered is whether the Chief CIT could have proceeded to decide the merits of the matter when he chose to reject the application on the ground of delay. An identical issue was considered by the Division Bench of this Court in the case of Centre for Individual and Corporate Action (CICA) v. Asst CIT and it was held that the ITAT in that case adopted a procedure which is highly prejudicial to the assessee inasmuch as it having decided not to proceed with the matter on the ground of delay, cannot unilaterally decide the appeal on merits, moreso when the assessee was not given proper opportunity to contest the matter in the main appeal on merits. It may be true that the show cause notice issued by the CIT pointed out two grounds; (i) the application was filed beyond the time limit specified under the 14th Proviso to Section 10(23C)(vi) and (ii) the assessee society did not exist solely for educational purpose. In my view, when the authority takes a decision to reject the application on the ground of limitation, it is but proper for the authority to refrain from rendering finding on the merits of the matter. On the question of delay, the contention of the revenue is that there is no power conferred on the CIT to condone the delay. Nevertheless, this Court, while exercising jurisdiction under Article 226 of the Constitution of India, had examined the facts and circumstances of each case and when it is convinced that the peculiar facts called for exercise of discretion, the delay was condoned;

2. Coming back to the facts, on receipt of show cause notice, the assessee submitted their first reply, wherein they have pointed out that they could not finalise the accounts for the year 2012-2013 earlier and could do it only by the end of September, 2012, as they were entrusted with huge responsibility of organizing and conducting a sports event by the Education Department of the Government of Tamil Nadu in July, 2012, and it was the first time, the institution was entrusted with such a task. After enclosing the relevant Government Orders in that regard, the assessee pointed out that the event comprised of conducting team sport events and field events for both boys and girls of 28 schools in South Chennai District and the entire staff of the school and the society members had worked hard from July'2012 and completed the sports meet on 04.09.2012. Therefore, the assessee stated that due to the maiden responsibility entrusted to their institution by the Education Department, it had taken some time for them to finalise the accounts. Therefore, the delay, they pleaded, neither willful nor wanton and assured that henceforth they would file returns on time without fail. Subsequently, by another representation, the assessee stated that in event the Chief CIT does not condone the delay in filing the application, they requested to consider the application for approval u/s 10(23C)(vi) for the subsequent A.Y namely, 2013-2014;

3. After receipt of the reply and written submission and after affording an opportunity of personal hearing, the Chief CIT pointed out that there is no power for condoning the delay in filing the application in Form No.56D and with regard to alternative prayer, the same was also rejected stating that the A.Y is defined u/s 2(9) to mean the period of 12 months commencing on the 1st April of every year and therefore, the application cannot be treated as application for the A.Y 2013-2014. Ultimately, in the impugned order, the application was rejected as out of time. However, without stopping there, the Chief CIT thereafter, proceeded to analyze the objective of the Society, which was an exercise not called for. Having rejected the application on the ground of limitation, the question of examining the merits of the matter would not arise and it is a superseded exercise. Therefore, to that extent, this Court is inclined to accept the submissions of the assessee's counsel. However, considering the legal position that there is no power to condone the delay in filing an application u/s 10(23C), this Court is not inclined to exercise its extraordinary jurisdiction to condone the delay. However, this Court is inclined to give appropriate direction to the Chief CIT to consider the assessee's application as an application for the subsequent assessment year, in accordance with law. Such direction is issued considering the peculiar facts and circumstances of the case and that the assessee could not have made an application for the subsequent A.Y, since their application for A.Y 2012-2013 was still pending consideration and the impugned order came to be passed only on 13.11.2013.

(See 2016-TIOL-1728-HC-MAD-IT)