Per: K S Jhaveri :— 1. By way of this appeal, the appellant- revenue has challenged the order dated 01.03.2007 passed by the Income-tax Appellate Tribunal, Rajkot Bench, in ITA No. 434/Rjt/2006.
2. While admitting this appeal on 11.01.2008, this Court has framed the following substantial question of law:
Whether, the Appellate Tribunal was right in law and on facts in holding that the order of the Commissioner rejecting the application for registration u/s 12A of the Act on the ground of non-compliance of requirement of filing the audited accounts was bad and thereby directing the CIT to grant registration, if other conditions are fulfilled?
3. The facts of the present case are that the assessee had filed an application u/s 12A(a) of the Act for registration and the same was rejected by CIT(A) on the ground that the assessee had not fulfilled the conditions u/s 12A(b) which are defined in the Explanation below sub-section (2) of Section 288. On appeal by the assessee before the Tribunal, the Tribunal reversed the order passed by CIT(A) and allowed the appeal. Being aggrieved by the said order, the present appeal is preferred by the revenue.
4. Mr. Pranav Desai, learned advocate for the revenue contended that the assessee was obliged u/s 12A(b) of the Act to get the accounts audited by an Accountant within the meaning of Explanation to sub-section 2 of Section 288 if the income of the Trust exceeds
' 50,000/-. He submitted that the Tribunal had committed an error in reversing the order passed by CIT(A) and therefore the same deserves to be quashed and set aside.
5. Though served none appears for the assessee.
6. Heard learned advocate for the revenue and perused the materials on record. Section 288 of the Income Tax Act, 1961 provides for appearance by an authorised representative before the Appellate Tribunal or any authority. Section 12A of the Act provides for conditions of registration of trusts. It shall be relevant to peruse sections 288 and 12A of the Act at this stage. The same are reproduced hereunder:
"288 - Appearance by authorised representative (1) Any assessee who is entitled or required to attend before any income-tax authority or the Appellate Tribunal in connection with any proceeding under this Act otherwise than when required under section 131 to attend personally for examination on oath or affirmation, may, subject to the other provisions of this section, attend by an authorised representative. (2) For the purposes of this section, "authorised representative" means a person authorised by the assessee in writing to appear on his behalf, being-
(i) a person related to the assessee in any manner, or a person regularly employed by the assessee; or (ii) any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or (iii) any legal practitioner who is entitled to practise in any civil court in India; or (iv) an accountant; or (v) any person who has passed any accountancy examination recognised in this behalf by the Board; or (vi) any person who has acquired such educational qualifications as the Board may prescribe for this purpose; or [(via) any person who, before the coming into force of this Act in the Union territory of Dadra and Nagar Haveli, Goa†, Daman and Diu, or Pondicherry, attended before an income-tax authority in the said territory on behalf of any assessee otherwise than in the capacity of an employee or relative of that assessee; or]
(vii) any other person who, immediately before the commencement of this Act, was an income-tax practitioner within the meaning of clause (iv) of sub-section (2) of section 61 of the Indian Incometax Act, 1922 (11 of 1922), and was actually practising as such.
Explanation.-In this section, "accountant" means a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949), and includes, in relation to any State, any person who by virtue of the provisions of sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), is entitled to be appointed to act as an auditor of companies registered in that State. (3) [***] (4) No person-
(a) who has been dismissed or removed from Government service after the 1st day of April, 1938; or (b) who has been convicted of an offence connected with any income-tax proceeding or on whom a penalty has been imposed under this Act, other than a penalty imposed on him under [clause (ii) of sub-section (1) of] section 271; or
(c) who has become an insolvent, shall be qualified to represent an assessee under sub-section (1), for all times in the case of a person referred to in sub-clause (a)*, for such time as the [Chief Commissioner or Commissioner] may by order determine in the case of a person referred to in sub-clause (b)*, and for the period during which the insolvency continues in the case of a person referred to in sub-clause (c)*.
(5) If any person-
(a) who is a legal practitioner or an accountant is found guilty of misconduct in his professional capacity by any authority entitled to institute disciplinary proceedings against him, an order passed by that authority shall have effect in relation to his right to attend before an income-tax authority as it has in relation to his right to practise as a legal practitioner or accountant, as the case may be;
(b) who is not a legal practitioner or an accountant, is found guilty of misconduct in connection with any income-tax proceedings by the prescribed authority, the prescribed authority may direct that he shall thenceforth be disqualified to represent an assessee under sub-section (1).
(6) Any order or direction under clause (b) of subsection (4) or clause (b) of sub-section (5) shall be subject to the following conditions, namely:-
(a) no such order or direction shall be made in respect of any person unless he has been given a reasonable opportunity of being heard; (b) any person against whom any such order or direction is made may, within one month of the making of the order or direction, appeal to the Board to have the order or direction cancelled; and
(c) no such order or direction shall take effect until the expiration of one month from the making thereof, or, where an appeal has been preferred, until the disposal of the appeal.
(7) A person disqualified to represent an assessee by virtue of the provisions of sub-section (3) of section 61 of the Indian Income-tax Act, 1922 (11 of 1922), shall be disqualified to represent an assessee under sub-section (1)." "12A - Conditions as to registration of trusts, etc. The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:-
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or Commissioner] before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later:
Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,-
(i) from the date of the creation of the trust or the establishment of the institution if the Chief Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Chief Commissioner or Commissioner is not so satisfied;]
(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds fifty] thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form. duly signed and verified by such accountant and setting forth such particulars as may be prescribed.] "
6.1 The Tribunal dissenting from the view taken by the CIT(A) has observed in the impugned order as under:
"The learned AR of the assessee contended that it is not the requirement of the law to file the copies of the audited statement of accounts by CA along with the application for registration u/s. 12AA of the Income Tax Act, 1961. The learned DR on the other hand supported the impugned order of the CIT. We find sufficient force in the contention of the assessee. The procedure for registration has been prescribed u/s. 12AA of the Act and as per the said provision, the CIT on receipt of application has to register the trust or institution u/s. 12A and he can call for the documents or information from the Trust regarding genuineness of the activities of the Trust and he is to satisfy himself about the object of the trust and he is to pass the order in writing regarding registering the Trust or refusing the registration. We find that there is no condition precedent to file the audited accounts along with the application. Therefore, we are of the considered view that the CIT has grossly erred in refusing registration in the instant case on the ground for non-compliance of requirement of filling the audited accounts. We find that the assessee has got the accounts audited, but according to the CIT the auditor does not conform to the definition of accountant in terms of explanation below section 288(2). Section 288 permits an ssessee to be represented before the appellate tribunal or any income-tax representative as that term is defined in sub-section (2). The said Seciton has nothing to do in case of grant of registration u/s. 12A. In view of the above, we hold that the order of the CIT in refusing registration on the above ground is not in order. Therefore, we reverse the order of the CIT and direct the CIT to grant registration if other conditions are fulfilled.
3. The learned AR of the assessee next contended that the CIT ought to have condoned the delay in making the application u/s. 12AA for the reasons mentioned in letter dtd. 23.3.2006. From the order of the CIT, we find that the CIT has not discussed anything in his order as to the request for condonation of delay. The learned DR did not dispute this fact. Therefore, we direct the CIT to consider the request for condonation of the delay and pass a speaking order in that regard while considering registration u/s. 12A as directed in the foregoing paragraph."
6.2 Considering the provisions of Sections 288 and 12A of the Act as well as the documents placed on record, we are of the opinion that the Tribunal is justified in coming to the conclusion that the view taken by the CIT is erroneous. The assessee has got the accounts audited and it is for the CIT to satisfy himself about the object of the Trust that he calls for such documents pursuant to the application. We are in complete agreement with the reasonings adopted and finding of facts arrived at by the Tribunal.
7. For the foregoing reasons, we answer the question raised in the present appeal in the affirmative i.e. in favor of the assessee and against the revenue. We hold that the Tribunal was right in law and on facts in holding that the order of the Commissioner rejecting the application for registration u/s 12A of the Act on the ground of noncompliance of requirement of filing the audited accounts was bad and thereby was justified in directing the CIT to grant registration, if other conditions are fulfilled. Appeal is dismissed accordingly.