Commissioner of Income Tax vs HPS Social Welfare Foundation

V.K. Jain, J.—This is an appeal against the order of Tribunal dt. 29th Aug., 2008 whereby the appeal filed by the Revenue being ITA No. 3612/Del/2007 against the order dt. 18th May, 2007 passed by CIT(A), in respect of asst. yr. 2003-04, was dismissed. Since there was delay of 224 days in filing the appeal, CM No. 3907 of 2010, for condonation of delay in filing the appeal has also been filed.

The impugned order having been received by the Appellant on 4th Nov., 2008, the period of limitation prescribed for filing the appeal expired on 4th March, 2009, whereas the appeal has been filed on 14th Oct., 2009. A perusal of the application would show that on 23rd Feb., 2009, Director General of IT (Exemptions) approved filing of appeal and sent the file to the AO on 24th Feb., 2009. The AO, who was required to comply with the order, proceeded on leave on 27th Feb., 2009 without sending the file to the office of senior standing counsel of the Department for the purpose of drafting the appeal. He joined the office on 16th March, 2009 but continued to forget that appeal was to be filed in this case. He was transferred on 17th June, 2009 and handed over the charge to the new officer. It has been stated in the application that on receiving the copy of the order passed by the Tribunal, in the case of this very Assessee for the asst. yr. 2005-06, the AO noted on 20th Aug., 2009 that the Tribunal had relied upon its earlier order passed for the asst. yr. 2003-04 and he then realized that the appeal had not been filed in respect of asst. yr. 2003-04 and sent the file to the senior standing counsel on 21st Aug., 2009.

We are not satisfied with the explanation given by the Appellant for the delay in filing the appeal. We fail to appreciate how the AO, who received the file from the Director General of IT (Exemptions) on 24th Feb., 2009 could have continued to forget, till the time he was transferred, that he had to send the file to the office of senior standing counsel, for drafting the appeal in terms of the approval given by Director General of IT (Exemptions) on 23rd Feb., 2009. There has to be some system in the office of the AO, which would ensure compliance of such time bound orders. When the AO was transferred on 17th June, 2009 and he handed over the charge to the new officer, he was expected to bring it to the notice of his successor that the appeal in terms of the approval dt. 23rd Feb., 2009 was required to be filed in this case. In any case, he must have handed over all the files to his successor, while relinquishing charge of the office held by him. The new incumbent was required to examine at least urgent and time bound files, received by him from his predecessor. Had he done so, he would have come to know that the appeal required to be filed in this case had already been delayed and, therefore, he should immediately send the file to the office of the senior standing counsel for the purpose of drafting the appeal. We, therefore, find it difficult to condone so much delay in filing of this appeal.

We have also examined the appeal on merits. The Assessee foundation was set up in order to provide fees, books, equipments and scholarship, etc. to needy students, to help mentally retarded, crippled and other physically handicapped children in their rehabilitation, to render assistance to indigent persons for their medical treatment, etc. and to conduct education in public health. The chairman and directors are stated to be mostly retired bureaucrats and other persons, who have worked for upliftment of the needy and poor. During assessment of the Respondent for the asst. yr. 2003-04 the AO noted that the Assessee had received donation of Rs. 2 crores, besides corpus donation of Rs. 1 crore from HCL Perot System and had given donations amounting to Rs. 2,07,65,600 to various institutions and NGOs. On being required by the AO, the Respondent Assessee submitted a list of 76 institutions/NGOs to whom donations were given by it. Confirmation from 64 such institutions were also submitted. The AO was of the view that the donations had been given at the sweet will of the Assessee and had been used for the personal benefits. He concluded that the Assessee was a tool in the hands of HCL Perot System, where donations were being used for personal benefits. Accordingly he denied benefit of exemption under Sections 11 and 12 of the IT Act, 1961 to the Assessee and determined its taxable income at Rs. 2,61,78,450.

On appeal filed by the Assessee, CIT(A) deleted the additions except in respect of two donations, one made to Gandhi Smarak and the other to Kaivalya Charities. He was of the view that the Assessee had genuinely carried out activities in accordance with its objects as enumerated in its memorandum of association and that since there was no material on record to suggest that the Assessee had infringed the provisions of Section 13(1) of the Act, there was no reason to deny benefit of exemption to the trust. Confirmation from 10 more donees were filed before CIT(A) and thus the Assessee filed confirmation from 74 out of 76 parties to which donations were given by it. The addition made in respect of two institutions namely, Gandhi Smarak and Kaivalya Charities were, however, upheld.

During the course of hearing before the Tribunal, it was pointed out that the chairman of the Assessee was former cabinet secretary whereas the other directors were retired IAS officers or IFS officers and no one had ever utilized the funds of the Assessee for his personal purpose.

The Tribunal noted that the organizations to which donations were given were charity organizations such as Blind Welfare Hostel, Delhi Councils for Children Welfare Association, etc. and the AO had not pointed out any circumstance to show that these donations were not made for the purpose of charity. It was further noted that the AO had not pointed out the personal element stated to be involved in giving these donations. It was also noted that the donations had been given through payee''s account cheques. The Tribunal found that no circumstance had been pointed out by the AO to show that the donations had been used for personal benefit of directors of HCL Perot System. The Tribunal accordingly maintained the finding recorded by CIT(A).

Section 13 of IT Act stipulates the circumstances in which the income of a trust will not be exempted from its income. In the present case, as noted by CIT(A), the AO has not pointed out violation of any provision of Section 13 of the Act by the Assessee. The finding recorded by CIT(A) in this regard has been confirmed by the Tribunal and there is no material before us to indicate that the finding recorded by CIT(A) and the Tribunal is perverse in any manner.

CIT(A) as well the Tribunal, both have found that the organizations to which donations were given by the Assessee during assessment year in question were genuine charity organizations. There was no evidence before the AO to show that these were not genuine organizations or were not engaged in social and charitable activities. The AO attributed personal elements to these donations without even indicating any circumstance which could give rise to such an inference. The order passed by the AO does not show that the directors of HCL Perot Systems were connected with these organizations or were managing their affairs. The payments to all the organizations were made by account payee cheques. Confirmations from 74 out of 76 organizations were submitted by the Assessee. Deletion in respect of remaining two donations were confirmed by CIT(A) and have not been interfered with by the Tribunal. If the AO doubted any particular donation, he could have summoned the officer bearers of the organization which received that donation. That having not been done, he could not have disputed the genuineness of the donations.

There was absolutely no material before the AO to show that the funds given to these NGOs/institutions were used for personal benefit of HCL Perot System or any of its directors. Therefore, it cannot be said that the finding of fact recorded by CIT(A) and Tribunal upholding genuineness of the donations is perverse, calling for intervention by this Court. No contravention of Section 13 of IT Act having been made out and the genuineness of the donations having been accepted by CIT(A) as well as by the Tribunal, there is no ground for interference by this Court u/s 260A of IT Act. No substantial question of law arises for our consideration in this case. The appeal as well as CM No. 3907 of 2010 for condonation of delay are hereby dismissed.