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Facts
The assessee, an AOP/BOI, filed its ITR declaring NIL income for AY 2022-23, claiming exemption under Section 11 of the Income Tax Act. The claim was rejected by the CPC and CIT(A) under Section 143(1) due to a one-day delay in uploading Form 10B, leading to the taxation of gross receipts without allowing expenses.
Held
The Tribunal held that the delay in filing Form 10B was a curable defect and the requirement was directory, not mandatory. Condoning the delay, the Tribunal directed the AO to allow the benefit of Section 11 exemption to the assessee.
Key Issues
Whether the denial of Section 11 exemption is justified due to a minor delay in filing Form 10B during processing under Section 143(1), and if such a defect is curable.
Sections Cited
11, 12, 12A, 12A(b), 139(1), 139(9), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI AVDHESH KUMAR MISHRA
ORDER
PER AVDHESH KUMAR MISHRA, AM
The appeal for the Assessment Year (‘AY’) 2022-23 filed by the assessee is directed against the order dated 24.01.2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, New Delhi [‘CIT(A)’].
The assessee has raised following grounds of appeal: - “On the facts and in the circumstances of the case and in law the ADDL/JCIT(A)-5, Kolkata erred in - 1. confirming the following actions of DDIT, CPC, Bengaluru: -
a. not allowing exemption claimed u/s 11 of the I.T. Act. 1961 on the ground that Audit Report in Form 10B dated 27.09.2022 was Incorporated in the system on 08.10.2022: c. taxing the gross receipts of Rs.75,70,590/- without allowing revenue expenditure incurred in a sum of Rs.67,41,795/- on the activities of the Assessee: d. determining taxable income at Rs.75,60,590/-against NIL return;
The above actions being arbitrary, fallacious, unwarranted and illegal must be quashed with directions for appropriate relief.”
The relevant facts giving rise to this appeal are that the assessee, an AOP/BOI, filed its Income Tax Return (‘ITR’) for the relevant year on 08.10.2022 declaring NIL income. The Assessing Officer (CPC), Bangalore processed the ITR under section 143(1) of the Income Tax Act, 1961 (‘Act’), wherein the claim of exemption under section 11 of the Act was rejected on the reasoning that the audit report in Form No. 10B had not been filed on or before the filing of the ITR under Section 139(1) of the Act. After rejection of the claim of exemption under section 11 of the Act, the Assessing Officer (CPC) taxed the entire gross receipts of Rs.75,60,590/- as income. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal by holding that the denial of claim of exemption under section 11 of the Act in processing of the ITR under section 143(1) of the Act was justified as there was a delay of one day in uploading the audit report in form 10B. The relevant finding of the Ld. CIT(A) is reproduced hereunder:
The Vedic Culture Centre “5.2 Ground of appeal
No. 1 is against the disallowance of exemption under section11 of the Act as claimed in the return of income (ITR). Facts involved in the issue is that the appellant had claimed exemption u/s 11 for Rs.75,60,590/- for application of its funds to charitable activities. As per the provisions of sec. 12A(b), in order to claim exemption under sec. 11 of the Act, the appellant was required to e-file audit report in Form 10B within one month prior to the due date of filing ITR as per sec. 139(1). The extended due date as per sec. 139(1) in this case was 07.11.2022. So the appellant was required to e-file Form 10B on or before 07.10.2022. It was however filed on 08.10.2022. The appellant in its submission has claimed that the said Form was submitted on 27.09.2022 but somehow in the e filing portal it was accepted on 08.10.2022. So, it had actually submitted it within the date specified in sec. 12A(b). But such claim of appellant is not acceptable as it is noted that 27.09.2022 is the date on which the Form 10B was prepared. Fact is that it was uploaded in e filing portal only on 08.10.2022. Since there was delay in filing Form 10B, AO, CPC had rightly disallowed the claim of exemption u/s 11. Since the appellant has violated the statutory provisions of sec. 12A, action of CPC is upheld and this ground of appeal is dismissed.”
At the outset, the Ld. Counsel, drawing our attention to the CBDT Circular No. 10/2019 dated 22.05.2019, submitted that the filing of the audit report in Form No. 10B was directory in nature and not mandatary; hence, the same was condonable in view of the provisions of section 12A of the Act and that was why the CBDT condoned the delay in filing the audit report in Form No. 10B for AYs 2016-17 and 2017-18 even without filing the condonation petition. However, in cases for the AY 2018-19 onward, the Circular was silent. The Ld. Counsel submitted that the filing of audit The Vedic Culture Centre report in Form 10B online on or before filing the ITR under section 139(1) of the Act was one of the requirements to avail the benefit under section 11 and 12 of the Act. The requirement of filing of Form No. 10B online on or before filing the ITR under section 139(1) of the Act was directory in nature and thus, was curable defect. The Assessing officer (‘AO’) should have accepted the uploaded audit report in Form No. 10B at the time of processing the ITR under section 143(1) of the Act as the said audit report was available on the Income Tax Portal. It was contended that the AO, at most, had treated the said ITR as a defective ITR under section 139(9) of the Act if the audit report was not available online along with the ITR on the Income Tax Portal and the assessee should have been provided an opportunity to rectify the said defect/deficiency in the ITR. However, the AO did not do the needful. The Ld. Counsel, in view of above-mentioned Circular and following judicial decisions, submitted that the AO was not justified in rejecting the claim of exemption under section 11 of the Act:
(i) Rai Bahadur Bissesswarlal Motilal Malwasie Trust 195 ITR 825, (Cal) (ii) Calcutta Management Association 42 ITD 62 (iii) Sankulp Welfare Society 303 ITR 64 (iv) National Horticulture Board 176 taxman.167 (v) Sahja Nand Charity Trust 228 ITR 292 4.1 Alternatively, the Ld. Counsel submitted that after rejection the claim of exemption under section 11 of the Act, at most the income as per the The Vedic Culture Centre Income & Expenditure account of the assessee would have been taxed instead of the gross receipts of Rs.75,60,590/-. The corresponding expenditure of Rs.67,41,795/- claimed against the gross receipts of Rs.75,60,590/- had to be allowed, argued the Ld. Counsel.
On the other hand, the Ld. Sr. Departmental Representative (‘Sr. DR’), placing reliance on orders of the Authorities below, prayed for dismissal of the appeal on the reasoning that filing of the audit report in Form No. 10B online on or before the filing of ITR under section 139(1) of the Act was mandatory and not directory in nature.
We have heard both parties and have perused the material available on the record. We find merit in the contention of the Ld. Counsel that failing in filing the audit report in Form NO. 10B online on or before the filing of ITR under section 139(1) of the Act is a curable defect which gets buttressed by the above-mentioned case laws and the intent of the above- mentioned Circular issued by the CBDT. Further, we are of the considered view that the denial of the claim of exemption under section 11 of the Act due to delay in filing the audit report in Form No. 10B online on or before the filing of ITR under section 139(1) of the Act is a debatable issue as evident from various case laws and such delay is condonable too as the CBDT, vide the above-mentioned Circular has already condoned the delay for two AYs. Thus, keeping in view the above, we hereby hold that the denial of claim of exemption under section 11 of the Act while processing The Vedic Culture Centre the ITR under section 143(1) of the Act is not justified. Consequentially, we condone the delay in filing the audit report in Form No. 10B online and direct the AO to allow the benefit of section 11 of the Act in this case. The assessee gets consequential relief accordingly.
In the result, the appeal of the assessee is allowed. Order pronounced in open Court on 30th July, 2025