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Facts
The assessee claimed exemption under Section 11 of the Income Tax Act, 1961, for Assessment Years 2014-15 and 2017-18. The exemption was disallowed by the CPC due to the failure to furnish the audit report in Form 10B within the due date, which is a mandatory condition for claiming exemption under Section 12A(1)(b). The assessee's subsequent applications for condonation of delay were rejected by the CIT(E) and CIT(A), citing the assessee as a habitual defaulter.
Held
The Tribunal held that the assessee had not adhered to the time limitations provided in the Act and was a habitual defaulter. The disallowance of exemption by the CPC and upheld by the lower authorities was found to be correct due to the non-compliance with the mandatory requirement of filing the audit report within the prescribed time.
Key Issues
Whether the exemption under Section 11 can be disallowed solely for the delay in filing the mandatory audit report in Form 10B, and whether the assessee's repeated delays constitute habitual default justifying the rejection of condonation applications.
Sections Cited
11, 12A(1)(b), 44AB, 143(1), 119(2)
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Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Date of Hearing 03.11.2025 Date of Pronouncement 09.12.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals have been preferred by the assessee against the orders of even date as passed by the Learned Commissioner of Income-tax, Appeal, ADDL/JCIT(A)-2 Coimbatore [hereinafter referred to as “CIT(A)”] pertaining to the intimation orders passed u/s. 143(1) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Years [A.Ys.] 2014-15 and 2017-18.Since in the above P a g e | 2 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation appeals, the issues are common and also the fact that appeals were heard together, they are being taken up together for adjudication vide this composite order for the sake of brevity. Our decision in the AY 2014-15 would apply mutatis mutandis to the appeal for AY 2017-18.
The grounds of appeal
are as under: 2 .
1. The Additional Commissioner of Income-tax (Appeals)-2, Coimbatore (hereinafter referred to as the Addl CIT(A)) erred in upholding the action of Centralized Processing Center (CPC) (hereinafter referred to as the Assessing Officer) in disallowing the benefit/ exemption under section 11 on the ground that the appellants failed to furnish the audit report in Form no 10B together with their return of income.
2. The appellants contend that on the facts and in the circumstances of the case and in law, the Addl CIT(A) ought not to have upheld the action of the Assessing Officer in disallowing the exemption claimed by the appellants under section 11 inasmuch as he has not correctly appreciated the facts of the case in its entirety and hence, the impugned disallowance is bad in law and the action of the Assessing Officer needs to be reversed.
3. The appellants further, contend that on the facts and in the circumstances of the case and in law, the Addl CIT(A) ought to have allowed the exemption claimed by the appellants under section 11 inasmuch non-furnishing of Form no 10B is merely a venial and technical breach of law and the same cannot be a sole reason to disallow the claim of the appellants which otherwise they are entitled to.
4. The appellants further, contend that on the facts and in the circumstances of the case and in law, they have furnished Form no 10B on 24thJanuary, 2018 and have made good the technical breach of the law and hence, a suitable direction may be given to allow the exemption claimed by the appellants under section 11 of the Act.
3. Facts of the case are that the Centralized Processing Centre(CPC) in the orders u/s 143(1) for both the assessment years P a g e | 3 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation denied the exemption claimed u/s 11 of the Act by the assessee on the ground that the assesse had not filed Audit Report in Form 10B with return of income. The assessee filed appeals before the ld.CIT(A) who after examining all facts of the case dismissed both the appeals. His observations and decision rendered are reproduced as below:
“7.1 The submission of the appellant along with the statement of fact, grounds of appeal and other details available on record are perused. It is noticed from the record available that the main contention of the appellant in this appeal is the disallowance of the exemption claimed u/s.11 amounting to Rs.31,69,249/- in the intimation order passed by CPC u/s.143(1) of the Income Tax Act, 1961. 7.2 The appellant trust filed return of income for the A.Y 2014-15 on 19/09/2014 within due date declaring NIL total income after claiming exemption of Rs.31,69,249/- u/s.11 of the Income Tax Act. The return of Income was processed u/s.143(1) of the Income Tax Act, 1961 and disallowed the appellant's claim of Rs.31,69,249/- u/s.11 of the Income Tax Act, in respect of the Income from other source for the amount of Rs.31,69,249/-. The appellant has not filed audit report in Form No.10B within the due date as specified u/s 44AB and filed audit report on 24. January 2018 i.e after processing of return of income u/s 143(1). Main reason behind not allowing exemption u/s,11 was the late filling of audit report in Form 10B. The appellant has not filed tax audit report in form 10B as required u/s 12A(1)(b) read with sec 44AB of the Income Tax Act 1961 within the specified due date. Therefore, the CPC has passed an intimation order u/s 143(1) of the Act on 16/03/2016 disallowing the exemption claimed u/s. 11 amounting to Rs.31,69,249/-. 7.3 Also, it was clearly mentioned by CPC in the said intimation order passed u/s 143(1) of the Act on 16/03/2016 that as per section 12A(1)(b), where the total income of the trust or institution as computed without giving effect to the provisions of sec 11& 12 exceeds Rs. 2 lakhs, the accounts of the trust or institution needs to be audited and report of such audit in the prescribed form to be furnished along with the return of income filed. The provisions of Section 11 & 12 is not applicable in appellant's case for the reason that the appellant had not complied with the conditions of the sec 12A(1)(b). In spite of opportunities given as per first proviso to sec 143(1), the appellant P a g e | 4 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation have not furnished the corrected return along with audit report in form 10B. Therefore, the CPC has passed an intimation order u/s 143(1) disallowing the exemption claimed u/s.11 and taxed income of Rs.31,69,249/- at maximum marginal rate due to non submission of audit report u/s 12A(1)(b) as per the proviso to sec 143(1) of the Income Tax Act 1961. 7.4 In this regard the provisions of section 12A(1)(b) is reproduced as under: 12A. [(1)] 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:- (b) where the total income of the trust or institution as computed under this Act without giving effect to 96 [the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax 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 97 duly signed and verified by such accountant and setting forth such particulars as may be prescribed.] 7.5 Further, during the appeal proceeding, the appellant has submitted that the audit report in form 10B has not been furnished in the prescribed form along with return of income within due date as well as before passing order u/s 143(1) of the Act on 16/03/2016 by CPC. The appellant has filed form 10B for the year under consideration (i.e AY 2014-15) only on 24/01/2018. 7.6 In view of the above, the appellant's contention of an intimation order u/s 143(1) vide order dated 26/09/2019 passed by CPC disallowing the exemption claimed u/s.11 amounting to Rs.31.69,249/- for non-filing of audit report u/s 12A(1)(b), after providing due opportunity to the appellant as per the provisions of sec 143(1) of the Income Tax Act is found to be correct. 7.7 Further, as stated by appellant that the request for condonation of delay in filing form 10B for the concerned year was filed before the CIT, Exemption, Mumbai on 27/06/2024 as per the CBDT's Circular No. 10/2019 circulated through F.No. 197/55/2018-ITA-I dated 22/05/2019. Subsequently, the Ld.CIT, exemption has passed an order in writing vide DIN & Order No: ITBA/Com/F/17/2024-25/1068025534(1) dated 27/08/2024 rejecting the condonation request filed by the appellant stating as under:
P a g e | 5 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation CBDT vide Para 4(ii) of Circular No. 10/2019 dated 22.05.2019 has authorized Commissioners of Income Tax, in all other cases of belated applications in filing Form No. 10B for years prior to A.Y. 2018-19, to admit such applications for condonation of delay under section 119(2) of the Act and decide on merits. In this case, the assessee has filed Form 108 on 24.01.2018. The delay by the assessee in filing of Form No. 10Bis 1223 days: The assessee has applied for condonation of delay after a further period of 2346 days on 27.06.2024. The assessee has delayed filing of Form 10B in AYs/. 2014-15, 2015-16 and 2017-18. Hence it is a habitual defaulter, In view of the facts and circumstances mentioned above, I am not able to arrive at a conclusion that the reason for the delay stated by the applicant is bonafide and genuine. Hence, the application seeking condonation of delay in filing Form No. 10B by the assessee for the A.Υ. 2014-15is hereby rejected. 7.8 In the case of appellant, for the issue concerned regarding condonation of delay in filing audit report which is mandatory as per sec 12A(1)(b) of the Income Tax Act 1961, the CBDT has already issued circular vide Circular No. 10/2019 circulated through F.No. 197/55/2018-ITA-I dated 22/05/2019 and issued direction u/s 119(2) to mitigate the hardship of the assessee. By following the direction of CBDT's Circular No. 10/2019 dated 22/05/2019, the appellant has filed request for condonation of delay in filing form 10B for the concerned year before the CIT, Exemption, Mumbai on 27/06/2024. Subsequently, the appellant's request for condonation of delay in filing Form 10B filed before the CIT, Exemption, Mumbai has been rejected vide order dated 27/08/2024.
In view of the above, an intimation order u/s 143(1) vide order dated 26/09/2019 passed by CPC disallowing the exemption claimed u/s.11 amounting to Rs.31,69,249/- for non-filing of audit report u/s 12A(1)(b) after providing opportunity of being heard as per the first proviso to sec 143(1) of the Income Tax Act has reached finality by the order of CIT, Exemption, Mumbai passed on 27/06/2024. Therefore, an intimation order passed by CPC u/s 143(1) of the Act on 16/03/2016 disallowing the exemption claimed u/s.11 amounting to Rs.31,69,249/- is hereby upheld. Hence, the grounds of appeal
filed by the appellant have no merits and dismissed accordingly.”
4. In the course of hearing of the appeal, none appeared on behalf of the assessee although the ld.AR made a request for adjournment to subsequent date. It was noticed from the earlier order sheet notings that P a g e | 6 ITA No. 181, 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation in the instant case, the ld.AR has sought further time on as many as 11 occasions. Vide order sheet dated 30.10.2025,the case was adjourned as per his request with the stipulation that no further opportunity would be accorded and no further adjournment request would be entertained. Despite these facts, the ld.AR sought adjournment again which is accordingly rejected by the Bench and the matter is adjudicated on merits.
The ld. Departmental representative relied on the appellate order claiming that the assessee is a habitual defaulter. Vide a written submission made, it is submitted that the CIT(E) denied condonation of delay for filing Form 10B through order dated 27.06.2024. The assessee had not filed appeal before this order. The CIT(A) dismissed assessee's appeal against which assessee is in appeal before ITAT. Following facts have been highlighted for taking due cognizance while deciding appeal:
Delay in filing Form 10B: 1223 days (filed on 24.01.2018) 2. Delay in filing appeal to CIT(E) for Form 10B: 2346 days (filed on 27.06.2024) 3. Delay in filing appeal to CIT(A): 3105 days for filing appeal against order u/s. 143(1).The above facts depicts that the assesse is a habitual defaulter.
P a g e | 7 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation 5.1 The ld.DR has further submitted that the assessee filed appeal before ITAT against CIT(A) order dated 30.12.2024 against the intimation order dated 16.03.2016.It did not filed audit report in Form no.10B within the due date as per section 44AB of the Act and filed the same on 24.01.2018. However, no evidence of having filed the Form on the above date was furnished before the ld.CIT(A).Although the CIT(A) condoned the delay for filing of appeal, he dismissed the appeal on the observation that the request for condonation of delay in filing of Form no.10B before the CIT(E) had been rejected vide order dated 27.8.2024. Therefore, he held that the issue had reached finality by the CIT(E) order dated 27.6.2024. It is stated that the CIT(E) relied on CBDT Circular n0.10/2019 dated 22.5.2024 and rejected appeal by stating that the delay stated by the assessee was not bonafide and genuine as the assessee was habitual defaulter. Therefore, CIT(E) had used his discretionary power given by the Board through the above Circular. The CIT(A) has taken cognizance of this order and mentioned that the issue had reached finality .It is also intimated that the assessee did not contest the order passed by CIT(E) to High Court. It is submitted that the instant appeal cannot survive as the CIT(E) has already rejected appeal of the assessee filed u/s 119(2)(b) of the Act for delay in filing of Form 10B and assessee not filing any appeal before hon’ble High Court.
P a g e | 8 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation Reliance has been placed on Little Angels Education Society v. Union of India [2021] 127 taxmann.com 473 (Bombay) [2021] 280 Taxman 4 (Bombay)/[2021) 434 ITR 423 (Bombay) [25.03.2021].
Having considered all the relevant facts of the case, perusal of the relevant orders and the submission made by the ld.DR, it is quite evident that the assessee has not adhered to time limitations provided in the Act at all in complete defiance thereof. The ld.CIT(A) has exhaustively dealt with the entire matter threadbare and dismissed the appeal. We do not find any infirmity in the conclusion drawn by the ld.CIT(A) as the assessee is apparently habitual defaulter as evident from the fact that it filed Form no.10 B on 24.01.2018, after a delay of 1223 days. Further, appeal to the CIT(E) in respect of Form 10B was filed on 27.06.2024for condonation of delay was filed after inordinate delay of 2346 days for which no reasons have been attributed. Since the assessee has been consistently non-compliant before the above authorities it has utterly failed to improve upon its case in any manner. Even before us also, the assessee kept on making requests for adjournments from time to time, thus delaying adjudication of the appeal. Its non-compliant attitude continued before the Bench as well. In absence of any submission in support of the impugned appeal, we do P a g e | 9 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation not find any reason for interference in the matter and therefore, uphold the appellate order.
In the result, the instant appeal is dismissed.
8.ITA No. 182/MUM/2025 (A.Y. 2017-18)
1. The Additional Commissioner of Income-tax (Appeals) – 2, Coimbatore (hereinafter referred to as the Addl CIT(A)) erred in upholding the action of Centralized Processing Center (CPC) (hereinafter referred to as the Assessing Officer) in disallowing the benefit exemption under section 11 on the ground that the appellants failed to furnish the audit report in Form no 10B together with their return of income.
2. The appellants contend that on the facts and in the circumstances of the case and in law, the Addl CIT(A) ought not to have upheld the action of the Assessing Officer in disallowing the exemption claimed by the appellants under section 11 inasmuch as he has not correctly appreciated the facts of the case in its entirety and hence, the impugned disallowance is bad in law and the action of the Assessing Officer needs to be reversed. 3. The appellants further, contend that on the facts and in the circumstances of the case and in law, the Addl CIT(A) ought to have allowed the exemption claimed by the appellants under section 11 inasmuch non- furnishing of Form no 10B is merely a venial and technical breach of law and the same cannot be a sole reason to disallow the claim of the appellants which otherwise they are entitled to. 4. The appellants further, contend that on the facts and in the circumstances of the case and in law, they have furnished Form no 10B on 11thApril, 2019 and have made good the technical breach of the law and hence, a suitable direction may be given to allow the exemption claimed by the appellants under section 11 of the Act. 9. Since we have already dismissed appeal of the assessee on identical set of facts as discussed in para above, the decision rendered therein applies mutatis mutandis to the present appeal as well which is accordingly dismissed.
P a g e | 10 182/Mum/2025 A.Y. 2014-15, 2017-18 J.V. Foundation 10. In the result, both the appeals are dismissed.
Order pronounced in the open court on 09/12/2025. NARENDER KUMAR CHOUDHRY PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)