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Facts
The assessee, a religious/charitable trust, filed its return of income and an audit report in Form 10B before the due date. However, the original Form 10B contained an error, showing NIL application of income instead of Rs.15,45,540/-. A revised Form 10B was filed later, correcting this error, but after the due date for filing the return of income.
Held
The Tribunal held that the filing of Form 10B is a procedural requirement and not a mandatory one for claiming exemption under Section 11. Following the Gujarat High Court's decision, the denial of exemption solely on the ground of a belatedly filed revised Form 10B, which corrected a procedural error, was set aside.
Key Issues
Whether exemption under Section 11 can be denied due to a delay in filing a revised audit report (Form 10B) when the original was filed on time but contained a clerical error.
Sections Cited
11, 11(1)(a), 12A, 139(1), 143(1), 154, 250, 119(2)(b)
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Income Tax Appellate Tribunal, “K(SMC
Before: SHRI VIKRAM SINGH YADAVSHRI SANDEEP SINGH KARHAIL
Date of Hearing – 24/11/2025 Date of Order - 26/11/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 08.09.2025, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Additional / Joint Commissioner of Income Tax (Appeals) - 3, Kolkata [“learned Addl. / Joint CIT(A)”], for the assessment year 2017-18.
The only grievance of the assessee is against the denial of exemption under section 11 of the Act due to the delay in filing revised Form 10B after the due date for filing the return of income for the year under consideration.
We have considered the submissions of the both sides and perused the material available on record. The brief facts of the case are that the assessee is a religious/charitable trust registered under section 12A of the Act vide order dated 20.09.2015. For the year under consideration, the assessee filed its return of income under section 139(1) of the Act on 28.08.2017, declaring gross receipts of Rs.31,79,940/- and claiming application of income towards objects of the trust of Rs.15,45,540/- and accumulation not exceeding 15% of gross receipts amounting to Rs.2,42,865/-. The return filed by the assessee was processed vide intimation dated 09.03.2019 issued under section 143(1) of the Act denying the exemption claimed by the assessee under section 11(1)(a) of the Act aggregating to Rs.17,88,405/- on the basis that the assessee has not e-filed the audit report in Form 10B along with on or before the filing of income.
The learned CIT(A) vide impugned order, dismissed the appeal filed by the assessee and upheld the denial of exemption under section 11(1)(a) of the Act. Being aggrieved the assessee is in appeal before us.
During the hearing, the learned Authorized Representative (“learned AR”) submitted that the due date for filing the return of income for the year under consideration, was 07.11.2017 and the assessee filed the return of income for the year under consideration on 28.08.2017. The learned AR submitted that the assessee filed the original audit report in Form 10B on 01.09.2017, i.e., prior to the due date for filing the return of income for the year under consideration. However, due to inadvertence, in the original audit report in Form 10B filed on 01.09.2017, the amount applied towards the object of the trust was shown as Rs. Nil instead of Rs.15,45,540/-. The learned AR further submitted that after processing of its return of income vide intimation issued under section 143(1) and rejection of its rectification application under section 154 of the Act, denying the exemption claimed under section 11 of the Act, the assessee filed the revised audit report in Form 10B on 03.09.2019, wherein the amount applied towards the activity of the trust was mentioned correctly as Rs.15,45,540/-. Accordingly, the learned AR submitted that merely due to an inadvertent mistake which was subsequently rectified by filing the revised Form 10B, the exemption claimed under section 11(1)(a) of the Act cannot be denied to the assessee on the basis that said revised Form 10B was belated and filed beyond the due date of filing the return of income in the present case.
On the other hand, the learned Departmental Representative vehemently relied upon the order passed by the lower authorities and submitted that the claim of the assessee was rightly rejected as the revised Form 10B was filed after the due date for filing the return of income.
Having considered the submissions of both sides and perused the material available on record, it is an undisputed fact that in the present case, the assessee was holding a valid certificate of registration under section 12A of the Act since 20.11.2015. Further, it is also evident from the record that in its return of income, the assessee declared gross receipts of Rs.31,79,940/- and claimed application of income towards the object of the trust of Rs.15,45,540/-. Further, the assessee also claimed an accumulation not exceeding 15% of gross receipts of Rs.2,42,865/-. It is also a matter of record that before the due date of filing the return of income, the assessee filed Form 10B on 01.09.2017. However, we find that in the original tax audit report in Form 10B, which forms part of the paper book from pages 7-9, the amount of income applied towards the object of the trust is mentioned as Rs. Nil instead of Rs.15,45,540/-. Further, we find that the amount of income accumulated or set apart for application towards objects of the trust to an extent of 15% is mentioned as Rs.2,42,865/-. Thus, it is evident that since the claim of the assessee for application of income towards the object of the trust was not supported by the declaration in the original tax audit report in Form 10B, the AO denied the exemption of Rs.17,88,405/- claimed by the assessee under section 11(1)(a) of the Act. We find that after rejection of its claim, the assessee filed the revised tax audit report in Form 10B on 03.09.2019, which forms part of the paper book from pages 33-35, wherein the amount applied towards the objects of the trust has been correctly mentioned as Rs.15,45,540/-. Further, the amount accumulated has been mentioned as Rs.2,42,865/-.
Now, the issue arises whether the revised tax audit report filed by the assessee in Form 10B on 03.09.2019, after the due date for filing the return of income, can be considered for the purpose of grant of exemption to the assessee under section 11 of the Act. We find that while deciding a similar issue, the Hon’ble Gujarat High Court in Parul Mahila Pragati Mandal vs. Income Tax Officer (Exemption), reported in (2025) 175 taxman.com 922 (Gujarat), held that the exemption under section 11 of the Act cannot be denied merely because the audit report in Form 10B was not filed within time.
The Hon’ble Gujarat High Court further observed that the requirement of filing Form 10B is only a procedural requirement and the failure to file Form 10B along with the return of income cannot be treated as a mandatory requirement for the purpose of claiming exemption under sections 11 and 12 of the Act. The relevant findings of the Hon’ble Gujarat High Court, in the decisions cited supra, are reproduced as follows: - “7.1 In Association of Indian Panel Board Manufacturers v. Dy. CIT [2023] 157 taxmann.com 550 /482 ITR 54 (Gujarat), this Court has categorically held that filing of Form 10B is only a procedural requirement and the failure to file Form 10B along with the return of income cannot be treated as mandatory requirement for the purpose of claiming exemption under Section 11 and 12 of the Act and even if such Form is filed at a later stage, the Assessee will still be entitled to claim exemption. The aforesaid decision in the case of Association of Indian Panel Board (supra) has been followed by this Court in case of CIT (Exemption) v. Anjana Foundation [2024] 168 taxmann.com 462 (Gujarat). Thus, it will be seen that the Petitioner-Assessee could not be denied the exemption merely because Form 10B was not filed within time. In such circumstances, the denial on the part of the Department to condone the delay in complying with the procedural requirement on the part of the Assessee would result in denial of a substantive right of the Assessee to claim an exemption, which would in turn, result in the Assessee having to pay the demanded amount, thereby unjustly enriching the Department. In such view of the matter in our opinion, the Petitioner would have been caused undue hardship which the Department could have alleviated by allowing the Assessee's application under Section 119(2)(b) of the Act, which is rejected only on the technical grounds. 7.2 This Court in several recent decisions, namely in the case of Royal Led Equipments (P.) Ltd. v. Chief Commissioner of Income-tax [2025] 174 taxmann.com 61 (Gujarat)/Special Civil Application No. 14786 of 2024 and in the case of Surat Smart City Development Ltd. v. Principal Commissioner of Income-tax [2024] 169 taxmann.com 222 (Gujarat)/Special Civil Application No. 10397 of 2024 has directed the Department to consider the Assessee's applications under Section 119(2)(b) of the Act to ensure that the purpose for which the said provision remains on the statute book is carried out and the said provision is not rendered illusory or becomes a dead letter.”
In the present case, we find that the audited balance sheet and profit and loss account of the assessee form part of the record, and the assessee has also furnished a copy of the same in the paper book filed before us. Thus, the aspect of incurring expenditure by the assessee towards the object of the trust can very well be examined by the AO from the details filed by the assessee, and if required, more details can be sought for complete verification of the issue.
Since in the peculiar facts of the present case, the assessee duly complied with the procedural requirement of filing the audit report in Form 10B before the due date for filing the return of income, and only the error which crept in the same was rectified vide revised audit report in Form 10B filed on 03.09.2019, i.e. after the due date for filing the return of income, respectfully following the aforesaid decision of the Hon’ble High Court, we are of the considered view that the same cannot be the sole basis for denying the exemption claimed by the assessee under section 11(1)(a) of the Act. Accordingly, the impugned order is set aside, and the matter is restored to the file of the AO to decide the claim of the assessee under section 11 of the Act on merits after accepting the revised audit report filed by the assessee in Form 10B on 03.09.2019. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 26/11/2025