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Facts
The assessee, a Public Trust, filed its return of income claiming exemption under Sections 11 and 12. The CPC processed the return and made adjustments disallowing exemptions due to a belatedly filed audit report in Form 10-BB. The CIT(A) upheld the disallowance, leading to the present appeal.
Held
The Tribunal held that the delay in filing the audit report (Form 10-BB) was a procedural lapse and not fatal to the claim of exemption, especially since the audit was completed in time and the report was available before the processing of the return. The Tribunal condoned the delay and directed the Assessing Officer to grant the exemption.
Key Issues
Whether a delay in filing the audit report in Form 10-BB, where the audit itself was completed in time and the report was available during processing, can be a ground for denial of exemption under Section 11 of the Income Tax Act.
Sections Cited
11, 12, 11(1)(a), 11(2), 11(6), 143(1), 139(1), 12A(b), 119, 251
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Income Tax Appellate Tribunal, MUMBAI “SMC” BENCH : MUMBAI
Before: JUSTICE (RETD.) SHRI C.V. BHADANG & SHRI VIKRAM SINGH YADAV
Assessment Year : 2024-25 St. Francis Xavier Church Trust, Income Tax Officer, Plot 379/B, Behind Orion Mall Exemption Ward, Thane and S.T. Depot, vs. Quershi Mansion, Panvel-410206. Gokhale Road, PAN : AAETS4913N Naupada, Thane-400602. (Appellant) (Respondent) For Assessee : NONE For Revenue : Smt. B. Brahma Vidya Date of Hearing : 25-11-2025 Date of Pronouncement : 25-11-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Addl/JCIT(A)-Agra, dated 29-07-2025, pertaining to Assessment Year (AY) 2024-25, wherein the assessee has taken the following grounds of appeal: “1.1. On the facts and in circumstances of the case and in law the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming the denial of exemption/deductions under Section 11 of the Act resorted to by the Centralized Processing Centre [CPC), Income Tax Department, Bengaluru (the learned Assessing Officer) while processing the Return of Income under Section 143(1) of the Act on the grounds that the Audit Report in Form 10-BB was filed belatedly, though with the Return of Income which was filed within the extended time limit under Section 139(1) of the Act.
1.2. The learned CIT(Appeals) and the learned Assessing Officer failed to appreciate that the time limit prescribed for filing the Audit Report is only declaratory and not mandatory. The lower authorities failed to appreciate that delay in filing the Audit Report is only a procedural lapse and the same cannot be fatal leading to denial of exemption/benefits under Section 11 of the Act particularly when the said Audit Report was available on record when the Return of Income was processed under Section 143(1) of the Act. 1.3. The learned CIT (Appeals) failed to appreciate the explanations/submissions furnished by the Appellant and the legal position emerging from the decisions of various High Courts/Income-tax Appellate Tribunals dealing with amended provisions of Section 12A(b) of the Act. In view of the above, the Appellant prays that the learned Assessing Officer may kindly be directed to grant the exemption under Section 11 of the Act to the Appellant and reduce the Total Income to Rs. 1,23,686/- as declared in the Return of Income filed. 2.1. Without prejudice to the above, it is submitted that the denial of exemption under Section 11 of the Act, as discussed above, has led to denial of deductions of the following amounts resulting into a demand of Rs. 3,45,310/- after adjusting the TDS refund of Rs. 41,461/- against the Appellant: 2.1.1 A sum of Rs.6,73,510/- under section 11(1)(a) of the Act being the amount accumulated or set apart for application to charitable or religious purposes or for the stated objects of the trust to the extent it does not exceed 15 per cent of the income; 2.1.2 A sum of Rs.9,00,000/- being the amount accumulated or set apart for specified purposes under Section 11(2) of the Act. 2.1.3. A sum of Rs.22,688/- under section 11 read with Section 11(6) of the Act being the amount of capital expenditure incurred to be allowed as application of income. It is submitted that the disallowances referred to above are unjustified and bad in law as the denial of exemption under Section 11 of the Act itself is ill- founded and unwarranted. In view of the above, the Appellant prays that the learned Assessing Officer be directed to grant deductions for the above items as claimed in the Return of Income and reduce the total income accordingly. 3.1. Without prejudice to the above, it is submitted that on the facts and in the circumstances of the case and in law, the learned CTT(Appeals) erred in confirming the adjustments resorted to by the learned Assessing Officer while processing the Return of Income under Section 143(1) of the Act. 3.2. It is submitted that the basic issue leading to denial of exemption under Section 11 of the Act viz. delay in filing the Audit Report in Form 10-BB, itself is a highly debatable question of law and the same cannot be the ground for adjustment/additions/disallowances under Section 143(1)(a)/143(1) of the Act. It is submitted that the learned Assessing Officer has resorted to the adjustments without complying with the provisions of Section 143(1) of the Act The Appellant prays that the adjustments made while processing the Return of Income under Section 143(1) of the Act are illegal, unwarranted and contrary to the law and may therefore be kindly struck down/deleted. The Appellant hereby craves the leave to add to, alter or amplify the aforesaid grounds of appeal, which are independent of each other, as and when the need arises at the time of hearing.”
None appeared on behalf of the assessee nor was any adjournment application filed. Considering the matter involved under consideration, it was decided to proceed and decide the matter basis the material available on record.
Briefly the facts of the case are that the assessee is a Public Trust registered under the Maharashtra Public Trust Act, 1950 and also u/s. 12AB of the Income Tax Act, 1961 („the Act‟). It filed its return of income declaring total income of Rs. 1,23,686/-, after claiming exemption u/s. 11 and 12 of the Act. The Central Processing Centre, Bengaluru („CPC, Bengaluru) processed the return of income and in terms of intimation issued u/s. 143(1) of the Act, made certain adjustments, disallowing Rs. 6,73,510/- u/s. 11(1)(a) of the Act, Rs. 9,00,000/- u/s. 11(2) of the Act and Rs. 22,688/- being capital expenditure claimed u/s. 11 of the Act, thereby determining the assessed income at Rs. 17,19,884/- and consequent tax liability of Rs. 3,45,310/- for the reason that the auditor report in Form-10BB was not furnished within the prescribed due date as so specified.
The assessee thereafter carried the matter in appeal before the Ld.CIT(A), who has sustained the disallowance so made by the CPC and the appeal of the assessee has been dismissed. Against the said order, the assessee is in appeal before us.
As part of its grounds of appeal, the assessee has submitted that though there is a delay in filing the audit report in Form-10BB, however, such audit report was filed well before filing of the return of income. It has been further submitted that the delay in filing the audit report is only a procedural lapse and the same cannot lead to denial of exemption particularly when the said audit report was available on record when the return of income was processed by CPC u/s. 143(1) of the Act.
The Ld.DR has been heard, who has submitted that as per Rule 12(2) of the Income Tax Rules, 1962 („the Rules‟), the audit report in Form-10BB is mandatorily required to be furnished one month prior to the due date for filing the return of income. It was submitted that for the impugned assessment year i.e., AY. 2024-25, the extended due date for e-filing of Form-10BB was 7th October, 2024. However, the assessee has filed Form- 10BB on 4th November, 2024, which is delayed by 29 days. Further reference was drawn to the findings of the Addl/JCIT(A), wherein he has held that in absence of condonation of delay by the competent authority and in absence of any evidence of such delay being condoned, the filing of Form-10BB renders the claim of exemption under section as invalid under law. It was accordingly submitted that there is no infirmity in the order of the Addl/JCIT(A) and the same be upheld.
We have heard the Ld.DR and perused the material available on record. Admittedly, for the impugned assessment year i.e, AY. 2024-25, due date for filing of the return of income u/s 139(1) was 31st October, 2024, which was extended to 15th November, 2024 and before the extended due date, the assessee has e-filed its return of income on 13th November, 2024. Further, it is also an admitted fact that the assessee has e-filed the audit report in Form-10BB on 04-11-2024 well before the filing of the return of income i.e., on 13-11-2024. The return of income was processed by the CPC, Bengaluru and order u/s. 143(1) of the Act was issued on 28-01-2025 and, therefore, at the time of processing of return of income, Form-10BB was very much available on record.
It is also evident from the record that given the extended due date for e-filing of return of income u/s 139(1) of 15-11-2024, the extended due date for filing the audit report in Form-10BB was 15-10-2024 and given that the assessee has filed the audit report on 04-11-2024, there is slight delay by 19 days in filing such audit report.
We find that though time lines have been specified for furnishing such audit reports, at the same time, as can be seen in the instant case, the time lines have been extended by the CBDT given the circumstances prevailing at the relevant point in time. Further, the matter relating to condonation of delay in filing such audit reports has been dealt by the CBDT from time to time and necessary instructions have been issued to the competent authority for condoning such delay. In this regard, reference can be drawn to the CBDT Circular No. 16/2024, dt. 18-11-2024, wherein it has been provided that the CBDT in exercise of its powers conferred u/s. 119(2)(b) of the Act authorizes, the Pr. Commissioners of Income Tax (Pr.CsIT) / Commissioners of Income Tax (CsIT) to admit and deal with applications for condonation of delay in filing Form No. 9A/10/10B/10BB for AY. 2018-19 and subsequent assessment years where there is a delay of upto 365 days. It has been further provided that the Pr. Chief Commissioners of Income Tax (Pr.CCsIT)/ Chief Commissioner of Income Tax (CCsIT)/ Director Generals of Income Tax (DGsIT) to admit and deal with applications for condonation of delay in filing Form No. 9A/10/10B/10BB for AY.2018-19 and subsequent assessment years where there is a delay of more than 365 days. It has been provided that the Pr.CCsIT/ CCsIT/ Pr. CsIT/CsIT while entertaining such applications for condonation of delay in filing Form No. 9A/10/10B/10BB, shall satisfy themselves that the applicant was prevented by reasonable cause from filing such Forms before the expiry of the time allowed and the case is of genuine hardship on merits.
We therefore, find that these timelines needs to be complied with but at the same time, where there is delay in complying with the timelines, one needs to see whether there is reasonable cause for such delay and where there is substantial compliance in terms of conduct of the audit, issuance of audit report and the contents of the audit report are not in dispute, the delay in furnishing or uploading the audit report should be condoned and same cannot be basis for denial of claim of exemption. In other words, the rigours of the timelines have to be seen as directory in nature and not mandatory in nature given the fact that CBDT has itself extended the due dates from time to time and further, powers have been delegated to the Competent authority to condone such delays.
In the instant case, the assessee may not have approached the competent authority for seeking the condonation of delay u/s 119, however, where the assessee has approached the Ld.CIT(A) by way of filing an appeal against non-consideration of the audit report in Form 10BB by CPC, the ld CIT(A) in exercise of his appellate powers u/s 251 was well within his rights to condone the delay and consider the audit report so filed by the assessee. The Courts and Co-ordinate Benches have also consistently held that filing of such forms is only a procedural requirement and failure to file the audit report along with the return of income cannot be treated as a mandatory requirement for the purposes of claim of exemption u/s 11 and 12 and even if such form has been filed at a later stage, the assessee will still be entitled to claim of exemption and the delay has been condoned. In this regard, we refer to the decision of the Co-ordinate Ahmedabad Bench in the case of Health Foundation and Research Centre vs. ACIT [2025] 175 taxmann.com 447 (Ahmedabad – Trib.), wherein it was held as under: “13. On the substantive issue of belated filing of Form No. 10B, we note that the Hon'ble Gujarat High Court in Association of Indian Panelboard Manufacturers (supra) has categorically held that where Form 10B was belatedly filed but audit was completed in time, the denial of exemption solely on that ground is not justified. The Hon'ble Court emphasized that the requirement of filing the audit report along with return is directory and not mandatory, and that the claim of exemption under section 11 should not be denied when there is substantial compliance with the law. Similarly, in Anjana Foundation case (supra) the Hon'ble Court reiterated that the purpose of requiring Form 10B is to ensure that the conditions of sections 11 and 12 are fulfilled, and if the audit is completed in time, mere technical delay in uploading the form should not defeat the substantive right of the assessee to exemption. The CBDT Circular No. 2/2020 dated 03.01.2020 also supports this view it clarifies that the Commissioners of Income-tax are authorised to condone delay in filing Form No. 10B under section 119(2)(b), subject to satisfaction of reasonable cause. While the assessee may not have approached the CIT for condonation under that route, the principle underlying the circular is equally relevant that the delay in uploading the form, if not attributable to malafide intent and the audit is completed in time, ought not to disentitle a trust from exemption. The co-ordinate benches have consistently followed this legal position that exemption under section 11 cannot be denied merely due to delay in filing Form 10B when the audit was admittedly completed prior to the finalisation of assessment.
In the present case, the audit was completed on 29.07.2019 and the audit report was signed on 27.07.2019 well before the conclusion of the assessment proceedings. The explanation for delay in e-filing the report is procedural and technical. In absence of any adverse finding by the AO on the merits of the exemption, and in light of the legal and factual matrix, we find no justification in denying exemption under section 11 solely on account of such delay.
We are, therefore, of the considered view that both the delay in filing Form 10B and the delay of 63 days in filing appeal before the CIT(A) deserve to be condoned in the interest of substantial justice. The CIT(A) ought to have admitted the appeal and adjudicated the grounds on merits.
In view of the foregoing discussion, we set aside the impugned order of the CIT(A) dated 28.09.2023 and condone the delay of 63 days in filing the appeal before the CIT(A). Further, applying the ratio laid down by the Hon'ble Gujarat High Court and co-ordinate benches of the Tribunal, and keeping in view CBDT Circular No. 2/2020, we also condone the delay in filing Form No. 10B and direct the Assessing Officer to grant the benefit of exemption under sections 11 and 12 in accordance with law.
Accordingly, the matter is restored to the file of the Assessing Officer with a direction to recompute the income of the assessee after granting exemption under section II and treating the corpus donations as capital receipts, and allowing the 15% statutory deduction under section 11(1)(a) as claimed in accordance with the law.”
In light of aforesaid discussion and in the entirety of facts and circumstances of the case, considering the fact that there is mere delay of 19 days in uploading of the audit report which has been uploaded well before the filing of the return of income and available on record at the time of processing of return of income and in absence of any adverse material on record or any malafide alleged by the Revenue, we hereby condone the delay in filing of the audit report in Form 10BB and direct the AO to consider the audit report and decide the claim of exemption u/s 11 and 12 in accordance with law after providing reasonable opportunity to the assessee.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 25-11-2025