SHRI NAGHER DASHA SHRIMALI YUVAK MANDAL,MUMBAI vs. ITO, EXEM. WARD 2(3), MUMBAI

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ITA 4957/MUM/2026Status: DisposedITAT Mumbai15 July 2026AY 2020-216 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the delay in filing Form 10B was a procedural lapse, not a substantive one, and that the substantive requirement of obtaining the audit report was met. Following various High Court judgments, the Tribunal condoned the delay.

What were the facts?

The assessee, a charitable trust, filed its return of income claiming exemption under Section 11. The audit report in Form 10B was obtained on time but filed electronically 18 days late along with the return. The exemption was denied due to this delay.

What were the issues?

Whether a delay in electronically filing the audit report in Form 10B, when obtained within the prescribed time, can lead to denial of exemption under Section 11 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 11,Section 12AA,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLENARENDER KUMAR CHOUDHRY & HON’BLE

For Respondent: Ms. Jayshree Thakur,Ld. Sr.D.R
Pronounced: 15.07.2026

आदेश / ORDER

PER: NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER : This appeal has been preferred by the ASSESSEE against the order dated 04.02.2026, impugned herein, passed by the National Faceless Appeal Centre(NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2020-21, whereby, the Ld. Commissioner affirmed the denial of exemption under section 11 of the Act, on account of delay in filing the audit report in Form No. 10B.

2.

In the instant case, the Assessee, a charitable trust registered under section 12AA of the Act, filed its return of income on 02.02.2021, declaring aggregate income of ₹9,83,580/-, and claiming exemption under section 11 of the Act. The audit report in Form No. 10B, though duly obtained and signed by the auditor on 15.01.2021, however, was filed electronically on 02.02.2021, along with the return of income, resulting in a delay of only 18 days. The CPC, while processing the return, denied the exemption and determined the total income at ₹10,21,080/-. The rectification application filed by the Assessee was also rejected, and the said action was affirmed by the Ld. Commissioner.

3.

Before the Ld. Commissioner it was submitted by the Assessee the audit report had been obtained within time and was available on the portal, along with the return of income, much before the processing thereof. The Ld. Departmental Representative, on the other hand, relied upon the impugned order.

4.

We have heard the Ld. DR and considered her submissions and perused the material available on record. It is an undisputed fact that the Assessee had obtained the audit report within the prescribed period and filed the same, along with the return of income, before the return was processed. Thus, the substantive requirement of audit stood duly complied with, and the delay of merely 18 days in its electronic filing was only a procedural lapse.

5.

We observe that recently, the Hon’ble Co-ordinate Bench of the Tribunal at Mumbai, in the case of Sadhubella Education Society v. ITO)-2(3), {ITA No. 411/Mum/2026, decided on 18.06.2026}, also dealt with an identical issue concerning the delay in filing Form No. 10B and, while following the judgments of the Hon’ble High Courts, including that of the Hon’ble Jurisdictional High Court, ultimately held that Form No.

10B, though filed belatedly, however, was valid, by observing and holding as under:

“ 17. In the present case, the Assessee has consistently maintained that Form No. 10B was duly furnished and was available on record. The delay, if any, was purely technical and procedural in nature. The audit report had been obtained and furnished, and the substantive conditions prescribed under section 12A(1)(b) stood substantially complied with. 18. It is now well-settled that exemption available to a charitable institution cannot ordinarily be denied merely on account of procedural lapses, when the substantive requirements stand fulfilled. The provisions relating to filing of audit reports are directory in nature and deserve liberal interpretation, particularly when the delay occurred during the period severely affected by the COVID-19 pandemic and when the requisite audit report was ultimately made available before the authorities. 19. Further, various judicial pronouncements have consistently held that procedural requirements should not defeat substantive claims for exemption, where no prejudice is caused to the Revenue and the necessary audit report is available on record. 20. The Hon'ble Gujarat High Court, in the case of Sarvodya Charitable Trust vs. Income Tax Officer (Exemption) (2021) 125 taxmann.com 75 (Gujarat), has settled the issue that filing of audited report in Form No. 10B is directory in nature and the approach of the authorities ought to be equitous /balancing and judicious and availing of exemption should not be denied merely on the bar of limitation. This is more so, when the legislature has conferred vide discretionary powers to condone the delay on the authorities concerned. For brevity and ready reference, the conclusion drawn by the Hon'ble Gujarat High Court, is reproduced herein below: - "That in the cases of delay in filing form 10B the approach of the authorities ought to be equitious, balancing and judicious. Further, availing of exemption should not be denied merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. This Court in CIT Vs. Gujarat Oil and Allied Industries Ltd. (1993) 201 ITR 325 (Guj) has also held that provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice Benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the Assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by assigning sufficient cause"

21.

We further observe that Hon'ble Jurisdictional High Court in the case of Church of Our Lady of Immaculate Conception vs. Commissioner of Income tax (Exemption) and Ors., in (Writ Petition (L) No.14461 of 2025 decided on 02.09.2025) has also dealt with identical case, wherein there was a delay of 29 days in filing of Form-10B. The Hon'ble Jurisdictional High Court by considering the judgment of the Hon'ble Gujarat High Court i.e., Sarvodaya Charitable Trust case (supra), ultimately condoned the delay in 10B of the Act, by observing and holding as under:- "9. Having heard the learned Counsel for the parties, we agree with the contentions of the Petitioner. We find that admittedly there was only a 29 day delay in filing Form No.10B. In the present case, when one considers that Respondent No. 1 never doubted the factual situation put forth by the Petitioner to explain the delay, Respondent No.1 ought to have condoned the delay. We find that if this delay is not condoned, there will be genuine hardship to the Petitioner, inasmuch as, the Petitioner would be denied the exemption otherwise claimed under the provisions of Section 11 of the Act and which is a substantial amount. 10. We are of the view that Respondent No.1 ought to have taken a justice oriented approach rather than a pedantic one, and condoned the delay. We also find that in similar facts, this Court in the case of Mirae Asset Foundation (supra), Sau Dwarkabai tai Karwa Charitable Trust (supra) and Kotak Family Foundation (supra) has taken a similar view and condoned the delay. Even the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust (supra) took the view that in cases like the present one (delay in filing Form No.10B), the approach of the authorities ought to be equitious, balancing and judicious and availing of exemption should not be denied merely on the bar of limitation. This is more so, when the legislature has conferred wide discretionary powers to condone the delay on the authorities concerned. The relevant portion of this decision reads thus:- "31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no. 2 might be justified in denying the exemption under section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condonation for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. 32. We may also refer to the decision of this Court in CIT. v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated us a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by assigning sufficient cause." 11. In view of the foregoing discussion, we hereby quash and set aside the impugned order dated 30th January 2025 passed by Respondent No.1 under Section 119(2)(b) of the Act. 12. Now that the impugned order is quashed, we also hereby condone the delay in filing Form No. 10B by the Petitioner." 22. Thus, considering the entirety of the facts and circumstances of the case, particularly:(a) the unprecedented disruptions caused by the COVID-19 pandemic; (b) the repeated extensions granted by the CBDT for filing statutory forms and returns; (c) the fact that Form No. 10B had been furnished by the Assessee and was made available on record; and (d) the settled principle that substantive benefits should not be denied for mere technical or procedural lapses, we are of the considered view that the delay, if any, in furnishing Form No. 10B deserves to be condoned. 23. Accordingly, the impugned order is set aside and the jurisdictional Assessing Officer (JAO) is directed to consider Form No. 10B furnished by the Assessee as validly filed and thereafter examine and verify the merits of the case and grant the exemption claimed under sections 11 and 12 of the Act, in accordance with law.

6.

Thus, from the aforesaid analyzations it has become clear that obtaining the audit is substantive, whereas furnishing the prescribed report along with the return is procedural and the requirement may be complied with before completion of the assessment. The present case satisfies this requirement because the report was electronically furnished before the assessment was completed.

7.

We further observe that the reliance placed by the Ld. Commissioner on the judgment of the Hon’ble Supreme Court in PCIT v. Wipro Ltd.[2022] 140 taxmann.com 223 (SC)is misplaced, as the said judgment concerned a belated declaration under section 10B(8), whereby, the assessee sought to change its statutory option and claim carry- forward of losses. The present case, however, concerns the delayed filing of an audit report, which had already been obtained within time and was filed along with the return of income.

8.

Thus, considering the peculiar facts and circumstances in totality, the delay of 18 days in filing Form No. 10B is hereby condoned. The impugned order passed by the Ld. Commissioner is set aside, and the Assessing Officer/CPC is directed to accept Form No. 10B filed by the Assessee and allow the exemption under section 11 of the Act, as claimed, after factual verification of the claim lodged for deduction.

9.

In the result, the appeal filed by the Assessee is allowed.

Order pronounced in the open court on 15.07.2026.

Sd/- Sd/- MAKARAND VASANTMAHADEOKAR NARENDER KUMAR CHOUDHRY ACCOUNTANT MEMBER JUDICIAL MEMBER (Soumili Das) Private Secretary Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.

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