MOSE VALLEY EDUCATION TRUST,MUMBAI vs. INCOME TAX OFFICER EXEMPTION, MUMBAI

The assessee has raised various grounds challenging the denial of exemption u/s 11, non-consideration of audit report in Form No.10B, denial of excess application of income and consequential demand raised by CPC.

Briefly stated, the assessee is a trust registered u/s 12A of the Act. The assessee filed its return of income on 31.10.2017 claiming exemption u/s 11. While processing the return u/s 143(1), CPC denied the exemption

Aggrieved, the assessee preferred appeal before the Ld CIT(A). The Ld. CIT(A) observed that though Form No.10B had been uploaded on 30.10.2017, the audit report was approved by the trustees only on 01.04.2019 and therefore the requirement of furnishing audit report before the due date was not satisfied. The Ld CIT(A) further held that the power to condone delay in filing Form No.10B vested only with the competent authority under section 119(2)(b) and not with the appellate authority and accordingly confirmed the action of CPC.

Before us, the Ld. AR submitted that the auditor had uploaded Form No.10B on 31.10.2017 and the return of income was also filed within the due date. The communication proposing adjustment was issued much later alleging that no audit report had been filed along with the return, despite the fact that both the return and audit report were already available on the portal. It was submitted that the audit report was subsequently accepted by the trustees on 01.04.2019 and even assuming that there was a delay, the same was merely technical in nature. The Ld AR further drew our attention to CBDT Circular No.2/2020 dated 03.01.2020 and submitted that clause 4(i) thereof specifically condones delay in filing Form No.10B for A.Y. 2016-17 and A.Y. 2017-18 where the audit report had been obtained before filing of the return and furnished subsequently but before the due date prescribed u/s 139. The Ld AR also relied upon the judgment of the Hon’ble Bombay High Court in the case of Manav Vikas Bahuuddeshiya Gramin Seva Sanstha [2026] 185 taxmann.com 576 and the decision of the Pune Bench of the Tribunal in ITA Nos.2147 & 2148/Pun/2025. 2

The Ld. DR relied upon the orders of the lower authorities. 7. We have heard the rival submissions and perused the material available on record. The short controversy before us is whether exemption u/s 11 could be denied while processing the return u/s 143(1) merely on account of alleged defect in furnishing Form No.10B.

We find from the record that the assessee had filed its return of income on 31.10.2017. The audit report in Form No.10B was also uploaded on the portal on 30.10.2017. The only objection raised by the Revenue authorities is that the trustees approved the audit report subsequently on 01.04.2019. Thus, the existence of the audit report and its availability on the departmental portal are not in dispute. The denial of exemption has been made purely on a technical ground.

We further find merit in the contention of the assessee based upon CBDT Circular No.2/2020 dated 03.01.2020. The Circular specifically provides that for A.Y. 2016-17 and A.Y. 2017-18, the delay in filing Form No.10B shall stand condoned in cases where the audit report was obtained before filing of the return of income and furnished subsequently before the due date prescribed under section 139. The Circular was issued in exercise of powers under section 119(2)(b) of the Act with a view to remove hardship faced by charitable institutions.

The facts of the present case stand on an even better footing. Here, the assessee's case is that Form No.10B itself was uploaded on 30.10.2017 along with the return filing process and therefore there was no delay in filing the audit report. Even assuming that the subsequent approval by the trustees on 01.04.2019 gave rise to any procedural irregularity, the same is merely technical in nature and cannot result in denial of substantive exemption otherwise available under sections 11 and 12.

We also note that the Hon'ble Bombay High Court in the case of Manav Vikas Bahuuddeshiya Gramin Seva Sanstha (supra) has reiterated that procedural requirements relating to filing of audit reports should not defeat substantive claims of exemption where the conditions regarding charitable activities and audit are otherwise satisfied. Similar view has been taken by the Pune Bench of the Tribunal in ITA Nos.2147 & 2148/Pun/2025 relied upon by the assessee.

Considering the totality of facts, the CBDT Circular No.2/2020, the judgment of the Hon'ble Bombay High Court in the case of Manav Vikas Bahuuddeshiya Gramin Seva Sanstha (supra), the decision of the Pune Bench and the consistent view taken by the co-ordinate benches in similar matters relating to A.Y. 2017-18, we hold that the CPC as well as the Ld CIT(A) were not justified in denying exemption u/s 11 to the assessee.

We accordingly direct the Assessing Officer/CPC to grant exemption u/s 11 and recompute the income in accordance with law after accepting the audit report in Form No.10B. The grounds relating to denial of application of income and consequential demand are allowed.

In the result, the appeal of the assessee is allowed. 1. Order pronounced in the open court on 23/06/2026.