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Facts
The assessee, a trust, filed its return for AY 2018-19 declaring NIL income. The audit report in Form 10B was inadvertently not filed by the due date. The return was processed, and exemption u/s.11 was denied for late filing of Form 10B.
Held
The Tribunal held that the filing of the audit report in Form 10B is a procedural and directory requirement, not mandatory. Since the substantive conditions for exemption were met and the audit report was filed before appeal, denial of exemption on this technicality was not justified.
Key Issues
Whether denial of exemption u/s.11 on the sole ground of belated filing of audit report in Form 10B, despite substantial compliance, is justified.
Sections Cited
11, 12A, 10(23C)(iiad), 143(1), 139(1), 12AA
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R.RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
The present appeal filed by the assessee are directed against order passed by the learned Commissioner of Income Tax, Appeal, ADDL/JCIT (A), Jodhpur, dated 23.12.2024 for assessment years 2018-19.
At the outset, we find that there is a delay of 32 day in appeals filed by the assessee. The assessee filed an affidavit explaining the reasons for delay in filing the appeal. After hearing both the parties, we find that there is a reasonable cause for the assessee in not filing appeals on or before the due date prescribed under the law and thus, in the interests of justice, we condone delay in filing of appeals and admit appeals filed by the assessee for adjudication.
The assessee has raised the following common grounds of appeal:-
1. The order of the CIT(A) upholding the denial of exemption u/s.11 of the Act by the AO, CPC is bad in law, opposed to law and facts and is liable to be quashed.
2. The Appellant being possessing valid registration u/s.12AA of the Act, the CIT(A) erred in upholding the action of AO in denying the exemption, without adverting to the facts and circumstances of the case and the grounds and submissions of the appellant 3. The Appellant running two educational institutions, the CIT(A) grossly erred in even failing to adjudicate the appellant's plea for allowing exemption u/s. 10(23C)(iiad) of the Act.
4. The appellant having fulfilled the substantial conditions to claim exemption u/s.11 of the Act, the CIT(A) erred in upholding the denial of the same on technical grounds 5. The exemption claimed by the appellant u/s.11 of the Act having been disallowed for the sole reason that the audit report in Form 10B was filed belatedly, the CIT(A) erred in failing to allow the same as the audit report was available before him. 6 The CIT(A) failed to appreciate that the appellant's petition to condone the delay in filing the audit report was rejected by the CIT(Exemptions) on a mere technical ground that he was not the competent auditory to condone delay beyond 365 days. In such circumstances, the CIT(A) erred in failing to adjudicate the appeal on merits.
7. Even in case the exemption u/ss. 10(23C) (iiiad) and 11 of the Act are not allowed, it is only the net income of the appellant, if any, that can be brought to tax and the CIT(A) erred in failing to adjudicate and allow this ground of the appellant.
8. Any other grounds that may be raised at the time of hearing.
The brief facts of the case are that the assessee is a Trust registered u/s.12A of the Income Tax Act, 1961 (in Short ‘the Act’). The assessee filed its return of income on 31.10.2018 for the assessment year 2018-19 declaring NIL income and got their books of accounts audited along with audit report in Form 10B. However, the form 10B was omitted to be electronically filed inadvertently. The Return of income was processed u/s.143(1) on 31.01.2020 determining the total income of the assessee at Rs.93,21,637/-, whereby exemption u/s.11 was denied for the reason that audit report in Form No.10B was not filed within the due date prescribed under the Act read with rule 12A(1)(b), thereby assessing the entire gross receipts of Rs.93,21,637/- at maximum marginal rate without considering expenditure incurred during the previous year relevant to assessment year 2018-19. The assessee filed the audit report in Form 10B on 11.02.2020.
Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The Ld.CIT(A) vide order u/s.250 dated 23.12.2024 while holding that he had no power to condone the delay in filing Form 10B, went on to hold that the requirement to file Form 10B before the prescribed due date was a mandatory requirement. Further, the ld.CIT(A) has observed that the ld.CIT(E), Chennai has already rejected the assessee’s petition for condonation of delay in filing the audit report in Form 10B on 24.09.2021.
6. Aggrieved by the order of the Ld. CIT(A), the assessee has filed the instant appeal before this Tribunal.
7. The Ld.AR for the assessee stated that the assessee is rightly eligible to claim exemption u/s.11 for the following reasons: 1. Provision regarding furnishing of audit report along with the return of income has been held in plethora of cases to be a procedural provision. It has been held that furnishing of audit report is directory and not mandatory in nature and its substantial compliance would suffice.
2. In the instant case, the date of audit report was 11.02.2020 and therefore the audit report was filed before filing the appeal against the intimation u/s.143(1) of the Act and therefore the condition for claiming exemption u/s.11 was satisfied.
8. The Ld.AR in respect of filing of audit report being directory and not mandatory in nature, our attention was drawn to the decision of the Hon’ble Gujarat High Court in the case of CIT(E) v Shri Laxmanarayan Dev Shrishan Seva Khendra 2024 (10) TMI 99 wherein the Hon’ble High Court after considering the decision of the Apex Court in Wipro Limited (supra) held as follows:
“5. Reliance placed by the learned Senior Standing Counsel Ms.Maithili Mehta for the assessee on the decision of the Hon’ble Supreme Court in case of The Principal Commissioner of Income Tax-III and Others versus M/s. Wipro Limited in Civil Appeal No.1499 of 2022 would not be applicable in the facts of the case, as in the facts of the present case, the assessee has claimed the exemption under Section 11 read with Section 12A (1) (b) of the Act which required the assessee to file Audit Report in Form of 10B of the Act which has nothing to do with claiming 100% exemption of total income in respect of newly established 100% Export Oriented Undertakings under Section 10B of the Act. Section 10B (8) of the Act requires the assessee to file an undertaking before the due date of furnishing of return of income under sub-section (1) of Section 139 of the Act before the Assessing Officer in writing that the provision of Section 10B of the Act may not be made applicable to him, otherwise the provision of this Section shall not apply to him for any of the relevant assessment year.
Considering the language of the provision of Section 10B (8) of the Act, the Hon’ble Supreme Court held that it was mandatory on part of the assessee to file declaration before the due date of filing of return under Sub-section (1) of Section 139 of the Act, whereas, in the facts of the said case the assessee filed such undertaking along with the revised return under Sub-section (5) of Section 139 of the Act and in such facts, the Hon’ble Supreme Court held that the twin conditions prescribed under Section 10B (8) of the Act was mandatory to be fulfilled and it cannot be said that though the declaration is mandatory, the filing of such declaration within the due date of filing of return under Sub-section (1) of Section 139 of the Act would be directory.
Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption) in Special Civil Application No. 6097 of 2020 decided on 09th December, 2020 as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal.
In such circumstances, we are of the opinion that the Tribunal has not committed any error by not following the decision in case of M/s.Wipro Limited (supra) as referred to and relied upon by learned advocate for the assessee-Revenue, and has rightly followed the decision of this Court in case of Social Security Scheme of GICEA (supra).
9. In view of the foregoing reasons, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order of the Tribunal. The Appeal is accordingly dismissed.”
The Ld. AR further drew our attention to the decision rendered by the Hon’ble Gujarat High Court in Sarvodaya Charitable Trust v ITO [2021] 125 taxmann.com 75 (Guj) where it was held that benefit of exemption could not be denied merely on bar of limitation in furnishing audit report in Form No.10B. Further, the Ld. AR had also relied upon the decision of the Jurisdictional High Court in the case of Chandraprabhuji Maharaj Jain v DCIT [2019] 110 taxmann.com 11 (Mad) wherein it was held that when the assessee was entitled to a statutory benefit, it would be incumbent upon the concerned authority to examine the admissibility of the benefit than to foreclose the assessee on technicalities.
The Ld. AR also drew our attention to the decisions of the coordinate bench of this Tribunal in the case of The Shakti Foundation v ITO in and Kaakkum Karangal v ITO in wherein similar issues regarding delay in filing Form 10B were subject matter of consideration and the coordinate bench was of the view that the filing of Form 10B was only directory in nature and not mandatory.
In view of the above, the Ld.AR prayed that the assessee be granted exemption u/s.11 since the filing of Form 10B is only directory and not mandatory in nature and that the substantive conditions for claiming exemption were fulfilled in the instant case.
On the other hand, the Ld.DR of the Revenue objected to the submissions of the Ld.AR and relied on the findings of the Ld.CIT(A).
We have heard the rival contentions and perused all the material available on record before us and the judicial precedents relied on. We observe that the assessee has to comply with certain conditions failing which the assessee will lose the benefit of claiming exemption u/s.11, one of them being filing of Form 10B one month prior to the due date of filing the return of income u/s.139(1). On consideration of the plethora of cases cited before us, the moot principle coming out of all the said decisions is that the filing of audit report in Form 10B is only directory and not mandatory in nature and thus we are of the considered view that denial of exemption u/s.11 merely on pretext of a delay that has occurred in filing of audit report in Form 10B which is only a procedural irregularity cannot become an impediment in law in claiming the exemption.
In addition to the cases cited by the Ld.AR, we note that there are other decisions in which it has been clearly held that filing of Form 10B is only directory and not mandatory in nature, few of which have been stated as under:
Association of Indian Panelboard Manufacturer v DCIT [2023] 157 taxmann.com 550 (Guj) CIT v Xavier Kelavani Mandal (P.) Ltd. [2014] 41 taxmann.com 184 (Guj) M/s.Alternative India for Development v ITO in / Chny / 2024 – Chennai ITAT Puran Chand Arora Charitable Trust v ITO [2025] 172 taxmann.com 161 (Del. Trib)
We also note that the Delhi Bench of the Hon’ble Income Tax Appellate Tribunal in the case of Trilok Singh Bhandari Charitable Trust v ITO [2025] 174 taxmann.com 737 (Del. Trib) relying on the decision of the Hon’ble Madras High Court in the case of Chandraprabhuji Maharaj Jain (supra) held that the requirement of filing audit report in Form 10B before the due date as per Rule 12A(1)(b) is directory in nature and not mandatory.
We further note that the decision of the Ahmedabad Bench of the Hon’ble Income Tax Appellate Tribunal in Association of Indian Panelboard Manufacturer v DCIT [2022] 143 taxmann.com 418 (Ahmedabad Trib.) referred to by the Ld. CIT(A) stands reversed by the decision of the Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer v DCIT [2023] 157 taxmann.com 550 (Guj) and that the decision of the Hon’ble Supreme Court in Wipro Limited (supra) relied upon by the Ld. CIT(A) has clearly been distinguished by the Hon’ble Gujarat High Court in the case of CIT(E) v Shri Laxmanarayan Dev Shrishan Seva Khendra (supra).
In view of the above, we are of the opinion that filing of Form 10B is only a procedural-cum-directory requirement and therefore, once the conditions for claiming exemption u/s.11 has been substantively fulfilled, the bar of limitation on furnishing of such audit report would not result in grave consequence of denial of exemption u/s.11 of the Act and thus we direct the AO to grant exemption as claimed by the assessee u/s.11 of the Act.
In the result the appeal of the assessee is allowed.
Order pronounced in the court on 05th August, 2025 at Chennai.