DCIT(EXEMPTIONS), CIRCLE 1(1), HYDERABAD vs. NATIONAL INSTITUTE OF RURAL DEVELOPMENT AND PANCHAYATI RAJ, HYDERABAD

PER MANJUNATHA G., A.M :

These appeals are filed by the Revenue against the separate orders of learned Commissioner of Income Tax (Appeals), National
Faceless
Appeal
Centre
[in short
“NFAC”],
Delhi, dated
20.05.2025, pertaining to A.Ys.
2015-16
and 2016-17, respectively. The assessee has also filed Cross Objection Nos. 27
and 28/Hyd/2025 against Revenue’s appeals ITA Nos. 1210 and 1211/Hyd/2025. Since common issues are involved in both the appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.
2. First we take up Revenue appeals. The Revenue has, more or less, raised common grounds of appeal for both the assessment years. Therefore, for the sake of brevity, grounds of appeal filed for the A.Y. 2015-16 in ITA No.1210/Hyd/22025 are re-produced as under:

3
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

“1. The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law.
2. The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law in deleting the addition of Rs.23,46,79,812/-
3. The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law in holding that the notice issued by the non juri ictional Assessing Officer is not valid when the assessee has not questioned the juri iction of the Assessing Officer as per the provisions of section 124(3) of the Income-tax Act, 1961. 4.1 The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law in holding that that exemption under sec.11 of the Income-tax Act, 1961 can be claimed in the return of income filed under sec.148 of the Income-tax Act, 1961. 4.2 The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law in holding that for claiming exemption under sec.11 of the Income-tax Act, 1961, filing of return of income under sec.139(4A) rws 12A(1)(b) of the Income-tax Act, 1961 was not a pre requisite for the assessment year 2015-16. 4.3 The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law in holding for the assessment year 2015-16, filing of return of income under sec.139(4A) is not required for claiming exemption under sec.11 of the Income-tax Act, 1961, when the amendment has been brought w.e.f. 01.04.2017 indicating that the filing of return of income under sec.139(4A) is required. Further, the learned
CIT(Appeals) failed to appreciate that the Finance Act, 2017 has clearly mentioned that the amendments are clarificatory in nature only.
5. The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law in not appreciating that fact that assessee cannot use proceedings under section 148 of the Income-tax Act, 1961 as a means to claim exemption in order to evade payment of taxes.
6.1 The learned CIT(Appeals) erred on the facts and in the circumstances of the case and in law in holding that exemption under sec.11 of the Income-tax Act, 1961 is allowable even when the Form 10B is filed belatedly.
6.2 The learned CIT(Appeals) erred circumstances of the case and in law in allowing the exemption under on the facts and in the sec.11 of the Income-tax Act, 1961 when there was delay in filing audit report in Form
10B, when the CBDT when the CBDT empowered the ITO concerned to condone the delay in filing
Form
10B as per
Instruction
No.F.No.267/482/77-IT(part) dated 09.02.1978. 7. Any other ground that may be urged at the time of hearing.”

4
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

The assessee has not filed its return of income for the year under consideration. To verify the facts of the case, a show-cause notice under Section 148A(b) of the Act was issued on 22.03.2022 by the ITO, Ward–8(1), Hyderabad. The assessee has not filed any reply to the show-cause notice under Section 148A(b) of the Act.

6
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

Therefore, the A.O. passed the order under Section 148A(d) of the Income-tax Act on 20.04.2022. Along with the said order, notice under Section 148 of the Act, dated 21.04.2022 was issued. In response to the notice u/s 148 of the Act, the assessee has filed its return of income on 18.05.2022 declaring nil total income after claiming exemption under Section 11 of the Income-tax Act, 1961. 4. The case was selected for scrutiny and during the course of assessment proceedings, the A.O. noticed that, the assessee has claimed exemption under Section 11 of the Income-tax Act, 1961, however, the claim of the assessee was not allowable, because, the assessee has not filed the return of income along with the audit report in Form No. 10B within the time specified under Section 139(1) of the Act as required under the provisions of Section 12A(1)(b) of the Act. Since the assessee has not furnished the return of income on or before the due date along with the audit report in Form No. 10B, exemption claimed under Section 11 of the Act has been rejected and the excess of income over expenditure to the tune of Rs. 23,46,79,812/- has been assessed as income of the assessee.

7
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

8
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj under Section 11 of the Act only on the ground that, the assessee has not furnished its return of income on or before the due date provided under Section 139(1) of the Act, and also for not filing the audit report in Form No. 10B on or before the specified date, even though as per the provisions of Section 12A(1)(b) of the Act, there is no condition for filing the return of income along with the audit report in Form No. 10B on or before the due date provided for filing the return of income under Section 139(1) of the Act, for claiming exemption under Section 11 of the Act. The assessee has also referred to the amendment to Section 12A of the Act, by the Finance Act, 2017 and the Finance Act, 2020, making it mandatory for filing return of income on or before the due date provided under Section 139(1) of the Act, for claiming exemption under Section 11 of the Act, and submitted that, the said amendment is clarificatory in nature and cannot be retrospectively applied for the assessment year under consideration.
6. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of certain judicial precedents, including the decision of the ITAT Jaipur Bench in the case of Mukesh Kumar Agarwal vs. ITO, reported in 143 taxmann.com

9
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

139 (2022), quashed the assessment order passed by the A.O. by holding that, initiation of reopening proceedings under Section 147 of the Act and the notice issued under Section 148 of the Act by the non-juri ictional officer, i.e., ITO, Ward–8(1), Hyderabad, is bad in law and liable to be quashed.
“5.3 I am totally in agreement with the contentions of the appellant that the non-juri ictional Assessing officer has no powers to initiate proceedings u/s 147 of the Act and issue notice u/s 148 of the Act. In the present case show-cause notice u/s 148A(b) of the Act dt. 22.03.2022, consequent order 148A(d) of the Act dt. 20.04.2022 and notice u/s 148 of the Act dated 21.04.2022 were issued by the ITO, Ward-8(1), Hyderabad who is not the juri ictional Assessing officer of the case. Rather, ACIT
(Exemption), Circle-1(1), Hyderabad is the juri ictional Assessing officer of the case. While dealing with the objection of the appellant on the issue raised by the appellant, the I passing the impugned assessment order has commented on the juri iction of the JAO and the FAO of NFAC and not the exact issue of juri iction raised by the appellant. I also find that in the case of Mukesh Kumar Agarwal Vs. ITO [2022] 143 taxmann.com
139 (Jaipur – Trib.), Hon’ble ITAT, Jaipur has held that Notice issued u/s 148 and reassessment proceedings consequent to such notice by a non- juri ictional Assessing officer was void ab initio. Operational portion of the ITAT order is at para no. 2.7 which is as under –
The Bench feels that there are lapses on the part of the Assessing
Authority to decide the juri iction of the case. When the case of the assessee falls under the juri iction of the ITO, Ward 1(2),
Jaipur then as to how the other Assessing Officer, (ITO, Ward 5(2),
Jaipur having no juri iction can issue the notice u/s 148 of the Act. An order passed by an officer without recording reasons has no relevance which is void ab initio and deserves to be annulled.
The defect in the order is not curable and it cannot be rectified even by sending the matter back to the concerned officer. Further since the notice u/s 148 is issued solely on the basis of information received from DDI, Wing, Jaipur without making any further enquiry and without referring the matter to the Juri ictional Officer and non juri ictional officer has issued notice u/s 148 of the Act, therefore, reopening of the assessment is not valid. Hence, the reassessment proceedings consequent to notice issued by non-juri ictional Assessing Officer is ab initio

10
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj void. Taking into consideration the above facts and circumstances, the order passed by the ld. CIT(A) is quashed.
In the case of Nishi Kapoor v. ITO [IT Appeal No. 1556 (Delhi) of 2019, dated 2-9- 2019] wherein similar issue was raised and Hon’ble ITAT,
Delhi has dealt in the issue as under –
“4. He has submitted that these reasons are recorded by ITO, Ward 2(3),
Noida and thereafter, he has written a letter dated 07.09.2017 PB 10 to the Assessing Officer (ITO, Ward 2(1), Faridabad) stating therein that the notice u/s 148 of the Act was issued on 30.03.2017. As per acknowledgement of return for assessment year submitted by the assessee on 07.09.2017, assessee comes under the juri iction of ITO,
Ward 2(1), Faridabad. The ITO, Ward 2(3), Noida therefore, transferred this case to ITO, Ward 2(1), Faridabad. Ld. Counsel for assessee submitted that the ITO, Ward 2(3), Noida who has recorded reasons for reopening of the assessment was not having juri iction over the case of assessee and that the ITO, Ward 2(1), Faridabad who has further issued notice u/s 148 and 142(1) of the Act and completed the reassessment order who was having juri iction over the case of the assessee did not record reasons for the reopening of the assessment. Therefore, initiations of reassessment proceedings are illegal, bad in law and liable to be quashed. In support of which contention he has relied upon order of ITAT
Agra Bench in the case of S.N. Bhargawa v. ITO 147 ITD 306 in which it was held us under:
“IT: Where Assessing Officer, Agra initiated reassessment proceedings against assessee anal subsequently he transferred case to Assessing Officer, Mathura, who was having juri iction over assessee, and thereupon Assessing Officer, Mathura, without recording fresh reasons and on the basis of reasons recorded by Assessing Officer, Agra issued on assessee a fresh notice u/s 148. Assessing Officer, Mathura had not validity assumed juri iction to initiate reassessment proceedings against assessee.”

12
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

“6.2 The issues involved are whether the exemption u/s 11 of the Act is allowable if there is failure on the part of the appellant to file the return of income u/s 139(4A) and also audit report in Form 10B was not filed within the time stipulated in section 139(4)/139(1) of the Act.

A. Whether the computation of income of the assessee-society should be in accordance with section 11 or not and whether the filing of audit report along with the return filed in response to notice under section 148 will entitle the assessee for benefit of computation of section 11?

The AO has denied to compute the income in accordance with the provisions of section 11 on the reasoning that assessee had not filed the return under section 139(4A) read with section 12A(b).

• The assessee is a society, who has been granted registration under section 12A by Commissioner looking to its objects of charitable purpose, i.e., it is engaged in imparting education and running various educational institutions. Thus, the registration under section 12A is fait accompli and, consequently, the computation of income has to be in accordance with sections 11 to 13. The assessee-society had not filed its return of income and it was only in response to notice issued by the Assessing Officer under section 148 that the assessee has filed its return of income along with the audited Balance Sheet and Profit & Loss Account.

Section 139 falls under Chapter XIV – ‘Procedure for assessment’ which provides procedures and conditions for filing of return of income. Section 139(1) mandates every person having income exceeding the maximum amount not chargeable to tax to file return of income. Similarly, section 139(1)(4A) mandates that every person in receipt of income derived from property held under trust, i.e., charitable trust, etc., to file its return of income in case its total income exceeds the maximum amount not chargeable to tax without giving effect to the provisions of sections 11 &
12 of the Act. In case of failure to file such return of income under this section 139, penalty has been prescribed. In case of failure to file return by any person under section 139(1) penalty has been prescribed under section 271F. Similarly, in case of failure to file return by charitable society under section 139(4A) penalty has been prescribed under section 272A(2)(e). On a plain reading of the relevant provisions, failure to file the return under section 139(4A) cannot be interpreted to mean that income cannot to be computed in the case of a charitable trust under section 11. During the relevant assessment years, there is no such provision in the Act that in case return is not filed by charitable society

13
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj under section 139(4A), then its income cannot be computed in accordance with the provision of the Act. [Para 20]

• Further, on going through the provisions of section 148, once the return has been filed in response to the notice issued under section 148, the provisions of this Act shall apply as if such return were a return required to be furnished under section 139. Thus, return filed under section 148 is treated as return filed under section 139, which will include sub-section (4A) of section 139. Once such return is treated as return filed under section 139, then all the provisions of Act shall apply which will include section 11 of the Act. The phrase “so far as may be” in section 148 has to be interpreted in the manner that wherever conditions of applicability of any procedure prescribed in any section of the Act is required, then same has to be applied. If a return has been filed under section 148, then the relevant provisions of section 139
have to be applied and also the procedure of assessment and computation of income; and it cannot be interpreted in a restrictive manner to exclude any procedure. [Para 21]

• Thus, whether it is a case of a regular assessment or it is a case of an assessment consequent to issue of notice under section 148, not only the procedure of return as given in section 139 has to be applied, but also such income has to be computed on the basis of such return in accordance with the provision of the Act, which of course will be subject to any specific provision in the Act which itself bars a claim or an exemption. Thus, section 148 provides that all the provision of the Act has to apply on such return furnished in response to notice under section 148. The department has referred to the words “so far as may be” to canvass the proposition that all the provisions will not apply. This contention of the department is not correct. The meaning of these words “so far as may be” will not mean to exclude provision of section 11. It is only such provision which are inconsistent with the provision of section 148 as compared to section 139 regarding procedure for assessment will not be applicable so far as may be.

In reassessment proceedings even the income which has escaped assessment has to be computed in accordance with the provisions of the Act which will include section 11 as is in the present case.
It will not be correct to say that while computing income under section 148 the entire gross receipts are to be taxed. Further, it is not the case of the assessee that it is reagitating or seeking review of the issue or the deduction for which determination has already taken place. The case of the assessee is that while computing income which has escaped assessment, the computation has to be done in accordance with the provision of the Act which include section 11. It is a case of a determination of correct escaped income as per the provision of the Act.
[Para 22]

14
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

B. Whether there is any such bar or limitation in the Act for claiming exemption under section 11 in the case of an assessment proceeding consequent to issue of notice under section 148. As per clause (b) of section 12A where the total income of the trust/institution without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income tax, a return has to be furnished along with the audit report obtained from an accountant as prescribed under the Act. However no time limit has been prescribed in this clause (b) of section 12A for furnishing of such return and the audit report in the Act. The Assessing Officer is trying to read a condition in clause (b) itself to hold that such return has to be filed before the due date of filing of return in this clause for claiming benefit of sections 11 & 12. On going through clause (b) of section 12A, the Assessing Officer is not correct in reading such condition. All that clause (b) mandates is that provision of sections 11 & 12 shall not apply unless the accounts are audited and a return is filed along with the audited accounts. Thus, as and when computation is to be done these conditions need to be complied with. The issue whether return has been filed in time or not is not relevant for clause (b) of section 12A. [Para 23]

• The amendment made by the Finance Act, 2017 inserted clause (ba) imposing a further condition that such return of income is to be furnished in terms of section 139(4A), within the time allowed under that section.
Firstly, this requirement was not there before this amendment; and secondly, this insertion of additional clause clearly shows that such condition was not there in existing clause (b) of section 12A. Had such condition being there in clause (b) itself, then there was no need to insert a further clause (ba) by the Legislature for denying benefit of sections 11 & 12 in case return is not filed in time as per provision of section 139(4A). It is relevant to note that clause (b) has not been amended, but a new clause (ba) has been inserted by the Finance Act, 2017 to put a further condition with effect from 1-4-2018, which was not there for the assessment years under consideration. It is also important to note that this condition of furnishing the return within the time allowed under section 139(4A) has been made applicable from assessment year 2018-19 as has been specifically stated in the Finance Act, 2017 and not for the assessment year under consideration. One does not agree with the contention of the department that this amendment is clarificatory in nature. As rightly pointed out by the assessee that this amendment has been made by the Finance Act,
2017 effective from assessment year 2018-19, meaning thereby that this clause has not been made applicable even for the assessment year 2017-
18, the return of which were still to be filed. Thus, the Legislature has thought fit to make this amendment applicable from next assessment

15
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj years onwards and not even to the current assessment year 2017-18. [Para 25]

. The Assessing Officer was not justified in denying the benefit of the exemption under section 11 and the Assessing Officer is directed to compute the same in accordance with the provisions of section 11. [Para
27]
(Supra) is that –

i. There is no provision in the Act stating that in case return is not filed by charitable society u/s 139(4A), then its income cannot be computed in accordance with the provision of the Act.

ii. Once the return has been filed in response to the notice issued u/s 148, the provisions of Act shall apply as if such return were a return required to be furnished u/s 139. iii. No time limit has been prescribed in clause (b) of section 12A for furnishing of such return and the audit report in the Act.

Thus, in view of the judgement in the case of United Educational
Society Vs. JCIT (Supra), exemption u/s 11 of the Act cannot be denied for failure of the appellant to file return of income u/s 139(4A).

16
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

Thus, in view of the aforesaid judgements, exemption u/s 11 of the Act cannot be denied for failure of the appellant to file audit report in Form 10B within the time limit stipulated in section 139(4)/139(1) of the Act.

18
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj under Section 148, the assessee cannot make any fresh claim or deductions/exemptions. The Ld. CIT(A) without appreciating the relevant facts, simply deleted the additions made by the A.O.
Therefore, he submitted that, the order of the Ld. CIT(A) should be set aside and the additions made by the A.O. should be upheld.
11. The learned counsel for the assessee, Shri G. Srinivasa Rao,
C.A. on the other hand, referring to the order of the Ld. CIT(A) in respect of the juri iction issue submitted that, the Ld. CIT(A) has rightly quashed the assessment order passed by the A.O. under Section 147 r.w.s. 144B of the Act, by virtue of invalid notice issued by the non–Juri ictional Assessing Officer, because the A.O. who has issued the notice does not have any juri iction over the assessee and therefore, the assessment order passed by the A.O. in consequence to the invalid notice vitiates the entire proceedings and therefore, the Ld. CIT(A) has rightly quashed the assessment order. Therefore, the order of the Ld. CIT(A) should be upheld.
12. The learned counsel for the assessee, Shri G. Srinivasa Rao,
C.A. supporting the order of the Ld. CIT(A) submitted that, the 19
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj assessee is a charitable institution registered under Section 12A of the Act, and also satisfied all the conditions for claiming exemption under Section 11 of the Act, except filing return of income along with Audit Report in Form 10B on or before the due date provided under Section 139(1) of the Act. Further, as per the provisions of Section 12A(1)(b) of the Act, filing of return of income along with Audit Report on or before the due date provided under Section 139(1) of the Act is not mandatory and further, only after insertion of sub-clause (ba) to the 3rd proviso by the Finance Act,
2017 w.e.f. 01.04.2018 (A.Y. 2018-19) filing of return of income is mandatory for claiming exemption under Section 11 of the Act.
The Ld. CIT(A) after considering relevant facts and also by relying on certain judicial precedents has rightly deleted the additions made by the A.O. Therefore, he submitted that, the order of the Ld. CIT(A) should be upheld.
13. We have heard both parties, perused the material available on record and had gone through the arguments of the authorities below. The assessee is a society registered under Section 12A of the Income-tax Act, 1961 has claimed exemption under Section 11
of the Act, in the return of income filed in response to the notice

20
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj issued under Section 148 of the Act. Admittedly, the assessee has not filed original return of income under Section 139(1) of the Act, and further for the first time, it has furnished return of income in response to notice under Section 148 of the Act on 18.05.2022. The A.O. denied exemption under Section 11 of the Act on the ground that, the assessee has not furnished return of income along with the Audit Report in Form No. 10B on or before the due date provided under Section 139(1) of the Act, which is a pre- condition for claiming exemption under Section 11 of the Act as per the provisions of Section 12A(1)(b) of the Act, 1961. The A.O.
further noted that, the assessee has also furnished Audit Report in Form 10B beyond the due date provided under Section 139(1) of the Act and in the absence of relevant Audit Report in Form
10B, exemption under Section 11 of the Act cannot be allowed.
14. We have given our thoughtful consideration of the relevant reasons given by the A.O. to deny the benefit of exemption under Section 11 of the Act, in light of various arguments of the counsel for the assessee and we do not ourselves subscribe to the reasons given by the A.O. for the simple reason that, once the return has been filed in response to notice under Section 148, the provisions

21
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj of the Act shall apply as if such a return were a return required to be furnished under Section 139 of the Act. Thus, return filed under Section 148 is treated as return filed under Section 139 of the Act which will include sub-section (4) of Section 139. Further, such return is treated as filed under Section 139 and consequently, if the assessee satisfied other conditions precedent for claiming exemption under Section 11 of the Act, then there is no bar for claiming exemption under Section 11 of the Act.
15. Insofar as the arguments of the learned Senior A.R. for the Revenue, that as per the provisions of Section 12A(1)(b) of the Act, filing return of income is mandatory for claiming exemption under Section 11 of the Act, in our considered view, until insertion of sub-clause (ba) by the Finance Act, 2017 w.e.f. 01.04.2018 that is applicable for A.Y. 2018-19, there is no such condition of filing return of income for claiming exemption under Section 11 of the Act. Further, only after insertion of sub-clause (ba), filing of return of income under Section 139(1) of the Act is mandatory for claiming exemption under Section 11 of the Act. Therefore, in our considered view, the reasons given by the A.O. to deny the benefit of exemption under Section 11 of the Act only on the ground that 22
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj the assessee has not furnished return of income under Section 139(1) of the Act is contrary to the scheme of taxation of trusts/societies claiming exemption under Section 11 of the Act.
Further, insofar as the arguments of Ld. Sr. A.R. in light of the decision of the Hon'ble Supreme Court in the case of Sun
Engineering Works (P) Ltd. v. CIT [1992] 198 ITR 297 (SC) that the provisions of Section 148 is beneficial to the Revenue and the assessee cannot make a fresh claim of any exemption or deduction in the return of income filed under Section 139(1) of the Act, in our considered view, it is not a case of making a fresh claim of any deduction or exemption, but it is a case of making a claim in the return of income filed in response to notice issued under Section 148 of the Act for the first time and therefore, in our considered view, the decision relied upon by the Revenue on the decision of the Hon’ble Supreme Court in the case of Sun Engineering Works
(P) Ltd. v. CIT (supra) is not applicable.
16. Having said so, let us come back to other arguments of the learned counsel for the assessee in light of filing of audit report in Form 10B, beyond the due date provided under Section 139 of the Act. There is no dispute with regard to the fact that, in order to 23
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj claim exemption under Section 11 of the Act, the assessee needs to file return of income along with the audit report. However, there is no condition as to filing of the said audit report and return of income on or before the due date provided under Section 139, before insertion of sub-clause (ba) in Section 12A(1)(b), and therefore, in our considered view, on this ground also, the rejection of exemption under Section 11 of the Act is not in accordance with law as held by the Coordinate Bench of ITAT,
Delhi Bench in the case of B.R. Hospital Research Institute Vs.
ITO [2024] 167 taxmann.com 389, wherein it has been clearly held that filing Form 10B for availing benefit under Section 11 of the Act is directory in nature and not mandatory and if the assessee has not filed audit report in Form 10B along with the return of income, however, filed the same later on before the Ld.
CIT(A) and claim of assessee for exemption under Section 11 of the Act should be allowed. In the present case, there is no dispute with regard to the fact that the assessee has furnished return of income in response to notice under Section 148 of the Act, within the time allowed thereon and also filed the audit report in Form
10B along with return. Further, the assessee has also satisfied

24
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj other conditions precedent for claiming exemption under Section 11 of the Act. Therefore, in our considered view, the assessee is eligible for claiming exemption under Section 11 of the Act. The Ld. CIT(A) after considering the relevant facts and also by following various judicial precedents has rightly allowed exemption under Section 11 of the Act to the assessee. Thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the grounds taken by the Revenue.
17. Insofar as ground nos. 2 and 3 of the Revenue on the issue of the assessment order being quashed by the Ld. CIT(A) being invalid, in our considered view, although there is merit in the arguments of the learned Senior A.R. for the Revenue on this issue, but we are not going to adjudicate this ground raised by the Revenue because the Revenue has not succeeded on other grounds relating to the merits of the issue. Further, we have allowed relief to the assessee on merits in respect of exemption claimed under Section 11 of the Act. Therefore, in our considered view, the other grounds taken by the Revenue become infructuous and thus, ground numbers 2 and 3 of the Revenue are dismissed as infructuous.

25
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

27
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

“1. That on the facts and circumstances of the case and in law, the notice issued u/s 148 of the Act dt. 21-04-2022 for the AY 2015-16 is barred by limitation, since the last date to issue the said notice is 31-03-2022 only as per the first proviso to section 149(1)(b) of the Act and hence the impugned assessment order dt.01-03-2024 is also bad-in-law and is liable to be quashed.
2. That on the facts and circumstances of the case and in law, the notice issued u/s 148 of the Act dt. 21-04-2022 for the AY 2015-16 is bad-in- law as the same was issued without taking separate prior approval of the PCCIT, AP & Telangana for passing the order u/s. 148A(d) of the Act.”

28
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

ITA No.1211/Hyd/2025 and C.O.No.28/Hyd/2025
24. The facts and issues involved in this appeal filed by the Revenue and C.O. filed by the assessee are identical to the facts and issues which we had considered in ITA No.1210/Hyd/2025
and CO No.27/Hyd/2025 for A.Y. 2015-16. But for the figures, the issues considered by the Ld. CIT(A) are identical to the facts and issues considered by us for A.Y. 2015-16. The reasons given by us in the preceding paragraph nos. 13 to 18 and 22 shall mutatis mutandis apply to this appeal and C.O. as well. Therefore, for similar reasons, we are inclined to uphold the order of Ld. CIT(A) and dismiss the appeal filed by the Revenue and cross-objection filed by the assessee.
25. In the result, both the appeal filed by the Revenue and cross- objection filed by the assessee are dismissed.

29
ITA Nos.1210 and 1211/Hyd/2025 & C.O. Nos.27 and 28/Hyd/2025
National Institute of Rural Development & Pranchayati Raj

Order pronounced in the Open Court on 19th December, 2025. श्री विजय पाल राि
(VIJAY PAL RAO)
उपाध्यक्ष /VICE PRESIDENT (मंजूनाथ जी)
(MANJUNATHA G.)
लेखा सदस्य/ACCOUNTANT MEMBER

Hyderabad, dated 19.12.2025. TYNM/sps

आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:-

आदेशधिुसधर / BY ORDER

Sr. Private Secretary
ITAT, Hyderabad.