Loading judgment…
Facts
The assessee, a charitable trust, filed its return of income declaring Nil income for AY 2018-19. The audit report on Form 10B, required by February 15, 2018, was filed late on December 31, 2019. The CPC disallowed the claim for application of income for charitable purposes, which was upheld by the CIT(A).
Held
The Tribunal held that the filing of Form 10B is directory and not mandatory. Since the audit report was filed during the appellate proceedings and the assessee has a valid registration under section 12A, the benefit of sections 11 and 12 should be allowed.
Key Issues
Whether the denial of exemption under sections 11 and 12 for late filing of audit report in Form 10B is justified, despite the report being filed during appellate proceedings?
Sections Cited
143(1), 11, 12, 10(23C)(iiiad), 12A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: Dr. MANISH BORAD
Assessee by : Shri Umesh Kumar Mali Revenue by : Shri R.Y. Balawade, Addl. CIT Date of hearing : 29.09.2025 Date of : 10.10.2025 pronouncement आदेश/ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER :- This appeal at the instance of the assessee is directed against the order of Ld. CIT(A) dated 29.02.2024 framed u/s 250 of the Income Tax Act, 1961 for A.Y. 2018-19 which is arising out of order passed u/s 143(1) of the Act dated 04.03.2020.
Registry has informed that there is a delay of 323 days in filing of the present appeal. Application for condonation of delay alongwith affidavit dated 10.03.2025 stands filed. Main reason for the delay is on account of non communication about the impugned order from the earlier tax consultant who had received it on his e-mail address. Considering the fact that the assessee’s are dependant upon tax consultants for filing of the appeal, after hearing Ld. Departmental Representative (DR) and on perusal of the records I find that the sufficient cause prevented the assessee from filing the appeal in time. The delay is not intentional and therefore following the ratio laid down by the Hon'ble Apex Court in the case of Collector, Land Acquisition vs. Master Katiji and Others(1987) 167 ITR 471(SC) (Supreme Court) and in the case of Inder Singh Vs State of Madhya Pradesh judgement dated 21.03.2025 (2025) INSC 382), I hereby condone the delay of 323 days in filing of the instant appeal and admit it for adjudication.
3. Sole grievance of the assessee is that Ld. CIT(A) erred in confirming the action of the Assessing Officer (AO) in not allowing the application of income incurred for charitable purposes solely on the ground of non furnishing of audit report on Form 10B within the prescribed time limit.
4. Ld. Counsel for the assessee vehemently argued referring to the details placed on records and submitted that firstly filing of audit report is directory in nature and secondly he submitted that the assessee duly uploaded the audit report within 30 days of receiving the communication from the Central processing Centre (CPC) but without considering the assessee’s submissions, the CPC passed the order by not allowing the application of funds for charitable purposes at Rs. 39,95,991/-
5. On the other hand Ld. Departmental Representative (DR) vehemently argued supporting the order of the Ld. CIT(A).
I have heard rival contentions and perused the record placed before me. The grievance of the assessee is that Ld. CIT(A) erred in not allowing the claim of application of income of Rs. 39,95,991/- claimed to be incurred for charitable purpose solely on the ground that audit report on Form 10B has not been furnished within the prescribed time limit. I note that the assessee is a charitable trust, mainly engaged in philanthropic activities more particularly in the field of Education and also runs a school in the name of Super English School at Sangli. During the F.Y. 2017-18 relevant to A.Y. 2018-19 gross Fees collection is Rs. 41,22,116/- and expenses towards administration and management of the school incurred at Rs. 35,20,913/- and also capital expenditure worth Rs. 4,75,078/- incurred towards laboratory items and other equipments. The return of income furnished on 31.08.2018 declaring Nil income. Audit report on Form 10B which was required to be uploaded upto 15.02.2018 was not filed. The CPC sent a communication to the assessee dated 04.12.2019 proposing the alleged adjustment for want of audit report on Form 10B and assessee was required to remove the defects within 30 days. The assessee on receiving the said communication from the CPC filed the audit report on Form 10B on 31.12.2019. Surprisingly the CPC did not consider the assessee’s reply and the audit report uploaded on 31.12.2019 and passed the order u/s 143(1)(a) of the Act dated 04.03.2020. Against the order of CPC u/s 143(1)(a) of the Act assessee preferred appeal before Ld. CIT(A) but failed to succeed on both the grounds firstly allowing of application of income u/s 11 and the alternate claim of expenditure u/s 10(23C)(iiiad) of the Act.
I find that firstly the CPC erred in not allowing the benefit of expenditure u/s 11 of the Act inspite of the fact that assessee has duly uploaded the audit report within the time given by the CPC. Even otherwise it has been consistently held that even if the audit report is filed before the conclusion of the appellate proceedings before Ld. CIT(A), the same should be considered for allowing the claim of the assessee u/s 11 of the Act and for this I place reliance on the decision of the Sahej Seva Trust, Kolhapur order dated 06.05.25 and the relevant finding of the Tribunal reads as under:- 2. The only grievance of the assessee is that the benefit of sections 11
and 12 has been denied to the assessee for non filing of Form No.10B within the prescribed time limit and that ld.CIT(E) has not considered the Form No.10B filed at the later stage on 02.03.2022 which was filed at the appellate proceedings. It was also submitted that filing of Form No.10B is directory in nature and the same should have been considered by Ld. CIT(A) while deciding the issue.
Ld. Departmental Representative supported the orders of the lower authorities.
We have heard both the sides and perused the record placed before us. We note that assessee holds valid registration u/s.12A of the Act vide letter dated 13.03.2022, but has filed Form No.10B belatedly on 02.03.2022 and ld.CIT(A) who has also the co-terminus powers to that of ld. AO did not accepted the audit report filed on Form No.10B and denied the benefits of sections 11 and 12 to the assessee.
We note that the Coordinate bench, Surat in the case of S.M. K.R. Vashi High School Vs. ITO (Exemption) reported in 157 taxmann.com 702 (ITAT, Surat) has held that even if the Form No.10B could not be uploaded due to some technical error on the income-tax portal, benefit of section 11 could not be denied merely on account of delay in furnishing the audit report. Hon’ble High Court in the case of CIT (Exemption) Anjana Foundation reported in 168 taxmann.com 462 (Gujarat) has held that filing of Form No.10B is a procedural requirement and benefit of section 11 should not be denied for delay in furnishing Form No.10B. Hon’ble Court thus affirmed the view taken by the Tribunal in its order dated 07.02.2023 in ITA No.695/Ahd/2023. We therefore following the ratio laid down in the above referred decisions hold that the assessee holding valid registration u/s.12A of the Act has filed Form No.10B belatedly but during
the appeal proceedings itself and filing of such report is directory and not mandatory as held by Hon’ble Courts, therefore, benefit of sections 11 and 12 claimed by the assessee in income-tax return deserves to be allowed. Grounds of appeal raised by the assessee are allowed.
Respectively following the above decision and on due considering of the facts of the case, since the Audit Report for A.Y. 2019-20 already stands uploaded on 31.12.2019 which is much prior to the passing of the impugned order as well as the passing of the intimation u/s 143(1)(a) of the Act by CPC, Ld. CIT(A) erred in not considering the Audit Report and not allowing the claim of assessee of application of Rs. 39,95,991/- incurred for charitable purpose. Accordingly finding of the Ld. CIT(A) is reversed and grounds of appeal raised by assessee are allowed and Jurisdictional Assessing Officer (JAO) is directed to allow the claim of the assessee for application of income at Rs. 35,20,913/- and Capital expenditure at Rs. 4,75,078/- for charitable purposes. Grounds of appeal raised by the assessee are allowed.
In the result appeal of the assessee is allowed.
Order pronounced on this 10th day of October, 2025.