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Facts
The assessee's exemption claim under Section 11 was disallowed by the CPC for Assessment Years 2020-21, 2021-22, and 2022-23, on the ground of belated filing of the Audit Report in Form 10B. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeals, leading the assessee to file further appeals before the ITAT.
Held
The ITAT held that the filing of Form 10B for claiming exemption under Section 11 is a procedural and directory requirement, not mandatory to be filed by the due date. Distinguishing the Supreme Court's decision in Wipro Limited and relying on other High Court and Tribunal judgments, the ITAT found that since the assessee had eventually filed the report, the delay should be condoned. The Tribunal allowed the appeals and directed the A.O. to grant the exemption.
Key Issues
Whether the exemption under Section 11 of the Income Tax Act can be denied solely due to the belated filing of the Audit Report in Form 10B, and if such a delay is condonable.
Sections Cited
11, 10B, 10B(8), 12A, 12AA, 10(23C)(v), 119, 119(2)(b), 139(1), 139(5), 143(1)
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Income Tax Appellate Tribunal, DELHI
Before: YOGESH KUMAR U.S. & SHRI MANISH AGARWAL
ORDER
PER YOGESH KUMAR, U.S. JM:
The captioned Appeals are filed by the Assessee against the orders of the Commissioner of Income Tax appeal, Addl/JCIT(A), Indore (Ld. CIT(A) for short) dated 08/09/2025 pertaining to Assessment Years 2020-21, 2021-22 and 2022-23 respectively.
2. Brief facts of the case are that, the returns filed by the Assessee were processed for the years under consideration by the CPC, Bangalore, under Section 143(1) of the Income Tax Act, (‘Act’ for short), wherein the CPC, Bangalore has disallowed the exemption under Section 11 of the Act and treated the entire income as taxable on the ground that the Audit Report in Form No. 10B has not been Tathagat Vs. A.O. filed on or before the due date. Aggrieved by the intimations issued by the CPC, Assessee preferred three Appeals before the Ld. CIT(A). The Ld. CIT(A) vide orders impugned dated 08/09/2025, dismissed the Appeals of the Assessee. As against the orders of the Ld. CIT(A), Assessee preferred the captioned Appeals.
3. The Ld. Counsel for the Assessee submitted that the Assessee has secured the Audit Report before filing the return, due to unintentional reasons, the same could not be filed on time, however, the same has been filed with a delay which is inadvertent. The Ld. Counsel has produced following date chart to substantiate its claim.
Summary of Filing 10B (Audit Report) and ITR A.Y 10B (Due 10B (Filing No. of ITR (Due ITR (Filing No. of date) Date) Days date) Date) days delay delay 2020-21 15/01/2021 31/03/2021 75 days 15/02/2021 31/03/2021 44 days 2021-22 15/02/2022 15/03/2022 28 day 15/03/2022 15/03/2022 No delay 2022-23 07/10/2022 14/10/2022 7 days 07/11/2022 02/11/2022 No delay Further, the Ld. AR relying on the plethora of Judgments sought for allowing the Appeals.
Per contra, the Ld. Departmental Representative filed written submission as under:-
“1. A perusal of the section itself shows that the first appellate authority has been specifically excluded from the power to condone any delay u/s 119(2)(b).
Further, the Hon'ble Income Tax Appellate Tribunal (Ahmedabad) in the case of Association of Indian Panel board Manufacturer [2022] 143 taxmann.com 418 (Ahmedabad-ITATO [22-07-2022] has held as under: Section 119 of the Income-tax Act. 1961- Central Board of Direct Taxes instructions to subordinate authorities (Condonation of delay in filing Form No. 108)- Assessment year 2018-19- Assessee, a charitable institution registered under section 12AA. claimed exemption under section 11-on filing original return of Income had not filed Audit Report-immediately thereafter, assessee filed Audit Report in Form 10B by uploading same in electronic mode - Central Processing Centre denied exemption under section 11 for want of submission of Form 108. On appeal, Commissioner (Appeals) held that Form B shall be submitted electronically with effect from 1-4-2016 applicable for assessment year 2016-17 and as per CBDT Circular No. 273 dated 3-6 1970, CBDT had authorized jurisdictional Commissioner/Director of Income- tax to condone delay in filing form 10B, and Commissioner (Appeals) did not have any power under section 119(2)(b) to condone delay in filing Form 10B. Thus, Commissioner (Appeals) dismissed assessee's appeal holding that assessee had remedy before jurisdictional Commissioner/ Pr. Commissioner/Director of Income-tax for condoning delay in filing Form B and claiming benefit of section 11. It was noted that assessee was well aware that there was a delay in filing Form 10B, however assessee seemed to have not made any application for condonation of delay in filing Form 10B before concerned Pr. Commissioner/Commissioner/Director of Income-tax as provided under section 119(2)(b). Whether there was no infirmity in order passed by Commissioner (Appeals)-hold, Yes (Paras 6.2 and 6.3) [In favour of revenue."
The Hon'ble Apex Court in the case of CC v, Dilip Kumar & Company [2018] 95 taxmann.com 327/69 GST 239 has laid down following principles. (1) Exemption notification/provisions should be interpreted strictly, the burden of proving applicability would be on the assessee to show that his case comes within the parameters of exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessees and it must be interpreted in favour of the revenue. Further, the Hon'ble Apex court in the case of Principal Commissioner of Income Tax-III, Bangalore and another Vs. M/s Wipro Limited (Judgment dated 11.07.2022 in the Civil Appeal No. 1449 OF 2022) has applied strict construction to reverse the findings of the Hon'ble High Court (HC) of Kamataka which had earlier allowed carry forward of such losses. The Hon'ble SC held that the requirement of filing a declaration within a timeline is "mandatory" in nature as per the language of the provision. It reiterated the age-old principle that a taxing statute should be read as it is and held that the exemption/ deduction provisions should be "strictly" and "literally complied with and, therefore, a strict interpretation should be adopted. The Supreme Court has stated as under "In view of the above discussion and for the reasons stated above, we are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B(8) of the IT Act. We hold that for claiming the benefit under Section 10B(8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is answered in favour of the Revenue and against the assessee The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit
under Section 10B (8) of the IT Act on non-compliance of the twin conditions as provided under Section 10B (8) of the IT Act, as observed hereinabove" The ratio laid down by the Hon'ble Apex Court that to claim the benefit under the statue which comes with certain conditions envisaged in that particular section, is to be fulfilled and to be considered mandatory in nature and not directory in nature, is clearly applicable to the facts and circumstances of this case. It is evident that the appellant did not file Audit Report in Form 10B before due date in violation of Rule 12A(1)(b) of Income Tax Act, 1961. It is a trite law that if a thing is said to be done in a particular manner, it shall be done in that manner and its performance in any other mode or fashion shall be of no consequence Therefore, in application of the above decisions of the Apex Court and also the mandated provisions of the statute, the Assessing Officer/CPC has rightly disallowed the exemption claimed and made addition of the same to the total income of the appellant as per the provisions of the Act.”
5. We have heard both the parties and perused the material available on record. The CPC issued the Intimation under Section 143(1) of the Act denying the exemption under Section 11 of the Act on the ground that the Assessee filed Form 10B belatedly. Admittedly, the Assessee has filed Form 10B after the expiry of due date. It is well settled law that filing of Form 10B for claiming exemption under Section 11 of the Act is not mandatory requirement but only directory in nature. The Co-ordinate Bench of the Tribunal of the Pune Bench while dealing with the identical issue in (ITO Vs. the New Miraj Education Society vide order dated 01/01/2026, held as under:-
“8. We have also perused the decision of Coordinate Bench of Pune Tribunal in the case The Nanded Sikhgurudwara Sachkhand Hazur Sahib (supra) (to which both the Members are parties) and find that the Tribunal under similar set of facts has dismissed the appeal of the Revenue and allowed the claim of exemption u/s. 11 of the Act to the assessee. The relevant observations and findings of the Tribunal, in the above referred case, are as under:- “20. So far as the grievance of the Revenue that the Ld. CIT(A) / NFAC has erred in allowing the appeal of the assessee by holding that filing of audit report in the prescribed form before completion of the assessment proceedings is sufficient compliance under the provisions of the Act is concerned, we find the Ld. CIT(A) / NFAC while deciding the issue has followed the decision of the Coordinate Bench of the Tribunal in assessee‟s own case for assessment year 2014-15. We find the Hon‟ble Gujarat High Court in the case of CIT (Exemptions) vs. Laxmanarayan Dev Shrishan Seva Khendra (supra), while deciding an identical issue after considering the decision of the Hon'ble Supreme Court in the case of PCIT vs. Wipro Limited (supra), has held that when the assessee has already filed the audit report in Form 10B electronically during the pendency of appellate proceedings along with copy of audited financial statements, delay in filing of the said Form is rightly condoned by the Commissioner of Appeals and the Tribunal. The relevant observations of the Hon‟ble High Court read as under: “4. Learned Senior Standing Counsel Ms.Maithili Mehta for the appellant submitted that in case of Principal Commissioner of Income Tax-III, Bangalore v. M/s.Wipro Limited of the Hon'ble Supreme Court rendered on 11th July, 2022 in Civil Appeal No.1449 of 2022 it was held that requirement of Section 10B(8) of the Act which provides for requirement of furnishing declaration for claiming exemption under Section 10B of the Act is mandatory but the time limit within which such declaration is to be filed is also held to be mandatory. Relying upon the aforesaid decision, it was submitted that the assessee ought to have filed the audit report in Form 10B of the Act before the due date of filing of the return to claim the exemption under Section 12A of the Act.
Reliance placed by the learned Senior Standing Counsel Ms.Maithili Mehta for the appellant 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 Tathagat Vs. A.O. 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 appellant 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.”
We find the Hon‟ble Gujarat High Court in the case of CIT (Exemption) vs. Anjana Foundation (supra) has held that a charitable trust cannot be denied benefit of section 11 solely for not filing audit report in Form No.10B, as it is only a procedural requirement. 22 x x x x x 23. However, as mentioned earlier, the Hon‟ble Gujarat High Court after considering the decision of the Hon'ble Supreme Court in the case of PCIT vs. Wipro Limited (supra) has held that where the assessee had already filed audit report in Form 10B electronically during pendency of appellate proceedings along with copy of audited financial statements, it is sufficient compliance for claiming the exemption u/s 11 of the Act. Since in the instant case the assessee has already submitted the audited report in Form No.10BB during assessment proceedings itself, therefore, the assessee in our opinion is in a better position. The various other decisions relied on by the Revenue as per grounds of appeal or during the course of arguments are distinguishable and not applicable to the facts of the present case. In view of the above discussion, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC allowing the claim of exemption u/s 10(23C)(v) of the Act for belated filing of Form No.10BB. We hold and direct accordingly. The grounds raised by the Revenue are accordingly dismissed.”
Based on the facts of the case and legal position set out and in the absence of any contrary material/decision brought on record by the Revenue before us, we do not find any infirmity in the order
of Ld.CIT(A) in allowing the assessee’s claim of exemption u/s. 11 of the Act. Accordingly, grounds of appeal raised by the Revenue are dismissed.
10. In the result, the appeal of Revenue is dismissed.”
5. In view of the above and following the ratio laid down by the Co- ordinate Pune Bench of the Tribunal in the case of the New Miraj Education Society (supra), we find merit in the contention of the Assessee, accordingly, we hold that the Assessee is entitled for exemption under Section 11 of the Act for the years under consideration and we direct the A.O. to grant the exemption. Accordingly, the Appeals of the Assessee are allowed.
Order pronounced in the open court on 18th March, 2026