KANCHANBA EDUCATION TRUST,AHMEDABAD vs. THE AC/DCIT. CIRCLE-1, EXEMPTION, AHMEDABAD

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT(A)-1, Chennai vide order dated 11.07.2025 passed for A.Y. 2024-25.

The assessee has raised the following grounds of appeal:

The brief facts of the case are that the assessee is a Public Charitable Trust registered under the Bombay Public Trust Act, 1960 and also registered under section 12A of the Income-tax Act (“the Act”). The trust runs “Aim International School” and it filed its return of income for A.Y. 2024-25 on 25.09.2024 within the extended due date of 15.11.2024 declaring total income at Nil after claiming exemption under sections 11 and 12 of the Act aggregating to Rs. 5,77,26,463/-. While processing the return under section 143(1) of the Act, CPC Bengaluru disallowed the entire claim of exemption on the ground that Form 10B, which was required to be furnished at least one month before the due date for filing the return under section 139(1) of the Act, had not been filed. Instead, the assessee had filed Form 10BB on 25.09.2024 believing that it was eligible for exemption under section 10(23C). Upon realizing the legal position under section 11(7) that a trust registered under section 12A cannot simultaneously claim exemption under section 10(23C), the assessee filed Form 10B on 18.12.2024, which was Kanchanba Education Trust vs. AC/DCIT Asst.Year –2024-25 - 3– admittedly beyond the prescribed timeline. The CPC therefore denied the exemption, thereby raising a tax demand of Rs. 26,57,210/-.

In appeal before CIT(A), the assessee argued that the failure to file Form 10B on time was due to sufficient cause because the trustee responsible for tax matters was elderly and suffering from ill-health, resulting in delay. It was also contended that Form 10BB had been filed within time, that subsequent filing of Form 10B amounted to substantial compliance, and that denial of exemption was unjustified for a mere procedural lapse. The assessee also submitted that the accumulation under section 11(1)(a) of the Act was within the permissible limit and that the clerical error in Form 10BB was corrected in the return itself. The assessee relied upon the decision of the Ahmedabad Bench in ITO (Exemptions) v. Ramji Mandir Religious & Charitable Trust wherein delayed filing of Form 10/10B was held to be directory. The CIT(A), however, rejected these contentions, holding that CPC processing is system-driven and cannot go beyond statutory timelines prescribed in section 12A(1)(b) of the Act, and further held that only the CIT(E) under section 119(2)(b) can condone delay and that neither CPC nor CIT(A) had such powers. Accordingly, the appeal was dismissed.

Before the Tribunal, the assessee submitted that the trust had bona fide filed Form 10B under a mistaken belief that exemption under section 10(23C) applied, but upon becoming aware of the correct legal position after 01.04.2022 the assessee immediately filed Form 10B. It was submitted that the lapse was technical, unintentional, and wholly procedural and that the substantive compliance of maintaining regular books, getting accounts audited, filing the return in time, and applying income for charitable purposes Kanchanba Education Trust vs. AC/DCIT Asst.Year –2024-25 - 4– had been satisfied. The assessee relied on the decision of the ITAT Ahmedabad in Shree Vardhman Stanakvasi Jain Shravak Trust v. ITO, (date of pronouncement: 14.02.2025) and other similar decisions which have held that (a) non-filing or late filing of Form 10B is a procedural defect, (b) exemption under sections 11 and 12 cannot be denied when the audit report becomes available before completion of assessment or appellate proceedings, and (c) if Form 10B is on record during appellate proceedings, the requirement of law is deemed satisfied.

In response, Ld. DR placed reliance on the observations made by CIT(Appeals) in the appellate order.

We have heard the rival contentions and perused the material on record. On careful consideration of the rival submissions, the record, and the judicial precedents, it is evident that the sole ground for denial of exemption under sections 11 and 12 is the delayed filing of Form 10B. The substantive requirement of obtaining an audit report was ultimately complied with when Form 10B was filed on 18.12.2024, which was prior to the conclusion of the first appellate proceedings. The question that arises is whether the delay in filing Form 10B is so fatal as to disentitle an otherwise compliant charitable trust from exemption.

This issue now stands conclusively settled by the decision of Hon'ble Supreme Court in the case of Commissioner of Income-tax (Exemption) vs. Anjana Foundation [2025] 178 taxmann.com 658 (SC)/[2025] 307 Taxman 169 (SC)[15-09-2025], wherein the Hon'ble Supreme Court dismissed the SLP against order of High Court that charitable trust cannot be Kanchanba Education Trust vs. AC/DCIT Asst.Year –2024-25 - 5– denied benefit of Section 11 solely for not filing audit report in Form No. 10B, as it is only a procedural requirement. The Ahmedabad Bench of the Tribunal in Shree Vardhman Stanakvasi Jain Shravak Trust v. ITO, vide order dated 14.02.2025 examined the scope of section 143(1), the nature of Form 10B compliance, and the binding effect of the judgment of the Hon’ble Gujarat High Court in Association of Indian Panelboard Manufacturers v. DCIT (2023) 157 taxmann.com 550 (Guj.). The Tribunal held that the High Court has laid down in no uncertain terms that although obtaining the audit report is a substantive condition, the time and mode of furnishing it are purely procedural. The High Court held that non-filing of the report along with the return is at best a procedural omission and cannot be an impediment to claiming exemption. In the case of Parul Mahila Pragati Mandal vs. Income-tax Officer (Exemption) [2025] 175 taxmann.com 922 (Gujarat)[30-04-2025], the High Court held that Filing of Form 10B is only a procedural requirement, and its non-filing with return does not bar exemption under section 11, and even if such Form is filed at a later stage, assessee will still be entitled to claim exemption. Applying these principles, the Tribunal in Shree Vardhman Stanakvasi Jain Shravak Trust ITA allowed the appeal since Form 10B had been filed during appellate proceedings. The Tribunal reiterated that delayed filing of Form 10B is a curable defect and does not extinguish the exemption otherwise available under law. The Tribunal also applied the decision in Shree Swaminarayan Charitable Trust v. ITO, which similarly held that late submission of Form 10B is directory and cannot be used to deny exemption once the audit report is on record.

Thus, in light of the pronouncements of the Hon'ble Supreme Court, Hon’ble Gujarat High Court and the ITAT referred to above, we find that the delay in furnishing Form 10B is merely a procedural lapse and cannot be a ground to deny the assessee its substantive statutory exemption. We therefore set aside the order of the CIT(A) and direct the Assessing Officer to allow the exemption under sections 11 and 12 in full as claimed in the return of income.

Accordingly, the appeal of the assessee stands allowed. This Order pronounced in Open Court on 11/12/2025