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Facts
The assessee, a registered trust, filed its income tax return for AY 2017-18 declaring nil income and claiming exemption under Section 11. The return was filed belatedly under Section 139(4), and the audit report (Form 10B) was also filed belatedly. The CPC denied the exemption based on the delayed filing of the audit report.
Held
The Tribunal held that the delay in filing the audit report is a procedural issue and not a ground to deny exemption. The return filed under Section 139(4) is considered valid, and since the audit report was also filed, it constitutes substantial compliance. Therefore, the denial of exemption on technical grounds is unjustified.
Key Issues
Whether denial of exemption under Section 11 for belated filing of the audit report (Form 10B) is justified when the return of income was filed within the extended time limit under Section 139(4)?
Sections Cited
11, 12, 119(2), 139, 139(1), 139(4), 139(4A), 143(1), 12A(1)(b), 44AB, 234A, 234B, 234C, 234D, 250
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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
O R D E R
PER SIDDHARTHA NAUTIYAL, JM:
This appeal by the Assessee is directed against the order dated 10/03/2025 passed by the Office of the Commissioner of Income Tax, Appeal Addl/JCIT(A)-Gwalior [hereinafter referred to as “CIT(A)”], u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), for the Assessment Year (AY) 2017-18.
The assessee has raised the following grounds of appeal:
“1. The Ld. CIT(A) has erred in law and on facts of the case in disallowing exemption of Rs. 81,83,475/-claimed u/s. 11 of the Act. Triloknath Vatsalya Vatika vs. DCIT CPC Bangalore Present JAO – The ITO Ward-1 € Asst. Year : 2017-18
2. The Ld. CIT(A) has failed to appreciate that the delay in filing of audit report (Form No. 10B) being a procedural requirement is directory in nature and cannot led to denial of exemption to the appellant.
The Ld. CIT(A) has erred in holding that an application u/s. 119(2) of the Act is the only remedy and no relief can be granted via appellate authority.
4. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s. 234A/B/C/D of the Act.
5. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
3. The brief facts of the case are that the appellant, Shri Triloknath Vatsalya Vatika, a trust registered under section 12A of the Income-tax Act, 1961 (Act), filed its return of income for the Assessment Year 2017-18 declaring nil income and claiming exemption under section 11 of the Act. The said return was processed under section 143(1) by the CPC, Bengaluru, vide intimation dated 31.03.2019, whereby exemption under section 11 was denied on the ground that Form 10B, being the audit report prescribed for charitable trusts, had not been filed within the stipulated time. Consequently, the CPC computed the entire gross receipts, including corpus and voluntary donations, as taxable income and raised a demand.
3. Aggrieved by the said intimation, the assessee filed an appeal before the CIT(Appeals). The CIT(Appeals) noted that the assessee trust was registered under section 12A of the Act and had filed its return of income beyond the due date of 31.07.2017 prescribed under section 139(1) of the Act and further that the audit report in Form 10B was uploaded belatedly on 13.06.2019, long after the specified date of 30.06.2017. It was observed that under section 12A(1)(b), the audit report in Form 10B must be furnished before the “specified date” as defined under section 44AB, i.e., one month Triloknath Vatsalya Vatika vs. DCIT CPC Bangalore Present JAO – The ITO Ward-1 € Asst. Year : 2017-18 prior to the due date for filing the return under section 139(1) of the Act. Since the appellant failed to furnish Form 10B within the prescribed time, the CPC was justified in denying exemption under sections 11 and 12. The CIT(Appeals) also referred to CBDT Circular No. 16/2022 dated 19.07.2022, which authorizes condonation of delay in filing Form 10B up to three years by the Principal Chief Commissioner or Chief Commissioner of Income-tax under section 119(2)(b) of the Act, and observed that the assessee had not sought such condonation from the competent authority. The CIT(Appeals) held that neither CPC nor the Assessing Officer nor the CIT(Appeals) had jurisdiction to condone such delay. Accordingly, the CIT(Appeals) upheld the action of CPC in denying the benefit of section 11 and dismissed the appeal, holding that the appellant was not entitled to exemption in the absence of timely filing of Form 10B.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
We have carefully considered the rival submissions and perused the material available on record. The undisputed facts of the case are that the assessee is a trust duly registered under section 12A of the Act had filed its return of income for the assessment year 2017-18 declaring nil income and claiming exemption under section 11 of the Act. It is an admitted position that although the return of income was filed belatedly beyond the due date prescribed under section 139(1), it was nonetheless filed within the permissible time limit allowed under section 139(4) of the Act. The audit report in Form No. 10B was also duly furnished, albeit belatedly. The CPC, while processing the return under section 143(1), denied the benefit of exemption under section 11 on the ground that Form No. 10B had not been Triloknath Vatsalya Vatika vs. DCIT CPC Bangalore Present JAO – The ITO Ward-1 € Asst. Year : 2017-18 filed within the specified date and accordingly treated the entire gross receipts as taxable income. We are of the considered viewthat the disallowance of exemption on such a technical ground is contrary to the settled legal position and the consistent view taken by various judicial forums. The Hon’ble Income Tax Appellate Tribunal, Nagpur Bench, in the case of Shri Panchmurti Education Society vs. Income-tax Officer [2025] 171 taxmann.com 546 (Nagpur - Trib.) [21-01-2025], has categorically held that where a return of income is filed within the extended time limit permissible under section 139(4) of the Act, such a return is to be treated as a valid return under section 139 and the benefit of section 11 cannot be denied merely on the ground that Form 10B was not filed along with the original return. The Tribunal in the said decision further observed that the amendment to section 12A(1)(ba) is effective only from assessment year 2018- 19 and that, as clarified by CBDT Instruction dated 23.04.2019, the expression “time allowed under section 139” includes a belated return filed under section 139(4). The decision also emphasized that the beneficial amendment made by the Finance Act, 2023, w.e.f. 01.04.2023, expressly recognizes that return of income filed under section 139(1) or section 139(4) would satisfy the compliance requirement of section 139(4A), thus clarifying the legislative intent that belated returns are also valid for the purpose of claiming exemption under section 11 of the Act. Similarly, in Rajasthan Nursing Council vs. Assistant Director of Income-tax [2025] 175 taxmann.com 358 (Jaipur - Trib.) [07-05-2025], ITAT held that a trust registered under section 12AA cannot be denied exemption under section 11 merely because the return of income was filed after the due date under section 139(1) but within the extended period permitted under section 139(4) of the Act. The Tribunal, relying on CBDT Circular F. No. 173/193/2019- Triloknath Vatsalya Vatika vs. DCIT CPC Bangalore Present JAO – The ITO Ward-1 € Asst. Year : 2017-18 ITA-I dated 23.04.2019 and Circular No. 6/2020 dated 19.02.2020, observed that the expression “section 139” used in section 12A(1)(ba) encompasses both sub-sections (1) and (4) thereof and that a return filed under section 139(4) must be considered as filed within the time prescribed under section 139(1) for the purposes of availing exemption under section 11 of the Act. Further support is drawn from the decision of the Pune Bench of the Tribunal in Indian Medical Association vs. Deputy Commissioner of Income-tax [2025] 175 taxmann.com 811 (Pune - Trib.) [16-06-2025], wherein it was held that where the assessee trust had filed a valid belated return under section 139(4) along with the audit report in Form 10B, the benefit of exemption under section 11 could not be denied merely because both were filed after the due date prescribed under section 139(1). The Tribunal categorically held that once the return is filed under section 139(4), it is a valid return in law, and the assessee is entitled to claim exemption accordingly.
In the present case, the assessee trust had duly filed its return of income within the extended statutory limit permissible under section 139(4) of the Act and had subsequently filed its audit report in Form 10B. The filing of the audit report, though belated, in our view, constitutes substantial compliance with the procedural requirement of section 12A(1)(b), and in view of the above judicial precedents and CBDT circulars, denial of exemption under section 11 on this procedural ground is unjustified. It is well settled that beneficial provisions granting exemption to charitable trusts must be interpreted liberally so as to advance the object of charity and not to defeat it on mere technicalities. Accordingly, we are of the considered view that the assessee trust has duly complied with the conditions prescribed under section 12A(1)(b) read with section 139 of the Act. Triloknath Vatsalya Vatika vs. DCIT CPC Bangalore Present JAO – The ITO Ward-1 € Asst. Year : 2017-18
In the result, the appeal of the assessee is allowed.