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Facts
The assessee, a public charitable trust, filed its return for AY 2020-21 declaring NIL income. The CPC denied exemption under section 11 solely because the audit report in Form No. 10B was not filed within the prescribed time, although it was uploaded before the return was filed.
Held
The Tribunal held that the filing of the audit report in Form No. 10B is a procedural requirement and not a substantive condition precedent for claiming exemption under sections 11 and 12 of the Act. Denial of exemption on this technical ground is unsustainable, especially when the audit report was available and substantive conditions were met.
Key Issues
Whether denial of exemption under Section 11 is justified solely on the ground of delayed filing of the audit report in Form No. 10B, when the report was otherwise available.
Sections Cited
11, 11(1)(a), 12A, 143(1)
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Income Tax Appellate Tribunal, ‘A’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The present appeal has been filed by the assessee, a public charitable trust duly registered under section 12A of the Income-tax Act, 1961, against the order dated 26.12.2024 passed by the Addl./JCIT(A), Faridabad, arising out of the intimation issued under section 143(1) for the assessment year 2020-21, whereby the exemption claimed under section
In the grounds of appeal, the assessee has, inter alia, challenged the impugned order on two principal planks: firstly, that the appeal before the first appellate authority came to be dismissed ex parte without affording a meaningful opportunity of being heard; and secondly, that the lower authorities erred in upholding the adjustments made under section 143(1), namely: (a) denial of deduction under section 11(1)(a) in respect of actual revenue expenditure of ₹ 89,77,260 debited to the Income and Expenditure Account; and (b) disallowance of the claim for statutory accumulation of income under section 11(1)(a) to the extent of ₹ 11,65,005, thereby treating the gross receipts of ₹ 1,01,42,265 as taxable income.
1. 1. 3. At the threshold, it is noted that the appeal before us is barred by limitation by 221 days. The assessee has filed an affidavit of the Secretary of the Trust explaining the reasons for the delay. It has been averred that the return of income for A.Y. 2020-21 was filed on 11.02.2021 declaring NIL total income; that the intimation under section 143(1) dated 30.11.2021 was appealed against before the NFAC; that the income-tax matters of the Trust were being handled by its tax practitioner, Shri Manoj Patil, ITP; that the hearing notices issued under section 250 were forwarded to him, but due to a personal emergency, the same could not be further forwarded to the counsel engaged to attend the appellate proceedings;
Adv.Chandansinh Solanki Education Trust that the Trust was under a bona fide impression that adequate arrangements had been made; and that it was only upon receipt of the recovery letter dated 13.08.2025 that the Trust became aware of the appellate order dated 26.12.2024, whereupon immediate steps were taken to file the present appeal. On a careful consideration of these facts and circumstances, and keeping in view the settled principle that a litigant should not be made to suffer for the inadvertent lapses of its counsel or representative, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period. Accordingly, the delay of 221 days is condoned.
The brief factual matrix, shorn of embellishment yet rich in material significance, is that the assessee-trust filed its return of income for the relevant assessment year on 11.02.2021 declaring NIL income. The return was processed under section 143(1) by the CPC, which denied exemption under section 11 on the sole ground that the audit report in Form No. 10B had not been filed within the prescribed time. As a corollary thereto, the CPC disallowed the deduction claimed for actual application of income amounting to ₹ 89,77,260 and also denied the benefit of statutory accumulation of income to the extent of 15 per cent of gross receipts amounting to ₹ 11,65,005, thereby taxing the gross receipts of ₹ 1,01,42,265 as income of the Trust.
It is an undisputed and admitted position that the accounts of the assessee-trust were duly audited and that the Adv.Chandansinh Solanki Education Trust audit report in Form No. 10B was uploaded on 10.02.2021, i.e., prior to the filing of the return of income on 11.02.2021. Thus, the audit report was very much in existence and available within the statutory time framework. The denial of exemption has, therefore, been made solely on a technical interpretation of the timing requirement for filing Form No. 10B, without disputing either the charitable nature of the objects of the Trust or the factum of application of income for charitable purposes.
The learned counsel for the assessee submitted that the due date of filing the return of income for A.Y. 2020-21 was 15.02.2021 and that Form No. 10B had been filed on 10.02.2021, which was otherwise required to be filed one month before the due date of filing of return. It was contended that there was, at the highest, only a marginal and venial delay, which could not have been made the basis for denying the entire exemption under section 11 and taxing the gross receipts of the Trust. It was further submitted that, in any event, even assuming without admitting that there was a procedural lapse, the entire receipts could not be taxed; at the most, only the surplus, if any, could be brought to tax. In support of these propositions, reliance was placed on the decisions of the Hon’ble Gujarat High Court in CIT (Exemption) v. Anjana Foundation [2024] 168 taxmann.com 462 (Guj.), affirmed by the Hon’ble Supreme Court in 178 taxmann.com 658 (SC), and in Association of Indian Panel Board Manufacturers v. DCIT [2023] 157 taxmann.com 550
Per contra, the learned Senior Departmental Representative submitted that once the statute prescribes a time-limit for filing the audit report, the same has to be strictly complied with and that there is no express provision in the Act for condonation of delay. He, therefore, supported the orders of the lower authorities.
We have carefully considered the rival submissions and perused the material placed on record. The denial of exemption under section 11 in the present case rests solely on the ground that Form No. 10B was not filed within the prescribed time, despite the fact that the audit report was admittedly uploaded prior to the filing of the return of income and that the accounts of the Trust were duly audited. There is no allegation, much less any finding, that the objects of the Trust are not charitable in nature, that the income has not been applied for charitable purposes, or that the statutory conditions of section 11, other than the timing of filing Form No. 10B, have not been fulfilled.
The Hon’ble Gujarat High Court, in CIT (Exemption) v. Anjana Foundation (supra), following its earlier decision in Association of Indian Panel Board Manufacturers v. DCIT (supra), has categorically held that a charitable trust cannot be denied the benefit of section 11 merely for not filing the audit report in Form No. 10B along with the return of income,
Adv.Chandansinh Solanki Education Trust as such requirement is only procedural in nature and not a substantive condition precedent for availing exemption. The Hon’ble Court further held that where the audit report is available on record and the substantive conditions of section 11 are otherwise satisfied, denial of exemption on such a hyper-technical ground is wholly unsustainable. The aforesaid judgment has since been affirmed by the Hon’ble Supreme Court.
The coordinate benches of the Tribunal have also consistently taken the same view. In Shree Bihari Seva Samiti v. ITO [2023] 149 taxmann.com 478 (Mumbai – Trib.) and in Trinity Education Trust v. ITO [ITA No. 669 (Srt.) of 2018], it has been held that even if Form No. 10B is filed at a later stage, exemption under section 11 cannot be denied where the audit report is otherwise available and the trust has substantially complied with the conditions. These decisions follow the ratio of the Hon’ble Bombay High Court in CIT v. Xavier Kalavani Mandal (P.) Ltd., wherein it was held that filing of Form No. 10B is a procedural requirement and a curable defect.
In the present case, not only was the audit report available on record, but it was also uploaded prior to the filing of the return of income. The denial of exemption has been made without examining the merits of the application of income or the statutory accumulation, and solely on the ground of an alleged procedural lapse in the timing of uploading Form No. 10B. On these admitted facts, and in the Adv.Chandansinh Solanki Education Trust light of the binding judicial precedents, we have no hesitation in holding that the filing of audit report in Form No. 10B is only a procedural requirement and not a substantive condition for claiming exemption under sections 11 and 12 of the Act.
Respectfully following the ratio laid down by the Hon’ble Gujarat High Court in Anjana Foundation (supra) and Association of Indian Panel Board Manufacturers (supra), as affirmed by the Hon’ble Supreme Court, and the consistent view taken by the coordinate benches of the Tribunal, we direct the Assessing Officer / CPC to allow the exemption claimed by the appellant-trust under section 11 of the Act, including the deduction on account of actual application of income amounting to ₹ 89,77,260 and the statutory accumulation of 15 per cent of gross receipts amounting to ₹ 11,65,005, and to recompute the income of the appellant- trust accordingly. The artificial taxation of the gross receipts of ₹ 1,01,42,265 as taxable income is hereby set aside.
In the result, the appeal of the assessee-trust is allowed. The impugned orders of the lower authorities, to the extent they deny exemption under section 11 on the sole ground of non-filing of Form No. 10B within the prescribed time, are reversed. The Assessing Officer is directed to grant consequential relief in accordance with law.
In the result, the appeal of the assessee is allowed.
Order pronounced on 29th January, 2026.
Sd/- Sd/- (MAKARAND VASANT (AMIT SHUKLA) MAHADEOKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 29/01/2026 KARUNA, sr.ps Copy of the Order forwarded to :