Section 12A(1)(b) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 12A(1)(b) falls under section 12A of the Income-tax Act, 1961, which corresponds to sections 332 to 355 of the Income-tax Act, 2025, the provisions on registered non-profit organisations.
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 12A(1)(b) is CIT v. Hardeodas Agarwalla Trust (198 ITR 511), cited in 46 of the 171 judgments on BharatTax that turn on this section.
Leading authorities on Section 12A(1)(b)
Filing an audit report, such as Form 10B under Section 12A(1)(b), is a directory procedural requirement for charitable trusts, not mandatory. If the report is not filed with the return, the Assessing Officer must provide an opportunity to rectify the defect before completing the assessment.
An assessee trust substantially satisfying conditions for exemption under section 11 should not be denied exemption merely due to delay in filing the audit report in Form 10B, as the legislature has conferred wide discretionary powers to condone such delay.
The scope of adjustment under Section 143(1)(a) is limited and has been well-settled by judicial pronouncements.
The cancellation of registration under section 12AA(3) is limited to circumstances specified in the section. Income and application of funds issues are matters of assessment, not grounds for cancellation under section 12AA(3).
A delay in filing Form 10B by a charitable trust, due to an oversight by the Chartered Accountant, is condonable, and the matter should be remanded to the Assessing Officer for a decision on merits.
Exemption under section 11 of the Income Tax Act cannot be denied merely because Form 10B was not filed along with the return of income, as this is a procedural requirement and not a mandatory condition for claiming exemption.
Filing of the audit report in Form No. 10B with the return of income is not mandatory for claiming exemption under Section 11. If the report is filed after the return but within the period permitted by law, the exemption cannot be denied.
The power to disallow a deduction or relief claimed in a return under section 143(1)(a) can only be exercised when the claim is prima facie inadmissible, meaning the error is clear or self-evident from the face of the return and accompanying documents. A debatable issue cannot be decided under this section.
A deduction claimed must be inadmissible on the face of the return and accompanying documents for it to be rectified under section 143(1)(a). Debatable issues cannot be resolved through this summary assessment.
