Condonation Route for Late Form 10 Filing in Section 11(2) Accumulation: Analysis of ITAT Bangalore’s Ruling in Kammavari Snagham (Regd.) Vs DCIT

1. Overview of the ITAT Decision

In Kammavari Snagham (Regd.) Vs DCIT (Exemption) (ITAT Bangalore), the Tribunal addressed whether an assessee can claim accumulation under Section 11(2) where Form No. 10 was not filed within the statutory time limit but was furnished later, before processing of the return.

The Tribunal held that:

  • The time limit for filing Form No. 10 prescribed in the Income Tax Act 1961 is mandatory and cannot be treated as merely directory.
  • However, the assessee is not without remedy. The Tribunal directed that the assessee may seek condonation of delay under Section 119(2) by approaching the CBDT.
  • The assessee was specifically directed to file a condonation application before CBDT within 90 days from receipt of the Tribunal’s order, and the Assessing Officer was instructed to extend the benefit of accumulation under Section 11(2) if CBDT condones the delay.

Thus, while the Tribunal did not itself allow the accumulation claim of ₹4,47,39,679 for AY 2015-16, it opened a procedural path for potential relief through condonation.

2. Factual Background and Procedural History

2.1 Status of the Assessee and Registration

  • The assessee is a society registered under the Karnataka Societies Registration Act.
  • It was granted registration under Section 12A on **9 October 1990`.
  • That registration was later cancelled by the CIT(Exemptions) under Section 12AA(3).
  • On appeal, the ITAT, Bengaluru, set aside the cancellation and remanded the matter. Pursuant thereto, the CIT(Exemptions) granted registration again on **23 October 2023`.

2.2 Return Filing and Claim Under Section 11(2)

For Assessment Year 2015-16:

  • The assessee filed its return of income on **29 October 2015, declaring **nil income**, having claimed exemption under Section 11`.
  • It also claimed accumulation under Section 11(2) amounting to ₹4,47,39,679.

During processing under Section 143(1):

  • The Central Processing Centre (CPC), Bengaluru, disallowed the claim of ₹4,47,39,679 under Section 11(2) on the ground that Form No. 10 was not filed with the return.

2.3 Explanation for Belated Form 10 and Rectification Attempt

The assessee’s explanation was as follows:

  • At the relevant time, according to the assessee, no facility was available on the income-tax e-filing portal to upload Form No. 10.
  • The assessee stated that it approached the Assessing Officer, who advised it to file the form.
  • Form No. 10 was thereafter uploaded on **20 February 2017`.

Subsequently:

  • The assessee filed a rectification application under Section 154, contending that Form No. 10 had now been filed and was on record, and therefore the disallowance should be rectified.
  • The CPC, through a communication dated **24 February 2017, rejected the rectification request, holding that the prescribed form was not furnished along with the return and hence the condition for accumulation under Section 11(2)` was not satisfied.

3. CIT(A) Proceedings and Findings

The assessee carried the matter before the CIT(A).

3.1 Scope of Allowance and Disallowance

The CIT(A) noted that:

  • CPC had accepted the assessee’s claims regarding application and normal accumulation of income under the other provisions of Section 11.
  • The only controversy pertained to the additional accumulation claimed under Section 11(2) for ₹4,47,39,679.

3.2 Requirement of Electronic Filing of Form 10

Upon examining Section 11 and the relevant rules (particularly Rule 17 read with Rule 12(2) of the Income-tax Rules, 1962), the CIT(A) concluded that:

  • The prescribed statement in Form No. 10 must be filed electronically with the return of income.
  • The assessee itself admitted that Form No. 10 had not been filed either electronically or manually along with the original return.
  • The later electronic upload on 20 February 2017 could not be treated as compliance with the requirement that the form accompany the return.

The CIT(A), relying on judicial precedents that require strict compliance for exemption provisions, upheld the CPC’s action and confirmed the disallowance of ₹4,47,39,679 under Section 11(2).

The CIT(A)’s order was passed on **29 January 2026and was partly in favour of the assessee on other aspects, but adverse regardingSection 11(2)` accumulation. Against this portion, the assessee appealed to the ITAT.

4. Grounds Raised Before the ITAT

In its appeal, the assessee broadly argued: