Delayed Form 10B Filing Does Not Forfeit Exemption Under Sections 11 & 12 When Report Precedes Return Processing: ITAT Mumbai

Case Reference

Rotary Club of Bombay Queens Necklace Charitable Trust Vs ITO (Exem.) (ITAT Mumbai)
Assessment Year: 2023–24
Order Date: 06th March 2026
**Appeal No.😗* ITA No. 8306/Mum/2025

Background and Factual Matrix

The assessee in this case is a public charitable trust, duly registered under the Maharashtra Public Trusts Act, 1950 and also holding registration under Section 12AB of the Income Tax Act, 1961. Assessed in the capacity of an Association of Persons (AOP Trust), the assessee had been consistently claiming exemption benefits under Sections 11 and 12 of the Act in prior years.

For Assessment Year 2023–24, the assessee e-filed its return of income within the extended due date of 30.11.2023, declaring a total income of Rs. 8,750/- and simultaneously claiming a tax refund of Rs. 1,01,089/-. The return was filed through ITR-7, bearing acknowledgement number 533475680291123.

A critical procedural requirement applicable to such trusts is the submission of an audit report in Form No. 10B, as mandated under Section 12A(1)(b) of the Income Tax Act, 1961. The extended due date prescribed for filing this form for AY 2023–24 was 31.10.2023. The assessee filed Form No. 10B on 29.11.2023, thereby incurring a delay of 29 days beyond the prescribed deadline. The acknowledgement number for the Form 10B submission was 533536960291123.

A pivotal factual element — one that would go on to significantly influence the Tribunal's reasoning — is that Form No. 10B was filed on 29.11.2023, one day before the return of income was filed on 30.11.2023. In other words, the audit report was already on record at the time the return was submitted and, more critically, when the Centralized Processing Centre (CPC) subsequently processed that return.

Action Taken by the CPC and Revenue Authorities

The Centralized Processing Centre, Bengaluru, processed the assessee's return under Section 143(1) of the Income Tax Act, 1961 and issued an intimation dated 18.11.2024. Despite the audit report being available on the system at the time of processing, the CPC denied the exemption claimed under Sections 11 and 12 solely on the ground that Form No. 10B had not been uploaded within the stipulated due date.

As a result of this denial, the CPC made substantial additions of Rs. 31,31,790/-, representing the amounts accumulated or set apart for application to charitable or religious purposes under Section 11(1)(a) of the Act. The total income was thereby recomputed at Rs. 31,40,538/-, against the originally declared figure of Rs. 8,748/-. After adjusting the refund of Rs. 1,01,089/-, the CPC raised a tax demand of Rs. 8,56,040/- against the assessee.

The assessee challenged this action by filing a response to the proposed adjustment notice (DIN No. EFL/2324/G22/ITR000596100909 dated 17.12.2023), disagreeing with the disallowance. However, the CPC proceeded with the addition.

Appeal Before the CIT(A) and Its Outcome

Aggrieved by the intimation under Section 143(1), the assessee preferred an appeal before the learned Commissioner of Income Tax (Appeals). Before the CIT(A), the assessee placed on record detailed reasons explaining the delay in filing Form No. 10B: