Delhi ITAT: Late Filing of Form 10B Cannot Be Ground to Deny Section 11 Exemption to Charitable Trust
Background and Overview
The Income Tax Appellate Tribunal, Delhi Bench, has delivered a significant ruling in favour of charitable trusts, reaffirming that the delayed submission of Form 10B does not automatically extinguish an assessee's right to claim exemption under Section 11 of the Income Tax Act, 1961. The Tribunal, in the matter of Managingbody of Shri Haryana Gaushala vs ITO (ITAT Delhi), held that the requirement of filing Form 10B is purely procedural and directory in nature, and a mere technical lapse in meeting the prescribed deadline cannot be used as a weapon to defeat an otherwise valid exemption claim.
This ruling carries considerable weight for charitable and religious trusts across India that may have inadvertently missed the audit report filing deadline, only to face blanket denial of exemption at the assessment stage.
Facts of the Case
The assessee in this matter is a trust duly registered under Section 12A of the Income Tax Act, 1961. For Assessment Year 2021-22, the assessee filed its return of income on 15.03.2022. However, the audit report in Form 10B was filed much later, on 03.09.2024, which was significantly beyond the prescribed deadline — i.e., at least one month prior to the due date of filing the return of income, as mandated under Section 12A(1)(b).
Action Taken by CPC
Upon processing the return, the Centralised Processing Centre (CPC), Bengaluru, disallowed the exemption claimed under Section 11 of the Act. The sole reason cited was the assessee's failure to furnish the audit report in Form 10B within the stipulated timeframe. An intimation order under Section 143(1) of the Income Tax Act, 1961 was issued on 26.10.2022, reflecting the disallowance.
Proceedings Before the First Appellate Authority
Aggrieved by the CPC's action, the assessee approached the Addl./JCIT(A)-2, Jaipur, who passed an order dated 01.01.2025. The First Appellate Authority (FAA) upheld the denial of exemption. The primary reasoning relied upon by the FAA was that the assessee had applied to the Commissioner (Exemptions) for condonation of the delay in filing Form 10B, and that application had been rejected by the competent authority. Based on this, the CIT(A) concluded that there was no irregularity in the CPC's action of denying the exemption.
The assessee, dissatisfied with this outcome, preferred a further appeal before the Delhi Bench of the ITAT.
Key Legal Issue
Whether the belated filing of Form 10B — the audit report required under Section 12A(1)(b) — can be treated as a sufficient ground to outrightly deny exemption under Section 11 of the Income Tax Act, 1961?