Mumbai ITAT: Revised Form 10B Submitted Within CPC-Granted Time Must Be Considered — ₹25.56 Crore Section 11 Claim Restored
Case Overview
Case Name: DCIT Vs Bharat Diamond Bourse (ITAT Mumbai)
Appeal Number: ITA 4818/MUM/2026
Date of Order: 21/08/2026
Assessment Year: 2023-24
Forum: Income Tax Appellate Tribunal, Mumbai
Background and Factual Matrix
Bharat Diamond Bourse, a not-for-profit entity incorporated under Section 25 of the Companies Act, 1956 and presently governed by Section 8 of the Companies Act, 2013, holds registration under Section 12A of the Income Tax Act, 1961. For Assessment Year 2023-24, the organisation filed its return of income in Form ITR-7 on 23/10/2023, declaring total income as Nil after availing exemption under Section 11 of the Act.
Among the various claims made in the return, the assessee had specifically claimed accumulation/deemed application of income to the extent of 15% under Section 11(1)(a), amounting to ₹25,56,37,629/-. This figure was correctly reflected in the return of income as filed. However, at the time the auditor submitted the audit report in Form 10B, the relevant column capturing this accumulation amount was inadvertently left blank — an omission that would subsequently trigger a cascading sequence of events before the Centralized Processing Centre (CPC), Bengaluru, and ultimately before the Mumbai Bench of the Income Tax Appellate Tribunal.
What Happened During CPC Processing
The Initial Mismatch
When the CPC, Bengaluru processed the return under Section 143(1), it detected a discrepancy between the 15% accumulation claim declared in the ITR-7 and the corresponding entry in the original Form 10B, which showed the figure as nil. Acting on this inconsistency, the CPC issued a communication dated 20/12/2024 to the assessee, formally pointing out the mismatch and granting a period of 30 days to furnish a response or explanation.
The Assessee's Timely Response
Upon receiving the CPC's notice, the assessee promptly filed a revised Form 10B that correctly reflected the 15% accumulation amount of ₹25,56,37,629/-, in alignment with what had already been disclosed in the original return of income. This revised Form 10B was furnished on 27/12/2024 — well within the 30-day window specifically provided by the CPC.
Premature Processing by CPC
Despite having issued the clarification notice and allowing a 30-day response period, the CPC completed the processing of the return on 23/12/2024 — that is, before the response period had even expired and without considering either the assessee's explanation or the revised Form 10B. As a consequence, the entire amount of ₹25,56,37,629/- was treated as taxable income, resulting in a total assessed income of ₹25,56,37,630/- as against the Nil income declared in the return.
Proceedings Before CIT(A)
Aggrieved by the intimation issued under Section 143(1), the assessee filed an appeal before the Learned Commissioner of Income Tax (Appeals)/Addl./JCIT(A)-1, Ludhiana.
Before the appellate authority, the assessee contended that:
- The omission in the original Form 10B was entirely inadvertent and attributable to the auditor.
- The claim of 15% accumulation was correctly and transparently disclosed in the original ITR-7.
- The CPC had itself acknowledged the discrepancy by issuing a notice on 20/12/2024 and had granted 30 days to respond.
- The CPC processed the return prematurely, before the 30-day period elapsed and without considering the revised Form 10B.
- Reliance was placed on Additional CIT v. A.L.N. Rao Charitable Trust (1995) 216 ITR 697 (SC).
The Ld. CIT(A), after examining the intimation under Section 143(1), the audit report, the return of income, written submissions and supporting documents, concluded that the omission was inadvertent in nature and had been duly rectified by the revised Form 10B. The appellate authority directed the Assessing Officer to allow the deduction/deemed application of income to the extent of 15% under Section 11(1) of the Act amounting to ₹25,56,37,629/-.