ITAT Delhi: Section 11 relief cannot be refused merely for late e‑filing of Form 10B

1. Background of the dispute

The Delhi Bench of the Income Tax Appellate Tribunal in B R Hospital Research Institute Vs ITO (ITAT Delhi) examined whether a charitable institution registered under the Income Tax Act 1961 can be denied exemption under Section 11 for AY 2018-19 only because the audit report in Form 10B was not furnished electronically along with the return of income.

The Centralized Processing Centre (CPC) had issued an intimation under Section 143(1) dated 21.05.2019, in which the assessee’s claim for exemption under Section 11 was rejected on the ground that Form 10B had not been filed with the return. The National Faceless Appeal Centre (NFAC), acting through the Ld. CIT(A), confirmed this action, holding that only the CIT (Exemptions) had jurisdiction to condone delay in filing Form 10B and the appellate authority could not step into that role.

On further appeal, the ITAT Delhi considered:

  • Whether the absence of e‑filed Form 10B along with the original return is a substantive bar to Section 11 exemption, or only a procedural/ directory requirement; and
  • Whether reliance by the Revenue on strict-interpretation decisions such as Commissioner of Customs v. Dilip Kumar & Company and PCIT v. Wipro Limited was justified in the context of late filing of Form 10B.

The Tribunal eventually granted relief to the assessee, holding that the audit-report filing requirement, in the facts of the case, was directory, and directed the Assessing Officer to allow exemption under Section 11. Certain other grounds were restored to the file of the Assessing Officer for fresh adjudication.

2. Grounds of appeal before the ITAT

The assessee raised a wide array of grounds challenging the intimation under Section 143(1) dated 21.05.2019, including jurisdictional issues, denial of Section 11 exemption, scope of processing under Section 143(1), and related interest and computation aspects.

Key elements of the grounds included:

  • Challenge to the validity of the Section 143(1) intimation as being without proper jurisdiction and application of mind.
  • Contention that exemption under Section 11 was duly available and wrongly denied.
  • Objection to CPC making disallowances that, according to the assessee, went beyond the permissible adjustments under Section 143(1).
  • Specific grievance that disallowance of Rs. 7,02,026/- as application of income was unjustified.
  • Assertion that the audit report under Section 10B (as mentioned in the grounds; contextually, Form 10B for Section 11) had been duly obtained and its filing was only a procedural requirement.
  • Alternate plea that if Section 11 exemption was not allowed, the expenditure of Rs. 7,02,026/- ought to be allowed as a deduction under Section 37 as it was directly relatable to income generation.
  • Challenge to levy of interest under Section 234B and Section 234C.

During the hearing, the assessee’s Authorised Representative clarified that Grounds 1 to 5 were not being pressed at this stage. The Tribunal, therefore, dismissed those grounds as not pressed and focused mainly on Grounds 6 and 7, with consequential consideration of Grounds 8 and 9.

3. Assessee’s submissions on delayed Form 10B (Grounds 6 & 7)

3.1 Core contention

On Grounds 6 and 7, the assessee argued that:

  • The audit report in the prescribed form had in fact been obtained within time;
  • The assessee failed to upload it electronically along with the return, but the physical audit report existed and was available;
  • The requirement of furnishing Form 10B along with the return is procedural and directory, not a rigid condition that wipes out entitlement to exemption if not met strictly; and
  • Audit-report details were reflected in the return, evidencing substantial compliance.

The assessee emphasized that denial of Section 11 exemption purely on such a technical lapse would be contrary to various judicial precedents treating such requirements as directory when the substantive eligibility for exemption is otherwise satisfied.

3.2 Case laws relied upon by the assessee

The assessee placed reliance on several decisions, inter alia:

  • CIT v. Software Technologies Parks of India, 2019 (8) TMI 168 (Delhi High Court)
  • Shri Chandraprabhuji Maharaj Jain Juna Mandir Trust v. DCIT(E), (2019) 266 Taxman 399 (Madras High Court) – concerning Form 10 and condonation of procedural lapses.
  • CIT (Exemptions) v. Shree Shyam Mandir Committee, (2018) 400 ITR 466 (Rajasthan High Court)
  • SNDP Yogam v. ADIT (Exemption), (2016) 46 CCH 0736
  • Association of Corporation and Apex Societies of Handlooms v. ADIT, (2013) 351 ITR 287 (Delhi High Court)
  • ACIT v. Hi-Line Pens Pvt. Ltd., 2013 (9) TMI 440 (ITAT Delhi) – on allowing deduction under Section 80IB despite delayed filing of Form 10CCB.
  • CIT v. Xavier Kelavani Mandal (P.) Ltd., 2012 (9) TMI 1049 (Gujarat High Court)

In particular, CIT v. Xavier Kelavani Mandal (P.) Ltd. was stressed for the proposition that:

  • Filing the relevant audit report is a procedural requirement;
  • It can be complied with at a later stage (even in appeal) without losing the substantive benefit; and
  • Where the audit report existed before filing of the return, mere delay in furnishing it with the return is not a ground to deny statutory relief.