ITO Vs Laxmanarayan Dev (ITAT Ahmedabad)
The appeal before the Income Tax Appellate Tribunal, Ahmedabad concerned the denial of exemption under Section 11 of the Income Tax Act, 1961 for Assessment Year 2017–18 on account of late filing of the audit report in Form No. 10B as required under Section 12A(1)(b). The Revenue challenged the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, which had allowed the assessee’s claim.
The assessee is a public charitable trust engaged in educational activities, operating schools and a Yogashram. It has been registered under Section 12AA since 1 April 2004 and is also approved under Section 80G. For A.Y. 2017–18, the assessee filed its return of income on 11 October 2017 declaring nil income. However, the audit report in Form 10B was not uploaded along with the return. Due to communication gaps, the assessee did not respond to communications from the Central Processing Centre (CPC). Consequently, the CPC processed the return under Section 143(1) on 24 March 2019, denied exemption under Section 11, and raised a tax demand of ₹1,52,42,281.
During appellate proceedings, the assessee electronically uploaded Form 10B on 27 February 2021. It admitted that there was a procedural delay in filing the audit report, attributing it to technical issues. The assessee relied on several judicial precedents, including a judgment of the Gujarat High Court in CIT v. Xavier Kelavani Mandal (P.) Ltd., which held that filing Form 10B at a later stage—either before the Assessing Officer or at the appellate stage—constitutes sufficient compliance, as the requirement is directory rather than mandatory. Additional reliance was placed on judgments from various High Courts consistently holding that exemption under Section 11 should not be denied merely because the audit report was filed belatedly, provided substantive conditions were satisfied.
