Missed Form 10? ITAT Gives Trust a Lifeline – AO Directed to Await Condonation Decision Before Denying Section 11(2) Benefit

Friends of Sick Association Vs ITO (Exemption) (ITAT Bangalore)

Missed Form 10? ITAT Gives Trust a Lifeline – AO Directed to Await Condonation Decision Before Denying Section 11(2) Benefit

The Bangalore ITAT granted relief to Friends of Sick Association by restoring the matter to the Assessing Officer where exemption under Section 11(2) had been denied merely because Form 10 was not filed within the prescribed time, resulting in taxation of accumulated income of ₹93.36 lakh and a consequential demand of about ₹34.28 lakh.

The CPC, while processing the return under Section 143(1), denied the accumulation benefit under Section 11(2) on the ground that Form 10 had not been filed before the due date. The appellate authority upheld the adjustment, observing that Form 10 was filed only on 14.02.2025, after the intimation under Section 143(1) had already been issued, and therefore the statutory requirement had not been complied with.

Before the Tribunal, the assessee explained that Form 10 had not been filed due to an inadvertent error on the part of the auditor. Immediately upon noticing the omission after receipt of the intimation, the trust filed Form 10 and thereafter submitted an application before the CIT(Exemptions) under Section 119(2)(b) seeking condonation of delay. The condonation application was still pending.

The Tribunal noted that this was not a case where Form 10 had never been filed, but rather a case of delayed filing coupled with a pending condonation request before the competent authority. Considering the circumstances, the ITAT held that the proper course would be to restore the matter to the Assessing Officer and direct him to take a decision in accordance with law after the condonation application is decided.

Accordingly, the issue was remanded to the AO with a direction to act based on the outcome of the condonation proceedings and after granting a reasonable opportunity to the assessee.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This appeal at the instance of the assessee is directed against the order of ld. Addl/JCIT(A)-6, Mumbai dated 10.11.2025 vide DIN & Order No.ITBA/APL/S/250/20225-26/1082446371(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2024-25.

2. The assessee has raised the following grounds of appeal:-

1. The Order of the learned Commissioner passed under section 250 of the Act is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant’s case.

2. The Appellant denies to be assessed to tax on total income as determined by the learned AO of Rs. 93,36,280/- as against the total income declared as Nil on the facts and circumstances of the case.

3. The learned Commissioner of Income-tax (Appeals) erred in holding that the Appellant has no interest in pursuing the appeal despite the Appellant being unaware of the notice issued u/s 250 of the Act in the facts and circumstances of the case.

4. The Ld. CIT(A) erred in law and on facts in upholding the disallowance of accumulation u/s 11(2) of 93,36,275/- merely on the ground of delay in filing Form-10, without appreciating that the Appellant had duly disclosed the accumulation in the return of income and audited statements.

5. The Ld. CIT(A) erred in law in placing reliance on decisions that are wholly inapplicable to the issue under consideration, such as Dilip Kumar & Company (SC), which deal with strict interpretation of fiscal incentive provisions and not with the procedural requirement of filing Form-10 under Section 11(2).

6. The Ld. CIT(A) failed to appreciate that denial of exemption defeats the purpose of Section 11 and amounts to taxation of a charitable trust on a mere procedural lapse.

8. The Ld. CIT(A) has erred in law and on facts in failing to adjudicate several specific grounds raised by the Appellant and in not dealing with the submissions made in the course of appellate proceedings.

8. The Appellant craves leave of this authority to add, alter, delete or substitute any of the grounds urged above.

9. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity.

3. Brief facts of the case are that assessee filed its return for AY 2024-25 on 15.11.2024 by declaring total taxable income of Rs. Nil. The said return was thereafter processed and accordingly intimation u/s 143(1) of the Act was passed on 29.1.2025 wherein the CPC determined the total income of Rs.93,36,280/- and determined the tax payable amounting to Rs.34,27,636/- thereon by not granting the exemption claimed u/s 11 (2) of the Act amounting to Rs.93,36,280/- on account of non-filing of Form10.

4. Aggrieved by the intimation passed u/s 143(1) of the Act dated 29.1.2025, the assessee preferred an appeal before the ld. CIT(A)/Addl/JCIT(A).

5. The ld. Addl. JCIT(A)-6 Mumbai dismissed the appeal of the assessee by holding that the assessee was required to file Form No.10 as per section 11 (2) of the Act r.w. Rule 17(2) on or before the due date as per the Income Tax Act. Further, ld. Addl/JCIT(A) observed that the assessee has filed Form 10 on 14.2.2025 which is after the passing of intimation dated 29.1.2025 and accordingly held that CPC was correct in denying the claim of exemption of Rs.93,36,275/- u/s 11(2) of the Act. Lastly, the ld. Addl./JCIT(A) also held that it is a trite law that if a thing is said to be done in a particular manner, it shall be done in that manner and its performance in any other mode or fashion shall be of no consequence and therefore, the ld. Addl/JCIT(A) did not inclined to interfere with the decision of the AO.

3. Again, aggrieved by the order of ld. Addl/JCIT(A)-6 Mumbai, the assessee has filed the present appeal before this Tribunal.

7. Before us, the ld. A.R. of the assessee filed a synopsis along with evidence of filing Form No.10 as well as copy of the application filed before the ld. CIT(Exemptions), Bengaluru seeking condonation of delay in filing Form 10. Further, the ld. A.R. of the assessee vehemently submitted that as the condonation application is still pending before the ld. CIT(Exemptions), Bengaluru this appeal may be remitted to the file of AO with a direction to take a decision in accordance with law after application for condonation of delay filed by the assessee is disposed of by the competent authority.

8. The ld. D.R. on the other hand, also fairly conceded that the case of the assessee may be remitted to the file of AO with a direction to act accordingly as per the result of condonation application.

9. We have heard the rival submissions and perused the materials available on record. The only dispute in the present case is related to disallowance of exemption claimed of Rs.93,36,275/-u/s 11(2) of the Act. On going through the intimation passed u/s 143(1) of the Act, the claim made u/s 11(2) of the Act has been disallowed as per provisions of section 143(1)(a)(ii) of the Act as the assessee had not filed the Form 10 for claiming the accumulation of income. Before us, the ld. A.R. of the assessee vehemently submitted that the CPC denied the exemption claimed u/s 11 solely on the ground that Form 10 was not filed within the prescribed time and consequently determined the total income at Rs.93,36,280/- and raised a demand of Rs.34,27,640/-. Therefore, in our considered opinion, it is not a case that no Form 10 has been filed. In fact, the contention of the assessee is that upon receipt of the intimation u/s 143(1) of the Act, the assessee realized thereafter that Form 10 had not been filed due to an inadvertent error on the part of the auditor and the same was subsequently filed on 14.2.2025. It is also submitted before us that an application for condonation of delay in filing of the form 10 u/s 119(2)(b) of the Act was also filed on 28.3.2025 before the ld. CIT(Exemptions, Bengaluru which is still pending for consideration and accordingly prayed that the present issue may be remitted to the file of AO with a direction to take a decision in accordance with law after application for condonation of delay filed by the assessee is disposed of by the competent authority. This being so, in the interest of justice, equity and fair play and as requested by the ld. A.R of the assessee, we deem it fit and proper to restore the matter to the file of AO with a direction to take a decision in accordance with law after application for condonation of delay filed by the assessee is disposed of by the competent authority. Needless to say, a reasonable opportunity must be granted to the assessee. Thus, the AO is directed to take action in accordance with law based on the outcome of the application for condonation of delay. It is ordered accordingly.

10. In the result, appeal filed by the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 29th May, 2026