Case Law Details
Juba Jyoti Jubak Sangha Vs Central Board of Direct Taxes (CBDT) and others (Orissa High Court)
Core Issue: The principal issue before the Orissa High Court was whether the Commissioner of Income Tax (Exemption) was justified in rejecting the assessee’s application under section 119(2)(b) for condonation of delay in filing the audit reports in Form 10B for Assessment Years 2020-21 and 2021-22, thereby denying exemption under section 12A, despite the delay having been caused by the Covid-19 pandemic and genuine hardship.
Facts: The petitioner, a charitable organization registered under section 12A, sought exemption from income tax for AYs 2020-21 and 2021-22. However, the audit reports in Form 10B, prescribed under Rule 17B, were filed belatedly on 20.04.2022 and 29.03.2022, resulting in delays of 460 days and 73 days, respectively. The petitioner filed an application under section 119(2)(b) seeking condonation of delay, explaining that the delay occurred due to the Covid-19 pandemic and the resulting hardship. The Commissioner of Income Tax (Exemption), Hyderabad rejected the application on the ground that sufficient cause and genuine hardship had not been established, leading to denial of exemption under section 12A. Aggrieved, the petitioner invoked the writ jurisdiction of the High Court.
Findings of the High Court: The Court observed that there was no dispute regarding the period of delay. The only question was whether the delay deserved to be condoned in exercise of the discretionary power under section 119(2)(b). The Court reiterated that the requirement of furnishing the audit report is essentially procedural and that exemption should not be denied merely because the audit report was filed after the prescribed due date, particularly when it is available before completion of the assessment proceedings and sufficient cause is shown.
The Court accepted the petitioner’s explanation that the delay occurred during the Covid-19 pandemic and noted that the Revenue had not effectively disputed the factual assertion that the delay was attributable to the pandemic. It held that the hardship explained by the petitioner constituted “genuine hardship” within the meaning of section 119(2)(b).
The Court further observed that the Commissioner had adopted an unduly technical and pedantic approach while exercising discretionary powers. Instead of examining the application pragmatically, the authority rejected it without appreciating the object of section 119(2)(b), which is intended to mitigate genuine hardship. The discretion vested in the Commissioner under CBDT Circular No. 10/2019 dated 22.05.2019 and CBDT Circular No. 16/2024 dated 18.11.2024 ought to have been exercised liberally where sufficient cause existed.
Relying upon its earlier decision in Action Research for Health and Socio-economic Development v. CBDT (2025) and the decision of the Gujarat High Court in Sarvodaya Charitable Trust v. ITO (Exemption), the Court reiterated the settled principle that when substantial justice and technical considerations are in conflict, the cause of substantial justice must prevail. Mere delay in filing Form 10B cannot deprive a charitable institution of substantive exemption where the delay is bona fide and adequately explained.
The Court concluded that the Commissioner had failed to apply his mind in the proper perspective and that the rejection of the condonation application amounted to an arbitrary exercise of discretion under section 119(2)(b).
Decision: The Orissa High Court set aside the order dated 24.01.2023 rejecting the condonation application and remitted the matter to the concerned authority with a direction to treat the audit reports in Form 10B for AYs 2020-21 and 2021-22 as having been filed within the prescribed time by invoking section 119(2)(b). The authority was further directed to consider the petitioner’s claim for exemption under section 12A on that basis and grant all consequential reliefs in accordance with law.
Key Principle: The power under section 119(2)(b) is intended to alleviate genuine hardship and must be exercised in a pragmatic, justice-oriented manner. Delay in filing Form 10B, particularly during the Covid-19 period, should not defeat a substantive claim for exemption under section 12A when the audit report is available before assessment and the delay is satisfactorily explained.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. Mr. Rudra Prasad Kar, learned Senior Advocate enters appearance on behalf of the petitioner and files his appearance memo in Court today, which is taken on record.
2. Challenging the order dated 24th January, 2023 (Annexure-1) rejecting the petition for condonation of delay filed under Section 119(2)(b) of the Income Tax Act, 1961 for filing the audit report in Form 10B prescribed under Rule 17B of the Income Tax Rules, 1962 (for short, “IT Rules”) for claiming exemption from payment of income tax under Section 12A of the Income Tax Act, 1961 (for brevity, “IT Act”) for the Assessment Years 2020-21 and 2021-22 by the Commissioner of Income Tax (Exemption), Hyderabad (“CIT”, abbreviated), the Petitioner has approached this Court by way of filing this writ petition under Articles 226 & 227 of the Constitution of India.
3. Learned Senior Advocate appearing for the Petitioner submitted that despite sufficient cause being shown, Opposite Party No.2 has rejected the application for condonation of delay of 460 and 73 days respectively in filing the audit report. It is submitted that the delay was caused due to Covid-19 Pandemic, which was not appreciated by the said authority.
3.1. Learned Senior Advocate advanced and valiantly argued that reasons given by the CIT to disallow the exemption claimed in the returns are not sustainable. Though the audit reports in Form 10B could be filed even before the assessment, the same was filed on 20th April, 2022 and 29th March, 2022. The audit reports were due for submissions 15th January, 2021 and 15th January, 2022. Thus, there was only 460 and 73 days’ delay. The approach of the CIT indicates pedantic; rather utilizing his judicial discretion he should have been pragmatic in his approach. He, therefore, submitted that under Section 119(2)(b) of the Income Tax Act by virtue of Circular No. 10 of 2019, dated 22.05.2019 and circular No. 16 of 2024 dated 18.11.2024, the CIT has been delegated with power to exercise discretion while dealing with the application for condonation of delay in filing the Form 10B for the Assessment Years 2020-21 and 2021-22. Despite such discretion is conferred on the CIT, the reason for the delay being not appreciated appropriately, the order is susceptible to be interfered with in the present proceeding, as such the same is liable to be set aside.
3.2. He strenuously urged that serious prejudice would ensue to the Petitioner if 460 and 73 days’ delay is not condoned as the audit report under Section 12A read with Rule 17B is required to be considered by the competent authority for the purpose of claiming benefits under the IT Act.
3.3. To buttress his argument, he placed reliance on the decision of the Gujarat High Court in Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption), (2021)18 ITR-OL 253 (Guj) and contended that the provision relating furnishing of audit report with the return is to be treated as procedural and the same could be filed even before the assessment.
4. Mr. Avinash Kedia, learned Junior Standing Counsel for the Income Tax Department submitted that the CIT exercising his discretion under Section 119(2)(b) of the IT Act rejected the application for condonation of delay having found no sufficient cause shown by the Petitioner. He submitted that genuine hardship being not demonstrated by the Petitioner, the rejection of petition for condonation of delay is not unjustified.
5. Heard learned Senior Advocate appearing for the Petitioner and learned Junior Standing Counsel for Income Tax Department.
6. Considering the rival submissions made by the learned counsel for the respective parties, this Court is satisfied that there is no dispute with regard to delay of 460 days and 73 days in submitting the audit reports in Form-10B prescribed under Rule 17B of the IT Rules in order to claim benefit under Section 12A of the IT Act for the Assessment Years 2020-2021 and 2021-22.
6.1. This Court is of the considered view that the benefit of exemption should not have been denied merely on account of delay in furnishing audit report, which could be produced at a later stage either before the Assessing Officer or the Appellate Authority by assigning sufficient cause. This Court also takes cognizance of the fact that at an around 13.03.2022, Covid-19 Pandemic was continuing and it is believed that the contention of the Advocate for the Petitioner that on account of suffering from Covid-19 the audit report could not be furnished. Such a stance of the petitioner sounds genuine since no objection is raised by the learned Senior Standing Counsel for the Income Tax against such statement.
6.2. This Court, taking note of such identical plea and taking cognizance of Covid-19 Pandemic situation at and around the date of filing of audit report in 2022, has elaborately discussed the factors of consideration of petition for condonation of delay in the case of Action Research for Health and Socio-economic Development vs. Central Board of Direct Taxes (CBDT) and others, W.P.(C) No.8035 of 2025 which stood disposed of vide judgment dated 25.04.2025.
6.3. Considering the facts and situation of the said case and applying the legal position discussed in similar fact-situation as obtained in Action Research for Health and Socio-economic Development (supra), this Court is of the opinion that the Commissioner of Income Tax (Exemption), Hyderabad has not applied his conscientious mind in proper perspective. Taking cognizance of well-established principle that when technical consideration and cause of substantial justice are pitted against each other, it is the substantial justice which is to prevail, this Court holds that mere technicality should not have been ground for claim of exemption under Section 12A of the IT Act. Thus, the CIT has failed to consider the application for condonation of delay in its right earnest under the provisions of Section 119(2)(b) of the Income Tax Act, 1961 read with power conferred by virtue of Circular No. 10/2019, dated 22.05.2019 and circular No. 16 of 2024 dated 18.11.2024.
6.4. Ergo, finding that there was “genuine hardship” faced by the petitioner during the relevant period and refusal to condone the delay invoking power under Section 119(2) of the IT Act being arbitrary exercise of discretion having regard to the fact-situation, Order dated 24th January, 2023 passed by the Commissioner of Income Tax (Exemption), Hyderabad-opposite party No. 1 (Annexure-1) is hereby set aside. The matter is remitted to the authority concerned (O.P. No. 3) to consider audit report in Form 10B furnished under Rule 17B of the Income Tax Rules to claim exemption under Section 12A of the Income Tax Act and in consequence thereof, the opposite party no. 3 is directed to grant all consequential relief to the petitioner by taking into account the Audit Report in Form 10B pertaining to the Assessment Years 2020-21 and 2021-22 submitted on 20th April, 2022 and 29th March, 2022, as if the same is filed within period specified invoking Section 119(2)(b) of the Income Tax Act, 1961.
6.5. With the observation made supra and directions issued, the writ petition stands disposed of. As a result of the disposal of the writ petition, all pending interlocutory applications, if any, shall stand disposed of.
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