DCIT Vs Bharat Diamond Bourse (ITAT Mumbai)
Revised Form 10B Filed Within Time Granted by CPC Cannot Be Ignored: Mumbai ITAT Protects ₹25.56 Crore Section 11 Claim
The assessee, a Section 8 company registered under Section 12A, claimed 15% accumulation of income amounting to ₹25.56 crore under Section 11(1)(a) in its original return. However, the auditor inadvertently omitted the amount in the original Form 10B, leading the CPC to deny the claim while processing the return under Section 143(1).
The CPC had issued a communication dated 20 December 2024 pointing out the mismatch and granted the assessee 30 days to respond. The assessee furnished a revised Form 10B containing the correct particulars within that period. Nevertheless, the CPC processed the return before considering the response and assessed ₹25.56 crore as income.
The Mumbai ITAT held that this was not merely a case of belated filing requiring condonation. Once the CPC itself granted an opportunity to rectify or explain the discrepancy, the revised Form 10B submitted within that time was required to be considered.
The Tribunal distinguished the Supreme Court’s decision in PCIT v. Wipro Ltd., observing that the assessee here had acted within the specific opportunity granted during processing. Consequently, the question of the CIT(A)’s jurisdiction to condone delay did not arise.
The matter was restored to the AO/CPC to verify the revised Form 10B and examine the Section 11 claim in accordance with law. The Revenue’s appeal was dismissed.
List of Cases Discussed / Relied Upon
- DCIT Vs Bharat Diamond Bourse (ITAT Mumbai)
- Additional CIT v. A.L.N. Rao Charitable Trust (1995) 216 ITR 697 (SC)
- PCIT v. Wipro Ltd., (2022) 140 taxmann.com 223 (SC)
- Collector, Land Acquisition, Anantnag & Anr. v. Mst. Katiji & Ors., 167 ITR 471 (SC)
- N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Present appeal filed by revenue arises out of the order dated 05/02/2026 passed by Learned Commissioner of Income Tax, Appeal/ADDL/JCIT (A)-1 Ludhiana [hereinafter referred to as “Ld.CIT(A)”] for AY 2023-24, on the following grounds of appeal:-
“1) On the facts and circumstances of the case and in law, the Ld. Addl/ Jt. CIT(A) 1, Ludhiana has erred in directing the Assessing Officer to allow deduction/deemed application of income to the extent of 15 percent under section 11(1) of the Income Tax Act, 1961 amounting to Rs. 25,56,37,629/, without appreciating that the assessee had failed to furnish a complete and correct audit report in Form 10B within the prescribed time.
2) On the facts and circumstances of the case and in law, the Ld Addl/ Jt. CIT(A) 1, Ludhiana has erred in granting the benefit of deemed application of income u/s. 11(1) of the Act by relying upon the decision of the Honble Supreme Court in the case of Addl CIT and Ors vs A L N Rao Charitable Trust (1995) 216 ITR 697 (SC) without appreciating that the said decision is not applicable to the facts of the instant case, as the assessee had failed to comply with the mandatory statutory requirement of furnishing a complete and correct audit report in Form 10B within the prescribed time and had also filed the revised audit report belatedly, ie after the due date and even after completion of processing of return under section 143(1), without obtaining any condonation of delay from the competent authority.
3) On the facts and circumstances of the case and in law, the Ld. Addl/ Jt. CIT(A) 1, Ludhiana has erred in holding that the omission in the audit report was merely inadvertent and curable, without appreciating that compliance with filing of audit report in prescribed form within due date is a mandatory condition for claiming exemption u/s. 11 of the Act.
4) On the facts and circumstances of the case and in law, the Honble ITAT failed to appreciate binding judicial precedence of Honble Supreme Court in the case of PCIT Vs Wipro Ltd (2022) (140 taxman.com 223)(SC) wherein the Honble Apex Court has held that the twin conditions of filing the prescribed declaration and filing it within the prescribed time are both mandatory, and not directory in nature, in order to claim the benefit of exemption reiterating that the statutory provisions, esp. the exemption provisions, are to be construed literally and strictly.
5) On the facts and circumstances of the case and in law, the Ld. Addl./Jt. CIT(A) 1, Ludhiana has erred in granting relief to the assessee by effectively condoning the delay in filing the revised audit report in Form 10B, which is beyond her jurisdiction, as such condonation is governed by the provisions of section 119(2)(b) of the Act and can be exercised only by the competent authority authorized by the CBDT, and therefore, the impugned order is contrary to law and liable to be set aside.
6) The appellant craves leave to add, amend, alter vary and/OR withdraw any the grounds of appeal.”
1.1. At the outset, it is noticed from the appeal record that there is a delay of 134 days in filing the present appeal by the Revenue.
The Revenue has furnished an explanation for the delay and has prayed for condonation thereof. We have considered the explanation furnished by the Revenue and find the same to be reasonable and sufficient for explaining the delay in filing the present appeal. It is well settled that the expression “sufficient cause” employed in the law of limitation is required to receive a liberal and justice-oriented interpretation so as to advance substantial justice, rather than to defeat a meritorious cause on technical considerations. The Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag & Anr. v. Mst. Katiji & Ors., reported in 167 ITR 471 (SC), has held that the expression “sufficient cause” is adequately elastic to enable the Courts to do substantial justice by disposing of matters on merits and that the State, as a litigant, is also entitled to an even-handed application of the law. Further, in N. Balakrishnan v. M. Krishnamurthy, reported in (1998) 7 SCC 123, the Hon’ble Supreme Court has held that the length of delay is not decisive and that acceptability of the explanation is the relevant consideration. In the present case, having regard to the explanation furnished and the overall facts and circumstances of the case, we are satisfied that the Revenue was prevented by sufficient cause from filing the appeal within the prescribed period. Accordingly, in the interest of substantial justice, the delay of 134 days in filing the present appeal is hereby condoned and the appeal is admitted for adjudication on merits.
2. Brief facts of the case are as under:-
The assessee is a company incorporated u/s. 25 of the Companies Act, 1956, now governed by section 8 of the Companies Act, 2013, and is a not-for-profit organisation registered u/s. 12A of the Income-tax Act, 1961. For AY 2023-24, the assessee filed its return of income in Form ITR-7 on 23/10/2023, declaring total income at Nil after claiming exemption u/s. 11 of the Act. The assessee had, inter alia, claimed accumulation/deemed application of income to the extent of 15% u/s. 11(1)(a) amounting to Rs. 25,56,37,629/-.
2.1. The return of income was processed by the CPC, Bengaluru u/s. 143(1) on 23/12/2024. While processing the return, the CPC did not allow the claim of accumulation/deemed application of income to the extent of 15% u/s. 11(1)(a), resulting in determination of total income at Rs. 25,56,37,630/-, as against the Nil income returned by the assessee. The assessee’s claim of Rs. 25,56,37,629/- towards 15% accumulation was reflected in the return, but the same was computed at Nil while processing the return.
2.2. The assessee submitted that, while filing the audit report in Form 10B, the auditor had inadvertently omitted to mention the amount of accumulation/deemed application of income to the extent of 15% u/s. 11(1)(a), although the said claim had correctly been made in the original return of income. It was further submitted that the error was subsequently rectified by filing a revised Form 10B, wherein the amount of Rs. 25,56,37,629/- was duly reflected. The assessee had also received a communication dated 20/12/2024 from the CPC seeking clarification regarding the mismatch between the amount reported in the return and the audit report.
2.3. In response to the aforesaid communication, the assessee furnished its explanation on 27/12/2024, stating that the omission in the original Form 10B was inadvertent and had been rectified by filing the revised Form 10B. However, the CPC had already processed the return u/s. 143(1) on 23/12/2024 and, consequently, the said response was not considered while issuing the intimation.
Aggrieved by the aforesaid intimation u/s. 143(1), the assessee preferred an appeal before the Ld. CIT(A).
3. During the appellate proceedings, the assessee submitted that the omission in the original Form 10B was merely an inadvertent error committed by the auditor, which had subsequently been rectified. It was further submitted that the assessee had correctly made the claim of 15% accumulation in its original return and that the CPC had completed the processing of the return before expiry of the period granted to the assessee for responding to the clarification notice dated 20/12/2024. The assessee also relied upon the decision of the Hon’ble Supreme Court in Additional CIT v. A.L.N. Rao Charitable Trust (1995) 216 ITR 697 (SC).
3.1. The Ld.CIT(A), upon considering the intimation u/s. 143(1), the audit report, return of income, written submissions and supporting documents, noted that the assessee was registered u/s. 12A and that the CPC had denied the deduction u/s. 11(1) primarily on account of the mismatch between the claim made in the return of income and the original Form 10B. The Ld. CIT(A) further noted that the assessee had inadvertently omitted to mention the amount of 15% accumulation/deemed application in the relevant column of Form 10B and had subsequently rectified the omission by filing the revised Form 10B.
3.2. Accordingly, the Ld. CIT(A) held the contention of the assessee to be tenable and directed the AO to allow deduction/deemed application of income to the extent of 15% u/s. 11(1) of the Act amounting to Rs. 25,56,37,629/-. The ground raised by the assessee was accordingly allowed.
Aggrieved by the aforesaid order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.
4. The Ld.DR submitted that the Ld. CIT(A), who had condoned the delay, was not the jurisdictional authority in the facts of the present case. According to him, an Additional CIT(A) had no jurisdiction to condone the delay in furnishing Form 10B by the assessee. He, therefore, submitted that the impugned order was passed without jurisdiction and supported the order of the CPC. The Ld. DR placed reliance on the decision of the Hon’ble Supreme Court in PCIT v. Wipro Ltd., reported in (2022) 140 taxmann.com 223 (SC).
4.1. The Ld.DR further submitted that the decision relied upon by the Ld. AR in ALN Rao Charitable Trust (supra) is distinguishable on facts, since, in the present case, the assessee had failed to comply with the statutory requirement of furnishing the prescribed audit report in Form 10B within the stipulated time.
4.2. Per contra, the Ld.AR submitted that the CPC had issued notice dated 20/12/2024, pointing out the mismatch and granting the assessee 30 days’ time to respond to the same. The said notice is placed at pages 102 to 104 of the paper book. It was submitted that, within the period so allowed, the assessee furnished the revised Form 10B, wherein the accumulation to the extent of 15% was correctly reported, in conformity with the disclosure already made in the return of income. The Ld. AR submitted that the CPC, however, failed to take into consideration the revised Form 10B furnished in response to its notice and proceeded to make the disallowance under section 11(1) of the Act.
4.3. The Ld.AR thus contended that, in the facts of the present case, there was no continuing default or delay on the part of the assessee, since the requisite Form 10B containing the corrected particulars was furnished within the period of 30 days specifically granted by the CPC in its notice dated 20/12/2024. According to the Ld.AR, the issue, therefore, is not one of condonation of delay, but whether the CPC was justified in disregarding the revised Form 10B furnished by the assessee within the time allowed in response to its own notice.
We have perused the submissions advanced by both sides in light of records placed before us.
5. The short controversy arising for our consideration is whether, in the facts of the present case, the claim of the assessee could be denied merely on the ground of the particulars contained in the original Form 10B, when the assessee had furnished the revised Form 10B within the time allowed by the CPC in response to the notice dated 20/12/2024.
5.1. It is an admitted position that the CPC, vide notice dated 20/12/2024, had specifically brought the discrepancy to the notice of the assessee and granted 30 days’ time to furnish its response. The assessee, within the said period, furnished the revised Form 10B incorporating the particulars relating to accumulation to the extent of 15%, which, according to the Ld. AR, were in accordance with the claim already disclosed in the return of income. The said notice is placed at pages 102 to 104 of the paper book. Thus, the revised Form 10B was not furnished suo motu after the completion of the proceedings, but was furnished in response to the specific opportunity granted by the CPC to rectify/respond to the discrepancy.
5.2. In these circumstances, we find merit in the contention of the Ld. AR that the issue cannot be viewed merely as a case of delayed furnishing of Form 10B. Once the CPC itself had identified the discrepancy and granted a period of 30 days to the assessee to respond, the revised Form 10B furnished within such period was required to be considered while processing the claim. The material fact, therefore, is that the assessee had complied with the opportunity granted by the CPC within the stipulated period.
5.3. The reliance placed by the Ld.DR on the decision of Hon’ble Supreme Court in PCIT v. Wipro Ltd. (supra) also needs to be considered in the factual context of the present case. The question before us is not merely whether a statutory requirement can be dispensed with, but whether the revised Form 10B furnished by the assessee within the time specifically granted by the CPC in response to its notice could be ignored while determining the claim under section 11 of the Act. The facts presently before us are, therefore, distinguishable to the extent that the assessee had acted upon the opportunity granted during the processing proceedings.
5.4. As regards the objection of the Ld.DR regarding the jurisdiction of the Ld.CIT(A) to condone the delay, we note that the assessee’s primary contention before us is that the revised Form 10B was furnished within the time allowed by the CPC itself. It is found to be correct from the record, that this submission of the assessee cannot be controverted. Therefore, the question of condonation of delay in furnishing the revised Form 10B would not arise. Under these facts, the issue of jurisdiction of the Ld.CIT(A) to condone the delay would be consequential and would not determine the claim where the assessee has complied with the time granted by the CPC in its notice.
5.5. We accordingly find that the revised Form 10B furnished by the assessee within the period allowed in the notice dated 20/12/2024 ought to have been considered while processing the return. The disallowance made by the CPC under section 11(1) of the Act merely by disregarding the revised Form 10B, without examining the same, cannot be sustained. The issue is accordingly restored to the file of the Assessing Officer/CPC, as the case may be, to verify the revised Form 10B furnished by the assessee within the stipulated period and examine the assessee’s claim under section 11 of the Act in accordance with law. Needless to say, the assessee shall be afforded reasonable opportunity of being heard.
Accordingly grounds raised by the revenue stands dismissed.
In the result, the appeal filed by the revenue stands dismissed.
Order pronounced in the open court on 21/08/2026.
