Banirupa Charitable Trust Vs Central Board of Direct Taxes (Orissa High Court)
Summary:The Orissa High Court considered a writ petition challenging the order dated 19th January, 2026 passed by the Commissioner of Income Tax (Exemption), Hyderabad, rejecting the petitioner’s application under Section 119(2)(b) of the Income Tax Act, 1961 for condonation of delay in filing the audit report in Form 10B prescribed under Rule 17B of the Income Tax Rules, 1962 for claiming exemption under Section 12A for Assessment Year 2021-22.
The petitioner submitted that the prescribed due date for furnishing the audit report was 15th February, 2022, whereas Form 10B was filed on 5th March, 2022, resulting in a delay of 18 days. It was contended that the delay occurred due to the Covid-19 pandemic and that the Commissioner had been delegated powers to exercise discretion under Section 119(2)(b) by Circular No.10 of 2019 dated 22.05.2019 and Circular No.16 of 2024 dated 18.11.2024. The petitioner further relied upon the decision of the Gujarat High Court in Sarvodaya Charitable Trust v. Income Tax Officer (Exemption), contending that furnishing the audit report was procedural and that it could be filed even before assessment.
The Income Tax Department defended the impugned order, submitting that the Commissioner had exercised discretion under Section 119(2)(b) and had rejected the application after finding that sufficient cause and genuine hardship had not been demonstrated.
The Court noted that there was no dispute regarding the 18-day delay in submitting Form 10B for AY 2021-22. It held that the benefit of exemption should not have been denied merely because of delay in furnishing an audit report which could be produced at a later stage before the Assessing Officer or Appellate Authority by assigning sufficient cause. The Court also took cognizance of the fact that the Covid-19 pandemic was continuing around 13.03.2022 and considered the petitioner’s contention that Covid-19 infection had prevented timely furnishing of the audit report to be genuine, particularly as no objection was raised by the Department against that statement.
The Court referred to its earlier decision in Action Research for Health and Socio-economic Development vs. Central Board of Direct Taxes (CBDT) and others, W.P.(C) No.8035 of 2025, disposed of on 25.04.2025, in which factors relevant to consideration of condonation of delay in a similar factual situation involving the Covid-19 pandemic had been discussed.
Applying the legal position considered in that earlier case, the High Court found that the Commissioner of Income Tax (Exemption), Hyderabad had not applied his conscientious mind in the proper perspective. The Court emphasised the established principle that where technical considerations and the cause of substantial justice are pitted against each other, substantial justice should prevail. It held that mere technicality should not have been a ground for denying the claim of exemption under Section 12A.
The Court further held that the Commissioner had failed to consider the condonation application in its proper perspective under Section 119(2)(b), read with the powers conferred by Circular No.10/2019 dated 22.05.2019 and Circular No.16 of 2024 dated 18.11.2024. Finding that the petitioner had faced “genuine hardship” during the relevant period and that refusal to condone the delay amounted to an arbitrary exercise of discretion having regard to the facts, the Court set aside the order dated 19th January, 2026.
The matter was remitted to the concerned authority to consider the audit report in Form 10B furnished under Rule 17B for claiming exemption under Section 12A. The authority was directed to grant all consequential relief to the petitioner by taking into account the Form 10B audit report pertaining to AY 2021-22 submitted on 5th March, 2022, as if it had been filed within the specified period by invoking Section 119(2)(b) of the Income Tax Act, 1961. The writ petition was accordingly disposed of, along with any pending interlocutory applications.
Cases Discussed
- Action Research for Health and Socio-economic Development vs. Central Board of Direct Taxes (CBDT) and others, W.P.(C) No.8035 of 2025, judgment dated 25.04.2025 — referred to by the Orissa High Court for the legal position and factors governing condonation of delay in a similar Covid-19-related Form 10B matter.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. Challenging the order dated 19th January, 2026 (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 Year 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.
2. Learned Advocate appearing for the Petitioner submitted that despite sufficient cause being shown, Opposite Party No.1 has rejected the application for condonation of delay of 18 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.
2.1. Learned 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 5th March, 2022. The audit report was due for 15th February, 2022. Thus, there was only 18 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 Year 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.
2.3. He strenuously urged that serious prejudice would ensue to the Petitioner if 18 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.
2.3. 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.
3. 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.
4. Heard learned Advocate appearing for the Petitioner and learned Junior Standing Counsel for Income Tax Department.
5. 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 18 days in submitting the audit report 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 Year 2021-22.
5.1. 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 Junior Standing Counsel for the Income Tax against such statement.
5.2. 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.
5.3. 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.
5.4. 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 19th January, 2026 passed by the Commissioner of Income Tax (Exemption), Hyderabad-opposite party No.2 (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 Year 2021-22 submitted on 5th March, 2022, as if the same is filed within period specified invoking Section 119(2)(b) of the Income Tax Act, 1961.
5.5. 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.
