Church of Our Lady of Immaculate Conception Vs CIT (Exemption) (Bombay High Court)
Summary: The Bombay High Court allowed the writ petition filed by Church of Our Lady of Immaculate Conception and quashed the order dated 30 January 2025 passed under Section 119(2)(b) of the Income-tax Act, 1961, rejecting the trust’s application for condonation of a 29-day delay in filing Form No. 10B for Assessment Year 2022-23. The Court also condoned the delay in filing Form No. 10B.
The Petitioner was a Charitable Trust established for charitable and religious purposes and administered by the Archdiocese of Bombay. It was registered as a Public Charitable Trust under the Maharashtra Public Trust Act, 1950 and had been assessed to income-tax since 1975. It was registered under Section 12A(1)(ac)(i) of the Act and had also been registered under Section 12A(a).
For A.Y. 2022-23, the Petitioner filed its Return of Income on 5 November 2022, within the extended time permitted under Section 139(1). The due date for filing the audit report in Form No. 10B under Section 12A(1)(b) was 7 October 2022. Form No. 10B was, however, e-filed on 5 November 2022, resulting in a delay of about 29 days. The return was processed under Section 143(1) on 8 March 2023, and the exemption claimed under Section 11 was disallowed because Form No. 10B had not been filed within the prescribed time.
The Petitioner thereafter filed an application dated 16 March 2023 under Section 119(2)(b) seeking condonation of the delay. The explanation was that the accounts were handled by a lady accountant who suffered a miscarriage in August 2022 and was advised bed rest for two months. As a result, she could not attend the office and the accounts could not be submitted to the chartered accountant/auditors for finalisation of the audit report and financial statements. The Petitioner supported the explanation with a medical certificate.
The Petitioner emphasised that Form No. 10B was e-filed on 5 November 2022 before filing the Return of Income on the same date and that the audit report was available on record when the return was processed under Section 143(1). It therefore sought condonation of the 29-day delay.
Respondent No. 1 rejected the application on the ground that the Petitioner had failed to establish a reasonable cause preventing timely filing of the audit report. Before the High Court, however, the Petitioner submitted that the Revenue had neither doubted nor denied the factual circumstances relied upon to explain the delay. There was also no allegation of wilful or intentional default. The evidence concerning the accountant’s health was not disputed. The Petitioner contended that the delay was beyond its control, was purely technical, caused no loss of revenue and involved no attempt to evade tax.
The Petitioner relied upon the decisions in Mirae Asset Foundation Vs. Pr. Commissioner of Income-tax, Sau Dwarkabai tai Karwa Charitable Trust Vs. Commissioner of Income-tax (Exemption), Kotak Family Foundation Vs. Commissioner of Income-tax (Exemption), and Sarvodaya Charitable Trust Vs. Income Tax Officer (Exemption). It was submitted that the requirement of furnishing Form No. 10B was directory and procedural in nature and that the substantive benefit under Section 11 should not be denied merely because the audit report was furnished late, particularly when it was available at the time of processing or assessment.
The High Court agreed with the Petitioner’s submissions. It noted that the delay was admittedly only 29 days and that Respondent No. 1 had never doubted the factual circumstances put forward to explain the delay. In those circumstances, the Court held that the delay ought to have been condoned. Failure to condone it would result in genuine hardship because the Petitioner would be denied the substantial exemption otherwise available under Section 11.
The Court held that the authority should have adopted a justice-oriented approach rather than a pedantic one. It also noted that in similar circumstances the Bombay High Court had taken a similar view in Mirae Asset Foundation, Sau Dwarkabai tai Karwa Charitable Trust and Kotak Family Foundation. It further relied upon the Gujarat High Court’s decision in Sarvodaya Charitable Trust, which held that the approach in cases involving delay in filing Form No. 10B should be equitable, balancing and judicious, and that exemption should not be denied merely because of limitation where the authorities possess discretionary powers to condone the delay.
The Court reproduced the relevant portion of Sarvodaya Charitable Trust, including the principle that furnishing the audit report with the return is a procedural requirement, directory in nature, and that substantial compliance would suffice. The Gujarat High Court had also held that exemption should not be denied merely because of delay in furnishing the audit report and that the report could be produced at a later stage before the Income-tax Officer or appellate authority by assigning sufficient cause.
Consequently, the Bombay High Court quashed and set aside the impugned order dated 30 January 2025 passed under Section 119(2)(b). It expressly condoned the Petitioner’s delay in filing Form No. 10B. The Rule was made absolute in those terms and the writ petition was disposed of without any order as to costs.
Cases Discussed
- Sau Dwarkabai tai Karwa Charitable Trust Vs. Commissioner of Income-tax (Exemption) — Bombay High Court.
- Kotak Family Foundation Vs. Commissioner of Income-tax (Exemption) — Bombay High Court.
- Sarvodaya Charitable Trust Vs. Income Tax Officer (Exemption) — Gujarat High Court, [2021] 125 taxmann.com 75.
- CIT Vs. Gujarat Oil and Allied Industries Ltd. — Gujarat High Court, [1993] 201 ITR 325.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The above Writ Petition challenges the impugned order dated 30th January 2025, passed by Respondent No.1 for the Assessment Year 2022-23 under Section 119(2)(b) of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] rejecting the Petitioner’s application dated 16th March 2023 filed for condonation of delay of 29 days. By the impugned order, Respondent No.1 has refused to condone the delay in filing Form No. 10B for A.Y. 2022-23. Consequently, the exemption claimed by the Petitioner under Section 11 of the Act has been denied to the Petitioner which is a Charitable Trust.
2. The Petitioner is a Charitable Trust established for charitable and religious purposes. The supervision, control and administration are provided for in the church law. The Church is established and administered by the Archdioces of Bombay. Church of Our Lady of Immaculate Conception, the Petitioner, aims to provide basic necessities such as food, educational and medical help to the poor and marginalised parishioners. The Trust also aims at protecting and preserving the environment of Planet Earth, encouraging involvement through targeted programmes for different age groups, encourages self-development, leadership and empowerment of the community, reinforcing the spirituality of the parishioners through interactive spiritual programmes and activities as well as educational programmes based on human values and interfaith dialogues. The Petitioner is registered as a Public Charitable Trust under the provisions of the Maharashtra Public Trust Act, 1950 with the office of the Charity Commissioner, Greater Mumbai vide PTR No. D-218 (Mumbai) dated 20th November 1969. The Petitioner has been assessed to income-tax since 1975, having PAN: AAATC2637D and regularly filing its Return of Income. The Petitioner is registered under Section 12A(1)(ac)(i) of the Act vide registration No. AAATC2637DE19759 dated 23rd September 2021, and under Section 12A(a) vide order dated 7th November 1975.
3. The Petitioner filed the Return of Income for the Assessment Year 2022-23 on 5th November 2022 i.e. within the time limit prescribed under Section 139(1) of the Act as extended by the CBDT from time to time. The due date for filing the audit report in Form No.10B in terms of the provisions of Section 12A(1)(b) was 7th October 2022. The audit report in Form No.10B was filed by the Petitioner on 05th November 2022 (i.e. the same day on which the Return of Income was filed), resulting in a delay of about 29 days. The assessment for A.Y. 2022-23 was processed under Section 143(1) of the Act on 8th March 2023, disallowing the exemption claimed by the Petitioner under Section 11 of the Act. This was on the basis that Form No.10B was not filed within the prescribed time-frame.
4. Accordingly, the Petitioner filed an application on 16th March 2023 before Respondent No.1 seeking condonation of delay in filing Form No. 10B. It was submitted that the Petitioner could not file the said Form No. 10B in due time because the accounts of the Petitioner were handled by a lady accountant who unfortunately suffered a miscarriage in the month of August 2022 and was advised to take bed rest for two months and due to which she was unable to attend the office at the relevant time. The above fact was substantiated by a medical certificate, and in view thereof, the Petitioner could not submit the accounts to the chartered accountant/auditors for finalising the audit report and signing of the financial statements for the financial year ending 31st March 2022. Accordingly, Form No.10B was e-filed on 05th November 2022 before filing of the Return of Income for the A.Y. 2022-23 which was e-filed on the extended due date i.e. 05th November 2022. It was also stated that the audit report in Form No.10B was available on record when the said Return of Income was processed under Section 143(1) of the Act at CPC on 08th March 2023. Accordingly, the Petitioner prayed for condonation of delay of 29 days in filing the audit report in Form No.10B.
5. Respondent No.1, however, vide the impugned order dated 30th January 2025 rejected the application for condonation of delay on the ground that the Petitioner has not been able to adduce any reasonable cause which prevented it from filing the audit report within the specified date.
6. In this backdrop, the Counsel for the Petitioner, submitted that Respondent No.1 has not doubted or denied any of the facts as stated by the Petitioner. In fact, there is not even a mention that the delay of 29 days is caused because of any wilful/intentional default on the part of the Petitioner. The fact that accountant was not keeping good health and could not attend the office is also not disputed by Respondent No.1. The evidence filed in support thereof is also not doubted by Respondent No.1. The delay was caused on account of serious health issues of the accountant (as stated above), and who was responsible for maintaining the financial records and co-ordinating the preparation for filing the audit report. This failure was beyond the Petitioner’s control and not due to any wilful neglect. The delay was purely technical and there was no loss of revenue and nor any attempt to evade tax.
7. In support of her arguments, the Counsel for the Petitioner relied upon the judgments of this Court in the case of Mirae Asset Foundation Vs. Pr. Commissioner of Income-tax (Writ Petition No. 713 of 2025), Sau Dwarkabai tai Karwa Charitable Trust Vs. Commissioner of Income-tax (Exemption) ([2025] 174 taxmann.com 245 (Bombay)) and Kotak Family Foundation Vs. Commissioner of Income-tax (Exemption) ([2025] 176 taxmann.com 56 (Bombay)) as well as the judgment of the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust Vs. Income Tax Officer (Exemption) ([2021] 125 taxmann.com 75 (Gujarat)). It was contended by the learned Counsel that it is a fairly settled legal position that filing of audit report in Form No. 10B is directory in nature i.e. the requirement of furnishing the audit report by the due date is merely procedural and the benefits of Section 11 cannot be denied only on account of the delay in filing of the said audit report, especially when such report was available at the time of processing /assessment.
8. On the other hand, the learned Counsel for Respondent however, defended the action of the Revenue and stated that the Petitioner has failed to make out a case for condonation of delay as discussed by Respondent No.1 in his order.
9. Having heard the learned Counsel for the parties, we agree with the contentions of the Petitioner. We find that admittedly there was only a 29 day delay in filing Form No.10B. In the present case, when one considers that Respondent No.1 never doubted the factual situation put forth by the Petitioner to explain the delay, Respondent No.1 ought to have condoned the delay. We find that if this delay is not condoned, there will be genuine hardship to the Petitioner, inasmuch as, the Petitioner would be denied the exemption otherwise claimed under the provisions of Section 11 of the Act and which is a substantial amount.
10. We are of the view that Respondent No.1 ought to have taken a justice oriented approach rather than a pedantic one, and condoned the delay. We also find that in similar facts, this Court in the case of Mirae Asset Foundation (supra), Sau Dwarkabai tai Karwa Charitable Trust (supra) and Kotak Family Foundation (supra) has taken a similar view and condoned the delay. Even the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust (supra) took the view that in cases like the present one (delay in filing Form No.10B), the approach of the authorities ought to be equitious, balancing and judicious and availing of exemption should not be denied merely on the bar of limitation. This is more so, when the legislature has conferred wide discretionary powers to condone the delay on the authorities concerned. The relevant portion of this decision reads thus:-
“31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no. 2 might be justified in denying the exemption under section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condonation for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.
32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income- Tax Officer or before the appellate authority by assigning sufficient cause.”
11. In view of the foregoing discussion, we hereby quash and set aside the impugned order dated 30th January 2025 passed by Respondent No.1 under Section 119(2)(b) of the Act.
12. Now that the impugned order is quashed, we also hereby condone the delay in filing Form No.10B by the Petitioner.
13. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. No order as to costs.
14. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
