Kammavari Snagham (Regd.) Vs DCIT (ITAT Bangalore)
Belated Form 10: ITAT Directs Condonation Route for ₹4.47 Crore Accumulation Claim
The ruling in brief
The Bangalore Bench of the Income Tax Appellate Tribunal, in Kammavari Snagham (Regd.) v. DCIT (Exemption), declined to accept the contention that the deadline for filing Form 10 could simply be treated as directory. However, it gave the society an opportunity to seek condonation of delay, directing it to approach the CBDT within 90 days from receipt of the order. The benefit of accumulation would depend on condonation being granted.
The dispute concerned ₹4,47,39,679 claimed under Section 11(2) for Assessment Year 2015-16. While the order provides a route for relief, its reasoning raises an important question concerning the assessment year to which the statutory filing deadline applied.
The background: Accumulation denied during processing
The assessee was a society registered under the Karnataka Societies Registration Act. It had obtained registration under Section 12A on 9 October 1990. That registration was subsequently cancelled, but the Tribunal set aside the cancellation and remanded the matter. The CIT(Exemptions) thereafter granted registration on 23 October 2023.
For AY 2015-16, the society filed its return on 29 October 2015, declaring nil income after claiming exemption under Section 11. Its claim for accumulation of ₹4.47 crore under Section 11(2) was denied during processing because Form 10 had not been filed with the return.
The society explained that no facility for electronic uploading was available at the relevant time. According to its account, it approached the Assessing Officer, who directed it to file the form. Form 10 was consequently uploaded on 20 February 2017.
The society sought rectification under Section 154, contending that the form was now available on record. The CPC nevertheless rejected the request by communication dated 24 February 2017, maintaining that the prescribed form had not accompanied the return.
The first appeal: Subsequent filing did not cure the default
The CIT(A) noted that the CPC had accepted the society’s claims concerning application of income and accumulation under the other applicable provisions of Section 11. The disputed disallowance specifically concerned the additional accumulation claimed under Section 11(2).
The appellate authority held that Form 10 was required to be filed electronically with the return. Since the society admittedly had not furnished it, either electronically or manually, with the return, the CIT(A) upheld the denial.
The society then approached the Tribunal against the appellate order dated 29 January 2026.
The competing arguments before the Tribunal
The society produced a paper book containing its return, rectification application and Form 10 filed manually and electronically. It relied on ITO v. St. Agnes Society, ITA No. 1098/Bangalore/2018, and the Supreme Court decision referred to in the order as Hotel Owners’ Association.
Its argument was that the filing deadline was directory rather than mandatory. Since Form 10 had been furnished before processing of the return, the delay had caused no prejudice to the Revenue and should not defeat the accumulation claim.
The Revenue argued that a statutory deadline could not be ignored. According to it, the proper remedy was condonation by the designated authority, rather than treating the time limit as optional. It also sought to distinguish earlier decisions on the ground that they concerned a deadline prescribed by the Rules, whereas the deadline was subsequently incorporated into the Act.
The Tribunal’s decision: Seek condonation, not automatic acceptance
The Tribunal noted that there was no Revenue allegation that the accumulated funds had not been invested in the prescribed manner. It also acknowledged that the society had explained the reasons for delayed filing.
Nevertheless, the Tribunal held that a time limit prescribed by the Act could not be treated as merely directory. In its view, such an approach would undermine statutory limitation periods.
It identified Section 119(2) as the route for seeking condonation and referred to CBDT Circular No. 7/2018. The Tribunal emphasised that the explanation should receive proper consideration and that a satisfactory explanation could justify condonation.
The society was directed to apply to the CBDT within 90 days from receipt of the order. The Assessing Officer was to give effect to the benefit of Form 10 if delay was condoned. The Tribunal did not itself condone the delay or unconditionally allow the ₹4.47 crore exemption claim.
Author’s comments: The assessment year makes a difference
An important qualification deserves attention. The appeal concerns AY 2015-16, whereas CBDT Circular No. 7/2018 expressly records that the Finance Act, 2015 amendments to Sections 11 and 13 took effect from 1 April 2016—AY 2016-17. The circular’s delegated condonation relief also specifically concerns AY 2016-17.
Consequently, the Tribunal’s reliance on a deadline incorporated into the Act, and on that circular, calls for closer examination in the context of AY 2015-16. The distinction between the earlier legal framework and the amended provisions cannot be overlooked.
For practitioners, this order should therefore be reported with that qualification. The law applicable to the particular assessment year must be examined before applying its reasoning to another case. For the society itself, the immediate relief remains the opportunity to seek condonation within the period directed by the Tribunal.
Cases Discussed
- ITO v. St. Agnes Society, ITA No. 1098/Bangalore/2018 (ITAT Bangalore) — Relied upon by the assessee for the contention that the time limit for filing Form No. 10 was directory rather than mandatory and that delayed filing should not prevent determination of the correct tax liability. The Tribunal distinguished the coordinate Bench decision on the ground that it did not consider the statutory provisions which, according to the Tribunal, governed the prescribed time for filing Form No. 10.
- Commissioner of Income-tax v. Nagpur Hotel Owners’ Association, (2001) 247 ITR 201 (Supreme Court) — Referred to by the assessee as “Hotel Owners’ Association” in support of its contention regarding the timing of Form No. 10. The decision concerns the requirement that the prescribed information for claiming Section 11(2) benefit be available to the Assessing Officer during assessment proceedings.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1) The assessee has filed this appeal against the order dated 29th January 2026 passed by the learned Commissioner of Income Tax (Appeals)-6, Mumbai [the learned CIT(A)”]. By that order, the learned CIT(A) partly allowed the assessee’s appeal against the rectification order under section 154 of the Income-tax Act, 1961, arising from the intimation issued under section 143(1) by the Central Processing Centre, Bengaluru, for assessment year 2015-16 on 24th February 2017.
2) The assessee is a society registered under the Karnataka Societies Registration Act and is on the records of the CIT (Exemptions), Bengaluru. It was granted registration under section 12A of the Income-tax Act, 1961, on 9th October 1990. The CIT (Exemptions) subsequently cancelled that registration by an order under section 12AA (3) of the Act. On appeal, the ITAT, Bengaluru Bench, set aside the cancellation order and remanded the matter to the CIT (Exemptions), who thereafter granted registration under section 12A on 23rd October 2023. For the assessment year under consideration, the assessee filed its return of income on 29th October 2015, declaring nil income after claiming exemption under section 11. While processing the return under section 143(1), the exemption claim of ₹4,47,39,679 was disallowed because Form No. 10 had not been filed with the return. According to the assessee, the form could not be uploaded because no electronic facility was then available. The assessee therefore approached the Assessing Officer, who directed it to file the form. Accordingly, the assessee filed Form No. 10 on 20th February 2017 and then sought rectification of the disallowance relating to accumulation under section 11(2). The CPC rejected the rectification application by communication dated 24th February 2017 on the ground that the prescribed form had not been filed with the return. Consequently, the exemption under section 11 was not allowed.
3) Aggrieved, the assessee contended that it had reasonable cause for not filing Form No. 10 with the return because no facility for electronic upload was available at the relevant time. It stated that the form was uploaded on the e-filing portal on 20th February 2017 and was therefore on record. Accordingly, the denial of exemption under section 11(2), in its submission, constituted a mistake apparent from the record. The learned CIT(A) noted that the CPC had accepted the assessee’s claims regarding income applied and accumulated under the other applicable provisions of section 11, but had rejected the claim of ₹4,47,39,679 under section 11(2) for non-compliance with rule 17 read with rule 12(2) of the Income-tax Rules, 1962. After considering section 11 and the rules applicable to the assessment year, the learned CIT(A) held that the required statement in Form No. 10 had to be filed electronically with the return. He further noted that the assessee had filed the form only after the prescribed time and had admitted that it was not filed, either electronically or manually, with the return. He therefore upheld the CPC’s denial of the assessee’s claim for accumulation of ₹4,47,39,679 under section 11(2). Relying on judicial precedents requiring exemption claims to be examined strictly, the learned CIT(A) concluded that the CPC had correctly disallowed the claim. The appellate order was passed on 29th January 2026, against which the assessee is now in appeal before us.
4) Assessee has raised the following grounds of appeal:
1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned ADDL/JCIT[A] is not justified in upholding the denial of grant of exemption u/s.11[2] of the Act to the extent of Rs.4,47,39,679/- in the proceedings u/s.154 of the Act, after the appellant had filed the Form 10, which was before the completion of the assessment under the facts and in the circumstances of the appellant’s case.
3. Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s.234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant’s case deserves to be cancelled.
4. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs
5) Shri Narendra Sharma, the authorised representative, filed a 23-page paper book containing the assessee’s income-tax return, the rectification application, and Form No. 10 filed both manually and electronically. He also referred to the written submissions made before the learned CIT(A) and relied on the coordinate bench’s decision in ITO v. St. Agnes Society, ITA No. 1098/Bangalore/2018. He argued that the time limit for filing Form No. 10 is directory rather than mandatory. Referring to paragraph 7 of that decision, he submitted that a delay in filing Form No. 10 should not impede determination of the assessee’s tax liability. As the assessee had filed the form before its return was processed, no prejudice was caused to the Revenue. Relying also on the Supreme Court’s decision in Hotel Owners’ Association, he contended that the prescribed time limit for filing Form No. 10 is not mandatory.
6) The learned Senior Departmental Representative, Smt. Prajakta Thakur, Joint Commissioner of Income Tax, strongly supported the order of the learned CIT(A), relying on section 11 of the Act and the applicable rules. She submitted that Form No. 10 must be filed with the prescribed authority within the statutory time limit. If the form is filed late, the assessee’s only remedy is to seek condonation from the Central Board of Direct Taxes, as no other authority may exercise a power specifically conferred on the designated authority. She further argued that the earlier decisions treating the filing deadline as directory were distinguishable because the time limit was then prescribed only by the rules, whereas it is now set out in the Act itself. The coordinate bench decision relied on by the assessee was therefore inapplicable because it did not consider the governing statutory provisions. Ignoring a time limit prescribed by the Act would effectively render every statutory deadline under the income-tax law directory.
7) We have carefully considered the rival submissions and reviewed the orders of the lower authorities. It is undisputed that the assessee did not file Form No. 10 within the prescribed time for accumulation under section 11 of the Act. However, the Revenue does not contend that the assessee failed to invest the accumulated amount in the prescribed manner. The assessee also explained to the Revenue authorities the reasons for the delay in filing Form No. 10.
8) We find that the time limit for filing Form No. 10 under section 11(2)(a) is prescribed by the Act itself. A statutory time limit cannot be treated as discretionary or merely directory; otherwise, every limitation period under the Act, including the time limit for filing a return of income, would become directory.
9) The assessee’s only available remedy is to apply to the competent authority under section 119(2) of the Act for condonation of the delay in filing Form No. 10, particularly since it has explained why the form could not be filed on time. CBDT Circular No. 7/2018 permits the condonation of such delay.
10) We find no error in the learned CIT(A)’s conclusion that a time limit prescribed by the Income-tax Act cannot be treated as merely directory. At the same time, the legislature has empowered the competent authorities to condone delay where necessary to advance substantial justice. That power should be exercised only after duly considering the assessee’s explanation, rather than rejecting it without examination. Accepting the assessee’s broader contention would render statutory time limits directory and undermine the mandate of the law; such an interpretation cannot be adopted. In that case, all the statutory time limits prescribed under the Act, read with the provisions of section 119 (2) (b), would be obliterated from the statute. Nevertheless, where the explanation is satisfactory, the delay may appropriately be condoned.
11) The learned authorised representative relied on a coordinate bench decision concerning assessment year 2014-15. We find, however, that the bench did not consider the statutory provisions then governing the prescribed time for filing Form No. 10.
12) In view of the above, we direct the assessee to file an application before the Central Board of Direct Taxes seeking condonation of the delay in filing Form No. 10 within 90 days from the date of receipt of that order. The learned assessing officer may consider the application of the assessing children and, thereafter, see whether condonation of the delay is permitted, and, if so, grant the assessee the benefit of Form No. 10.
13) In the result, appeal filed by the Assessee is allowed as indicated above.
Order pronounced in the open court on 30th September, 2026.
