Section 11 & 12 Exemption cannot Be Denied Merely for Late Form 10B, Corpus Donations Exemption Cannot Be Denied Without Hearing

Tirupur Vision Rotary Trust Vs ACIT (Exemptions) (ITAT Chennai)

Exemption Under Section 11 & 12 Not to Be Denied Merely for Late Form 10B – Matter Sent Back- Corpus Donations & 11/12 Benefits to be Re-Examined

The dispute concerned denial of exemption on corpus donations & disallowance of benefits u/ss 11 & 12 due to late filing of audit report.

The Trust filed return at Nil after claiming exemption of ₹12,84,457. CPC, while processing u/s 143(1), disallowed corpus donations of ₹29,57,595 & denied exemption u/ss 11 & 12, citing delay in filing Form 10B. The Addl. CIT(A) upheld the adjustment.

Before ITAT, the Trust argued that:

• CPC made corpus donation adjustment without giving opportunity.
• For delay in filing audit report, a petition u/s 119(2)(b) seeking condonation was already filed before CCIT, Coimbatore, & was pending.

Tribunal held that CPC erred in making disallowance without hearing the assessee. Further, since condonation petition was pending, exemption claim u/ss 11 & 12 must be re-examined after outcome of CCIT’s decision.

Accordingly, ITAT set aside orders of CPC & Addl. CIT(A) and restored matter to AO for fresh adjudication after granting opportunity to Trust & considering the condonation petition. Thus, the appeal was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

Aforesaid appeal filed by the assessee for Assessment Year (AY) 2022-23 arises out of the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A)-1, Kolkata [hereinafter “Addl. CIT(A)”] dated 25.03.2025 vide intimation u/s. 143(1) of the Income-tax Act, 1961 (hereinafter “the Act”) issued by Centralized Processing Center, Bengaluru [AO] dated 31.03.2023.

2. The assessee is a Trust and filed its return of income at Nil after claiming exemption of Rs.12,84,457/-. In the intimation issued u/s. 143(1) of the Act, the CPC disallowed the assessee’s claim of corpus donations of Rs. 29,57,595/-, and did not allow exemption u/s. 11 & 12 of the Act , on the ground that the assessee had not filed the audit report in Form 10AB within the prescribed time. Aggrieved, the assessee preferred an appeal before the Ld. Addl. CIT(A) who dismissing the appeal by confirming the adjustments.

3. The learned Authorized Representative (AR) of the assessee submitted additional ground that the CPC has made adjustment of Rs.29,57,595/- in respect investment claimed u/s 11(5) without providing any opportunity and therefore adjustment needs to be set aside. The Ld. AR in respect of denial exemption u/s 11 and 12 for not filling audit report in time has submitted that assessee has filed a petition u/s. 119(2)(b) of the Act before the Ld. CCIT, Coimbatore, seeking condonation of delay in filing the return of income, and the said petition is still pending. The Ld. A.R thus prayed that the order of the Ld. Addl. CIT(A) be set aside and the matter remitted to be decided for providing proper opportunity and after considering the outcome of the condonation petition filed before the CCIT, Coimbatore.

4. On the other hand, the Ld. Departmental Representative (DR) relied upon the orders of the lower authorities.

5. We have heard the rival submissions and perused the material available on record. The CPC has disallowed the assessee’s claim of exemption towards corpus donations without providing adequate opportunity to the assessee and as regards to denial of exemption under sections 11 & 12 of the Act for the reason that audit report in Form 10B has not been filed within the prescribed date, the Ld. AR has brought to our notice that the assessee has filed a petition for condonation of delay in filing the return of income u/s. 119(2)(b) of the Act, which is presently pending before the learned CCIT, Coimbatore. Accordingly, we set aside the impugned orders and restore the matter to the file of the A.O, with a direction to decide the assessee’s claim afresh after providing proper opportunity to the assessee and awaiting the decision of the Ld. CCIT, Coimbatore, on the condonation petition. Thus, the appeal filed by the assessee is allowed for statistical purposes only.

6. In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced on 29^th day of September, 2025 at Chennai.