Bangalore ITAT : Belated Filing of Form 10B Cannot Defeat Section 11 Exemption – Audit Report Filed During Appeal Proceedings Held Sufficient

FULL TEXT OF THE ORDER OF ITAT BANGALORE

1. ITA No. 2617/Bang/2025 is filed by Anasuya Foundation Bangalore (the assessee/appellant) for assessment year 2018-19 against the appellate order passed by the Joint Commissioner of Income Tax Appeal-5 Delhi dated 15^th September 2025 wherein the appeal filed by the assessee against the order passed u/s 143(1) of the Income Tax Act by the Central Processing Centre Bangalore (the Ld. AO) was dismissed. The assessee is in appeal before us.

2. The fact shows that assessee is a charitable trust registered u/s 12AA of the Act. The assessee has obtained Audit Report in Form No. 10B on 23^rd June 2018. It filed its return of income on 31^st August 2018. However, due to oversight as claimed by the assessee, the Audit Report in Form No. 10B could not be uploaded electronically on or before the filing of the return of income i.e. on 31^st of August 2018. The assessee came to know about the error and uploaded the Audit Report on 26^th March 2025.

3. Subsequently the return of income was processed u/s 143(1) of the Income Tax Act 1961 on 4^th March 2020. While processing the return of income the claim of the assessee of deduction of application of income on revenue account of Rs. 38,52,101/- was considered as zero and therefore the total income of the assessee was computed at Rs. 76,74,000/-against the return income of Rs. 38,21,898/-. Further the assessee has claimed exemption u/s 10 of Rs. 38,37,000/- in return of income was also considered at Rs. NIL. Thus, the total income of the assessee was computed at Rs. 76,74,000/-.

4. Thus, the issue in appeal is that assessee was denied application of income during the previous year on revenue account of Rs. 38,52,101/- as well as the accumulation of income of Rs. 38,37,000/-. Thus, the assessee was aggrieved with the above intimation passed by the Ld. Assessing Officer.

5. Against this assessee preferred an appeal before the Ld. CIT-A on 26/3/2025. Condoning the delay, appeal was admitted by the ld. CIT (A).

6. Assessee made a detailed written submission before the Ld. CIT-Appeal. The Ld. CIT-Appeal noted that for availing the exemption u/s 11 of the Act the audited accounts in Form No. 10B must be furnished along with the return of income through e-filing portal of the Income Tax Dept. and no manual or physical filing is accepted. Further the above report is required to be uploaded and e-verified by Chartered Accountant using a digital signature within the prescribed date line before the due date of filing the relevant income tax return. It was further stated that according to the provisions of Section 44AB of the Act such report is required to be submitted a month prior to the due date. The assessee has failed to do so. The Ld. CIT-Appeal further suggested that according to the Circular No. 16 of 2024 dated 18.11.2024 the condonation of delay in filing Form No. 10B for assessment year 2018-19 and subsequent years the remedial action lies by filing a condonation petition. If the condonation is granted, the benefit would be allowed. As there is no power left with the CIT-Appeal to interfere, the appeal of the assessee was dismissed.

7. The assessee Ld. Authorized Representative submitted that the Coordinate Bench in case of Arham Mitra Mandalin ITA No. 1110/Bang/2023 dated 27^th June 2024 on identical facts and circumstances relying on the decision of the Hon’ble Gujarat High Court and several other judicial precedents has held that filing of audit report along with the return of income is directory in nature and not mandatory and exemption u/s 11 of the Act cannot be denied when the audit report is available before AO while passing the intimation u/s 143(1) (a) of the Act. He further relied on the decision of the Coordinate Bench. In case of Adhi Ganesh Mandir Charitable Trust in 182 taxmann.com 796 for assessment year 2023-24. The AR further relied upon the decision of the Hon’ble Gujarat High Court in 167 taxmann.com 548 in case of Laxminarayan Dev Shrishan Seva Khendra wherein for assessment year 2017-18 in Form No. 10B was uploaded during the pendency of appeal before the CIT-Appeal and the Ld. CIT-Appeal condoned the delay, confirmed by the Tribunal such decision was upheld. He further referred to paragraph No. 8 wherein the decision of the Hon’ble Supreme Court in case of Wipro Ltd. in 446 ITR 1 SC was also considered and further relying on the decision of the Hon’ble Gujarat High Court in case of Social Security Scheme vs. CIT 147 Taxman.com 283 Gujarat the appeal of the revenue was dismissed. He submits that issue is squarely covered in favour of the assessee.

8. The learned departmental representative vehemently submitted that there is a date line provided under the income tax act itself for filing of the form No. 10 B of the act. The act itself provides that such form is required to be filed in a particular manner on or before the due date of filing of the return of income. A statutory timeline is provided in the act itself. Therefore, how a particular timeline which is provided in the act itself can be said to be directory in nature. He submits that he can understand if rules provide such timeline to file form No. 10 B. He submits that ,even if this view is taken that though the timeline for filing form No. 10 B is provided in the act itself, even then it is considered as directory in nature, then even the due date submitted for filing of the return of income should also be considered as directory in nature and not mandatory. If such a view is taken the whole of the act and its provisions would go for a toss. It was further stated that in such circumstances the timeline from framing the assessment order which is also provided in the act should also be considered as a directory in nature and no order could have been held to be time-barred. He further submitted that the honourable Supreme Court in the decision of Wipro Ltd has decided this issue and held that timeline is provided under the act are mandatory. Distinguishing the decision of the honourable Supreme Court at the drop of the hat is unwarranted.

9. We have carefully considered the rival contention and perused the order of the Ld. Lower Authorities. In this case for assessment year 2018-19 the due date for filing of the return of income was 31^st August 2018. According to the provisions of Section 44AB of the Act read with Section 12A(1)(b) of the Act read with Rule 12(2) of the Income Tax Rules Form No. 10B was required to be filed one month before the due date of filing of the return of income. Admittedly the assessee did not file Form No. 10B. The intimation u/s 143(1) of the Act was passed on 4^th March 2020. By that time also the assessee did not file any such audit report. The assessee file appeal before the Ld. CIT-A on 23^rd June 2025 on that date it electronically uploaded Form No. 10B as stated by the assessee. Such form is placed before us in a paper book at Page No. 112-116 of the paper book. Thus, when the appeal was pending before the Ld. CIT-A, the form No. 10B was available. The Hon’ble Gujarat High Court was also dealing with an identical situation where the form No. 10B for assessment year 2017-18 was filed during the pendency of appellate proceedings, the Ld. CIT-Appeal accepted such form and granted relief to the assessee. On appeal by the revenue before the ITAT this was upheld. On appeal by the revenue u/s 260A of the Act before the Hon’ble High Court no infirmity was found in the order of the Ld. CIT-Appeal. Thus, the Hon’ble High Court accepted that even if form No. 10B is filed electronically during the pendency of the appellate proceedings before the Ld. CIT-Appeal the assessee cannot be denied benefit of Section 11 and accumulation of income. The facts are identical before us. The Hon’ble Gujarat High Court in paragraph No. 4 of that order is also confronted with the decision of the Honorable Supreme Court in Wipro Ltd. wherein the Honorable High Court made a distinction held that reference to the aforesaid decision of the Honorable Supreme Court has no connection whatsoever remotely to the facts of the present case before the Hon’ble High Court. Further the Coordinate Bench in assessment year 2018-19 in ITA No. 1110/Bang/2023 has also held so. However, in the case before the Tribunal before passing of the intimation u/s 143(1)A of the Act the audit report was available. In our case same was not available. Thus, the decision of the ITAT does not apply. However, the decision of the Hon’ble Gujarat High Court squarely applies.

10. In Commissioner of Income Tax (Exemptions) vs. Laxmanarayan Dev Shrishan Seva Khendra [2024] 167 taxmann.com 548 (Gujarat) [10-09-2024] the honourable Gujarat high court held that: –

3.9. Being aggrieved and dissatisfied with the decision of the Tribunal, the appellant preferred this Appeal before this Court.

4. Learned Senior Standing Counsel Ms.Maithili Mehta for the appellant submitted that in case of Pr. CIT v. Wipro Ltd. of the Hon’ble Supreme Court rendered on 11^th July, 2022 in Civil Appeal No.1449 of 2022/[2022] 140 com 223/288 Taxman 491/446 ITR 1 (SC) it was held that requirement of Section 10B(8) of the Act which provides for requirement of furnishing declaration for claiming exemption under Section 10B of the Act is mandatory but the time limit within which such declaration is to be filed is also held to be mandatory. Relying upon the aforesaid decision, it was submitted that the assessee ought to have filed the audit report in Form 10B of the Act before the due date of filing of the return to claim the exemption under Section 12A of the Act.

5. Reliance placed by the learned Senior Standing Counsel Ms.Maithili Mehta for the appellant on the decision of the Hon’ble Supreme Court in case of Wipro Ltd. (supra) would not be applicable in the facts of the case, as in the facts of the present case, the assessee has claimed the exemption under Section 11 read with Section 12A(1)(b) of the Act which required the assessee to file Audit Report in Form of 10B of the Act which has nothing to do with claiming 100% exemption of total income in respect of newly established 100% Export Oriented Undertakings under Section 10B of the Act. Section 10B(8) of the Act requires the assessee to file an undertaking before the due date of furnishing of return of income under sub-section (1) of Section 139 of the Act before the Assessing Officer in writing that the provision of Section 10B of the Act may not be made applicable to him, otherwise the provision of this Section shall not apply to him for any of the relevant assessment year.

6. Considering the language of the provision of Section 10B(8) of the Act, the Hon’ble Supreme Court held that it was mandatory on part of the assessee to file declaration before the due date of filing of return under Sub-section (1) of Section 139 of the Act, whereas, in the facts of the said case the assessee filed such undertaking along with the revised return under Sub-section (5) of Section 139 of the Act and in such facts, the Hon’ble Supreme Court held that the twin conditions prescribed under Section 10B(8) of the Act was mandatory to be fulfilled and it cannot be said that though the declaration is mandatory, the filing of such declaration within the due date of filing of return under Sub-section (1) of Section 139 of the Act would be directory.

7. Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. ITO (Exemption) in Application No.6097 of 2020 decided on 09^th December, 2020/[2021] 125 com 75/278 Taxman 148 (Gujarat) as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal.

8. In such circumstances, we are of the opinion that the Tribunal has not committed any error by not following the decision in case of Wipro Limited (supra) as referred to and relied upon by learned advocate for the appellant-Revenue, and has rightly followed the decision of this Court in case of Social Security Scheme of GICEA (supra).

9. In view of the foregoing reasons, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order of the Tribunal. The Appeal is accordingly dismissed.”

11. Thus following the decision of the Honorable Gujarat High Court we hold that even if the assessee has violated the provisions of Section 12A(1) of the Act by not filing the form No. 10B electronically in time and despite the decision of the Honorable Supreme Court in case of Wipro Ltd. Supra, the assessee is entitled to the benefit of form No. 10B filed at the time of filing of the appeal before the Ld. CIT-Appeal.

12. Coming to the order of the Ld. CIT-Appeal we find that the advice rendered by the Ld. CIT-Appeal in paragraph no. 6.5 of the order is correct and in accordance with the plain reading of the law. Further we also do not find that how could the CPC u/s 143(1) of the Act grant the assessee the benefit of accumulation and application in absence of Form No 10 B.

13. However, following the judicial precedents of the Honorable Gujarat High Court which we are bound to follow in absence of any contrary decision of any other High Court, appeal of the assessee is to be allowed. Accordingly, we allow the appeal of the assessee and direct the Ld. Assessing officer to grant the benefit of deduction of application of income as well as accumulation of income.

14. The appeal of the assessee is allowed.

Order pronounced in the open court on 26^th May, 2026.