Exemption Can’t Be Denied for Late Form 10B Filing: ITAT Kolkata

ITAT Kolkata order Whether exemption u/s 11 or 10(23C) can be denied during intimation U/s 143(1) solely because Form 10B or 10BB was filed belatedly, even though the forms were eventually furnished and were available with AO

Saraswati Devi Educational And Social Trust Vs CPC (ITAT Kolkata)

Key issue: 

Whether exemption under section 11 or 10(23C) can be denied during intimation under section 143(1) solely because Form 10B or 10BB was filed belatedly, even though the forms were eventually furnished and were available with the Assessing Officer?

Tribunal’s Analysis

• The assessee trust filed its returns on 27.03.2021 (AY 2020–21) and 31.10.2023 (AY 2023–24), and uploaded its Form 10B/10BB along with the returns.
• CPC rejected the exemption claim under section 11 by invoking section 143(1) citing late filing of audit reports, without providing prior opportunity to the assessee as required by the proviso to section 143(1)(a).
• The Tribunal observed that the audit report was available with the tax authorities before finalization of intimation, and that the default was technical or procedural in nature.

Judicial Precedent Relied Upon

Sarvodaya Charitable Trust v. ITO [(2021) 125 taxmann.com 75 (Guj.)]

Held that exemption under section 11 cannot be denied merely on delayed filing of Form 10B when the audit report was ultimately furnished and delay was condonable. The Court emphasized substantive compliance over procedural lapses, noting the CBDT’s discretion under section 119(2)(b) to condone delay.

The ITAT in this case followed the same reasoning—holding that technical delay does not defeat a substantive exemption claim, particularly in the context of processing under section 143(1) where no detailed adjudication is intended.

Observations and Ruling

• CPC was not justified in denying exemption under section 11 or 10(23C) merely for delayed filing of audit reports.
• The opportunity required under proviso to section 143(1)(a) was not granted before making the adjustment.
• Therefore, the intimations under section 143(1) for both AYs were quashed.
• The Tribunal directed that exemption under section 11/12/10(23C) be allowed since the trust’s audit report was filed and compliance was substantially met.

Statutory Provisions Involved

1. Section 11 of the Income Tax Act, 1961  -Provides exemption for income derived from property held under trust wholly for charitable or religious purposes, subject to conditions regarding application and accumulation of income.

2. Section 12A(1)(b) and Section 12AB

Mandates that a trust claiming exemption under sections 11 and 12 must furnish an audit report in Form 10B (for section 11) or Form 10BB (for section 10(23C)) before the specified date under Rule 17B.

3. Section 139(1) and Rule 12AB/Rule 17B  -Prescribes that Form 10B/10BB be filed at least one month prior to the due date for filing the return of income under section 139(1).

4. Section 143(1)(a)(ii)/(iv)

Allows the CPC to make adjustments in processing returns for disallowance of deductions, exemptions, or reliefs claimed when information furnished is inconsistent with the prescribed forms, or if relevant reports are not uploaded within prescribed time.

5. Proviso to Section 143(1)(a)

Requires that an intimation be sent to the assessee to give an opportunity to respond before making any such adjustment.

6. Section 119(2)(b)

Empowers the Central Board of Direct Taxes (CBDT) to condone delays in filing Form 10B/10BB or returns when sufficient cause exists, ensuring substantive exemption is not denied on mere technical non-compliance.