Development Education & Welfare Trust Vs ITO (ITAT Kolkata)
Belated Return Within Section 139(4) Does Not Defeat Trust Exemption: Delayed Form 10B Treated as Procedural
Facts of the case
The assessee, a public charitable trust registered under section 12A, challenged the denial of exemption under sections 11 and 12 for two assessment years. Its accounts had been audited as required under section 12A(1)(b), and the audit report in Form 10B had been obtained. However, both the return and the audit report were furnished after the original due dates.
For AY 2019-20, the order records the due date for filing the return and Form 10B as 31 October 2019. The trust filed its return on 23 November 2020, declaring nil income after claiming exemption, and uploaded Form 10B on 5 January 2021.
While processing the return under section 143(1) on 5 February 2021, the CPC denied the exemption because Form 10B had been filed late. This resulted in an addition of ₹33,27,747.
CIT(A) accepted one explanation but sustained the denial on another ground
The CIT(A) accepted that delayed furnishing of Form 10B was a procedural mistake and that exemption could not be denied on that ground. Nevertheless, the appellate authority sustained the addition for a different reason.
According to the CIT(A), filing the return within the due date under section 139(1) was mandatory for claiming exemption under sections 11 and 12. Since the return had been filed after 31 October 2019, the trust was held ineligible.
The controversy before the Tribunal therefore centred on whether a return filed within the permissible period under section 139(4) satisfied the return-filing condition for exemption, despite being filed after the original due date.
Tribunal’s reasoning: Section 139 is wider than section 139(1)
The Tribunal recorded that the return filed on 23 November 2020 was within the extended time available under section 139(4). It consequently treated the return as a valid return furnished within the time allowed under section 139.
The Bench held that the statutory reference to section 139 could not be restricted to section 139(1) alone. It included a belated return validly furnished under section 139(4).
For this conclusion, the Tribunal followed DCIT v. Bishnupur Public Education Institute, ITA No. 1021/KOL/2023, order dated 24 February 2025, which had examined the return-filing requirement, delayed procedural forms and the relevant CBDT clarification.
The reasoning reproduced from that decision also drew support from Shri Mahudi Madhupuri Jain v. ITO and Susila Educational Trust v. ITO. These decisions recognised that a valid belated return did not, merely because of its filing after the original due date, disentitle an otherwise eligible trust to exemption.
CBDT clarification and the Finance Act, 2023 amendment
The precedents discussed in the order relied upon the CBDT clarification dated 23 April 2019, F. No. 173/193/2019-ITA-I. That clarification explained that a registered trust seeking exemption should furnish its return within the time allowed under section 139, and directed rectification of processing demands raised on this issue.
The Tribunal’s adopted reasoning emphasised that the clarification did not confine the permissible period to section 139(1).
The reproduced decisions also examined the Finance Act, 2023 amendment expressly referring to the time allowed under section 139(1) or section 139(4). They understood the amendment’s purpose as excluding the unintended availability of exemption through an updated return, rather than introducing eligibility for belated returns for the first time.
Delayed Form 10B and final decision
The Tribunal followed the line of authorities treating delayed furnishing of an audit report as a procedural lapse, where the relevant substantive requirements had been satisfied. The discussion included Indian Sugar Mills Association, Association of Indian Panelboard Manufacturers, and Sarvodaya Charitable Trust, through the precedents reproduced in the order.
For AY 2019-20, the Tribunal set aside the CIT(A)’s order and directed the Assessing Officer to allow the exemption under section 11 as claimed.
The same conclusion was applied to AY 2020-21, since the issue was similar. Both appeals were allowed, providing substantive relief rather than merely restoring the matters for reconsideration.
Author’s comments
The decision reinforces an important distinction: a return filed after the original due date is not necessarily a return filed outside the statutory time. Where section 139(4), including an applicable extension, permits the filing, the original due date alone cannot determine eligibility under the reasoning adopted here.
Equally, delayed uploading of an audit report and failure to obtain the required audit are different matters. This case concerned audited accounts and an obtained report furnished late. The ruling should be applied with attention to the assessment year, actual filing dates and applicable statutory requirements.
The order does not separately reproduce the filing dates or adjustment amount for AY 2020-21. Its relief for that year rests on the finding that the issue was identical. The practical takeaway is to establish the applicable section 139(4) deadline and the audit compliance through records, rather than relying merely on the description “belated return.”
Cases Discussed
- DCIT Vs Bishnupur Public Education Institute, ITA No. 1021/KOL/2023, dated 24/02/2025 (ITAT Kolkata) — Followed. The Tribunal adopted the reasoning that a return filed within section 139(4) is valid for the relevant exemption requirement and that procedural delay in filing Form 10 cannot by itself defeat a substantive exemption claim.
- Shri Mahudi Madhupuri Jain Vs ITO, ITA No. 184/AHD/2024, dated 04/06/2024 (ITAT Ahmedabad) — Relied upon through Bishnupur Public Education Institute. Interpreted section 12A(1)(ba), the Finance Act, 2023 amendment and the CBDT clarification in favour of recognising a valid return filed under section 139(4).
- Susila Educational Trust Vs ITO, ITA No. 1095/Chny/2024, dated 30/08/2024 (ITAT Chennai) — Relied upon through Bishnupur Public Education Institute. Applied CBDT Circular No. 2/2018 and the clarification dated 23 April 2019 to a return filed within section 139(4).
- CIT (Exemption) Vs Indian Sugar Mills Association, ITAT No. 270 of 2023, dated 10/01/2024 (Calcutta High Court) — Relied upon through Bishnupur Public Education Institute. Delayed furnishing of Form 10B was treated as a procedural matter.
- Association of Indian Panelboard Manufacturer Vs DCIT, R/Tax Appeal No. 655 of 2022, dated 21/03/2023 (Gujarat High Court) — Relied upon through Bishnupur Public Education Institute. A procedural omission in furnishing an audit report did not automatically extinguish entitlement to exemption.
- Seth Chagan Mall Hira Lall Dugar Charitable Trust Vs ITO (Exemption), [2024] 168 taxmann.com 326 (ITAT Kolkata) — Relied upon through Bishnupur Public Education Institute. Discussed delayed statutory forms and procedural compliance for charitable exemption.
- Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (ITAT Rajkot) — Relied upon through Shri Mahudi Madhupuri Jain. Recognised section 11 exemption where the return was filed after the section 139(1) deadline but within section 139(4).
- Sarvodaya Charitable Trust Vs ITO (Exemption), [2021] 125 taxmann.com 75 (Gujarat High Court) — Relied upon through Bangarh Educational Welfare Trust. Furnishing the audit report was treated as procedural and directory, with substantial compliance being sufficient.
- CIT Vs Gujarat Oil and Allied Industries Ltd., [1993] 201 ITR 325 (Gujarat High Court) — Relied upon through Sarvodaya Charitable Trust. Recognised that delayed production of an audit report could constitute sufficient procedural compliance.
- Bangarh Educational Welfare Trust (ITAT Kolkata) — Relied upon through Seth Chagan Mall Hira Lall Dugar Charitable Trust. Discussed delayed returns and Form 10B in the context of section 11 exemption.
- Sasha Association for Craft Producers Vs ITO, ITA No. 181/Kol/2021, dated 16/08/2023 (ITAT Kolkata) — Relied upon through Seth Chagan Mall Hira Lall Dugar Charitable Trust. Considered delayed furnishing of Form 10.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These are appeals preferred by the assessee against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 29.05.2026, and 30.05.2026 for the AY 2019-20 and 2020-21 respectively.
ITA No. 2366/KOL/2026
2. The only issue raised by the assessee is against the order of Ld. CIT (A) confirming the rejection/disallowance of claim of exemption u/s 11 and 12 of the Act on the ground that the return was filed beyond due date, whereas the Ld. AO/ CPC in the intimation u/s 143(1) of the Act disallowed the claim for delayed filing of form 10B (audited report).
3. The facts in brief are that the assessee is a public charitable trust duly registered u/s 12A of the Act. The books of accounts of the trust were audited as required u/s 12A(1)(b) of the Act and audit report in form 10B was duly obtained. The assessee filed the return of income declaring income at Nil after claiming exemption u/s 11 and 12 of the Act. The due date of filing the audit report in form 10B was October 31st 2019 and the due date for filing ITR was October 31st 2019. The assessee filed the return of income on 23.11.2020 and filed the audited report on 05.01.2021. The Ld. AO / CPC, rejected the claim of the assessee u/s 11 of the Act in intimation u/s 143(1) of the Act dated 5.2.2021, on the ground that the audit report in form 10B was filed beyond the due date.
4. Aggrieved assessee preferred the appeal before the Ld. Commissioner of Income-tax (Appeals).
5. The Ld. CIT (A) went up a step further by holding that the delayed filing of audit report in form 10B is procedural mistake and exemption u/s 11 of the Act could not be denied however ld. CIT(A) rejected the claim u/s 11 of the Act along with the exemption u/s 11 of the Act on the ground that ITR was not filed within the due date i.e. 31.10.2019 and was filed on 23.11.2020. The Ld. CIT (A) held that since the filing of ITR within the prescribed due date was a mandatory condition to claim exemption u/s 11 and 12 of the Act and accordingly, the addition of ₹33,27,747/- made by the Ld. AO / CPC in the impugned intimation was confirmed by the Ld. CIT (A).
6. After hearing the rival contentions and perusing the materials available on record, we find that the Ld. AO / CPC rejected the claim of the assessee u/s 11 of the Act on the ground that form 10B was not filed within the due date i.e. on or before 31.10.2019 and was in fact filed on 05.01.2021. The return of income was filed by the assessee on 23.11.2020, against the due date on 31.10.2019. We note that the Ld. CIT (A) though accepted the delay in filing the audit report in form 10B to be a procedural mistake but still upheld the addition made by the Ld. AO by rejecting the claim u/s 11 of the Act on the ground that the filing of ITR within the due date is mandatory and therefore, claim u/s 11 of the Act could not be allowed. In this case, though the assessee has not filed the return of income within the due date u/s 139(1) of the Act and was filed within the time allowed u/s 139(4) of the Act i.e. within the extended time. Therefore, we find merit in the contention of the assessee that the return filed on 23.11.2020 is still a valid return within the meaning of Section 139 of the Act, which includes section 139(1) of the Act as well as 139(4) of the Act. The case of the assessee is squarely covered by the decision of co-ordinate Bench in case of DCIT Vs Bishnupur Public Education Institute in ITA No. 1021/KOL/2023 for A.Y. 2016-17 vide order dated 24.02.2025, wherein the co-ordinate Bench has held as under:-
“07. On the other hand, the ld. Counsel for the assessee submitted that the return was filed by the assessee on 17.02.2017, though in the said return no claim was made as regards accumulation of income u/s 11(2) of the Act. The ld. Counsel for the assessee stated that the assessee during the course of assessment proceedings made its claim before the ld. AO and form no.10 was also filed on 29.08.2018. The ld. AR contended that the return filed on 17.02.2017, is a valid return within the meaning of Section 139 of the Act which include Section 139(1) of the Act as well as 139(4) of the Act. Therefore, even if the return is not filed within the due time u/s 139(1) of the Act, the same can be filed within the time limit u/s 139(4) of the Act. Moreover, filing of form no.10 is procedural lapse on the part of the assessee which was duly filed during the course of assessment proceedings itself. The ld. AR therefore, submitted that mere filing of form no.10 during the assessment proceeding cannot be a ground for denying the legitimate exemption u/s 11(2) of the Act, when all the conditions precedent for allowing such exemption have been fulfilled by the assessee. The ld. AR submitted that the activities of the trust are not in doubt and therefore, the exemption u/s 11(2) of the Act could not be denied on technicalities. The ld. AR in defense of his arguments relied on a series of decisions in case of M/s Susila Educational Trust Vs. ITO in ITA No. 1095/Chny/2024 order dated 30.08.2024 for A.Y. 2018-19, Shri MahudiMadhupuri Jain Vs. ITO in ITA No. 184/AHD/2024 order dated 04.06.2024, CIT (Exemption) Vs. M/s Indian Sugar Mills Association in ITAT No. 270 of 2023, I.A. No. GA/1/2023 & GA/2/2023 order dated 10.01.2024, Association of Indian Panelboard manufacturer Vs. DCIT in R/Tax Appeal no.655 of 2022 order dated 21.03.2023, Seth Chagan Mall Hira Lall Dugar Charitable Trust vs. Income-tax Officer, Exemption [2024] 168 taxmann.com 326 (Kolkata – Trib.)/[2025] 210 ITD 266 (Kolkata – Trib.)[16-10-2024].
08. After hearing the rival contentions and perusing the materials available on record, we find that the return of income has been filed beyond the due date u/s 139(1) of the Act, however, it was filed well within the time allowed u/s 139(4) of the Act. We note that in the return filed u/s 139(1) of the Act, the assessee has not claimed exemption u/s 11(2) of the Act in respect of accumulations made, however during the course of assessment proceedings, a claim was lodged before the ld. AO by filing the revised consolidated computation of income. The assessee also filed the form no.10 for accumulation on 29.08.2018. Now the issue before us is whether the assessee is entitled to said exemption although the return as well as form no.10 has been filed belatedly. So far as the return of income filed on 17.02.2017is concerned, we are of the view that the same is filed within the time limit allowed u/s 139 of the Act which includes the return filed u/s 139(1) of the Act as well as 139(4) of the Act. The case of the assessee is covered by the decision of the co-ordinate Bench in case of Shri MahudiMadhupuri Jain Vs. ITO (supra), wherein the co-ordinate Bench held as under: –
“7. The provision of Section 12A(1)(ba) of the Act was amended w.e.f. 01.04.2023 and the time allowed for the filing of return was prescribed as ‘within the time allowed under sub-section (1) of sub-section (4) of that section’. Thus, there is no doubt that for A.Y. 2023-24 onwards the time limit for filing of return of the trust includes not only the time limit for filing the original return u/s 139(1) of the Act but also the time as available for filing belated return u/s 139(4) of the Act.
8. The contention of the ld. AR is that the above amendment was only clarificatory in nature and that the return for the earlier years filed within the time limit u/s 139(4) of the Act also gets this benefit. On the other hand, the Ld. CIT-DR has contended that for the years prior to A.Y. 2023-24 the benefit of exemption u/s11 of the Act is available only to returns filed within the time limit as available u/s 139(1) of the Act.
9. In order to resolve this controversy, it will be relevant to examine the Memorandum of the Finance Bill, 2023 which is found to be as under:
9. Denial of exemption where return of income is not furnished within time
9.1 As per the provisions of twentieth proviso to clause (23C) of section 10 of the Act, if the return of income is not furnished by a trust or institution under first regime within the time under section 139 of the Act, exemption under subclause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act shall not be available to such trust or institution.
a. Similarly, as per the provisions of clause (ba) of sub-section (1) of section 12A of theAct, if the return of income is not furnished by a trust or institution under the secondregime within the time under section 139 of the Act, exemption under section 11, 12 of theAct shall not be available to such trust or institution.
b. Section 139 of the Act was amended by the Finance Act, 2022 providing for an option to the taxpayers to furnish updated return of income up to 2 years from the end of assessment year.
c. This resulted in unintended consequences of allowing exemption under section 11, 12 of the Act and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available to the trusts where they furnish updated return of income. Accordingly, it is proposed to clarify that the exemption under section 11, 12 and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available only if the return of income has been furnished within the time allowed under sub-section (1) or sub-section (4) of section 139 of the Act.
d. Hence, it is proposed to,
a) amend the twentieth proviso of clause (23C) section 10 of the Act to provide that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via) shall furnish the return of income for the previousyear in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under sub-section (1) or sub-section (4) of that section.
b) amend clause (ba) of sub-section (1) of section 12A of the Act to provide that the person in receipt of the income shall furnish the return of income for the previous year in accordance with the provisions of subsection (4A) of section 139 of the Act, within the time allowed under subsection (1) or sub-section (4) of that section.
e. These amendments will take effect from 1stApril, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.
10. It is apparent from the above clarification that this amendment was introduced to exclude the category of updated returns of income u/s 139(8) of the Act. The requirement of Section 12A(1)(ba) of the Act for this year was that the return should be filed within the time allowed under that section (i.e. u/s. 139 of the Act). Section 139 provides time limit for filing of original return, belated return, revised return as well as updated return. Thus, all these category of returns were eligible for consideration under the general time line of section 139 of the Act. In order to exclude the category of updated return of income, this amendment was brought in to exclude the revised/updated category of returns and specific mention of section 139(1) & 139(4) of the Act was made in Section 12A(1)(ba) of the Act. It is apparent from the Memorandum that time limit for belated return u/s 139(4) of the Act was available for the earlier years as well which was continued and made specific vide this amendment. There is no dispute to the fact that the assessee has filed its return of income for this year within the time limit of section 139(4) of the Act. Therefore, the department was not correct in denying the exemption u/s11 of the Act while processing the return.
11. The Circular F No. 173/193/2019 –ITA-1, dated 23.04.2019 issued by the CBDT and relied upon by the assessee refers to Memorandum to the Finance Bill, 2017 and gives clarification in respect of amendment to section12A of the Act, that a person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed u/s 139 of the Act. As per this clarification, the return of income was required to be filed within the time allowed u/s 139 of the Act and the relevant portion of the Circular is reproduced below:
“2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under:
“as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under subsection (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed under section 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as in provide for further-condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years.”
3. Additionally, an excerpt of circular No. 2/2018 dated 15-2-2018 “Explanatory Notes to the Provisions of the Finance Act, 2017” on insertion of clause (ba) in Sub-section (1) of section 12A is quoted as under:
“The entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act.”
3. Thus, for a trust registered under section 12AA of the Act to avail the benefit of exemption under section 11 shall inter-alia file its return of income within the time allowed under section 139 of the Act. Accordingly, orders under section 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified.”
(Emphasis supplied)
12. It is, thus, clear from the above Circular that exemption u/s 11 of the Act was available in respect of the return of income filed u/s 139 of the Act. This Circular does not mandate that the return has to be filed only within the time limit available u/s 139(1) of the Act and rather directs to rectify the unjust demand raised u/s 143(1)(a) of the Act. As the assessee had filed its return of income within the time limit of section 139(4) of the Act, it was eligible for benefit of exemption u/s 11 of the Act. It has been held by the Ld. ITAT, Rajkot Bench in the case of Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (Rajkot-Tri), which has been relied upon by the assessee, that if the assessee had filed return of income after due date of filing of return u/s.139(1) of the Act but before due date prescribed u/s 139(4) of the Act, benefit of exemption u/s 11 of the Act can’t be denied to the assessee by invoking the provisions of Section 12A(1)(ba) of the Act.
13. In view of the above provisions of law, the clarificatory Circular of the CBDT as well as the judicial pronouncement, we are of the considered opinion that the department was not correct in disallowing exemption u/s 11 of the Act while processing the return, as the return of income was filed by the assessee within the due date as per the provisions of the Act. Accordingly, findings of the Ld. JCIT(A) is reversed and the department is directed to allow the exemption u/s. 11 of the Act as claimed by the assessee.
14. In the result, appeal preferred by the assessee is allowed.”
09. Similarly, the co-ordinate Bench in the case of M/s Susila Educational Trust Vs. ITO (supra) has decided the issue in favour of the assessee by holding and observing as under: –
“4.3 The ld.AR argued that the CIT(A) failed to consider Circular No.2/2018 issued vide F.No.370142/15/2017-TPL dated 15.02.2018 explaining Finance Act, 2017 and the explanatory notes to the provisions of the Finance Act, 2017 and subsequent clarification issues by CBDT in F.No.173/193/2019-ITA-I dated 23.04.2019 with reference to time allowed for filing of return of income, subsequent to insertion of clause (ba) in sub-section 1 of section 12A of the Act. She produced the relevant copy of Circular No.2/2018, wherein the Explanatory notes to the provisions of Finance Act, 2017 was explained as under:-
“15.4 Further, as per the provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there was no clarity as to whether the said return of income was to be filed within time allowed under section 139 or otherwise.
15.5 In order to provide clarity in this regard, further amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act.
In view of the above excerpts of Finance Act, 2017 explaining the provisions of Finance Act, 2017 by the CBDT, clarified that amendment to section 12A of the Act was made so as to provide additional condition that the person in respect of income chargeable to income-tax claiming exemption shall furnish return of income within the time allowed u/s.139 of the Act. She stated that the assessee’s case is squarely covered by the CBDT Circular No.2/2018 dated 15.02.2018.
5. We noted that even in regard to representation received by CBDT for the applicability of amended provisions of section 12AA of the Act for filing of return required u/s.139(4A) of the Act, CBDT referring the Finance Bill, 2017 has clarified vide F.No.173/193/2019-ITA-1 dated 23.04.2019 as under:-
F.No. 173/193/2019-ITA-I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, 23 April, 2019
To,
The Pr. DGIT (Systems),
New Delhi.
Subject : Clarification with regard to the time allowed for filing of return of income subsequent to the insertion of Clause (ba) in sub–section 1 of section 12A of the income –tax Act , 1961.
Sir,
Undersigned is directed to refer to the representation(s) received on above mentioned subject stating that while processing of ITR-7 for the A.Y. 2018-19, in respect of the belated returns filed u/ s 139(4) of the Income Tax Act, 1961 (Act), the following is being communicated u/s 143(1)(a) of the Act:-
“As per section 12A(1)(ba) of the Income -tax Act , 1961 the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. Otherwise, the exemption u/s-11 i.e. sr. no 4(i) and 4 viii in schedule Part BTI is not allowed.”
Based on this, exemption u/s 11 of the Act has been denied to otherwise eligible trust, thereby creating huge demand.
2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under:
“as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under subsection (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/ s 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act.
These amendments are clarificatory in nature.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 201 8-19 and subsequent years.”
3. Additionally, an excerpt of circular 02/2018 dated 15.02.2018 “Explanatory Notes to the Provisions of the Finance Act, 2017” on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under:
“the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act.”
3. Thus, for a trust registered u/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified.
This issues with the approval of Chairman(CBDT).
(Vinay Sheel Gautam)
JCIT (OSD) (ITA-I)
Telefax: 011-23093070
E-mail: [email protected]
Copy to:-
The Pr. CCIT(Exemptions), New Delhi.
5.1 From the above communication, it is clear that CBDT has taken a conscious decision and finally agreed for the position that trust registered u/s.12AA of the Act, in order to avail the benefit of exemption u/s.11 of the Act shall inter-alia files its return of income within the time allowed u/s.139(1) of the Act. The CBDT has categorically directed the Assessing Officers and this clarification was issued to the Pr.DGIT(Systems), New Delhi that the orders issued u/s.143(1A) of the Act in the case where already disallowance were carried out, those may be rectified. Hence, the CBDT itself accepted the position that even returns filed u/s.139 is to be accepted. It means that it has enlarged its scope of section 139 of the Act, which includes provisions of section 139(4) also. Here provision of section 139(4) w.e.f. 01.04.2017 lays down that any person who has not furnished return of income within the time allowed u/s.139(1) of the Act, may furnish the return for any previous year at any time before the end of the relevant financial year or before the completion of assessment whichever is earlier. Here, in the present case, the assessee has filed return of income for the relevant assessment year 2018-19 on 09.02.2019 and here assessment year ends on 31.03.2019. It means, this return is filed within the provision of section 139(4) of the Act. In term of section 139(4) of the Act, a return filed at a belated stage but upon complying with the requirement of such provision, has to be treated as return of income. In the present case, the CBDT has already clarified vide F.No.173/193/2019-ITA-I dated 23.04.2019, which is reproduced above that the assessee is entitled for exemption u/s.11 of the Act, if such return of income is filed within the time allowed u/s.139 of the Act. It means that it covers all the provisions of section 139 of the Act and it is not limited to section 139(1) of the Act. Hence, we allow the appeal of assessee and direct the AO to allow exemption u/s.11 of the Act in this case of the assessee.
6. In the result, the appeal filed by the assessee is allowed.”
010. Therefore, we are inclined to hold that the return filed by the assessee is to be treated as filed within the time allowed u/s 139 of the Act, which includes the return filed u/s 139(1) as well as return of income filed u/s 139(4) of the Act. So far as the filing of form no.10 is concerned during the assessment proceedings on 29.08.2018, we are of the considered view that the late filing of the said form is a procedural delay on the part of the assessee and cannot be used as ground for denying the legitimate exemption u/s 11(2) of the Act. The case of the assessee find force from the decision of Hon’ble High Court in case of CIT(E) Vs. M/s Indian Sugar Mills Association in ITAT/270/2023 (supra), wherein the Hon’ble Court has held that filing of form no.10B is a procedural provision. Similarly, in the case of Association of Indian Panel board manufacturer Vs. DCIT (supra), Hon’ble Gujrat High Court has held that the non-filing of audit report along with return of income which was at best procedural omission, could never lead to an impediment in law in claiming the exemption. Similarly, in the case of M/s Seth Chagan Mall Hira Lall Dugar Charitable Trust Vs. ITO (supra), the co-ordinate Bench held that filing of audit report is only a procedural provision and could not be used to reject the exemption u/s 11 of the Act. The operative part of the same is extracted below:-
“2.1. We have also gone through the cited judgment passed by the hon ITAT and find that the Coordinate Bench of ITAT, Kolkata in the case of Bangarh Educational Welfare Trust (supra) find that the facts of the case were that a Trust was granted registration u/s 12AA(b)(i) of the Act, return of income filed claiming deduction u/s 11 of the Act and the deduction of Rs. 1,35,87,109/- claimed by the assessee denied on the ground that the assessee failed to file the return before the due date and secondly audit report in Form-10B was not filed before the due date prescribed in this Act. The Hon’ble Member has after going over the Circular of CBDT and after discussing several judgments of the hon ITAT has passed the order in favour of the assessee. The operative portion of the aforesaid decision is as thus:
“12. Now, the second reason for which lower authorities have denied the deduction u/s 11 of the Act is of filing the belated audit report on form 10B of the Act. Now, clause (b) of section 12A(1) of the Act provides for a condition that if the income of a trust exceeds a maximum amount which is not chargeable to tax in the previous year the account have to be audited and the person in receipt of such income furnishes the audit report before the specified date. In the case of the assessee, Form No.10B was to be filed and the relevant rule is rule 17B of the Income Tax Rules which provides that the report of audit of the accounts of a trust or institution which is required to be furnished under Clause (b) of section 12A, shall be in Form No.10B.
13. Now, on perusal of the Form 10B, we notice that the same is required to be submitted electronically, one month prior to the due date of the filing of return of income. Admittedly, in the case in hand, the audit report on form 10B has been uploaded on 30.03.2019 which is even after the date of filing the return of income on 15.11.2018. Now, before us, it has been contended by the ld. counsel for the assessee that filing of audit report is directory in nature and even if report is submitted in time before the conclusion of the assessment proceedings, the same needs to be considered. Though the assessee referred to the various decisions, we find it pertinent to refer to the judgment of the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust v. ITO(Exemption) (supra) wherein Para 32 of the said judgment reads as follows:
32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Gujarat), 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.”
14. In the above judgment, Hon’ble Court has held that filing of audit report is directory in nature and its substantial compliance would suffice. The ld. Departmental Representative failed to place before us any other binding precedents of Hon’ble Jurisdictional High Court or the Hon’ble Apex Court. Therefore, considering the ratio laid down in the Hon’ble Gujarat High Court in the case of Assessment year: 2018-19 Bangarh Educational Welfare Trust Sarvodaya Charitable Trust v. ITO(Exemption) (supra), we find that though the audit report has been uploaded after the filing of return of income but the said report has been signed by the auditor on 28.10.2018 and the copy of this report is placed at 40- 41 of paper book and the date of audit report is prior to the filing of the return of income, therefore, it is presumed that conducting of audit for preparation of audit report is before e-filing of the return of income but as claimed by the assessee due to technical glitches, the report was uploaded after filing the return of income.
15. Though the Hon’ble Court holds that the report should be considered even filed in the course of assessment proceedings, or before in appellate authority, however, we notice that in the instant case, the case of the assessee was not selected for scrutiny assessment and it was mere processing of return by the computer with the set program. Had it been the case of scrutiny proceeding u/s 143(3) of the Act, the case could have been different. The ld. A.O may had an opportunity to go through the audit report. But still when the issue came before ld. CIT(A) who also possesses coterminus power with that of A.O and as per section 251(1)(a) of the Act, the ld. CIT(A) in disposing the appeal against order of assessment has the power to confirm, reduce, enhance or annul the assessment, therefore, though, it was not possible to entertain the audit report while processing the return u/s 143(1)(a) of the Act, but the ld. CIT(A) was well within its power to have entertained the said report and examined the same as could have been done by the A.O. Assessment year: 2018-19 Bangarh Educational Welfare Trust.
16. We, therefore, in the given facts and circumstances and respectfully following the judgment of Hon’ble Gujarat High Court in the case Sarvodaya Charitable Trust v. ITO(Exemption) (supra), we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub-clause (b) and (ba) to section 12 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos.1 to 4 of the assessee are allowed.”
2.2. We have also gone through the order passed by the cob of ITAT, Kolkata in Sasha Association for Craft Producers v. ITO in [IT Appeal No. 181 (Kol.) of 2021, dated 16-8-2023] on the issue for non-submission of Form-10, the Hon’ble Member has allowed the appeal of the assessee.
3. Keeping in view the above cited decisions and considering the facts of the present case, we are of this view that the appellant is entitled to deduction and his claim cannot be denied only on this regard that Form-9A has been filed later on, not with the returned income. The appellant has been able to establish his ground of delay that the trustee responsible for handling tax related matters was hospitalized and he had been suffering from severe illness. It is also not in dispute that the copy of discharge certificate and doctor’s prescription has been filed by the assessee before the ld. CIT (Exemption).
Accordingly, we condone the delay and the matter is sent back to the file of ld. CIT (Exemption) to pass order as per law. Accordingly, the appeal is hereby allowed.
4. In the result, the appeal filed by the assessee is allowed for statistical purposes.”
011. Considering the facts of the aforesaid decisions, we are inclined to dismiss the appeal of the Revenue.
012. In the result, the appeal of the Revenue is dismissed.”
7. Since, the facts of the case are quite similar to the facts as decided by the co-ordinate Bench (supra), we are therefore, inclined to set aside the order of Ld. CIT (A) and direct the Ld. AO to allow the exemption u/s 11 of the Act to the assessee as claimed. The appeal of the assessee is allowed.
ITA No. 2367/KOL/2026
8. The issue raised in this appeal is similar to one as decided by us in ITA No. 2366/KOL/2026. Accordingly, our decision would, mutatis mutandis, apply to this appeal of assessee in ITA No.2367/KOL/2026 as well. Hence, the appeal of assessee in ITA No. 2366/KOL/2026 is allowed.
9. In the result, both the appeals of the assessee are allowed.
Order pronounced on 07.10.2026.
