DAV Montessory School Vs ITO (Exemptions) (ITAT Jaipur)
Jaipur ITAT Holds Late Filing of Form 10B Is Procedural; Directs AO to Grant Exemption Where Audit Report Was Available Before Processing Return
The Jaipur ITAT held that while furnishing an audit report in Form 10B is mandatory, the timing of its filing is a procedural requirement, and exemption cannot be denied merely because the audit report was not filed along with the return, provided it was available with the Assessing Officer before processing the return under section 143(1). Accordingly, the Tribunal restored the matter to the Assessing Officer to consider the audit report and grant consequential relief.
The assessee, a charitable educational institution, was denied exemption under section 10(23C)(vi) as CPC had processed the return without allowing the exemption on the ground that Form 10B had not been filed within the prescribed time. Although one appeal against the original intimation under section 143(1) was dismissed due to an inordinate delay of 1,911 days, the Tribunal entertained the appeal arising from the order under section 154, where the issue had been adjudicated on merits.
The Tribunal found that Form 10B had already been uploaded and was available on the departmental portal before the return was processed under section 143(1), a fact not disputed by the Revenue. Relying on the Gujarat High Court’s decision in Association of Indian Panelboard Manufacturers v. DCIT, it held that filing of the audit report is a procedural requirement and once the report is available before completion of assessment, exemption cannot be denied on technical grounds. The Tribunal therefore set aside the matter to the Assessing Officer with directions to consider the audit report already on record and grant appropriate relief by rectifying the assessment. The appeal arising from the rectification proceedings was allowed for statistical purposes, while the belated appeal against the original intimation was dismissed.
Cases Discussed
- Association Of Indian Panelboard … vs The Deputy Commissioner Of Income Tax (Gujarat High Court), C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023
FULL TEXT OF THE ORDER OF ITAT JAIPUR
These two appeals of the assessee are directed against the orders of the ld. Addl/Joint Commissioner of Income Tax (Appeal)-1, Visakhapatam, both dated 22/01/2026, one emanating from the order of the AO, dated 27.08.2020 passed u/s 143(1) of the Act, 1961and another emanating from the order of the AO passed u/s 154 of the Act dated 12/02/2025.
2. Both the appeals filed are in respect to the common dispute relating to disallowance of claim for exemption u/s 10(23C) for non filing of audit report in Form l0Bwhich was supposed to have been e-filed within the stipulated time along with the return or before the filing of the same , as per provisions of section 12A(1)(b).
3. Brief facts are that the assessee under the name of “DAV Montessory School Samity ” is registered under section 12A(1)(ac)(i) vide order dated 24/09/2021 covering the period AY 2022-23 to AY 2026-27 (Form 10AC), which succeeds the earlier registration u/s 12AA dated 07/06/2010 ( as per copy of certificate contained in pb 26).
4. The assessee filed its original return for this Asst year 2019-20, u/s 139(1) on 30th August, 2019 (in ITR — 7), which was subsequently revised on 15th February, 2020, which was processed u/s 143(1) by CPC, Bangalore on 27th August, 2020, on an assessed income of 2.30 crones, without allowing the claim for exemption u/s 10(23C), for non filing of audit report in Form 10B, within the stipulated time.
5. An appeal before the Ld CIT(A) was filed against the said intimation u/s 143(1)(a) dated 27/08/2020, which was belatedly filed by 1911 ( One thousand Nine Hundred Eleven days) , and in absence of any application for condonation being filed by the assessee along with form — 35 , explaining the reasons for delay , the said appeal has not been admitted for adjudication on merits by the ld first appellate authority u/s 249(3) of the Act , against which the assessee is in appeal before the tribunal in ITA 751/ JP / 2026 , praying for condoning the said delay and for considering the appeal on merits.
6. The grounds of appeal taken in Form 36 in ITA — 751/ JP/26are as follows:
“1. That on the facts and in the circumstances of the case the Ld. JCIT (Appeals)-1 Visakhapatnam has erred in law as well as in facts in not condoning the delay and dismissing the appeal solely on grounds of delay. The action is arbitrary, unjustified and contrary to the principles of natural justice. Kindly condone the delay and treat the appeal as valid.
2. That on the facts and in the circumstances of the case the Ld. Assistant Director of Income Tax, CPC is wrong, unjust and has erred in law and facts in disallowing the benefit of section 10(23C)(vi) of the Act and making addition amounting to Rs. 2,30,00,958/- as per provisions of Income Tax Act, 1961. Kindly direct to allow the expenditure to assessee.
3. That the appellant craves permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.”
7. Meanwhile, the assessee filed a rectification request u/s 154, on 12th February, 2025 , in ITR-7( rectification) seeking rectification of the intimation u/s 143(1) dated 27th August, 2020 , which has been rejected vide a rectification order of even date 12th February, 2025, against which the assessee filed an appeal before the Ld. first appellate authority , on 24/02/2025, which has been admitted by the Ld. first appellate authority and adjudicated on merits but by dismissing the claim of the assessee by observing as follows :
“5.1.3 It is evident from the provisions of section 10(23C) (of the Act read with Rule 12(2) of the IT Rules that the appellant is required to file the Audit Report in the Form No. 10B electronically along with the Return of Income prior to the due date for furnishing the return of income under sub-section (1) of section 139. In the instant case the appellant filed its return of income on 30.08.2019. However, it had filed the Form 10B electronically on 05-10-2020. The appellant is supposed to file Form No. 10B electronically along with the return of income on or before 30.08.2019. Hence, the CPC is rightly denied the benefit of exemption u/s 10(23C)(vi) of the IT Act. In view of the above, the grounds raised by the appellant on this issue are “dismissed”.
8. Now, the assessee is also in appeal against the said order in ITA No 1719/JP/2026, on the following grounds:
“1. That on the facts and in the circumstances of the case the Ld. Addl(A)-1 Visakhapatnam is wrong, unjust, and has erred in law and facts in confirming the disallowance of benefit under section 10(23C) (vi) of the Act and making an addition amounting to Rs. 2,30,00,958/- as per provision of Income Tax Act, 1961. Kindly allow the same.
2. That the appellant craves permission to add to or amend to any of the above grounds of appeal or to withdraw any of them. “
9. Condonation of delay :In course of hearing before the tribunal the ld. AR admitted that the appeal in ITA No. 1719/JP/2026 is belatedly filed by 71 days. He has filed an application for condonation of delay. Considering the submissions made by the assessee along with an affidavit explaining the delay we condone the delay and admit this appeal for hearing on merits.
10. The ld. AR submitted that two appeals are filed one is travelled against the intimation u/s 143(1) dated 27/08/2020 , and the other appeal has travelled against rectification order u/s 154 dated 12/02/2025 , but the issues disputed in both the appeals are identical where the claim for exemption u/s 10(23C)(vi) has been disallowed by CPC , while processing the return u/s 143(1) , because of late filing of audit report in Form 10B.
10.1 He further submitted that in the instant case, the assessee has filed its return of income on 30th August 2019 which has been subsequently revised on 15.02.2020 and the audit report in Form 10B has been furnished on 15.02.2020(as per acknowledgment receipt enclosed in paper book page36).
10.2 He further pointed out that the assessment u/s 143(1) has been completed by CPC Bangalore on 27.08.2020 and the audit report in Form 10B was already before the CPC, Bangalore on the date of assessment u/s 143(1) and as such, the AO should have taken into cognizance the said audit report already uploaded in the portal and existing before him on the date of assessment. As such, he prayed for necessary direction for acceptance of the audit report and for allowing of the exemptions as claimed by the assessee in his return.
11. The ld. DR relied on the order of the ld. CIT(A) and submitted that in the instance case, there has been multiplicity of proceedings where the appeal filed against original assessment was pending before the ld. first appellate authority which has been dismissed for delay u/s 249(3). The assessee has filed rectification u/s 154, pending appeal disputing identical grounds which should not have been admitted for hearing, but he has not disputed the fact that the audit report in form JOB was available before the AO , on the date on which the return has been processed u/s 143(1) on 27/08/2020.
12. We have heard the rival submissions and the materials on record and we find that both the appeals before the tribunal relates to only one single issue of non filing of audit report in Form 10B within the stipulated time frame whereby the exemptions claimed by the assessee in ITR 7 has not been allowed.
13. Before proceeding further, we note that there are parallel proceedings initiated in the instant case, which relates to the same issue of belated filing of audit report in form 10B.
13.1 As such in order to prevent contradictory rulings and also considering the fact that the first appeal proceedings connected to the appeal No ITA — 751/ JP/26, has not been adjudicated on merits by the Ld JCIT(A), refusing to condone the inordinate delay of 1911 ( One thousand Nine Hundred Eleven days), in filing the same, we dismiss the appeal No ITA 751/ JP / 2026, refusing to condone the inordinate delay. As such this appeal of the assessee is dismissed.
14. In respect of the remaining appeal in ITA No. 1719/JP/2026which has been adjudicated by the Ld first appellate authority on merits , we are of the opinion considering the various judicial precedents on this issue that furnishing of audit report in Form 10B is mandatory but the filing of the same is procedural and as such, we are of the opinion that since the audit report in Form 10B was available with the AO, CPC, Bangalore on the date of assessment u/s 143(1) , the same should have been accepted and cognizance should have been given to the said audit report for the purpose of assessment.
15. On this aspect of the matter we rely on the decision of the Hon’ble Gujrat High Court in the case of Association Of Indian Panelboard … vs The Deputy Commissioner Of Income Tax on 21 March, 2023 C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 IN THE HIGH COURT OF GUJARAT, where the Hon’ble Court has observed in para 5.5 of the order as follows:
“5.5 It is to be observed in the present case that the Form D- the audit report, though was not filed with the return of income, the same was available with the Assessing Officer when he processed the return of income under Section 143(1) of the Act. The conditions for claiming exemption under Section 11 was satisfied. Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Even though the Form 10B was filed at a later stage, when it was part of the record of the Assessing Officer in course of the processing of the return of income, the Assessing Officer could not have denied undefined the exemption claimed by the assessee under Sections 11(1) and 11(2) on the ground that the audit report was not filed.
5.6 The tribunal further committed an error in appreciating the import of Section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No.7/18 dated 20.12.2018 issued under Section 119 of the Act could not be, therefore said to have taken away the appellate remedy.
5.7 The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12 (2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about filing of audit report as stated above.
6. The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee.”
15.1 As such, respectfully following the law laid down by the Hon’ble High court we set aside this matter to the files of the AO for consideration of Form JOB already uploaded and available on record since prior to the date of assessment u/s 143(1) , which should not have been ignored and we direct the same to be considered for the purpose of rectification of the assessment.
16. In the result, the appeal of the assessee in ITA No. 1719/JP/2026 is allowed for statistical purposes.
17. In the result, the appeal of the assessee in ITA No: 1719/JP/2026 is allowed for statistical purpose and the appeal in ITA / 751/ JP /2026, is dismissed.
Order pronounced on 28.07.2026 under Rule 34(4) of the Income Tax Appellate Tribunal Rules 1963.
