Delay in Filing Form 10B Cannot Justify Denial When Report Was Available Before CPC Order: ITAT [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) held that the denial of exemption under Section 11 and 12 of the Income Tax Act on the sole ground of delay in filing Form 10B was not justified, as the report was available with the CPC before the order was passed.

Seva Bharathi (assessee), a trust registered under Section 12A of the Income Tax Act, filed its return of income for the Assessment Year (AY) 2022-23 on November 2, 2022, declaring a total income. The assessee filed the necessary Tax Audit Report in Form 10B on the same date along with the return.

The original due date for filing Form 10B was September 30, 2022, later extended by the CBDT up to October 7, 2022. Since the assessee filed it on November 2, 2022, there was a delay.

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The Central Processing Centre (CPC), Bengaluru, processed the return and an order was passed on March 28, 2023. The CPC denied the benefit of Sections 11 and 12 to the trust, citing the delay in filing the audit report in Form 10B.

Aggrieved by the CPC’s order, the assessee filed an appeal before the ITAT. The counsel for the assessee contended that when the audit report in Form 10B was available with the CPC, having been filed along with the return of income, the delay of 25 days could not be a ground for denying the substantive exemption.

The assessee argued that filing Form 10B is directory, not mandatory, and the substantive benefit should not be withdrawn due to a minor procedural delay.

The two-member bench, comprising Vijay Pal Rao (Vice President) and Madhusudan Sawdia (Accountant Member), considered the submissions and observed that the audit report was filed along with the return of income and was very much available with the CPC when the return was processed on March 28, 2023.

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The Tribunal cited consistent judicial precedents from various High Courts, including the Gujarat High Court, which held that the benefit of exemption should not be denied solely due to a delay in furnishing the report in Form 10B. It emphasized that while filing the audit report is a substantive requirement, the mode and stage of filing is procedural or directory.

The Tribunal concluded that since the Form 10B was filed along with the return of income and within the due date of filing the return of income, the delay in filing the Form 10B cannot be a ground for denial of the exemptions under Sections 11 and 12 of the Income Tax Act, 1961. In the result, the appeal filed by the assessee challenging the denial of exemption was allowed.

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