Income Tax Exemption u/s 11 Cannot be denied Merely due to Delay in Filing Form 10B: ITAT [Read Order]

The ITAT Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that income tax exemption under Section 11 of the Income Tax Act, 1961, cannot be denied merely due to a delay in filing the mandatory Form 10B, if the other conditions for claiming the exemption are otherwise fulfilled.

The appeal was filed by Shree Bhakt Samaj Vikas Education Trust, which had its exemption claim of over ₹2.8 crore rejected by the Centralized Processing Centre (CPC), Bengaluru, solely because the audit report was not filed within the due date prescribed under Section 139(1).

The Trust submitted that the delay occurred due to a genuine lapse on the part of its consultant and that the audit report was eventually filed and available with the Assessing Officer before the final processing of the return under Section 143(1).

However, both the CPC and the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the disallowance. The CIT(A) further dismissed the appeal ex-parte citing non-prosecution, despite the fact that the Trust had not been given an effective hearing on merits.

The bench of Dr. B.R.R. Kumar (Vice President) and Sidhartha Nautiyal (Judicial member) observed that the Gujarat High Court has consistently held that furnishing an audit report in Form 10B is a procedural requirement and not a substantive condition for availing exemption under Section 11.

The bench noted that if the Form 10B is available with the Department before completion of assessment, exemption cannot be denied merely for procedural delay.

Accordingly, the tribunal ruled that the delay was a curable defect and should not stand in the way of the trust’s legitimate claim for exemption. It restored the exemption and allowed the appeal, clarifying that the claim under Section 11 could not be denied simply due to late filing of Form 10B when all other substantive conditions were satisfied.

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