2025 (7) TMI 1921 - AT - Income Tax

Form 10B filing is directory; delayed upload due to software glitch not bar to exemption under s.11

ITAT held that the requirement to file audit report in Form 10B is directory, not mandatory, and exemption under s.11 cannot be denied solely for delayed ... Denying the claim of deduction u/s 11 - late filing of Form 10B of the act - HELD THAT:- equirement of filing audit report in Form 10B is directory and not mandatory and exemption under section 11 of the Act cannot be denied only on account of delay in filing of audit report in Form 10B. As in the present case, according to the assessee, the audit report was prepared on 30th August, 2019; but the same could not be uploaded at the time of filing of return on 30/09/2019 which was ultimately uploaded on 18/10/2019. In our view, since the audit report in Form 10B was already uploaded and the same was filed before issuing intimation under section 143(1) of the Act, exemption under section 11 of the Act cannot be denied on this ground alone. Thus, we are of the view that the assessee was prevented by sufficient cause for not uploading the audit report in Form 10B because of software glitches; therefore, we condone the delay in uploading the Form 10B and allow the claim of exemption under section 11 of the Act. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether non-uploading / late uploading of audit report in Form 10B on the income-tax portal disentitles a trust to exemption under section 11 when the audit report was signed before the return filing and subsequently uploaded before issuance of intimation under section 143(1). 2. Whether the requirement of filing the audit report in Form 10B is mandatory (jurisdictional condition) or directory (procedural requirement) for the grant of exemption under section 11. 3. Whether technical glitches in the income-tax portal constitute 'sufficient cause' to condone delay in uploading Form 10B and thereby permit allowance of exemption under section 11. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of late uploading of Form 10B on entitlement to exemption under section 11 Legal framework: Section 11 provides exemption for income applied for charitable objects; records and audit compliance (including filing of audit report in Form 10B) form part of compliance requirements tied to claim of exemption. Precedent Treatment: The Tribunal relied on decisions of co-ordinate benches and higher courts addressing denial of exemption for procedural non-compliance and on more recent orders of coordinate benches that treated late uploading caused by technical problems as constituting sufficient cause for condonation. (References to prior decisions were considered by the Tribunal.) Interpretation and reasoning: The Court examined facts showing the audit report was signed prior to filing the return and was uploaded subsequently but before the issue of intimation under section 143(1). The Tribunal accepted the factual position that the audit report was prepared and signed on an earlier date and that the delay in uploading was due to portal/software glitches. Given that the signed Form 10B was ultimately on record before finalization of assessment/intimation, the Tribunal held that denial of exemption solely on account of delay in uploading would be disproportionate and contrary to the object of section 11. Ratio vs. Obiter: Ratio - Where an audit report in Form 10B is prepared and signed before filing the return and subsequently uploaded before issuance of intimation under section 143(1), mere delay in uploading, absent mala fide or prejudice to revenue, does not disentitle the assessee to exemption under section 11. Obiter - Observations on comparative factual matrices of other cited cases and broader policy considerations regarding software glitches; these support but are not essential to the decision in the facts before the Tribunal. Conclusion: Exemption under section 11 cannot be denied solely on account of late uploading of Form 10B where the audit report was signed prior to return filing and uploaded before intimation under section 143(1); the claim of exemption was allowed. Issue 2 - Whether filing audit report in Form 10B is mandatory or directory Legal framework: Distinction between mandatory (jurisdictional) conditions precedent and directory requirements in tax compliance; statutory text read with scheme of assessment and grant of exemptions under section 11. Precedent Treatment: The Tribunal relied on consistent rulings of co-ordinate benches and higher courts that have interpreted procedural compliances in exemption claims, including the treatment of certain filings as directory where substantive compliance has been otherwise established. Interpretation and reasoning: The Tribunal analyzed the statutory scheme and concluded that the requirement of filing Form 10B is procedural and directory rather than an absolute condition precedent to entitlement. The reasoning emphasized substance over form: where the audit report exists, is signed within time, and is placed on record before the assessment process crystallizes, the filing requirement should not be converted into a forfeiture of substantive exemption rights, particularly where delay arises from circumstances beyond the assessee's control. Ratio vs. Obiter: Ratio - The filing/uploading requirement for Form 10B is directory and not mandatory for denying exemption under section 11 where substantive compliance (signed audit report) exists and is put on record before intimation/assessment. Obiter - General policy statements on distinguishing procedural defaults that may warrant condonation in other contexts. Conclusion: The Tribunal held the requirement to file Form 10B is directory; therefore, delay in uploading, standing alone, does not mandate denial of exemption under section 11. Issue 3 - Whether technical glitches constitute 'sufficient cause' to condone delay in uploading Form 10B Legal framework: Established principle permitting condonation of delay where a party is prevented by 'sufficient cause' from complying with procedural time limits; administrative directions delegating condonation powers to revenue officers and circulars recognizing systemic portal issues. Precedent Treatment: The Tribunal noted earlier decisions and administrative communications recognizing technical difficulties in portal uploads and permitting condonation where supported by documentary evidence. Interpretation and reasoning: The Tribunal accepted documentary evidence (dates of signing, UDIN, sequence of filings, and correspondence indicating portal errors and departmental advice to apply for condonation) as establishing that the assessee was prevented from uploading in time due to technical glitches. The Tribunal referenced an administrative circular that delegated condonation powers, using that to corroborate the existence and recognition of recurring portal problems. Given those findings, the delay was attributable to circumstances beyond the assessee's control and constituted 'sufficient cause.' The Tribunal therefore exercised the remedial approach of condoning the delay and granting the exemption where otherwise allowable. Ratio vs. Obiter: Ratio - Technical glitches in the income-tax portal that prevent timely uploading of Form 10B constitute sufficient cause for condonation of delay where supported by contemporaneous documentary evidence and where the signed audit report is otherwise available; delay may be condoned and exemption allowed. Obiter - Remarks suggesting administrative remedies and practice adjustments for recurring portal failures. Conclusion: The Tribunal found sufficient cause in the form of software/portal glitches, condoned the delay in uploading Form 10B, and allowed the claim of exemption under section 11. Cross-references and Overall Conclusion Cross-reference: Issues 1-3 are interlinked - the directory characterization of Form 10B filing (Issue 2) and acceptance of technical glitches as sufficient cause (Issue 3) inform the outcome on the substantive entitlement to exemption despite late uploading (Issue 1). Overall conclusion: On the facts, the Tribunal condoned the delay in uploading Form 10B caused by portal/software glitches, treated the filing requirement as directory, and allowed the exemption under section 11 where the audit report was signed before return filing and ultimately uploaded before intimation under section 143(1).