Denial of exemption under Section 11 for delayed Form 10B; delay condoned to prevent hardship and preserve trust corpus

Denial of charitable exemption turned on whether delay in filing Form 10B justified condonation; court accepted bona fide compliance evidenced by timely Form 10 and completed audit, treating the proviso requiring the audit report as procedural and directory, and found the delay inadvertent due to first-year applicability and lack of awareness. Ignorance of law was recognised as not presumptive knowledge in context, and undue hardship from denial of exemption would dilute the trust corpus. Consequently the impugned order refusing relief was quashed and the delay in filing Form 10B for the relevant year was condoned.

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Issues: Whether the delay in filing Form 10B for A.Y. 2021-22 should be condoned and the impugned order rejecting the condonation application and the consequent intimation under Section 143(1) denying exemption under Section 11 should be quashed.

Analysis: The discretionary power to condone delay under Section 119(2)(b) is to be exercised to advance substantial justice and mitigate genuine hardship. Relevant considerations include the bona fides of the applicant, the nature of the default, the extent of delay, whether the default was deliberate or due to culpable negligence, and the hardship caused by refusing relief. The requirement to furnish an audit report with the return is a procedural/directory provision where substantial compliance and filing before completion of assessment or before the relevant authority may suffice. The petitioner filed Form 10 and completed the audit within time; Form 10B was filed before the intimation under Section 143(1); the delay arose in the first year the filing obligation applied to the petitioner and is shown to be inadvertent rather than deliberate; refusing condonation would cause substantial hardship by denying exemption and diminishing the trust corpus. The petitioners inability to show evidence of unawareness of law does not, by itself, mandate rejection where facts and surrounding circumstances demonstrate bona fides and genuine hardship, and where the delay is not deliberate.

Conclusion: The delay in filing Form 10B is condoned, the impugned order rejecting the condonation application is quashed and set aside, and the intimation under Section 143(1) denying exemption under Section 11 is quashed; relief is granted in favour of the assessee.

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