2025 (7) TMI 1965 - AT - Income Tax

Denial of exemption for charitable trusts reversed where belated return and late Form 10B filing were condoned.

Belated filing of return under section 139(4A) before the last date for filing a belated return under section 139(5) constitutes due compliance with ... Denial of exemption u/s 11 - there was a delay in filing of the return of income and audit report in Form 10B was furnished belatedly - HELD THAT:- As in view of the decision of Debendra and Rohini Memorial Trust [2023 (7) TMI 278 - ITAT KOLKATA] and various other decisions, filing of the return u/s 139(4A) but before last day of filing of belated return under section 139(5) constitutes due compliance with clause (ba) in subsection (1) of section 12A and the assessee is entitled for exemption under section 11 of the Act. Belated filing of the audit report - There is no dispute to the fact that the return of income was filed belatedly i.e. on 06.07.2015 as against the due date u/s 139(1) of the Act on 30.09.2014. There is also no dispute to the fact that the intimation order was passed on 29.03.2017 and the assessee filed the audit report in Form 10B on 27.04.2021 whereas the Ld. Addl. / JCIT(A) has passed the order on 28.02.2025. Under these circumstances, we have to see as to whether the assessee trust is entitled to claim exemption u/s 11 of the Act or not. We find an identical issue had come up in the case of Bangarh Educational Welfare Trust [2023 (1) TMI 1456 - ITAT KOLKATA] where the claim of exemption u/s 11 of the Act was denied on two counts i.e. the return of income was not filed before the due date as prescribed u/s 139(1) and the audit report in Form 10B was not uploaded before the due date prescribed under the Act. As in the case of CIT v. Laxmanarayan Dev Shrishan Seva Khendra [2024 (10) TMI 99 - GUJARAT HIGH COURT] has held that where the assessee, a public charitable trust, did not upload audit report in Form 10B along with its return of income and CPC processed return u/s 143(1) denying benefit of section 11, since assessee had already filed audit report in Form 10B electronically during pendency of appellate proceedings along with copy of audited financial statements, delay in filing said form was to be condoned. Thus, we hold that the Ld. Addl. / JCIT(A) was not justified in rejecting the claim of exemption u/s 11 of the Act on account of delay in filing of the return of income as well as delay in uploading the audit report in Form 10B. Assessee appeal allowed. Issues: Whether the assessee (a charitable trust) is entitled to exemption under section 11 of the Income-tax Act, 1961 despite (i) filing the income tax return after the due date under section 139(1) and (ii) uploading the audit report in Form No.10B belatedly (filed during appellate proceedings).Analysis: Applicable statutory provisions include section 11, clause (b) and clause (ba) of section 12A(1), and the filing requirements of section 139 (including sub-sections (4A) and (5)). CBDT circulars and administrative directions clarify that returns filed within the time allowed under section 139 (including belated returns under section 139(5) where applicable) should be treated as meeting clause (ba) of section 12A(1) for specified years; authorities have power to consider condonation of delayed audit reports under section 119(2) and administrative instructions. Judicial authorities have characterised the requirement to furnish the audit report in Form No.10B as directory/substantial compliance in appropriate circumstances and have condoned delay where the audit report was filed before appellate disposal and the audit was conducted prior to filing of return. The facts show return was filed belatedly but within the period contemplated for belated returns for relevant years and Form No.10B was uploaded during appellate proceedings (with audit date preceding filing), invoking the principles of substantial compliance and condonation as reflected in CBDT guidance and judicial precedents.Conclusion: The exemption under section 11 is allowable to the assessee; the delayed filing of the return and belated uploading of Form No.10B do not disentitle the assessee where belated return falls within the time allowed under section 139 and the audit report was filed during appellate proceedings with audit dated prior to filing. Relief is in favour of the assessee.