Denial of exemption under section 11 for late Form 10B filing - CIT(E) directed to decide condonation; AO to apply exemption if condoned.

Denial of exemption under section 11 arose from late filing of Form 10/10B and consequent non-condonation by the CIT(E); the tribunal noted CBDT circulars authorising CIT(E) to condone delay and prescribing disposal timelines, but the assessee's condonation petition remained pending. The tribunal directed the CIT(E) to decide the condonation petition within the prescribed timeframe and instructed the assessing officer, if delay is condoned, to consider the claim for exemption under section 11 in accordance with law, granting the assessee a reasonable opportunity of being heard.

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Issues: Whether the denial of exemption under Section 11 of the Income-tax Act, 1961 on the ground that Form 10/10B was not filed within the prescribed time can be sustained for AY 2018-19 and AY 2019-20 where (a) Form 10B was filed before a belated return for AY 2018-19 and a condonation petition is pending, and (b) Form 10/10B was filed before the revised return for AY 2019-20 and a condonation petition is pending.

Analysis: For AY 2018-19, the assessee filed a belated return and Form 10B before filing the belated return; a condonation petition under the applicable CBDT circulars for condonation of delay (including Circular No.06/2020 dated 19.02.2020 and subsequent circulars fixing timelines) is pending before the Principal CIT(Exemption). The Tribunal directed the Principal CIT(Exemption) to decide the condonation petition and directed the Assessing Officer to consider entitlement under Section 11 if delay is condoned, allowing the assessee a reasonable opportunity of hearing.

Analysis: For AY 2019-20, the assessee filed the original return within time and later filed a revised return; Form 10 was filed before the revised return. The Tribunal applied the settled principle that a revised return under Section 139(5) substitutes the original return, and therefore Form 10 filed prior to the revised return must be treated as filed before the due date. The Tribunal found the CIT(A) was incorrect in rejecting exemption solely for alleged delay in filing Form 10, directed the Principal CIT(Exemption) to condone delay on the facts, and directed the AO to consider Section 11 benefit if delay is condoned, with reasonable opportunity to the assessee.

Conclusion: The appeals for AY 2018-19 and AY 2019-20 are allowed for statistical purposes and the matters remitted for disposal of the condonation petitions; if delay is condoned, entitlement to exemption under Section 11 shall be considered in accordance with law in favour of the assessee.

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