Delayed Form 10B filing cannot conclusively deny section 11 exemption until condonation is decided.

Delayed filing of Form 10B was treated as a procedural issue, and exemption under section 11 was not to be finally denied at the processing stage where the audit report was already on record and a condonation application was pending before the competent authority. The governing framework placed condonation jurisdiction under section 119(2)(b) with the designated Principal Commissioner or Chief Commissioner, so the appellate authority should await that decision before sustaining an adjustment under section 143(1). The matter was therefore restored for fresh adjudication after disposal of the condonation request, reflecting that a procedural lapse should not defeat exemption where statutory conditions may otherwise be satisfied.

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Issues: Whether exemption under section 11 could be denied in processing under section 143(1) solely because Form 10B was filed belatedly, and whether the appeal should be restored for reconsideration after disposal of the condonation request by the competent authority.

Analysis: The dispute arose from disallowance of exemption under section 11 on account of delayed filing of Form 10B, though the audit report was already on record before processing of the return. The governing framework under section 12A(1)(b) and Rule 17B required timely filing of Form 10B, while section 119(2)(b) and CBDT Circular No. 16/2024 vested condonation jurisdiction in the specified Principal Commissioner or Chief Commissioner. The pending condonation application before the competent authority was material, and the appellate authority ought to have awaited its outcome before sustaining the adjustment. The delay was stated to be only 29 days, and the relief sought was examined in the light of the principle that procedural lapse should not defeat exemption where statutory conditions are otherwise satisfied.

Conclusion: The denial of exemption at the processing stage was not finally upheld, and the matter was directed to be examined by the competent authority on the condonation application first. The appeal was restored to the file of the appellate authority for fresh adjudication after such decision, in favour of the assessee.

Final Conclusion: The order does not finally determine the exemption claim on merits and sends the matter back for decision after consideration of the delay-condonation request.

Ratio Decidendi: Where condonation of delay in filing Form 10B is within the statutory domain of the designated authority, the exemption claim should not be finally negatived in appeal before that application is decided.

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