Section 119(2)(b) condonation applications for delayed Form-10B audit reports allowed after Commissioner's strict rejection quashed

The Kerala HC allowed writ petitions challenging rejection of applications under Section 119(2)(b) for condonation of delay in filing audit reports in Form-10B. The court held that delay in filing audit reports can be maximum 30 days since law requires uploading at least one month before return filing due date. The court found Commissioner should have exercised discretionary power to condone delay rather than taking strict view. Relying on Al Jamia Mohammediyah Education Society precedent, the court quashed CIT(E) orders dismissing condonation applications and condoned the petitioners' delay in filing Form-10B audit reports.

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Issues:
Consideration of delay in filing audit report under Section 119(2)(b) of the Income Tax Act, 1961.

Analysis:
The judgment by the High Court of Kerala involved several writ petitions concerning the condonation of delay in filing audit reports by entities registered under Section 12A of the Income Tax Act, 1961. The petitioners were required to file their return of income by a specified date, with the audit report in Form-10B due earlier. However, due to an extension granted by the Central Board of Direct Taxes, the deadline for filing the audit report was also extended. The petitioners failed to meet the extended deadline but filed the audit report before the return filing date. They sought condonation of the delay under Section 119(2)(b) of the Act, which was rejected by the Commissioner of Income Tax (Exemption).

The petitioners argued that the Commissioner took a mechanical approach in rejecting the condonation applications and should have considered the circumstances, especially since the returns were filed on time. On the other hand, the Income Tax Department contended that the reasons provided for the delay were not acceptable and that filing the audit report was mandatory. The court considered a judgment from the Bombay High Court emphasizing a balanced and judicious approach to condonation applications.

After hearing both parties, the court held that the petitioners were entitled to succeed. It was noted that the delay in filing the audit report was minimal and that the Commissioner should have exercised discretion to condone the delay under Section 119(2)(b) instead of taking a strict view. The court referenced the Bombay High Court's judgment to support its decision, highlighting that the delay was not intentional or deliberate. As a result, the court allowed the writ petitions, quashing the Commissioner's orders and condoning the delay in filing the audit reports for the specified assessment year.

In conclusion, the High Court of Kerala granted the writ petitions, overturning the Commissioner's orders and condoning the delay in filing the audit reports. The judgment emphasized the need for a balanced and judicious approach in considering condonation applications under the Income Tax Act, 1961.

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