2025 (5) TMI 716 - HC - Income Tax

CIT(E) must condone thirty-day delay in Form 10B filing when genuine hardship established for trust assessment

Fiitjee Foundation For Education Research And Trainings Versus Commissioner Of Income Tax (Exemption)

Fiitjee Foundation For Education Research And Trainings Versus Commissioner Of Income Tax (Exemption) - 2025:DHC:3039 - DB The core legal questions considered in this judgment revolve around the petitioner's application for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961, specifically:Whether the delay of one month in filing Form 10B for AY 2022-23 constitutes 'genuine hardship' warranting condonation under Section 119(2)(b) of the Act;The scope and exercise of discretion vested in the Commissioner of Income Tax (Exemption) [CIT(E)] in condoning delay in statutory compliance;The applicability and interpretation of the requirement to file Form 10B at least one month prior to filing the income tax return under Sections 11, 12, 12A, and 44AB of the Act;The consequences of non-compliance with the prescribed timeline for filing Form 10B, including denial of exemption under Section 11 of the Act and subsequent scrutiny assessment;The evidentiary standard and nature of proof required to establish 'genuine hardship' for condonation of delay;The reasonableness and correctness of the CIT(E)'s rejection of the petitioner's application for condonation of delay.Regarding the delay and 'genuine hardship' under Section 119(2)(b) of the Act, the Court examined the statutory framework and relevant precedents. Section 119(2)(b) empowers the tax authorities to condone delay in compliance where 'genuine hardship' is demonstrated. The Court relied heavily on the Bombay High Court's decision in Sitaldas K. Motwani v. Director-General of Income Tax, which adopts a liberal interpretation of 'genuine hardship.' This precedent emphasizes that the power to condone delay must be exercised to advance substantial justice rather than be defeated by technicalities. The Court quoted the decision extensively, highlighting that:'The Legislature has conferred the power to condone delay to enable the authorities to do substantive justice to the parties by disposing of the matters on merit... There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides... The approach of the authorities should be justice oriented so as to advance cause of justice.' The Court noted that the petitioner is a charitable organization regularly availing exemption under Sections 11, 12, and 12A, and there was no dispute regarding the charitable nature of its activities. The statutory requirement under Section 12A(1)(b)(ii) read with Section 44AB mandates filing of Form 10B, an audit report, at least one month prior to filing the return under Section 139(1). The petitioner filed the return on 07.11.2022 within the prescribed extended timeline but filed Form 10B on the same date, thus delayed by one month beyond the due date of 07.10.2022.The delay was attributed to the unavailability of the petitioner's accountant due to medical reasons-specifically, the illness of the accountant's son with dengue in September 2022, which delayed the audit process. The petitioner furnished medical reports, prescriptions, blood reports, and hospital records to substantiate this claim. Although there was some initial confusion regarding the identity of the patient (two names appearing in the medical documents), the petitioner clarified that both names referred to the same individual. The Court found no reason to disbelieve the petitioner's explanation and accepted that the delay was caused by genuine hardship.The CIT(E), while acknowledging the documents and explanations, rejected the condonation application on the ground that the delay was 'without reasonable cause.' The Court observed that the CIT(E) had issued notices seeking clarifications, which the petitioner duly responded to, but the rejection was still made. The Court found this conclusion erroneous and inconsistent with the principles established in the precedent, which require a liberal and justice-oriented approach to condonation of delay.Applying the law to the facts, the Court emphasized that the delay was neither deliberate nor due to negligence but arose from unforeseen medical hardship affecting the petitioner's accountant. The petitioner had otherwise complied with statutory requirements and had a prima facie entitlement to exemption under Section 11. The Court underscored that refusal to condone delay in such circumstances would defeat the cause of substantial justice and result in penalizing the petitioner for a non-deliberate delay.The Court also addressed the competing arguments implicitly raised by the CIT(E) and the tax authorities, who contended that strict compliance with the timeline is necessary to maintain the integrity of the tax regime and that delay without reasonable cause should not be condoned. The Court balanced this against the petitioner's right to exemption and the principle that technicalities should not override substantive justice. It held that the authorities must exercise discretion judicially and not reject applications for condonation without proper appreciation of the facts and hardship involved.In conclusion, the Court allowed the petition and directed the CIT(E) to issue an order condoning the thirty-day delay in filing Form 10B for AY 2022-23. The Court's reasoning establishes that:The expression 'genuine hardship' under Section 119(2)(b) must be given a liberal and justice-oriented interpretation;Medical hardship affecting key personnel responsible for compliance can constitute sufficient cause for delay;The tax authorities have a duty to exercise discretion judicially and not reject condonation applications arbitrarily;Substantial justice and merit-based adjudication should prevail over mere technical non-compliance;Prima facie entitlement to exemption and bona fide compliance efforts weigh heavily in favor of condonation of delay.The significant holding includes the verbatim adoption of the Bombay High Court's reasoning on 'genuine hardship,' which the Court found directly applicable and instructive. The Court explicitly stated that 'there is no ground to disbelieve that the petitioner that its accountant was unavailable during the said period for the aforesaid reason,' affirming the factual basis for hardship.Ultimately, the final determination was that the delay of one month in filing Form 10B was justified by genuine hardship and the CIT(E)'s rejection of the condonation application was erroneous. The Court's order mandates condonation of the delay, thereby preserving the petitioner's entitlement to exemption under the Income Tax Act for the relevant assessment year.