2025 (9) TMI 913 - HC - Income Tax

Delay in e filing Form 10B for charitable trust: court finds bona fide cause and directs condonation of delay.

Denial of exemption under Sections 11-12 was challenged on grounds of delay in uploading/e filing Form 10B. Court found the delay was caused by bona fide ... Denial of Benefit of Section 11 & 12 - delay caused in uploading/e-filing of Form 10B - HELD THAT:- There is no lack of bona fide imputable to petitioner. That apart, in the present case, the delay was caused due to the fact that staff of CA Firm met with an accident which is beyond control. Therefore, the delay was not deliberate and cannot be attributed to petitioner. Thus, we are of the considered opinion that the application for condonation of delay ought to have been allowed. Due to bona fide inaction on part of the professional engaged (CA Firm), petitioner cannot be made to suffer. It is also pertinent to mention that an affidavit explaining the reasons for delay in uploading/e-filing of Form 10B was filed along with the writ petition as Annexure-P/5, which was not controverted by respondent. In M. Kalappa Sethi v. M. V. Laxmi Narain Rao [1972 (5) TMI 79 - SUPREME COURT] it was held that an uncontroverted affidavit shall be taken as an affidavit on fact. Therefore, this Court is left with no option but to accept the averments of the affidavit (Annexure-P/5) to be true. The fact that there was any mala fide intention in uploading/e-filing Form 10B belatedly is not alleged in impugned order. The fact that petitioner is a charitable trust, is also not denied. Looking at the charitable activities itself, in our view, delay condonation application should have been allowed. Courts have repeatedly held that such approach in the cases of present type should be equitious, balancing and judicious. Even though technically and strictly and liberally speaking, respondent might be justified in rejecting application but the assessee, a public charitable trust, with so many years of charitable activities, which otherwise satisfies the condition for availing such exemption should not be denied the same merely due on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. It does not appear that assessee petitioner was lethargic or lacked bona fide in making claim beyond the period of limitation. In fact, we do not understand why would any party, who is entitled to claim, would intentionally delay in uploading the required documents. ISSUES PRESENTED AND CONSIDERED 1. Whether the Commissioner erred in rejecting an application under section 119(2)(b) for condonation of delay in uploading/e-filing audit report in Form 10B where the delay was caused by circumstances beyond the assessee's control (staff accident at the CA firm) and there was no allegation of mala fide. 2. Whether a charitable trust which filed its return and audit report physically but failed to upload Form 10B within the prescribed time can be denied exemption under sections 11 and 12 of the Income Tax Act solely on account of such delay, when the assessee otherwise satisfies conditions for exemption. 3. The extent to which principles of liberal, justice-oriented approach to 'sufficient cause' in condonation applications (as articulated by higher courts) apply to revenue authorities when exercising discretion under section 119(2)(b). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation under section 119(2)(b) for delay in uploading Form 10B Legal framework: Section 119(2)(b) confers power on the Commissioner to condone delay in compliance with statutory or procedural requirements; Rule 12(2) of the Income Tax Rules prescribes e-filing/updating timelines for Form 10B; non-compliance can attract disallowance of exemption in assessment proceedings (as reflected in CPC adjudication under section 143(1)). Precedent treatment: The Court relied on the Apex Court's guidance in Esha Bhattacharjee (liberal, pragmatic, justice-oriented approach; 'sufficient cause' is elastic and context-sensitive) and on coordinate high-court authorities that have applied equitable, balancing and judicious standards when revenue rejects condonation applications for inadvertent omissions by professional advisors. Interpretation and reasoning: The Court found no allegation of mala fide against the assessee and accepted the factual explanation (uncontroverted affidavit) that the delay arose because the auditor's assistant met with an accident and did not handover the pending e-filing task. The Commissioner's order was characterized as perfunctory and lacking consideration of these circumstances. The Court applied the principle that technical rules should not be given undue emphasis where substantial justice and bona fide conduct are shown. The Court further observed that an assessee should not suffer for bona fide inaction of an engaged professional where circumstances were beyond control. Ratio vs. Obiter: Ratio - where delay in statutorily prescribed electronic filing is caused by circumstances beyond the assessee's control and there is no mala fide, the Commissioner should consider condoning the delay under section 119(2)(b) applying a liberal, justice-oriented standard. Obiter - general reflections on why an assessee would not intentionally delay and broader policy comments on statutes of repose and discretionary relief in exceptional hardship. Conclusion: The Court held that the condonation application ought to have been allowed; proceeded to condone the delay and quash the impugned rejection under section 119(2)(b). Issue 2 - Denial of exemption under sections 11 & 12 due to late upload of Form 10B Legal framework: Exemptions under sections 11 and 12 are contingent on compliance with statutory and rule-based conditions including audit/reporting obligations (Form 10B). Failure to comply within time can lead to denial of exemption, but statutory discretion to condone delays may restore entitlement where sufficient cause is shown. Precedent treatment: The Court relied on decisions holding that denial of exemption purely on limitation grounds, where the assessee otherwise qualifies and delay is bona fide, is to be viewed equitably (citations invoked in reasoning endorse this approach). The Court referenced coordinate bench and Bombay High Court authorities that refused to deny exemption to longstanding charitable trusts for inadvertent professional errors. Interpretation and reasoning: Applying the condonation finding under section 119(2)(b), the Court reasoned that the assessee's substantive entitlement to exemption should not be defeated by a technical lapse when the legislature has given discretionary relief. The Court emphasized absence of mala fide and consistent charitable activity as relevant contextual factors supporting allowance of exemption. Ratio vs. Obiter: Ratio - where condonation is properly granted for delayed compliance, consequent denial of exemption solely on limitation/technical grounds is inappropriate if the assessee otherwise satisfies statutory conditions. Obiter - comments on public charitable trusts and policy reasons for an equitable approach. Conclusion: The Court directed the revenue to allow the benefit of sections 11 and 12 to the trust, setting aside the assessment adjustment that flowed from non-upload of Form 10B. Issue 3 - Role of uncontroverted affidavit and standard of inquiry by revenue authority Legal framework: Courts treat uncontroverted affidavits as evidence of fact where not challenged; revenue authorities are required to record reasons when exercising discretion and to consider bona fide explanations rather than rejecting applications perfunctorily. Precedent treatment: The Court applied M. Kalappa Sethi (uncontroverted affidavit to be accepted) and cited decisions directing a reasoned and non-technical approach by revenue when discretionary relief is invoked. Interpretation and reasoning: The affidavit explaining the delay was uncontroverted and the Court held the Commissioner erred in failing to engage with the factual explanation. The Court emphasized that perfunctory rejection without addressing bona fide grounds is legally unsustainable. Ratio vs. Obiter: Ratio - an uncontroverted affidavit explaining sufficient cause must be taken as true for purposes of adjudicating a condonation application; the revenue authority must record considered reasons when exercising discretion under section 119(2)(b). Obiter - broader admonition against mechanical rejections by revenue. Conclusion: The Court accepted the uncontroverted affidavit, found the Commissioner's rejection legally deficient for want of reasoned consideration, and held that the condonation should have been allowed. Disposition The Court quashed the impugned order refusing condonation, condoned the delay in uploading Form 10B, and directed the revenue to allow the benefits of sections 11 and 12 to the trust. The writ petition was disposed accordingly.