2025 (11) TMI 158 - AT - Income Tax

Deemed s.11(1) charity deductions allowed under Explanation 2(2) after condoning delayed Form 10B and Form 9A filings under s.119(2)(b)

ITAT, Pune (AT) allowed the assessee's claims under s.11(1)(a) and deemed application under Explanation 2(2) to s.11(1) by condoning delayed filing of ... Denial of deduction u/s. 11(1)(a) - non submission of Audit Report on Form 10B - HELD THAT:-The issue is no longer res integra. It has been held in the case of Sarvodaya Charitable Trust [2021 (1) TMI 214 - GUJARAT HIGH COURT] that delay in filing of Form No.10B is directory in nature and the same can even be furnished even at the appellate stage. Respectfully following the judicial precedent and also observing that assessee has finally furnished Audit Report on 29.10.2016 which is much prior to the culmination of the assessment proceedings, therefore, the claim of application of income at Rs. 4,82,850/- u/s. 11(1)(a) of the Act stands allowed. Ground Nos. 2 and 3 raised by the assessee are allowed. Denial of deemed application exercised on Form No.9A as per clause 2 to Explanation 2 to sub-section (1) for non furnishing of section 11 of Form 9A prescribed under the Income Tax Rules - CBDT Circular No.07/2018 dated 20.12.2018 indicates that various representations were received by Board/Field authorities that on account of technical reasons and also the first year of filing of these forms there had been delay in filing Form No.10 and Form 9A for A.Y. 2016-17 and the said circular was issued to condone the delay u/s. 119(2)(b) of the Act. I find that the case of the assessee is also for A.Y. 2016-17 and this being a common problem faced by the various assessee’s, find that delay in filing Form No.9A deserves to be condoned in the larger interest of justice, considering the new rules and regulations for e-filing of such forms and also observing that Commissioner(s) have been directed to entertain the uploaded applications and after satisfying themselves may condone the delay as specified u/s. 119(2)(b) of the Act. Accordingly, since the assessee has also exercised option of filing Form No.9A on 15.01.2019 which is also prior to the conclusion of the appellate proceedings before ld.CIT(A) and also considering the CBDT Circular No.07/2018, the delay in filing of Form No.9A is hereby condoned and the claim of the assessee for deemed application of income under clause 2 of Explanation to section 11(1) of the Act is allowed. Ground No. 4 and 5 raised by the assessee are allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether delay in filing Audit Report on Form No.10B defeats claim of deduction under section 11(1)(a) where the form was filed prior to completion of assessment proceedings. 2. Whether belated filing of Form No.9A (option under clause 2 to Explanation 2 to section 11(1)) after the due date under section 139(1) can be condoned for A.Y. 2016-17 and the deemed application of income allowed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Delay in filing Form No.10B and entitlement to deduction under section 11(1)(a) Legal framework: Deduction under section 11(1)(a) depends on fulfilment of conditions including, where applicable, submission of Audit Report in Form No.10B as prescribed by the Rules; statutory timelines in section 139(1) govern filing of returns but the question is whether non-filing of Form 10B by that due date is a condition precedent or directory. Precedent treatment: The Tribunal follows judicial authorities holding that filing of Form No.10B is directory in nature and may be permitted to be filed during the assessment or appellate proceedings; the decision specifically notes adherence to a High Court precedent treating delay in filing Form 10B as non-fatal to the claim. Interpretation and reasoning: The Tribunal observes that the Audit Report was in fact furnished on 29.10.2016, prior to culmination of assessment proceedings, and that established judicial view treats filing of Form 10B as directory rather than jurisdictional. On that basis the procedural lapse does not extinguish the substantive entitlement to deduction where the report is ultimately produced within the assessment process. Ratio vs. Obiter: The holding that Form No.10B may be accepted when filed before completion of assessment proceedings is applied as ratio in allowing the deduction; reliance on prior judicial decisions is treated as binding authority for the proposition that delay is directory. Conclusion: The claim of application of income of Rs. 4,82,850 under section 11(1)(a) is allowed because Form No.10B was furnished before completion of assessment and the filing requirement is directory. Issue 2 - Belated filing of Form No.9A for deemed application under clause 2 to Explanation 2 to section 11(1) Legal framework: Clause 2 to Explanation 2 to section 11(1) permits an option in Form No.9A to deem certain amounts as applied to charitable purposes if the option is exercised on or before the due date of filing return under section 139(1). The CBDT's administrative power under section 119(2)(b) enables condonation of delay in specified circumstances. Precedent treatment: The Tribunal relies on administrative guidance (CBDT Circular authorizing condonation for AY 2016-17) and treats that guidance as a relevant discretionary exercise under section 119(2)(b); the Tribunal does not distinguish or overrule judicial precedents but applies the Circular to the facts. Interpretation and reasoning: The Tribunal examines the factual matrix - the assessee initially attempted electronic filing of Form No.9A on 29.10.2016 but the form did not appear on the e-filing portal due to technical issues; Form No.9A was re-filed on 15.01.2019, prior to conclusion of appellate proceedings. The Tribunal notes the CBDT Circular No.07/2018 addressing first-year e-filing difficulties for AY 2016-17 and expressly authorizing Commissioners to admit belated Form No.9A/Form No.10 applications where reasonable cause prevented timely filing. Given the common systemic problem, the Circular's direction to condone delay under section 119(2)(b) is applied to the present facts. The Tribunal further notes that Commissioners must be satisfied as to reasonable cause; the technical failure on the e-portal and representations received by the Board constitute such a cause in the Tribunal's view. Ratio vs. Obiter: The grant of relief by condoning the delay under the CBDT Circular is applied as the operative ratio for this appeal. Observations about the nature of first-year e-filing difficulties and administrative practice under the Circular are treated as explanatory reasoning tied to the exercise of condonation powers, not mere obiter. Conclusion: The delay in filing Form No.9A for AY 2016-17 is condoned under the administrative scheme authorized by section 119(2)(b) (as reflected in CBDT Circular No.07/2018), and the deemed application of income of Rs. 8,09,074 under clause 2 to Explanation 2 to section 11(1) is allowed. Cross-references and interaction between issues The Tribunal treats both issues as procedural non-compliance questions turnable by either judicial principle (directory character of Form 10B) or executive condonation (CBDT Circular under section 119(2)(b) for Form 9A). The acceptance of Form No.10B and condonation of Form No.9A are independently justified but both result in reinstatement of the claimed applications of income under section 11(1). Disposition The Tribunal allows the claims for both the audited application under section 11(1)(a) (Form No.10B) and the deemed application under clause 2 to Explanation 2 to section 11(1) (Form No.9A), directing that the delay in filing Form No.9A for AY 2016-17 be condoned in view of the CBDT Circular and the technical difficulties in first-year e-filing.