Order restores s.11 exemption, condones Form 10B delay via CBDT Circular 10/2022 under s.119(2)(b) and treats procedural lapse as cured

ITAT Delhi allowed the appeal of the assessee-trust and reversed the disallowance of exemption under s.11. It held that for AY 2021-22, in view of CBDT's extension of the ITR due date owing to the COVID-19 pandemic and the condonation Circular No. 10/2022 u/s 119(2)(b), the assessee's conduct was compliant. The trust had its accounts audited u/s 12A(1)(b)(ii) and uploaded Form 10B on 16.11.2021, i.e., before filing and processing of the return u/s 143(1). The Tribunal held that mere non-generation of an electronic receipt could not invalidate timely filing, condoned any alleged delay, and directed CIT(E) to allow exemption u/s 11.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether denial of exemption under Section 11 on the ground of alleged delayed filing of Form 10B, in a case of claimed technical glitch on the income tax portal, was justified.

1.2 Whether, in the facts, filing/uploading of Form 10B is to be treated as having been made within the prescribed/specified date, or in any event liable to be condoned, so as not to defeat the assessee's claim under Sections 11 and 12A.

1.3 Whether the requirement of filing Form 10B, in the circumstances where audit was completed in time and Form 10B was on record before processing under Section 143(1), is to be treated as directory and procedural rather than mandatory so as to deny exemption.

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2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Justification of denial of exemption under Section 11 for alleged delayed filing of Form 10B; treatment of filing date and condonation

Legal framework (as discussed):

2.1 The assessee is registered under Section 12A and required to get its accounts audited under Section 12A(1)(b)(ii) and furnish audit report in Form 10B within the prescribed time to claim exemption under Section 11.

2.2 The due date for filing the return of income for Assessment Year 2021-22 was extended by the Central Board of Direct Taxes up to 15 March 2022 due to the COVID-19 pandemic.

2.3 CBDT Circular No. 10/2022 dated 19 July 2022 provides for condonation of delay under Section 119(2)(b) for filing Form 10B for Assessment Year 2018-19 and subsequent years.

Interpretation and reasoning:

2.4 The Tribunal recorded that the assessee, a charitable society registered under Section 12A, obtained audit and uploaded Form 10B on 16 November 2021, before filing its return on 15 December 2021, and prior to processing under Section 143(1).

2.5 It was found as a matter of fact that the portal did not generate an acknowledgement/receipt for the Form 10B filed on 16 November 2021 due to a technical glitch; on receiving CPC communication, the assessee re-uploaded Form 10B on 8 March 2022.

2.6 The CPC treated the Form 10B as filed only on 8 March 2022 and denied exemption under Section 11 on the ground that Form 10B was belated, ignoring that the first upload was prior to both the extended due date and the processing under Section 143(1).

2.7 The Tribunal emphasised that this was not a case where Form 10B was not filed, or was filed only after processing/assessment; instead, audit was completed within the prescribed time and Form 10B was in fact uploaded before the filing and processing of the return.

2.8 In this factual matrix, the Tribunal held that mere non-generation of receipt on the portal due to technical glitch cannot be treated as so fatal as to deem Form 10B as not filed within the specified date and thereby deny exemption under Section 11.

2.9 The Tribunal considered that, even assuming there was any delay, in light of the extended due date and the CBDT's condonation Circular under Section 119(2)(b), such delay deserved to be condoned, particularly when the substantive conditions for exemption were satisfied.

Conclusions:

2.10 The Tribunal held that the assessee's uploading of Form 10B on 16 November 2021 is to be treated as a valid filing within the specified date.

2.11 Any perceived delay in filing Form 10B, if at all, stands condoned; denial of exemption under Section 11 on this technical ground was not justified.

2.12 The Tribunal directed the competent authority to treat Form 10B as filed within time and to allow the exemption under Section 11.

Issue 3: Nature of the requirement of filing Form 10B - directory vs. mandatory in the given circumstances

Legal framework (as discussed through precedents):

3.1 The Tribunal referred to a coordinate bench decision in the case of a charitable trust where Form 10B was obtained before filing the return but filed later, and the exemption under Section 11(1)(a) had been denied solely on that ground.

3.2 That coordinate bench, relying on another decision concerning Form 10CCB for deduction claims, had held that where the prescribed form is filed before completion of proceedings under Section 143(1), the claim cannot be denied merely due to delayed upload.

Interpretation and reasoning:

3.3 The Tribunal noted that the coordinate bench had observed that filing of Form 10B is directory to facilitate assessment and not mandatory in the sense that non-compliance would automatically extinguish the statutory benefit when substantive conditions are met.

3.4 It was recorded that the assessee was running a charitable trust and carrying on charitable activities over the years and, in such a context, a mere lapse in timely upload of Form 10B, especially when audit was conducted and report filed before processing of the return, should not be used to deny a substantive benefit conferred by the statute.

3.5 The Tribunal found the facts of the present case to be materially similar to those in the earlier coordinate bench decision, including that the relevant form (here Form 10B) was on record before the return was processed under Section 143(1).

Conclusions:

3.6 The Tribunal adopted and applied the reasoning of the coordinate bench that the requirement of furnishing Form 10B in such circumstances is procedural/directory, and non-strict compliance does not justify denial of exemption under Section 11 when all substantive conditions are otherwise fulfilled.

3.7 On this basis also, the Tribunal held that the assessee's claim under Section 11 could not be denied for the alleged delay or portal-related irregularity in filing Form 10B and allowed the appeal.

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