2026 (2) TMI 162 - HC - Income Tax

Denial of tax exemption for charitable trust due to delayed Form 10BB upheld as improper; payment directed.

Denial of exemption to a charitable trust based solely on delayed filing of Form 10BB was criticised: the court held that a procedural lapse should not ... Denial of exemption u/s 11 - application filed for condonation of delay in filing Form 10BB u/s 119(2)(b) as required u/s 12A(b)(ii) as been rejected - reasons stated in the application for condonation of delay were that the Managing Trustee of the Petitioner Trust/aged about 68 years and is a senior citizen was suffering from medical aliments, resulting in the delay in filing Form 10B. HELD THAT:- The benefit of statutory exemption or redemption cannot be denied to an assessee who is otherwise entitled to such exemption, merely due to a procedural lapse. A mere failure to file the Return of Income or the prescribed form within the stipulated time should not stand in the way of granting legitimate exemptions or redemptions available under the provisions of the Act. This Court has consistently taken the view that the Income Tax Department is primarily concerned with the collection of cess and cannot saddle an assessee with tax liability when the assessee is otherwise entitled to benefits in the nature of redemption or exemption. Following the decision of Unichem Laboratories [2002 (9) TMI 110 - SUPREME COURT] held that it is not on the part of the duty of the Department to collect or to retain the tax amount, which is not due to it, and is legitimately due to an assessee. Considering the fact that the application for condonation of delay was filed only on 05.02.2024, there shall be a direction to the petitioner to pay a sum of Rs. 50,000/-. Issues: (i) Whether the delay in filing the Audit Report in Form No.10BB for Assessment Year 2023-24 should be condoned under Section 119(2)(b) of the Income-tax Act, 1961 and the impugned order rejecting the condonation petition quashed.Analysis: The Court examined the statutory requirement to file Form No.10BB one month prior to the due date for filing the return under Section 139(1) and Rule 17B, the respondent's reliance on CBDT Circular No.2/2020 empowering commissioners to admit belated applications up to 365 days, and the facts presented in the condonation application including medical records concerning the Managing Trustee. The Court balanced the binding force of the CBDT circular with principles of substantial justice, observed that procedural lapse should not automatically defeat entitlement to statutory exemptions where reasonable cause exists, and noted the petitioner's senior-citizen status and medical evidence while also recording the assessing authority's concerns about habitual non-compliance. The Court directed payment of a specified goodwill amount to a charitable institution as a condition for quashing the impugned order and ordered fresh assessment in accordance with law upon compliance.Conclusion: The condonation of delay in filing Form No.10BB for AY 2023-24 is granted in favour of the assessee by quashing the impugned order, subject to the petitioner complying with the court's stipulated direction for payment, and the Assessing Officer is directed to pass fresh assessment in accordance with law.Ratio Decidendi: Where an assessee is otherwise entitled to statutory exemption, discretionary power under Section 119 must be exercised in accordance with substantial justice and reasonable cause shown to admit belated applications for condonation of delay rather than depriving the assessee of the benefit on purely procedural grounds.