Delay in filing Audit Report in Form No.10B - condonation principles under administrative discretion favour relief for short, bona fide delays.

Short, bona fide delays in filing the Audit Report in Form No.10B may be addressed through delegated administrative discretion to prevent genuine hardship; authorities and circular guidance permit merits-based condonation for delays of limited duration, treating the audit report as filed in time and enabling claim of exemption where substantial compliance is shown. Reliance on prior-year defaults alone is insufficient; decision-makers must apply mind to factors such as length and cause of delay, subsequent compliance, and comparative precedents. Where these conditions are met, the practical effect is that the delayed Form No.10B can be regularised and the return processed as if timely filed.

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Issues: Whether the delay of 50 days in filing the Audit Report in Form No.10B for A.Y. 2018-19 should be condoned under Section 119(2)(b) of the Income-tax Act, 1961 so as to enable the Petitioner-Trust to avail exemption under Section 11 of the Income-tax Act, 1961, and whether the impugned order dated 07/10/2025 rejecting the application for condonation should be quashed.

Analysis: The factual matrix shows filing of the return and Form 10B on 20/12/2018 whereas the due date was 31/10/2018, resulting in a 50-day delay. The statutory framework includes Section 119(2)(b) which empowers the Board to relax requirements to avoid genuine hardship, and the Finance Act, 2017 insertion of clause (ba) in Section 12A(1) which linked the due date of Form 10B to Section 139(4A). CBDT Circular No.16/2022 (19/07/2022) provided that delays not exceeding 365 days may be decided on merits, with delegated authorities required to act within prescribed timelines. Judicial precedents treat the requirement to furnish the audit report with return as procedural or directory where substantial compliance is shown, and emphasise liberal construction of benevolent provisions to prevent genuine hardship. The Court finds that Respondent No.1 failed to apply mind in accordance with the delegated power under Section 119(2)(b) and the relevant circulars, unduly relying on prior-year filing delays while ignoring timely compliance in subsequent years and the shortness of the present delay. Considering the nature and extent of delay (50 days), the purpose of Section 119(2)(b) to mitigate genuine hardship, and binding/ persuasive authorities recognizing substantial compliance and relief in comparable circumstances, the conditions for exercising discretion in favour of the Petitioner are met. The Court further directed that, having condoned the delay, the Form No.10B shall be treated as filed within time and the return processed in accordance with law within three months of uploading the order.

Conclusion: The impugned order dated 07/10/2025 is quashed and set aside; the delay of 50 days in filing Form No.10B is condoned; the Form No.10B shall be treated as filed within time and the Respondents shall process the Petitioner's Return of Income in accordance with law within three months from the date of uploading this Order.

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