2026 (3) TMI 282 - HC - Income Tax

Condonation of delay in tax audit filing upheld; remand for reassessment and consideration of charitable exemption.

Delay in filing the Tax Audit Report (Form 10B) was treated as excusable under Section 119(2) by applying the reasonable-cause standard set out in the ... Denial of benefit of exemption u/s 11 - delay in filing Form 10B - reasonable cause for delay - Validity of the Commissioner's rejection of the application for condonation of delay in filing Form 10B and whether the petitioner established reasonable cause for the delay - HELD THAT:- The Court examined the reasons advanced by the petitioner - that trustees were preoccupied with a visit of foreign donors and the managing trustee, who handles financial matters, was unavailable to coordinate the audit before the due date - and found those reasons to be reasonable in the context of a charitable trust running a children's home. The impugned order applied CBDT Circular No.2/2020 and required proof of reasonable cause; the Court concluded that, on the facts before it, the Commissioner's rejection of the condonation application lacked justification. Consequentially, the Court quashed the impugned order and directed that the AO redo the exercise u/s 143 and consider granting the exemption u/s 11 if the petitioner is otherwise eligible. [Paras 8, 9] Final Conclusion: The writ petition is allowed: the order rejecting condonation of delay in filing Form 10B for AY 2023-2024 is quashed and the AO is directed to re-examine the matter u/s 143 and grant exemption u/s 11 if the petitioner satisfies the statutory conditions. Issues: Whether the delay in filing Tax Audit Report in Form 10B for Assessment Year 2023-24 should be condoned and the impugned order rejecting the application for condonation under Section 119(2) of the Income-tax Act, 1961 quashed.Analysis: The Court considered the statutory framework including Section 12A, Section 139(4A) and Section 119(2) of the Income-tax Act, 1961 and Circular No.2/2020 dated 03-01-2020 which authorises Commissioners to admit belated applications of condonation of delay up to 365 days subject to satisfaction that the assessee was prevented by reasonable cause. The petitioner filed the return within the due date but filed Form 10B belatedly and later filed a revised Form 10B; the petitioner explained that trustees and the managing trustee were preoccupied with a visit by foreign donors and that the managing trustee was unavailable to coordinate the audit before the due date, and supporting material was placed on record. The Court found the petitioner's activities charitable in nature and the reasons for delay to be reasonable. The Court noted its consistent approach in similar cases and observed that, in the circumstances, the impugned order did not properly appreciate the reasonable cause justification and the discretionary power under the cited circular and statute.Conclusion: The impugned order rejecting the application for condonation of delay is quashed and the matter is remitted to the Assessing Officer to re-exercise jurisdiction under Section 143 of the Income-tax Act, 1961 and to extend the benefit of exemption under Section 11 of the Income-tax Act, 1961 to the petitioner if otherwise eligible.