2026 (3) TMI 1500 - HC - Income Tax

Bona fide delay in Form 10B filing condoned; procedural lapse could not defeat charitable exemption claims.

A bona fide 16-day delay in uploading Form 10B audit report was condoned under Section 119(2)(b) because the report already existed and the lapse was only ... Assessment of trust - delay in filing audit report - audit report was not furnished along with the return, the petitioner was not entitled for exemption u/s 11 to 13 - delay of 16 days HELD THAT: - The Court reiterated that the petitioner already had the audit report in the prescribed form and the delay in uploading it was only of 16 days. It treated the lapse as an error of form and not of substance, and held that in the absence of any genuine doubt regarding the activities of the trust, such a trivial lapse could not justify refusal of relief u/s 119(2)(b). The statutory power was required to be exercised objectively to remove hardship, and its refusal had wrongly led to denial of exemption and consequential demand. On that basis, the Court itself allowed the application, condoned the delay, and annulled the consequential intimation and rectification orders founded on non-filing of Form 10B with the return. [Paras 14, 15, 16, 21] The application u/s 119(2)(b) was allowed, the delay was condoned, Form 10B was directed to be treated as filed with the return, and the consequential demand was directed to be withdrawn. Final Conclusion: The writ petition was allowed. The High Court quashed the fresh order passed after remand, condoned the 16-day delay in filing Form 10B for AY 2018-19, treated the form as filed along with the return, and set aside the consequential intimation and rectification orders with a direction to issue a nil-demand order. Issues: Whether the 16-day delay in filing/uploading Form 10B audit report was liable to be condoned under Section 119(2)(b) of the Income-tax Act, 1961, and whether the intimation under Section 143(1) of the Income-tax Act, 1961, the rectified intimation under Section 154 of the Income-tax Act, 1961, and the refusal to condone delay were liable to be set aside.Analysis: The petitioner was a charitable religious trust claiming exemption under Sections 11 to 13 of the Income-tax Act, 1961. The audit report in Form 10B was available but was uploaded belatedly by 16 days due to inadvertence. The refusal to condone the delay had already been found unsustainable in the earlier round, and the fresh rejection merely reproduced the earlier order without objective reconsideration. The delay was held to be bona fide and the omission was treated as an error of form, not substance. The authority under Section 119(2)(b) of the Income-tax Act, 1961 was required to adopt an objective approach to remove hardship and not to defeat exemption on such a trivial lapse.Conclusion: The delay was condoned, the Form 10B was directed to be treated as filed along with the return, and the rejection of exemption and consequential demand were set aside in favour of the assessee.Final Conclusion: The petitioner obtained complete relief against the tax demand and the impugned administrative orders were quashed, resulting in restoration of the claimed exemption position.Ratio Decidendi: A bona fide and minor delay in furnishing a statutory audit report, when the report existed and the lapse is merely procedural or formal, may be condoned under Section 119(2)(b) of the Income-tax Act, 1961 to avoid undue hardship, and consequential denial of exemption cannot be sustained.