Procedural delay in Form 10B filing cannot by itself defeat Section 12A exemption where sufficient cause is shown.

Delay in filing Form 10B audit reports was treated as a procedural lapse, not a ground to deny exemption under Section 12A where sufficient cause and genuine hardship were shown. The HC held that the authority under Section 119(2)(b) had not properly applied its mind, especially in light of the continuing Covid-19 situation, and that substantial justice should prevail over technicality. The refusal to condone delay was found arbitrary on the facts. The rejection order was set aside, and the matter was remitted for consideration of the audit reports and consequential relief by treating them as filed within time.

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Issues: Whether the refusal to condone delay in filing Form 10B audit reports under the income-tax regime was justified, and whether exemption under Section 12A could be denied solely on account of such delay.

Analysis: The delay in filing the audit reports was undisputed. The Court held that the audit report requirement was procedural in nature and could be considered at a later stage, and that exemption should not be denied merely for delayed filing when sufficient cause and genuine hardship were shown. Taking note of the continuing Covid-19 situation during the relevant period and applying the principle that substantial justice prevails over technicality, the Court found that the authority had not applied its mind properly while exercising discretion under Section 119(2)(b). The refusal to condone delay was found to be arbitrary in the facts of the case.

Conclusion: The order rejecting condonation of delay was set aside, and the matter was remitted for consideration of the Form 10B audit reports and for grant of consequential relief by treating the reports as filed within time.

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