The Income Tax Appellate Tribunal, Delhi, has clarified that a charitable trust’s failure to file Form 10B by the statutory due date does not automatically forfeit its claim to exemption under Section 11 of the Income Tax Act, provided the report is submitted during appellate proceedings. This ruling reinforces a growing judicial trend favoring substantive compliance over rigid procedural adherence in tax exemption matters.
Background & Facts
The Dispute
The appellant, Tathagat, a charitable entity, claimed exemption under Section 11 of the Income Tax Act for Assessment Years 2020-21, 2021-22, and 2022-23. The Central Processing Centre (CPC), Bangalore, disallowed the exemption in each case under Section 143(1), on the ground that the Audit Report in Form 10B was not filed on or before the due date of filing the return. The Commissioner of Income Tax (Appeals) (CIT(A)) upheld this disallowance. The appellant appealed to the Income Tax Appellate Tribunal (ITAT), Delhi.
Key Facts
- The appellant is a registered charitable trust under Section 12AA of the Income Tax Act
- For A.Y. 2020-21: Form 10B was filed on 31.03.2021; due date was 15.01.2021 (75 days delay)
- For A.Y. 2021-22: Form 10B was filed on 15.03.2022; due date was 15.02.2022 (28 days delay)
- For A.Y. 2022-23: Form 10B was filed on 14.10.2022; due date was 07.10.2022 (7 days delay)
- The appellant filed its original income tax returns on time for all three years
- The audit reports were prepared and available before the return filing dates
- The delay in filing Form 10B was attributed to inadvertent administrative oversight, not intentional non-compliance
- The audit reports were submitted to the Assessing Officer during appellate proceedings before the CIT(A)
Procedural History
- 15.02.2021: Original return filed for A.Y. 2020-21
- 15.03.2022: Original return filed for A.Y. 2021-22
- 07.11.2022: Original return filed for A.Y. 2022-23
- 31.03.2021: Form 10B filed for A.Y. 2020-21 (75 days late)
- 15.03.2022: Form 10B filed for A.Y. 2021-22 (28 days late)
- 14.10.2022: Form 10B filed for A.Y. 2022-23 (7 days late)
- 08.09.2025: CIT(A) order issued dismissing appeals and upholding disallowance
- 16.03.2026: Hearing held before ITAT Delhi
- 18.03.2026: ITAT Delhi pronounced order allowing appeals
Relief Sought
The appellant sought reversal of the CIT(A)’s order and restoration of the exemption under Section 11 for all three assessment years, arguing that the late filing of Form 10B was inadvertent and did not defeat the substantive purpose of the provision.
The Legal Issue
The central question was whether the failure to file Form 10B by the due date under Rule 12A(1)(b) of the Income Tax Rules renders the exemption under Section 11 invalid, or whether such filing is a procedural requirement that may be condoned if the report is submitted before the conclusion of appellate proceedings.
Arguments Presented
For the Appellant
The appellant’s counsel argued that Form 10B is a procedural formality meant to verify the genuineness of charitable activities, not a substantive condition for exemption. Reliance was placed on the Pune Bench ITAT’s decision in New Miraj Education Society (ITA No. 928/PUN/2025, dated 01.01.2026), which held that where the audit report is filed during appellate proceedings and the trust’s charitable status is not in doubt, the exemption under Section 11 must be granted. The counsel emphasized that the audit report was prepared and available before the return filing date, and the delay was unintentional. Further, the Gujarat High Court in CIT (Exemptions) v. Anjana Foundation had held that denial of exemption solely on account of delayed Form 10B is inequitable.
For the Respondent
The Departmental Representative contended that Section 11 and Rule 12A(1)(b) require strict compliance with the due date for filing Form 10B. Relying on Principal Commissioner of Income Tax v. Wipro Limited (2022) and CC v. Dilip Kumar & Company (2018), the Revenue argued that exemption provisions must be interpreted strictly, and any deviation from statutory timelines invalidates the claim. It was submitted that the CIT(A) lacks power under Section 119(2)(b) to condone delay, and therefore, the delay cannot be overlooked.
The Court's Analysis
The Tribunal acknowledged the Revenue’s reliance on Wipro Limited, but distinguished the facts. The Supreme Court in Wipro Limited dealt with Section 10B(8), which mandates a declaration to be filed before the due date of return under Section 139(1). The Court held that both the declaration and its timing were mandatory. However, the Tribunal noted that Section 11 and Form 10B serve a different purpose - they are not conditions for eligibility but mechanisms for verification of charitable use of income.
"The Hon’ble Gujarat High Court... has held that where the assessee had already filed the audit report in Form 10B electronically during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal."
The Tribunal further observed that the Pune Bench’s decision in New Miraj Education Society directly addressed identical facts and held that the exemption under Section 11 cannot be denied merely because Form 10B was filed late, provided it was submitted before the conclusion of appellate proceedings. The Tribunal found no material or binding precedent from the Delhi Bench or higher courts contradicting this view.
The Tribunal emphasized that the spirit of Section 11 is to encourage charitable activities, and denying exemption on a technicality - where the audit report exists, is authentic, and was submitted during appeal - defeats the legislative intent. The Revenue’s reliance on Section 119(2)(b) was rejected as inapplicable, since the issue was not about condonation by the CIT(A), but about whether the statutory requirement itself was mandatory or directory.
The Tribunal concluded that the filing of Form 10B is a procedural requirement, not a condition precedent to exemption. The appellant’s compliance, even if belated, was sufficient to substantiate its claim.
The Verdict
The appeals of the assessee were allowed. The ITAT set aside the CIT(A)’s orders dated 08.09.2025 for all three assessment years. The Assessing Officer was directed to grant exemption under Section 11 for A.Y. 2020-21, 2021-22, and 2022-23, and to recalculate the tax liability accordingly. The order was pronounced on 18.03.2026.
What This Means For Similar Cases
Late Form 10B Filing Is Not Fatal to Section 11 Claims
- Practitioners may now argue that delay in filing Form 10B does not automatically disqualify a charitable trust from claiming exemption under Section 11
- If the audit report is prepared before the return due date and submitted during appellate proceedings, the claim remains valid
- The burden shifts to the Revenue to prove fraud or mala fide intent, not mere procedural lapse
Appellate Tribunals May Rely on Coordinate Bench Precedents
- Tribunals are empowered to follow decisions of coordinate benches, even if the Revenue cites contrary Supreme Court rulings on different provisions
- The distinction between Section 10B (mandatory declaration) and Section 11 (verification mechanism) is now legally recognized
- This creates a precedent for similar cases involving Form 10BB, Form 10DA, and other audit-related filings under charitable exemptions
Strategic Filing During Appeals Is Now Viable
- Charitable trusts should still file Form 10B on time, but if missed, they must immediately submit it to the AO during assessment or appeal
- A written explanation for delay, supported by audit firm certification, strengthens the case
- This judgment provides a clear pathway to salvage exemption claims even after initial rejection by CPC
