Late Form 10B Can’t Block Charity Exemption When Audit Report Was Already on Record: ITAT

Vishva Kalyan Foundation, a public charitable trust, filed its return for AY 2020-21 declaring nil income after claiming exemption under Sections 11 and 12 of the Income-tax Act. Although the audit report in Form No. 10B was uploaded with a delay of about 73 days, it was e-filed on 30.03.2021 along with the return and was available on the departmental system well before the Centralised Processing Centre processed the return under Section 143(1) on 30.11.2021. Despite this, the CPC denied the exemption solely on the ground of late filing of Form 10B, taxed the gross receipts of Rs. 82.96 lakh, and raised a demand of Rs. 32.74 lakh.

Rectification applications were rejected, and the first appeal was dismissed by the CIT(A) on the ground of delay of about 1021 days without examining the merits.

Issue Before Tribunal: Whether exemption under Sections 11 and 12 can be denied at the Section 143(1) processing stage merely because Form No. 10B was filed belatedly, despite the audit report being available on record before processing of the return.

ITAT’s Decision: The ITAT held that filing of Form No. 10B is a procedural requirement and that any delay therein is a curable defect. Since the audit report had already been furnished and was available on the departmental system when the return was processed, denial of exemption under Sections 11 and 12 at the processing stage was contrary to settled law.

The Tribunal found that the CIT(A) erred in refusing to condone the delay and in dismissing the appeal in limine, especially when the underlying adjustment itself was unsustainable in view of binding Gujarat High Court judgments and consistent Tribunal precedents. Thus, the Tribunal directed that the exemption under Sections 11 and 12 be allowed to the assessee and set aside the denial made by the CPC.

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