Supreme Court Upholds Condonation of Delay in Filing Form 10B

The assessee, Manav Vikas Bahuuddeshiya Gramin Seva Sanstha, a charitable trust engaged in providing medical aid to underprivileged sections, filed its audit report in Form 10B for AY 2016–17 with a delay of 687 days. The delay occurred due to the Chartered Accountant’s lack of awareness regarding newly introduced online filing requirements, which was claimed to be an inadvertent and unintentional error. The Commissioner of Income Tax (Exemptions) rejected the condonation application under Section 119(2)(b), holding that the reason furnished was not sufficient.

Aggrieved, the assessee approached the Bombay High Court (Nagpur Bench), which found the explanation to be bona fide and noted that denial of condonation would result in loss of legitimate exemption benefits. The High Court accordingly quashed the rejection order and condoned the delay, subject to payment of costs. The Revenue challenged this decision before the Supreme Court by way of a Special Leave Petition.

Main Issue: Whether the delay in filing an audit report in Form 10B by a charitable trust can be condoned under Section 119(2)(b) when the delay is attributed to a bona fide and unintentional error.

SC’s Decision: The Supreme Court dismissed the Special Leave Petition filed by the Revenue and declined to interfere with the High Court’s order. Exercising its discretionary jurisdiction under Article 136 of the Constitution, the Court held that no interference was warranted in the facts and circumstances of the case. By doing so, the Supreme Court effectively upheld the Bombay High Court’s ruling, which had taken a liberal view in condoning the delay. The High Court had emphasised that the audit report had already been filed, the explanation for the delay was honest, and strict refusal would unjustly deprive the charitable trust of exemption benefits. It had also considered the nature of activities carried out by the trust and relied on precedent to adopt a pragmatic approach.

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