School Society Lost Income Tax Exemption Due to Late Audit Report Filing; ITAT Grants Relief and Restores Claim

The Income Tax Appellate Tribunal (ITAT), Delhi Bench has given relief to a trust Shri Maharaja Agarsen Siksha Samiti of Hathras, Uttar Pradesh, by allowing its appeal against denial of tax exemption under Sections 11 and 12 of the Income Tax Act.

The case first involved a significant delay of 656 days in the filing of the appeal before the Tribunal. The trust said it was not aware of the order passed by Commissioner of Income Tax (Appeals) as the order was only uploaded on the online portal of the Income Tax Department and was not served by any other prescribed mode. According to the trust, it came to know about the order only when its consultant checked the portal in January 2026, after which it promptly filed the appeal.

ITAT condoned the delay, if one accepts this explanation. The Tribunal noted that in the present transition phase towards a technology-driven tax administration system, taxpayers may take time to adapt to online modes of communication. It also found no evidence of mala fide intention or negligence on the part of the trust.

On merits of the case, the dispute was with regard to late filing of Audit Report of the trust in Form 10B, which is a pre-requisite for claiming exemption under Sections 11 and 12. The trust filed its income tax return and audit report on 5 February 2021, before the extended due date of 15 February 2021 for filing the return. However, the audit report was required to be filed at least one month before the return filing deadline and was therefore technically late.

The Central Processing Centre (CPC) refused the exemption and processed the return under Section 143(1) and assessed the income of the trust at Rs 19,53,286 instead of accepting the returned nil income. The exemption was not denied on the ground of delayed filing of Form 10B only, the trust submitted.

The audit report was filed late but the same was already filed and was available with the department before CPC processed the return in November 2021, the Tribunal said. ITAT noted that various judicial precedents have condoned such delays and hence delay in filing of Form 10B in this case deserves to be condoned.

Accordingly, the Tribunal directed the Assessing Officer to verify the registration of the trust under Section 12AA and to see that the exemption was denied only on account of the delayed audit report. The Assessing Officer was directed to grant the exemption under Sections 11 and 12 in accordance with law subject to these verifications.

Accordingly the appeal of the Trust was allowed for statistical purpose and the matter was remanded to the Assessing Officer for necessary action.