ITAT Clarifies Form 10B Filing Is Directory, Not Mandatory for Section 11 Exemption; Favours Assessee

ITAT Delhi dismissed the Revenue’s appeal for AY 2018-19, upholding the Section 11 exemption to the assessee. The delay in filing Form 10B was procedural, as the audit report was submitted before the assessment completion.

The present appeal has been filed by the Income Tax Department in the ITAT Delhi, challenging an order dated August 06, 2024, passed by the CIT(A)/NFAC in favour of the assessee, Dogra Educational Society. The case is related to the Assessment Year 2018-19.

The assessee, Dogra Educational Society, is an educational trust registered under section 12A, and filed its ITR declaring NIL income. The Assessing Officer (AO) selected the return for scrutiny. During the assessment proceedings, the AO denied the assessee’s claim of exemption under section 11 of the Income Tax Act, mainly on two grounds, i.e., the return was not filed within the prescribed time under section 139(4A), and the audit report in Form 10B was not filed along with the return but was uploaded later. The AO completed the proceedings, assessing the total income at Rs. 3,39,71,372.

The aggrieved assessee filed an appeal before the CIT(A), who partly allowed the assessee’s appeal, holding that the delay in filing Form 10B was a procedural lapse and could not be permitted as per the law. By citing earlier judgments of ITAT and the Gujarat High Court based on a similar issue, the CIT(A) held that filing the audit report along with the return is a directory requirement. Since the audit report was submitted before completion of the assessment, the exemption under section 11 could not be denied merely due to the delay.

The Income Tax Department thereafter filed an appeal before the ITAT Delhi, challenging the decision of the CIT(A). Where the revenue cited CBDT Circular No. 2/2020 and argued that Form 10B must be e-filed along with the return. It was also stated that the assessee failed to seek condonation of delay under section 119(2)(b) from the CIT (Exemptions), hence is eligible for Section 11 exemption.

However, the tribunal rejected the aforesaid claim of the Revenue, holding that courts and tribunals have consistently treated the requirement of filing Form 10B as directory. Since no contrary judicial authority was cited by the Revenue, the Tribunal found no error in the CIT(A)’s order. Accordingly, the appeal of the Revenue was dismissed, and the exemption under section 11 was upheld.