ITAT Directs Grant of Section 11 Exemption Despite Late Filing of Form 10B

The ITAT allowed the assessee’s appeal and directed the Revenue to grant exemption under Sections 11 and 12, holding that the delay in filing Form 10B was procedural and justified in the COVID period.

The present appeal has been filed by the Savli Taluka Rifle Association against the Assessing Officer, challenging the order of CIT(A) dated December 09, 2025, for the Assessment Year 2020-21 in the proceedings under section 154 of the Income Tax Act.

Background of the case

The assessee filed its income tax return on February 10, 2021. While processing the return under Section 143(1), the Central Processing Centre (CPC) disallowed the exemption claimed under Section 11 because Form 10B was not filed within the stipulated timeframe.

After which, the assessee filed a rectification application, stating that Form 10B had in fact been filed along with the return. However, the AO rejected the request, stating that the form was not submitted within the prescribed time limit.

The assessee then filed an appeal before the CIT(A), but the appeal was dismissed. Thereafter, the matter was taken to the ITAT.

The assessee argued during the hearing that it is a registered charitable entity under Section 12AA and that its accounts were duly audited. The audit report in Form 10B was signed on December 4, 2020 and was filed along with the return of income on February 10, 2021, which was within the due date for filing the return.

The assessee also argued that filing Form 10B is a procedural requirement, and since it was available with the department before processing the return, the exemption should not have been denied on technical grounds.

Tribunal’s Decision

After hearing both sides, the Tribunal noted that there was no dispute about the audit being completed and the report being available with the department at the time of return processing. Although the form was required to be filed one month before the due date (i.e., by January 15, 2021), it was filed along with the return within the extended due date.

The tribunal said the financial year 2020-21 was the peak period of COVID-19. Because of the pandemic, there may have been delays in filing the audit report on time. Such a delay should not have been viewed negatively against the assessee.

The audit report in Form No. 10B was already available. Therefore, the Revenue authorities were not right in denying exemption under Sections 11 and 12 of the Act on a technical ground. Filing the form on time is mainly a procedural requirement.

It is a settled legal position that courts have allowed exemptions or deductions even when the audit report was submitted later during the assessment proceedings. Hence, a delay in filing should not result in the denial of the exemption if the report is ultimately available.

As a result, the ITAT directed the Revenue to allow the exemption claimed under Sections 11 and 12. As a result, the appeal of the assessee was allowed.