ITAT Quashes Rectification Order, Restores Section 11 Exemption Over Late Form 10B Filing

The ITAT Mumbai set aside a rectification order passed denying the Section 11 exemption because Form 10B was filed late, holding that the company was awarded a proper opportunity of hearing before issuing the order.

The appeal was filed by a charitable trust named Tehmina K. Katrak Charitable Trust against the Income Tax Officer Exemption Ward 2(4), Mumbai, challenging an order dated November 11, 2025, passed by the Additional/Joint Commissioner of Income Tax (Appeals), Mysore, for the Assessment Year 2021-22.

On January 1, 2022, the assessee had filed its income tax return (ITR) for the year in consideration within the statutory due date, i.e., before March 15, 2022, as set by the CBDT vide its Circular No. 01/2022 [F. No. 225/49/2021/ITA-II], dated January 11, 2022. During the assessment of the return, the Assessing Officer (AO) denied the Section 11 exemption on the grounds that Form 10B was filed late on February 19, 2022.

The assessee argued that it attempted to furnish Form 10B on January 11, 2022; however, due to the technical glitches in the income tax portal, the form could not be reflected on the portal, which resulted in a significant delay. However, the form was later uploaded on the portal. Originally, the return was processed and an exemption was granted by the CPC under Section 143(1). Later, the department had passed a rectification order withdrawing the Section 11 exemption under Section 154, claiming it was mistakenly allowed previously.

When the tribunal analysed the facts of the case, it noted that the issue of Form 10B late filing had already been examined during the initial assessment of the return, and also the delay caused due to technical glitches in the portal was genuine. Further, it held that it is not allowed to reopen the matter under Section 154, which amounted to reviewing a decision, as rectification applies only to clear and obvious mistakes. The tribunal further noted that the assessee was not given any opportunity of hearing before issuing the rectification order, which reflects an explicit violation of the principles of natural justice. It held that the department acted incorrectly in withdrawing the exemption.

Considering the aforementioned findings, the tribunal set aside the impugned rectification order and restored the Section 11 exemption. In the end, the assessee’s appeal was allowed.