CBDT Circular fixing time limit for condonation application u/s 119(2)(b) is illegal – HC

CBDT Circular fixing a time limit for making condonation application u/s 119(2)(b) of the Income Tax Act, 1961 (the Act) is illegal – Madras High Court

In a recent judgment, Madras High Court condoned the delay in filing audit report Form 10-B observing that CBDT Circular fixing a time limitation for making application under section 119(2)(b) of the Income Tax Act, 1961 (the Act) is illegal as section 119(2)(b) has not mentioned any time limit for filing the application for condonation of delay.

ABCAUS Case Law Citation:
4629 (2025) (07) abcaus.in HC

In the instant case the Petitioner had filed a Writ Petition challenging the impugned order passed by the Commissioner of Income Tax (Exemption) denying to condone the delay in filing audit report in Form 10B.

The Petitioner was a charitable trust. Before the Hon’ble High Court it was submitted that the trust had to file audit report 30 days prior to the filing of return of income. Due to the second wave of covid-19, the petitioner was unable to file audit report on time for the relevant assessment year.

For the relevant Assessment Year the time limit for filing ITR was extended. However, the petitioner had filed the ITR and Form 10-B after a delay of 131 days. The Petitioner, along with return, also filed a request to condone the delay of 131 days in filing the ITR and the audit report.

However, the CIT rejected the application on the sole ground that the application was barred by limitation by citing the CBDT Circular No.16 of 2024 issued on 18.11.2024.

The Hon’ble High Court noted Clause 3 of the CBDT Circular No.16 of 2024 which read as follows:

“3.No application for condonation of delay in filing of Form No.9A/10/10B/10BB shall be entertained beyond three years from the end of the assessment year for which such application is made. The time limit for filing of such application within three years from the end of the assessment year will be applicable for application filed on or after the date of issue of this Circular. A condonation application should be disposed of, as far as possible, within six months from the end of the month in which such application is received by the Competent Authority.”

The Hon’ble High Court observed that a reading of the above clause would make it clear that no application for condonation of delay shall be entertained beyond the period of 3 years from the end of the assessment year. In the present case, the application for condonation had to be filed on or before 31.03.2024, but the petitioner had filed in the month of January 2025.

The Hon’ble High Court further observed that Section 119(2)(b) of the Income Tax Act, 1961, has not mentioned any time limit for filing the application for condonation of delay.

The Hon’ble High Court held that the CBDT Circular stating that the delay in filing Form 10-B can be condoned upto 365 days, is beyond the scope of provisions in the law. When the Act has not fixed any time limit, but fixing the time limit by virtue of the Circular is not in accordance with law, then the scope of the provisions of law has to be followed.

The Hon’ble High Court opined that the reasons assigned by the petitioner for the delay of 131 days in filing the Form 10-B were reasonable.

Therefore, the Hon’ble High Court set aside the impugned order passed by the CIT and condoned the delay in filing the Form 10-B for the assessment year 2020-2021 before the CIT(Exemption).

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