Delay in furnishing Form 10B – Period between 15.03.2020 till 20.08.2022 to be excluded as per decision of Hon’ble Supreme Court
In a recent judgment, Hon’ble High Court has directed acceptance of Audit Report in Form 10B holding that Covid period to be excluded for the purposes of calculating limitation as per decision of Hon’ble Supreme Court.
ABCAUS Case Law Citation:
5033 (2026) (02) abcaus.in HC
In the instant case, the assessee had challenged the order passed by the CIT(E) in rejecting application for condonation of delay in furnishing audit report in Form 10B.
The petitioner was registered as a Charitable Institution, under the provisions of section 12A of the Income Tax Act. The Petitioner was entitled to exemption from payment of Income Tax, subject to such institutions complying with the requirements of the Income Tax Act read with the Rules. One such requirement was the filing of a Form 10B, along with an Audit Report, certifying the character of the institution to be that of a Charitable Institution.
For the assessment year, 2020-2021, the due date for filing of such Audit Report as well as Form 10B was 15.01.2021. However, the petitioner was able to file the income tax returns as well as Form 10B, only on 31.03.2021.
For the said delay in filing Form 10B, the exemption u/s 11 was denied to the petitioner and was called upon by the Income Tax Officer (Exemption) to pay tax on the income of the petitioner.
The petitioner approached the CIT(Exemption) and submitted that, the income of the petitioner was exempted from payment of tax as Form 10B, had already been filed by the petitioner, for the assessment year, 2020-2021. However, the CIT(E) turned down his submission observing that Form 10B, had not been accepted in view of the delay in filing of the said Form.
The petitioner, moved an application for condonation of delay, in filing Form 10B, for the assessment year, 2020-2021 which was also rejected. The case of the petitioner was that, the Circular No. 2/2020, dated 03.01.2020, issued by the Central Board of Direct Taxes (CBDT), permitted Commissioners of Income Tax to accept the belated applications, after condoning the delay in filing of such applications as well as Form 10B, for any assessment year, after 2018-2019. The Circular specifically stated that, the Commissioners of Income Tax were required to satisfy themselves that, the assessee was prevented from filling such applications within the stipulated time. However, the CITE) rejected the said application of the petitioner.
Before the Hon’ble High Court, the Petitioner relied upon the judgment of the Hon’ble High Court of Gujarat and Bombay High Court.
The Revenue contended that, the rejection of Form 10B was in accordance with Law in as much as no application for condonation of delay was filed, along with the said Form 10B. It was submitted that, the application for condonation of delay came to be filed only, in the year, 2023, which was about two (02) years, after the filing of the Form 10B.
The Hon’ble High Court observed that the application filed by the petitioner for condonation of delay stated that, there was a delay of 77 days in filing Form 10B, on account of the advent of the COVID – 19 Pandemic, and on account of the Chartered Accountant of the petitioner being unable to prepare the necessary Audit Report. It was also mentioned that, the said Chartered Accountant, had also passed away due to complications arising out of a COVID 19 Pandemic.
The Hon’ble High Court noted that the CIT(E) had rejected the application for condonation of delay on a cryptic ground simply stating that, the reasons given by the petitioner were not sufficient. The reason did not meet the requirements of Principles of Natural Justice in as much as such an order, would require the reasons would be given in writing.
The Hon’ble High Court opined that in the absence of proper reasons, the order would have to be treated to be passed in violation of the Principles of Natural Justice and would have to be set aside.
The Hon’ble High Court further noted that the Gujarat High Court after considering the various contentions, raised by both sides, relying upon the Circular No.10/2019, dated 22.05.2019, issued by the Central Board of Direct Taxes, had held that, the requirement of furnishing the Audit Report should be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. The High Court had also held that, the condonation application by an assessee, which is a Public Charitable Trust, for the past 30 years, cannot be rejected, on the ground of limitation, when wide discretionary powers for condonation had been given, on that basis. The Hon’ble High Court not only set aside the order of rejection but also condoned the delay in filing of Form 10B.
Further Bombay High Court followed this judgment and condoned the delay in the filing of the Form 10B by the petitioner, in that case. The S.L.P. filed against this judgment of the Hon’ble High Court of Bombay, came to be dismissed.
The Hon’ble High Court further noted that in the application filed for condonation of delay, the petitioner had specifically referred to the directions of the Hon’ble Supreme Court that the period from 15.03.2020 till 20.08.2022, shall be excluded for the purpose of limitation in judicial and Quasi judicial proceedings.
In view of the directions of the Hon’ble Supreme Court, the Hon’ble High Court opined that in such circumstances, the period between 15.01.2021 till 31.03.2021, would stand excluded for the purposes of calculating limitation. Apart from this, there was no dispute that the Chartered Accountant of the petitioner, had passed away due to COVID 19 Pandemic complications. In those circumstances, there was every need for condonation of delay in the filing of Form 10B, by the petitioner.
Accordingly, the Hon’ble High Court allowed Writ Petition and set aside the order of CIT(E) with a further direction to accept Form 10B filed by the petitioner without reference to the delay in filing of the said Form 10B.
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