Denying accumulation of u/s 11(2) merely on grounds of delay in filing Form No. 10 is unsustainable

Denying the accumulation of u/s 11(2) merely on grounds of a procedural delay in filing Form No. 10 is unsustainable in law.

In a recent judgment, ITAT has held that denying the accumulation of under section 11(2) merely on grounds of a procedural delay in filing Form No. 10 is unsustainable in law

ABCAUS Case Law Citation:
5235 (2026) (09) abacus.in ITAT

The appellant assessee was a charitable trust, engaged in charitable activities for the benefit of the general public by providing medical facilities, medical intervention, treatment, and special education to spastics and other physically and mentally challenged children. The assessee held a valid registration under section 12A and section 80G of the Income Tax Act, 1961 (‘the Act’).

For the assessment year under consideration, the assessee filed its Return of Income declaring ‘Nil’ income. In the return of income, the assessee specifically set apart and accumulated an amount under Section 11(2) of the Act.

During the assessment proceedings under section 143(3) of the Act, the Assessing Officer (AO) noticed that against gross receipts of Rs.99,18,247/-, the assessee had accumulated income under Section 11(2) of the Act. The AO noted that the accumulation could not be allowed because Form No. 10 was not furnished electronically within the due date prescribed under section 139(1) of the Act read with Rule 17(2) of the Income-tax Rules, 1962.

Consequently, the Assessing Officer treated the accumulation as short application of income and added the same to the total income of the assessee. 

The CIT(A)/ First Appellate Authority dismissed the appeal of the assessee and confirmed the order of the AO.

Before the Tribunal, the assessee submitted that the Form 10 was available before the AO prior to the finalization of the assessment order. 

It was also submitted that that relevant Assessment Year was the initial transition year in which the requirement of mandatory electronic filing of Form No. 10 was introduced. Taking cognizance of the genuine difficulties faced by trusts, the CBDT had issued Circular No. 7/2018 dated 20.12.2018 authorizing the condonation of delay in filing Form No. 10 to prevent genuine hardship.

The assessee placed reliance on the binding judgment of the Hon’ble Supreme Court wherein it was held that furnishing the details/Form No. 10 before the completion of the assessment proceedings is sufficient compliance with the provisions of section 11(2) of the Act. The assessee also placed reliance on the decision of Hon’ble Gujarat High Court and the Hon’ble Allahabad High Court and submitted that exemption to a genuine charitable institution should not be denied merely on technical or procedural delays when the substantive conditions of accumulation are met.

The Tribunal observed that it was an undisputed fact that the intention and particulars of the accumulation under section 11(2) of the Act were categorically disclosed by the assessee in its Return of Income.  It was also a fact that the assessee furnished Form No. 10 electronically during the course of the scrutiny assessment proceedings and prior to the passing of the final assessment order.

The Tribunal noted that on the question of furnishing Form No. 10 during the course of assessment proceedings, the law is well settled by the Hon’ble Supreme Court.

The Tribunal observed that CBDT Circular reiterates the administrative intent that genuine charitable institutions should not be penalized with the loss of exemption solely on technical or procedural delays.  Since the assessee was a genuine charitable trust carrying out noble objects, and had duly disclosed the accumulation in the return of income, and had filed Form No. 10 during the assessment proceedings, denying the accumulation of Rs.13,69,273/- under section 11(2) merely on grounds of a procedural delay was unsustainable in law.

Accordingly, the Tribunal set aside the impugned order and directed the AO to accept Form No. 10 filed during the assessment proceedings and grant the benefit of accumulation under section 11(2) of the Act, and delete the addition made.

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