Exemption u/s 11 allowed for ITR filed u/s 139 not u/s 139(1) as per CBDT Circular

For claiming exemption u/s 11, assessee is required to furnish return of income within time allowed u/s 139 and not u/s 139(1) of the Act – ITAT

In a recent judgment, ITAT Pune has held that for claiming exemption u/s 11, assessee is required to furnish the return of income within time allowed u/s 139 and not u/s 139(1) of the Act even for pre-amendment period.

ABCAUS Case Law Citation:
5029 (2026) (02) abcaus.in ITAT

In the instant case, the Revenue had challenged the order passed by the CIT(A) in allowing exemption u/s 11 to the respondent trust without considering that the assessee had not filed return of income within due date prescribed u/s 139(1) which was a mandatory condition.

The assessee trust was registered under the Societies Registration Act, 1860 and solely engaged in carrying on educational activities.  The assessee trust was approved u/s 12AA(1)(b)(i) of the Income Tax Act, 1961 (the Act) by the CIT(Exemption).

For AY 2018-19, the assessee filed e-return of income declaring total income of Rs. Nil and claiming exemption u/s 11 of the Act.  The return was initially processed u/s 143(1) of the Act by CPC by disallowing the exemption claimed.

Thereafter, the case of the assessee was selected for scrutiny under E-assessment Scheme, 2019 through CASS.  During the course of assessment proceedings, it was noted by the Assessing Officer (AO) that total receipts had been claimed by the assessee trust as exemptions u/s 11 of the Act.  On verification of Form 10B i.e. audit report, the AO found that the assessee e-filed Form No. 10B on 07.12.2019. The return of income for relevant AY 2018-19 was filed on 23.11.2018 which was beyond the extended due date of 31.10.2018 as per the CBDT Order u/s 119 of the Act.

The AO, therefore, noted that the assessee had filed return of income as well as audit report beyond the due date and therefore there was a violation of conditions as prescribed u/s 12A of the Act and the provisions of section 11 and 12 shall not apply in relation to the income of the assessee trust. 

The AO therefore, proceeded to complete the assessment u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act by disallowing the exemption claimed by the assessee and adding the same back to the income of the trust in view of the provisions of section 12A(1)(b) of the Act r.w. 1st proviso to Rule 12(2) of the Income Tax Rules, 1962.

Aggrieved, the assessee carried the matter before the CIT(A)/NFAC.  During the appellate proceedings, the assessee contended that the AO ought not to have denied the exemption claimed by the assessee since section 12A(1)(b) allows the filing of return of income within time allowed u/s 139 and not essentially u/s 139(1) of the Act.  The assessee also raised an alternate plea before the CIT(A)/NFAC that the addition, if any, ought to have been restricted only to the net commercial income and not the entire gross receipts. 

The CIT(A)/NFAC noted that the application of the assessee for condonation of delay in submission of Form 10B for A.Y. 2018-19 had been allowed under section 119(2)(b) of the Act by the Principal Chief Commissioner of Income-tax (Exemptions).

The CIT(A) allowed the appeal of the assessee and directed the AO to allow exemption claimed by the assessee u/s 11 of the Act after due verification of the facts

Before the Tribunal, the assessee submitted the issue was covered in favour of the assessee by the CBDT Circular.

It was submitted that as per the said Circular the return of income filed by the assessee was within time limit u/s 139(4) of the Act and the said CBDT Circular had not been considered by the AO/ CIT(A)/NFAC. Therefore, there was no merit in the ground of appeal raised by the Revenue in view of the said Circular.

The Tribunal noted that as per paras 2 and 3 of the said CBDT Circular, the assessee is required to furnish the return of income within time allowed u/s 139 and not u/s 139(1) of the Act.  Further, CBDT had directed to rectify the demands raised on the impugned issue.

The Tribunal opined that in view of the CBDT Circular and in the absence of any contrary material brought on record by the Revenue, there was no merit in the ground of appeal taken by the Revenue. 

Accordingly, the ground raised by the Revenue was dismissed.

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