Facts of the Case

The petitioner, FIITJEE Foundation for Education Research and Trainings, is a charitable organisation consistently availing exemption under Sections 11 and 12 of the Income-tax Act. For Assessment Year 2022-23, the petitioner filed its return of income on 07.11.2022 within the extended due date under Section 139(1). The audit report in Form 10B was also filed on 07.11.2022, resulting in a delay of one month since Form 10B was required to be filed by 07.10.2022.

Due to the delayed filing of Form 10B, the Central Processing Centre issued an intimation dated 04.04.2023 under Section 143(1) denying exemption under Section 11 and raising a demand of ₹18,12,06,760. The petitioner’s return was subsequently selected for scrutiny and assessment was completed under Section 143(3) on 25.03.2024.

In the meantime, the petitioner filed an application dated 07.08.2023 under Section 119(2)(b) seeking condonation of the delay of one month, explaining that the statutory audit was delayed due to serious illness of the son of the petitioner’s accountant during September 2022. Despite furnishing medical records and explanations, the Commissioner of Income Tax (Exemption) rejected the application by order dated 02.08.2024, leading to the present writ petition.

Issues Involved

Whether the delay of one month in filing Form 10B due to genuine hardship ought to be condoned under Section 119(2)(b), whether rejection of the condonation application was arbitrary and amounted to failure to exercise jurisdiction vested in the authority, and whether denial of exemption under Section 11 on account of such delay was sustainable.

Petitioner’s Arguments

The petitioner contended that it had a consistent history of compliance and had been granted exemption in earlier years. The delay in filing Form 10B was neither deliberate nor due to negligence, but arose from unavoidable circumstances relating to serious illness in the family of its accountant, which delayed completion of audit. It was argued that all material facts and medical records substantiating genuine hardship were placed before the authority, and refusal to condone the delay defeated substantive justice.

Respondent’s Arguments

The Revenue relied on the impugned order to contend that the petitioner had failed to establish sufficient cause for delay and that statutory timelines for filing Form 10B were mandatory. It was argued that exemption under Section 11 could not be allowed in the absence of timely filing of the audit report.

Court Order / Findings

The Delhi High Court examined the scope of Section 119(2)(b) and reiterated that the expression “genuine hardship” must be construed liberally to advance the cause of substantial justice. The Court noted that the petitioner had placed sufficient material on record to demonstrate that the delay was occasioned by circumstances beyond its control, namely illness of the accountant’s son, which delayed completion of the audit.

The Court observed that the delay was only of thirty days, the petitioner had otherwise complied with all statutory requirements, and there was no allegation that the petitioner was not entitled to exemption on merits. Relying on the principles laid down in Sitaldas K. Motwani v. Director-General of Income Tax, the Court held that refusal to condone such marginal delay amounted to arbitrary exercise of discretion and failure to discharge the statutory duty under Section 119(2)(b).

Accordingly, the impugned order rejecting the condonation application was held to be erroneous.

Important Clarification

The High Court clarified that powers under Section 119(2)(b) are meant to mitigate genuine hardship and must be exercised in a justice-oriented manner. Technical or marginal delays, when satisfactorily explained and supported by evidence, cannot be used to deny substantive statutory benefits such as exemption under Section 11.

Final Outcome

The writ petition was allowed. The Commissioner of Income Tax (Exemption) was directed to condone the delay of thirty days in filing Form 10B for Assessment Year 2022-23 and issue an appropriate order accordingly. All consequential actions based on denial of exemption due to such delay were rendered unsustainable.

Link to download order https://www.mytaxexpert.co.in/uploads/1769756023_FIITJEEFOUNDATIONFOREDUCATIONRESEARCHANDTRAININGSVsCOMMISSIONEROFINCOMETAXEXEMPTION.pdf 

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