Facts of the Case

The petitioner, Delhi Maharashtriya Educational and Cultural Society, is a society registered under the Societies Registration Act, 1860 and engaged in charitable and welfare activities. For Assessment Year 2018-19, the petitioner filed its return of income on 31.10.2018 within the extended due date, declaring Nil income after claiming exemption under Sections 11 and 12 of the Income-tax Act. The audit report in Form 10B was prepared on 30.09.2018 but could not be uploaded along with the return due to an inadvertent error on the part of the auditor/tax professional. Upon realising the omission, the petitioner uploaded Form 10B on 16.11.2018, resulting in a delay of 16 days.

While processing the return under Section 143(1), the exemption under Sections 11 and 12 was denied solely on account of delay in filing Form 10B, creating a demand of ₹2,23,53,562. Rectification under Section 154 was also rejected. The petitioner thereafter filed an application under Section 119(2)(b) seeking condonation of delay, which was rejected by the Commissioner of Income Tax (Exemptions) on 14.06.2024 on the ground that auditor’s error did not constitute reasonable cause. The petitioner approached the Delhi High Court.

Issues Involved

Whether a delay of 16 days in filing audit report in Form 10B caused due to inadvertent professional error constitutes “genuine hardship” under Section 119(2)(b), whether rejection of condonation application on technical grounds was justified, and whether substantive exemption under Sections 11 and 12 could be denied for such minor procedural lapse.

Petitioner’s Arguments

The petitioner contended that it is a long-standing charitable society with a consistent history of compliance and no allegation of mala fides. It was submitted that the return of income was filed within time, the audit was completed within the prescribed period, and Form 10B was uploaded before any assessment proceedings commenced. The delay was purely inadvertent and attributable to professional error. Reliance was placed on several High Court and Supreme Court judgments holding that procedural lapses should not defeat substantive charitable exemptions.

Respondent’s Arguments

The Revenue contended that statutory timelines must be strictly adhered to and that mere attribution of delay to an auditor’s mistake does not automatically establish genuine hardship. Reliance was placed on precedents emphasising discipline in statutory compliance and the need to explain delay with cogent reasons.

Court Order / Findings

The Delhi High Court held that the facts clearly demonstrated a bona fide mistake resulting in a marginal delay of 16 days in uploading Form 10B. The Court observed that the return was filed within time, reference to the audit report was made in the return, and the audit report itself was prepared within the prescribed period. The Court held that an assessee, particularly a charitable institution, should not be made to suffer for an inadvertent professional error. Relying on consistent judicial precedents, including decisions of the Supreme Court and various High Courts, the Court held that the approach under Section 119(2)(b) must be equitable, balancing and judicious, and that denial of condonation in such cases would defeat the benevolent object of the statute. The rejection order dated 14.06.2024 was therefore held to be unsustainable.

Important Clarification

The Court clarified that filing of Form 10B is a procedural requirement intended to facilitate assessment. Where audit is completed in time and delay in uploading the report is marginal, bona fide and without mala fides, denial of exemption under Sections 11 and 12 on such technical grounds causes genuine hardship and warrants exercise of powers under Section 119(2)(b).

Final Outcome

The writ petition was allowed. The order dated 14.06.2024 rejecting condonation under Section 119(2)(b) was set aside. The authorities were directed to pass a fresh order on the petitioner’s application for condonation of delay in filing Form 10B within eight weeks and thereafter proceed in accordance with law.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769502292_DELHIMAHARASHTRIYAEDUCATIONALANDCULTURALSOCIETYTHROUGHAUTHORISEDREPRESENTATIVEVsCOMMISSIONEROFINCOMETAXEXEMPTIONSDELHI.pdf 

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