My institution filed its audit report on time but in Form 10B when Form 10BB was the right form, and the CPC has denied the exemption and raised a demand on the gross receipts. Is filing the wrong audit form fatal?
No. Where the accounts were in fact audited by a chartered accountant and an audit report was uploaded within time, the choice of the wrong form is a procedural lapse and not a failure of the substantive condition, and exemption cannot be denied on that ground alone. The Tribunal set aside the appellate order and directed the Assessing Officer to verify substantive compliance and, if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil.
Decided by the ITAT (Prashant Maharishi, Vice President and Keshav Dubey, Judicial Member) on 2026-04-21, reported as ITA No. 2570/Bang/2025 (ITAT Bangalore, 'A' Bench); Assessment Year 2022-23. It bears on section 10(23C), section 10(23C)(vi), section 10(23C)(iiiad), section 11, section 143(1), section 154, section 119(2)(b), section 254(1), section 234A, section 234B, section 234C of the Income Tax Act 1961, in Charitable Trusts & Exemption, Capital Gains Exemptions and Assessment & Scrutiny matters.
Wrong-form filings are a mass problem created by the change in the audit-report rules, and the CPC's processing is automatic and unforgiving — here a nil return became a demand of Rs 62,49,410 on gross receipts of Rs 1,56,07,598, with the maximum marginal rate applied. Three practical points come out of the order. First, the Tribunal did not wait for the s.119(2)(b) condonation application to be disposed of; it acted under its own s.254(1) power to pass such orders as it thinks fit. Second, the first appellate authority had dismissed the appeal by PRESUMING that the condonation application must have been rejected because more than two years had passed since it was filed; the Tribunal recorded that this was surprising, and that presumption is itself an appealable error worth pleading. Third, the Tribunal added that because the annual receipts were below Rs 5 crore the income was in any event exempt under s.10(23C)(iiiad), a fallback worth checking in every small-institution case. Note carefully which regime the case falls in: for AY 2022-23 the form followed the exemption route — an institution approved under s.10(23C) filed Form 10BB and a s.12A/12AB trust filed Form 10B. From AY 2023-24 both routes use the same pair of forms, selected instead by a threshold test: Form 10B where total income computed without ss.11 and 12 or s.10(23C)(iv), (v), (vi) or (via) exceeds Rs 5 crore, or where foreign contribution has been received, or where income has been applied outside India, and Form 10BB in every other case. A reader who takes the AY 2022-23 rule into AY 2023-24 will pick the wrong form again.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is a society registered under the Karnataka Societies Registration Act 1960 on 25 October 1977, running an English medium school at Gadag. It was registered under s.10(23C)(vi) by the CIT (Exemptions), Bengaluru by order dated 28 September 2017 for AY 2016-17 onwards, and was granted approval under clause (i) of the first proviso to s.10(23C) on 4 April 2022 in Form No. 10AC, URN AAATC6144KC20170, effective from AY 2022-23 to AY 2026-27. For AY 2022-23 it filed its return on 3 November 2022, within the extended due date of 7 November 2022, declaring nil income and claiming a refund of Rs 81,880. By oversight it claimed exemption under s.11 instead of s.10(23C)(vi), and it filed its audit report on 24 September 2022 in Form No. 10B instead of Form No. 10BB. The CPC, by intimation under s.143(1) dated 31 March 2023, denied the exemption, computed total income at Rs 1,56,07,598 and raised a demand of Rs 62,49,410 after TDS credit. On 15 April 2023 the society filed a rectification application, the audit report in Form No. 10BB, and an application under s.119(2)(b) to condone the delay; the condonation application was still pending. The CPC passed an order under s.154 on 13 May 2023 computing the same income and a net amount payable of Rs 61,96,470. The Addl./JCIT(A)-6, Kolkata dismissed the appeal on 10 September 2025, presuming that the CIT(E) must have refused condonation because more than two years had passed, and holding that filing Form No. 10BB by the specified date was a statutory requirement.
The appeal was partly allowed. Denial of exemption under s.10(23C)(vi) solely because Form 10B was inadvertently filed instead of Form 10BB for AY 2022-23 is not justified where the accounts were audited by a chartered accountant, an audit report was uploaded within the due date and the correct form was subsequently filed; the error is procedural. The appellate order was set aside and the Assessing Officer was directed to verify substantive compliance with the conditions of s.10(23C)(vi), and if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil (paras 9.2 and 9.7).
The Tribunal recorded what was not in dispute: the return was filed within the due date, an audit report was filed on or before the due date, the approval in Form No. 10AC was subsisting, and the only lapse was the form used. It held that the Tribunal as final fact-finding authority has wide powers under s.254(1) to pass such orders as it thinks fit, which allow it to look beyond technicalities and render substantive justice, and that a genuine claim should not be denied for a procedural or technical lapse where the substantive conditions are fulfilled. Getting the accounts audited and furnishing a report, albeit in the wrong form, showed an intention to comply. It took support from Mangalore Chemicals & Fertilisers Ltd v. Deputy Commissioner of Commercial Taxes for the proposition that not all statutory conditions are of equal importance and some belong merely to the area of procedure, and from Sambhaji v. Gangabai for the proposition that procedure is the handmaid and not the mistress of justice. It applied CIT v. G.M. Knitting Industries (P.) Ltd. and the line of High Court authority there approved, under which filing an audit report along with the return is directory and compliance at any time before the assessment is framed suffices, and CIT v. Xavier Kelavani Mandal (P.) Ltd., following CIT v. Gujarat Oil & Allied Industries Ltd. and CIT v. Shahzadanand Charity Trust, under which the audit report may be produced at a later stage before the officer or the appellate authority on sufficient cause. It also observed that as the aggregate annual receipts of Rs 1,56,07,598 were well below Rs 5 crore, the income was in any event exempt under s.10(23C)(iiiad).
the assessee did get its accounts audited by a qualified accountant and furnished an audit report, albeit in the wrong form.
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Handle my notice → Ask a CA on WhatsAppNo. Where the accounts were in fact audited by a chartered accountant and an audit report was uploaded within time, the choice of the wrong form is a procedural lapse and not a failure of the substantive condition, and exemption cannot be denied on that ground alone. The Tribunal set aside the appellate order and directed the Assessing Officer to verify substantive compliance and, if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil. This was decided by the ITAT (Prashant Maharishi, Vice President and Keshav Dubey, Judicial Member) and bears on section 10(23C), section 10(23C)(vi), section 10(23C)(iiiad), section 11, section 143(1), section 154, section 119(2)(b), section 254(1), section 234A, section 234B, section 234C of the Income Tax Act 1961. It is reported as ITA No. 2570/Bang/2025 (ITAT Bangalore, 'A' Bench); Assessment Year 2022-23. Wrong-form filings are a mass problem created by the change in the audit-report rules, and the CPC's processing is automatic and unforgiving — here a nil return became a demand of Rs 62,49,410 on gross receipts of Rs 1,56,07,598, with the maximum marginal rate applied. Three practical points come out of the order. First, the Tribunal did not wait for the s.119(2)(b) condonation application to be disposed of; it acted under its own s.254(1) power to pass such orders as it thinks fit. Second, the first appellate authority had dismissed the appeal by PRESUMING that the condonation application must have been rejected because more than two years had passed since it was filed; the Tribunal recorded that this was surprising, and that presumption is itself an appealable error worth pleading. Third, the Tribunal added that because the annual receipts were below Rs 5 crore the income was in any event exempt under s.10(23C)(iiiad), a fallback worth checking in every small-institution case. Note carefully which regime the case falls in: for AY 2022-23 the form followed the exemption route — an institution approved under s.10(23C) filed Form 10BB and a s.12A/12AB trust filed Form 10B. From AY 2023-24 both routes use the same pair of forms, selected instead by a threshold test: Form 10B where total income computed without ss.11 and 12 or s.10(23C)(iv), (v), (vi) or (via) exceeds Rs 5 crore, or where foreign contribution has been received, or where income has been applied outside India, and Form 10BB in every other case. A reader who takes the AY 2022-23 rule into AY 2023-24 will pick the wrong form again. If it applies to you, the first step is this: File the correct form as soon as the error is spotted, and file a condonation application under s.119(2)(b) the same day — the Tribunal treated the prompt correction here as evidence of an intention to comply.
The assessee is a society registered under the Karnataka Societies Registration Act 1960 on 25 October 1977, running an English medium school at Gadag. It was registered under s.10(23C)(vi) by the CIT (Exemptions), Bengaluru by order dated 28 September 2017 for AY 2016-17 onwards, and was granted approval under clause (i) of the first proviso to s.10(23C) on 4 April 2022 in Form No. 10AC, URN AAATC6144KC20170, effective from AY 2022-23 to AY 2026-27. For AY 2022-23 it filed its return on 3 November 2022, within the extended due date of 7 November 2022, declaring nil income and claiming a refund of Rs 81,880. By oversight it claimed exemption under s.11 instead of s.10(23C)(vi), and it filed its audit report on 24 September 2022 in Form No. 10B instead of Form No. 10BB. The CPC, by intimation under s.143(1) dated 31 March 2023, denied the exemption, computed total income at Rs 1,56,07,598 and raised a demand of Rs 62,49,410 after TDS credit. On 15 April 2023 the society filed a rectification application, the audit report in Form No. 10BB, and an application under s.119(2)(b) to condone the delay; the condonation application was still pending. The CPC passed an order under s.154 on 13 May 2023 computing the same income and a net amount payable of Rs 61,96,470. The Addl./JCIT(A)-6, Kolkata dismissed the appeal on 10 September 2025, presuming that the CIT(E) must have refused condonation because more than two years had passed, and holding that filing Form No. 10BB by the specified date was a statutory requirement. The matter was decided on 2026-04-21 by the ITAT (Prashant Maharishi, Vice President and Keshav Dubey, Judicial Member). On those facts the ITAT held as follows. The appeal was partly allowed. Denial of exemption under s.10(23C)(vi) solely because Form 10B was inadvertently filed instead of Form 10BB for AY 2022-23 is not justified where the accounts were audited by a chartered accountant, an audit report was uploaded within the due date and the correct form was subsequently filed; the error is procedural. The appellate order was set aside and the Assessing Officer was directed to verify substantive compliance with the conditions of s.10(23C)(vi), and if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil (paras 9.2 and 9.7).
The Tribunal recorded what was not in dispute: the return was filed within the due date, an audit report was filed on or before the due date, the approval in Form No. 10AC was subsisting, and the only lapse was the form used. It held that the Tribunal as final fact-finding authority has wide powers under s.254(1) to pass such orders as it thinks fit, which allow it to look beyond technicalities and render substantive justice, and that a genuine claim should not be denied for a procedural or technical lapse where the substantive conditions are fulfilled. Getting the accounts audited and furnishing a report, albeit in the wrong form, showed an intention to comply. It took support from Mangalore Chemicals & Fertilisers Ltd v. Deputy Commissioner of Commercial Taxes for the proposition that not all statutory conditions are of equal importance and some belong merely to the area of procedure, and from Sambhaji v. Gangabai for the proposition that procedure is the handmaid and not the mistress of justice. It applied CIT v. G.M. Knitting Industries (P.) Ltd. and the line of High Court authority there approved, under which filing an audit report along with the return is directory and compliance at any time before the assessment is framed suffices, and CIT v. Xavier Kelavani Mandal (P.) Ltd., following CIT v. Gujarat Oil & Allied Industries Ltd. and CIT v. Shahzadanand Charity Trust, under which the audit report may be produced at a later stage before the officer or the appellate authority on sufficient cause. It also observed that as the aggregate annual receipts of Rs 1,56,07,598 were well below Rs 5 crore, the income was in any event exempt under s.10(23C)(iiiad). In the words reproduced by the source cited on this page: "the assessee did get its accounts audited by a qualified accountant and furnished an audit report, albeit in the wrong form." The decision followed or applied Mangalore Chemicals & Fertilisers Ltd v. Deputy Commissioner of Commercial Taxes, judgment dated 2 August 1991, 1992 AIR 152, (1991) 55 ELT 437 (SC) — applied; Sambhaji v. Gangabai, 20 November 2008, 2008 (17) SCC 117 (SC) — applied; CIT v. G.M. Knitting Industries (P.) Ltd. (2015) 376 ITR 456 (SC) — applied; CIT-IV v. Xavier Kelavani Mandal (P.) Ltd. [2014] 221 Taxman 43 (Guj) — followed; CIT v. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj) — relied upon; CIT v. Shahzadanand Charity Trust [1997] 228 ITR 292 (P&H) — relied upon.
It was decided by the ITAT on 2026-04-21 and is reported as ITA No. 2570/Bang/2025 (ITAT Bangalore, 'A' Bench); Assessment Year 2022-23. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(23C), section 10(23C)(vi), section 10(23C)(iiiad), section 11, section 143(1), section 154, section 119(2)(b), section 254(1), section 234A, section 234B, section 234C, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was partly allowed. Denial of exemption under s.10(23C)(vi) solely because Form 10B was inadvertently filed instead of Form 10BB for AY 2022-23 is not justified where the accounts were audited by a chartered accountant, an audit report was uploaded within the due date and the correct form was subsequently filed; the error is procedural. The appellate order was set aside and the Assessing Officer was directed to verify substantive compliance with the conditions of s.10(23C)(vi), and if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil (paras 9.2 and 9.7). It arises in Charitable Trusts & Exemption, Capital Gains Exemptions and Assessment & Scrutiny matters, on section 10(23C), section 10(23C)(vi), section 10(23C)(iiiad), section 11, section 143(1), section 154, section 119(2)(b), section 254(1), section 234A, section 234B, section 234C of the Income Tax Act 1961, and was decided by Prashant Maharishi, Vice President and Keshav Dubey, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not let the appeal be dismissed because the s.119(2)(b) application is still pending. The Tribunal decided the appeal on merits, and expressly disapproved the first appellate authority's assumption that a long-pending application must have been rejected. Frame the ground as substance versus procedure: the accounts were audited by a chartered accountant, a report was obtained and uploaded within time, the approval was subsisting and the return was filed on time — only the form was wrong. Check whether the CBDT has already covered your year by circular. For AY 2023-24 the Board allowed institutions that had filed the wrong one of Form 10B and Form 10BB on or before 31 October 2023 to file the correct form by 31 March 2024; that route does not cover AY 2022-23, which is why this appeal had to be fought. For a small institution, run the s.10(23C)(iiiad) fallback: if aggregate annual receipts are below the prescribed limit, the income may be exempt without reference to the approval at all. Confirm which form your year actually requires before refiling: up to AY 2022-23 by the exemption route taken, from AY 2023-24 by the income, foreign-contribution and overseas-application test.
Validity check could not be completed. Validity check could not be completed. No appeal against this order and no contrary decision were searched for or located. The order is very recent (21 April 2026). It sits with a wider line of Tribunal decisions treating a late or defective audit report as curable — a comparable order of the Indore bench in Roshni Homi Daji Bahu Uddeshiya Shiksha Avam Sarvajanik Nyas v. CPC dated 25 September 2025 was located but read only in summary form and is not relied on here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order's own framing of the rules is loose in one place and should not be repeated. In para 9.1 the Tribunal says that for AY 2022-23 'the statutory requirement, as per Rule 16CC, was indeed to file Form 10BB'. That is right for this assessee because it was approved under s.10(23C)(vi), and Rule 16CC prescribed Form 10BB for that route; it is not a general proposition, because a s.12A/12AB trust for the same year filed Form 10B under Rule 17B. The threshold-based split described in why_it_matters comes from the Income Tax Department's own published guidance on who must file each form, which states the test but does not state the assessment year from which it applies; that the split is a new-regime feature is corroborated by CBDT Circular No. 2/2024, which addresses wrong-form filings 'for the A.Y. 2023-24'. The rule notification number was not verified and is deliberately not cited. Separately, the order records the ground of appeal as citing 'CIT v. Monarch Educational Society (2020) 113 taxmann.com 311 (Mad)'; that is the assessee's citation as printed in the grounds and was not checked. The Tribunal disposed of the appeal as 'partly allowed' although the direction covers the whole relief sought on the audit-form issue. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was partly allowed. Denial of exemption under s.10(23C)(vi) solely because Form 10B was inadvertently filed instead of Form 10BB for AY 2022-23 is not justified where the accounts were audited by a chartered accountant, an audit report was uploaded within the due date and the correct form was subsequently filed; the error is procedural. The appellate order was set aside and the Assessing Officer was directed to verify substantive compliance with the conditions of s.10(23C)(vi), and if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil (paras 9.2 and 9.7).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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