Our audit report was not e-filed with the return and exemption was denied. Can the delay be condoned?
Yes. The requirement to furnish the audit report with the return is procedural and directory, so exemption under ss.11 and 12 cannot be refused merely for late filing. The Commissioner's refusal to condone was set aside because the s.119(2)(b) discretion must be exercised equitably and judiciously, not on an exclusively pro-revenue view.
Decided by the High Court (Gujarat High Court (J.B. Pardiwala and Ilesh J. Vora, JJ.; judgment delivered by Ilesh J. Vora, J.); R/Special Civil Application Nos. 8977, 9370 and 9760 of 2020) on 2020-12-22, reported as [2021] 126 taxmann.com 77 (Gujarat) / [2021] 279 Taxman 229 (Gujarat). It bears on section 11, section 11(2), section 11(5), section 12, section 12A, section 119(2)(b), section 143(1), section 142(1), section 143(2) of the Income Tax Act 1961, in Charitable Trusts & Exemption and Refunds, Interest & Condonation matters.
This is the answer to a rejection order under s.119(2)(b) and to the s.143(1) adjustment that follows when Form 10B does not reach the portal with the return. The facts are the ordinary ones: the report was obtained on time, the online confirmation step was missed, and a thirty-year-old trust lost its exemption for it. The Court's markers are what to write to: delay not abnormally large, bona fide mistake rather than deliberate negligence, substantive conditions otherwise satisfied.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A public charitable trust registered with the Charity Commissioner and under s.12A for more than thirty years claimed exemption for assessment year 2014-15. Its auditor filed the audit report in Form No. 10B on 1 September 2014 and the trust filed its return on 27 September 2014, followed by a revised return on 22 November 2014 declaring nil income, claiming a refund of Rs 1,92,845 and claiming exemption of Rs 73,43,699 under s.11(1) and Rs 17,50,000 under s.11(2). The trustees did not complete the online confirmation, so the audit report was not e-filed with the return. What actually cost the trust its exemption was a different form: Form No. 10, the notice of accumulation required for the s.11(2) claim, was never filed. The return was processed under s.143(1) on 14 January 2016, exemption was refused and a demand of Rs 2,17,210 raised, the intimation itself pointing to the non-filing of Form No. 10 and suggesting it be filed with a condonation request. The trust e-filed Form No. 10 on 11 February 2019, about thirty-seven months after the processing, and applied under s.119(2)(b) to condone the delay. The Commissioner rejected the application by order dated 26 August 2019, holding that no genuine hardship had been shown, that a thirty-year-old trust must be taken to know the law, that the plea about the tax consultant was unsubstantiated, that compliance with ss.11(2) and 11(5) had not been proved, and that the conditions in CBDT Circular No. 273 dated 3 June 1980 were not met.
The writ applications were allowed. The Commissioner's order of 26 August 2019 was quashed and the condonation application allowed (para 34), the Court holding that an assessee which is a public charitable trust of thirty years' standing and which substantially satisfies the conditions for exemption should not be denied it merely on the bar of limitation, especially where the legislature has conferred wide discretionary powers to condone the delay (para 32). The two connected petitions were allowed on the same terms (para 35). The Court declared the trusts entitled to seek exemption under s.12 and directed the authorities to give effect to it - but expressly made that subject to ss.143(2) and 142(1), on the assessee's counsel's own fair submission, so the Department remains free to examine the claim by notice even though the ordinary time limits had run (para 36). It is therefore relief on the condonation question, not a final ruling that the exemption is due.
The Court set the Commissioner's order against a line of authority on s.119(2)(b). 'Genuine hardship' means genuine difficulty and is to be read liberally, since an applicant does not benefit by claiming late and refusing condonation throws out a meritorious matter at the threshold - Artist Tree (P.) Ltd. v. CBDT, drawing on B.M. Malani v. CIT; and this Court's own decision in Jay Vijay Express Carriers, which cautioned that the power is not to be exercised routinely but held it should have been exercised there (para 28). Section 119 is couched in very wide terms (para 29). It adopted the Karnataka High Court in Dr. (Smt.) Sujatha Ramesh v. CBDT: the approach in such cases must be equitious, balancing and judicious rather than always pro-revenue, and where the claim on merits is a fit one it should not be defeated on limitation if the delay is not abnormally large (para 30); and the Delhi High Court in G.V. Infosutions, which asked what more an assessee could produce to substantiate an adviser's inadvertence, and observed that where the legislature intends relief against hardship the authorities must construe the provision reasonably (para 31). On those authorities it held the Commissioner should have taken a fair and dispassionate view (paras 27, 32). It added, by reference to its own decision in CIT v. Gujarat Oil & Allied Industries, that furnishing the audit report with the return is procedural and directory, so substantial compliance suffices and the report may be produced later before the Income-tax Officer or the appellate authority on sufficient cause (para 33).
Technically, strictly and liberally speaking, the respondent might be justified in denying the exemption under section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.
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Handle my notice → Ask a CA on WhatsAppYes. The requirement to furnish the audit report with the return is procedural and directory, so exemption under ss.11 and 12 cannot be refused merely for late filing. The Commissioner's refusal to condone was set aside because the s.119(2)(b) discretion must be exercised equitably and judiciously, not on an exclusively pro-revenue view. This was decided by the High Court (Gujarat High Court (J.B. Pardiwala and Ilesh J. Vora, JJ.; judgment delivered by Ilesh J. Vora, J.); R/Special Civil Application Nos. 8977, 9370 and 9760 of 2020) and bears on section 11, section 11(2), section 11(5), section 12, section 12A, section 119(2)(b), section 143(1), section 142(1), section 143(2) of the Income Tax Act 1961. It is reported as [2021] 126 taxmann.com 77 (Gujarat) / [2021] 279 Taxman 229 (Gujarat). This is the answer to a rejection order under s.119(2)(b) and to the s.143(1) adjustment that follows when Form 10B does not reach the portal with the return. The facts are the ordinary ones: the report was obtained on time, the online confirmation step was missed, and a thirty-year-old trust lost its exemption for it. The Court's markers are what to write to: delay not abnormally large, bona fide mistake rather than deliberate negligence, substantive conditions otherwise satisfied. If it applies to you, the first step is this: Put the date the audit report was actually obtained on record, since a report obtained in time but not uploaded is the strongest version of this case.
A public charitable trust registered with the Charity Commissioner and under s.12A for more than thirty years claimed exemption for assessment year 2014-15. Its auditor filed the audit report in Form No. 10B on 1 September 2014 and the trust filed its return on 27 September 2014, followed by a revised return on 22 November 2014 declaring nil income, claiming a refund of Rs 1,92,845 and claiming exemption of Rs 73,43,699 under s.11(1) and Rs 17,50,000 under s.11(2). The trustees did not complete the online confirmation, so the audit report was not e-filed with the return. What actually cost the trust its exemption was a different form: Form No. 10, the notice of accumulation required for the s.11(2) claim, was never filed. The return was processed under s.143(1) on 14 January 2016, exemption was refused and a demand of Rs 2,17,210 raised, the intimation itself pointing to the non-filing of Form No. 10 and suggesting it be filed with a condonation request. The trust e-filed Form No. 10 on 11 February 2019, about thirty-seven months after the processing, and applied under s.119(2)(b) to condone the delay. The Commissioner rejected the application by order dated 26 August 2019, holding that no genuine hardship had been shown, that a thirty-year-old trust must be taken to know the law, that the plea about the tax consultant was unsubstantiated, that compliance with ss.11(2) and 11(5) had not been proved, and that the conditions in CBDT Circular No. 273 dated 3 June 1980 were not met. The matter was decided on 2020-12-22 by the High Court (Gujarat High Court (J.B. Pardiwala and Ilesh J. Vora, JJ.; judgment delivered by Ilesh J. Vora, J.); R/Special Civil Application Nos. 8977, 9370 and 9760 of 2020). On those facts the High Court held as follows. The writ applications were allowed. The Commissioner's order of 26 August 2019 was quashed and the condonation application allowed (para 34), the Court holding that an assessee which is a public charitable trust of thirty years' standing and which substantially satisfies the conditions for exemption should not be denied it merely on the bar of limitation, especially where the legislature has conferred wide discretionary powers to condone the delay (para 32). The two connected petitions were allowed on the same terms (para 35). The Court declared the trusts entitled to seek exemption under s.12 and directed the authorities to give effect to it - but expressly made that subject to ss.143(2) and 142(1), on the assessee's counsel's own fair submission, so the Department remains free to examine the claim by notice even though the ordinary time limits had run (para 36). It is therefore relief on the condonation question, not a final ruling that the exemption is due.
The Court set the Commissioner's order against a line of authority on s.119(2)(b). 'Genuine hardship' means genuine difficulty and is to be read liberally, since an applicant does not benefit by claiming late and refusing condonation throws out a meritorious matter at the threshold - Artist Tree (P.) Ltd. v. CBDT, drawing on B.M. Malani v. CIT; and this Court's own decision in Jay Vijay Express Carriers, which cautioned that the power is not to be exercised routinely but held it should have been exercised there (para 28). Section 119 is couched in very wide terms (para 29). It adopted the Karnataka High Court in Dr. (Smt.) Sujatha Ramesh v. CBDT: the approach in such cases must be equitious, balancing and judicious rather than always pro-revenue, and where the claim on merits is a fit one it should not be defeated on limitation if the delay is not abnormally large (para 30); and the Delhi High Court in G.V. Infosutions, which asked what more an assessee could produce to substantiate an adviser's inadvertence, and observed that where the legislature intends relief against hardship the authorities must construe the provision reasonably (para 31). On those authorities it held the Commissioner should have taken a fair and dispassionate view (paras 27, 32). It added, by reference to its own decision in CIT v. Gujarat Oil & Allied Industries, that furnishing the audit report with the return is procedural and directory, so substantial compliance suffices and the report may be produced later before the Income-tax Officer or the appellate authority on sufficient cause (para 33). In the words reproduced by the source cited on this page: "Technically, strictly and liberally speaking, the respondent might be justified in denying the exemption under section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned." The decision followed or applied Artist Tree (P.) Ltd. v. CBDT [2014] 52 taxmann.com 152 / [2014] 369 ITR 691 (Bombay) - followed (para 28); Jay Vijay Express Carriers v. CIT [2013] 34 taxmann.com 61 / 215 Taxman 562 (Gujarat) - followed (para 28); B.M. Malani v. CIT [2008] 174 Taxman 363 / 306 ITR 196 (SC) - followed (para 28); State of Jharkhand v. Ambay Cement 2005 taxmann.com 1352 (SC) - followed (para 28); Dr. (Smt.) Sujatha Ramesh v. CBDT [2017] 87 taxmann.com 228 / [2018] 401 ITR 242 (Karnataka) - followed (para 30); G.V. Infosutions (P.) Ltd. v. Dy. CIT [2019] 102 taxmann.com 397 / 261 Taxman 482 (Delhi) - followed (para 31); CIT v. Gujarat Oil & Allied Industries [1993] 201 ITR 325 (Gujarat) - followed (para 33); Applied later in Kheda Jilla R C Mission Employees Credit and Consumer Co-Op. Society Ltd. v. Chief Commissioner of Income-tax [2025] 174 taxmann.com 545 (Gujarat), R/Special Civil Application No. 10781 of 2024, 1 April 2025 (Bhargav D. Karia and D.N. Ray, JJ.).
It was decided by the High Court on 2020-12-22 and is reported as [2021] 126 taxmann.com 77 (Gujarat) / [2021] 279 Taxman 229 (Gujarat). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 11, section 11(2), section 11(5), section 12, section 12A, section 119(2)(b), section 143(1), section 142(1), section 143(2), 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 writ applications were allowed. The Commissioner's order of 26 August 2019 was quashed and the condonation application allowed (para 34), the Court holding that an assessee which is a public charitable trust of thirty years' standing and which substantially satisfies the conditions for exemption should not be denied it merely on the bar of limitation, especially where the legislature has conferred wide discretionary powers to condone the delay (para 32). The two connected petitions were allowed on the same terms (para 35). The Court declared the trusts entitled to seek exemption under s.12 and directed the authorities to give effect to it - but expressly made that subject to ss.143(2) and 142(1), on the assessee's counsel's own fair submission, so the Department remains free to examine the claim by notice even though the ordinary time limits had run (para 36). It is therefore relief on the condonation question, not a final ruling that the exemption is due. It arises in Charitable Trusts & Exemption and Refunds, Interest & Condonation matters, on section 11, section 11(2), section 11(5), section 12, section 12A, section 119(2)(b), section 143(1), section 142(1), section 143(2) of the Income Tax Act 1961, and was decided by Gujarat High Court (J.B. Pardiwala and Ilesh J. Vora, JJ.; judgment delivered by Ilesh J. Vora, J.); R/Special Civil Application Nos. 8977, 9370 and 9760 of 2020. 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. Explain the cause of the default concretely as a bona fide lapse, because the discretion turns on genuine hardship and absence of deliberate negligence. Show that the substantive conditions for exemption are met, so the only defect is procedural. Do not let the application be rejected on limitation alone; the Court treated a bar of limitation applied mechanically as a failure to exercise the discretion.
Still good law. Applied by the Gujarat High Court in Kheda Jilla R C Mission Employees Credit and Consumer Co-Op. Society Ltd. v. Chief Commissioner of Income-tax [2025] 174 taxmann.com 545 (Gujarat), R/Special Civil Application No. 10781 of 2024, decided 1 April 2025, which set out the passage from this judgment on the equitious, balancing and judicious approach and, applying it, quashed the refusal to condone and allowed the condonation application - while itself directing, as here, that the exemption claim could be examined by notice under s.143(1)/143(2). Nothing on the report of this judgment records an appeal or contrary authority. Condonation applications are now made under CBDT Circular No. 16/2024 dated 18 November 2024, which governs delay in filing Forms 10B and 10BB and prescribes the competent authority and an outer time limit; check its current terms before applying. 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 form in default was Form No. 10 - the notice of accumulation for the s.11(2) claim - not the Form 10B audit report, which the auditor had filed on time but which was never e-filed with the return because the trustees did not confirm it online. The delay was about thirty-seven months from the processing of the return. Read the relief as narrowly as the Court gave it: the condonation refusal was quashed and the condonation allowed, and the declaration of entitlement to exemption under s.12 was expressly made subject to ss.143(2) and 142(1), on the assessee's own counsel's submission, so the Department may still examine the claim by notice notwithstanding the expiry of the ordinary time limits. File the condonation application under the current machinery: CBDT Circular No. 16/2024 dated 18 November 2024 governs condonation of delay in filing the trust audit forms and prescribes the competent authority and an outer time limit for the application. The judgment contains an internal inconsistency about the date of the rejection order: para 10 gives 19 August 2019 while paras 3, 11, 26 and 34 - including the operative direction - give 26 August 2019, which is the order quashed. The three connected petitions are disposed of together and the judgment does not set out the separate facts of the other two. The specific terms of CBDT Circular No. 16/2024, beyond the fact that it governs condonation of delay in the trust audit forms, were not read. 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 writ applications were allowed. The Commissioner's order of 26 August 2019 was quashed and the condonation application allowed (para 34), the Court holding that an assessee which is a public charitable trust of thirty years' standing and which substantially satisfies the conditions for exemption should not be denied it merely on the bar of limitation, especially where the legislature has conferred wide discretionary powers to condone the delay (para 32). The two connected petitions were allowed on the same terms (para 35). The Court declared the trusts entitled to seek exemption under s.12 and directed the authorities to give effect to it - but expressly made that subject to ss.143(2) and 142(1), on the assessee's counsel's own fair submission, so the Department remains free to examine the claim by notice even though the ordinary time limits had run (para 36). It is therefore relief on the condonation question, not a final ruling that the exemption is due.
TaxSphere, “Trust for Reaching the Unreached v CIT”, https://taxnotice.vittsphere.com/caselaw/case/trust-for-reaching-the-unreached-v-cit/ (validity last checked 2026-08-19)
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