ITAT Kolkata: Denial of Section 11 Exemption at CPC Stage for Late Form 10B is Not Permissible

Background and Context

The Kolkata Bench of the Income Tax Appellate Tribunal, in the case of Srimanta Sankaradeva Kalakshetra Vs Ward-2(3), examined whether exemption under Section 11 could be refused while processing a return under Section 143(1) on the sole ground that the audit report in Form No. 10B had been uploaded after the prescribed due date.

The dispute related to Assessment Year 2020-21. The assessee, a charitable institution, had filed its return of income on 19.05.2021 claiming exemption under Sections 11 and 12 of the Income Tax Act 1961. The Centralized Processing Centre (CPC) initially processed the return and later passed a rectification order under Section 154, disallowing the exemption on account of delayed filing of Form 10B.

Subsequently, the first appellate authority (Addl./Joint CIT(A)) sustained the CPC’s action on the ground that it had no power under Section 119(2)(b) to condone delay in filing Form 10B and that only specified higher authorities (Pr. CCIT/CCIT/CIT(Exemptions)) could consider such condonation.

The matter finally reached the ITAT Kolkata, which partially allowed the appeal for statistical purposes and remanded the case back to the first appellate authority with specific directions.

Chronology of Key Events

Return filing and CPC processing

• The assessee filed its return of income for AY 2020-21 on 19.05.2021.
• The statutory due date for furnishing the audit report in Form No. 10B was 15.01.2021.
• Form No. 10B was actually uploaded on 15.05.2021, i.e., with a delay of about four months.
• The return was processed at CPC and subsequently a rectification order under Section 154 was issued on **22.11.2022`.
• In the rectification order, CPC:
  • Denied exemption under Section 11 on the ground that Form 10B was filed belatedly and not furnished along with or prior to the return.
  • Determined total income at ₹11,65,54,296.
  • Raised a tax demand of ₹6,34,22,210 (as per the order).

Appeal before first appellate authority

The assessee filed an appeal before the Addl./Joint CIT(A) against the CPC order. There was a delay of 608 days in filing the appeal, which the appellate authority condoned and proceeded to decide the appeal on merits.

On merits, the Addl./Joint CIT(A):

• Accepted that Form 10B was indeed filed beyond the due date.
• Held that the first appellate authority had no jurisdiction to condone delay in filing Form 10B in view of Section 119(2)(b).
• Relied on judicial precedent, including Association of Indian Panelboard Manufacturer vs. Deputy Commissioner of Income tax [2022] 143 com 418 (Ahmedabad – ITAT), to hold that only the Pr. CCIT/CCIT/CIT(Exemptions) could deal with condonation of delay in such forms.
• Consequently, upheld CPC’s denial of exemption under Section 11 and dismissed the appeal.

Grounds Raised Before ITAT

The assessee challenged the appellate order before the ITAT and raised several substantive grounds, including:

1. Sustaining denial of exemption under Sections 11 and 12 despite:

   • The return having been filed within the extended time permissible under Section 139(4), and
   • The audit report in Form 10B being on record during assessment/appellate proceedings.

2. Reasonable cause for delay in filing return and Form 10B, attributed to:

   • Severe disruptions caused by the COVID-19 pandemic;
   • Lockdowns and containment zones in Assam;
   • The auditor being in home isolation;
     all of which were stated to be beyond the control of the assessee.

3. Incorrect view on condonation powers:

   • The Addl./Joint CIT(A) erred in holding that the appellate authority had no jurisdiction to condone procedural delay under Section 119(2)(b),
   • While ignoring a justice-oriented approach adopted by various judicial forums, including the ITAT decision in Bishnupur Public Education Institute (2025) and several High Court decisions treating the filing of Form 10B as a directory/procedural requirement.