Delay in filing Form 10 condoned due to genuine hardship and substantive compliance.

ORDER

1. The above Writ Petition challenges the impugned order dated 24th April 2025 passed by Respondent No.1 for A.Y. 2016-17 under Section 119(2)(b) of the Income-tax Act, 1961 (for short “the Act”) rejecting the Petitioner’s application dated 16th October 2023 for condonation of delay in filing Form No. 10. Respondent No. 1 has, by the impugned order, refused to condone the delay of 2154 days in filing Form No.10. Consequently, the accumulation claimed by the Petitioner under Section 11(2) of the Act has been denied to the Petitioner.

2. The Petitioner is a registered Charitable Trust set up with the object of providing education, relief from poverty and other charitable objects and is regularly assessed under the provisions of the Act. The Petitioner filed its Return of Income for A.Y. 2016-17 on 15th October 2016, declaring nil income after claiming accumulation of Rs. 1,13,51,040/- under Section 11(2) of the Act.

3. The accounts of the Petitioner were duly audited, and the fact of accumulation under Section 11(2) of the Act was duly mentioned in the accounts as well as in the audit report in Form No. 10B, which was furnished on 15th October 2016, i.e. within the due date.

4. The notice for accumulation under Section 11(2) was required to be given in Form No.10. With effect from A.Y. 2016-17, i.e., the year under consideration, the process of filing Form No.10 was required to be done online. Due to technical difficulties faced by it, the Petitioner filed Form No. 9A on 15th October 2016, which is the form for exercising an option in terms of Explanation 1 to Section 11(1), instead of filing Form No. 10. There was no delay in filing Form No. 9A, as it was filed on the same day as the Return of Income. In Form No. 9A, it was stated that the amount of Rs. 1,13,51,040/-was received in December and could not be spent in the last quarter, and, therefore, the same was being accumulated.

5. The primary difference between the exercise of an option under Explanation 1 to Section 11(1) by filing Form 9A and accumulation under Section 11(2) by filing Form No.10 is that, in the former case, application of income of a particular year is allowed to be postponed by one year, whereas in the latter case, the income can be accumulated for a period not exceeding five years and the accumulated amount has to be spent within that time and the purpose of accumulation is required to be mentioned. In the Petitioner’s case, the income was applied by the Petitioner for charitable purposes within the next year itself. The details of income of the Petitioner, its accumulation and application for charitable purposes for various assessment years show that, as against an accumulation of Rs. 1,13,51,040/- in A.Y. 2016-17, the Petitioner’s application was Rs. 2,08,72,038/- for F.Y. 2016-17, i.e, the entire accumulation was applied for charitable purposes in the very next year by the Petitioner. Moreover, the entire accumulation over the years has been utilised and applied for charitable purposes.

6. The Petitioner’s return was selected for scrutiny and an assessment order dated 15th December 2018 (received by the Petitioner on 24th December 2018) was passed by Respondent No. 2 denying the benefit of accumulation under Section 11(2) of the Act on the ground that the requisite Form No. 10 was not filed by the Petitioner within the specified due date as required under the Act. Accordingly, the Petitioner’s income was assessed at Rs. 1,13,51,040/- and a demand of Rs. 48,89,917/- was raised on the Petitioner.

7. The Petitioner filed an Appeal before the Commissioner of Income-tax (Appeal) [for short “the CIT(A)”] on 21st January 2019. In the statement of facts as well as in the written submission filed before the CIT(A), it was pointed out that the intention of the Petitioner was to accumulate the amount of Rs. 1,13,51,040/- for a period of one year and spend the amount in the next financial year, which it had done. It was further submitted that the filing of the incorrect form was a technical default due to an inadvertent mistake. It was also submitted that the genuineness of the Petitioner-Trust was not in doubt.

8. During the pendency of the Appeal before the CIT(A), Respondent No. 2 attached the bank account of the Petitioner due to nonpayment of the demand of Rs. 48,89,917/-. The Petitioner made a payment of Rs. 10,00,000/- under protest, being more than 20% of the impugned demand, on 22nd February 2019.

9. Subsequently, the CIT(A) dismissed the Petitioner’s appeal by his order dated 2nd April 2022, holding that filing of Form No.10 was mandatory and that non-furnishing would result in denial of the benefit of accumulation under Section 11(2) of the Act. The Petitioner filed an appeal before the Income-tax Appellate Tribunal [for short “the Tribunal/ITAT”].

10. Before the Tribunal, it was pointed out that Form No. 10 was required to be filed electronically for the first time in A.Y. 2016-17 and that there were technical glitches and that the Petitioner had filed Form No. 9A by mistake. A reference was made to CBDT Circular No. 03/2020 dated 3rd January 2020, by which Commissioners of Income-tax have been authorised to condone delays in filing Form No. 9A and 10. The Petitioner also expressed its readiness to file Form No.10, if so directed by the Tribunal.

11. The Tribunal by its order dated 5th September 2022 found merit in the Petitioner’s claim that it was a charitable trust and held that the benefit under the provisions of the Act should not be denied to it merely because of delay in filing Form No.10. Accordingly, the Tribunal set aside the order passed by the CIT(A) and directed the CIT(A) to adjudicate on merits considering Form No.10. The Petitioner was also directed to file a condonation petition explaining delay in filing Form No.10 before Respondent No.1.

12. As per the direction of the Tribunal, the Petitioner e-filed Form No.10 online on 8th September 2022, i.e within 3 days of the Tribunal passing its order. The amount of Rs. 1,13,51,040/- was stated to have been accumulated for “Education, Relief of Poverty and Other Charitable Objects” in Form No.10. The application for condonation of delay was also separately filed with Respondent No. 1 subsequently on 16th October 2023.

13. The Petitioner thereafter filed a letter dated 13th December 2022 with Respondent No.2 requesting him to give effect to the order of the Tribunal and grant consequential refund of taxes paid by the Petitioner and also requested Respondent No.2 by a separate letter to release its bank account with the Central Bank of India, which was attached vide notice under Section 226(3) dated 26th February 2019. Accordingly, Respondent No.2 intimated the bankers that the bank account of the Petitioner be released.

14. As mentioned earlier, the Petitioner filed an application dated 16th October 2023 before Respondent No.1 seeking condonation of delay in filing Form No.10. Respondent No.1 issued a notice dated 21st March 2024 seeking various details in connection with the condonation application filed by the Petitioner, including reasonable cause for delay in filing Form No.10. The Petitioner furnished all the details called for by Respondent No.1, by letter dated 26th March 2024. In response to a specific query received from Respondent No. 1 as regards frequency of accumulation and utilisation, the relevant details were provided which clearly showed that (1) the utilisation in the immediately following assessment year was higher than the accumulation of Rs. 1,13,51,040/- during the year; and (2) all incomes and accumulations were applied to charitable purposes within a period of 5 years as provided in Section 11(2).

15. Respondent No.1 thereafter passed the impugned order dated 24th April 2025, rejecting the condonation application filed by the Petitioner on the following grounds:

16. In this factual backdrop, the learned Counsel for the Petitioner submitted that Respondent No.1 has not doubted or denied any of the facts stated by the Petitioner. The delay was caused in the peculiar circumstances referred to above. This failure was not due to any wilful neglect but rather on account of the rejection of the Petitioner’s claim that the filing of Form No. 9A be regarded as a technical default. The delay was purely technical, and there was no loss of revenue, nor any attempt to evade tax. The computation of the period of delay as being 2154 days was unjust and erroneous because the period of 2154 days was worked out by taking the entire period from the date of the filing of Return of Income till the date of filing Form No.10. The delay would be only 28 days, namely, from the date on which the assessment order was received by the Petitioner (24th December 2018) to the date on which Appeal was filed with CIT(A) (21st January 2019) if the period from the date of filing the appeal before CIT(A) was excluded. Since the Petitioner was pursuing an appellate remedy claiming that the filing of Form No.9A instead of Form No.10 was a mere technicality, the same would constitute a reasonable cause. In the Income-tax Return, audited accounts and the audit report, the Petitioner specifically exercised the option under Section 11(2) of the Act. Therefore, filing of Form No. 9A instead of Form No.10 was indeed a bonafide error, which could not be regarded as baseless or an afterthought, especially because the application of income by the Petitioner in the immediately following assessment year was higher than the accumulation of Rs. 1,13,51,040/- during the year and the Petitioner had applied the entire accumulation within a period of 5 years as permitted in Section 11(2). Form No. 10 was filed within 3 days of the Tribunal’s order. Respondent No.1 had adopted a hyper-technical and pedantic approach, which caused great prejudice to the Petitioner. Respondent No.1 ought to have adopted a lenient and pragmatic view of the matter and condoned the delay. Even the AO had lifted the attachment of the bank account pursuant to the Tribunal’s order and, therefore, even he understood the Tribunal’s order as granting relief to the Petitioner. Since the accumulated amount was applied by the Petitioner for charitable purposes in the very next year, there was no significance in mentioning the purpose for which the accumulation was being done, as the details of actual utilisation were available. In any event, the purpose of accumulation was stated to be “Education, Relief of Poverty and Other Charitable Objects”, which was in line with the specific objects of the Trust. Therefore, all the reasons given in the impugned order were required to be discarded.

17. The learned Counsel for the Petitioners has relied upon the judgments of this Court in the following cases in support of the proposition that in matters of condonation of delay, a highly pedantic approach should be eschewed and a justice-oriented approach should be adopted:

18. The learned Counsel for Respondents, however, defends the action of the Revenue and states that the Petitioner has failed to make out a case for condonation of delay as discussed by Respondent No.1 in his order. He further submits that the assessment order dated 15th December 2018 clearly specified that the Petitioner had failed to file Form No.10 for claiming accumulation under Section 11(2) of the Act, and despite that being so, the Petitioner filed the Form No.10 after nearly 4 years, i.e. on 8th September 2022. He further submits that the application for condonation of delay was filed on 16th October 2023, after a span of one year from the filing of the Form No.10. He further submits that the question of technical glitches will arise only if the Petitioner had filed the correct Form No.10 instead of filing Form No.9A.

19. He further submits that Respondent No.1 has passed the impugned order in accordance with the Circular No.3/2020 dated 3rd January 2020 issued by the CBDT under Section 119(2)(b) of the Act, as per which Respondent No.1 has to be satisfied that the Assessee was prevented by reasonable cause from filing Form No. 10 within the stipulated time. In this connection, it was submitted that the Petitioner had failed to provide reasonable cause for its failure to file Form No.10 within the specified time.

20. He further submits that the judgments relied upon by the Petitioner are distinguishable inasmuch as the delay in the present matter is grossly inordinate. He lastly prayed for dismissal of the present Petition.

21. We have heard the learned Counsel for the parties. We have also perused the material placed on record.

22. Admittedly, the Petitioner had filed its Return of Income for the concerned A.Y. 2016-17 within the specified date. In Part B-TI, clause 9(vi) of the return of income, the Petitioner indicated that it accumulated a sum of Rs.1,13,51,040/-. Also, the Petitioner had filed its audit report in Form No.10B within time, wherein it was specified that the income of Rs. Rs.1,13,51,040/- was sought to be accumulated under Section 11(2) of the Act. Hence, we are of the view that there is sufficient material on record to demonstrate that the Petitioner had clearly expressed its intention to accumulate its income of Rs.1,13,51,040/- under Section 11(2) of the Act.

23. Admittedly, A.Y. 2016-17 was the first year wherein the Form No.10 was to be filed electronically. Hence, the possibility of the Petitioner having faced technical glitches while filing the requisite forms cannot be ruled out. This is precisely why the CBDT had issued Circular No. 3/2020 dated 3rd January 2020 for empowering the Commissioners of Income Tax to decide the applications for condonation of delay in filing Form Nos. 9A and 10. In the present matter, the Petitioner has filed Form No.9A within time instead of filing Form No.10, due to which the claim of accumulation was denied under Section 11(2) of the Act. The benefit of accumulation under Section 11(2) of the Act ought not to be denied to the Petitioner when the entire accumulated amount has actually been applied to charitable purposes well within the time allowed under the Act, and the activities of the Petitioner trust are genuine. We find that if this delay is not condoned, there will be genuine hardship to the Petitioner, inasmuch as the Petitioner would be saddled with a tax liability of Rs. 48,89,917/- even though it has substantially complied with the requirements of Section 11(2) of the Act.

24. We also find that in similar facts, this Court in the case of Mirae Asset Foundation v. Principal Commissioner of Income-tax – 6, Mumbai  3 (Bombay)/Writ Petition No. 713 of 2025 and Sau Dwarkabai tai Karwa Charitable Trust v. Commissioner of Income-tax (Exemption) 245 (Bombay) and Kotak Family Foundation v. Commissioner of Income-tax (Exemption)  57 (Bombay) has taken a similar view and condoned the delay. This Court has also relied on the judgment of the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust v. Income Tax Officer (exemption)  148 (Gujarat). A Division Bench of the Gujarat High Court in Sarvodaya Charitable Trust (supra) took a view that in cases like the present one (delay in filing Form No.10), the approach of the authorities ought to be equitious, balancing, judicious, and availing of exemption should not be denied merely on the bar of limitation. This is more so when the legislature has conferred wide discretionary powers to condone the delay on the authorities concerned. The relevant portion of this decision reads thus :-

“31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no.2 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 condonation 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.

32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-Tax Officer or before the appellate authority by assigning sufficient cause.”

25. In view of the foregoing discussion, we quash and set aside the impugned order dated 24th April 2025 passed by Respondent No. 1 under Section 119(2)(b) of the Act and condone the delay in filing Form 10 by the Petitioner.

26. Rule is made absolute in the aforesaid terms, and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.

27. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.