Condonation of Delay in Filing Form 10 Must Be Allowed for First-Time E-Filing Oversights

By | August 11, 2026
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Condonation of Delay in Filing Form 10 Must Be Allowed for First-Time E-Filing Oversights

Condonation of Delay in Filing Form 10 Must Be Allowed for First-Time E-Filing Oversights

Issue

Whether the CIT (Exemptions) erred in rejecting the assessee-trust’s application under Section 119(2)(b) for condonation of delay in filing Form 10, thereby denying exemption under Section 11(2) for accumulated income due to an oversight during the first year of mandatory e-filing.

Facts

  • Trust Operations: For Assessment Year 2016-17, the assessee-trust, which runs a school, recorded total receipts of ₹2.33 crores and applied ₹1.49 crores toward its charitable objects.
  • Accumulation & Investment: Unable to meet the 85% application threshold, the trust decided to accumulate the remaining income under Section 11(2) for modernization and refurbishment, investing the surplus in term deposits per the modes specified under Section 11(5).
  • Procedural Delay: Form 10 could not be filed within the statutory deadline due to administrative oversight caused by the newly introduced requirement for mandatory e-filing.
  • Disallowance by AO: During assessment proceedings, the Assessing Officer disallowed the accumulated income claim for want of timely filing of Form 10.
  • Condonation Request: The assessee filed an application under Section 119(2)(b) before the CIT (Exemptions) explaining the bona fide oversight and e-filed Form 10 with complete investment details; however, the CIT (Exemptions) rejected the application.

Decision

  • The High Court allowed the writ petition and set aside/quashed the impugned order passed by the CIT (Exemptions).
  • The Court held that in light of CBDT Circular No. 7/2018, genuine hardships arising from the transition to electronic filing should be considered sympathetically.
  • The revenue authorities were directed to issue an order condoning the delay in filing Form 10, enabling the assessee-trust to claim exemption under Section 11.

Key Takeaways

  • Substance Over Procedural Defaults: Procedural delays due to initial technological transitions (such as mandatory e-filing) should not defeat substantive statutory exemptions when funds are genuinely applied or invested in specified modes.
  • CBDT Circular Applicability: Authorities exercising powers under Section 119(2)(b) must adhere to the benevolent intent of relevant CBDT Circulars (such as Circular No. 7/2018) to prevent undue hardship to charitable trusts.
  • Bona Fide Compliance: Where accumulation conditions under Section 11(5) are verifiably fulfilled, administrative delays in submitting Form 10 warrant condonation if backed by a valid, reasonable cause.
HIGH COURT OF GUJARAT
Sadhu Vasvani Mission
v.
Commissioner of Income-tax (Exemption)
A.S. Supehia and Ms. VAIBHAVI D. NANAVATI, JJ.
R/SPECIAL CIVIL APPLICATION NO.10859 of 2020
JULY  16, 2026
Tushar Hemani, Sr. Counsel and Ms. Vaibhavi K. Parikh for the Petitioner. Ms. Maithili D. Mehta for the Respondent.
JUDGMENT
A.S. Supehia, J.- At the outset, it is notice by was and as pointed out by learned Senior Counsel Mr.Tushar Hemani that the present matter was ordered to be heard with Visha Oswal Tap. Shantibhuvan Upashrayand Derasar v. CIT (Exemptions) [R/Special Civil Application No. 11105 of 2020] which has been allowed by the judgment dated 10.07.2026 and submitted that on the same analogy, since the issue raised in the present petition is the common to the said petition, the same may be disposed of in terms of the judgment dated 10.07.2026.
BRIEF FACTS:
2. The petitioner is a trust formed over 30 years back and is engaged in the charitable activities of running a school providing facilities up to Higher Secondary Education. During the Financial Year 2015-16 relevant to Assessment Year 2016-17 (i.e. the year under consideration), the total receipts of the petitioner aggregated to Rs.2,33,06,849/- and income applied for the charitable purpose of the petitioner aggregated to Rs.1,49,17,593/-. Since the petitioner could not apply 85% of its income during the year under consideration, the petitioner decided to accumulate such “surplus” in accordance with the provisions of section 11(2) of the Income Tax Act, 1961 (for short, “the Act”) for modernization and refurbishment of the existing facilities since the same were created long back. Accordingly, the petitioner invested the surplus funds in the term deposits ranging from the dates 23.12.2015 to 29.03.2016, i.e., six in numbers. All the above investments fall within the ambit of securities prescribed under Section 11(5) of the Act.
2.1. As per Section 11(2) read with Rule 17, the last date for furnishing Form 10 (i.e. Statement to be furnished to the Assessing Officer / Prescribed Authority under Sub-Section (2) of Section 11 of the Act) was 17.10.2016 i.e. due date for furnishing return of income for the year under consideration as per section 139(1) of the Act. However, while filing the return of income, the system never asks an assessee to upload Form 10 and hence, the petitioner, inadvertently and through oversight, missed out filing Form 10 within the prescribed time limit. It may also be worthwhile to note that Rule 17 was amended by the IT (Eighteenth Amendment), Rules, 2016 w.e.f. 01.04.2016 as per which, Form 10 was to be filed electronically. Prior to the said amendment, Form 10 was to be filed manually.
2.2. The concerned Assessing Officer, vide notice dated 22.09.2018, called upon the petitioner to show cause as to why the accumulation of funds in question should not be disallowed on account of failure on the part of the petitioner in filing Form No. 10. Eventually, assessment was framed whereby dis-allowance was made in respect of the same.
2.3. The petitioner, vide letter dated 12.10.2018 (filed on 17.10.2018), moved an application before the Commissioner of Income Tax (Exemptions), Ahmedabad (i.e. the respondent herein) for condonation of delay in filing Form No.10 for the year under consideration. The respondent, vide the said letter, was apprised about the activities of the petitioner, receipts and application of income during the year under consideration as well as the purpose behind accumulation of surplus. It was further stated therein that the petitioner, through oversight, omitted to file Form No. 10 being the intimation to the Assessing Officer about the intention of the petitioner to accumulate the surplus. However, such intimation was filed before the Assessing Officer during the course of assessment proceedings on 10.07.2018. Hence, it was submitted that delay in filing Form No.10 may kindly be condoned.
2.4. The respondent, vide notice dated 10.12.2018, called upon the petitioner to show cause as to why the application for condonation of delay should not be rejected. The petitioner, vide letter dated 21.12.2018, sought an adjournment since the Authorized Representative was pre-occupied with some urgent work. The respondent, vide notice dated 24.12.2018, granted adjournment and called upon the petitioner to provide reasons for not filing Form No. 10 along with supporting evidences as well as details of accumulated or set-apart funds invested along with supporting documents.
2.5. The petitioner filed Form No.10 electronically on 02.01.2019. The petitioner, vide letter dated 02.01.2019, again explained the reason behind delay in filing Form No.10. The petitioner also furnished details of investment made during the year under consideration and submitted that all the conditions prescribed under section 11(5) of the Act have been fulfilled.
2.6. The petitioner, vide letter dated 09.01.2019, also furnished the photo copies of the term deposits in question.
2.7. The petitioner, vide letter dated 29.01.2019, explained the source of investment and also furnished relevant extract of bank book and bank statements.
2.8. However, the respondent, vide order dated 17.09.2019 passed under section 119(2)(b) of the Act, rejected the application for condonation of delay in filing Form No. 10 for the year under consideration.
SUBMISSION BEHALF OF PETITIONER:
3. Learned Senior Advocate Mr.Hemani appearing for the petitioner, at the outset has submitted that the petitioner was prevented by reasonable cause from filing Form No. 10 and Form No.10B within the stipulated time period and hence, delay in filing Form No. 10 and Form No. 10B ought to have been condoned.
3.1. Further, reference is also made to the Circular No.2 of 2020 issued by the CBDT which provides for condonation of delay in filing Form 10B for A.Y. 2016-17. Thus, it is submitted that the said Circular authorized the Commissioner to admit belated applications in Form No.10B in respect of A.Y.2016-17 after the expiry of the time allowed under the relevant provisions of the Act. Thus, it is urged that in light of the order passed by this Court and the Circular No.6 of 2020, dated 19.02.2020 the writ petition may be allowed.
3.2. Learned Senior Advocate Mr.Hemani has also placed reliance on the decision of the Coordinate Bench dated 23.08.2024 passed in Shri Visha Oswal Tap. Shantibhuvan Upashray and Derasar v. CIT (Exemptions)  (Gujarat)/Special Civil Application No.10669 of 2020 followed by us in the judgment dated 10.07.2026 passed in Special Civil Application No.11105 of 2020. Thus, the above petition came to be allowed.
SUBMISSIONS ON BEHALF OF RESPONDENTS:
4. Per contra, learned Senior Standing Counsel Ms.Maithili D. Mehta for respondent while opposing the present petition has submitted that in fact, the petitioner did not file Form No. 10A as prescribed in its limitation and the provisions of Section 119(2) of the Act cannot be more in his favour. It is submitted that the respondent authority after considering the facts formed an opinion that no genuine hardship would be caused to the petitioner in case the Form No.10 is not allowed.
OPINION AND CONCLUSION:
5. We have heard the learned advocates appearing for the respective parties.
6. As previously noted by us on an analogous issue in Special Civil Application No.11105 of 2020 this Court in its judgment dated 10.07.2026 has set aside the action of the respondents rejecting the application under Section 119(2)(3) of the Act by considering the Circular No.6/2020 dated 19.02.2020.
7. In the present case, the respondent has issued a Circular No. 7/2018 dated 20.12.2018, the relevant paragraphs are as under:
“4. Representations have been received by the Board/ field authorities stating that the Form No. 9A and Form No.10 could not be filed in the specified time for AY 2016-17, which was the first year of e-filing of these forms. It has been requested that the delay in filing of Form No. 9A and Form NO.10for AY 2016-17 may be condoned under section 119(2) (b) of the Act.
5. Accordingly, in supersession of earlier Circular/Instruction issued in this regard, with a view to expedite the disposal of applications filed by trusts for condoning the delay and in exercise of the powers conferred under section 119(2)(b) of the Act, the Central Board of Direct Taxes hereby authorizes the Commissioners of Income-tax, to admit belated applications in Form No. 9A and Form No.10 in respect of AY 2016-17 where such Form No. 9A and Form No.10 are filed after the expiry of the time allowed under the relevant provisions of the Act.
6. The Commissioners will, whil-e -entertaining such belated applications in Form No. 9A and Form No.10, satisfy themselves that the assessee was prevented by reasonable cause from filing of applications in Form No. 9A and Form No.10 within the stipulated time. Further, in respect of Form No. 10 the Commissioners shall also satisfy themselves that the amount accumulated or set apart has been invested or deposited in anyone or more of the forms or modes specified in sub-section (5) of section 11 of the Act.”
8. The respondents were required to consider that in case the Form No. 10 of the petitioner is not allowed, the petitioner would face genuine hardship as he had invested surplus funds into term deposits.
9. Thus, in light of the aforesaid circular, the writ petition requires to be allowed by quashing and setting aside the impugned order. We may mention that the legislature has conferred the power on the Board to condone the delay to enable the authorities to do substantial justice to the parties by considering the reasons assigned in the application on merits. The expression ‘genuine hardship’ has to be given considered meaning to help the assessee. There may be some cases where the delay is required to be condoned even if, it is inordinate, however, there is a meritorious claim of an assessee which cannot be thrown out at the threshold causing genuine hardship and injustice to an assessee. Ultimately, the provision of Section 119(2)(b) of the Act is meant for doing a substantial justice and the same has to be kept in mind while dealing with the applications. At the same time, the authority has also to be alive of the unexplained and deliberate delay in filing claim/application along with the facet of genuine hardship. Overall, the approach of the authority should be justice oriented to do the substantial justice in case the authority finds that the claim made under the application under Section 119(2)(b) of the Act is rejected, it would cause the genuine hardship to the assessee.
10. As the writ petition is allowed, the impugned order dated 17.09.2019 is quashed and set aside. The respondents are directed to pass an order condoning the delay for Form No.10 for enabling the petitioner to get an exemption under Section 11 of the Act.