Delay in Filing Form 10B During COVID-19 Must Be Condoned to Grant Section 12A Exemption

By | July 22, 2026
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Delay in Filing Form 10B During COVID-19 Must Be Condoned to Grant Section 12A Exemption

Issue

Whether the Commissioner of Income Tax (Exemption) was justified in rejecting the assessee’s application under Section 119(2)(b) for condonation of delay in filing Form 10B (audit report) for AYs 2020-21 and 2021-22, thereby denying exemption under Section 12A.

Facts

  • Context & Exemption Claim: The assessee, a charitable trust, sought tax exemption under Section 12A of the Income-tax Act, 1961 for Assessment Years 2020-21 and 2021-22.

  • Audit Report Requirement: To claim Section 12A exemption, the assessee was required to furnish an audit report in Form 10B as per Rule 17B.

  • Delay in Filing:

    • For AY 2020-21, the due date was January 15, 2021, but it was filed on April 20, 2022 (a delay of 460 days).

    • For AY 2021-22, the due date was January 15, 2022, but it was filed on March 29, 2022 (a delay of 73 days).

  • Reason for Delay: The delay occurred primarily due to disruptions and hardship caused by the COVID-19 pandemic, including the key person suffering from COVID-19.

  • Application under Section 119(2)(b): The assessee applied to CIT (Exemption), Hyderabad, seeking condonation of delay under Section 119(2)(b) read with relevant CBDT circulars (Circular No. 10/2019 and Circular No. 16/2024).

  • CIT (Exemption) Order: The CIT (Exemption) rejected the application, holding that the assessee failed to establish sufficient cause or genuine hardship.

Decision

  • Procedural Delay Should Not Defeat Substantive Exemption: Benefit of Section 12A exemption should not be denied merely due to delay in filing the audit report, as the report can be furnished at a later stage before the Assessing Officer or Appellate Authority upon showing sufficient cause.

  • Genuine Hardship Established: The explanation that the audit report could not be filed on time due to COVID-19 infection was genuine and sound, given the ongoing pandemic circumstances around March 2022.

  • Failure to Exercise Discretionary Powers: The CIT (Exemption) failed to apply mind conscientiously and failed to consider the condonation application in right earnest as empowered under Section 119(2)(b) and applicable CBDT circulars.

  • Matter Remitted: The order of the CIT (Exemption) was set aside, and the matter was remitted back to the authority to consider Form 10B and process the Section 12A exemption claim.

Key Takeaways

  1. Substance Over Technical Delays: Filing Form 10B is a procedural requirement; procedural delays should be condoned if the trust acts in good faith and demonstrates genuine cause.

  2. Pandemic Disruptions Constitute Sufficient Cause: Illness and operational disruptions during the COVID-19 pandemic represent reasonable and valid grounds for condoning statutory filing delays under Section 119(2)(b).

  3. CBDT Circulars Mandate Pragmatic Approach: Authorities exercising powers under Section 119(2)(b) must act liberally to prevent genuine hardship, rather than taking a hyper-technical view to reject relief.

HIGH COURT OF ORISSA
Juba Jyoti Jubak Sangha
v.
Central Board of Direct Taxes
HARISH TANDON, CJ.
and MURAHARI SRI RAMAN, J.
WP (C) No.15624 of 2026
JUNE  25, 2026
Rudra Prasad Kar, Sr. Adv. and Pranaya Kumar Mishra, Adv. for the Petitioner. Avinash Kedia, Jr. Standing Counsel for the Respondent.
ORDER
1. Mr. Rudra Prasad Kar, learned Senior Advocate enters appearance on behalf of the petitioner and files his appearance memo in Court today, which is taken on record.
2. Challenging the order dated 24th January, 2023 (Annexure-1) rejecting the petition for condonation of delay filed under Section 119(2)(b) of the Income Tax Act, 1961 for filing the audit report in Form 10B prescribed under Rule 17B of the Income Tax Rules, 1962 (for short, “IT Rules”) for claiming exemption from payment of income tax under Section 12A of the Income Tax Act, 1961 (for brevity, “IT Act”) for the Assessment Years 2020-21 and 2021-22 by the Commissioner of Income Tax (Exemption), Hyderabad (“CIT”, abbreviated), the Petitioner has approached this Court by way of filing this writ petition under Articles 226 & 227 of the Constitution of India.
3. Learned Senior Advocate appearing for the Petitioner submitted that despite sufficient cause being shown, Opposite Party No.2 has rejected the application for condonation of delay of 460 and 73 days respectively in filing the audit report. It is submitted that the delay was caused due to Covid-19 Pandemic, which was not appreciated by the said authority.
3.1. Learned Senior Advocate advanced and valiantly argued that reasons given by the CIT to disallow the exemption claimed in the returns are not sustainable. Though the audit reports in Form 10B could be filed even before the assessment, the same was filed on 20th April, 2022 and 29th March, 2022. The audit reports were due for submissions 15th January, 2021 and 15th January, 2022. Thus, there was only 460 and 73 days’ delay. The approach of the CIT indicates pedantic; rather utilizing his judicial discretion he should have been pragmatic in his approach. He, therefore, submitted that under Section 119(2)(b) of the Income Tax Act by virtue of Circular No.10 of 2019, dated 22.05.2019 and circular No.16 of 2024 dated 18.11.2024, the CIT has been delegated with power to exercise discretion while dealing with the application for condonation of delay in filing the Form 10B for the Assessment Years 2020-21 and 2021-22. Despite such discretion is conferred on the CIT, the reason for the delay being not appreciated appropriately, the order is susceptible to be interfered with in the present proceeding, as such the same is liable to be set aside.
3.2. He strenuously urged that serious prejudice would ensue to the Petitioner if 460 and 73 days’ delay is not condoned as the audit report under Section 12A read with Rule 17B is required to be considered by the competent authority for the purpose of claiming benefits under the IT Act.
3.3. To buttress his argument, he placed reliance on the decision of the Gujarat High Court in Sarvodaya Charitable Trust v. ITO (Exemption) (Gujarat) and contended that the provision relating furnishing of audit report with the return is to be treated as procedural and the same could be filed even before the assessment.
4. Mr. Avinash Kedia, learned Junior Standing Counsel for the Income Tax Department submitted that the CIT exercising his discretion under Section 119(2)(b) of the IT Act rejected the application for condonation of delay having found no sufficient cause shown by the Petitioner. He submitted that genuine hardship being not demonstrated by the Petitioner, the rejection of petition for condonation of delay is not unjustified.
5. Heard learned Senior Advocate appearing for the Petitioner and learned Junior Standing Counsel for Income Tax Department.
6. Considering the rival submissions made by the learned counsel for the respective parties, this Court is satisfied that there is no dispute with regard to delay of 460 days and 73 days in submitting the audit reports in Form-10B prescribed under Rule 17B of the IT Rules in order to claim benefit under Section 12A of the IT Act for the Assessment Years 2020-2021 and 2021-22.
6.1. This Court is of the considered view that the benefit of exemption should not have been denied merely on account of delay in furnishing audit report, which could be produced at a later stage either before the Assessing Officer or the Appellate Authority by assigning sufficient cause. This Court also takes cognizance of the fact that at an around 13.03.2022, Covid-19 Pandemic was continuing and it is believed that the contention of the Advocate for the Petitioner that on account of suffering from Covid-19 the audit report could not be furnished. Such a stance of the petitioner sounds genuine since no objection is raised by the learned Senior Standing Counsel for the Income Tax against such statement.
6.2. This Court, taking note of such identical plea and taking cognizance of Covid-19 Pandemic situation at and around the date of filing of audit report in 2022, has elaborately discussed the factors of consideration of petition for condonation of delay in the case of Action Research for Health and Socio-economic Development v. CBDT  (Orissa)/[2026] 484 ITR 211 (Orissa)/W.P.(C) No.8035 of 2025 which stood disposed of vide judgment dated 25.04.2025.
6.3. Considering the facts and situation of the said case and applying the legal position discussed in similar fact-situation as obtained in Action Research for Health and Socio-economic Development (supra), this Court is of the opinion that the Commissioner of Income Tax (Exemption), Hyderabad has not applied his conscientious mind in proper perspective. Taking cognizance of well-established principle that when technical consideration and cause of substantial justice are pitted against each other, it is the substantial justice which is to prevail, this Court holds that mere technicality should not have been ground for claim of exemption under Section 12A of the IT Act. Thus, the CIT has failed to consider the application for condonation of delay in its right earnest under the provisions of Section 119(2)(b) of the Income Tax Act, 1961 read with power conferred by virtue of Circular No.10/2019, dated 22.05.2019 and circular No.16 of 2024 dated 18.11.2024.
6.4. Ergo, finding that there was “genuine hardship” faced by the petitioner during the relevant period and refusal to condone the delay invoking power under Section 119(2) of the IT Act being arbitrary exercise of discretion having regard to the fact-situation, Order dated 24th January, 2023 passed by the Commissioner of Income Tax (Exemption), Hyderabad-opposite party No.1 (Annexure-1) is hereby set aside. The matter is remitted to the authority concerned (O.P. No.3) to consider audit report in Form 10B furnished under Rule 17B of the Income Tax Rules to claim exemption under Section 12A of the Income Tax Act and in consequence thereof, the opposite party no.3 is directed to grant all consequential relief to the petitioner by taking into account the Audit Report in Form 10B pertaining to the Assessment Years 2020-21 and 2021-22 submitted on 20th April, 2022 and 29th March, 2022, as if the same is filed within period specified invoking Section 119(2)(b) of the Income Tax Act, 1961.
6.5. With the observation made supra and directions issued, the writ petition stands disposed of. As a result of the disposal of the writ petition, all pending interlocutory applications, if any, shall stand disposed of.