Condonation of Delay in Form 10B Granted as Medical Grounds

Condonation of Delay in Form 10B Granted as Medical Grounds Outweigh Circular Time Limit

Issue

Whether delay in filing the audit report in Form 10B under Section 11 can be condoned under Section 119(2)(b) when supported by genuine medical grounds, despite CBDT Circular No. 16 of 2024 prescribing a three-year time limit.

Facts

Assessee & Exemption Claim: The petitioner, an elderly managing trustee (~70 years old) of an educational trust, claimed income tax exemption for Assessment Years 2019-20 and 2020-21.
Procedural Delay: For both assessment years, the mandatory audit report in Form 10B was uploaded a few days after submitting the respective returns of income.
Condonation Application: The petitioner applied for condonation of delay under Section 119(2)(b), explaining that the delay was caused by ill-health and submitting supporting medical reports.
Rejection by Revenue: The applications were rejected solely on the ground that they were filed beyond the 3-year timeline specified in CBDT Circular No. 16 of 2024 (dated 18.11.2024).
Petitioner’s Argument: The petitioner contended that Section 119(2)(b) itself does not prescribe a rigid statutory time limit and that genuine hardship must be considered.

Decision

The High Court held that the petitioner demonstrated sufficient cause for the delay through valid medical documentation.
The court noted that administrative circulars restricting time limits cannot override the statutory intent of Section 119(2)(b) to prevent genuine hardship.
The rejection orders were set aside, and the delay in filing Form 10B was condoned, subject to the payment of nominal costs.
The matter was decided in favour of the assessee.

Key Takeaways

Substance Over Technical Timelines: CBDT circulars prescribing rigid time limits for condonation applications under Section 119(2)(b) cannot shut out genuine cases where sufficient cause (such as medical incapacitation) is established.
Directory Nature of Form 10B Filing: Where the audit report in Form 10B is available and filed shortly after the return of income, hyper-technical rejections defeat the substantive statutory exemptions granted to educational and charitable trusts.
Cost-Based Relief: Courts can exercise extraordinary writ jurisdiction to condone procedural delays on merit while imposing costs to balance equity and administrative inconvenience.

HIGH COURT OF MADRAS

John and Marie Almedia Educational Trust

Commissioner of Income-tax (Exemptions)

Senthilkumar Ramamoorthy, J.

WP Nos. 15587 & 16818 of 2025
WMP Nos.17622, 17623, 19066 & 19067 of 2025

JULY 3, 2026

A. Sanjay Arvind and Rajnish Pathiyil for the Petitioner. V.J. Arulraj, Sr. Standing Counsel for the Respondent.

ORDER

1. The petitioner had applied for condonation of delay in filing Form 10B for assessment years 2019-20 and 2020-21 under Section 119(2)(b) of the Income-Tax Act, 1961 (the I-T Act).

2. Learned counsel for the petitioner submits that the petitioner was unable to file Form 10B along with the return of income for the two relevant assessment orders on account of ill-health. Referring to medical reports in this regard, he submits that the petitioner had both a slipped disc and vision related issues. Adverting to orders impugned herein, learned counsel submits that the sole ground for the rejection of the applications is the filing of the application after three years from the end of the relevant assessment order. Learned counsel submits, in this regard, that Section 119(2)(b) of the I-T Act does not prescribe any time limit for entertaining an application under the said provision.

3. In response, Mr.Arulraj, learned senior standing counsel, points out that the medical reports do not justify the failure to file the audit report during the relevant period. He also points out that the audit reports were received by the petitioner sufficiently in time to enable filing along with the return of income. Referring to Circular No.16 of 2024 dated 18.11.2024 of the CBDT, learned standing counsel, submits that said circular is binding on the income-tax authorities.

4. Section 119, in relevant part, reads as under:

“119.(1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:

Provided that no such orders, instructions or directions shall be issued-

(a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the [the Joint Commissioner (Appeals) or] the [Commissioner (Appeals)] in the exercise of his appellate functions.

…….

(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise [any income-tax authority, not being [a Joint Commissioner (Appeals) or] a Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law.”

As can be seen from Section 119, said provision empowers the CBDT to issue orders, instructions or directions to the income-tax authorities. Clause (b) of subsection (2) does not prescribe a time limit within which an application for condonation should be made. The provision enables such condonation in order to avoid genuine hardship to the assessee concerned. Undoubtedly, as submitted by learned standing counsel, the income-tax authorities are bound by the circular fixing a time limit.

5. The petitioner is the managing trustee of an educational trust. Exemptions have been claimed in the returns of income for the relevant assessment years. The right to avail of such exemptions is contingent on filing a return of income accompanied by the audit report in Form 10B. The audit report, in each relevant assessment year, was filed a few days after filing the return of income. The petitioner was about 70 years old at the relevant time. Tthe petitioner, however, cannot entirely be absolved of responsibility.

6. Considering all these aspects, I am satisfied that sufficient cause is shown, including by way of documents relating to the medical condition of the petitioner. Therefore, the delay in filing the audit report in Form 10B is condoned subject to the payment of a sum of Rs.30,000/- as costs to the Medical Research Foundation, Sankara Nethralaya, Old No.18, New No.41, College Road, Chennai 600 006, (Ph:91-44-28271616), within two weeks from the date of receipt of a copy of this order. Assessment proceedings relating to the relevant assessment years shall proceed on the basis that the delay in filing Form 10B stands condoned.

7. These writ petitions are disposed of on the above terms. No costs. Consequently, connected miscellaneous petitions are closed.