2024 (9) TMI 1194 - HC - Income Tax

Exemption un/s 11 (1) - Rejection of application for condonation of delay in filing Form 10B under the Income Tax Act, 1961 - delay of 361 days occurred in filing Form 10B electronically - HELD THAT - Central Board of Direct Taxes directed the authorities to condone the delay caused in filing Form 10B in the cases where the audit report for the previous year has been obtained before filing of return of income. The interpretation made by the authority while passing the impugned order would reveal that the authority has held that Form 10B should have been filed on or before 31st March, 2018. In our considered opinion, the interpretation of the authority with regard to clause 4(i) is ex facie fault. We say so because as per the plain language of the Circular No.10, CBDT, in no uncertain terms, has directed that delay in cases where Form 10B obtained before filing of return of income is specified, meaning thereby, Form 10B ought to have been obtained before filing return of income so as to have the benefit of clause 4(i), whereas while passing the impugned order; instead of word obtained , the authority considered it as filed . Therefore, this being a basic factual understanding and interpretation of the Circular, in our view, based on such interpretation; the impugned order cannot be said to be in accordance with law and the Circular No.10 dated 22nd May, 2019. Present petition, on this count, deserves to be allowed and is hereby allowed by quashing and setting aside the impugned order.

Summary

Issues:
Challenge to rejection of application for condonation of delay in filing Form 10B under the Income Tax Act, 1961.

Analysis:
The petitioner, a Trust engaged in charitable activities, challenged the rejection of their application for condonation of delay in filing Form 10B under Section 119(2)(b) of the Income Tax Act, 1961. The petitioner had a genuine reason for the delay, citing the illness and subsequent death of their Accountant as the cause. The delay in filing Form 10B electronically was 361 days, and the petitioner had filed a rectification application under Section 154 of the Act, which was rejected. An appeal was also dismissed on the grounds that the order under Section 119(2)(b) is not appealable. The petitioner approached the High Court seeking relief.

The petitioner argued that the rejection of the condonation of delay was unjust, emphasizing the genuine hardship faced due to the Accountant's death. They relied on Circular No.10 dated 22nd May, 2019, which directed authorities to condone delays in filing Form 10B for specific years under certain conditions. The petitioner contended that the authority should have considered this circular and not rejected the application for delay condonation.

On the other hand, the respondent supported the impugned order, stating that the petitioner did not fall within the category specified in the Circular No.10, as the audit report was filed after the specified date. The respondent argued that the rejection was justified under the Circular's provisions.

The High Court analyzed the Circular No.10 dated 22nd May, 2019, and found fault with the authority's interpretation. The Court noted that the Circular required Form 10B to be obtained before filing the return of income, not filed as interpreted by the authority. The Court held that the authority's interpretation was flawed, and the impugned order was not in accordance with the law and the Circular. Consequently, the Court allowed the petition, quashing the impugned order and providing all consequential reliefs to the petitioner.