ITAT Allows Exemption u/s 11 Despite Delay in Filing Audit Report Citing Income Tax Circular
The present appeal has been filed by a trust named P D Memorial Trust (Appellant), against the Income Tax Officer (Respondent) in the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘A’: New Delhi, before Shri Challa Nagendra Prasad (Judicial Member) and Shri Avdhesh Kumar Mishra (Accountant Member). The appeal was heard on October 15, 2025, and was decided on October 30, 2025. The appeal has been filed challenging an order dated June 24, 2024, issued by the Additional/Joint commissioner of Income Tax (A), Madurai [‘Addl./JCIT(A)’].
The trust is involved in providing education services to students and running various educational institutions and is registered under Section 12A of the Act. On March 31, 2022, the trust filed its income tax return (ITR). Thereafter, the Assessing Officer (CPC), Bangalore, processed the ITR under section 143(1) of the Income Tax Act, 1961 (‘Act’), and did not find the exemption claimed under section 11 of the Act, hence rejected the claim because the tax audit report (TAR) in Form No. 10B had not been filed one month before the filing of the ITR under section 139(1) of said Act. Then, the assessing officer (AO) taxed the entire gross receipts of Rs. 40.06 Crore as income.
The assessee, dissatisfied with this action, then approached the Ld. Addl. CIT(A); however, the CIT(A) dismissed the appeal, saying the denial of exemption claimed under section 11 of the Act was valid and justified, as the assessee had lately filed its TAR in form 10B.
On this decision, the authorised representative of the assessee cited CBDT Circular No. 10/2019 dated 22.05.2019, and said that it is not compulsory to file a tax audit report in Form No. 10B, and is a directory in nature, and thereafter, this was acceptable under section 12A of the Act. This is the reason why CBDT condoned the delay in filing the audit report in Form No. 10B for AYs 2016-17 and 2017-18, even assessee did not file any petition requesting the condonation of the delay. However, the circular did not mention the cases after the assessment year 2018-19.
The counsel submitted that filing a tax audit report in form No. 10B online atleast one month before filing the ITR under section 139(1) of the Act was directory in nature and not compulsory; hence, the assessing officer should understand this and should have accepted the uploaded audit report in Form No. 10B at the time of processing the ITR under section 143(1) of the Act, as the said audit report was available on the Income Tax Portal.
Further, the counsel highlighted that if the audit report was not available online at the income tax portal along with the ITR, then the assessing officer should have treated the concerned ITR as defective under section 139(9) of the Act, and thereafter the assessee should have been given a chance to correct the specified deficiency in the ITR. However, the AO did not do it.
Also, after rejecting the claim of exemption under section 11 of the Act, the assessing officer should have taxed income as per the Income and Expenditure account of the assessee and not the gross receipts of Rs. 40.06 crore. Hence, the assessing officer was not justified in rejecting the claim of exemption under section 11 of the Act.
However, the learnt CIT-DR argued that the appeal should be rejected. According to them, submitting the audit report in Form 10B online at least one month before filing the Income Tax Return (ITR) under section 139(1) is a mandatory requirement, not just a formality.
When the case was taken before the appellate authority, it analysed both sides’ arguments and reviewed the submitted documents and concluded the following:
- We agree with the assessee’s representative that failing to file the Form 10B audit report before submitting the ITR is a mistake that can be corrected later. This is supported by various legal decisions and a circular issued by the CBDT (Central Board of Direct Taxes).
- We also believe that denying the exemption under section 11 of the Income Tax Act just because the audit report was filed late is not right. This is a debatable issue, as seen in many cases, and such delays have been accepted before. In fact, the CBDT has already excused similar delays for the two previous years through its circular.
- Therefore, we decided that rejecting the exemption claim under section 11 during the ITR processing under section 143(1) is not correct. We accept the late filing of Form 10B and instruct the Assessing Officer to allow the exemption under section 11. The assessee is granted the resulting benefits.
Final Result: The assessee’s appeal is allowed.
Citation: P D Memorial Trust Vs Income Tax Officer (ITAT Delhi); ITA No.3784/Del/2024; 30/10/2025; 2021-22
Refer to the official judgement for complete information.
