Court sets aside refusal to condone delay in audit report filing; charitable exemption claim to be reconsidered on merits

5-Second Takeaway

The Court held that exemption under section 12A should not have been denied merely because the audit report was filed late, where the delay arose from genuine hardship during the Covid-19 pandemic. It set aside the refusal to condone delay, treating the late Form No. 10B as capable of being considered under section 119(2)(b) with consequential relief.

Banirupa Charitable Trust challenged the refusal to condone delay in furnishing its audit report for the purpose of claiming exemption under section 12A. The trust explained that the delay occurred during the Covid-19 period, when compliance was disrupted.

The Court accepted that explanation as genuine and held that the exemption claim should not have been defeated on a purely technical ground. It observed that the audit report could be produced at a later stage before the assessing officer or the appellate authority if sufficient cause was shown.

The Court also found that the Commissioner of Income-tax (Exemption) had not applied his mind properly while rejecting the request under section 119(2). In its view, the refusal was an arbitrary exercise of discretion, especially where substantial justice and technicality were in conflict.

Accordingly, the order rejecting condonation was set aside. The matter was remitted to consider Form No. 10B filed on 5 March 2022 as if it had been filed within time and to grant consequential relief.