Court says bona fide misunderstanding over amended due date during COVID-19 period amounted to reasonable cause and genuine hardship.
The Bombay High Court has condoned a 30-day delay in filing Form No. 10B by Vallabh Welfare Foundation for Assessment Year 2020-21, setting aside an order of the Commissioner of Income Tax (Exemptions) that had rejected the condonation request. The Court also quashed the intimation issued under Section 143(1) of the Income Tax Act, which had denied the charitable institution exemption under Section 11 and raised a tax demand of Rs. 27,35,970.
A Division Bench of Justices B.P. Colabawalla and Farhan P. Dubash held that the delay occurred due to a bona fide misunderstanding regarding the amended filing requirement introduced by the Finance Act, 2020. Under the amended provision, the audit report in Form 10B had to be filed one month before the due date of the return. The Court noted that A.Y. 2020-21 was the first year of this change and that the period coincided with the COVID-19 lockdown, when compliance deadlines were frequently extended.
The petitioner, a charitable institution registered under Section 12AA and engaged in education, healthcare and social welfare activities, had filed its return on 9 February 2021 and submitted Form 10B on 14 February 2021. The institution believed, in good faith, that the old filing position continued to apply and that the report could be filed along with the return. However, the tax department treated the form as belated and denied the exemption.
The Court observed that the delay was short and not deliberate. It further held that refusing condonation would cause genuine hardship because the petitioner would lose the benefit of exemption under Section 11 and face a substantial tax demand. Relying on earlier rulings, including Sitaldas K. Motwani and Mirae Asset Foundation, the Bench reiterated that Section 119(2)(b) must be applied in a liberal and justice-oriented manner where substantial justice is at stake.
Although the petitioner had also filed a condonation application before the CBDT, the High Court declined to send the matter back to that forum, noting that similar relief had already been granted in other cases concerning A.Y. 2020-21. The Court therefore condoned the delay itself, quashed the impugned rejection order dated 18 February 2025, and directed the department to process the return afresh treating Form 10B as filed in time.
Bottom Line :
Income Tax - Section 119(2)(b) - Delay of 30 days in filing Form No. 10B for A.Y. 2020-21 condoned - Bona fide misunderstanding regarding newly amended due date during COVID-19 period constituted reasonable cause - Refusal to condone would cause genuine hardship by denial of exemption under Section 11 - Impugned order rejecting condonation and intimation under Section 143(1) set aside.
Statutory provision(s): Section 11, Section 12A(1)(b), Section 119(2)(b), Section 143(1), Section 12AA, Section 139(1)
