1128 Days’ Delay in Filing Form 10B Condoned: A Big Relief for Charitable Trusts
One of the most feared nightmares for charitable trusts is losing exemption under Section 11 merely because of a procedural lapse.
A recent and very reassuring judgment of the Bombay High Court has once again reaffirmed that substantive justice must prevail over technical lapses. In Shamal Mohan Patil Education Society vs Commissioner of Income Tax (Exemptions), Pune, the Bombay High Court condoned a massive delay of 1128 days in filing Form 10B and directed the Income Tax Department to grant the benefit of exemption under Section 11.
This ruling is a strong message to the tax authorities that genuine hardship should not be ignored in the name of procedural rigidity.
Background of the Case
The assessee was a charitable education society running a large school with nearly 5,000 students. For AY 2017-18, the trust had obtained its audit report in Form 10B well within time, but due to miscommunication between the old and new auditors, the form was not e-filed along with the return of income.
The return was processed under Section 143(1) and exemption under Section 11 was denied solely because Form 10B was not electronically filed within the prescribed time. This resulted in a staggering tax demand of over ₹3.35 crore.
When the mistake came to light, the trust uploaded Form 10B belatedly and applied for condonation of delay under Section 119(2)(b). The application was rejected by the Commissioner (Exemptions), forcing the trust to approach the Bombay High Court.
Revenue’s Stand:
Procedural Default Is Fatal
The Department argued that:
Filing of Form 10B within the due date is mandatory
Lapse of auditors cannot be an excuse
Exemption provisions must be strictly construed
Based on this, the condonation application was rejected.
Court’s Analysis:
Procedure Is Handmaid of Justice
The Bombay High Court strongly disagreed with this rigid approach and made several important observations:
Filing Form 10B is Procedural, Not Substantive
The Court relied upon the Gujarat High Court ruling in Sarvodaya Charitable Trust, holding that filing of audit report along with the return is a procedural requirement and substantial compliance is sufficient.
Genuine Hardship Must Be Interpreted Liberally.
Section 119(2)(b) exists precisely to mitigate genuine hardship. Denial of exemption to a functioning educational institution merely due to a clerical lapse would cause severe and irreparable damage.
No Malafide Intention:
The audit was completed on time. There was no dispute about the genuineness of activities. The delay occurred due to human error and professional misunderstanding, not deliberate non-compliance.
Merits Cannot Be Pre-Judged at Condonation Stage.
The authority while deciding condonation cannot examine whether exemption is otherwise allowable. That issue arises only after delay is condoned.
Consistent Judicial View
The Court relied on its earlier rulings including:
Al Jamia Mohammediyah Education Society (affirmed by Supreme Court)
St. Anne’s Church
Western Arch Developers.
All these decisions consistently hold that charitable institutions should not be punished for technical lapses when no revenue loss or misuse is alleged.
Final Verdict
The Bombay High Court:
Quashed the rejection order
Condoned the delay of 1128 days
Directed the Department to treat Form 10B as filed within time
Ordered processing of the return and grant of exemption under Section 11.
This is a landmark relief, especially considering the unusually long delay involved.
Why This Judgment Is Extremely Important
This ruling is a big relief for:
Educational trusts
Religious institutions
Charitable societies
NGOs dependent on professional compliance
In recent years, denial of exemption due to Form 10B / Form 10BB issues has become a common reason for huge automated tax demands. This judgment clearly establishes that automation cannot override equity and fairness.
Practical Takeaways for Trusts and Taxpayers
Always obtain audit reports within due date
If Form 10B is missed, apply for condonation under Section 119(2)(b)
Clearly explain absence of malafide intent.
Highlight genuine hardship and reliance on professionals
Do not hesitate to seek judicial remedy where exemption is denied mechanically
Conclusion
This judgment reinforces a fundamental principle of tax jurisprudence: law exists to serve justice, not to destroy genuine institutions on technical grounds. While compliance is important, human errors are inevitable-and the law provides remedies for exactly such situations. For charitable trusts facing denial of exemption due to delayed filing of Form 10B, this ruling is nothing short of a lifeline. Based on the judgment of the Bombay High Court dated 14 November 2025 in Writ Petition No. 9073 of 2025.
