Dawat E Islami Hind vs Commissioner Of Income Tax ...
2026 Latest Caselaw 1414 Bom

Bombay High Court

Dawat E Islami Hind vs Commissioner Of Income Tax ... on 9 February, 2026

Author: B. P. Colabawalla

Bench: B. P. Colabawalla

2026:BHC-OS:3875-DB


                                                                  77-WP-3-2026.doc



                      IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                          ORDINARY ORIGINAL CIVIL JURISDICTION

                                  WRIT PETITION NO. 3 OF 2026

           Dawat E Islami Hind                                      .. Petitioner

                    Versus

           Commissioner of Income Tax
           (Exemptions), Mumbai and Anr.                            .. Respondents


                Adv. Mohamed Nawaz Haindaday, i/b M/s. Shahid Hussain, for
                the Petitioner.

                Adv. Pritish Chatterjee, for the Respondent-Revenue.



                                CORAM: B. P. COLABAWALLA &
                                            FIRDOSH P. POONIWALLA, JJ.

                                 DATE:      FEBRUARY 9, 2026

           P. C.

1. Rule. Respondents waive service. With the consent of the

Parties, Rule made returnable forthwith and heard finally.

2. This Writ Petition challenges an order dated 07/10/2025 passed

by Respondent No.1 under Section 119(2)(b) of the Income Tax Act, 1961 (for

short "IT Act") rejecting the Application for condonation of delay in filing

Form 10B by the Petitioner for A. Y. 2018-19. Resultantly, the Petitioner has

been denied benefit of exemption under Section 11 of the IT Act.

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3. Brief facts of the case are that the Petitioner is a public religious-

cum-charitable Trust carrying out various activities, including providing aid

and relief to the poor and needy, education, aid in education, and such other

various relief activities. The said activities are carried out from donations

received by it during any financial year. The Petitioner filed its Return of

Income under Section 139 for A. Y. 2018-19 on 20/12/2018. The Petitioner

also filed its Audit Report in Form 10B on 20/12/2018. The due date for

filing returns for A. Y. 2018-19 was 31/10/2018. The Petitioner has claimed

that the Audit Report in Form No.10B could not be filed by the due date for

various reasons, including the shortage of duly qualified accountants to

collate information into Financial Statements, resulting in a delay in

submitting the financial records for audit to its Chartered Accountants.

Consequently, due to the delay in filing of the Audit Report in Form 10B, the

Petitioner was denied the benefit of exemption under Section 11 vide a

intimation under Section 143(1)(a) of the IT Act. Subsequently, a demand of

Rs.10,30,95,810/- was raised on the Petitioner Trust.

4. It is not in dispute that the Audit Report in Form 10B was

required to be uploaded online along with the Return of Income or before

filing the Return of Income, i.e. by 31/10/2018 and that the Audit Report was

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

filed online on 20/12/2018. As such, there is a delay of 50 days in the filing

of Form 10B.

5. In this factual backdrop, we have perused the records and heard

Mr. Haindaday, learned Counsel appearing for the Petitioner and Mr. Pritish

Chatterjee appearing for the Respondent Revenue.

6. Mr. Haindaday submits that pursuant to the delay as set out

above, the Petitioner filed an application for condonation of delay in filing

Form 10B on 09/08/2023, which is at Exhibit D to the Writ Petition. In this

Application, the Petitioner has relied upon CBDT's Circular No. 16/2022

dated 19/07/2022, which provides that in the event of a delay not exceeding

365 days, the Commissioner of Income Tax may decide the application for

condonation of delay on merits.

7. It is the Petitioner's case that they had duly explained the

reasons for the delay and had stated true and clear facts without attributing

the delay to any fictitious reason, or attribute the delay to its Chartered

Accountants. The delay was purely out of issues beyond the control of the

Petitioner, and the Petitioner took all steps to ensure that it could file its

Audit Report at the earliest.

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

8. Mr. Haindaday submits that vide the impugned order dated

07/10/2025, which was passed after more than 2 years, Respondent No.1 has

referred to the Petitioner's delays of earlier assessment years in filing of Form

10B, which were for the period A. Y. 2013-14 up to A. Y. 2017-18. Respondent

No.1, however, ignored the submission of the Petitioner that from the period

A. Y. 2019-20 up to A. Y. 2022-23, the Return of Income as well as Form 10B

were filed within time.

9. Be that as it may, Mr. Haindaday submitted that the

requirement of filing Form 10B along with the Return of Income is

procedural and the Audit Report can be admitted even subsequent to the

filing of the Return of Income. In this regard he has relied upon the

judgement of the Hon'ble Gujarat High Court in Sarvodaya Charitable

Trust vs. Income Tax Officer (Exemption) [2021] 125

taxmann.com 75 (Gujarat) to support his contention.

10. Mr. Haindaday submits that clause (b) of Section 119(2) is a

beneficial provision aimed at providing relief. Adverting to Circular No.

16/2022 dated 19/07/2022, he submits that the circular read with Section

119(2)(b) provides for the delegatee of the Authority referred to in Section 119

[such delegatee being Respondent No.1, and the Authority being CBDT], to

exercise the delegated authority in terms of the said Section. Mr. Haindaday

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relies upon a decision of the Hon'ble High Court of Delhi in Sun

Pharmaceutical Industries Ltd. Vs. Income Tax Officer [2025] 171

taxmann.com 469 (Delhi) para 41 which analyses Section 119 as being

demonstrative of the statute conferring power upon the Board to relax a

prescription or enlarge a period of limitation as opposed to imposing or

introducing a restriction or for that matter constricting a period within which

a right may be exercised under the IT Act.

11. We note that though the Petitioner was not strictly mandated to

file an Application for condonation of delay within a particular period of

time, which was subsequently introduced vide Circular No. 16/2024 dated

18/11/2024 prescribing a time period of 3 years within which such an

Application for condonation of delay had to be made, but as pointed out by

Mr. Haindaday, the Circular No. 16/2022 dated 19/07/2022, upon which the

Petitioner places reliance, strictly mandates disposal of an application for

condonation made to it within three months of receipt. The impugned order

was passed more than 2 years from the date of the Application for

condonation for delay having been made.

12. The Revenue has filed its Affidavit in Reply to the Petition dated

09/01/2026. Mr. Pritish Chatterjee, the learned Counsel for the

Respondents, while opposing the grant of relief to the Petitioner, contends

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

that the Petitioner is a habitual defaulter in compliance with respect to the

filing of Form 10B. Mr. Chatterjee draws our attention to a tabulation in

paragraph 7 of the Reply, highlighting the delays in filing of Form 10B for the

period from A. Y. 2013-14 to A. Y. 2017-18. Mr. Chatterjee would submit that

the impugned order is well-reasoned and is issued after considering the

submissions of the Petitioner and documents on record. He finally submits

that the impugned order rightly rejected the application for condonation of

delay.

13. We asked the Counsel for the Petitioner to provide clarification

on the delays for the earlier assessment years and the resultant effect of the

delays, including the outcome of any applications for condonation of delays

made for the said assessment years.

14. The Petitioner in compliance with our directions filed a detailed

Affidavit in Rejoinder dated 06/02/2026 rebutting Respondent No.1's reply.

We do not consider it necessary to discuss the contents of the Rejoinder

except on the issue of delays in the assessment years prior to the period of the

impugned order.

15. Mr. Haindaday draws our attention to the provision of Section

12A which deals with the requirement of filing of Audit Report and the result

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

of non-compliance. He submits that the law as applicable for the period

which the Respondents allege delay on the part of the Petitioner in fact did

not provide for any due date. Clause (b) of sub-section (1) of Section 12A

reads as under:

"(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed Form duly signed and verified by such accountant and setting forth such particulars as may be prescribed."

[Emphasis is ours]

16. The requirement with respect to the Audit Report was with

respect to its filing along with the Return of Income for the relevant

assessment year. The Petitioner submits that as long as the Audit Report was

filed along with the Income Tax Returns, it was sufficient compliance with

the law and cannot be held otherwise. The Petitioner has annexed a tabular

statement detailing the due date of filing of ITR, date of filing of ITR and date

of filing of Audit Report in Form 10B and submits that there has been no

delay as alleged by the Respondents.

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

17. The Petitioner submits that the due date with respect to filing of

Audit Report was first introduced by the Finance Act, 2017 with effect from

1st April 2018. Finance Act, 2017 inserted clause (ba) in sub-section (1)

Section 12A which reads as under:-

Following clause (ba) shall be inserted after clause

(b) of sub-section (1) of section 12A by the Finance Act, 2017, w.e.f. 1-4-2018 :

"(ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section."

[Emphasis supplied]

18. The newly inserted clause (ba) in Section 12A(1) attributed a due

date to the filing of Form 10B by linking it to the due date of filing of ITR

[Section 139(4A) read with Section 139(1)]. By virtue of this amendment, the

Petitioner submits, there was a delay of 50 days in filing of Form 10B for A. Y.

2018-19 for which it sought condonation.

19. The scheme of Section 119 of the IT Act, lays special emphasis on

clause (b) of sub-section (2) read with sub-section (1). The important terms

used are also relevant to understand the essence of the benevolent purpose

provided in Section 119. Sub-section (1) contains the words "proper

administration of this Act" whereas clause (b) of sub-section (2) contains

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

the words "for avoiding genuine hardship". The Hon'ble Supreme Court

in UCO Bank, Calcutta v. Commissioner of Income Tax, W. B.

[(1999) 4 SCC 599 : (1999) 237 ITR 889 : 1999 SCC OnLIne SC 580

at page 605] analysed the status of circulars issued under Section 119.

Paragraph 9 of the judgment reads as follows:

"119. (1) The Central Board of Direct Taxes may, from time to time, issue such orders, instructions and directions to other Income Tax Authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:

Provided that no such orders, instructions or directions shall be issued--

(a) so as to require any Income Tax Authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions."

Under sub-section (2) of Section 119, without prejudice to the generality of the Board's power set out in sub-section (1), a specific power is given to the Board for the purpose of proper and efficient management of the work of assessment and collection of revenue to issue from time to time general or special orders in respect of any class of incomes or class of cases setting forth directions or instructions, not being prejudicial to assessees, as the guidelines, principles or procedures to be followed in the work relating to assessment. Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under Section 119 of the Income Tax Act which are binding on the authorities in the administration

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of the Act. Under Section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forego the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manner as laid down in Section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities."

[Emphasis supplied]

20. The Delhi High Court in Dr. K. Jagadeesan V. Central

Board of Direct Taxes and Others [(1998) 231 ITR 755 : 1998 SCC

OnLine Del 996 : (1998) 150 CTR 379] has, while discussing the

provisos to sub-section (1) of Section 119, held that the power under clause

(b) of sub-section (2) does not circumvent or restrict the discretionary power

of an authority with respect to assessments. Powers delegated to the Board

are for avoiding genuine hardship occasioned by the rigorous application of

the rule of limitation in specified matters and for avoiding genuine hardship

by relaxing any requirement in any provisions. Paragraph 11 of the said

judgment is reproduced as under:

"11. Section 119, as it stands, contemplates orders, instructions and directions to the income-tax authorities

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being issued by the Board for the proper administration of the Act. They are the policy decisions and thus of general nature which are covered by section 119(1). The proviso makes it clear that the Board does not have power to circumvent the statutory powers or discretion of an income-tax authority by reference to a particular assessment or a particular case. The only cases in which the orders touching any individual case can be issued are provided by clauses (b) and (c) of sub-section (2) [as it now stands]. They are for avoiding genuine hardship occasioned by rigourous application of the rule of limitation in specified matters and for avoiding genuine hardship in any case, by relaxing any requirement contained in any of the provisions of Chapter IV or VIA relating to deduction claimed thereunder. The categories of such "any case" do not cover the cases of prosecution and composition."

21. Considering the law as applicable for the earlier relevant

Assessment Years, we find that Respondent No.1 failed in application of mind

while dealing with the condonation of delay. As discussed above, the

Respondent No.1 ought to have followed the exercise of delegated authority

in terms of the law delegating such authority. The law, read with the relevant

circular, mandated that the benefits of an enabling provision ought to

percolate to the Assessee so as to save it from the rigours of law. In the

present case, considering that the delay was merely fifty days, and further

considering that the main ingredient on which Respondent No.1 based its

rejection of the application was a perceived delay in earlier years, we find that

there has been a gross violation of the directions under Section 119(2)(b) read

with the Circular for the relevant period issued thereunder. Respondent No.1

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

was necessarily bound to follow the law both in letter and spirit and not cause

its exercise of discretion to be coloured by non-existent conditions.

22. The Hon'ble Gujarat High Court in Sarvodaya Charitable

Trust vs. Income Tax Officer (Exemption) [2021] 125

taxmann.com 75 (Gujarat) has observed that the provision regarding

furnishing of Audit Report with the Return of Income has to be treated as a

procedural provision. It is a directory in nature and its substantial

compliance would suffice.

23. We also find that not granting the benefit of Section 11 to the

Petitioner would certainly cause genuine hardship to the Petitioner and may

adversely affect the functioning of its activities which provide relief to

thousands of students who are utilising its educational aid and schools run by

it. The purpose of Section 119(2)(b) is to mitigate such genuine hardship

faced by the Assessees and hence the phrase "genuine hardship" is to be

construed liberally. In contrast, when the delay is condoned, especially a

delay of merely 50 days, the highest that can happen is that the case would be

decided on merits after hearing the parties. This view is supported by the

judgment of this Court in Western Arch Developers vs. Pr.

Commissioner of Income Tax-(Centra) [2025] 177 taxmann.com

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313 (Bombay) wherein one of us was a member (B. P. Colabawalla, J.).

Thus, we find that on this count also, the delay deserves to be condoned.

24. We also rely on another judgement of this Court in St. Anne's

Church vs. Commissioner of Income-tax (Exemptions) [2025] 178

taxmann.com 16 (Bombay) passed by the same bench under similar

circumstances where it was observed that the Petitioner being a Charitable

Trust would face grave hardship if the delay in filing Form No.10 was not

condoned and if exemption was denied to them only on this count. The

Petitioner-Trust ought not to be foisted with such a liability on account of an

inadvertent delay.

25. Thus, in view of the foregoing discussion, we quash and set aside

the impugned order dated 07/10/2025 for A. Y. 2018-19 and condone the

delay of 50 days in filing Form No.10B. Since the delay is now condoned, the

Respondents shall treat the Form No.10B filed by the Petitioner to have been

filed within time and process the Return of Income filed by the Petitioner in

accordance with law within 3 months from the date of uploading this Order

on the High Court's website.

FEBRUARY 9, 2026 Darshan Patil 77-WP-3-2026.doc

26. Rule is made absolute in the aforesaid terms, and the Writ

Petition is also disposed of in terms thereof. However, there shall be no order

as to costs.

27. This order will be digitally signed by the Private Secretary/

Personal Assistant of this Court. All concerned will act on production by fax

or email of a digitally signed copy of this order.

[FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.]

FEBRUARY 9, 2026 Darshan Patil

Signed by: Darshan Patil Designation: PA To Honourable Judge Date: 11/02/2026 10:52:44