Orissa High Court
Society For Training Action Research vs Central Board Of Direct Taxes .... ... on 24 June, 2025
Author: Murahari Sri Raman
Bench: Murahari Sri Raman
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.16471 of 2025
Society for Training Action Research .... Petitioner
and Rehabilitation
Mr. T.K. Satapathy, Advocate
along with Mr. Chitrasen Parida, Advocate
-Versus-
Central Board of Direct Taxes .... Opposite Parties
(CBDT) and others
Mr. Avinash Kedia, Jr. Standing Counsel for CGST
CORAM:
HON'BLE THE CHIEF JUSTICE
AND
HON'BLE MR. JUSTICE MURAHARI SRI RAMAN
ORDER
Order No. 24.06.2025
01. 1. Mr. T.K. Satapathy, learned counsel enters appearance on
behalf of the petitioner and files his appearance memo in Court
today, which is taken on record.
2. Challenging the order dated 12.02.2025 (Annexure-1)
rejecting the petition for condonation of delay filed under Section
119(2)(b) of the Income Tax Act, 1961 for filing the audit report in
Form 10B prescribed under Rule 17B of the Income Tax Rules,
1962 (for short, "IT Rules") for claiming exemption from payment
of income tax under Section 12A of the Income Tax Act, 1961 (for
brevity, "IT Act") for the Assessment Year 2017-18 by the
Commissioner of Income Tax (Exemption), Hyderabad ("CIT",
abbreviated), the Petitioner has approached this Court by way of
filing this writ petition under Articles 226 & 227 of the
Constitution of India.
3. Mr. T.K. Satapathy, learned Advocate appearing along
with Mr. Chitrasen Parida, learned counsel for the Petitioner
submitted that despite sufficient cause being shown, the Opposite
Party No.2 has rejected the application for condonation of delay of
353 days in filing the audit report. It is submitted that the delay
was caused due to negligence of Auditor, which was not
appreciated by the said authority.
3.1. Learned Advocate advanced valiantly argued that
irrelevant decisions have been referred to and relied on by the CIT
to disallow the exemption claimed in the returns. Though the audit
report in Form 10B could be filed even before the assessment, the
same was filed on 19.03.2021. The audit report was due for
submission was 31.03.2020. Thus, there was only 353 days' delay.
The approach of the CIT indicates pedantic; rather utilizing his
judicial discretion he should have been pragmatic in his approach.
He, therefore, submitted that under Section 119(2)(b) of the
Income Tax Act by virtue of Circular No.10 of 2019, dated
22.05.2019, the CIT has been delegated with power to exercise
discretion while dealing with the application for condonation of
delay in filing the Form 10B for the Assessment Year 2017-18.
Despite such discretion is conferred on the CIT, the reason for the
delay being not appreciated appropriately, the order is susceptible
to be interfered with in the present proceeding, as such the same is
liable to be set aside.
3.2. He strenuously urged that serious prejudice would ensue to
the Petitioner if 353 days' delay is not condoned as the audit report
under Section 12A read with Rule 17B is required to be considered
by the competent authority for the purpose of claiming benefits
under the IT Act.
3.3. To buttress his argument, he placed reliance on the
decision of the Gujarat High Court in Sarvodaya Charitable Trust
vs. Income Tax Officer (Exemption), (2021)18 ITR-OL 253 (Guj)
and contended that the provision relating furnishing of audit report
with the return is to be treated as procedural and the same could be
filed even before the assessment.
4. Mr. Avinash Kedia, learned Junior Standing Counsel for
the Income Tax Department submitted that the CIT exercising his
discretion under Section 119(2)(b) of the IT Act rejected the
application for condonation of delay having found no sufficient
cause shown by the Petitioner. He submitted that genuine hardship
being not demonstrated by the Petitioner, the rejection of petition
for condonation of delay is not unjustified.
5. Mr. T.K. Satapathy, learned Advocate appearing along
with Mr. Chitrasen Parida, learned counsel for the Petitioner and
Mr. Avinash Kedia, learned Junior Standing Counsel for Income
Tax Department.
6. Considering the rival submissions made by the learned
counsel for the respective parties, this Court is satisfied that there
is no dispute with regard to delay of 353 days in submitting the
audit report in Form-10B prescribed under Rule 17B of the IT
Rules in order to claim benefit under Section 12A of the IT Act for
the Assessment Year 2017-18. It is also not fact on record that the
petitioner has been availing the benefit of exemption since
Assessment Year 2016-17.
6.1. This Court is of the considered view that the benefit of
exemption should not have been denied merely on account of delay
in furnishing audit report, which could be produced at a later stage
either before the Assessing Officer or the Appellate Authority by
assigning sufficient cause. This Court also takes cognizance of the
fact that at an around 13.03.2022, Covid-19 Pandemic was
continuing and it is believed that the contention of the Advocate
for the Petitioner that on account of negligence of Auditor the audit
report could not be furnished. Such a stance of the petitioner
sounds genuine since no objection is raised by the learned Senior
Standing Counsel for the Income Tax against such statement.
6.2. This Court, taking note of such identical plea and taking
cognizance of Covid-19 Pandemic situation at and around the date
of filing of audit report in 2022, has elaborately discussed the
factors of consideration of petition for condonation of delay in the
case of Action Research for Health and Socio-economic
Development vs. Central Board of Direct Taxes (CBDT) and
others, W.P.(C) No.8035 of 2025 which stood disposed of vide
judgment dated 25.04.2025.
6.3. Considering the facts and situation of the said case and
applying the legal position discussed in similar fact-situation as
obtained in Action Research for Health and Socio-economic
Development (supra), this Court is of the opinion that the
Commissioner of Income Tax (Exemption), Hyderabad has not
applied his conscientious mind in proper perspective. Taking
cognizance of well-established principle that when technical
consideration and cause of substantial justice are pitted against
each other, it is the substantial justice which is to prevail, this
Court holds that mere technicality should not have been ground for
claim of exemption under Section 12A of the IT Act. Thus, the
CIT has failed to consider the application for condonation of delay
in its right earnest under the provisions of Section 119(2)(b) of the
Income Tax Act, 1961 read with power conferred by virtue of
Circular No.10/2019, dated 22.05.2019.
6.4. Ergo, finding that there was "genuine hardship" faced by
the petitioner during the relevant period and refusal to condone the
delay invoking power under Section 119(2) of the IT Act being
arbitrary exercise of discretion having regard to the fact-situation,
Order dated 12.02.2025 passed by the Commissioner of Income
Tax (Exemption), Hyderabad-opposite party No.2 (Annexure-1)
are hereby set aside. The matter is remitted to the said authority
concerned to consider audit report in Form 10B furnished under
Rule 17B of the Income Tax Rules to claim exemption under
Section 12A of the Income Tax Act and in consequence thereof,
the Commissioner of Income Tax (Exemptions)-opposite party
No.2 is directed to grant all consequential relief to the petitioner by
taking into account the Audit Report in Form 10B pertaining to the
Assessment Year 2017-18 submitted on 19.03.2021, as if the same
is filed within period specified invoking Section 119(2)(b) of the
Income Tax Act, 1961.
6.5. With the observation made supra and directions issued, the
writ petition stands disposed of. As a result of the disposal of the
writ petition, all pending interlocutory applications, if any, shall
stand disposed of.
(Harish Tandon)
Chief Justice
(M.S. Raman)
Judge
A. Nanda
Location: High Court of Orissa, Cuttack
Date: 25-Jun-2025 11:27:14
