INDIAN MEDICAL ASSOCIATION PUNE BRANCH,PUNE V. DCIT EXEMPTION CIRCLE, PUNE

ITA 1873/PUN/2025

AI Insights

The case involves the Indian Medical Association Pune Branch, a public charitable trust, which appealed against the order of the Ld. Addl / JCIT(A) denying them exemption under section 11 of the Income Tax Act due to a delay in filing the audit report in Form 10B. The trust had filed an updated return under section 139(8A), declaring a total income and claiming exemption under section 11, which was disallowed by the CPC. The Tribunal examined whether the procedural delay in filing the audit report should affect the substantive right to claim exemption under section 11, referencing various judicial precedents and CBDT circulars that supported the trust's position.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 837585 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2022-2023
• Appeal Filed On: 05-08-2025
• Other Referred Cases: DCIT vs. Bishnupur Public Education Institute, Shri Rajkot Vishashrimali Jain Samaj, M/s Susila Educational Trust Vs. ITO, M/s Seth Chagan Mall Hira Lall Dugar Charitable Trust Vs. ITO, CIT(E) Vs. M/s Indian Sugar Mills Association, Association of Indian Panel board manufacturer Vs. DCIT, Bangarh Educational Welfare Trust, Sarvodaya Charitable Trust v. ITO(Exemption)
• Laws Referred To: Income Tax Act, 1961, Bombay Public Trust Act, 1950
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDYA RATNA KISHORE
• Assessee Lawyers: NIKHIL S PATHAK; HOLDING
• Keywords: Set aside; Revised return; TDS; Charitable institution; Benefit of exemption
• Section: 143(3); 56; 11; 12AA; 12A; 139; 12; 10; 10B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.1873/PUN/2025 Assessment year : 2022-23 Indian Medical Association Pune Branch 992, DR Nitu Mandke House, Tilak Road, Pune – 411002 Vs. DCIT, Exemption Circle, Pune PAN: AAATI2653M (Appellant) (Respondent) Assessee by : Shri Nikhil S Pathak Department by : Shri Vidya Ratna Kishore Date of hearing : 18-12-2025 Date of pronouncement : 20-02-2026 O R D E R PER R.K. PANDA, V.P: This appeal filed by the assessee is directed against the order dated 30.06.2025 of the Ld. Addl / JCIT(A)-5, Delhi relating to assessment year 2022- 23. 2. Facts of the case, in brief, are that the assesse is a public charitable trust formed under the Bombay Public Trust Act, 1950. It carries on various activities towards benefit of society at large. It filed its updated return of income u/s 139(8A) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 18.12.2023 declaring total income of Rs.7,72,110/-. The return was filed after offering short term capital gain of Rs.3,73,849/- and long term capital gain of Printed from counselvise.com 2 ITA No.1873/PUN/2025 Rs.3,98,857/-, while simultaneously claiming exemption u/s 11 of the Act. According to the Assessing Officer it has claimed to have utilized more than 85% of its gross receipts of Rs.1,77,08,249/- and encashment proceeds of Rs.1,60,70,939/- towards charitable purposes. However, the CPC vide intimation u/s 143(1) of the Act disallowed the exemption claimed u/s 11 of the Act and assessed the income of the assessee at Rs.3,45,51,290/-. 3. Before the Ld. Addl / JCIT(A) the assessee filed the following financial details: 4. It was argued that the assessee has offered its short term capital gain and long term capital gain properly and also updated return filed u/s 139(8A) of the Act. It was submitted that the CPC has not taken in to account the claims made by the assessee u/s 11 and 12 of the Act regarding utilization of income and wrongly Printed from counselvise.com 3 ITA No.1873/PUN/2025 calculated the taxable income at Rs.3,45,51,290/-. It was submitted that even if the assessee has made any procedural mistake it will not allow the Assessing Officer for taxing the gross collection. Referring to the audited accounts it was submitted that gross collection is Rs.1,77,08,249/- against which the assessee has incurred expenditure of Rs.99,49,982/- and therefore, the net surplus is only Rs.77,58,267/-. It was further submitted that the trust has spent around 56.18% of the gross receipts and has apportioned Rs.84,26,361/- for future use in subsequent years which has resulted into more than 85% usages of the gross collection during the year and therefore, taxation of gross income is wrong. Relying on various decisions it was submitted that the application of section 56 of the Act is either unwarranted or bad in law. It was further submitted that only the long term capital gain and short term capital gain has to be taxed and also merely because the assessee could not file return in time and could not make claim of TDS amounting to Rs.3,05,557/- as appearing in Form No.26AS, the same cannot be denied to the assessee. 5. However, the Ld. Addl. / JCIT(A) was not satisfied with the arguments advanced by the assessee and held that the exemption was denied not on the basis of nature of income taxable u/s 56 of the Act but it is due to the assessee’s lapse in timely filing of the audit report. He noted that the Income Tax Act as amended by the Finance Act, 2017 makes it mandatory for charitable and religious trusts to file their return of income within the due date specified u/s 139(1) of the Act to claim exemption u/s 11 of the Act. The updated return facility u/s 139(8A) of the Act Printed from counselvise.com 4 ITA No.1873/PUN/2025 allows taxpayers to file or update returns within 24 months from the end of the relevant assessment year. However, this provision does not override the specific conditions for claiming certain exemptions or deductions such as those u/s 11 which require timely filing. According to him, if the return is not filed within this time, the exemption is not available. The relevant observations of the Ld. Addl. / JCIT(A) from para 6.3 to 6.4 read as under: Printed from counselvise.com 5 ITA No.1873/PUN/2025 6. So far as granting of TDS credit is concerned, the Ld. Addl. / JCIT(A) restored the issue to the file of the Assessing Officer with certain directions for which the assessee is not in appeal, therefore, we are not concerned with the same. 7. Aggrieved with such order of the Ld. Addl. / JCIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 11 The learned Addl. CIT(A) erred in holding that the assessee trust was not entitled to claim exemption u/s 11 on the ground that there was delay in filing in Form 10B and return of income on the part of the assessee. 2] The learned Addl. CIT(A) erred in holding that the assessee had claimed exemption u/s 11 by filing an updated return u/s 139(8A) which was not justified and hence, exemption u/s 11 could not be allowed to the assessee. 3] The learned Addl. CIT(A) failed to appreciate that just because, the assessee had made the claim of exemption in the updated return filed u/s 139(8A), there was no reason to disallow the claim of exemption made u/s 11 of the Act. 4] The learned Addl. CIT(A) erred in not appreciating that the assessee had filed its return of income and also audit report in Form 10B before the intimation order passed by the learned CPC and hence, there was no reason to deny the claim of exemption claimed u/s 11 of the Act. 5] The learned Addl. CIT(A) failed to appreciate that even if, there was a small delay in filing the audit report in Form 10B, since the assessee has Printed from counselvise.com 6 ITA No.1873/PUN/2025 ultimately filed the same, the claim of exemption u/s 11 ought to have been granted. 6] Without prejudice to the above grounds, assuming without admitting that the exemption u/s 11 is not allowable to the assessee trust, the learned CPC erred in taxing the gross receipts as an income of the assessee without appreciating that only the net surplus after deducting the expenditure incurred could be taxed as an income of the assessee. 7] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 8. The Ld. Counsel for the assessee at the outset referring to the decision of the Tribunal in assessee’s own case for assessment years 2014-15 to 2020-21 submitted that the Tribunal in assessee’s own case has directed the Assessing Officer / CPC to allow the claim of exemption u/s 11 of the Act although the returns were filed in time. 9. The Ld. Counsel for the assessee drew the attention of the Bench to the provisions of section 12A(1)(ba) of the Act which has been amended w.e.f. 01.04.2023. He submitted that after the amendment w.e.f. 01.04.2023, the exemption can be claimed only if the return of income is furnished either u/s 139(1) or u/s 139(4) of the Act. He drew the attention of the Bench to the Memorandum explaining the Finance Bill, 2023 and submitted that the same was introduced to exclude the category of returns filed u/s 139(8A) of the Act. He submitted that subsequent to the amendment brought in w.e.f. assessment year 2023-24, no exemption u/s 11 of the Act would be allowable when the same has been claimed in an updated return filed u/s 139(8A) of the Act. Printed from counselvise.com 7 ITA No.1873/PUN/2025 10. Referring to the decision of the Kolkata Bench of the Tribunal in the case of DCIT vs. Bishnupur Public Education Institute reported in (2025) 172 taxmann.com 307 (Kolkata – Trib.), he submitted that the Tribunal in the said decision has held that late filing of Form No.10 by the assessee being procedural delay on part of the assessee could not be used as ground for denying legitimate exemption u/s 11(2) to the assessee trust. He accordingly submitted that the grounds raised by the assessee be allowed. 11. The Ld. DR on the other hand heavily relied on the order the Ld. Addl. / JCIT(A). He submitted that the Ld. Addl. / JCIT(A) has given justifiable reasons while rejecting the claim of exemption u/s 11 of the Act. Therefore, the same should be upheld and the grounds raised by the assessee be dismissed. 12. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. Addl. / JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee filed its updated return u/s 139(8A) of the Act on 18.12.2023 declaring total income of Rs.7,72,110/- after claiming exemption u/s 11 of the Act. We find the CPC while processing the return disallowed the claim of exemption and determined the total income at Rs.3,45,51,290/-. We find the Ld. Addl. / JCIT(A) while confirming the order of the CPC held that the exemption u/s 11 of the Act cannot be claimed in an updated Printed from counselvise.com 8 ITA No.1873/PUN/2025 return if no original return is filed. According to him, the Income Tax Act as amended by the Finance Act, 2017 makes it mandatory for charitable and religious trusts to file their return of income within the due date specified u/s 139(1) of the Act to claim exemption u/s 11 of the Act. The updated return facility u/s 139(8A) of the Act allows taxpayers to file or update returns within 24 months from the end of the relevant assessment year. However, this provision does not override the specific conditions for claiming certain exemptions or deductions such as those u/s 11 which require timely filing. Since the assessee in the instant case has not filed its return along with the audit reports within the specified time, therefore, the CPC was justified in rejecting the claim of exemption u/s 11 of the Act. 13. It is the submission of the Ld. Counsel for the assessee that the provisions of section 12A(1)(ba) of the Act have been amended w.e.f. 01.04.2023 and after this amendment, the exemption can be claimed only if the return of income is furnished either u/s 139(1) or u/s 139(4) of the Act. It is his submission that this amendment was introduced to exclude the category of returns filed u/s 139(8A) of the Act. It is also his submission that subsequent to the amendment brought in w.e.f. assessment year 2023-24, no exemption u/s 11 of the Act would be allowable when the same has been claimed in an updated return u/s 139(8A) of the Act. Therefore, prior to assessment year 2023-24 even if the same has been claimed in an updated return u/s 139(8A) of the Act, the exemption u/s 11 of the Act cannot be denied. Printed from counselvise.com 9 ITA No.1873/PUN/2025 14. We find some force in the above arguments of the Ld. Counsel for the assessee. We find the relevant portion of the Memorandum explaining the Finance Bill, 2023 reads as under: “9. Denial of exemption where return of income is not furnished within time 9.1 As per the provisions of twentieth proviso to clause (23C) of section 10 of the Act, if the return of income is not furnished by a trust or institution under first regime within the time under section 139 of the Act, exemption under subclause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act shall not be available to such trust or institution. a. Similarly, as per the provisions of clause (ba) of sub-section (1) of section 12A of theAct, if the return of income is not furnished by a trust or institution under the secondregime within the time under section 139 of the Act, exemption under section 11, 12 of theAct shall not be available to such trust or institution. b. Section 139 of the Act was amended by the Finance Act, 2022 providing for an option to the taxpayers to furnish updated return of income up to 2 years from the end of assessment year c. This resulted in unintended consequences of allowing exemption under section 11, 12 of the Act and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available to the trusts where they furnish updated return of income. Accordingly, it is proposed to clarify that the exemption under section 11, 12 and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available only if the return of income has been furnished within the time allowed under sub-section (1) or sub- section (4) of section 139 of the Act. d. Hence, it is proposed to a) amend the twentieth proviso of clause (23C) section 10 of the Act to provide that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub- clause (vi) or subclause (via) shall furnish the return of income for the previousyear in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under sub- section (1) or sub-section (4) of that section. b) amend clause (ba) of sub-section (1) of section 12A of the Act to provide that the person in receipt of the income shall furnish the return of income for the previous year in accordance with the Printed from counselvise.com 10 ITA No.1873/PUN/2025 provisions of subsection (4A) of section 139 of the Act, within the time allowed under subsection (1) or sub-section (4) of that section. e. These amendments will take effect from 1stApril, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.” (emphasis supplied by us) 15. We find after considering the Memorandum explaining the Finance Bill, 2023, the Kolkata Bench of the Tribunal in the case of DCIT vs. Bishnupur Public Education Institute (supra) has decided an identical issue and allowed the claim of exemption u/s 11 of the Act. We find in that case also the assessee filed its return of income for assessment year 2016-17 on 17.02.2017. The assessee is registered u/s 12A of the Act vie order of Commissioner dated 29.08.2013. The assessee submitted form no.10B and claimed exemption u/s 11 of the Act accordingly. During the course of assessment proceedings the assessee filed a revised computation on 11.01.2018 claiming therein the exemption u/s 11(2) of the Act to the tune of Rs.3,78,41,876/-. The assessee also filed form No.10 online on 29.08.2018, in respect of such accumulation of profit. The Assessing Officer assessed the income at Rs.3,80,90,390/- by rejecting the claim of the assessee u/s 11(2) of the Act. In appeal the Ld. CIT(A) allowed the appeal of the assessee by observing that section 13(9) of the Act was inserted by Finance Act, 2015 with effect from 01.04.2016, was not applicable to the instant assessment year and accordingly directed the Assessing Officer not to invoke the provisions of Section 13(9) of the Act. The Revenue preferred an appeal before the Tribunal and the Printed from counselvise.com 11 ITA No.1873/PUN/2025 Tribunal after considering the rival arguments made by both the sides, Memorandum explaining the Finance Bill, 2023, CBDT Circular No.F No.173/193/2019 –ITA-1, dated 23.04.2019 and various other decisions has held the return filed by the assessee is to be treated as filed within the time limit allowed u/s 139 of the Act which includes the return filed u/s 139(1) of the Act as well as 139(4) of the Act. The relevant observations of the Tribunal from para 8 onwards read as under: “08. After hearing the rival contentions and perusing the materials available on record, we find that the return of income has been filed beyond the due date u/s 139(1) of the Act, however, it was filed well within the time allowed u/s 139(4) of the Act. We note that in the return filed u/s 139(1) of the Act, the assessee has not claimed exemption u/s 11(2) of the Act in respect of accumulations made, however during the course of assessment proceedings, a claim was lodged before the ld. AO by filing the revised consolidated computation of income. The assessee also filed the form no.10 for accumulation on 29.08.2018. Now the issue before us is whether the assessee is entitled to said exemption although the return as well as form no.10 has been filed belatedly. So far as the return of income filed on 17.02.2017is concerned ,we are of the view that the same is filed within the time limit allowed u/s 139 of the Act which includes the return filed u/s 139(1) of the Act as well as 139(4) of the Act. The case of the assessee is covered by the decision of the co-ordinate Bench in case of Shri Mahudi Madhupuri Jain Vs. ITO (supra), wherein the co-ordinate Bench held as under: - “7. The provision of Section 12A(1)(ba) of the Act was amended w.e.f. 01.04.2023 and the time allowed for the filing of return was prescribed as ‘within the time allowed under sub-section (1) of sub-section (4) of that section’. Thus, there is no doubt that for A.Y. 2023-24 onwards the time limit for filing of return of the trust includes not only the time limit for filing the original return u/s 139(1) of the Act but also the time as available for filing belated return u/s 139(4) of the Act. 8. The contention of the ld. AR is that the above amendment was only clarificatory in nature and that the return for the earlier years filed within the time limit u/s 139(4) of the Act also gets this benefit. On the other hand, the Ld. CIT-DR has contended that for the years prior to A.Y. 2023- 24 the benefit of exemption u/s11 of the Act is available only to returns filed within the time limit as available u/s 139(1) of the Act. Printed from counselvise.com 12 ITA No.1873/PUN/2025 9. In order to resolve this controversy, it will be relevant to examine the Memorandum of the Finance Bill, 2023 which is found to be as under: 9. Denial of exemption where return of income is not furnished within time 9.1 As per the provisions of twentieth proviso to clause (23C) of section 10 of the Act, if the return of income is not furnished by a trust or institution under first regime within the time under section 139 of the Act, exemption under subclause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act shall not be available to such trust or institution. a. Similarly, as per the provisions of clause (ba) of sub-section (1) of section 12A of theAct, if the return of income is not furnished by a trust or institution under the secondregime within the time under section 139 of the Act, exemption under section 11, 12 of theAct shall not be available to such trust or institution. b. Section 139 of the Act was amended by the Finance Act, 2022 providing for an option to the taxpayers to furnish updated return of income up to 2 years from the end of assessment year c. This resulted in unintended consequences of allowing exemption under section 11, 12 of the Act and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available to the trusts where they furnish updated return of income. Accordingly, it is proposed to clarify that the exemption under section 11, 12 and sub- clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available only if the return of income has been furnished within the time allowed under sub-section (1) or sub- section (4) of section 139 of the Act. d. Hence, it is proposed to a) amend the twentieth proviso of clause (23C) section 10 of the Act to provide that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub- clause (v) or sub-clause (vi) or subclause (via) shall furnish the return of income for the previousyear in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under sub-section (1) or sub-section (4) of that section. b) amend clause (ba) of sub-section (1) of section 12A of the Act to provide that the person in receipt of the income shall Printed from counselvise.com 13 ITA No.1873/PUN/2025 furnish the return of income for the previous year in accordance with the provisions of subsection (4A) of section 139 of the Act, within the time allowed under subsection (1) or sub-section (4) of that section. e. These amendments will take effect from 1stApril, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. 10. It is apparent from the above clarification that this amendment was introduced to exclude the category of updated returns of income u/s 139(8) of the Act. The requirement of Section 12A(1)(ba) of the Act for this year was that the return should be filed within the time allowed under that section (i.e. u/s. 139 of the Act). Section 139 provides time limit for filing of original return, belated return, revised return as well as updated return. Thus, all these category of returns were eligible for consideration under the general time line of section 139 of the Act. In order to exclude the category of updated return of income, this amendment was brought in to exclude the revised/updated category of returns and specific mention of section 139(1) & 139(4) of the Act was made in Section 12A(1)(ba) of the Act. It is apparent from the Memorandum that time limit for belated return u/s 139(4) of the Act was available for the earlier years as well which was continued and made specific vide this amendment. There is no dispute to the fact that the assessee has filed its return of income for this year within the time limit of section 139(4) of the Act. Therefore, the department was not correct in denying the exemption u/s11 of the Act while processing the return. 11. The Circular F No. 173/193/2019 –ITA-1, dated 23.04.2019 issued by the CBDT and relied upon by the assessee refers to Memorandum to the Finance Bill, 2017 and gives clarification in respect of amendment to section12A of the Act, that a person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed u/s 139 of the Act. As per this clarification, the return of income was required to be filed within the time allowed u/s 139 of the Act and the relevant portion of the Circular is reproduced below: “2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: \"as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under subsection (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed under Printed from counselvise.com 14 ITA No.1873/PUN/2025 section 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as in provide for further-condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018- 19 and subsequent years.\" 3. Additionally, an excerpt of circular No. 2/2018 dated 15-2-2018 \"Explanatory Notes to the Provisions of the Finance Act, 2017\" on insertion of clause (ba) in Sub-section (1) of section 12A is quoted as under: “The entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act.\" 3. Thus, for a trust registered under section 12AA of the Act to avail the benefit of exemption under section 11 shall inter-alia file its return of income within the time allowed under section 139 of the Act. Accordingly, orders under section 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified.” (Emphasis supplied). 12. It is, thus, clear from the above Circular that exemption u/s 11 of the Act was available in respect of the return of income filed u/s 139 of the Act. This Circular does not mandate that the return has to be filed only within the time limit available u/s 139(1) of the Act and rather directs to rectify the unjust demand raised u/s 143(1)(a) of the Act. As the assessee had filed its return of income within the time limit of section 139(4) of the Act, it was eligible for benefit of exemption u/s 11 of the Act. It has been held by the Ld. ITAT, Rajkot Bench in the case of Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (Rajkot-Tri), which has been relied upon by the assessee, that if the assessee had filed return of income after due date of filing of return u/s.139(1) of the Act but before due date prescribed u/s 139(4) of the Act, benefit of exemption u/s 11 of the Act can’t Printed from counselvise.com 15 ITA No.1873/PUN/2025 be denied to the assessee by invoking the provisions of Section 12A(1)(ba) of the Act. 13. In view of the above provisions of law, the clarificatory Circular of the CBDT as well as the judicial pronouncement, we are of the considered opinion that the department was not correct in disallowing exemption u/s 11 of the Act while processing the return, as the return of income was filed by the assessee within the due date as per the provisions of the Act. Accordingly, findings of the Ld. JCIT(A) is reversed and the department is directed to allow the exemption u/s. 11 of the Act as claimed by the assessee. 14. In the result, appeal preferred by the assessee is allowed.” 09. Similarly, the co-ordinate Bench in the case of M/s Susila Educational Trust Vs. ITO (supra) has decided the issue in favour of the assessee by holding and observing as under:- “4.3 The ld.AR argued that the CIT(A) failed to consider Circular No.2/2018 issued vide F.No.370142/15/2017-TPL dated 15.02.2018 explaining Finance Act, 2017 and the explanatory notes to the provisions of the Finance Act, 2017 and subsequent clarification issues by CBDT in F.No.173/193/2019-ITA-I dated 23.04.2019 with reference to time allowed for filing of return of income, subsequent to insertion of clause (ba) in sub- section 1 of section 12A of the Act. She produced the relevant copy of Circular No.2/2018, wherein the Explanatory notes to the provisions of Finance Act, 2017 was explained as under:- “15.4 Further, as per the provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there was no clarity as to whether the said return of income was to be filed within time allowed under section 139 or otherwise. 15.5 In order to provide clarity in this regard, further amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income tax Act. In view of the above excerpts of Finance Act, 2017 explaining the provisions of Finance Act, 2017 by the CBDT, clarified that amendment to section 12A of the Act was made so as to provide additional condition that the person in respect of income chargeable to income-tax claiming Printed from counselvise.com 16 ITA No.1873/PUN/2025 exemption shall furnish return of income within the time allowed u/s.139 of the Act. She stated that the assessee’s case is squarely covered by the CBDT Circular No.2/2018 dated 15.02.2018. 5. We noted that even in regard to representation received by CBDT for the applicability of amended provisions of section 12AA of the Act for filing of return required u/s.139(4A) of the Act, CBDT referring the Finance Bill, 2017 has clarified vide F.No.173/193/2019-ITA-1 dated 23.04.2019 as under:- F.No. 173/193/2019-ITA-I Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 23 April, 2019 To, The Pr. DGIT (Systems), New Delhi. Subject : Clarification with regard to the time allowed for filing of return of income subsequent to the insertion of Clause (ba) in sub– section 1 of section 12A of the income –tax Act , 1961. Sir, Undersigned is directed to refer to the representation(s) received on above mentioned subject stating that while processing of ITR-7 for the A.Y. 2018- 19, in respect of the belated returns filed u/ s 139(4) of the Income Tax Act, 1961 (Act), the following is being communicated u/s 143(1)(a) of the Act:- “As per section 12A(1)(ba) of the Income -tax Act , 1961 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. Otherwise, the exemption u/s-11 i.e. sr. no 4(i) and 4 viii in schedule Part BTI is not allowed.” Based on this, exemption u/s 11 of the Act has been denied to otherwise eligible trust, thereby creating huge demand. 2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: Printed from counselvise.com 17 ITA No.1873/PUN/2025 “as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under subsection (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/ s 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to incometax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 201 8-19 and subsequent years.” 3. Additionally, an excerpt of circular 02/2018 dated 15.02.2018 “Explanatory Notes to the Provisions of the Finance Act, 2017” on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under: “the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income -tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income- tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income -tax Act.” 3. Thus, for a trust registered u/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified. This issues with the approval of Chairman(CBDT). 5.1 From the above communication, it is clear that CBDT has taken a conscious decision and finally agreed for the position that trust registered u/s.12AA of the Act, in order to avail the benefit of exemption u/s.11 of the Act shall inter-alia files its return of income within the time allowed u/s.139(1) of the Act. The CBDT has categorically directed the Assessing Officers and this clarification was issued to the Pr.DGIT(Systems), New Delhi that the orders issued u/s.143(1A) of the Act in the case where Printed from counselvise.com 18 ITA No.1873/PUN/2025 already disallowance were carried out, those may be rectified. Hence, the CBDT itself accepted the position that even returns filed u/s.139 is to be accepted. It means that it has enlarged its scope of section 139 of the Act, which includes provisions of section 139(4) also. Here provision of section 139(4) w.e.f. 01.04.2017 lays down that any person who has not furnished return of income within the time allowed u/s.139(1) of the Act, may furnish the return for any previous year at any time before the end of the relevant financial year or before the completion of assessment whichever is earlier. Here, in the present case, the assessee has filed return of income for the relevant assessment year 2018-19 on 09.02.2019 and here assessment year ends on 31.03.2019. It means, this return is filed within the provision of section 139(4) of the Act. In term of section 139(4) of the Act, a return filed at a belated stage but upon complying with the requirement of such provision, has to be treated as return of income. In the present case, the CBDT has already clarified vide F.No.173/193/2019- ITA-I dated 23.04.2019, which is reproduced above that the assessee is entitled for exemption u/s.11 of the Act, if such return of income is filed within the time allowed u/s.139 of the Act. It means that it covers all the provisions of section 139 of the Act and it is not limited to section 139(1) of the Act. Hence, we allow the appeal of assessee and direct the AO to allow exemption u/s.11 of the Act in this case of the assessee. 6. In the result, the appeal filed by the assessee is allowed.” 010. Therefore, we are inclined to hold that the return filed by the assessee is to be treated as filed within the time allowed u/s 139 of the Act, which includes the return filed u/s 139(1) as well as return of income filed u/s 139(4) of the Act. So far as the filing of form no.10 is concerned during the assessment proceedings on 29.08.2018, we are of the considered view that the late filing of the said form is a procedural delay on the part of the assessee and cannot be used as ground for denying the legitimate exemption u/s 11(2) of the Act. The case of the assessee find force from the decision of Hon'ble High Court in case of CIT(E) Vs. M/s Indian Sugar Mills Association in ITAT/270/2023 (supra), wherein the Hon'ble Court has held that filing of form no.10B is a procedural provision. Similarly, in the case of Association of Indian Panel board manufacturer Vs. DCIT (supra), Hon'ble Gujrat High Court has held that the non-filing of audit report along with return of income which was at best procedural omission, could never lead to an impediment in law in claiming the exemption. Similarly, in the case of M/s Seth Chagan Mall Hira Lall Dugar Charitable Trust Vs. ITO (supra), the co-ordinate Bench held that filing of audit report is only a procedural provision and could not be used to reject the exemption u/s 11 of the Act. The operative part of the same is extracted below:- “2.1. We have also gone through the cited judgment passed by the hon ITAT and find that the Coordinate Bench of ITAT, Kolkata in the case of Bangarh Educational Welfare Trust (supra) find that the facts of the case were that a Trust was granted registration u/s 12AA(b)(i) of the Act, return Printed from counselvise.com 19 ITA No.1873/PUN/2025 of income filed claiming deduction u/s 11 of the Act and the deduction of Rs. 1,35,87,109/- claimed by the assessee denied on the ground that the assessee failed to file the return before the due date and secondly audit report in Form-10B was not filed before the due date prescribed in this Act. The Hon'ble Member has after going over the Circular of CBDT and after discussing several judgments of the hon ITAT has passed the order in favour of the assessee. The operative portion of the aforesaid decision is as thus: \"12. Now, the second reason for which lower authorities have denied the deduction u/s 11 of the Act is of filing the belated audit report on form 10B of the Act. Now, clause (b) of section 12A(1) of the Act provides for a condition that if the income of a trust exceeds a maximum amount which is not chargeable to tax in the previous year the account have to be audited and the person in receipt of such income furnishes the audit report before the specified date. In the case of the assessee, Form No.10B was to be filed and the relevant rule is rule 17B of the Income Tax Rules which provides that the report of audit of the accounts of a trust or institution which is required to be furnished under Clause (b) of section 12A, shall be in Form No.10B. 13. Now, on perusal of the Form 10B, we notice that the same is required to be submitted electronically, one month prior to the due date of the filing of return of income. Admittedly, in the case in hand, the audit report on form 10B has been uploaded on 30.03.2019 which is even after the date of filing the return of income on 15.11.2018. Now, before us, it has been contended by the ld. counsel for the assessee that filing of audit report is directory in nature and even if report is submitted in time before the conclusion of the assessment proceedings, the same needs to be considered. Though the assessee referred to the various decisions, we find it pertinent to refer to the judgment of the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust v. ITO(Exemption) (supra) wherein Para 32 of the said judgment reads as follows: 32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Gujarat), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible Printed from counselvise.com 20 ITA No.1873/PUN/2025 for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause.\" 14. In the above judgment, Hon'ble Court has held that filing of audit report is directory in nature and its substantial compliance would suffice. The ld. Departmental Representative failed to place before us any other binding precedents of Hon'ble Jurisdictional High Court or the Hon'ble Apex Court. Therefore, considering the ratio laid down in the Hon'ble Gujarat High Court in the case of Assessment year: 2018-19 Bangarh Educational Welfare Trust Sarvodaya Charitable Trust v. ITO(Exemption) (supra), we find that though the audit report has been uploaded after the filing of return of income but the said report has been signed by the auditor on 28.10.2018 and the copy of this report is placed at 40- 41 of paper book and the date of audit report is prior to the filing of the return of income, therefore, it is presumed that conducting of audit for preparation of audit report is before e-filing of the return of income but as claimed by the assessee due to technical glitches, the report was uploaded after filing the return of income. 15. Though the Hon'ble Court holds that the report should be considered even filed in the course of assessment proceedings, or before in appellate authority, however, we notice that in the instant case, the case of the assessee was not selected for scrutiny assessment and it was mere processing of return by the computer with the set program. Had it been the case of scrutiny proceeding u/s 143(3) of the Act, the case could have been different. The ld. A.O may had an opportunity to go through the audit report. But still when the issue came before ld. CIT(A) who also possesses coterminus power with that of A.O and as per section 251(1)(a) of the Act, the ld. CIT(A) in disposing the appeal against order of assessment has the power to confirm, reduce, enhance or annul the assessment, therefore, though, it was not possible to entertain the audit report while processing the return u/s 143(1)(a) of the Act, but the ld. CIT(A) was well within its power to have entertained the said report and examined the same as could have been done by the A.O. Assessment year: 2018-19 Bangarh Educational Welfare Trust. 16. We, therefore, in the given facts and circumstances and respectfully following the judgment of Hon'ble Gujarat High Court in the case Sarvodaya Charitable Trust v. ITO(Exemption) (supra) , we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub-clause (b) and (ba) to section 12 Printed from counselvise.com 21 ITA No.1873/PUN/2025 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos.1 to 4 of the assessee are allowed.\" 2.2. We have also gone through the order passed by the cob of ITAT, Kolkata in Sasha Association for Craft Producers v. ITO in [IT Appeal No. 181 (Kol.) of 2021, dated 16- 8-2023] on the issue for non-submission of Form-10, the Hon'ble Member has allowed the appeal of the assessee. 3. Keeping in view the above cited decisions and considering the facts of the present case, we are of this view that the appellant is entitled to deduction and his claim cannot be denied only on this regard that Form-9A has been filed later on, not with the returned income. The appellant has been able to establish his ground of delay that the trustee responsible for handling tax related matters was hospitalized and he had been suffering from severe illness. It is also not in dispute that the copy of discharge certificate and doctor's prescription has been filed by the assessee before the ld. CIT (Exemption). Accordingly, we condone the delay and the matter is sent back to the file of ld. CIT (Exemption) to pass order as per law. Accordingly, the appeal is hereby allowed. 4. In the result, the appeal filed by the assessee is allowed for statistical purposes.” 011. Considering the facts of the aforesaid decisions, we are inclined to dismiss the appeal of the Revenue. 012. In the result, the appeal of the Revenue is dismissed.” 16. Since in the instant case also the assessee admittedly has filed its updated return of income u/s 139(8A) of the Act on 18.12.2023 for the assessment year 2022-23 by claiming exemption u/s 11 of the Act which is within the time permissible u/s 139(4) of the Act, therefore, respectfully following the decision of the Kolkata Bench of the Tribunal in the case of DCIT vs. Bishnupur Public Education Institute (supra), we hold that the assessee cannot be denied the exemption u/s 11 of the Act on account of filing of the updated return. We, Printed from counselvise.com 22 ITA No.1873/PUN/2025 therefore, set aside the order of the Ld. Addl / JCIT(A). The grounds raised by the assessee are accordingly allowed. 17. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 20th February, 2026. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 20th February, 2026 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune Printed from counselvise.com 23 ITA No.1873/PUN/2025 S.No. Details Date Initials Designation 1 Draft dictated on 12.02.2026 Sr. PS/PS 2 Draft placed before author 13.02.2026 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Office Superintendent 10 Date on which file goes to the A.R. 11 Date of Dispatch of order Printed from counselvise.com "