Mandatory Condonation of Delay in Filing Form 10 to Prevent Genuine Hardship Under Section 119(2)(b).

The petitioner is a charitable trust running a school for over 30 years. For Assessment Year (AY) 2016-17, the petitioner failed to apply 85% of its income for charitable purposes and decided to accumulate the surplus for modernization under Section 11(2) of the Income Tax Act, 1961

Due to the introduction of mandatory electronic filing (Rule 17) and oversight, the petitioner failed to file Form 10 within the prescribed time limit (17.10.2016), although the funds were duly invested in prescribed securities under Section 11(5)

The Assessing Officer disallowed the accumulation. The petitioner’s application for condonation of delay under Section 119(2)(b) was rejected by the Respondent on 17.09.2019, on the grounds that no "genuine hardship" was established

1. Whether the respondent was justified in rejecting the application for condonation of delay in filing Form No. 10 for AY 2016-17 under Section 119(2)(b) of the Act given the transition to electronic filing

2. Whether the term "genuine hardship" should be interpreted liberally to ensure substantial justice in cases of technical defaults

The court primarily applied Section 119(2)(b) of the Income Tax Act, which empowers the Board to admit belated applications to avoid genuine hardship

It relied on CBDT Circular No. 7/2018 (dated 20.12.2018), which specifically authorized Commissioners to condone delays in filing Form 9A and Form 10 for AY 2016-17 because it was the first year of electronic filing

The court also referenced the principle that "genuine hardship" must be given a considered meaning to help the assessee and that procedural technicalities should not supersede substantial justice

The court reasoned that the transition from manual to electronic filing in AY 2016-17 constituted a reasonable cause for the petitioner’s oversight

Applying Circular No. 7/2018, the court noted that the CBDT itself recognized the difficulties faced by trusts during this transition year

The court emphasized that the power under Section 119(2)(b) is intended to do "substantial justice"; since the petitioner had actually invested the funds in accordance with Section 11(5), the failure to file Form 10 was a technical lapse. Forcing the petitioner to lose the exemption would cause "genuine hardship" and "injustice" that the statute aims to prevent

The court followed its own precedent in SCA No. 11105 of 2020, asserting the approach must be "justice-oriented"

The court allowed the petition and quashed the impugned order dated 17.09.2019. The court directed the respondents to pass an order condoning the delay in filing Form No. 10, thereby enabling the petitioner to claim the exemption under Section 11 of the Act