Delhi High Court Allows Bar Council of India to File Delayed Form 10 for Tax Exemption

New Delhi: The Delhi High Court has set aside an order by the Commissioner of Income Tax (Exemption) that rejected the Bar Council of India's (BCI) application to condone the delay in filing Form 10 for the Assessment Year (AY) 2016-17. The court, comprising Justices Rajiv Shakdher and Girish Kathpalia , directed the income tax authorities to accept the belated Form 10, paving the way for the BCI's claim for exemption under Section 11 of the Income Tax Act, 1961.

Case Background

The Bar Council of India, the apex professional body for regulating the legal profession and education, is a non-commercial organization registered under Section 12A of the Income Tax Act. Its income has historically been exempt under Section 10(23A) since April 1, 1962.

For AY 2016-17, the BCI filed its income return claiming exemption under Section 10(23A). However, unbeknownst to the BCI officials at the time, amendments to Sections 11 and 13 of the Act had come into effect from April 1, 2016, following the Finance Act, 2015. These amendments necessitated claiming certain exemptions, particularly for accumulated income, under Section 11(2) by filing Form 10 within the prescribed time (usually the due date for filing the income return).

Upon realizing the oversight during assessment proceedings in December 2018, the BCI promptly filed a revised computation claiming exemption under Section 11 and subsequently filed Form 10 along with an application seeking condonation of the delay on December 17, 2018. Despite a request to decide the condonation application before the assessment was completed, the Assessing Officer passed the AY 2016-17 order on December 30, 2018, without considering the Section 11 exemption claim. Subsequently, on January 30, 2019, the Commissioner dismissed the delay condonation application, stating that the BCI had "no intention of filing form 10 within due date and was not prevented by any reasonable cause".

Key Arguments Presented

The BCI argued before the High Court that the delay was a genuine mistake caused by their officials' lack of awareness regarding the recent amendments to the Act and Rules. They emphasized that similar delays in filing Form 10 for subsequent assessment years (2017-18 and 2018-19) were condoned by the same Commissioner on comparable grounds. The BCI contended that no prejudice was caused to anyone by the delay and therefore, the delay should have been condoned.

Conversely, the revenue supported the Commissioner's order, arguing that the BCI had failed to provide a sufficient reason for the delay. They also pointed out that the BCI had not claimed accumulation under Section 11(2) either in its original return or in Form 10B ( Audit Report) for AY 2016-17.

Court's Analysis and Reasoning

The High Court found the revenue's argument regarding the lack of claim in the original return or Form 10B unconvincing, stating that the claim for accumulation can be considered after the delay in filing Form 10 is condoned and the form is brought on record.

The bench critically examined the Commissioner's reasoning for rejecting the condonation, particularly the assertion that the BCI had "no intention of filing form 10". The court stated:

> "We are unable to decipher from the impugned order as to what those “reasons to believe” were which led the respondent to arrive at a conclusion that the petitioner had no intention to file Form 10 within the due date. Mere failure to claim accumulation cannot be read as “reasons to believe” that the petitioner did not intend to file Form 10."

The court also referred to various CBDT Circulars (including No. 07/2018, 30/2019, 03/2020, and 17/2022) which specifically authorized Commissioners to condone delays in filing Forms 9A and 10, especially for AY 2016-17, recognizing it as the first year of e-filing for these forms and following the amendments. These circulars, the court noted, reflected a policy to liberally condone such delays to mitigate genuine hardship.

Crucially, the court highlighted the inconsistency in the Commissioner's approach, noting that the same authority had condoned the BCI's delay in filing Form 10 for AYs 2017-18 and 2018-19 on similar grounds. The court found the BCI's explanation for the delay (not noticing amendments in the first year they were effective) believable and saw no benefit accruing to the BCI from delaying the filing.

Concluding that the discretion conferred for condoning the delay was not correctly exercised, the High Court allowed the petition.

The Verdict

The Delhi High Court set aside the impugned order dated January 30, 2019, condoned the delay in the Bar Council of India's submission of Form 10 for AY 2016-17, and directed that Form 10 be accepted, following which necessary consequences under the Income Tax Act will apply.

This judgment reinforces the principle that delay condonation applications should be considered based on reasonable cause, and authorities must exercise their discretion fairly, consistently, and in line with underlying policy guidelines such as CBDT circulars aimed at mitigating assessee hardship.