Extension of the ITR Due Date for Tax Audit Case Is Not Valid for the Assessee Subject to Audit Under Other Acts
Fact and issue of the case
This appeal in ITA No. 11/Mum/2023 for A.Y.2016-17 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-58, Mumbai in appeal No.CIT(A)-58, Mumbai/10245/2019-20 dated 14/11/2022 (ld. CIT(A) in short) against the order of assessment passed u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 18/07/2017 by the ld. Asst. Director of I.T. Bangalore-CPC (Int. Tax Ward 4(1)(1),Mum (hereinafter referred to as ld. AO).
The assessee has raised the following grounds of appeal:-
Learned CIT(A) 58, Mumbai erred in law in confirming order u/s 143(1)and the order u/s 154 by the ADIT.CPC, Bangalore on the ground that from the plain reading of clause Ill of Reserve Bank of India’s approval letter dated 5 August, 1985, it is soon that the RBI has issued a direction to get the accounts audited annually the books of account of limited companies by a qualified accountant, as prescribed in section 227 and 228 of Companies Act, 1956. The appellant prays that approval by RBI was granted to Gulu Hassanand Raney as proprietorship concern under the name Nautilus International (India) and not to limited company. Hence the order u/s 143(1) and 154 for not carry forward loss is wrong and as such bad in law.
Learned CIT(A) 58, Mumbai erred in law in confirming order u/s 143(1) and u/s 54 passed by the ADIT, by misconstruing and misinterpreting clause ill of RBI’s approval letter dated 5th August, 1985 on the ground that the appellant has not carried out business in the name of limited company during the year. The appellant prays that audit was carried out by qualified accountants Shreyans Jain and Associates, Chartered Accountants, who were competent to audit the accounts of limited companies and hence non carry forward of business loss is wrong presumption.
Learned CIT(A) 58 Mumbai erred in law in confirming the order u/s 143(1) and order u/s 154 by ADIT, CPC, on the ground that applicable due date of filing return of income will be 05.08.2016 u/s 139(1) of the LT. Act, 1961which is applicable to appellant’s case whose accounts are not subject to audit. The appellant is liable to get its accounts audited as per RBI’s approval letter dated 05th August, 1985. The appellant prays that accounts were audited by Qualified Chartered Accountants as prescribed by the Companies Act, 19567, hence confirming the order u/s 143(1) and 154 is bad in law.
Learned CIT(A) 58 Mumbai erred in law in confirming the order u/s 143(1)and 154 by ADIT CPC, by misconstruing and misinterpreting clause ill of RBI’s approval letter dated 5th August, 1985 presuming that sanction is given for audit of limited company only. The appellant prays that RBI’s letter dated 05th August, 1985 states “the concern should have its accounts audited annually by qualified accountants competent to audit the accounts of limited companies.” As per provisions of section 227 and 228 of the Companies Act, 1956, qualified chartered accountant practicing as proprietor/ firm are entitled to audit accounts of proprietary concern, firms, limited companies etc. The appellant prays that word used in letter dated 5th August, 1985 “competent to audit the accounts of limited companies” in relation to qualification of chartered accountant and not in relation to the appellant or limited company. The appellant prays that the accounts are audited by qualified chartered accountant, confirming the order u/s 143(1) and 154 for non-carry forward of loss is bad in law.
Leaned CIT(A) 58, Mumbai erred in law in confirming order u/s 143(1) and 154 by ADIT, CPC on the ground that for assessment year 2016-17, source of Income was Interest on Bank FDR/ Bank Interest and Interest on IT Refund and there being no income from business, hence not liable to audit. The appellant prays that appellant is carrying on business since 1975-76 as resident in India and from 1984-85 onward as non-resident as per RBI’s approval letter dated 5th August, 1985 and continued the business. It is possible that some time there may not be receipt from business, but expenses incurred to continue business and loss thereof amounts to continuation of business, hence liable to audit its accounts for Y. 2016-17 which appellant did afterwards. The appellant prays that he was continuing the business, hence confirming the order u/s 143(1) and 154 for disallowing loss and not carry forward of loss, is bad in law.
The appellant prays that since it continued the business and got accounts audited as per direction of RBI letter dated 5 August, 1985 by Qualified Chartered Accountant who is competent to audit of limited companies as prescribed in section 227 and 228 of the Companies Act, 1956, hence applicable due date to file its return of income will be as applicable to its, whose accounts are liable to audit under any other law (i.e. extended due date) and the appellant filed its return for AY 2016-17 on 17.10.2016 i.e. within time prescribed u/s 139(1) and as such entitled to carry forward business loss Rs.800566 and deprecation Rs.3 7735.
The appellant prays to allow carry forward of loss of Rs.838,301 i.e. business loss Rs. 800566 and depreciation loss Rs. 37735 as it got its accounts audited by Chartered Accountant and filed return of income within extended due date for A. Y.2016-1 7
The appellant craves leave to add, amend, alter, substitute and/ or modify any of the ground/s of appeal as may be advised and permitted by the Hon ‘ble Members of the Tribunal.
We have heard rival submissions and perused the materials available on record. We find that assessee is carrying on business of Agencies of shipyards and marine electronics by way of representing foreign shipyard and /or ship owner for ship repairing and/or day docking purposes as a proprietor in the name of Nautilus international (India). Assessee is carrying on business since 1975-76 in the above Proprietorship Name. Thereafter, in the Year 1983-84 (AY 1984-85) he became Non-Resident and continued the said business.
Since he became Non-Resident, as required, under Foreign Exchange Regulation Act (FERA) provisions, he was required to take approval from Reserve Bank of India for continuing his said Proprietary business. Permission was granted u/s 29(1)(a) of the FERA 1973 vide RBI’s Letter dated 05/08/1985. As per the clause (iii) of said R.B.I permission, one of the condition was Accounts are to be audited by Chartered Accountant. Accordingly, for the year under consideration i.e. for A.Y.2016-17, the accounts of the assessee were audited by a Chartered Accountant on 15/10/2016. The return of income for the A.Y.2016-17 was filed on 17/10/2016. The assessee claimed the business loss of Rs.8,38,301/- in the return of income to be carried forward to subsequent years. The ld. AO observed that since the return was not filed within the due date prescribed u/s.139(1) of the Act, in terms of Section 139(3) r.w.s.80 of the Act, the loss claimed by the assessee shall not be allowed to be carried forward to subsequent years. The ld. AR before us placed on record copy of press release dated 09/09/2016 issued by CBDT extending the due date of filing of returns to 17/10/2016 for A.Y.2016-17. For the sake of convenience, the said press release is reproduced hereunder:-
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, 9th September, 2016
Sub:- CBDT Extends due date for filing of Income Tax Returns – reg
The due date for filing of Income tax returns by tax payers whose accounts are required to be audited under the Income Tax Act is the 30th September of the following year. The tax payers whose business receipts exceed Rupees One Crore or professional receipts exceed Rupees twenty-five Lakh during the previous year 2015-1 6 are required to file an Income Tax return accompanied by an audit report by the above mentioned due date.
However, taking into consideration that the last date for making declarations under the Income Declaration Scheme 2016 is also 30th September, 2016, the Central Board of Direct Taxes has decided to extend the last date for such returns which were due on 30th September, 2016 to 17th October, 2016 in order to remove inconvenience and to facilitate ease of compliance
(Meenakshi J Goswami)
Commissioner of Income Tax
(Media and Technical Policy)
Official Spokesperson, CBDT
According to the ld. DR, only those cases where accounts of tax payers are required to be audited under the Income Tax Act alone would get extended time limit up to 17/10/2016 for filing the returns. The assessee in the instant case admittedly is not liable to get his accounts audited under the provisions of Income Tax Act. Per contra, the ld. AR stated that assessee is liable to get the accounts audited only as per RBI permission letter dated 05/08/1985 vide clause (iii) of the said letter. The assessee being a non-resident, this approval was necessary for the assessee to continue his business in India. We find that the expression “due date” is defined in Explanation-2 to Section 139(1) of the Act which reads as under:-
In this sub-section, “due date” means,
(a) where the assessee [other than an assessee referred to in clause (aa]) is
(i) a company;[***] or
(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or
(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,
The [30th day of September] of the assessment year;
(aa) in the case of an assessee [who] is required to furnish a report referred to in section 92E, the 30th day of November of the assessment year;
(b) in the case of a person other than a company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year;
(c) in the case of any other assessee, the 31st day of July of the assessment year.
We find that assessee’s case herein falls under the ambit of Explanation 2(a)(ii) to Section 139(1) of the Act, as the assessee is liable for audit under any other law for the time being in force. This expression “due date” is also mentioned in press release dated 09/09/2016. But on bare reading of the press release dated 09/09/2016, we are of the considered view that “due date” of filing of income tax return is extended from 30/09/2016 to 17/10/2016 only in respect of assessees whose accounts are required to be audited under the Income tax Act. This fact is further strengthened by the last line of the first paragraph of the press release extending the due date for professionals whose accounts are to be audited under the Income Tax Act by stating the expression “above mentioned due date”. Further, in the second para of the press release dated 09/09/2016, the CBDT in categorical terms states that it has decided to extend the last date for “such returns” which was due on 30/09/2016 to 17/10/2016. These words categorically go to prove that the CBDT had sought to extend due date from 30/09/2016 to 17/10/2016 only in respect of those cases where accounts are required to be audited under the provisions of Income Tax Act while filing the income tax returns. The said extended due date benefit cannot be extended to those assessee’s who were liable to get their accounts audited under any other law for the time being in force which is the case as that of the assessee before us. Hence, we hold that due date of filing of income tax return for the assessee for A.Yrs. 2016-17 is 30/09/2016 and not 17/10/2016 as contended by the ld. AR.
With regard to observation made by the ld. CIT(A) in page 6 of the order, that assessee has not carried out business in the name of any limited company thereby warranting the accounts to be audited by a person who is capable to audit the limited company, are of absolutely no relevance to the facts and we hold that the same are completely fallacious. From the perusal of the RBI permission letter dated 05/08/1985 mandating the assessee to get his accounts audited, we are of the considered opinion that what RBI mandate was only for the competence of the Chartered Accountant i.e. to say that a Chartered Accountant who is capable of auditing the corporate assessees should conduct the audit of the assessee herein. This was the sole mandate of RBI permission letter dated 05/08/1985. In our considered opinion, as stated supra, this has been completely misunderstood by the ld. CIT(A) while rendering his decision in page 6 of his order. Either way, this misunderstanding would not in any way advance the case of the assessee in view of our findings that the due date for the assessee herein is only 30/09/2016 and not 17/10/2016. Hence, we hold that assessee is not entitled to carry forward business loss incurred during the year to subsequent years. Accordingly, the grounds raised by the assessee are dismissed.
In the result, appeal of the assessee is dismissed.
Order pronounced on 2 1/03/2023 by way of proper mentioning in the notice board.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee