Extension of ITR Due Date For Tax Audit Cases Does Not Apply to Assessees Subject to Audit under Other Acts: ITAT

In the case of Gulu Hassanand Raney vs asst. Director of I.T. Bangalore-CPC, the Income Tax Appellate Tribunal (ITAT) made a ruling regarding the assessment year 2016-17. 

The Central Board of Direct Taxes (CBDT) had extended the due date for filing income tax returns from 30/09/2016 to 17/10/2016. Still, this extension applied only to cases where accounts needed to be audited under the provisions of the Income Tax Act. 

The benefit of the extended due date cannot be applied to individuals or entities required to have their accounts audited under any other law currently in effect.

The assessee is engaged in the business of agencies of shipyards and marine electronics, representing foreign shipyards and/or ship owners for ship repairing and day docking purposes under the proprietorship name of Nautilus International (India). 

The business has been operational since the year 1975-76. In 1983-84 (Assessment Year 1984-85), the assessee became a non-resident but continued with the same business.

Upon becoming a non-resident, in compliance with the provisions of the Foreign Exchange Regulation Act (FERA), he was obligated to seek approval from the Reserve Bank of India to continue his proprietary business. Approval was granted under Section 29(1)(a) of the FERA 1973 through RBI's letter dated 05/08/1985. According to clause (iii) of the RBI permission, one of the conditions was that the accounts should be audited by a Chartered Accountant.

For the assessment year 2016-17, the assessee's accounts were audited by a Chartered Accountant on 15/10/2016. The income tax return for the same year was filed on 17/10/2016, and the assessee claimed a business loss of Rs. 8,38,301/- to be carried forward to future years. However, the assessing officer noted that since the return was filed after the due date specified under Section 139(1) of the Income Tax Act, the loss claimed by the assessee could not be carried forward as per Section 139(3) read with Section 80 of the Act.

During the proceedings, the assessee's authorized representative presented a copy of a press release dated 09/09/2016 issued by the Central Board of Direct Taxes (CBDT), which extended the due date for filing returns to 17/10/2016 for the assessment year 2016-17. The text of the press release is provided below for reference.

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 9th September 2016

Press Release

Sub:- CBDT Extends due date for filing of Income Tax Returns – reg

The due date for filing of Income tax returns by taxpayers whose accounts are required to be audited under the Income Tax Act is the 30th September of the following year. The taxpayers whose business receipts exceed Rupees One Crore or whose professional receipts exceed Rupees twenty-five Lakh during the previous year 2015-16 are required to file an Income Tax return accompanied by an audit report by the above-mentioned due date.

Considering that the deadline for declarations under the Income Declaration Scheme 2016 also falls on 30th September 2016, the Central Board of Direct Taxes (CBDT) has made the decision to extend the deadline for returns due on the same date to 17th October 2016. This extension aims to alleviate any inconvenience and promote 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 taxpayers are required to be audited under the Income Tax Act alone would get an extended time limit of 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 the Income Tax Act. Per contra, the ld. AR stated that the assessee is liable to get the accounts audited only as per the RBI permission letter dated 05/08/1985 vide clause (iii) of the said letter. As the assessee is a non-resident, obtaining this approval was necessary for the continuation of their business in India. It is important to note that the term "due date" is defined in Explanation-2 to Section 139(1) of the Act, which states the following:

Explanation 2.—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.
 

ITAT Order:

Based on our analysis, the assessee's case falls within the scope of Explanation 2(a)(ii) of Section 139(1) of the Act, as they are subject to audit under another applicable law. The term "due date" is also mentioned in a press release dated 09/09/2016. However, upon careful examination of the press release, it is evident that the extension of the "due date" for filing income tax returns to 17/10/2016 applies only to assesses whose accounts require audit under the Income-tax Act. This interpretation is supported by the reference to the "above-mentioned due date" for professionals whose accounts are audited under the Income Tax Act in the first paragraph of the press release. Additionally, in the second part of the press release, the CBDT explicitly states that the last date for "such returns" due on 30/09/2016 is extended to 17/10/2016. These statements affirm that the CBDT intended to extend the due date from 30/09/2016 to 17/10/2016 solely for cases where accounts are audited under the Income Tax Act during the filing of income tax returns. Consequently, the benefit of the extended due date cannot be applied to assesses who are required to have their accounts audited under any other applicable law, as is the case with the present assessee. Therefore, we affirm that the due date for filing the income tax return for the assessee for A.Yrs. 2016-17 is 30/09/2016, contrary to the contention made by the ld. AR.

Regarding the observation made by the ld. CIT(A) on page 6 of the order, stating that the assessee did not conduct business under the name of a limited company and therefore the accounts should be audited by a person qualified to audit limited companies, we find this observation to be completely irrelevant to the facts of the case. Upon reviewing the RBI permission letter dated 05/08/1985, which mandated the assessee to have their accounts audited, we are of the opinion that the RBI requirement pertained only to the competence of the Chartered Accountant. In other words, the intention was that a Chartered Accountant capable of auditing corporate assessees should conduct the audit for the present assessee. The ld. CIT(A) has misconstrued this requirement in his decision on page 6 of the order. However, regardless of this misunderstanding, it does not impact the case of the assessee, as our findings establish that the due date for the assessee is only 30/09/2016 and not 17/10/2016. Therefore, we conclude that the assessee is not eligible to carry forward the business loss incurred during the year to subsequent years. Consequently, the grounds raised by the assessee are dismissed.

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