A critical analysis of the recent Order u/s 119 dated 20.08.2014 issued by the CBDT regarding extension of date of filing of Tax Audit Report u/s 44AB. By CA PAWAN JAIN, JAIPUR Miss EKTA JAIN [email protected] 9414052288 We are well aware of the fact that the tax audit report format have been notified by the CBDT in terms of power conferred under Section 295 vide notification dated Notification No. 33/2014, Dated: July 25, 2014, which are applicable from the Assessment year 2014-15. Earlier this notification created confusions for the audits completed/ submitted u/s 44AB before this notification but the said confusion about submission of such reports prior to the date of notification, being discussed here, has been removed by Order no. F.No.133/24/2014-TPL GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) (CENTRAL BOARD OF DIRECT TAXES) dated 20.08.2014 wherein it is clarified,in para 2, of the order that the tax audit report under section 44AB of the Act filed during the period from 1st April, 2014 to 24th July, 2014 in the pre-revised Forms shall be treated as valid tax audit report furnished under section 44AB of the Act. We are well aware that Section 44AB of the Income Tax Act, 1961 provides for tax audit for every assessee who are covered in either of the four clauses viz. Clause (a), (b), (c) & (d) of Section 44AB and such assessees are required to get their accounts audited by an accountant before the “SPECIFIED DATE” and furnish BY THAT DATE the report of such audit in the prescribed form. Explanation (ii) of the said Section 44AB provides that “Specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139. Thus, it is crystal clear that the due date u/s 44AB is directly linked with the due date prescribed u/s 139(1) as applicable to an assessee. Now there are TWO views in legal sector, SOME of them are of the opinion that extending the date of Tax audit report will automatically extend the date of filing of ITR. The contention behind it is that there is no date of obtaining and filing of tax audit report in section 44AB. The section 44AB has linked the date of filing of audit report with the “due date” of filing of ITR u/s 139(1) hence the due date of obtaining and furnishing the audit report u/s 44AB is dependent and linked with the “due date” mentioned in section 139(1). Though the contention appears to be soothing but law does not support this contention as the order is silent about the date of filing of Income tax returns u/s 139(1). In other words, Para 1 of this order u/s 119 has again caused not only some added confusion but has posed a big challenge on us either to defend/ fight for it or to prepare ourselves any how to file the return of such assessee because the plain reading of the said order dated 20.08.2014 give this impression only that the date of filing of Tax Audit Report u/s 44AB has been extended from 30.09.2014 to 30.11.2014, not the date of filing of return of the assessee liable to audit u/s 44AB as prescribed u/s 139(1) Expl.-II (a). So far as our defence is concerned, we must come forward with the help of our Institute either by way of a representation first, before the Ministry as well as CBDT pointing out the legel defects in the said order or by way of challenging the said order on legal grounds . The main object of our write up is to discuss -Whether CBDT have any power to extend due date Under section 44AB of the Income Tax Act,1961 or has power to extend due date for filing return of income u/s 139(1) for such relaxation? We are well aware about the power of CBDT conferred u/s 119 of the Income Tax Act, 1961. Here, for convenience, we are reproducing the relevant section 119(2) which reads as under: Sec.119(2)(a) “ Without prejudice to the generality of the foregoing power the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time whether by way of relaxation of any of the provisions of sections 115P, 115S, 115WD, 115WE,115WF, 115WG, 115WH, 115WJ, 115WK,139, 143, 144, 147, 148, 154, 155, 158BFA, sub-section(1A) of section 201, sections 210,211, 234A, 234B, 234C , 234E, 271 and 273 or otherwise, general or special orders in respect of any class of incomes or fringe benefits or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;” It clearly reveals that no where it is mentioned in this section that the CBDT has power u/s 119 to extend the due date of filing of Tax Audit report u/s 44AB because the provisions clearly speaks that the audit report shall be submitted within specified date and the provision is interwoven with provisions of section 139(1) r/w Rule 12. Further, Section 44AB does not provide for any powers to any authority with respect to alteration of the “Specified Date”. Therefore, the “Specified Date” for the purpose of obtaining and furnishing the tax audit report shall be the due date for furnishing the return of income under section 139(1). It also makes it clear that there cannot be an isolated extension of due date u/s 44AB without extension of due date u/s 139(1). Here it is worthwhile to notice that the order so issued u/s 119 dated 20.08.2014 starts with the language: “In exercise of power conferred by section 119 of the Income-tax Act (‘the Act’), the Central Board of Direct Taxes (CBDT) hereby extends the due date for obtaining and furnishing of the report of audit under section 44AB…” Neither Section 44AB nor Section 119 contains any provision which confers power for providing any relaxations from the provisions of Section 44AB to CBDT. Even the instructions with the ITR do not support the situation so arised, i.e., of filing of ITR before filing of Tax audit report. We would like to invite attention to instruction No. 4 – ‘Manner of filing of ITR’ which clearly states the following:- “From assessment year 2013-14 onwards in case an assessee who is required to furnish a report of audit under sections 10(23C)(iv), 10(23C)(v), 10(23C)(vi), 10(23C)(via), 10A, 10AA, 12A(1)(b), 44AB, 44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115VW he shall file the report electronically on or before the date of filing the return of income.” Accordingly, it has been clearly mentioned that Tax audit report should be e-filed on or before the date of filing ITR. Further, when we come to the columns No. 6, under ‘Audit Information’, of the instructions attached with the ITR the “date of audit report” and “date of furnishing of audit report” has to be reported in the ITR. Now, the question arises- how this is possible when return filing date is still 30/09/2014 and date of obtaining and furnishing the audit report is extended to 30/11/2014. We are attempting to clear through this write up that the present entire situation is, more or less, is a result of the unreasonable and belatedly (midyear) introduction of the new formats of the Tax audit report with a further blow by issue of SCHEMA for its mandatory e-filing, a few days back only. With due respect to the concerned authorities, the affected assessee and we professionals, without hesitation, can say that an absurd, complex and confusing situation has been created by this order dated 20.08.2014. With a view to protect the confidence of tax payers as well as professional in departmental proceedings, the CBDT must come forward and should extend the date of filing of return of income as, in fact, the situation created by extending the date of furnishing the audit report without extending the date of filing of income tax return has created anxiety in the minds of taxpayers and the chartered accountants as well as has presented an unreasonable and unjustified task of filing the ITR on or before 30/09/2014 and then again to e-file the TAR. We all are well aware of the facts that vide order F. NO. 225/117/2013/ITA.II, DATED 26-9-2013, in exercise of power under section 119(2)(a) of the IT Act, 1961 read with section 139 and rule 12, the CBDT relaxed the requirement of furnishing the Report of Audit electronically as prescribed under the proviso to sub-rule (2) of rule 12 of the IT Rules for the Assessment Year 2013-14 by the assessee who were finding it difficult to upload the prescribed Reports of Audit (as referred to above) in the system electronically to file the same manually before the jurisdictional Assessing Officer within the prescribed due date on further condition that the said Report of Audit should however be furnished electronically on or before 31-10-2013. Later on on representations by legal sections the CBDT issued an order dated 24.10.2013 in continuation of such order F.No. 225/117/2013 ITA-II which provided that “In exercise of powers conferred under section 119 of the Income tax Act, 1961, the Central Board of direct Taxes, in continuation to order u/s 119 dated 26.09.2013 in F. No. 225/117/2013/ITA.II, hereby directs that in cases where the ‘due date’ of furnishing reports of audit and corresponding income-tax returns was 30th September, 2013 and where the same are furnished electronically on or before 31st October, 2013, such reports of audit and returns of income shall be deemed to have been furnished within the due date prescribed under section 139 of the Income-tax Act, 1961.” Accordingly we must hope that instead of extension of due date of tax audit reports, the CBDT must come up with extension of due date u/s 139(1) and now it is a right time to issue a further order as was issued on 24.10.2013 for the assessment year 2013-14, under such facts and circumstances of the issue. In nutshell, we tried to point out that if the CBDT, in favour of natural justice and to protect the confidence of concerned in its order/notifications, wants to extend due date of obtaining and furnishing Tax Audit Report u/s 44AB, considering the fact of late issuance of the new format notification as well as late release of belated SCHEMA for e-filing of such forms, it can do so only by way extending due date u/s 139(1). Until and unless the parliament amends/alters the provisions of Section 44AB, any such order for isolated extension of due date u/s 44AB should, in our opinion based on above write-up, would be ultra vires, and may not survive in front of judicial review. LASTLY, we must hope that our REGIONAL COUNCIL at KANPUR will strongly suggest our apex body [ICAI] to appoint an expert committee of the Experts to test the legality and validity of the said order of the CBDT, issued u/s 119 on 20/08/2014 and after its satisfaction that as per section 119, the CBDT can relax the provisions of section 139 amongst the other section will make the CBDT realize the absurdity and the worst situation so created due to belatedly issued formats and SCHEMA and to issue such further order in continuation of this order dated 20.08.2014 as was issued on 24.10.2013 for the assessment year 2013-14, to legally justify the said order so issued for extension of filing of TAR under section 44AB. [It is clearly expressed that the object behind this write up is to bring awareness and unity for representation by our apex body, i.e., ICAI and the views herein above are personal in nature and should not be taken as legal opinion for any commercial or professional purpose. Counter views/suggestions on this write up is always welcome.] . ICAI/DTC/2014-15/Rep -09 To, Shri. K.V.Chowdary, Chairman, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, North Block, New Delhi–110 001 Dear Sir, At the outset, let me thank you for sparing your valuable time and sharing your wisdom with our Council on 27th August, 2014 at the headquarters of ICAI. Since ICAI’s prerogative is to strengthen the relationship between the taxpayers and the Department, we are duty bound to once again bring to your kind notice, the difficulties being faced by the assessees who are required to get their accounts audited under section 44AB of the Income-tax Act, 1961. The new forms were notified through Notification no. 33/2014 on 25/7/2014. As there were massive changes in the new forms prescribed by the CBDT, certain genuine concerns were raised by our members, regarding the date of effectiveness of the new formats which were brought to your kind notice. It was suggested that the new formats of audit report be made effective from the Assessment year 2015-16 and not Assessment year 2014-15. Alternatively, it was suggested that the due date for furnishing tax audit reports for the Assessment Year 2014-15 may be extended to 30th November, 2014. ICAI’s first recommendation of making the new formats effective from the AY 2015-16 did not find favour with the Department but the second alternative regarding extension upto 30th November was favourably considered. ICAI had given the second alternative presuming that the date of filing return of income under section 139(1) would also be extended since both the dates are inseparable. However, the extension was granted only for the due date of obtaining and furnishing tax audit reports without extension of due date of filing return of income. While we appreciate the speed with which the efforts were made to address the concerns of ICAI, however, non extension of due date of filing return along with the date of furnishing tax audit report has been a cause of major concern amongst the assessees, which was not the intention of the representation made by ICAI. Through this letter, we wish to bring the same to your kind attention: “Specified date” of furnishing tax audit report under section 44AB is directly linked with “due date” of filing return of income under section 139(1) “Section 44AB of the Income-tax Act, 1961 provides that every person- (a)… …. (d)… gets his accounts audited of such previous year audited by an accountant before the “specified date” and furnish by that date the report of such audit in the prescribed form duly signed and verified by an accountant and setting forth such particulars as may be prescribed: Provided…. Provided further…. Explanation- For the purposes of this section- (i) ………. (ii) “Specified date” in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date of furnishing the return of income under sub-section (1) of section 139.” (Emphasis supplied) “Explanation 2 to section 139(1) provides for the meaning of “due date”. As per Clause (a) of the said Explanation, “due date” means where the assessee (other than as assessee referred to in clause (aa)) is - a) Company; or b) 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 c) 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 assessement year.” The order No. F.No.133/24/2014-TPL dated 20th August, 2014 issued by the Department under section 119 provided for extension of the due date for obtaining and furnishing of the report of audit under section 44AB of the Act for Assessment Year 2014-15 in case of assessees who are not required to furnish report under section 92E of the Act from 30th day of September, 2014 to 30th November, 2014. Since the due date of obtaining and furnishing tax audit report under section 44AB is directly and clearly linked with the due date of filing of return of income under section 139(1), the aforementioned order has caused unrest and confusion amongst the assessees. There is a very strong view that extension of due date of furnishing tax audit reports automatically stands extended with the due date of filing return of income under section 139(1) since the date of furnishing tax audit report is linked with and is dependent upon the “due date” of filing return of income under section 139(1). Concerns of a genuine taxpaying non-corporate assessees For majority of the asessees who are required to get their accounts audited under section 44AB, the due date of filing return of income and tax audit report is presently 30th September. The due date for filing return of income of large corporates is already 30th November. Concerns are being raised by the non- corporate assessees, who are equally law abiding and thus have been in past finalizing their accounts after considering the issues raised by the tax auditors. Such assessees rely on the tax audit report for computation of total income after knowing their disallowances like disallowance u/s 40(a) etc. Since the tax audits are not completed (nor likely to be completed by 30th September), these assessees are finding it difficult to file their income tax returns. Although we are aware that such assessees can file a revised return under section 139(5) once the tax audit report is completed, this however would increase the compliance burden of assessee who would have to do the whole process again. On the other hand, if the Department completes its assessment before the expiry of one year from the end of the relevant Assessment year i.e. the time provided under section 139(5), the genuine assessee would have no choice, but to face penal consequences for almost no fault on his own part. Norm followed in earlier years Even though, prior to the amendment made by the Finance Act, 2008 when the due date of filing return of income under section 139(1) was NOT directly linked with the date of furnishing tax audit report, the extension of time, if any, was granted for both e-filing of returns and for tax audit reports. Also, in the year 2006-07 when the tax audit report was revised last through Notification No.208/2006 dated 10.8.2006, the due date of filing tax audit reports and their corresponding ITR were extended to 30th November, 2006. It is the first occasion in past several years when the due date of furnishing tax audit report has been extended without extension of due date of filing of returns. This is a major reason for the assessees to believe that the intention of the lawmakers is to extend both the due date of filing return of income and the tax audit report. Efforts of ICAI to supplement the initiatives of the Department We all are aware, the formats of tax audit reports were issued very late i.e 25th July 2014 and thereafter approximately a month’s time was taken by the Department to make the utility available to the auditors. Despite the same all efforts are being made by ICAI, as a partner in nation building, to bring awareness among the auditors and auditees: a) Guidance Note on tax Audit under section 44AB of the Income-tax Act, 1961 has been revised to guide the members regarding the new reporting responsibilities. b) Tax Awareness programmes are being organized by ICAI for creating awareness among the members all over India. Suggestion In the interest of the nation as a whole we suggest and request that: a) the due date of filing return of income under section 139(1) for assessees mentioned under clause (a) of Explanation 2 to section 139 (1) be extended in line with the extension granted for submission of tax audit report under section 44AB of the Act. b) Since the provisions applicable to every Assessment year are clarified by the relevant Finance Act well in advance, it is further suggested that all ITR forms and forms of Audit reports be notified well in advance by 1st April every year, to avoid such situations. We are hopeful for a positive consideration of our suggestion. With best regards Yours faithfully, CA. K. RAGHU
Posted on: Wed, 17 Sep 2014 10:37:00 +0000
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