Follow up article on TAR - Filing of Tax Audit report- confusions, delay and remedy - Second article for clarification.

[C.A. DEV KUMAR KOTHARI]

CIRCULAR NO. 6/2008  DATED 18-7-2008

CIRCULAR NO.5/2007, DATED 26-7-2007

Sections 44AB and 271B of the income Tax Act, 1961

The author has  received several letters in response to earlier article on the subject. Therefore, this second article is to clarify some doubts and confusions to avoid initiation of penalty proceedings and litigation.

The author convey thanks for sending useful comments and feed back by readers of TMI which will help in improving early compliance and clear doubts .

General:

First of all my view is that both  circulars issued by the CBDT for filing of returns for assessment year 2007-08 and 2008-09 are mainly  in  the context of filing of e-returns or annexure less  returns and not in context of filing of Tax Audit Report (TAR) and penalty u/s  271B.

 These circulars are simply guidelines for the persons who file returns. These circulars cannot be considered as instructions to tax officers or a notification exempting filing of TAR under Section 44AB or waiving penalty u/s 271B.

The instructions given on returns forms have limited application to the aspects related with filing of returns and not about compliance u/s 44AB.

In deed in the circular for A.Y. 2007-08 it is mentioned that TAR should not be filed even separately, but there is no such mention in circular for A.Y. 2008-09.  

In the Circular for AY 2008-09 we find reference of guidelines contained in other old circular particularly circular for returns for A.Y. 2007-08  to the effect that  TDS/ TCS certificates and tax challans  should  not to be filed  But that circular has not been relied or referred to for TAR and penalty u/s 271B in the circular for A.Y. 2008-09.

The Circular of 2007 can help to argue cases for both years  if  proceedings are initiated for levy of  penalty u/s 271B however, the A.O. may not consider it as binding and then appeal may have to be filed.

File TAR voluntarily:

When you have TAR with you, why not file the same voluntarily to avoid any doubt or confusion as to when the TAR was obtained, whether TAR is antedated etc. Why to complicate the matter.

A.Y. 2008-09

 CIRCULAR NO. 6/2008  DATED 18-7-2008 for assessment year 2008-09 is in relation to filing of returns. In this circular no where it has been mentioned that requirement of filing of TAR u/s 44AB is dispensed with and that penalty u/s 271B shall not be levied even if TAR is not filed separately in compliance of  S. 44AB.

 In this regard in relation to TAR, there is no reference to earlier circular which was issued for A.Y. 2007-08 .

 Therefore, the earlier circular for A.Y. 2007-08 may not be considered as applicable to A.Y. 2008-09 by the A.O.

A.Y. 2007-08

In CIRCULAR NO.5 / 2007, DATED 26-7-2007   we find that about TAR  there is clarification vide paragraph 6 (i)  from which we find that , for A.Y. 2007-08  there was a clarification to the effect that TAR should not also  be separately filed by assessee before or after filing of return. It may be furnished in original, during the assessment proceedings. However, it has also been mentioned that if the audit report has not been obtained before the due date, provisions of section 271B shall be attracted."

Thus we find that the circular itself have some contradictions. Furthermore this circulars is merely guidance to public for filing of return. This is not specific notification exempting filing of TAR. This is also not instruction to the revenue officers.

The experience shows that in past, when merely obtaining of TAR was necessary or  in case of belated returns accompanied with TAR, the A.O.'s levied penalty u/s 271B because TAR was not furnished before the due date. Such matters have went up to High Courts.

 In some cases even the date of TAR was doubted and the officers took view that TAR was not actually obtained before the due date and that the TAR was back dated.  I remember that in a case the certificate of practice of a CA was also suspended for back dating and signing TAR mentioning an earlier date.

Therefore, unless the TAR is actually filed before the due date, it is likely to create doubts, initiation of penalty proceedings, and litigation.

 To avoid all such things it is advisable to file TAR even for A.Y. 2007-08 voluntarily with a petition to condone delay, if any.

If TAR is not filed, the purpose of TAR shall also be defeated in most of cases where return is accepted and proceedings u/s 143(2) are not taken up.

Any person can challenge the circular as creating discrimination amongst assesses whose return are scrutinized (about 8-10 % of TAR cases)  and the rest of assesses  whose return is accepted u/s 143 (1). 

Letter for filing TAR for A.Y. 2007-08:

                                            From: assessee  - use letter head

To,

The Assessing Officer,

……

 

PAN    Assessment Year 2007-08- filing of Tax Audit Report u/s 44AB

I /  We have filed on line return / annexure less return  on 2007  vide acknowledgment no……

             At the time of filing of the return we had also offered to file various annexure , TDS/ TCS certificates, challan and TAR  however they  were not accepted by the department at the time of receiving the return or / its acknowledgement.

I / we had obtained Tax Audit Report dated….. before the due date (  --. --. .07).

I am / we are voluntarily filing Tax Audit Report as required u/s 44AB of the income Tax Act, 1961, kindly accept and acknowledge receipt of the same.

Circular about annexure less returns:

In CIRCULAR NO.5 / 2007, DATED 26-7-2007 for assessment year 2007-08   we find that about TAR  there is clarification vide paragraph 6 (i)  from which we find that , for A.Y. 2007-08  there was a clarification to the effect that TAR should not also  be separately filed by assessee before or after filing of return. It may be furnished in original, during the assessment proceedings. However, it has also been mentioned that  if the audit report has not been obtained before the due date, provisions of section 271B shall be attracted."

Therefore, as a view of abundant caution we are voluntarily filing Tax Audit Report.

Condonation of delay if any:

As stated above we had reason for not filing TAR before the due date. From the circular we understand that it is not necessary on our part to file TAR unless called for by the A.O.. Therefore there is no delay in filing of TAR. However, to keep the matter beyond doubt and with a view of abundant caution we are voluntarily filing TAR.

 Kindly accept the same.

I am / We are simple business person and do not know intricate tax laws and procedural requirement and I / we have to depend on tax consultants. Recently I / we have read that it is advisable to voluntarily file TAR so we are filing the same.

In view of above facts and circumstances and considering the fact that I am  / We are filing TAR voluntarily. The revenue has not suffered any damages due to non filing of TAR earlier. the default if any, at all is of a technical nature caused due to reasonable causes,  we request you to kindly condone the delay if any in filing of TAR and please do not initiate penalty proceedings u/s 271B.

Thanking you,

 

Yours faithfully,

 

Assessee **     For and on behalf of Assessee        

** Preferably should be signed by assessee, in case assessee is not available then A/R can file the same mentioning for and on behalf of assessee.            

Discussions to this article

[nagaraja k s]

many ca's in Bangalore feel that it is not necessary to file TAR along with ITR ack form , Even in the IT dept is not accepting any attchments/enclosures to the ack ITR, in this circumstance what should we do ? kindly clarify

[satbir singh wahi]

sir section 139c & 139d clarify this issue .

[Harish Chander Bhatia, Advocate]

My opinion is that, we should not act under any presumption and should not set any wrong precedent by filing the physical copy of the TAR and this would be the true compliance of the provisions of the section 271B, which are very clear in this regard and TAR is only to be obtained and the object of the Hon'ble Finance Minister of dispensing with filing of the physical papers in the department should be promoted. Likewise, in case of partnership firms the copy of first deed or the amendment to that is not being physically filed with the department and all these requirements occurs only when the case come up for scruitny under the Act.

[C.A. DEV KUMAR KOTHARI]

S.139C and 139D empower CBDT to make Rules to exempt requiremnet of documents which are required to be furnished along with the return.s which are filed u/s 139. These Rules are not concerned with requirement of furnishing Tax Audit Report which is mandatory u/s44AB. In Taxmann's IT Rules in form no 3CA and 3CB it is mentioned under the head Action points that TAR should be furnished before due date( there it is mentioned 31st Oct. now it is 30th Sept. see sl no. 7 under Form 3CA and sl. no. 3 in action points under form 3CB. There is general conception or understanding in mind that when return is filed electronically or annexure less return in hard copy, ther eis no need to file TAR. However, I feel that this is due to confusion created by language used in Circular of 2007. However. I advise my clients and frieds to do not take an adventure when it is not necessary and it is not likely to bring gain. offcourse if we keep litigation resulting into additional business above desired compliance, then matter woud be different.

[Uma Kothari]

With reference to observation of Shri Harish Chander Bhatia, Advocate, it is to notice that S. 271B as well as S. 44AB were amended long ago vide FA 1995 and the requiremnt since 01.07.1995 is furnish TAR before specified dated.

[DEV KUMAR KOTHARI]

In view of recent judgment of the Supreme Court [2008 -TMI - 31136 in case of CCE V Ratan Melting, a circular which is not in accordance with provisions of law or judgment of courts is not binding even on revenue also. In view of the same it is advisale to file TAR with COD ptn.