For better tax administration for assessee, auditors and A.O.: TAR -Synchronization of certain due date or last date for better compliance and tax administration.

[C.A. DEV KUMAR KOTHARI]

Relevant links:

Section 40, 43B, 44AB and 139 of the I.T.Act.

Form 3CD of I.T.Rules.

Past and present scenario:

Due date for obtaining and filing of tax audit report (TAR) and filing of return is same as per sections 44AB and 139 respectively. Similarly in respect of certain sums last date for actual payment or deposit is also fixed same as 'due date'. For assessment year 2008-09 such dates were 30^th September, 2008.

On consideration of the scheme of the Act there should be a time gap between the time allowed for making payments or deposits for allowability, obtaining TAR and filing of return so that fully different related work can be completed in satisfactory and complete manner and the A.O. also get fully satisfactory TAR and computation and return of income.   

In case the date s fixed as 30^th September, another difficulty in case of companies is that usually annual general meeting is also held in the last week of September and in many cases on 30^th September. Therefore, in case due date for filing of the return is also 30^th September, in some cases return may have to be filed on the basis of annual accounts which may still be in the process of approval of the shareholders in AGM. As per provisions of the Companies Act in case the company prepares its final accounts up to 31^st march ( the mandatory date for IT purposes) then the last date for holding AGM is also 30^th September.

Difficulties due to same last date for three matters:

In small organizations audit and filing of return may be done by same persons. However in medium and large organizations, usually the work of audit, and computation of income are usually handled by different persons.

Same last date for above mentioned four matters causes difficulties and hardship to assessee as work load comes at the same time. This may also cause duplication of work for assessee, auditor and A.O.  Because it is desirable that  in TAR some information should be given up to the due date for filing of return, which is not possible in almost all  cases, because   the auditor cannot keep his work pending till last moment.

Relevant information:

From form no. 3CD we find that in some clauses information up to the due date for filing of the return should be given so as to enable the A.O. to compute income correctly. For example :

Clause 17 (g) - disallowance u/s 40(b)/ 40 (ba) - disallowance due to non payment of TDS till due date for filing of return,

Clause 17 (i) provision for gratuity (remaining unpaid till due date and disallowable)

Clause  21 relating to s. 43B

Clause 27 relating to TDS information up to due date is desirable.

TAR is compilation of information

TAR is compilation of information and certification there of by auditor with a view to help the A.O. to compute income correctly. As discussed above for proper computation of income certain information up to the due date for filing of the return is required. In such circumstances if law is strictly complied with then the TAR should be finalized on the due date only. This is not possible because the auditor will not be in a position to verify and sign all TA Reports on due date. Therefore auditors usually render report earlier.

Present practice:

In case TAR is prepared earlier, then the assessee has to make claims based on further information gathered about payments etc. made after the date of TAR (or the date up to which information is given in TAR) and to claim the deduction by filing evidences. Or some assessees obtain revised annexures to TAR and file revised return after filing original return within due date. However, in case of paperless return it is not possible. When return is filed on line, and paper return is not acceptable, the option left is to obtain a revised TAR and file a revised return.

Example:

TAR is signed on 15^th September, 2008 giving details up to 31^st August for various matters relating to S. 40 and 43B. The report is not fully satisfactory and it does not help fully the assessee and the A.O. Suppose the assessee has made certain payments / deposits after 31^st August he has to make additional claims for such payments / deposits which are not supported by the TAR.

Suggestion:

Amounts allowable on actual payment , after end of previous year , u/s 43B should be allowed if paid say before  say 31^st October.

For deposit of TDS, when amount from which tax is deducted is allowable only if TDS is deposited, the last date for deposit of such TDS may also be fixed as 31^st October.

Due date for obtaining TAR should be fixed   after 30 days   say  30^th November  so that tax auditor can   give complete information and give full details of amounts allowable or disallowable u/s 40 ,43B etc.

Due date for filing of returns and TAR can be fixed say 31^st December.

In case above schedules are fixed, the auditor will be able to give fully satisfactory TAR by giving information up to the admissible date for payments and deposits.

After obtaining TAR the persons who are engaged in preparation of computation and return will get sufficient time to prepare and file return after fully considering relevant information in TAR.

 This will provide sufficient time to all concerned persons and they will get full information to work in a final manner. There will be no need to work in a provisional manner and then revising the work done to attain finality. This will avoid need of obtaining and filing revised TAR or its annexure and filing of revised return of income.

Help and assistance to the Assessing Officers:

When the assessee will be able to file return of income with complete and up to date information prepared with help of different professionals and other persons, there will be no need to revise return of income. The number of revised returns shall reduce considerably. The A.O. will be in better position to work on final returns of income supported by final and up to date TAR and relevant information required for making deductions or disallowances.