CBDT circular – no extension for the purpose of interest under section 234A- seems ultravirse the Income-tax Act.

[CA DEV KUMAR KOTHARI]

Relevant links:

Circular no. 153/53/2014-TPL (Pt.I) dated 26.09.2014 extendign due date for return of income but not for purpose of S.234A.

Sections 40, 43B, 44AB, 139, 234A, 295 of the Income-tax Act, 1961 (ITA)

Earlier article:

http://www.taxmanagementindia.com/Print/print_circular.asp?ID=53028

Un necessary un-certainty, harassment and litigation due to half hearted decision of CBDT to extend date to file Tax Audit Report without extending date for filing of Return of income. web hosted on  http://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=5846&discuss=Yes

And other related articles and other links provided therein.

Delayed action to extend due date for filing of Return of income (ROI):

After keeping tax payers and CA's on tenterhook for a long period, the CBDT has, in my opinion, rectified its own mistake and notified that last date of filing of ROI in case of TAR requirement cases would be 30.11.14 - that is the same as  extended date notified for TAX AUDIT REPORT(TAR).

This was a simple matter but unfortunately concerned people have to approach High Courts, and only after directions/ suggestions of many High Courts, the CBDT issued circular extending last date for filing of ROI to 30.11.2014. This shows that  even top l government authorities like CBDT is still working in half hearted manner, without applying logic and farsightedness. All such  incomplete, half heartedly taken actions lead to un-necessary uncertainties, harassment and litigation, as has been case about extension of due date for filing of TAR without corresponding extension for ROI.

No extension for S. 234A:

It seems that one more action taken by the CBDT is wrong which will not achieve much  revenue but will provide field for lot of litigation.

The Board has also stated that for the purposes of interest u/s 234A, due date shall still be considered as 30.09.14.  The relevant paragraph reads as follows (with highlights added by author for easy analysis):

“7. There shall be no extension of the “due date” for the purposes of Explanation 1 to section 234A (Interest for defaults in furnishing return) of the Act and the assessees shall remain liable for payment of interest as per the provisions of section 234A of the Act.”

This seems to be beyond IT Act:

This appears to be beyond the section 234A of the I.T.Act, and also beyond power of CBDT u/s 295, because CBDT should not impose an obligation which is not found in the Act.

The Board can postpone time to file return, time to pay taxes, relax rigors of interest etc. However, Board cannot impose additional liability or reduce time allowed under enactment.

As per the Explanation 1 to S.234A, the ‘due date’ means the date specified in sub-section (1) of section 139 as applicable in the case of assessee.

When due date is extended for the purpose of S. 139 (1) it get extended for all purposes. The Board cannot say that it is extended only for filing of return and not for other purposes.

‘Due date’ is relevant for many provisions and purposes:

The ‘due date’ is relevant for many provisions and purposes. In the context mainly for allowability of actual  payments u/s 43B, allowability of sums on payment of TDS within due date, some deductions for making investments within due date, filing of many  other reports (including TAR), fling of some statements or claims,  claim for carry forward of losses, eligibility for filing of revised return  if original return is filed within  ‘due date’,  interest on refund from  1^st April to ‘due date’ in case of late filed return, etc.

 Once due date is extended u/s 139(1), it get extended for all such and other relevant purposes in any given case.  

No specific power to prescribe different due dates for same assessee:

 On perusal of section 295 there seems no specific power to prescribe different due date u/s 139(1) for different purposes for same type of assesses. The Board can extend relaxation for particular type or class of assessee or assesses in particular area (e.g. for J & K this year). Therefore, extension only for TAR cases and not for other cases is valid. However, not extending due date for purpose of S. 234A for assessee requiring TAR is not valid.

One of the purposes of the IT Act is to collect interest from tax payers for delayed payment of advance tax, installments of advance tax and self assessment tax etc. For delay in filing of return interest can be levied only if there is short fall in payment of tax. We find that as per provisions of S. 211, the whole of tax must be paid in advance by 15^th of March of the previous year. The liability of interest for delayed filed returns mainly arises due to reasons of high pitched assessments. And demands raised in high pitched assessments are mostly reduced in appeals. Therefore, for this reason also there seems hardly any purpose of interest u/s 234A.    

Reason for not extending due date for ROI when due date for TAR was extended:

Before High Courts it was contended by revenue that extension of due date for ROI will adversely affect revenue due to delay in payment of tax and interest leviable u/s 234A.

When an assessee is required to pay full amount of tax as advance tax by 15^th  of March, then interest u/s 234A is not much relevant for not extending due date for ROI.  Interest for two months on short fall of advance tax paid (including TDS and TCS)  requiring self assessment tax payment will not be a big sum. Therefore, reason for not extending date for ROI while extending date for TAR, as mentioned before High Courts were not proper and logical. For loss of a small sum of interest, government cannot make provisions, by issue of circulars, which are not as per scheme of the Act. 

The High Court of Gujarat has only suggested a mid way and  asked  CBDT to consider  extension of due date for ROI. Though full judgment is not yet available/ not yet seen by author,  but it seems that there was only a suggestion  to tackle problem of assesses and interest of revenue. It cannot be said that the Gujarat High  Court has  ruled that due date can be different for S. 234A interest.  In any case  on this aspect any notice was not given and this aspect was not argued and possibly was not a matter of petition of Writ Petitioner. Therefore, observations of Gujarat High Court in this regard cannot be called a binding order or judgment, particularly when the spirit of  the order is suggestive to find a mid way. However, the Board has to see whether it is permissible for the Board to restrict extension for some purposes and not for some other purposes.

Thus paragraph 7 of the Circular , in opinion of author, is ultravirse the Income-tax Act and is unreasonable  and unjustified exercise of power by CBDT and seemingly illegal.

The circular is reproduced below with highlights added by author:

Order-Instruction - Income Tax

F. No  153/53/2014-TPL (Pt.I)

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

(CENTRAL BOARD OF DIRECT TAXES)

North Block, TPL Division

New Delhi, the 26th September, 2014

Order under section 119 of the Income-tax Act, 1961

Section 44AB of the Income-tax Act, 1961 („the Act‟) read with rule 6G of the Income-tax Rules, 1962 („the Rules‟) requires certain persons to file tax audit report in Form No.3CA/Form No.3CB along with prescribed particulars in Form No.3CD. Vide Notification No. 33/2014 dated 25th July, 2014, the forms for filing tax audit report have been revised. As per section 44AB of the Act, the tax audit report has to be obtained and furnished electronically by 30th November of the Assessment year in case of an assessee who is required to furnish report under section 92E of the Act and 30th September of the Assessment year in case of other assessees.

2. In view of the representations received by the Central Board of Direct Taxes („the Board‟), the due date for obtaining and furnishing of tax audit report under section 44AB of the Act for assessment year 2014-15 in respect of assessees who are not required to furnish report under section 92E of the Act has been extended from 30th September, 2014 to 30th November, 2014 vide Order No.133/24/2014-TPL dated 20th August, 2014 in exercise of power of the Board under section 119 of the Act. It has been further clarified that the tax audit report filed during the period from 01.04.2014 to 24.07.2014 in the pre-revised forms shall be treated as valid tax audit report under section 44AB.

3. After the extension of the due date for obtaining and furnishing of tax audit report under section 44AB of the Act, a number of representations have been received in the Board requesting for extension of due date for furnishing of return of income for the assessees who are required to obtain and furnish tax audit report under section 44AB of the Act and for whom the due date for furnishing return of income under section 139(1) of the Act is 30th September, 2014. Writ petitions have also been filed in various High Courts for directing the Board to extend the due date for furnishing of return of income from 30th September, 2014 to 30th November, 2014 in conformity with the extension of the due date for filing of tax audit report.

4. In the High Court of Delhi, a writ petition No.5990/2014 has been filed on this issue. However, before the pronouncement of judgement, the petitioner withdrew the writ petition on 23rd September, 2014. The High Court of Madras passed interim order on 24.09.2014 in writ petitions No.25443 and 26306 to 26310 of 2014 and directed the Board to consider the request of the assessees in general and consider the extension of time for furnishing the return of income, in tune with the order passed by the Board in F. No.133/24/2014-TPL dated 20.08.2014. It has been reported that the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh disposed the writ petition No.28159 and 28627 of 2014 with a direction to the Board to dispose of the representation of the petitioners. The High Court of Bombay disposed of writ petition No.2492 of 2014 vide order dated 25.09.2014 and directed the Board to look into the practical difficulties of the petitioners and take a just and proper decision in this matter.

5. The Gujarat High Court allowed Special Civil Application No.12656 of 2014 with Special Civil Application No.12571 of 2014 and vide judgement dated 22.09.2014 directed the Board to modify the order under section 119 of the Act dated 20.08.2014 by extending the due date for furnishing the return of income to 30th November, 2014. It has also been further stated in the said order that it would be open for the Board to qualify such relaxation by extending the due date for all purposes, except for the purpose of Explanation 1 to section 234A of the Act.

6. In compliance to the judgement of High Court of Gujarat and after considering the representations made for extension of due date for furnishing of return of income in compliance with the directions of the other High Courts, the Board, in exercise of power conferred by section 119 of the Act, hereby extends, subject to para 7 below, the `due-date‟ for furnishing return of income from 30th September, 2014 to 30th November, 2014 for the assessment year 2014-15 for all purposes of the Act, in case of an assessee, who,

(i) is required to file his return of income by 30th September, 2014 as per clause (a) of Explanation 2 to sub-section (1) of section 139 of the Income-tax Act, 1961; and

(ii) is also required to get his accounts audited under section 44AB of the Act or is a working partner of a firm whose accounts are required to be audited under section 44AB of the Act.

7. There shall be no extension of the “due date” for the purposes of Explanation 1 to section 234A (Interest for defaults in furnishing return) of the Act and the assessees shall remain liable for payment of interest as per the provisions of section 234A of the Act.

8. For removal of doubt, it is clarified that for an assessee (other than working partner of a firm which is required to obtain and furnish tax audit report), who is required to file its return of income by 30th September, 2014 but not required to obtain and furnish tax audit report under section 44AB, the due date for furnishing of return of income for assessment year 2014-15 remains as 30th September, 2014.

(Rajesh Kumar Bhoot)

Director (TPL)

Copy to:-

(i) The Chairman (CBDT), All Members, Central Board of Direct Taxes for information.

(ii) All Cadre Controlling Pr. Chief Commissioners of Income-tax with a request to circulate amongst all officers in their regions/charges.

(iii) The Pr. Director General of Income Tax (Admn.) Mayur Bhawan, New Delhi.

(iv) The Director General of Income Tax (Systems) with a request for uploading it on the Departmental website.

(v) Commissioner of Income Tax (M&TP), CBDT.

(Rajesh Kumar Bhoot)

Director (TPL)