OPTIONAL RELIEF AS PER PROVISO TO S.43B PROBLEMS DUE TO GAP OF ONE MONTH IN DUE DATES FOR TAR AND ITR

[DEV KUMAR KOTHARI]

Section 43B

Section 139 read with notifications for extension of due date for filing of ITR in tax audit cases.

Abbreviations – TAR and ITR means tax audit report and income tax return.

Section 43B AND S. 139 BOTH ARE  well-known section and its provisions are also well known to readers, therefore, a detailed discussion is not required.

For this write-up it is suffice to mention that certain allowable expenses specified in S.43B are allowed only in the year of actual payment. An exception is about such sums pertaining to the  previous year relevant to any assessment year which  can be claimed by assessee, as per the proviso to sub-section (1) of S.43B, which reads as follows:

        [Provided that nothing contained in this section shall apply in relation to any sum  which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.

In view of above proviso, for example any specified sum relating to PYE 31.03.2020 which remained un-paid as on 31.03.2020 can be claimed by assessee , if it is actually paid by him before due date for filing of ITR ( which, after extension, is 31.01.2021).

We find that as per   Notification No. 88/2020/ F. No. 370142/35/2020-TPL dt. 29th October, 2020,     due dates for TAR and ITR  stand extended to  31.12.2020 and 31.01.2021 respectively for the assessment year 2020-21.

Therefore, in TAR auditor can only include payments actually made by assessee till signing of the TAR, that can be latest by 31.12.2020. Whereas as per proviso actual payments made up to 31.01.2021 can be claimed by assessee.

As per practice and in view of online filing of ITR  and TAR, information provided in audited report (TAR)  is considered evidence of actual payment eligible for deduction as per above proviso. Though the AO can call for more evidence for his satisfaction.

Controversy:

Controversy which arises is when an assessee want to make claim for sums actually paid before due date and which could not be mentioned in TAR, say filed on last day that is 31.12.2020.

If assessee claim actual payments made after tax audit and till 31.01.2021, which could not be mentioned in TAR , then there will be mismatch in figures found in TAR and ITR. This can be a reason for adjustments, disallowance and enquiry.   

Many assessee can choose to pay by 31.12.2020  all related sums, and make claim in AY 2020-21 and sums actually  paid after 31.12.20  can be claimed in next year , in the example AY 2021-20 as per S.43B(1).

However, problem arises for assessee having fund flow limitation and high amount remaining outstanding as on  due date for TAR ( 31.12.20) and who have taxable income.  For example in case of seasonal industries and when goods are sold at long credit and receivables are high.

In such cases following approach can be adopted:

Prefer claim for actual payments made  up to filing of ITR (last date is 31.01.2021)  in the ITR and then file revised TAR.

 However, it is also difficult to collect information and make claim fully for payments actually made till 31.01.2021 and in view of contingencies being faced one would like to file ITR also well in time.

Therefore, it can be better and safe approach to file ITR  after uploading TAR and make claims as per TAR + further sums actually paid for which information is available before the time of filing of ITR.

Thereafter file a revised TAR and revised ITR mentioning actual payment made up to due date for ITR (31.01.2021).

It appears that tow dates for TAR and ITR will be regular practice in future. Therefore, proviso to  S. 43B (1) can be amended to prescribe due date of TAR instead of due date for TAR for providing above exception and privilege to assessee to make claim of sums actually paid after close of the previous year before due date for furnishing TAR or  the date can be mentioned which is prior to due date for TAR , say 30^th September to allows a period of six month from the close of previous year.