CA Sharad Jain
BACKGROUND : The provisions for audit under Sec 44AB of the Income Tax Act (“Act”) were introduced for the first time from the Assessment Year 1985-86. Since then the extension of due date for obtaining / obtaining and furnishing of Tax Audit Report (TAR) has remained an issue.
In many years in the past, the above due date was extended by the CBDT suo moto / on representations by the Tax Payers / Assesses, Trade Organizations etc. But in the last few years it has been continuously seen that the CBDT has denied / shown its much unwillingness / adamant attitude in the matter of extension of the due date, which resulted in serious conflicts (including approach to Hon’ble High Courts) between the Tax Payers, Chartered Accountants, Tax Consultants etc. and the CBDT.
The main reason behind the above denial / much unwillingness etc. of the CBDT was that the extension of due date would lead to delay in collection of self assessment tax and also loss of interest U/s. 234A.
Almost every year one or more reasons arises (e.g., natural calamities, festival seasons, delayed issuance of forms / utilities etc.) due to which the extension for above due date is sought. Such reasons may also occur in future years. The above main reason for denial / unwillingness of CBDT to extend due date will also remain in future and as such again serious conflicts may arise in the future. Therefore, in order to avoid such conflicts in future, there is a great need to look for alternative effective remedy for extension of above due date.
ALTERNATIVE REMEDY & REASONING THEREFOR :
The main concern / interest of the CBDT and that of the assesses etc. are completely different. The CBDT remains concerned about timely collection of self assessment tax and interest U/s. 234A for delay in payment thereof. Whereas, the assesses etc. generally remains worried about levy of harsh penalty U/s. 271B for non furnishing of TAR within due date. The CBDT do not have intention to earn from levy of penalty U/s. 271B.
It is mentionable here that it is a legally settled position that the penalties are provided in the law as a deterrent measures to ensure proper and timely compliances only and have never been considered as source for earning revenue. The further, legal position is that the levy of penalty U/s. 271B is also not mandatory but is discretionary. Apart from this, the Section 273B also prescribes that the above penalty is not leviable if reasonable cause is there. Therefore, in view of the above legal position, the penalty U/s. 271B can be generally waived in appropriate circumstances.
Thus, in the above background and considering legal position, the granting of general immunity from penalty may be an alternative effective remedy for extension of due date for obtaining and furnishing of TAR. For example, if the due date extension is sought from 30th September to 31st December then the CBDT can (instead of extending due date) declare through circular, notification etc. that no penalty U/s. 271B will be initiated / levied in cases where tax audit reports have been furnished up to 31st December. In this manner the concerns of both, the assesses as well as of the CBDT will be taken care of without going for the extension of above due date.
It is also mentionable here that the granting of general immunity from penalty is not a completely new measure. Earlier for Assessment Year 1985-86, the general immunity was granted by the CBDT vide circular no. 422 dated 19 June, 1985. The due date for obtaining of tax audit report for that year was 30th June 1985. But vide above circular it was provided that no penalty should be initiated for non compliance with the provisions of Sec 44AB in cases where audit report has been obtained up to 30th September, 1985.
In Sec 119(1) the CBDT has general powers for issue of orders, instructions and directions for proper administration of the Act. In the Sec 119(2)(a), several sections has been mentioned in respect of which the CBDT has been given specific powers to give relaxation in the public interest. In Sec 119(2)(a), there is no mention of Sec 271B. Though it can be presumed that powers of granting of general immunity from above penalty are contained in Sec 119(1) but it is felt that Sec 271B should also be included in Sec 119(2)(a).
SUGGESTION: Thus, it is suggested that in the forthcoming Union Budget, the penalty U/s. 271B may be included in the specific sections for which relaxation can be given in the public interest by the CBDT. This amendment will provide legal strength to the CBDT in granting above general immunity.
CONCLUSION: Thus, it can be concluded that the seeking of extension of above due date is a recurring event. The hardship of CBDT behind extension of due date is also a reality. In such circumstances, granting of general immunity from penalty may serve as an amicable and acceptable solution for the assesses as well as for the CBDT.