Project Revolt LLP Vs ITO (ITAT Mumbai)
Summary: The appeal was filed by Project Revolt LLP against the order dated 13.03.2026 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi, arising from an order dated 18.02.2022 under section 154 of the Income-tax Act, 1961 for AY 2017-18. The solitary issue before the Tribunal was whether the assessee’s return filed on 11.09.2017 was within the due date prescribed under section 139(1) and, consequently, whether the assessee was entitled to carry forward its business loss of ₹26,44,861.
The assessee was a Limited Liability Partnership constituted under the Limited Liability Partnership Act, 2008. For the financial year ended 31.03.2017, its turnover was ₹48,39,850. Since the turnover exceeded ₹40 lakh, its accounts were required to be audited under Rule 24(8) of the Limited Liability Partnership Rules, 2009. The accounts were actually audited and the audit report was obtained on 01.08.2017. The audited balance sheet, profit and loss account and audit report were available on record, and the assessee had disclosed the audit under the “Audit Details” column of its return.
The assessee filed its return for AY 2017-18 on 11.09.2017 declaring an aggregate loss of ₹27,68,692, consisting of business loss of ₹26,44,861 and unabsorbed depreciation of ₹1,23,831. While processing the return under section 143(1), the CPC proceeded on the basis that the applicable due date was 05.08.2017, treating the assessee as a non-audit case. Since the return was filed on 11.09.2017, it was treated as belated and carry forward of the business loss was denied under section 80. The unabsorbed depreciation of ₹1,23,831 was permitted to be carried forward.
The assessee subsequently filed an application under section 154 on 06.01.2022. It contended that, because its accounts were mandatorily required to be audited under the LLP Act and Rule 24(8) of the LLP Rules, the extended due date under Explanation 2(a)(ii) to section 139(1) was 30.09.2017. The return filed on 11.09.2017 was therefore within time and the denial of business-loss carry forward constituted a mistake apparent from the record. The Assessing Officer rejected the rectification application on 18.02.2022.
Before the CIT(A), the assessee submitted that Explanation 2(a)(ii) was not confined to accounts audited under the Income-tax Act. The provision expressly referred to accounts required to be audited under the Income-tax Act “or under any other law for the time being in force”. Since the assessee’s accounts were mandatorily audited under the LLP Act and Rules, it claimed that the 30.09.2017 due date applied. The CIT(A), however, held that because the turnover was below the threshold for tax audit under the Income-tax Act, the due date was 05.08.2017 and sustained the denial of business-loss carry forward.
Before the Tribunal, the assessee argued that the CIT(A)’s interpretation effectively rendered the words “or under any other law for the time being in force” redundant. It emphasised that the audit obligation under Rule 24(8) was statutory, the audit had actually been completed on 01.08.2017, and the audit particulars had been disclosed in the original return. The Revenue relied upon the reasoning contained in the impugned order.
The Tribunal found the essential facts undisputed: the assessee was an LLP; its turnover was ₹48,39,850; its accounts were required to be audited under Rule 24(8); the audit was completed on 01.08.2017; and the return was filed on 11.09.2017. It held that Explanation 2(a)(ii) to section 139(1) recognises two distinct statutory sources for an audit requirement—first, the Income-tax Act and, second, any other law for the time being in force. Accordingly, the extended due date was not dependent solely on crossing the tax-audit threshold under section 44AB.
The Tribunal held that once the assessee’s accounts were statutorily required to be audited under the LLP Act read with Rule 24(8), the assessee fell within the second limb of Explanation 2(a)(ii). The CIT(A)’s reasoning, which treated the assessee as a non-audit case because its turnover was below the Income-tax Act threshold, improperly read the words “under any other law for the time being in force” out of the provision.
The Tribunal further found that this was not a case where the assessee subsequently asserted an audit obligation merely to overcome a belated-return consequence. The LLP status, turnover, statutory audit requirement, audit report dated 01.08.2017 and disclosure of the audit in the original return were all contemporaneous records. The applicability of the 30.09.2017 due date therefore emanated from the return and accompanying material. The CPC had instead applied the 05.08.2017 date applicable to a non-audit case.
On section 80, the Tribunal held that denial of carry forward arises where the return of loss is not furnished in accordance with section 139(3), which requires filing within the time allowed under section 139(1). Since the applicable due date was 30.09.2017 and the return was filed on 11.09.2017, the return was timely and the foundational premise for denying the business-loss carry forward did not survive.
The Tribunal also held that the rejection of the assessee’s section 154 application could not be upheld. The mistake was discernible from the return, the audit particulars disclosed therein and the applicable statutory provision. Rectification did not require investigation into a fresh fact or reopening a concluded finding based on reasonably possible views. The error was apparent from the record and amenable to rectification under section 154.
Accordingly, the Tribunal held that the due date applicable to the assessee for AY 2017-18 was 30.09.2017. The return filed on 11.09.2017 was within the time prescribed under section 139(1) and could not be treated as a belated return under section 139(4). The assessee was therefore entitled to carry forward the business loss of ₹26,44,861 in accordance with law. The impugned order was set aside and the Assessing Officer was directed to allow the claim. The appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeal has been filed by the assessee against the impugned order dated 13.03.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi, arising from the order dated 18.02.2022 passed under section 154 of the Income-tax Act, 1961 for the assessment year 2017–18. The solitary issue raised in the appeal is whether the return of income filed by the assessee on 11.09.2017 was within the due date prescribed under section 139(1), and consequently, whether the assessee was entitled to carry forward the business loss of ₹26,44,861.
2. Brief facts are that the assessee is a Limited Liability Partnership constituted under the Limited Liability Partnership Act, 2008. For the financial year ended on 31.03.2017, the assessee had a turnover of ₹48,39,850. Since its turnover exceeded ₹40 lakh, its accounts were required to be audited in terms of Rule 24(8) of the Limited Liability Partnership Rules, 2009. The assessee accordingly got its accounts audited and obtained the audit report on 01.08.2017. The audited balance sheet, profit and loss account and the audit report were also available on record. In the return of income, under the relevant column relating to “Audit Details”, the assessee had specifically disclosed that its accounts were audited in terms of the LLP Act and the Rules framed thereunder.
3. The assessee filed its return of income for the assessment year 2017–18 on 11.09.2017 declaring an aggregate loss of ₹27,68,692, comprising business loss of ₹26,44,861 and unabsorbed depreciation of ₹1,23,831. While processing the return under section 143(1), the CPC proceeded on the premise that the due date applicable to the assessee was 05.08.2017, being the extended due date applicable to an assessee whose accounts were not required to be audited. Since the return had been filed on 11.09.2017, the CPC treated it as a belated return under section 139(4) and denied the carry forward of the business loss of ₹26,44,861 by applying section 80. The unabsorbed depreciation of ₹1,23,831 was, however, permitted to be carried forward. An intimation under section 143(1) was accordingly issued on 31.12.2017.
4. The assessee filed an application under section 154 on 06.01.2022, pointing out that its accounts were mandatorily required to be audited under the LLP Act read with Rule 24(8) of the LLP Rules and, therefore, the due date applicable to it under Explanation 2(a)(ii) to section 139(1) was 30.09.2017. Since the return had been filed on 11.09.2017, it was within the statutory due date and the denial of carry forward of the business loss was a mistake apparent from the record. The rectification application was, however, rejected by the Assessing Officer vide order dated 18.02.2022.
5. Before the learned CIT(A), the assessee reiterated that the expression used in Explanation 2(a)(ii) to section 139(1) is not confined to an assessee whose accounts are required to be audited under the Income-tax Act. It expressly includes a person whose accounts are required to be audited “under this Act or under any other law for the time being in force.” Since the assessee’s turnover exceeded the limit prescribed under Rule 24(8) of the LLP Rules, its accounts were mandatorily required to be audited under another law in force, namely, the LLP Act and the Rules framed thereunder. The learned CIT(A), however, held that since the assessee’s turnover was below the threshold prescribed for tax audit under the Income-tax Act, the due date applicable to it was 05.08.2017. He accordingly upheld the treatment of the return as belated and sustained the denial of carry forward of the business loss.
6. Before us, the learned counsel submitted that the learned CIT(A) had read Explanation 2(a)(ii) to section 139(1) as though it applied only where the accounts were required to be audited under the Income-tax Act. Such a construction, according to him, renders the expression “or under any other law for the time being in force” entirely redundant. He submitted that the assessee was under a statutory obligation to get its accounts audited under Rule 24(8) of the LLP Rules; the audit had actually been completed on 01.08.2017; and the fact of such audit was duly disclosed in the return itself. The return filed on 11.09.2017 was therefore within the due date of 30.09.2017, and the business loss could not have been denied merely because the CPC applied the due date meant for a non-audit case. The learned DR relied upon the reasoning contained in the impugned order.
7. We have heard the rival submissions and carefully perused the material placed on record. The essential facts are not in dispute. The assessee is an LLP; its turnover during the relevant year was ₹48,39,850; its accounts were required to be audited under Rule 24(8) of the Limited Liability Partnership Rules, 2009; the accounts were in fact audited and the audit report was obtained on 01.08.2017; and the return of income was filed on 11.09.2017. The issue, therefore, turns upon the correct interpretation of Explanation 2(a)(ii) to section 139(1), which, insofar as relevant, prescribes the due date for a person, other than a company, whose accounts are required to be audited under the Income-tax Act “or under any other law for the time being in force.”
8. The language employed by the Legislature is clear and leaves little room for any interpretative ambiguity. Explanation 2(a)(ii) recognises two distinct statutory sources from which the requirement of audit may arise: first, the Income-tax Act itself; and second, any other law for the time being in force. The applicability of the extended due date, therefore, is not dependent solely upon whether the turnover of the assessee crossed the threshold for tax audit under section 44AB. It is equally attracted where the accounts are required to be audited under another operative enactment. Once the assessee’s accounts were statutorily required to be audited under the LLP Act read with Rule 24(8) of the LLP Rules, it fell directly within the second limb of Explanation 2(a)(ii). The fact that its turnover may not have crossed the separate threshold prescribed under section 44AB does not efface or dilute the independent audit obligation arising under the LLP law.
9. The learned CIT(A), while noticing that the turnover of ₹48,39,850 necessitated an audit under the LLP Act, nevertheless held that the due date applicable to the assessee was that prescribed for a non-audit case because the turnover was below the threshold under the Income-tax Act. This reasoning juxtaposes two different statutory requirements and, in effect, reads out the words “under any other law for the time being in force” from Explanation 2(a)(ii). If the extended due date were intended to apply only to persons liable for audit under the Income-tax Act, the Legislature would not have expressly enlarged its ambit by incorporating audit requirements arising under other laws. The provision has to be applied in its entirety, and effect must be given to every part of the language consciously employed therein.
10. There is another important aspect. This is not a case where the assessee subsequently sought to claim that its accounts were audited under another law merely to overcome the consequence of filing a belated return. The statutory character of the assessee as an LLP, the turnover of ₹48,39,850, the audit requirement under the LLP Rules, the audit report dated 01.08.2017 and the disclosure of that audit in the original return were all part of the contemporaneous record. Thus, the applicability of the due date of 30.09.2017 emanated from the return and the material accompanying it. The CPC nevertheless applied the date of 05.08.2017 applicable to a non-audit case. The resulting denial of carry forward of the business loss did not arise from any debatable factual enquiry; it flowed from the application of an inapplicable due date despite the relevant facts being apparent from the record.
11. Section 80 denies the benefit of carrying forward a business loss only where the return of loss has not been furnished in accordance with section 139(3), which, in turn, requires the return to be furnished within the time allowed under section 139(1). In the present case, the due date under section 139(1) was 30.09.2017 and the return was filed on 11.09.2017. The return was thus filed well within the statutory time. Consequently, the foundation on which the CPC invoked section 80—namely, that the return was belated does not survive. Once that foundational premise is found to be erroneous, the consequential denial of carry forward of the business loss must also fall.
12. We are also unable to uphold the rejection of the assessee’s application under section 154. The mistake pointed out by the assessee was discernible from the return itself, the audit particulars disclosed therein and the applicable statutory provision. Rectification did not require investigation into any fresh fact, nor did it involve reopening a concluded finding resting upon two reasonably possible views. The error lay in treating an assessee, whose accounts were admittedly required to be audited under another law, as a non-audit case for determining the due date under section 139(1). Such an error was apparent from the record and was amenable to rectification under section 154.
13. Accordingly, we hold that the due date applicable to the assessee for filing its return of income for the assessment year 2017–18 was 30.09.2017. The return filed on 11.09.2017 was within the time prescribed under section 139(1) and could not have been treated as a belated return under section 139(4). The assessee is, therefore, entitled to carry forward the business loss of ₹26,44,861 in accordance with law. The impugned order is set aside and the Assessing Officer is directed to allow the claim.
14. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 31st August, 2026.
