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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as [‘NFAC’] dated 28.12.2021 passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as [‘the Act’] for the Assessment Year (AY) 2018-19. The assessee has raised the following grounds of appeal:
1. “The learned CIT(A) erred in confirming the disallowance of carried forward and set off of business loss of Rs. 32,87,558/- without appreciating the fact that the return of income was filed by the appellant within the due date under section 139(1) of the Income Tax Act, 1961 i.e. by 30/9/2018.
The learned CIT(A) has failed to appreciate the fact that the appellant was an LLP and was subject to audit under the other law under section 44ab where the due date was 30/9/2018 and the appellant had filed the return of income within the due date under section 139(1) for the said Assessment Year. 3. The learned CIT (A) passed the order without considering the principles of natural justice since any opportunity or sufficient time was given for submission of the details. 4. The appellant reserves the right to add, to alter, or amend the grounds of appeal
at or before the hearing of the appeal.”
2. Brief facts of the case are that the assessee is a limited liability partnership (LLP) governed by LLP Act, 2008. Assessee LLP Filed its return of income on 26-09- 2018, admitting total income at NIL and carry forward depreciation loss at Rs 40729/- and business loss of Rs 32,87,558/-. Assessee case was selected of scrutiny, during the assessment proceedings AO observed that as the assessee is not following in the category of assessee liable for tax audit hence due date in the case of assessee will be 31-july-2018, whereas assessee filed its return of income on 26-09-2018.
3. Treating the return as belated return u/s 139(4) r.w.s. 80 of the I.T. Act. The AO disallowed the carry forward loss amounting to Rs 32, 87,558/-. And allowed only Rs 40,729/- to be carry forward as depreciation loss. We observed that nowhere in the assessment order assessing officer mentioned the reasons for not allowing carry forward of business loss amounting to Rs 32,87,558/-.
4. As a matter of fact, assessee is not liable for tax audit u/s 44AB as assessee is not exceeding the threshold limit of turnover/revenue. But assessee is liable for Audit, under Rule 24(8) r.w.s. 34 of LLP Act, 2008. As per Rule 24(8) of the LLP Rules, 2009 assessee is liable for audit in case of entity exceeding turnover of Rs 40 lakhs or partner’s contribution exceeds Rs 25 lakhs in the relevant FY. In the case of assessee, its turnover was not exceeding 40 lakhs, but partner’s contribution was exceeded by Rs 25 lakhs. Hence assessee get his accounts audited as per Rule 24(8) and uploaded the same on the site of Registrar of Companies (ROC). As per the provisions of section 44AB it is prescribed as under: “That in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section, if such person gets the accounts such business audited under such law before the specified date and furnishes by that date the report of the audit as required under such law and a further report by an accountant in the form prescribed under this section.”
We have gone through the order of the AO, order of the Ld.CIT (A) and submissions of the assessee along with paper-book. In our observation considering the facts of the case along with provisions of Sec. 44AB, Sec. 80 and Sec. 139(1) the following facts emerged relevant to the appeal under consideration as under: i) Assessee is falling in the category of assessee as defined in Sec. 44AB; ii) The due date of filing of return in the case of assessee as per sec 139(1) will be 30th September 2018 or the due dates further extended by the board i.e. 15-Oct-2018 and 31-Oct-2018 vide F.NO. 225/358/2018/ITA.II, dated 24-09-2018 and 08-10-2018 respectively; iii) Assessee get his account audited before the due date as prescribed under the law i.e. on 26-09-2018;
iv) The relevant information about audit details in ITR-5 assessee has furnished vide column-e like assessee mentioned the Act with section under which audit has been conducted. The only information which assessee has not submitted was date of furnishing the audit report. The same can’t be furnished because any audit report conducted under any other law, other than Sec. 44AB of the I.T Act, system doesn’t accept. Hence assessee was not able to furnish this information without any of his fault; v) In absence of this only information AO treated the assessee as not falling in Sec. 44AB consequently treated the return of the assessee as belated return u/s. 139(4) and disallowed the claim of business loss to be carry forward amounting to Rs 32,87,558/- and further levied a penalty of Rs 1000/- u/s 234F; vi) All the documents of the paper-book were duly furnished before the authorities below also as certified by the assessee before us.
In view of the above observation, we found the order of AO as non- speaking order and without application of mind. We found the order of Ld. CIT (A) to be erroneous. Where he states that no audit report has been submitted by the assessee and sustained the decision of the AO. As we have observed vide page no 55 to 63 of paper-book submitted before us with a certificate from assessees side that the same has been submitted before the Ld. CIT(A) also. In this case as the utility of the department is not allowing the assessee to submit any other audit report but the same was duly submitted before the authorities below, assessee’s claim of carry forward of loss amounting to Rs. 32, 87,558/- can’t be disallowed.
In view of the above Ground No-1 and 2 raised by the assessee is allowed and AO is directed to revise a computation allowing carry forward of loss amounting to Rs. 32, 87,558/-. AO is further directed to delete the penalty of Rs. 1000/- u/s. 234F of the Act as the assessee filed the return of income well in time u/s. 139(1) and also get its accounts audited u/s. 44AB well in time.
In the result, appeal filed by the assessee is fully allowed. Order pronounced in the open court on 20th day of October, 2022.