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| DATE: | (Date of pronouncement) |
| DATE: | September 28, 2010 (Date of publication) |
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| Click here to download the judgement (bombay_mercantile_audit_delay.pdf) |
Delay in filing ROI due to late appointment of auditor must be condoned
The assessee, a co-op bank, filed a return for AY 2001-02 showing a loss of Rs. 15.94 crores. As the return was belated, the assessee filed an application u/s 119(2)(b) with the CBDT requesting condonation of delay and for being allowed carry forward of loss. The principal ground on which condonation was sought was that there was a delay in appointment of the statutory auditor by the Registrar and a consequent delay in preparing the s. 44AB tax audit report. The CBDT rejected the application on the ground that the reasons were general in nature and there were no exceptional circumstances beyond the control of the assessee to file the return. It was also stated that the assessee was operating for several years and was aware of its obligation to get the accounts audited and to file the return within the due date. The assessee challenged the rejection of the application. HELD upholding the challenge:
(i) The power to appoint statutory auditors is that of the Central Registrar and that was done on 3.9.2001. The Registrar appointed Chartered Accountants to be statutory auditors in place of the Departmental Auditors. This change was made in respect of all societies. Therefore, the assessee cannot be blamed for the delay in carrying out its audit as the same was beyond its control. The contention of the Revenue that the departmental auditors had started the audit in the year 2000 and it was for the assessee to get the audit expedited cannot be accepted. Though the departmental auditors might have started the audit, it appears that pursuant to the said policy decision that was taken, the departmental auditors were replaced by the Chartered Accountants to be the statutory auditors. Therefore, the reason given for delay deserves to be accepted;
(ii) It is well settled that in matters of condonation of delay a highly pedantic approach should be eschewed and a justice oriented approach should be adopted and a party should not be made to suffer on account of technicalities.
My tentative comments (subject to/pending a detailed study):
The operative portion of the order /direction of the court reads: –
In that view of the matter the above Petition is required to allowed. The impugned order dated 1832010 is required to be set aside and is accordingly set aside and resultantly the delay in filing the return to stand condoned and the Petitioner would be entitled to the carry forward and set off
of losses in accordance with law.. (underling supllied)
According to a strict reading and one’s understanding, the law mandates to the effect that a loss return, in order to securing the benefit of ‘carry forward’, is required to be filed within the prescribed ‘due date’.
Besides, the stakes involved are quite high. The Revenue might tale up the adverse decision for adjudication by the apex court.
The following points, – which are seen not to have been raised hence not dealt with in the high court’s order- are, if so raised, likely to be gone into and adjudicated upon by the apex court:
1. Was a writ at all maintainable?
2. Is it within the powers of court (judiciary) to, whatever be THE compulsions or justification, rewrite or read down the mandate of the law?
3. Why the circular relied on has, in terms, application, – despite the mandate of the statute?
(To put it differently, – whether, firstly, it is within the powers of the CBDT itself to condone the delay in question?)
Incidentally, it is observed that, the assessee has explained to the effect that the root cause leading to delayed filing of its loss return was a delay in appointment of the statutory auditor by the Central Registrar. Should that be so, – depending, of course, on a thorough investigation and finding of the actual factual position, – another pertinent poser one is tempted to put across is this:
Is the Central Registrar (concerned authority) in any way responsible and hence answerable in law for the loss to the assessee, in the event the belated claim to carry forward of the tax loss is ultimately held to be not ‘condonable’ and is accordingly rejected?
vswaminathan