PARAMSUKH INFRADEVELOPERS LLP,AGRA V. ITO, WARD 1(1)(1), AGRA

ITA 56/AGR/2023

AI Insights

The case revolves around Paramsukh Infradevelopers LLP, which filed an appeal against the order of the Commissioner of Income-tax (Appeals), NFAC, Delhi, which in turn arose from an intimation/order by CPC, Bengaluru under section 143(1) of the Income-tax Act, 1961. The primary contention was whether the return of income filed by the LLP was within the due date, thereby allowing the carry forward of business losses. The Tribunal examined the provisions of the LLP Act, 2008, LLP Rules, 2009, and the Income-tax Act, 1961, to determine the correct due date for filing the return of income.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 474817 (ITAT-AGRA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2019-2020
• Laws Referred To: Income-tax Act, 1961, Limited Liability Partnership Act, 2008, Limited Liability Partnership Rules, 2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILENDRA SRIVASTAVA
• Assessee Lawyers: RAJNI KANT VERMA
• Section: 143(1); 139(1); 13; 6; 139(4); 44AB; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH, AGRA BEFORE: SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No. 56/Agr/2023 Assessment Year: 2019-20 Paramsukh Infradevelopers LLP 3, Bank House Colony, Phase- second, Khandari, Civil Lines, Agra. PAN: AAQFP8761M v. Income-tax Officer, Ward 1(1)(1), Agra. (Appellant) (Respondent) Assessee by : Sh. Rajni Kant Verma, Advocate Revenue by : Sh. Shailendra Srivastava, Sr. DR Date of hearing : 09.12.2024 Date of Pronouncement : 31.12.2024 ORDER This appeal in ITA No. 56/Agr/2023 for the assessment year 2019-20 has arisen from the appellate order dated 08.02.2023(DIN& Order No. ITBA/NFAC/S/250/2022-23/1049561518(1)) passed by learned Commissioner of Income-tax(Appeals), NFAC, Delhi, which appeal in turn has arisen from the intimation/order dated 18.12.2019 passed by CPC, Bengaluru u/s. 143(1) of the Income-tax Act, 1961. ITA No. 56/Agr/2023 2 2. The grounds of appeal raised by assessee in Memo of appeal filed with Income Tax Appellate Tribunal, Agra Bench,Agra reads as under : “1. Because the order passed by the Authorities below are Erroneous illegal, arbitrary and bad in law. 2. Because the Authorities below erred in treating the return of income filed by the assessee as belated return and accordingly erred in not allowing the carry forward of loss of Rs. 16,96,446/- to the subsequent year for setoff. 3. Because the Authorities below also erred in not allowing the claim of the appellant of carry forward of loss to succeeding years despite of established facts that the return of income filed by the appellant was well within time. 4. Because the Authorities below also erred in holding that the appellant was not required to get accounts audited under the Income Tax Act or under any other law for the time being in force, therefore, required to file the return latest by 31st July. 5. Because the Authorities below also erred in not applying the provisions of rule 24(8) of the Limited Liability Partnership Rules in Legal manner. 6. Because the Authorities below also erred in calculating the contribution as per self invented formula by taking Closing Stock less Opening Stock at Rs.5,35,080/- as against contribution of more than Rs.1 Crore as required under Rule 24(8) of the LLP Rules 2009. 7. Because the Authorities below also erred in holding that the appellant has not uploaded any Audit Report for the concerned assessment year, therefore, the finding of the Learned Commissioner of Appeals is perverse. 8. The appellant craves leave to add, alter or delete any grounds of appeal.” ITA No. 56/Agr/2023 3 3. Brief facts of the case are that the assessee filed its return of income declaring business loss of Rs.16,96,486/- , on 17.09.2019. The return of income was processed by the CPC u/s. 143(1) of the Act, wherein business loss of Rs.16,96,486/- claimed by the assessee was denied to the assessee to be carried forward to the subsequent years, and income was assessed at Rs. Nil on the grounds that the assessee has filed return of income belatedly beyond the due date as prescribed u/s 139(1). The extended due date u/s 139(1) being 31.08.2019 , while return of income was filed by the assessee on 17.09.2019. Consequently, carry forward of the current year business losses to the tune of Rs. 16,96,486/- was denied to the assessee, as the return of income as per CPC was filed after the due date as prescribed u/s 139(1), being incorrect claim u/s. 143(1)(a)(ii). 4. Being Aggrieved, the assessee filed first appeal before ld. CIT(Appeals).The assessee claimed before ld. CIT(A) that the assessee’s books of accounts are required to be audited under the provisions of Rule 24 of Limited Liability Partnership Firm Rules, 2009. The assessee claimed that its accounts were audited by a ITA No. 56/Agr/2023 4 Chartered Accountant vide Audit Report dated 03.09.2019. The assessee claimed that since its accounts were audited , the due date of filing of return of income was 31.10.2019. Thus, the return of income filed on 17.09.2019 was filed within the due date u/s 139(1), and CPC has erred in not allowing carry forward of business loss of Rs. 16,96,446/- by treating the return of income as a belated return. The ld. CIT(A) referred to the Explanation 2 to Section 139(1) , and observed that the due date for filing of return of income of the assessee whose books of accounts are required to be audited under the 1961 Act or under any other law , is 30th September of the assessment year . While, in other cases, the due date is 31st July of the assessment year. The ld. CIT(A) observed that the due date as per Section 139(1) depends upon whether the books of accounts are required to be audited under the 1961 Act or under any other law for the time being in force. The ld. CIT(Appeals) dismissed the appeal of the assessee holding that the assessee has filed its return of income belatedly beyond the due date stipulated u/s. 139(1) of the Act , and hence as per section 139(3), business loss claimed by the assessee cannot be allowed to be carried forward, as the return of income is ITA No. 56/Agr/2023 5 filed beyond the time prescribed u/s. 139(1) of the Act. Ld. CIT(Appeals) referred to Rule 24(8) of Limited Liability Partnership Rules, 2009 and observed that auditing of the accounts of the assessee is not required for LLP whose turnover does not in any financial year exceed forty lakh rupees. The assessee was having Rs. Nil Turnover during the year under consideration. The ld. CIT(A) observed that the assessee is having capital work in progress during the year of Rs. 5,35,080/- , which is much less than Rs. 40 lacs. Learned CIT(Appeals) further observed that the assessee has stated in the ITR under the head ‘audit details’ that the assessee is not liable for audit u/s. 44AB and the audit report for the assessment year 2019-20 has not been filed. Ld. CIT(Appeals) concluded that in view of proviso to Rule 24(8) of LLP Rules, 2009, the LLP is not required to get its books of accounts audited , and also the assessee is not liable to get its books of account audited u/s. 44AB of the Act. The ld. CIT(A) observed that the return of income filed by the assessee is a belated return of income having been filed beyond the time prescribed u/s 139(1) as extended due date was 31.08.2019 , while return of income was filed on 17.09.2019 , and hence keeping in view ITA No. 56/Agr/2023 6 provisions of Section 139(3), the loss of Rs. 16,96,446/- claimed by the assessee to be carried forward to subsequent year is not allowed to be carried forward to the subsequent year. Thus, the appeal of the assessee was dismissed by ld. CIT(A). 5. Being Aggrieved, the assessee has now filed second appeal before the Tribunal, and the ld. Counsel for the assessee at the outset submitted that the short question which has arisen in this appeal is whether the return of income was filed within the due date as prescribed u/s. 139(1), or it was filed beyond the due date prescribed u/s. 139(1) of the Act. Claim of the assessee for carry forward of business loss is to be allowed if return of income is filed within the due date as prescribed u/s 139(1), otherwise the same is not allowable if the return of income is filed belatedly beyond the due date prescribed u/s 139(1), keeping in view provisions of Section 139(3). The ld. Counsel for the assessee drew my attention to Rule 24(8) of LLP Rules, 2009 read with first and second proviso’s. Rule 24(8) of the LLP Rules, 2009 is placed in Paper book at page 124. He also drew my attention to the provisions of section 139(1) of the 1961 Act read with Explanation-2. It was submitted that it is an admitted ITA No. 56/Agr/2023 7 fact that the assessee filed return of income on 17.09.2019 and as per 1961 Act, the due date of filing the return of income was 30.09.2019 keeping in view Explanation 2 to Section 139(1), as the assessee was required to get its books of account audited under the LLP Rules, 2009. The assessee has filed paper book containing 127 pages which is placed on record in file. The assessee has also filed the copy of Receipt in GAR-7 dated 30.10.2019 wrt to filing of LLP Form No. 8 with Ministry of Corporate Affairs (MCA) for the year ending on 31st March, 2019, which is placed on record in file, which is statement of account and solvency. As per said solvency certificate the contribution as on 31.03.2019 is Rs. 1,00,00,000/-. The said statement of account , solvency including statement of assets and liabilities as at 31.03.2019 are certified by the auditor(CA) M/s H A H G & Associates, Agra 5.2 Learned Sr. DR relied upon the order of ld. CIT(Appeals) and submitted that the assessee’s fresh contribution in the year under consideration is less than Rs. 25 lakhs, and the assessee is not liable to get its accounts audited under the LLP Rules. Thus,the due date of filing of the return of income in the case of assessee was 31.07.2019 ITA No. 56/Agr/2023 8 which was extended upto 31.08.2019. The assessee having filed return of income on 17.09.2019, and hence return of income is a belated return of income which was filed beyond the time prescribed u/s 139(1). It was also submitted that the assessee’s turnover is ‘Rs. Nil’ during the year, which is less than Rs.40 lakhs, and the assessee was not liable to get its accounts audited under the LLP Rules, 2009. The assessee is also not liable to get its accounts audited under the provisions of section 44AB of the 1961 Act. Thus, it was submitted that the authorities below have rightly disallowed the carry forward of business loss of Rs. 16,96,486/- to subsequent years. 6. I have considered rival contentions and perused the material on record. I have observed that the assessee is a Limited Liability Parrtnership(LLP_. The assessee filed its return of income on 17.09.2019 claiming business loss of Rs.16,96,486/- for the impugned assessment year to be carried forward to subsequent years. The assessee has filed paper book containing 127 pages, which is placed on record in file. On perusal of the paper book, I have observed that the assessee firm was audited by Harshit Goyal, ITA No. 56/Agr/2023 9 Membership No. 421306 of HAHG & Associates (Chartered Accountants FRN 017899C) , who have issued audit report dated 03.09.2019(PB/Page 48-48). On perusal of ITR placed on record, I have observed that it is mentioned in the ITR (Page 4/PB) filed with Revenue on 17.09.2019 that the audit report was issued under Limited Liability Partnership Act, 2008 u/s. 34(4) of the said Act, by the afore-said Chartered Accountant/Firm. I have further observed that the partner/members capital reflected in the ITR as on 31.03.2019 is 1,31,94,371/-. I have observed that as per LLP Form No. 8 filed with MCA, the contribution as on 31.03.2019 is Rs. 1,00,00,000/- while short term borrowings were Rs. 31,94,370.78. The said Form LLP-8 was filed with MCA on 30.10.2019. I have further observed that as per LLP agreement, the contribution of the assessee is stated to be Rs. 1 crore. I have further observed that the turnover of the assessee during the year under consideration is Rs. Nil. It is further observed that the assessee has sought carry forward of business loss of Rs.16,96,486/ to subsequent years, which is denied to be carried forward to subsequent year by Revenue. I have further gone through audited Profit and Loss account as well as ITA No. 56/Agr/2023 10 Balance Sheet , wherein turnover is reflected at Rs. Niland partner’s capital is reflected at Rs. 1,31,94,370.78. The assessee has also filed LLP agreement dated 30.12.2016, which is placed in page No. 99 to 107 of the paper book, where in contribution of partner is stated to be Rs. 1,00,00,000. I have also observed that the assessee has filed LLP Form No.8 for the F.Y. 2018-19 with MCA wherein the auditors, HAHG & Associates, Chartered Accountants are duly reflected to have certified the accounts and solvency of the assessee. Said form is filed on 30.10.2019 with MCA. I have further observed that the audit report was duly filed before the ld. CIT(Appeals) in appeal proceedings (paper book page 81-82) on 09.03.2022. Now, the short question, which arises on the above facts is whether the assessee has filed the return of income within due date as prescribed u/s. 139(1) of the Act or the return of income filed by the assessee is a belated return of income filed u/s 139(4) . If the assessee has filed belated return of income, then the assessee is not eligible to carry forward the business losses to subsequent years. 6.2Section 34(4) of Limited Liability Partnership Act, 2008 stipulates as under: ITA No. 56/Agr/2023 11 “ The accounts of limited liability partnerships shall be audited in accordance with such rules as may be prescribed : Provided that the Central Government may, by notification in the Official Gazette, exempt any class or classes of limited liability partnerships from the requirements of this sub-section.” 6.3 Rule 24(8) of the LLP Rules, 2009 is reproduced hereunder : “(8) The accounts of every limited liability partnership shall be audited in accordance with these rules; Provided that a limited liability partnership whose turnover does not exceed, in any financial year, forty lakh rupees, or whose contribution does not exceed twenty-five lakh rupees shall not be required to get its accounts audited: Provided further that if partners of such limited liability partnership decide to get the accounts of such LLP audited, the accounts shall be audited in accordance with these rules: Provided also that where the partners of such LLP do not decide for audit of the accounts of the LLP, such LLP shall include in the Statement of Account and Solvency a statement by the partners to the effect that the partners acknowledge their responsibilities for complying with the requirements of the Act and the Rules with respect to preparation of books of account and a certificate in the form specified in Form 8.” 6.4 On perusal of the said LLP Act 2008 and LLP Rules 2009, it is observed that it stipulates that the accounts of every LLP shall be audited in accordance with these Rules. I have observed that there are three proviso to said Rule 24(8) of LLP Rules, 2009. The first proviso is couched in a negative language wherein, it stipulates that ITA No. 56/Agr/2023 12 the Limited Liability Partnership, whose turnover does not exceed in any financial year forty lakh rupees shall not be required to get its accounts audited. Similarly, it also stipulates that the LLP, whose contribution does not exceed 25 lakh rupees, shall not be required to get its accounts audited. The word used in the first proviso between the two criteria to claim exemption from the requirement of audit is “OR”. Thus, if any of aforesaid conditions are met i.e. if either turnover during the financial year is not exceeding Rs. 40 lacs , there is no requirement to get the accounts audited under LLP Act,2008 read with LLP Rules, 2009. Similarly, if the contribution does not exceed Rs. 25 lacs , there is no requirement to get the accounts audited under LLP Act read with 2009 Rules. So far as requirement of second limb is concerned, it merely states that if the contribution does not exceed Rs.25 lacs, there is no requirement to get the accounts audited, it does not stipulate that contribution during the financial year does not exceed Rs. 25 lacs to get exemption from the audit. I cannot read the words in the statute which are not there or are conspicuously absent in the plain and clear wording of the provision. Admittedly, the assessee has a turnover of Rs. Nil , and hence the ITA No. 56/Agr/2023 13 assessee is out of the ambit of audit under LLP Act, 2008 read with LLP Rules, 2009. The intention was to exempt small LLP from the purview, but the use of the word ‘OR’ between the two criteria has created an anomalous situation, wherein even large LLP gets exempted from the ambit of audit under LLP Act. Say for example the LLP having turnover of Rs. 100 crores in a financial year but contribution of Rs. 20 lacs shall not be liable to audit under LLP Act, 2008 read with LLP Rules, 2009, although intention was to exempt small LLP. To deal with such situations where, there is a second proviso to Rule 24(8) of the LLP Rules, 2009, which is an integral part of the Rule itself, which stipulates that if the partners of such LLP(who otherwise is exempted from audit vide first proviso) decides to gets the accounts audited, the accounts shall be audited in accordance with the LLP Rules, 2009 . Thus, once the partners of such LLP decides to get the accounts audited, the same shall be audited as per LLP Rules,2009. Thus, the assessee in the instant case, although having turnover at Nil, but the capital contribution of Rs.1,31,94,370/- as at 31.03.2019 would not require to get its accounts audited under Rule 24(8) read with first proviso, but owing to second proviso to Rule ITA No. 56/Agr/2023 14 24(8), the partners having decided to get the accounts audited , the accounts then shall be required to be audited as per 2009 Rules, which in fact was audited by HAHG & Associates, Chartered Accountant in the instant case. It carries the force of law. Now, coming to limitation for filing of return of income, provisions of Explanation-2 to section 139(1) reads as under : Explanation 2.—In this sub-section, \"due date\" means,— (a) where the assessee other than an assessee referred to in clause (aa) is— (i) a company; or (ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or (iii) a partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force or the spouse of such partner if the provisions of section 5A applies to such spouse, the 30 the day of September of the assessment year; (aa) in the case of an assessee, including the partners of the firm or the spouse of such partner (if the provisions of section 5A applies to such spouse), being such assessee, who is required to furnish a report referred to in section 92E, the 30th day of November of the assessment year; (b) in the case of a person other than a company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year; (c) in the case of any other assessee, the 31st day of July of the assessment year. ITA No. 56/Agr/2023 15 On perusal of the above, it is abundantly clear by clause (a)(ii) of Explanation 2 to Section 139(1), that when a person (other than a company) whose accounts are required to be audited under this Act i.e. Income-tax Act, 1961 or under any other law for the time being in force, the due date is 30th September of the assessment year. The word used is ‘required’ to be audited under the 1961 Act or under any other law for the time being in force, the due date for filing of return of income is 30th September of the assessment year. Thus, once the Partner of such LLP which otherwise is not required to get its accounts audited vide first proviso to Rule 24(8), would be required to get its accounts audited vide second proviso to Rule 24(8) as the partners have decided to get its accounts audited even if it was not required to get its accounts audited vide first proviso,then in such case the same shall be audited in accordance with LLP Rules, 2009. Section 34(4) of The LLP Act, 2008 is also become relevant as it stipulates that the accounts of LLP shall be audited in accordance with such Rules as may be prescribed. Thus, once the partners of LLP invokes second proviso to Rule 24(8) then the accounts of such LLP shall be required to be audited in accordance with LLP Rules, ITA No. 56/Agr/2023 16 2009, and then the same shall satisfy the condition as is stipulated in Explanation-2 to Section 139(1) and the due date u/s 139(1) for filing return of income in the instant case shall be 30.09.2019. The assessee having filed the return of income on 17.09.2019, has filed the return of income within due date as prescribed u/s. 139(1) , and keeping in view the provisions of section 139(3), the assessee is eligible to carry forward loss of Rs.16,86,486/-. Thus, the appeal of the assessee stands allowed. 7. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 31.12.2024. Sd/- (RAMIT KOCHAR) ACCOUNTANT MEMBER Dated: 31.12.2024 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT Assistant Registrar ITAT Agra "