Follow up article on TAR - Filing of Tax Audit report- confusions, delay and remedy - Second article for clarification.

[C.A. DEV KUMAR KOTHARI]

CIRCULAR NO. 6/2008  DATED 18-7-2008

CIRCULAR NO.5/2007, DATED 26-7-2007

Sections 44AB and 271B of the income Tax Act, 1961

The author has  received several letters in response to earlier article on the subject. Therefore, this second article is to clarify some doubts and confusions to avoid initiation of penalty proceedings and litigation.

The author convey thanks for sending useful comments and feed back by readers of TMI which will help in improving early compliance and clear doubts .

General:

First of all my view is that both  circulars issued by the CBDT for filing of returns for assessment year 2007-08 and 2008-09 are mainly  in  the context of filing of e-returns or annexure less  returns and not in context of filing of Tax Audit Report (TAR) and penalty u/s  271B.

 These circulars are simply guidelines for the persons who file returns. These circulars cannot be considered as instructions to tax officers or a notification exempting filing of TAR under Section 44AB or waiving penalty u/s 271B.

The instructions given on returns forms have limited application to the aspects related with filing of returns and not about compliance u/s 44AB.

In deed in the circular for A.Y. 2007-08 it is mentioned that TAR should not be filed even separately, but there is no such mention in circular for A.Y. 2008-09.  

In the Circular for AY 2008-09 we find reference of guidelines contained in other old circular particularly circular for returns for A.Y. 2007-08  to the effect that  TDS/ TCS certificates and tax challans  should  not to be filed  But that circular has not been relied or referred to for TAR and penalty u/s 271B in the circular for A.Y. 2008-09.

The Circular of 2007 can help to argue cases for both years  if  proceedings are initiated for levy of  penalty u/s 271B however, the A.O. may not consider it as binding and then appeal may have to be filed.

File TAR voluntarily:

When you have TAR with you, why not file the same voluntarily to avoid any doubt or confusion as to when the TAR was obtained, whether TAR is antedated etc. Why to complicate the matter.

A.Y. 2008-09

 CIRCULAR NO. 6/2008  DATED 18-7-2008 for assessment year 2008-09 is in relation to filing of returns. In this circular no where it has been mentioned that requirement of filing of TAR u/s 44AB is dispensed with and that penalty u/s 271B shall not be levied even if TAR is not filed separately in compliance of  S. 44AB.

 In this regard in relation to TAR, there is no reference to earlier circular which was issued for A.Y. 2007-08 .

 Therefore, the earlier circular for A.Y. 2007-08 may not be considered as applicable to A.Y. 2008-09 by the A.O.

A.Y. 2007-08

In CIRCULAR NO.5 / 2007, DATED 26-7-2007   we find that about TAR  there is clarification vide paragraph 6 (i)  from which we find that , for A.Y. 2007-08  there was a clarification to the effect that TAR should not also  be separately filed by assessee before or after filing of return. It may be furnished in original, during the assessment proceedings. However, it has also been mentioned that if the audit report has not been obtained before the due date, provisions of section 271B shall be attracted."

Thus we find that the circular itself have some contradictions. Furthermore this circulars is merely guidance to public for filing of return. This is not specific notification exempting filing of TAR. This is also not instruction to the revenue officers.

The experience shows that in past, when merely obtaining of TAR was necessary or  in case of belated returns accompanied with TAR, the A.O.'s levied penalty u/s 271B because TAR was not furnished before the due date. Such matters have went up to High Courts.

 In some cases even the date of TAR was doubted and the officers took view that TAR was not actually obtained before the due date and that the TAR was back dated.  I remember that in a case the certificate of practice of a CA was also suspended for back dating and signing TAR mentioning an earlier date.

Therefore, unless the TAR is actually filed before the due date, it is likely to create doubts, initiation of penalty proceedings, and litigation.

 To avoid all such things it is advisable to file TAR even for A.Y. 2007-08 voluntarily with a petition to condone delay, if any.

If TAR is not filed, the purpose of TAR shall also be defeated in most of cases where return is accepted and proceedings u/s 143(2) are not taken up.

Any person can challenge the circular as creating discrimination amongst assesses whose return are scrutinized (about 8-10 % of TAR cases)  and the rest of assesses  whose return is accepted u/s 143 (1). 

Letter for filing TAR for A.Y. 2007-08:

                                            From: assessee  - use letter head

To,

The Assessing Officer,

……

 

PAN    Assessment Year 2007-08- filing of Tax Audit Report u/s 44AB

I /  We have filed on line return / annexure less return  on 2007  vide acknowledgment no……

             At the time of filing of the return we had also offered to file various annexure , TDS/ TCS certificates, challan and TAR  however they  were not accepted by the department at the time of receiving the return or / its acknowledgement.

I / we had obtained Tax Audit Report dated….. before the due date (  --. --. .07).

I am / we are voluntarily filing Tax Audit Report as required u/s 44AB of the income Tax Act, 1961, kindly accept and acknowledge receipt of the same.

Circular about annexure less returns:

In CIRCULAR NO.5 / 2007, DATED 26-7-2007 for assessment year 2007-08   we find that about TAR  there is clarification vide paragraph 6 (i)  from which we find that , for A.Y. 2007-08  there was a clarification to the effect that TAR should not also  be separately filed by assessee before or after filing of return. It may be furnished in original, during the assessment proceedings. However, it has also been mentioned that  if the audit report has not been obtained before the due date, provisions of section 271B shall be attracted."

Therefore, as a view of abundant caution we are voluntarily filing Tax Audit Report.

Condonation of delay if any:

As stated above we had reason for not filing TAR before the due date. From the circular we understand that it is not necessary on our part to file TAR unless called for by the A.O.. Therefore there is no delay in filing of TAR. However, to keep the matter beyond doubt and with a view of abundant caution we are voluntarily filing TAR.

 Kindly accept the same.

I am / We are simple business person and do not know intricate tax laws and procedural requirement and I / we have to depend on tax consultants. Recently I / we have read that it is advisable to voluntarily file TAR so we are filing the same.

In view of above facts and circumstances and considering the fact that I am  / We are filing TAR voluntarily. The revenue has not suffered any damages due to non filing of TAR earlier. the default if any, at all is of a technical nature caused due to reasonable causes,  we request you to kindly condone the delay if any in filing of TAR and please do not initiate penalty proceedings u/s 271B.

Thanking you,

 

Yours faithfully,

 

Assessee **     For and on behalf of Assessee        

** Preferably should be signed by assessee, in case assessee is not available then A/R can file the same mentioning for and on behalf of assessee.