Carry Forward of Business Loss cannot be denied merely for not getting Statutory Audit / Tax Audit done: ITAT [Read Order]

The Cochin bench of the Income Tax Appellate Tribunal (ITAT) has held that the carry forward of business loss cannot be denied to the assessee merely on the ground that the statutory audit/tax audit was not completed within the prescribed period. The Tribunal bench comprising Mr. George Mathan (JM) and Mr. Ramit Kochar (AM) held that such benefit cannot be denied to the assessee in the absence of a specific provision in the statute.

The assessee is engaged in the business of Manufacturing of Engineering goods and filed its income tax returns. The revenue initiated proceedings against the assesse for infringement of provisions of Section 44AB of the 1961 Act , for not getting tax-audit done within the prescribed time.

The first appellate authority has restored the matter to the file of the AO with direction to assess the income/loss of the assesse on the basis of audited financial statements and other material in accordance with law.

The bench observed that if the assesse has not got its statutory audit done under Companies Act, 1956 (Now Companies Act, 2013) within the prescribed time, or has not got its tax audit done under the provisions of Section 44AB of the 1961 Act, there are penal provisions provided under the statute for such non-compliances.

“There could be several reasons for not getting the statutory audit/tax-audit done within prescribed time, but unless there is specific/express provision which stipulates that if the audit is not done within prescribed time, the loss shall not be allowed to be carried forward, we cannot expand the scope of the statute. Section 80 stipulates that return of income is to be filed within the prescribed time, which assesse did complied with although provisional financial statements were filed along with return of income. Moreover, the tribunal in first round of litigation has directed AO to assess income/ loss of the assesse on the basis of audited financial accounts and other materials in accordance with law .Thus, under the above facts and circumstances, we are of the considered view, that there is no justification for denying the carry forward of the business loss for the year under consideration based on the audited financial statements keeping in view applicable and relevant provisions of the 1961 Act for computing such loss, and we confirm the appellate order of the ld. CIT(A),” the Tribunal said.