Books of account not audited at time of filing of ITR isn’t a criteria to deny carry forward of losses: ITAT

Case Details: DCIT v. Brahmos Aerospace (Thiruvananthapuram) Ltd. - [2022] 137 taxmann.com 340 (Cochin - Trib.)

Judiciary and Counsel Details

• • George Mathan, Judicial Member and Ramit Kochar, Accountant Member
  • Smt. Jamunna Devi, Sr. DR for the Appellant.
  • Abraham Joseph Markos, Adv. for the Respondent.

Facts of the Case

The assessee was engaged in the business of Manufacturing Engineering goods. It filed its return of income declaring loss. The return was duly filed within the prescribed time under section 139(1).

However, the financial statements were not audited by the time of filing of return of income. The assessee’s accounts were audited later after 3 months and filed with Assessing Officer (AO). The assessee did not file a revised return of income after getting its accounts audited with a revised figure of income (loss) post-audit.

AO completed the assessment by not allowing carried forward of business loss as no revised return was filed by the assessee. On appeal, the CIT(A) allowed relief to the assessee. Aggrieved-AO filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that if the assessee has not got its statutory audit done under the Companies Act within the prescribed time, or has not got its tax audit done under Income-tax Act, there are penal provisions provided under the statute for such non-compliance.
There could be several reasons for not getting the statutory audit/tax-audit done within the prescribed time, but unless there is a specific/express provision that stipulates that if the audit is not done within the prescribed time, the loss shall not be allowed to be carried forward, the scope of the statute cannot be expanded.

Section 80 of the Income-tax Act stipulates that the return of income is to be filed within the prescribed time, which the assessee did comply in the given case. Thus, there was no justification for denying the carry forward of the business loss based on the fact that accounts were not audited by the time of filing of return of income under section 139(1).

List of Cases Referred to

• • Asstt. CIT v. Kerala Hi-Tech Industries Ltd. [IT Appeal No. 601 (Coch) of 2010, dated 29-3-2012] (para 1)
  • CIT v. Pruthvi Brokers & Shareholders [2012] 23 taxmann.com 23/208 Taxman 498/349 ITR 336 (Bom.) (para 6).