My LLP was not required to be audited, but the partners had the accounts audited anyway. The CPC treated the return as belated and refused the carry forward of the business loss. Was the return late?
No. The Agra Tribunal held that where the partners of an LLP that is exempt from audit under the first proviso to Rule 24(8) of the LLP Rules 2009 decide to have the accounts audited, the second proviso requires the audit to be carried out in accordance with those Rules, and the LLP then becomes a person whose accounts are 'required to be audited ... under any other law for the time being in force' within Explanation 2(a)(ii) to s.139(1). The due date accordingly moved to 30 September, the return filed on 17 September was in time, and the business loss was allowed to be carried forward.
Decided by the ITAT (Shri Ramit Kochar, Accountant Member (SMC Bench)) on 2024-12-31, reported as ITA No. 56/Agr/2023 (ITAT Agra, SMC Bench); Assessment Year 2019-20. It bears on section 80, section 139(1), section 139(3), section 139(4), section 143(1), section 143(1)(a)(ii), section 44AB, section 72 of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
The carry forward of a loss stands or falls on a date, and the date is fixed by Explanation 2 to s.139(1), not by s.80 itself. This order is the rare authority that the s.139(1) due date can be extended by a voluntary audit under another statute — because Explanation 2(a)(ii) asks whether the accounts are 'required to be audited', and the second proviso to Rule 24(8) converts a voluntary decision into a requirement. The practical value is wider than LLPs: the same construction applies to any person whose accounts become required to be audited under any other law for the time being in force. The order also disposes of the Revenue's two usual counters — that the LLP's turnover was nil and its fresh contribution during the year below twenty-five lakh rupees (the contribution actually standing at Rs 1,31,94,370 as at 31 March 2019), and that the ITR itself said the assessee was not liable to audit under s.44AB. Neither mattered, because the requirement arose under the LLP Rules and not under the Income-tax Act. Two cautions. It is a single-member SMC order and turns on a reading of Rule 24(8) that the Bench itself described as producing an anomalous result: the word between the two exemption criteria in the first proviso is 'or', so a large LLP with a small contribution escapes audit, and the Bench declined to read words into the statute to cure that. And the audit report there was dated 3 September 2019, before the return was filed, with the LLP Form 8 filed with the Ministry of Corporate Affairs on 30 October 2019 — the sequence of documents mattered.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a limited liability partnership, filed its return for Assessment Year 2019-20 on 17 September 2019 declaring a business loss. The Central Processing Centre processed the return under s.143(1), assessed income at nil and denied carry forward of the loss on the footing that the return was filed beyond the s.139(1) due date, the extended due date being 31 August 2019; the denial was treated as correction of an incorrect claim under s.143(1)(a)(ii). Before the Commissioner (Appeals) the assessee said its accounts were required to be audited under Rule 24 of the LLP Rules 2009 and had in fact been audited by a Chartered Accountant under a report dated 3 September 2019, so the due date was 30 September 2019. The Commissioner (Appeals) held that the first proviso to Rule 24(8) exempts an LLP whose turnover does not exceed forty lakh rupees, that the assessee's turnover was nil, that the ITR itself recorded no liability to audit under s.44AB, and dismissed the appeal. Before the Tribunal the assessee produced a 127-page paper book including the audit report, the ITR entry recording the audit report as issued under s.34(4) of the LLP Act 2008, the LLP agreement recording a contribution of Rs 1 crore, audited accounts showing partners' capital of Rs 1,31,94,370.78, and LLP Form 8 filed with the Ministry of Corporate Affairs on 30 October 2019.
The appeal was allowed (para 7). Where the partners of an LLP that is exempt from audit under the first proviso to Rule 24(8) of the LLP Rules 2009 decide to have the accounts audited, the second proviso requires the accounts to be audited in accordance with those Rules, and s.34(4) of the LLP Act 2008 supports that reading; the LLP is then a person other than a company whose accounts are required to be audited under any other law for the time being in force within clause (a)(ii) of Explanation 2 to s.139(1), so the due date is 30 September of the assessment year. The return having been filed on 17 September 2019 was within the s.139(1) due date, and having regard to s.139(3) the assessee is eligible to carry forward the loss (para 6.4).
The Bench read Rule 24(8) with all three provisos. The first proviso is couched in negative language and uses 'or' between the two exemption criteria, so an LLP escapes audit if either its turnover does not exceed forty lakh rupees in the financial year or its contribution does not exceed twenty-five lakh rupees; the Bench declined to read into the second criterion words about contribution 'during the financial year' that are not there, observing that it cannot read words into a statute which are conspicuously absent, and acknowledging that the use of 'or' produces an anomalous result under which a large LLP may escape audit though the intention was to exempt small ones (para 6.4). The second proviso is an integral part of the Rule and provides that if the partners of such an LLP decide to get the accounts audited, the accounts shall be audited in accordance with the Rules; on the facts the partners had so decided and the accounts had been audited, and the Bench said that requirement 'carries the force of law'. Section 34(4) of the LLP Act 2008, which requires the accounts of LLPs to be audited in accordance with such rules as may be prescribed, was treated as reinforcing that. The Bench then applied Explanation 2 to s.139(1), stressing that the word used in clause (a)(ii) is 'required' to be audited under the Income-tax Act or under any other law for the time being in force, and concluded that the due date was 30 September 2019.
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Handle my notice → Ask a CA on WhatsAppNo. The Agra Tribunal held that where the partners of an LLP that is exempt from audit under the first proviso to Rule 24(8) of the LLP Rules 2009 decide to have the accounts audited, the second proviso requires the audit to be carried out in accordance with those Rules, and the LLP then becomes a person whose accounts are 'required to be audited ... under any other law for the time being in force' within Explanation 2(a)(ii) to s.139(1). The due date accordingly moved to 30 September, the return filed on 17 September was in time, and the business loss was allowed to be carried forward. This was decided by the ITAT (Shri Ramit Kochar, Accountant Member (SMC Bench)) and bears on section 80, section 139(1), section 139(3), section 139(4), section 143(1), section 143(1)(a)(ii), section 44AB, section 72 of the Income Tax Act 1961. It is reported as ITA No. 56/Agr/2023 (ITAT Agra, SMC Bench); Assessment Year 2019-20. The carry forward of a loss stands or falls on a date, and the date is fixed by Explanation 2 to s.139(1), not by s.80 itself. This order is the rare authority that the s.139(1) due date can be extended by a voluntary audit under another statute — because Explanation 2(a)(ii) asks whether the accounts are 'required to be audited', and the second proviso to Rule 24(8) converts a voluntary decision into a requirement. The practical value is wider than LLPs: the same construction applies to any person whose accounts become required to be audited under any other law for the time being in force. The order also disposes of the Revenue's two usual counters — that the LLP's turnover was nil and its fresh contribution during the year below twenty-five lakh rupees (the contribution actually standing at Rs 1,31,94,370 as at 31 March 2019), and that the ITR itself said the assessee was not liable to audit under s.44AB. Neither mattered, because the requirement arose under the LLP Rules and not under the Income-tax Act. Two cautions. It is a single-member SMC order and turns on a reading of Rule 24(8) that the Bench itself described as producing an anomalous result: the word between the two exemption criteria in the first proviso is 'or', so a large LLP with a small contribution escapes audit, and the Bench declined to read words into the statute to cure that. And the audit report there was dated 3 September 2019, before the return was filed, with the LLP Form 8 filed with the Ministry of Corporate Affairs on 30 October 2019 — the sequence of documents mattered. If it applies to you, the first step is this: Before conceding that a return was belated, work out the due date under Explanation 2 to s.139(1) rather than assuming 31 July: the test in clause (a)(ii) is whether the accounts are required to be audited under the Income-tax Act OR under any other law for the time being in force.
The assessee, a limited liability partnership, filed its return for Assessment Year 2019-20 on 17 September 2019 declaring a business loss. The Central Processing Centre processed the return under s.143(1), assessed income at nil and denied carry forward of the loss on the footing that the return was filed beyond the s.139(1) due date, the extended due date being 31 August 2019; the denial was treated as correction of an incorrect claim under s.143(1)(a)(ii). Before the Commissioner (Appeals) the assessee said its accounts were required to be audited under Rule 24 of the LLP Rules 2009 and had in fact been audited by a Chartered Accountant under a report dated 3 September 2019, so the due date was 30 September 2019. The Commissioner (Appeals) held that the first proviso to Rule 24(8) exempts an LLP whose turnover does not exceed forty lakh rupees, that the assessee's turnover was nil, that the ITR itself recorded no liability to audit under s.44AB, and dismissed the appeal. Before the Tribunal the assessee produced a 127-page paper book including the audit report, the ITR entry recording the audit report as issued under s.34(4) of the LLP Act 2008, the LLP agreement recording a contribution of Rs 1 crore, audited accounts showing partners' capital of Rs 1,31,94,370.78, and LLP Form 8 filed with the Ministry of Corporate Affairs on 30 October 2019. The matter was decided on 2024-12-31 by the ITAT (Shri Ramit Kochar, Accountant Member (SMC Bench)). On those facts the ITAT held as follows. The appeal was allowed (para 7). Where the partners of an LLP that is exempt from audit under the first proviso to Rule 24(8) of the LLP Rules 2009 decide to have the accounts audited, the second proviso requires the accounts to be audited in accordance with those Rules, and s.34(4) of the LLP Act 2008 supports that reading; the LLP is then a person other than a company whose accounts are required to be audited under any other law for the time being in force within clause (a)(ii) of Explanation 2 to s.139(1), so the due date is 30 September of the assessment year. The return having been filed on 17 September 2019 was within the s.139(1) due date, and having regard to s.139(3) the assessee is eligible to carry forward the loss (para 6.4).
The Bench read Rule 24(8) with all three provisos. The first proviso is couched in negative language and uses 'or' between the two exemption criteria, so an LLP escapes audit if either its turnover does not exceed forty lakh rupees in the financial year or its contribution does not exceed twenty-five lakh rupees; the Bench declined to read into the second criterion words about contribution 'during the financial year' that are not there, observing that it cannot read words into a statute which are conspicuously absent, and acknowledging that the use of 'or' produces an anomalous result under which a large LLP may escape audit though the intention was to exempt small ones (para 6.4). The second proviso is an integral part of the Rule and provides that if the partners of such an LLP decide to get the accounts audited, the accounts shall be audited in accordance with the Rules; on the facts the partners had so decided and the accounts had been audited, and the Bench said that requirement 'carries the force of law'. Section 34(4) of the LLP Act 2008, which requires the accounts of LLPs to be audited in accordance with such rules as may be prescribed, was treated as reinforcing that. The Bench then applied Explanation 2 to s.139(1), stressing that the word used in clause (a)(ii) is 'required' to be audited under the Income-tax Act or under any other law for the time being in force, and concluded that the due date was 30 September 2019.
It was decided by the ITAT on 2024-12-31 and is reported as ITA No. 56/Agr/2023 (ITAT Agra, SMC Bench); Assessment Year 2019-20. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 80, section 139(1), section 139(3), section 139(4), section 143(1), section 143(1)(a)(ii), section 44AB, section 72, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed (para 7). Where the partners of an LLP that is exempt from audit under the first proviso to Rule 24(8) of the LLP Rules 2009 decide to have the accounts audited, the second proviso requires the accounts to be audited in accordance with those Rules, and s.34(4) of the LLP Act 2008 supports that reading; the LLP is then a person other than a company whose accounts are required to be audited under any other law for the time being in force within clause (a)(ii) of Explanation 2 to s.139(1), so the due date is 30 September of the assessment year. The return having been filed on 17 September 2019 was within the s.139(1) due date, and having regard to s.139(3) the assessee is eligible to carry forward the loss (para 6.4). It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 80, section 139(1), section 139(3), section 139(4), section 143(1), section 143(1)(a)(ii), section 44AB, section 72 of the Income Tax Act 1961, and was decided by Shri Ramit Kochar, Accountant Member (SMC Bench). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For an LLP, read Rule 24(8) of the LLP Rules 2009 with all three provisos, and check whether the partners in fact decided to have the accounts audited — if they did, the second proviso makes the audit a requirement under those Rules. Assemble the documents that show the audit actually happened under the other law: the auditor's report and its date, the ITR entry recording the audit report as issued under s.34(4) of the LLP Act 2008, the audited profit and loss account and balance sheet, the LLP agreement recording the contribution, and LLP Form 8 filed with the MCA. Do not be deflected by an ITR entry saying the assessee is not liable to audit under s.44AB — that answers a different question from the one Explanation 2(a)(ii) asks. Take the point at the first appellate stage; here the audit report was filed before the Commissioner (Appeals) on 9 March 2022 and the Bench relied on it.
Validity check could not be completed. Validity check could not be completed. This is a single-member SMC order of 31 December 2024; no later treatment was searched for or found, and no High Court authority on the same construction of Rule 24(8) read with Explanation 2 to s.139(1) was located on this pass. The construction adopted is favourable but is not free from difficulty, and the Bench itself described the drafting of the first proviso as producing an anomalous situation. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
No key quote is offered. The sentence that states the conclusion in paragraph 6.4 came back in two materially different constructions on two passes — the full transcription rendering it '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 the docfragment rendering it 'the assessee has filed the return of income within due date as prescribed u/s. 139(1)' — so under this project's rule it is not treated as a quotation. Two figures for the loss appear in the order and do not reconcile: Rs 16,96,486 in paragraphs 3 and 6, Rs 16,96,446 in the grounds of appeal and in the Commissioner (Appeals) discussion at paragraph 4, and Rs 16,86,486 in the concluding sentence of paragraph 6.4. The order's own numbering runs 1, 2, 3, 4, 5, 5.2, 6, 6.2, 6.3, 6.4, 7 — there is no paragraph 5.1 or 6.1 in what was returned, and nothing is asserted here about whether they exist. The extended due date for the ordinary case in Assessment Year 2019-20 is taken from the order as 31 August 2019. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed (para 7). Where the partners of an LLP that is exempt from audit under the first proviso to Rule 24(8) of the LLP Rules 2009 decide to have the accounts audited, the second proviso requires the accounts to be audited in accordance with those Rules, and s.34(4) of the LLP Act 2008 supports that reading; the LLP is then a person other than a company whose accounts are required to be audited under any other law for the time being in force within clause (a)(ii) of Explanation 2 to s.139(1), so the due date is 30 September of the assessment year. The return having been filed on 17 September 2019 was within the s.139(1) due date, and having regard to s.139(3) the assessee is eligible to carry forward the loss (para 6.4).
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