Thursday, October 17, 2013

Does TAR signed by a CA on 30th September violate sec. 44AB of the Act?

By Subash Agarwal, Advocate

As per the provision of sec. 44AB, an assessee is required to get his accounts audited by a CA before the specified date  and furnish [  the same is required to be furnished electronically w.e.f. A.Y.:2013– 2014 as per proviso to Rule 12(2)] by the said date.

2.         Thus, as per the plain language of the statute, the Tax Audit Report (TAR) is required to be –
(a)        Signed by a CA before 30th September, i.e., on 29th September, or earlier
(b)        Electronically uploaded before the expiry of 30th September (i.e., 12 O’ clock mid -night)

3.         It is seen that due to extreme pressure of workload, CAs are completing the tax audit work and signing (digitally w.e.f. A.Y.:  2013 – 2014) the TAR bang on 30th September, which is the “specified date” for the purposes of sec. 44AB r.w. section 139(1) and Explanation 2 thereto, though as per the plain language of sec. 44AB, the same should have been done on or before 29th September.
The moot question that arises is whether digitally signing of TAR on 30th September by the CA violates sec. 44AB and makes the assessees vulnerable to penalty u/s. 271B of the Act?
One will analyse here the relevant provision on the touchstone of rules of statutory interpretation and strive to arrive at the correct conclusion.

4.         Normally, the golden rule of Statutory Interpretation is that the language of the statute should be read as it is and the intention of the legislature is primarily gathered from the language used.
Let us  now see what is the dictionary meaning of the term “before”?
As per “The Oxford Large Print Dictionary”, word “before” means “at an earlier time; earlier than; ahead of”.
But as per “Chamber’s Twentieth Century Dictionary”, it means “previous to the expiration of”.
As per the Law Lexicon (General Editior: Justice Y.V. Chandrachud), word “before” means –
(a)               Prior to; in time preceding; earlier.
(b)               Upto.
(c)                Not later than [ Premchand vs. Kisanlal, AIR 1976 Bom 82, 86]
Thus, the word “before” is capable of two meanings – One the common meaning, according to which, the TAR should be signed prior to the specified date. But as per other dictionaries including Law Lexicon, it also means “upto, not later than”. In other words, TAR can be signed on the specified date also.
5.         In Vegetable Products’ case 88 ITR 192   , Hon’ble Supreme Court held that where the provision of the statute is capable of two interpretations – one which is favourable to the assessee is required to be adopted.

6.         Further, the language used in the provision (Sec. 44AB) is – every person shall (under the specified circumstances) get his accounts audited by an accountant –
(a)        Before the specified date and
(b)        Furnish by that date, the TAR in the specified form.

Thus, if the term “before” is given common dictionary meaning, the TAR is to be obtained  / completed / signed prior to the specified date but has to be uploaded / furnished “upto” the specified date. Thus, the two interpretations create disharmony between the two limbs – thus, if the TAR is required to be signed one date before, why it is required to be furnished / uploaded a day after? It defies any logic.
Courts have held that inconsistency and repugnancy should be avoided and there should be harmonious construction of the statute [ see page 123 of Justice G.P. Singh’s Principles of Statutory Interpretation, 8th Edition]

7.         Thus, from the point of view of the Rule of Harmonious Construction of the statues, the term “before” has to be given a liberal meaning in favour of the assessee in the sense of “upto the specified date “as used in the second limb of the provision.

8.            The Hon’ble Bombay High Court in Premchand Nathmal Kothari’s case (AIR 1976 Bom. 82) interpreted the word "before" in section 3 of Maharashtra (Vidarbha Region) Agricultural Debtors’ Relief Act in the expression "before the 1st day of April, 1970." It was observed that the word will have to be considered and interpreted with reference to the context and the subject of enactment. It was no doubt true that a general principle of interpretation, where the words of the statute are plain, precise and unambiguous, the intention of the Legislature is to be gathered from the language of the statute itself and no external aid is admissible to construe those words. It is only where the language is ambiguous, uncertain, cloudy or susceptible or more than one meaning or shades of meaning that external aid will be permissible.
Thereafter certain other parts of the Act were also examined and it was observed that if all these sections were read together and harmoniously, it was obvious that the word ‘before’ was used by the Legislature in the context of the word ‘within’ meaning thereby ‘not later than’. Thereafter, it was observed that even if the dictionary meaning of the word ‘before’ is to be adhered to, the meaning of the word as given in Chamber’s Twentieth Century Dictionary is ‘previous to the expiration of’. If this meaning is given, it would mean that an application under section 3 of the Act could be filed before the expiration of or not later than 1st day of April, 1970.

9.         On the basis of various considerations analysed above, it can be safely concluded that if the CA concerned has digitally signed the TAR bang on 30th September, there is no violation of sec. 44AB.

10.       The issue under discussion has also fallen for consideration in the case of Chandra Kumar Seth vs. ITO 62 ITD 106 (All), where a view in favour of the assessee has been taken holding that TAR can be signed on the specified date and not necessarily prior to that date.

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