2025 (11) TMI 167 - HC - Income Tax

Board lacks power to relax Section 44AB; authority should extend Section 139(1) return due date to Nov 30, 2014

HC held that because the Board lacks power to relax section 44AB, it should relax section 139(1) by extending the return due date to 30 November 2014 so ... Extension of specified date for filing the tax audit report u/s 44AB - “specified date” in relation to the accounts of an assessee of the previous year relevant to an assessment year - HELD THAT:- As decided in All Gujarat Federation of Tax Consultants v. Central Board of Direct Taxes [2014 (9) TMI 784 - GUJARAT HIGH COURT] having regard to the fact that the Board has no power to relax the provisions of section 44AB of the Act, it would be in the fitness of things if with a view to bring the notification dated 20th August, 2014 within the ambit of its jurisdiction, the Board relaxes the provisions of section 139(1) of the Act by extending the due date for filing the return of income till 30th November, 2014 as a direct consequence whereof, the “specified date” for obtaining and furnishing the report of audit under section 44AB of the Act would get automatically extended.” In view of above decision of this Court whereby due date for filing the return u/s 139(1) is also deemed to have been extended after one month from the date of extension of the specified date by the respondent Board, in our opinion, the respondent Board is required to explain as to why the simultaneous notification for extension of due date is not issued. ISSUES PRESENTED AND CONSIDERED 1. Whether a circular issued by the Board extending the 'specified date' for furnishing the audit report under section 44AB of the Income Tax Act, 1961 for the relevant previous year suffices to redress the grievance without a simultaneous extension of the due date for filing return under section 139(1) of the Act (having regard to Explanation (ii) to section 44AB which defines 'specified date' as one month prior to the due date under section 139(1)). 2. Whether the Board, in exercise of powers under section 119 of the Act, is required to issue a contemporaneous notification extending the due date under section 139(1) whenever it extends the specified date under section 44AB, and if not, whether the Board must explain the omission. 3. Whether the court may grant relief by directing amendment of petitions and interim administrative relief in the form of permitting or recording extensions issued by the Board, and the extent to which the court may require explanation from the Board under Article 226 of the Constitution. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity and sufficiency of Board's circular extending the 'specified date' under section 44AB without a simultaneous extension of due date under section 139(1) Legal framework: Section 44AB mandates obtaining and furnishing an audit report by the 'specified date'; Explanation (ii) to section 44AB defines 'specified date' as one month prior to the due date for furnishing the return under section 139(1). Section 119(2)(a) empowers the Board to relax provisions of the Act, including section 139(1), whereas there is no express power in section 119 to relax section 44AB. Precedent Treatment: The Court relied upon and followed its earlier ruling in All Gujarat Federation of Tax Consultants v. Central Board of Direct Taxes which held that (i) 'specified date' in section 44AB and 'due date' in section 139 are inextricably linked, (ii) the Board cannot validly extend the specified date under section 44AB without extending the due date under section 139(1) unless it exercises its power to relax section 139(1), and (iii) the Board should extend the due date under section 139(1) where it intends to extend the date for furnishing audit reports. Interpretation and reasoning: The Court reasoned that the legislative scheme connects the two dates so that an extension of the date for furnishing audit reports inherently requires extension of the due date for filing returns, or at least a relaxation of section 139(1) such that the 'specified date' under section 44AB is effectively extended. A circular extending the 'specified date' alone risks being inconsistent with the statutory linkage unless the Board concurrently exercises its power under section 119 to relax section 139(1). The Board's circular extending the specified date for FY 2024-25 to 31.10.2025 was acknowledged as addressing the primary grievance (extension of audit report date) but the Court observed the statutory concern remains regarding non-extension of the return due date. Ratio vs. Obiter: The Court treated the earlier ruling as ratio and applied its legal principle that the two dates must coincide or be linked by valid exercise of section 119 powers. The observation that the circular redressed the immediate grievance but left open the question of simultaneous extension of the return due date is treated as operative reasoning (ratio for the present administrative remedy) rather than mere obiter. Conclusions: The Board's circular extending the specified date for furnishing audit reports has remedied the immediate grievance of petitioners regarding the audit-report deadline. However, in law the extension of the 'specified date' without a corresponding extension (or relaxation) of the due date under section 139(1) gives rise to a statutory inconsistency that requires explanation and, if necessary, corrective action by the Board. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Requirement and scope of Board's action to extend due date under section 139(1) when extending the specified date under section 44AB; necessity of explanation Legal framework: Section 119(2)(a) empowers the Board to relax provisions of the Act (including section 139(1)); there is no express power in section 119 to relax section 44AB. Explanation (ii) to section 44AB ties 'specified date' to the due date under section 139(1). Precedent Treatment: The Court followed the earlier decision which held that the Board cannot, consistently with legislative intent, extend the specified date alone and that it should, if it intends to extend audit-report timelines, exercise powers to relax section 139(1) so as to align the due date and specified date. Interpretation and reasoning: The Court observed that a notification or circular that purports to extend only the 'due date' for furnishing audit reports but not the statutory 'due date' for filing returns creates an untenable situation: there cannot be two incompatible dates for return filing and for determining the specified date under section 44AB. The Board's omission to issue a simultaneous notification extending section 139(1) raises jurisdictional and scheme-of-statute concerns and therefore the Board ought to either have extended the due date under section 139(1) (with suitable safeguards for revenue, if necessary) or explain why it refrained from doing so. Ratio vs. Obiter: The Court's direction that the Board should exercise section 119 to extend section 139(1) where it extends the specified date under section 44AB is reiterated as binding reasoning (ratio) following prior authoritative pronouncement; the suggestion that the Board could protect revenue interests by limiting the effect of extension for certain purposes (e.g., Explanation I to section 234A) is an accepted remedial measure previously articulated and treated as persuasive operational guidance rather than peripheral comment. Conclusions: The Board is required to either (a) issue an appropriate exercise of power under section 119 to extend the due date under section 139(1) so that the 'specified date' under section 44AB is correspondingly extended, or (b) provide an explanation as to why no such simultaneous extension was issued. The Court directed issuance of notice to the Board to explain the omission. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Court's remedial and procedural role when administrative circulars partially address petitions under Article 226; amendment of petitions and interim disposition Legal framework: Article 226 permits high courts to issue writs for enforcement of fundamental rights and for any other purpose; courts must respect legislative competence and may not legislate but can require administrative bodies to act within statutory limits. Precedent Treatment: The Court relied upon the existing jurisprudence (as recorded in the All Gujarat Federation decision) delineating the limits of Board's powers and the necessity of exercising section 119 when extending dates connected by statute, and the court applied that precedent to the present administrative action. Interpretation and reasoning: The Court held that where a petition seeks extension of dates and the respondents have issued a circular that partly grants the relief (extension of the specified date), the petitioners' grievance in respect of that relief is redressed and amendment of pleadings to reflect developments is permissible. Nevertheless, statutory inconsistency occasioned by non-extension of the return due date is not a matter the court will remedy by itself (which would amount to legislating); instead, the court will require the administrative authority to explain and, if necessary, correct the exercise of administrative power. Ratio vs. Obiter: The grant of amendment to the petition and disposal of the limited civil application is an interlocutory administrative ruling (procedural) and is ratio as to the court's approach to petitions rendered partially infructuous by administrative action. The Court's refusal to extend the due date itself is consistent with the settled principle that courts should not, under Article 226, arrogate legislative functions; that limitation of judicial power constitutes binding reasoning. Conclusions: Amendment of the petition was permitted and the limited application disposed of as the Board's circular addressed the audit-report deadline. However, because the statutory scheme links the specified date and due date, the Court directed that notice be issued to the Board to explain the absence of a simultaneous extension of the due date under section 139(1), and listed the matter for further consideration. OVERALL CONCLUSION The Board's circular extending the specified date for furnishing audit reports has furnished interim administrative relief to petitioners regarding the audit-report deadline; nevertheless, consistent statutory interpretation and precedent require that any extension of the specified date under section 44AB be accompanied by either a corresponding extension (or relaxation) of the due date under section 139(1) effected under section 119 or a cogent explanation from the Board for not issuing such an extension. The Court followed prior authority on this point, declined to itself extend the statutory due date, and issued notice to the Board to explain the omission.