Meenakshi Subramaniam
Former IRS officer
There is good news for LLPs, across the country. Those who do audit, without being required, can file income tax return by September 30, not July 31 every year. Previously LLPs doing mandatory audit alone could submit return by September. In recent case of Paramsukh Infradevelopers LLP v. Income Tax Officer [2025] 173 taxmann.com 767 (Agra – Trib.), the Agra Tribunal has given this much-awaited verdict.
[2025] 173 taxmann.com 767(Agra-Trib.)
Paramsukh Infradevelopers LLP
v.
Income-tax Officer
Brief facts of the case are that the assessee, a Limited Liability Partnership (LLP) filed its return of income declaring business loss of Rs.16,96,486/-, on 17.09.2019. The return of income was processed by the CPC u/s. 143(1) of the Act, wherein business loss of Rs.16,96,486/- claimed by the assessee was denied to the assessee to be carried forward to the subsequent years, and income was assessed at Rs. Nil on the grounds that the assessee has filed return of income belatedly beyond the due date as prescribed u/s 139(1). The extended due date u/s 139(1) being 31.08.2019, while return of income was filed by the assessee on 17.09.2019. Consequently, carry forward of the current year business losses to the tune of Rs. 16,96,486/- was denied to the assessee, as the return of income as per CPC was filed after the due date as prescribed u/s 139(1), being incorrect claim u/s. 143(1)(a)(ii).
Being aggrieved, the assessee filed first appeal before ld. CIT(Appeals).The assessee claimed that the assessee’s books of accounts are required to be audited under the provisions of Rule 24 of Limited Liability Partnership Firm Rules, 2009. The accounts were audited by a Chartered Accountant vide Audit Report dated 03.09.2019. The assessee claimed that since its accounts were audited, the due date of filing of return of income was 31.10.2019. Thus, the return of income filed on 17.09.2019 was filed within the due date u/s 139(1), and CPC has erred in not allowing carry forward of business loss of Rs.16,96,446/- by treating the return as belated return.
The ld.CIT(A) referred to the Explanation 2 to Section 139(1), and observed that the due date for filing of return of income of the assessee whose books of accounts are required to be audited under the 1961 Act or under any other law, is 30th September of the assessment year. While, in other cases, the due date is 31st July of the assessment year. The ld. CIT(A) observed that the due date as per Section 139(1) depends upon whether the books of accounts are required to be audited under the 1961 Act or under any other law for the time being in force. The ld. CIT(Appeals) dismissed the appeal of the assessee holding that the assessee has filed its return of income belatedly beyond the due date stipulated u/s. 139(1) of the Act, and hence as per section 139(3), business loss claimed by the assessee cannot be allowed to be carried forward. The Ld. CIT(Appeals) referred to Rule 24(8) of Limited Liability Partnership Rules, 2009 and observed that audting of the accounts of the assessee is not required for LLP whose turnover in any financial year exceeds forty lakh rupees.
The assessee was having Rs. Nil Turnover during the year under consideration. The ld. CIT(A) observed that the assessee is having capital work in progress during the year of Rs. 5,35,080/-, which is much less than Rs. 40 lacs. Learned CIT(Appeals) further observed that the assessee has stated in the ITR under the head ‘audit details’ that the assessee is not liable for audit u/s. 44AB and the audit report for the assessment year 2019-20 has not been filed. The Ld. CIT(Appeals) concluded that in view of proviso to Rule 24(8) of LLP Rules, 2009, the LLP is not required to get its books of accounts audited, and also the assessee is not liable to get its books of account audited u/s. 44AB of the Act. The ld. CIT(A) observed that the return of income filed by the assessee is a belated return of income having been filed beyond the time prescribed u/s 139(1) as extended due date was 31.08.2019, while return of income was filed on 17.09.2019, and hence keeping in view provisions of Section 139(3), the loss of Rs. 16,96,446/- claimed by the assessee to be carried forward to subsequent year is not allowed to be carried forward to the subsequent year. Thus, the appeal of the assessee was dismissed by ld. CIT(A).
Being aggrieved, the assessee now filed second appeal before the Tribunal. The ld. Counsel for the assessee at the outset drew attention to Rule 24(8) of LLP Rules, 2009 read with first and second proviso’s. He also drew attention to the provisions of section 139(1) of the 1961 Act read with Explanation-2. It was submitted that it is admitted per 1961 Act, the due date of filing the return of income was 30.09.2019 keeping in view Explanation 2 to Section 139(1), as the assessee was required to get its books of account audited under the LLP Rules, 2009.
The Learned Sr. DR relied upon the order of ld. CIT(Appeals) and submitted that the assessee’s fresh contribution in the year under consideration is less than Rs. 25 lakhs, and the assessee is not liable to get its accounts audited under the LLP Rules. Thus, the due date of filing of the return of income in the case of assessee was 31.07.2019 which was extended upto 31.08.2019. The assessee having filed return of income on 17.09.2019, and hence return of income is a belated return of income which was filed beyond the time prescribed u/s 139(1). It was also submitted that the assessee’s turnover is ‘Rs. Nil’ during the year, which is less than Rs.40 lakhs, and the assessee was not liable to get its accounts audited under the LLP Rules, 2009. The assessee is also not liable to get its accounts audited under the provisions of section 44AB of the 1961 Act. Thus, it was submitted that the authorities below have rightly disallowed the carry forward of business loss of Rs. 16,96,486/- to subsequent years.
JUDGEMENT
The judge considered rival contentions and perused the material on record. It was observed that the short question, which arises is whether the assessee has filed the return of income within due date as prescribed u/s. 139(1) of the Act or the return of income filed by the assessee is a belated return of income filed u/s 139(4). If the assessee has filed belated return of income, then the assessee is not eligible to carry forward the business losses to subsequent years.
LLP Act 2008 and LLP Rules 2009 stipulate that the accounts of every LLP shall be audited in accordance with these Rules. It was observed that there are three proviso to said Rule 24(8) of LLP Rules, 2009. The first proviso is couched in a negative language wherein, it stipulates that the Limited Liability Partnership, whose turnover does not exceed in any financial year forty lakh rupees shall not be required to get its accounts audited. Similarly, it also stipulates that the LLP, whose contribution does not exceed 25 lakh rupees, shall not be required to get its accounts audited. The word used in the first proviso between the two criteria to claim exemption from the requirement of audit is “OR”. Thus, if any of aforesaid conditions are met i.e. if either turnover during the financial year is not exceeding Rs. 40 lacs, there is no requirement to get accounts audited under LLP Act read with Rules. Similarly, if the contribution does not exceed Rs. 25 lacs, there is no requirement to get the accounts audited under LLP Act read with 2009 Rules. So far as requirement of second limb is concerned, it merely states that if the contribution does not exceed Rs.25 lacs, there is no requirement to get the accounts audited, it does not stipulate that contribution during the financial year does not exceed Rs. 25 lacs to get exemption from the audit. The judge said one cannot read the words in the statute which are not there or are conspicuously absent in the plain and clear wording of the provision. Admittedly, the assessee has a turnover of Rs. Nil, and hence the assessee is out of the ambit of audit under LLP Act, 2008 read with LLP Rules, 2009. The intention was to exempt small LLP from the purview, but the use of the word ‘OR’ between the two criteria has created an anomalous situation, wherein even large LLP gets exempted from the ambit of audit under LLP Act. Say for example the LLP having turnover of Rs. 100 crores in a financial year but contribution of Rs. 20 lacs shall not be liable to audit under LLP Act, 2008 read with LLP Rules, 2009, although intention was to exempt small LLP. To deal with such situations , there is a second proviso to Rule 24(8) of the LLP Rules, 2009, which is an integral part of the Rule itself, which stipulates that if the partners of such LLP (who otherwise is exempted from audit vide first proviso) decides to gets the accounts audited, the accounts shall be audited in accordance with LPR Rules 2009. Thus, once the partners of such an LLP decide to get accounts audited the same shall be audited as per LLP rules, 2009 Thus, the assessee in the instant case having turnover NIL but the capital contribution of Rs.1,31,94,370/-as at 31.03.2019 would not require to get its accounts audited under Rule 24(8) read with first proviso, but owing to second proviso to Rule 24(8), the partners having decided to to get accounts audited, the accounts shall required to be audited as per 2009 Rules.
Now, coming to limitation for filing of return of income, provisions of Explanation-2 to section 139(1) makes it is abundantly clear by clause (a)(ii) of Explanation 2 to Section 139(1), that when a person (other than a company) whose accounts are required to be audited under this Act i.e. Income-tax Act, 1961 or under any other law for the time being in force, the due date is 30th September of the assessment year.
The word used is ‘required’ to be audited under the 1961 Act or under any other law for the time being in force, the due date for filing of return of income is 30th September of the assessment year. Thus, once the Partner of such LLP which otherwise is not required to get its accounts audited vide first proviso to Rule 24(8), would be required to get its accounts audited vide second proviso to Rule 24(8) as the partners have decided to get its accounts audited even if it was not required to get its accounts audited vide first proviso, then in such case the same shall be audited in accordance with LLP Rules, 2009. Section 34(4) of The LLP Act, 2008 has also become relevant as it stipulates that the accounts of LLP shall be audited in accordance with such Rules as may be prescribed. Thus, once the partners of LLP invokes second proviso to Rule 24(8) then the accounts of such LLP shall be required to be audited in accordance with LLP Rules, 2009, and then the same shall satisfy the condition as is stipulated in Explanation-2 to Section 139(1) and the due date u/s 139(1) for filing return of income in the instant case shall be 30.09.2019. 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 keeping in view the provisions of section 139(3), the assessee is eligible to carry forward loss of Rs.16,86,486/-. Thus, the appeal of the assessee stands allowed.
In the result, appeal of the assessee is allowed. The case is decided in favour of assessee.
MISTAKEN NOTIONS REMOVED
One LLP owner said: ” A Chartered Accountant saved us.”
His friends asked: “How ?” The LLP owner said: ” I now know that audit done, even without mandatory requirement, would give me more time to file income tax return. The CA told me.”
There has been a misconception among LLP owners that income tax returns would have to be filed by end of July, though audit was not necessary, but done. The Paramsukh Infradevelopers judgement has cleared all the fears of LLPs, effectively. The cobwebs have been swept away.
LLPs CAN BREATHE EASY
For long, LLPs have been suffering, just for doing audit on own. This audit has not been recognized by income tax authorities and the extension in time, available to compulsory audit has not been extended to them. These LLPs have had to file income tax returns but July 31, not September 30. What was worse was that they were alleged to be filing belated returns by opting for September 30 date and denied carry forward of losses !
The LLPs were hit hard as they were not getting time, like LLPs doing mandatory audit, to file returns. Their voluntary audit was not being recognized. Their returns were being rejected, on the charge that they were belated returns under Section 139(4) of Act. Their losses were not being carried forward, like normal assessee.
LEGAL FACE-OFFS
Let us see some cases, where LLPs won after a hard battle, after convincing that they could file income tax returns till September 30.
In Learning Universe LLP v. DDIT [IT Appeal No. 1828 (Pune) of 2024, dated 12-12-2024) the Appellant was statutorily mandated to get its accounts audited as per the LLP Rules, 2009 which are enacted by virtue of the LLP Act, 2008, but as it was not required to do audit under Section 44AB, the return was rejected for being filed in September end. Now, this was strange as the Explanation 2 (a)(ii) of Section 139(1) states that due date is September 30, for those “required to be audited under this Act or under any other late for the time being in force”.
The assessee had filed its returns of income for assessment year 2015-16 on 13.09.2016 and for assessment year 2017-18 on 13.09.2018. It submitted that the assessee being LLP is statutorily required to get the accounts audited under LLP Act and file the income tax returns before the due date which is 30th September of relevant assessment year. The court found the AO;s order to be non-speaking and sketchy.
It was held by Pune Tribunal that the LLP statute being a codified Central Government Act, cannot be ignored to have no meaning and also failed to appreciate how the provisions of the Income Tax Act, 1961could supersede another codified Act, as the same would violate the principles of harmonious construction while interpreting statutes.
In Nicon Infra Llp, Mumbai v. Addll/Jy/Dcit/Ito, Nfac, Delhi (IT Appeal 187 (Mumbai) of 2022) the appellant’s turnover was not exceeding 40 lakhs, but partner’s contribution was exceeded by Rs 25 lakhs. Hence assessee got his accounts audited as per LLP Rule 24(8) of LLP Act, 2009. The assessee filed its return of income on 26-09-2018, with AO rejecting it as it was beyond date of July 31, 2018. The A disallowed the carry forward loss amounting to Rs 32, 87,558/-. Under LLP Rules, the last date for filing return was 30-09-2018 as LLP-mandated statutory audit was done, but this was rejected. The AO observed that the assessee is not falling in the category of tax audit. A penalty under Section 234F was also imposed. The court held that revision of computation of income should be done allowing the carry forward loss, the penalty should be struck off and the appellant’s plea for taking return of income date as September 30 should be allowed.
WHY LLPs, DOING AUDIT MUST GET TIME TO FILE RETURN
1. PARTNERS’ AUDIT DECISION IS DECIDER
Rule 24(8) of the LLP Rules, 2009 is reproduced hereunder :
“(8) The accounts of every limited liability partnership shall be audited in accordance with these rules;
Provided that a limited liability partnership whose turnover does not exceed, in any financial year, forty lakh rupees, or whose contribution does not exceed twenty-five lakh rupees shall not be required to get its accounts audited:
Provided further that if partners of such limited liability partnership decide to get the accounts of such LLP audited, the accounts shall be audited in accordance with these rules:
Provided also that where the partners of such LLP do not decide for audit of the accounts of the LLP, such LLP shall include in the Statement of Accounts and Solvency a statement by the partners to the effect that the partners acknowledge their responsibilities for complying with the requirements of the Act and the Rules with respect to preparation of books of account and a certificate in the form specified in Form 8.”
The moment designated partners decide to have an audit, as per second provision, date for filing income tax return shifts to September 30 of relevant assessment year. The first proviso of Turnover or capital contributions get secondary place. There may not be statutory Rs.40 lakhs or 25 lakhs, but when partners announce an audit, the audit engine rolls on. Automatically, the last date for submission of income tax return becomes September 30, not July 31.
In the present case, under first proviso of Rule 24(8) of LLP Rules, 2009 the assessee having turnover NIL but the capital contribution of Rs.1,31,94,370/-as at 31.03.2019 would not require to get its accounts audited under Rule 24(8) , but owing to second proviso to Rule 24(8), the partners having decided to to get accounts audited, the accounts shall required to be audited as per 2009 Rules.
The second proviso is an integral part of the rule. It cannot be dispensed with. Hence, if partners decide on audit, it has to be considered as a full audit, which has statutory authority.
2. LLP RULES CAN’T BE BRUSHED OFF
Rule 24(8) of the LLP Rules, 2009 is reproduced hereunder :
“(8) The accounts of every limited liability partnership shall be audited in accordance with these rules; Here, the words ‘These rules’ mean that LLP rules are to followed. It also underscores the importance of LLP rules.
3. SECTION 139, THE PARENT SECTION GIVES STRENGTH
Explanation-2 to section 139(1) reads as under :
Explanation2.—In this sub-section, “due date” means,—
where the assessee other than an assessee referred to in clause (a) is—
a company; or
a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or
a partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force or the spouse of such partner if the provisions of section 5A applies to such spouse, the 30 the day of September of the assessment year;
Thus, for a LLP completing audit, the date for filing return stands at 30th September of assessment year.
The word ‘required’ is used in the Section. As partners have decided to have audit, the LLP is required to do an audit.
4. LLP ACCOUNTS MUST BE AUDITED AS PER RULES
Section 34(4) of The LLP Act, 2008 is relevant as it stipulates that the accounts of LLP shall be audited in accordance with such Rules as may be prescribed.
5. SECTION 44AB ALLOWS AUDIT AS PER VARIOUS LAWS
Section 44AB reads:
“That in a case where such person is required by or under any other law to get his accounts audited it shall be sufficient compliance with the provisons of this section is such person gets the accounts of such business or profession audited under such law before the specified date
Section 44AB, thus, announces that compliance with audit under other laws is enough. It goes on to say that such audit would be considered as compliance with Section 44AB, itself. Section 44AB has given signal for LLP audit, it can be said.
6. PARTNERS TAKE RESPONSIBILITY, IF NO AUDIT
Section 24(8) of LLP Rules goes to extent of saying that where the partners of such LLP do not decide for audit of the accounts of the LLP, such LLP shall include in the Statement of Accounts and Solvency a statement by the partners to the effect that the partners acknowledge their responsibilities for complying with the requirements of the Act and the Rules with respect to preparation of books of account and a certificate in the form specified in Form 8. This shows that partners are very serious about audit and are ready to face consequences, where audit could not be done.
HOW LLP APPOINTS AUDITOR
if partners decided to get voluntary auditing done they appoint a Chartered Accountant.
In the case of voluntary audits, the auditor could be as per the LLP Agreement or by common accord among partners.
SUMMING UP REMARKS
The LLP owner will get time to play golf, now, as by simple process of audit, he gets 2 months more to file income tax return !
As many Sections in Income Tax Act itself like Section 44AB and Section 139(1) have acknowledged that audit under other laws is acceptable, the LLP which does audit under own rules ideally deserves more time to file income tax return.
It can be said that voluntary opting by a LLP triggers mandatory audit automatically.
To conclude, Paramsukh has come for LLPs, after the Paramsukh Infradevelopers verdict !
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