Hi Chandra Prakash,

You are hit by the provisions of sec 44AD only in case your trading income with other income exceeds maximum amount which is not chargeable to tax i.e Rs 2,50,000. If it doesn't you need not worry. If it does then you are in quite a bit trouble.

In such a case as per sec 44AD you need to declare income @ 8 % of your total turnover. Or if you declare less as in your case you need to get your accounts audited u/s 44AB and maintain books of accounts u/s 44AA. 

But the problem starts here , if you are a resident of Punjab / Haryana or Chandigarh you are safe but if you are resident in any other state then the due date for filing audit report u/s 44AB is over. You are liable for penalty u/s 271 A and B for not maintaining books of accounts and not getting tax audit done.

Here you have not been called for scruitny assessment but only to rectify defects u/s 139(9), you have to respond to such notice in 15 days and rectify the same. Here you have many options and you have to make up your mind. You can rectify the things mentioned in the notice and file a revised return with audit report. 

Though you have option to claim the benifit of presumptive income u/s 44AD and can declare income of 8% , now filing revised return shall not be advisable , reason being if the AO scrutinises your account and gets to know that you have revised the said return only to escape tax audit and penalty then he may hold you responsible for concealment of particulars and put penalty on you u/s 271 (1) (c).

I would advise you to get your accounts audited and file a revised return with audit report after you are done with responding to notice u/s 139(9). If you dont respond to notice within 15 days many interest and penal provision will be applicable holding your return as defective . 

As per feasablity question Sec 271 A alone has penalty of rs 25000 and 271 B has penalty of 1/2 % of turnover. Rather you can get your tax audit done and you can carry forward the loss too which will be carried forward for 4 years and you can save tax upto Rs 10000 approx in next year if you have speculative business income.I would kindly suggest you to get to work as soon as possible and rectify all the mistakes including tax audit report.

Regards,

Karthik V Kulkarni

@ Z:

This is what I was pointing out at. What KARTHIK have mentioned regarding revised return and audit report

@ Karthik:

The return can be considered valid if the 15 days of notice have elapsed but the said defect has been rectified after the said period BUT before the assessment is made

@ Rinkal,

Only AO has power to extend date after 15 days if you plead so. It is not an option available to the assessee. Only case the said period can be extended is if application is made to AO or if return is filed before assessment and AO condones the delay.

Regards,

Karthik V Kulkarni

@ Karthik:

I am not denying the fact that Ao has the power to extend the said period and it is not at the option of assessee. What I was talking is if the return is rectified of the said defects beyond the time limit prescribed in the notice but before the assessment is made then the return is still considered to be valid if the AO condones such delay.

I mean to say that there are chances that it can be considered valid. 

Hi Rinkal,

True , your statement is valid . But condonation of delay or extension of time is only given when there are compelling reasons for not filing within the specified period, like notice recieved late, the assessee being ill or assessee being out of the country etc. There is no chance in practical or theoratical sense that the assessee would be given condonation of delay when he had the notice served in time and in capacity to rectify the same. 

If you approach to condonation of delay, may be sec 139(9) or under any other section i.e assessment, appeals etc it depends on the person handling. As regarding the practicality as well as theoratical reading one has to concur on view that condonation of delay is not a relaxation of conditions specified in the said section be it anything rather it is the mechanism adopted to reduce prejudice to the assessee in exceptional circumstances. 

Whenever the word " may" arrive is Act practically it depends on the AO and the strength of the case. Here as the assessee is well aware there is no merit in arguing that there are chances. Though the AO are quasi judicial authorities and need to act in a fair manner, when the reason for extension itself has no merit the same is doubtfull of being granted. Ignorance of law can in no way be a meritable reason under any proceedings under any Act.

So though you are right in your statement on taking up into consideration all the facts your statemtent is not a feasable one. Proviso to sec 139(9) cannot be used universally.

Thank you for the discussion , appreciate it.

Regards

Karthik V Kulkarni

The fact is that the assessee has already approached to 2 CA. But none of them gave him a fair opinion. He is also ready to get audited but a CA should be available for audit ing the same. He has made attempts to get things done properly. Agree that filing the return was his mistake without knowing the actual interpretation but after receiving the notice he has made all possible attempts to rectify the same. He can thus convey the Ao and plead to consider into the matter.

Hi Rinkal,

The assessee has no case at all. He has approached CA for tax audit purpose and not for rectification u/s 139 purpose and his case regarding condonation of delay against sec 139(9) is slim. An oral advice in no way comparable to a written opinion given by a CA to blame it on CA. Though the assessee is making efforts he has time within which he can file , even within 15 days. Neglecting a certain notice on basis of vague reasons is not permissible.

And as for audit he should have approached a CA before filing of returns as audit report needs to be filed with ROI and approaching CA for tax audit purpose after a notice u/s 139(9) is no way acceptable. Where there is a difference in opinion  and on basis of difference in opinion the originally an effort was taken and based on that effort if any act was done by assessee contrary to the provisions of Act the same shall be liable for condonement. Not in case where there was no original effort to take a certain standpoint and on or after issuance on notice there was an attempt to rectify the same.

In CIT vs Grey coast foundry works (ahd) it was held that " where omission or wrong statement in the original return is discovered by the department as result of enquiry and there after a revised return is furnished making amendment that would not amount to a revised return as contemplated u/s 139(5)" .

Though it is true assessee can plead before the AO for condonation for delay the same is dependent on merits of case and on AO as mentioned by earlier.

As per my opinion there is a feable case with the assessee and he better get it rectified within time limit as specified in the notice.

Regards

Karthik V Kulkarni

@ Karthik:

Not all return filers are tax expert. It was definitely a mistake made by the assessee and I agree ignorance of law is no excuse. 

But think practically, no CA will give in writing that audit will not be undertaken. You also opined that audit will be necessary in the given case.  He was just trying to rectify the defects by doing tax audit done as suggested here, but it was CA who opined that tax audit is not reqd.

And yes he did make a mistake by filing the return on its own. I am not denying that fact. But that does not mean that such kind of mistakes does not happen in CA's office. (Here I am not offending CAs but talking about experts in general). Even they make mistakes. 

Here he is asking for a genuine opinion from CA but even that is not given by them. Please read the facts given above in the earlier posts. What will you comment on that?

He is just asking opinion on what can be done over here, to come to a conclusion. Also the CA also said the same thing to file on its own and rectify the defects. Think how logical was it by the CA to say such thing.

It is no point that we argue with each other. All is required is that the assessee needs to get tax audit and rectification done asap. 

Mr Prakash- You are a salaried Person  doing intra day share trading

You could have used ITR-2 .  

You have salary, Int on Fd, HP  and STCG .

The dept thought it is professional income. they didnt know it was speculative biz.

Since you have taken opinion of CAs Tell them to file return and defend it if required at leter stage.  99% i feel it is not a big issue.  

Thanks to all of you for your observations and inputs.

I still have couple of more days for the expiry of the notice. I received the notice (email)from income tax department on 22nd Sep. However, in the notice, the issue date mentioned as 19th Sep.

I did check on the internet before filing ITR-4. Yes, I could have simply ignored it and filed ITR-2 but I decided not to conceal it. I was not aware of the audit part and hence this issue.

Both CA's whom I met personally, after considering my transactions and the loss, confirmed that audit would not be required as it is a small amount. Also, the turnover even as per the contract value would not be more than 50 lacs.

I understand that there is a technical issue and I am not so sure how strong this case would be considering my source of income.

Also, what are the consequences of not responding to this notice? As per the notice, the return would be invalid. Is it same as not filing the return.

Today there is a news about the date extension for one more month? Am I eligible for it?

@ Karthick, when you say trading income with other income, what does other income refer to? I have salary income, FD interest and STCG (more than 2,50,000). But if you are referring to any income from business source, then no.

Hi Chandan,

Including all those not only trading or business. Kindly get it done. Though it can be rectified now, all the problems stated, it is unwise to neglect the same at this stage. 

Regards

Karthik V Kulkarni

Hi Chandan,

As per your query you are not covered by extension of tax audit report, your tax audit report submission time was with returns, i.e 31st July . And if you ignore the notice you will be held as assessee in default , yes in common paralance you will be considered not having to file the return of income. All the penal, interest provisions will be applicable and you will end up paying more tax.

Regards

Karthik V Kulkarni

@ Karthik:

I think CHANDRAPRAKASH is asking in reference to carry forward of losses and interest liability. Please clarify chandraprakash what was your purpose of asking?

If this was the reason then He can carry forward the losses if he submits the TAR in response to 139(9) notice. (As Tax audit due date has extended). Also he would not be charged u/s 234A for late filing of return as he has already filed the return. So no point of interest u/s 234A.

@ Chandra Prakash:

You can anyway not ignore your speculative transactions. It was mandatory for you to disclose either loss and getting audited or show presumptive income as per sec 44AD. Hence you cannot file itr2 anyhow.