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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. Shriram, N.J. Jamadar, JJ.
Perizad Zorabian Irani - Appellant
Versus
Principal Commissioner Of Income-tax - Respondent
Writ Petition No. 1333 of 2021
Decided On : 09-03-2022
Income Tax Act - Validity of Return of Income - Section 264, Section 139(9), Section 44AB - The court discussed the applicability of Section 44AB to the petitioner's case, the definition of 'profession' under Section 2(36) of the Act, and the interpretation of 'gross receipts in profession' under Section 44AB. The court relied on the judgment of the Madras High Court in Anandkumar Vs. Assistant Commissioner of Income Tax to support its decision. The court allowed the petition and issued a writ of certiorari and mandamus to quash the impugned orders and treat the return of income as valid.
Fact of the Case:
The petitioner challenged the rejection of her revision application under Section 264 of the Income Tax Act, which was based on the respondent's decision that the petitioner's return of income for A.Y.-2017-2018 was invalid due to non-auditing of accounts as required under Section 44AB of the Act.
Finding of the Court:
The court found that the petitioner's remuneration from the partnership cannot be treated as gross receipt in profession, and therefore, the petitioner was not required to get her accounts audited under Section 44AB.
Issues: The main issue was the applicability of Section 44AB to the petitioner's case and the interpretation of 'gross receipts in profession' under the said section.
Ratio Decidendi: The court relied on the judgment of the Madras High Court in Anandkumar Vs. Assistant Commissioner of Income Tax to support its decision that the petitioner's remuneration from the partnership cannot be treated as gross receipt in profession.
Final Decision: The petition was allowed, and a writ of certiorari and mandamus was issued to quash the impugned orders and treat the return of income as valid.
ORDER
1. Petitioner is impugning an order dated 25th March 2021 passed by respondent no.1 u/s 264 of the Income Tax Act 1961 (the said Act), rejecting the revision application filed by petitioner challenging the order dated 25th February 2020 passed under Section 139(9) by respondent no.2 treating the return of income filed by petitioner for A.Y.-2017-2018 as invalid. The reason why return of income was treated as invalid was because according to respondent, petitioner failed to get her accounts audited u/s 44AB though her gross receipts / turnover after including remuneration received from partnership firm was more than the threshold limit of Rs.50,00,000/-.
2. Petitioner is an individual deriving her income under the heads salary, income from house property, business / profession and income from other sources. Petitioner is an Actor by profession. Petitioner also is a partner in two partnership firms namely M/s Zorabian Sales and Marketing and M/s Zorabian Foods.
3. On or about 25th October 2017, petitioner filed her return of income for A.Y.-2017-2018 under Section 139(1) of the Act declaring total income of Rs.1,75,88,360/-. Out of this total income, a sum of Rs.1,09,65,411/- was declared under the heads of business and profession. Out of Rs. 1,09,65,411/-, petitioner derived a sum of Rs.8,45,220 as net income from petitioner's acting profession and Rs.1,01,20,191/- as remuneration received as working partner from the firm M/s Zorabian Sales and Marketing.
4. On 27th June 2019, petitioner received a notice from respondent no.2 alleging defect in the return on the ground that petitioner failed to get her accounts audited in accordance with provisions of Section 44AB of the Act. Petitioner replied to the said notice and explained that she was not required to get her account audited under Section 44AB,by letter dated 3rd July 2019. This explanation of petitioner was rejected and order dated 25th February 2020 came to be passed by respondent no.2 treating the return of income filed by petitioner as invalid due to non auditing of accounts as required under Section 44AB of the Act.
5. On or about 3rd February 2021, petitioner filed revision application under Section 264 of the Act impugning the order passed by respondent no.2. Petitioner made detailed submissions with the application. Respondent No.1 issued a notice dated 17th March 2021 thereby calling upon petitioner to show cause why revision application under Section 264 should not be rejected. By a letter dated 22nd March 2021, petitioner responded to the show cause notice. On 25th March 2021, respondent no.1 passed order dismissing the revision application, rejecting petitioner's submissions and upholding the order of respondent no.2. While doing so, respondent no.1 has relied upon decision of ITAT Kolkata in Amal Ganguli Vs. DCI, which had been reversed by the High Court in Sagar Dutta Vs. CIT, IT Appeal No.150 of 2009 dated 17th February 2014.
6. It is this order of respondent no.1, which is impugned in this petition.
7. Section 44AB of the Act reads as under:
"44AB. Every person:-
(a)................
(b) carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or
(d)...........
(e)............
get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
8. Dr. Shivram submitted that the provisions of Section 44AB are not applicable to the facts of the present case because: (a) the business is carried on by the partnership firm and not the assessee, (b) becoming the partner of partnership cannot be construed as carrying on business, (c) partners' remuneration cannot be construed as total sales turn over or gross receipts in business, (d) partners' remuneration does not arise out of carrying on profession, (e) partners' remuneratio
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