Gujarat High Court
M/S Mamta Starch Private Limited vs Principal Commissioner Of Income Tax 1 on 7 October, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1701 of 2024
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✔
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M/S MAMTA STARCH PRIVATE LIMITED
Versus
PRINCIPAL COMMISSIONER OF INCOME TAX 1 & ANR.
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Appearance:
VIJAY H PATEL(7361) for the Petitioner(s) No. 1
DS AFF.NOT FILED (N) for the Respondent(s) No. 1,2
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 07/10/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. Vijay Patel for the petitioner and learned Senior Standing Counsel Mr. Varun Patel for the respondent.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Varun Patel waives Page 1 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined service of notice of rule for and on behalf of the respondent.
3. Having regard to the controversy arising in this petition which is in a narrow compass, with the consent of learned advocates appearing for respective parties, the petition is taken up for hearing today.
4. By this petition under Article 227 of the Constitution of India, the petitioner has challenged the Order dated 5.12.2023 passed by the respondent exercising its powers under Section 119(2)(b) of the Income Tax Act, 1961 (for short 'the Act') rejecting the application preferred by the petitioner to condone the delay for filing a fresh Income Tax Return in response to the notice under Section 139(9) of the Act.
5. Brief facts of the case are as under: Page 2 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025
NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined 5.1 The petitioner filed return of income for Assessment Year 2018-19, on 14.9.2018, which was marked as defective return as per the provisions of Section 139(9) of the Act.
5.2 In response to the notice issued under Section 139(9) of the Act, the petitioner filed a reply with an explanation that the petitioner is not required to obtain the audit report under Section 44AB of the Act as the total turnover of the petitioner Company was to the tune of Rs.41,60,956/-, which is below the threshold limit of Rs.1 Crore. It was also submitted by the petitioner that books of accounts of the petitioner Company were audited under the provisions of Companies Act, 2013, however, as the turnover of the petitioner is below the threshold limit as provided under Section 144AB of the Act, the petitioner did not get it books of account Page 3 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined audited for the year under consideration.
5.3 The petitioner, therefore, has filed the return of income under Section 139(1) of the Act, claiming return of Rs.7,14,950/-.
5.4 It appears that in the return of income filed by the petitioner, the petitioner has shown sales of Rs.41,60,956/- and gross interest receipt of Rs.78,87,493/- in the income from business and profession.
Therefore, the respondent, considering the return of income filed by the petitioner, has held that the petitioner was required to get the audit report as per the provisions under Section 44AB of the Act. The return of income filed by the petitioner was, therefore, rightly considered as defective by the Central Processing Unit.
6. Learned advocate Mr. Vijay Patel for the Page 4 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined petitioner, under instructions, submitted that the petitioner is ready and willing to obtain audit report under Section 44AB of the Act and thereafter file a fresh return of income for the year under consideration, if the delay in filing such return is condoned as the petitioner was under bonafide belief that accounts are not required to be audited as the turnover of the petitioner was less than Rs. 1 Crore and the petitioner considered the interest income as not part of the turnover.
7. On the other hand, learned Senior Standing Counsel Mr. Varun Patel has referred to and relied upon the affidavit-in-reply filed on behalf of the respondent, which read as under:
"3. At the outset it is submitted that the petitioner's application has been decided based on the facts of the case and material available on records. It is submitted that the power of condonation Page 5 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined of delay has been delegated by the CBDT vide Circular No.9/2015 (F.No.312/22/2015-01) dated 09.06.2015 whereby the authority concerned is required to examine whether the case of the applicant is of genuine hardship on merits or not. It is submitted that the assessee herein has contended that the ROI for A.Y. 2018-19 was filled on 14.09.2018 which was marked as defective return as per provisions of section 139(9) of the Income Tax Act, 1961. In response to said notice, the assessee has submitted that out of total receipts, sale was only of Rs. 37.82 lakhs and balance was interest income and hence tax audit is not applicable in its case to the CPC. It is submitted that the said ROI was marked as defective by CPC. On perusal of return of income, it is seen that the assessee has shown sales of Rs.41,60,956/-and interest income at Rs.78,87,493/-. The gross receipts of the assessee exceeded Rs. 1 crore, therefore, its books of account were subject to audit u/s. 44AB of the Act. The assessee being Private Limited Company has failed to get its Page 6 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined books of account audited. It is therefore submitted that there is violation of provisions of section 44AB of the Act on the part of the assessee. Regarding, the alternative contention of the petitioner that the interest income cannot be considered as turnover of the assessee, it is submitted that the provisions of section 44AB provides that every person carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year has to 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. It is therefore submitted that considering the phrase 'turnover or gross receipt' used in the s.44AB of the Act, all gross receipts are to be computed for the purpose of section 44AB of the Act. It is also relevant to submit that the assessee has shown zero Page 7 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined income under the head of income from other sources in the ROI. It is therefore submitted that in view of above, the order u/s. 119(2)(b) of the Act rejecting the application of the assessee is just, proper and legal.
4. With reference to para no. 1, the respondent denies each and every allegation, averment and contention raised in this para if any. It is specifically denied that the impugned order is bad in law, contrary to facts involved, unreasoned or without affording opportunity of hearing.
5. With reference to para nos. 2, 2.1 to 2.9, it is submitted that the contentions in these paragraphs being general in nature and matter of fact and record do not call for any specific reply. The respondent however denies each and every allegation, averment and contention raised in these paras if any.
6. With reference to para nos. 3, 3(A) to 3(F), the respondent denies each and every allegation, averment and Page 8 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined contention raised in these paras if any. It is further reiterated what is stated hereinabove in paragraph no.4 and further submitted that the interest earned by the individual assessee is required to be considered as 'income from other source'. However, in the case of companies, so is the case of the assessee, interest income earned by the company cannot be considered as income from other sources as the same has to be credited in the profit and loss account. Once particular income (in the case of a company) is credited in the books, it becomes part of gross receipts. It is further submitted that the assessee company has to prove that the interest earned by it is received from the non- business activities in which business funds (whatever the nomenclature may it be) were not utilized. Interest earned from business advances cannot be considered as income from other sources.
In the present case, the assessee has declared sale proceeds of Rs.41,60,956/- whereas earned interest receipts of Rs.78,87,493/-. The major portion of the total receipts are received from Page 9 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined interest. It is thus submitted that the petitioner contention as to non-business receipt, is not sustainable. The purpose and intention of the assessee company is to generate income by any means. Further, the assessee has paid interest of Rs.57,71,497/- which is claimed as expenditure. The assessee cannot change the head of interest income and interest expenditure. If interest paid is business expenses, the corresponding interest receipts comes under the purview of 'gross receipts' embedded in section 44Ab of the Act. In view of the above, interest income earned on advances, deserves to be treated alike with business receipts for the purpose of working out turn over or gross receipts, and, it could not be treated differently from business receipts merely because such income flowed from a different source.
7. With reference to para nos. 3(G) to 3(1), the respondent denies each and every allegation, averment and contention raised in these paras if any. It is submitted that the reason given by Page 10 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined the assessee for condonation of delay and that the alleged refund could not be claimed, due to the mistake of his accountant/consultant, is not a sufficient cause for condonation of delay in filing Return of Income. It is further submitted that the reasons for delay provided by the petitioner are not tenable as the assessee had time to file/revise his Return of Income within the prescribed time. The petitioner had failed to revise/file his return of income within the due date as prescribed by the Act. It is submitted that the assessee has failed to show any 'genuine hardship' in revising/filing his Income- tax return. It is thus submitted that the impugned order is just, proper and legal."
8. Referring to the above averments, it was submitted that no interference may be made while exercising extraordinary jurisdiction under Article 227 of the Constitution of India.
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NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined
9. Considering the submissions made by the learned advocates for the respective parties and the facts of the case, the petitioner was under bonafide belief that the petitioner is not required to obtain audit report under Section 44AB of the Act as the turnover of the petitioner was less than Rs. 1 Crore, which is the threshold limit prescribed under Section 44AB of the Act, which reads as under:
"Section 44AB. Audit of accounts of certain persons carrying on business or profession.-- Every person,--
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or
(b) carrying on profession shall, if his gross receipts in profession exceed 4[fifty lakh rupees] in any previous year; or
(c) carrying on the business shall, if the Page 12 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB], as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
(d) carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year, 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 Page 13 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined and verified by such accountant and setting forth such particulars as may be prescribed:
Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:
Provided further that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later:
Provided also 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 provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the Page 14 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined audit as required under such other law and a further report by an accountant in the form prescribed under this section."
10. On perusal of the record, it appears that the petitioner filed the return of income without the audit report under Section 44AB of the Act though the petitioner has shown the interest income as part of the business income, in the return of income. Therefore, the gross receipt in case of the petitioner is more than Rs. 1 Crore. The petitioner was, therefore, required to obtain audit report as per the provisions of Section 44AB of the Act.
11. Learned advocate Mr. Vijay Patel for the petitioner, under instructions, submitted that the petitioner is ready and willing to file the audit report as per the provisions of Section 44AB of the Act along with the payment of penalty, if any, which may be levied in Page 15 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined accordance with law, within a period of four weeks from today, if the delay in filing the such audit report in the fresh return of income is condoned by the respondent in exercise of the powers under Section 119(2)(b) of the Act.
12. It is true that the provision of Section 119(2)(b) of the Act is to be exercised in case when there is a genuine hardship of the assessee so as to condone the delay in filing the return of income by the respondent to whom the powers are delegated. Reference to Circular No.9/2015 made by the respondent in the affidavit-in-reply clearly stipulates that the respondent is required to examine whether the case of the applicant is of genuine hardships on merits or not.
13. In the facts of the case, the petitioner Page 16 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined was under bonafide belief that the sales turnover of the petitioner was less than Rs. 1 Crore, the petitioner was not required to get its accounts audited under Section 44AB of the Act and the petitioner did not include the interest income of Rs. 78,87,493/- as part of the turnover, though the same was mentioned in the return of income as income from business or profession. The petitioner, thus, was under
bonafide belief that the petitioner was not required to obtain audit report though the gross receipt in case of the petitioner was more than Rs.1 Crore. In such circumstances, the petitioner would be deprived of the legitimate refund of more than Rs. 7 Lakh as claimed in the return of income, if the return of income is treated as defective. The petitioner is ready and willing to remove the defect in filing the return, by obtaining the Page 17 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025 NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined audit report under Section 44AB of the Act, it would be in the interest of justice if following direction is issued in the facts of the case:
i) The respondent shall consider the case of the petitioner to condone the delay, if the petitioner files the return of income as the petitioner is ready and willing to file return of income along with audit report within a period of four weeks from today.
14. The impugned order, therefore, is hereby quashed and set-aside. The matter is remanded to the respondent to pass appropriate order under Section 119(2)(b) of the Act to condone the delay in filing the return of income along with audit report within a period of four weeks from today.
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NEUTRAL CITATION C/SCA/1701/2024 JUDGMENT DATED: 07/10/2025 undefined The petition is, accordingly, disposed of. Rule is made absolute to the aforesaid extent. Direct Service is permitted.
(BHARGAV D. KARIA, J) (PRANAV TRIVEDI,J) SAJ GEORGE Page 19 of 19 Uploaded by SAJ GEORGE(HC01069) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:55:44 IST 2025