Perizad Zorabian Irani v. PCIT

Case snapshot

Sections / provisions: 44AB

Questions before the Court / Tribunal

• S. 44AB : Audit of accounts-Business-Profession–Remuneration received from Partnership Firm-Firm is separate legal entity- Remuneration and interest from partnership firm-Not to be included in gross receipt or turnover-Presumptive basis-No tax Audit is required, if remuneration does not exceeds threshold limit for Tax Audit- Return cannot be treated as invalid for failure to get Tax Audit report. [S. 2(13), 2(31)(iv), 2(36), 44AD, 139(9), 264, 271B, Art. 226] The petitioner is an actress shown her professional income and also remuneration from two partnership firms in her return of income. The professional income being less than prescribed limit petitioner has not obtained the tax Audit report. The Assessing Officer held that though the professional income was less than the prescribed limit for the Tax audit ,the remuneration received from two partnership firms being more than the…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

1/7 917-WP-1333-21.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1333 OF 2021 Perizad Zorabian Irani ….Petitioner V/s. Principal Commissioner of Income-Tax (Central)-1 Mumbai & Ors …Respondents ---- Dr. K. Shivram, Sr. Advocate i/b Mr. Rahul K. Hakani for Petitioner Mr. Suresh Kumar for Respondents ---- CORAM : K.R. SHRIRAM & N.J. JAMADAR, JJ DATED : 9th MARCH 2022 P .C. : 1 Petitioner is impugning an order dated 25 th 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 Meera Jadhav

2/7 917-WP-1333-21.doc two partnership firms namely M/s Zorabian Sales and Marketing and M/s Zorabian Foods. 3 On or about 25 th 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 25 th 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 3 rd 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 17 th March 2021 thereby calling Meera Jadhav

3/7 917-WP-1333-21.doc upon petitioner to show cause why revision application under Section 264 should not be rejected. By a letter dated 22 nd March 2021, petitioner responded to the show cause notice. On 25 th 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’ remuneration cannot be construed as Meera Jadhav

4/7 917-WP-1333-21.doc gross receipts from profession and (f) Section 44AB is not applicable where assessee is carrying on a profession as well as business simultaneously in different field. 9 Mr. Suresh Kumar, per contra reiterated the finding of respondent no.1 and respondent no.2 and relied upon the order of ITAT in Amal Ganguli. Mr. Suresh Kumar submitted that the order of ITAT in Amal Ganguli has not been entirely reversed by the High Court and only the penalty order was set aside because the Assessing Officer had not obtained necessary approval before issuing penalty order. Mr. Suresh Kumar submitted that the Hon’ble Court remanded the matter to the Assessing Officer for passing the penalty order after obtaining necessary approval from the competent authority .

Appellant / petitioner / assessee submissions

The judgment does not separately label this side’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Revenue / respondent submissions

6/7 917-WP-1333-21.doc for an eligible assessee engaged in an eligible business and that the assessee was not carrying on business independently but only as partner in the firm. The Assessing Officer further held that the assessee did not have any turnover and receipts on account of remuneration and interest from the firms cannot be construed as gross receipts mentioned in Section 44AD of the Act. This was challenged by the assessee before Commissioner of Income Tax (Appeals), who rejected the appeal and later before the ITAT , which also rejected the assessee’s challenge to the findings of the Assessing Officer. Before the High Court, counsel for the Revenue submitted that the assessee was not doing any business but the firm was carrying on business in which the assessee is a partner and, therefore, the condition that it should arise from an eligible business was not satisfied.

Court / Tribunal analysis and reasoning

7/7 917-WP-1333-21.doc be treated as gross receipt of the assessee. We respectfully agree with the view expressed by the Hon’ble Madras High Court. In fact, in the case at hand, petitioner’s case is the same that petitioner’s remuneration from the partnership cannot be treated as gross receipt in profession. 11 In the circumstances, in our view petitioner’s stand that she was not required to get her accounts audited under Section 44AB, is correct. 12 Petition, therefore, is allowed in terms of prayer clauses (a) and (b) which read as under: “(a) that this Hon’ble Court be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of petitioner’s case and after examining the legality and validity thereof quash and set aside the impugned orders dated 25 th March 2021 (Exhibit A) and 25 th February 2020 (Exhibit B) passed by respondent no.1 and respondent no.2 respectively and/or allow the claim of petitioner. (b) that this Hon’ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and directing respondent no.2 to treat the return of income dated for A.Y .2017-2018 filed by petitioner as a valid return of income.”

Operative decision and relief

The operative relief must be read from the final paragraphs of the complete packaged judgment.

Ratio and legal principle

The narrow proposition associated with Perizad Zorabian Irani v. PCIT concerns s. 44ab : audit of accounts-business-profession–remuneration received from partnership firm-firm is separate legal entity- remuneration and interest from partnership firm-not to be included in gross receipt or turnover-presumptive basis-no tax audit is required, if remuneration does not exceeds threshold limit for tax audit- return cannot be treated as invalid for failure to get tax audit report. [s. 2(13), 2(31)(iv), 2(36), 44ad, 139(9), 264, 271b, art. 226] the petitioner is an actress shown her professional income and also remuneration from two partnership firms in her return of income. the professional income being less than prescribed limit petitioner has not obtained the tax audit report. the assessing officer held that though the professional income was less than the prescribed limit for the tax audit ,the remuneration received from two partnership firms being more than the… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in WRIT PETITION NO.1333 OF 2021.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: S. 44AB : Audit of accounts-Business-Profession–Remuneration received from Partnership Firm-Firm is separate legal entity- Remuneration and interest from partnership firm-Not to be included in gross receipt or turnover-Presumptive basis-No tax Audit is required, if remuneration does not exceeds threshold limit for Tax Audit- Return cannot be treated as invalid for failure to get Tax Audit report. [S. 2(13), 2(31)(iv), 2(36), 44AD, 139(9), 264, 271B, Art. 226] The petitioner is an actress shown her professional income and also remuneration from two partnership firms in her return of income. The professional income being less than prescribed limit petitioner has not obtained the tax Audit report. The Assessing Officer held that though the professional income was less than the prescribed limit for the Tax audit ,the remuneration received from two partnership firms being more than the… Its practical value lies in the way the Bombay High Court connected the governing provisions—44AB—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 44AB and the decision date 2022-03-09; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Perizad Zorabian Irani v. PCIT, the proceeding is WRIT PETITION NO.1333 OF 2021, and the decision is dated 2022-03-09. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as K.R. SHRIRAM & N.J. JAMADAR, JJ. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 44AB. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is Review / appeal / SLP status: check pending. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 44AB — apply the exact version considered in the judgment.

Case network

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• Adityaraj Builders v. State of Maharashtra — Bombay High Court · Quashed / set aside
• SPL Labs India Pvt ltd Vs ITO,Circle 6 Bangalore — Supreme Court of India · Quashed / set aside

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