Why Tax Professionals Are Protesting Against The Ministry Of Corporate Affairs
Fatigued by the MCA portal, company secretaries in Jaipur, Chandigarh, Delhi, Mumbai raise an outcry of 'we want justice'.
Every company and Limited Liability Partnership registered in India is required to file annual returns by October-end every year, detailing their balance sheet, ownership details and other relevant details with the Ministry of Corporate Affairs.
This year, the deadlines were immediately after Diwali. To make matters worse, the MCA portal failed to accept the returns or threw up errors.
The official Twitter handle of the MCA shrugged off responsibility, saying these may be “intermittent issues” which started just two days before the due date and continued even after.
This claim is partially true as the V2—the old version in which companies’ filings are accepted—was working till Diwali. But V3, the latest version in which LLPs are supposed to file returns, wasn't.
Such issues with the MCA portal are not new. Most tax professionals felt that the high load that the website is facing is causing the site to break down.
Generally, every year, the portal does not support filing during the due dates. Knowing its limitations, the MCA used to extend the deadlines to give users more time to file the returns and distribute the load over the next few weeks.
While this year, the Finance Ministry extended the due dates for ITR cases, users were expecting a similar relaxation for MCA filings as well so that the load on the site can be managed effectively.
Given the significance of the matter, the Institute of Company Secretaries of India had sent three official representations on Oct. 11, Oct 21, and Oct. 31 highlighting various issues being faced by users, as well as explaining the reasons for seeking the extension.
In separate representations, ICSI had also written to the MCA highlighting the challenges faced by stakeholders in using its newly launched V3 portal.
However, none of these representations were answered or acted upon and the MCA, despite knowing the limitations of its portal, decided not to grant any extensions for late filing of forms.
This approach led to an uproar among professionals and many CS have visited the Registrar of Companies offices of Jaipur, Chandigarh and Mumbai seeking extension.
What The MCA Says About The Website
Generally, the MCA does not communicate about this issue. But its Twitter handle, in a bid to help professionals, has acknowledged that there are issues going on since Oct. 28.
However, it is learned that the MCA's stand was that the website was working fine till Oct. 28, and the glitches in the last 2-3 days do not justify any extension as they expect stakeholders to be proactive and not wait till the last moment.
To counter claims of the portal not working, it also shared statistics of the number of returns filed this year compared to the previous year.
Other Issues In Focus
In addition to the website glitches, the other issues were revision of Schedule III (Format of Balance Sheet), which requires every company to prepare a balance sheet by rounding off figures to 100s, 1,000s, etc, while the form for filing the same balance sheet asks details in actual numbers.
Additionally, the new format of the balance sheet expected companies to provide a lot of additional information, including transactions with struck-off companies, ratios and reasons for changes thereof, etc.
The bigger companies were able to manage this with the kind of support staff they have, but smaller companies were left scrambling. With no additional time given, they either ended up filing a wrong return or failed to file the form within the due date.
What Happens If The Company Fails To File Its Form?
Once the due date is over, if the form is not filed with the MCA, the company is required to pay additional fees of Rs 100 a day of delay for each form that is missed out on filing.
A lot of exemptions which are available to private companies also lapse till the time these returns are filed.
In addition to filing fees, which are levied only by the MCA—while Income Tax and GST authorities are providing these services for free—the companies are liable for additional penalties as mentioned under Section 92 and Section 137 of the Companies Act, 2013.
Understandably, all these issues will not absolve the company from any liabilities if the details are wrongly filed, even if it’s due to a clerical error.
The MCA has made it very clear that any data filed in these forms, if found incorrect intentionally or otherwise, can lead to penalty under sections 447, 448 and 449, whereby directors can be imprisoned with a fine which may extend up to Rs 10 lakh even for clerical mistakes.
What Next?
Company secretaries from all over India are constantly raising their voice and highlighting issues faced by them while filing the forms and returns, while the MCA continues to call it an “intermittent issue”.
Professionals are asking for a relaxation of additional fees for a few days until the MCA can fix its “intermittent issue” without making the company and others involved liable to pay penalties for the failure of the portal.
Jigar Shah is a CS and partner at JMJA and Associates LLP.
The views expressed here are those of the author, and do not necessarily represent the views of BQ Prime or its editorial team.