Heavy Penalty: A measure to ensure timely Income Tax Return Filing

Finance Bill 2017: An effort for fililng Income Tax Returns on due date via Introduction of Penalties

According to Section 271F of the Income Tax Act, 1961 (for short ‘the Act’), if a person who is required to furnish a return of his income, as required under sub-section (1) of section 139 of the Act or by the provisos to that sub-section, fails to furnish such return before the end of the relevant assessment year, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of Rs. 5,000.

The following proviso has been proposed to be inserted in the above-mentioned section, w.e.f. 1.04.2018 by the Finance Bill 2017:

“Provided that nothing contained in this section shall apply to and in relation to the return of income required to be furnished for any assessment year commencing on or after the 1st day of April, 2018.”

After Section 234E of the Act, the following section has been proposed to be inserted by the Finance Bill, 2017, with effect from the 1st day of April, 2018:-

   “234F. (1) Without prejudice to the provisions of this Act, where a person required to furnish a return of income under Section 139, fails to do so within the time prescribed in sub-section (1) of said section, he shall pay, by way of fee, a sum of-

(a) Five thousand rupees, if the return is furnished on or before the 31st day of December of the assessment year;

(b) Ten thousand rupees, in any other case;

Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

(2) The provisions of this section shall apply in respect of return of income required to be furnished for the assessment year commencing on or after the 1st day of April, 2018.”

Sub-section(1) of Section 139 subject to its provisos and Explanations incorporates that every person:

(a) being a company or a firm; or

(b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.

At present, Explanation 2 to sub-section(1) of Section 139 explains that in this sub-section, “due date” means:

(a) where the assessee is—

(i) a company other than a company referred to in clause (aa); or

(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or

(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force, the 30th day of September of the assessment year;

(aa) in the case of an assessee being a company, which is required to furnish a report referred to in section 92E, the 30th day of November of the assessment year;

(b) in the case of a person other than a company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year;

(c) in the case of any other assessee, the 31st day of July of the assessment year.

Measures are been taken continuously to increase the number of tax-payers, countrywide. Manyatimes, due dates are enhanced for filing of income tax returns. There remains pressure on the server and also, income tax return forms are introduced after the elapse of many days from the start of the assessment year. Also, the tax consultants have to look number of assesses as well as other due dates of other taxes. Trying to achieve the target and making compliance of filing of the returns within time via introduction of penalties may be avoided to make taxing system, tax-payers friendly.

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