Budget 2021 proposes Extending of due date for filing return of income in some cases, reducing time to file belated return and to revise original return and also to remove difficulty in cases of defective returns

Section 139 of the Act contains provisions in respect of the filing of return of income for different persons or class of persons. The said section also provides the due dates for filing of original, belated and revised returns of income for different classes of assessee.

Sub-section (1) of the section provides for the filing of original return of income for an assessment year. The Explanation 2 of the said section specifies the due-dates for filing of original return for different class of persons. The sub-clause (iii) of clause (a) of the said Explanation 2 provides that the due date for filing of original return of income for the partner of a firm whose accounts are required to be audited under the said Act or under any other law for the time being in force shall be 31st day of October of the assessment year.

Section 5A of the Act provides for taxation of spouses governed by Portuguese Civil Code. On account of this provision any income earned by a partner of a firm whose accounts are required to be audited shall be apportioned between the spouses and included in their total income, if the section 5A applies to them.

Since the total income of a partner can be determined after the books of accounts of such firm have been finalised, the due dates of partners are already aligned with the due date of the firm. Thus, the due date for filing of original return of income of such partner is 31st October of the assessment year. However, this relaxation is not there for spouse of such partner to whom section 5A of the Act applies. Therefore, it is proposed that the due date for the filing of original return of income be extended to 31st October of the assessment year in case of spouse of a 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, if the provisions of section 5A applies to them.

Further, in the case of a firm which is required to furnish report from an accountant for entering into international transaction or specified domestic transaction, as per section 92E of the Act, the due date for filing of original return of income is the 30th November of the assessment year. Since the total income of such partner can be determined after the books of accounts of such firm have been finalised, it is proposed that the due date of such partner be extended to 30th November of the assessment year.

Sub-sections (4) and (5) of section 139 of the Act contain provisions relating to the filing of belated and revised returns of income respectively. The belated or revised returns under sub-sections (4) and (5) respectively of the said section at present could be filed before the end of the assessment year or before the completion of the assessment whichever is earlier. With the massive technological upgrade in the Department where the processes under the Act are moving towards becoming faceless and jurisdiction-less, the time taken to conduct and complete such processes has greatly reduced. Therefore, it is proposed that the last date for filing of belated or revised returns of income, as the case may be, be reduced by three months. Thus the belated return or revised return could now be filed three months before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

Sub-section (9) of section 139 of the Act lays down the procedure for curing a defective return. It provides that in case a return of income is found to be defective, the Assessing Officer will intimate the defect to the assessee and give him a period of 15 days or more to rectify the said defect and if the defect is not rectified within the said period, the return shall be treated as an invalid return and the assessee will be considered to have never filed a return of income. The Explanation to the sub­section lists the conditions in which a certain return of income shall be considered to be defective. Representations have been received that the aforesaid conditions create difficulties for both the taxpayer and the Department, as a large number of returns become defective by application of the said conditions. This has resulted in a number of grievances. It has been represented that the conditions given in the said Explanation may be relaxed in genuine cases. Therefore, it is proposed that a proviso be inserted to the said Explanation empowering the Board to specify, vide notification that any of the above conditions shall not apply for a class of assessee or shall apply with such modifications, as maybe specified in such notification.

These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.

[Clause 32]

Text of the Relevant Clause of the Finance Bill 2021

Clause 32 of the Bill seeks to amend the section 139 of the Income-tax Act relating to return of income.

The said section provides for the filing of return of income for different persons or class of persons and time-limits for doing so.

It is proposed to amend sub-clause (iii), in clause (a), in Explanation 2, in sub-section (1) of the said section so as to provide that the due date for filing return of income for the spouse of the partner of a firm, if the governed by the provisions of section 5A of the said Act, shall be 31st October of the assessment year.

It is further proposed to amend clause (aa) of the said Explanation so as to provide that the due date for filing of return of income for partners of a firm, which is required to furnish report referred to in section 92E, shall be 30th November of the assessment year.

It is also proposed to amend sub-section (4) of the said section so as to provide that any person who has not furnished a return of income within the due date as per sub-section (1) of the said section may furnish a return for any previous year at any time within three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

It is also proposed to amend sub-section (5) of the said section so as to provide that a return of income filed under sub-sections (1) or (4) can be revised at any time within three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

It is also proposed to insert proviso before the Explanation to sub-section (9) of the said section so as to provide that the Board may specify, by notification, that any of the conditions specified in clauses (a) to (f) of the said Explanation shall not apply to such class of assessees or shall apply with such modifications, as may be specified in such notification.

These amendments will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.

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