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Consequences of Non or Late Filing of the Income Tax Return

Penalty u/s 271F: If a person fails to furnish return before the end of the relevant assessment year, the assessing officer may levy a penalty of Rs. 5,000/-. Thus, Non-filing of Income Tax Return may result in the penalty of Rs. 5,000/-.

I have recently authored blog “31st March’2018: Warning Bell for the filing of the Income Tax Return”.

31st March’ 2018: The last date for Income Tax return u/s 139(4) for Financial Year 2015-2016 & 2016-2017.

Many people came up with a query that what will happen if we do not file the Income Tax Return by the aforementioned deadline. There are many benefits of filing the Income Tax Return. But, here we are discussing only the adverse consequences of Non-Filing of the Income Tax Return.

1) Penalty u/s 271F: If a person fails to furnish return before the end of the relevant assessment year, the assessing officer may levy a penalty of Rs. 5,000/-. Thus, Non-filing of Income Tax Return may result in the penalty of Rs. 5,000/-.

Important Note:

This penalty provision has been abolished 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.

New section 234F in the Act provides that a fee for delay in furnishing of return shall be levied for the assessment year 2018-19 and onwards.  We have discussed it in detail in the blog “Income Tax Return Filing by Individuals for the A.Y 2018-19

2) Interest u/s 234A: Default in the furnishing of the Income Tax Return may attract Interest u/s 234A. If there are any taxes which are unpaid, penal interest @ 1% per month or part thereof will be charged till the date of payment of taxes.

3) Non-Carry Forward of Losses: You will not be able to carry forward losses if the return of income is not filed within due date.

However, the loss under the head “Income from house property” can be carried forward even if the return of income/loss of the year in which loss is incurred is not furnished on or before the due date of furnishing the return, as prescribed under section 139(1).

4) Best judgment assessment (Assessment under section 144):

 The Assessing Officer is under an obligation to make an assessment to the best of his judgment in the following cases: –

  • If the taxpayer fails to file the return required within the due date prescribed under section 139(1) or a belated return under section 139(4) or a revised return under section 139(5).
  • If the taxpayer fails to comply with all the terms of a notice issued under section 142(1).

Thus, Non-Filing of the Income Tax Return may result in the Best Judgement Assessment. This is an assessment carried out as per the best judgment of the Assessing Officer on the basis of all relevant material he has gathered.

5) Claim of Refund of Taxes: In case your tax payable is less than the TDS already deducted, you can claim the refund of such excess TDS by filing your Income Tax Return.

You must file your Income Tax Return to claim the refund of TDS.

Further, you are eligible for Interest @ 6% on refund amount as per Section 244A.

6) Penalty for Concealment of Income: If you have taxable income and do not file the return of Income you may end up paying penalty for concealment of Income. Till A.Y 2016-17, there was penalty u/s 271(1)(c), this penalty was for Failure to furnish returns, comply with notices, concealment of income, etc.

The Finance Act’2016, inserted section 270A with effect from 1st April, 2017. Penalty u/s 270A is for under-reporting and misreporting of income.

Thus, where no return of income is furnished and later you are assessed at income higher than maximum amount not chargeable to tax you may end up paying a heavy penalty.

7) Prosecution for Failure to Furnish Return of Income: In case you fail to furnish the return of Income, don’t be surprised if you receive notice of prosecution u/s 276CC.

Section 276CC provides for rigorous imprisonment for a term up to 7 years and fine.

Don’t wait and get your Income Tax Return filed!

Categories: Income Tax

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