Advocate Akhilesh Kumar Sah

Finance Bill 2017: An effort for filing 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.

-Observation of Delhi High Court in Sudhir Sareen vs. CIT (2000) 156 Taxation 593 (Del).

“While interpreting the machinery provisions of the Income-tax Act, the golden thread principle which runs throughout the texture has to be kept in view. An income which is liable to be taxed should not escape. An income not taxable, erroneously or unwittingly caught in the net of tax liability, should be allowed to escape. The tax collector should not hesitate in extending a helping hand to anyone who genuinely intends to pay the tax.”

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4 responses to “Heavy Penalty: A measure to ensure timely Income Tax Return Filing”

  1. Ram Prasad Agrawalla says:

    There should only Interest be charged not any kind of penalty. For health and other reasons the assessees may not be able to file returns. Hence the Government should seriously consider the cases. Further by mandatory penalty, the assessees may be discouraged not to at file any return which is very very adverse feature and detrimental to GDP and national interest.

  2. CA MBG Tilak says:

    Even inrespect of cases of below Rs INR 5.00 lakhs income pa , the penalty for non-filing if IT return , need to removed,since taxable threshhold limit out to have been raised to Rs INR 5.00 lakhs for the year 2017-18,as suggested by many forums keeping in view of inflamation & other factors, which the Finance Minister did not consider ,conservatively & what is the difference between Former FM Sri Chidambaramji & the present FM Hon”ble Shri Jaitlyji?It is also a fact that in most of the state Govts predominantly governed by IAS & IPS,AIS officers, corruption is rampant and what public legitimately ought to get the dues from the Govt are not getting thier dues from Govts due to a variety of reasons,& what the Govts/Banks have to get moneys from ordinary citizen, not VIPs , they are ruthless collecting, more moneys including interests on interests violating principles of Natural Justice , while justice delivery system in the Country has substantially failed, miserably viewed from a number of cases including the angles/case of Justice Karnan Vs Supreme Court of India, thus reducing a common citizen to poor person-This is a factual position in our Country thera is hardly any good governance & there is no point in declaring that out of 130 crore population ,only a small proportion are filing IT Returns.In case the present FM Hon”ble Shri Jaitlyji comes out from ivory towers and looks personally behind the rural & other parts of india as to how the common & poor people are suffering (by directly contesting the elections, keeping constant touch with commoners)), he would appreciate the above proposition & there could a be solution to people without possible harassment from IT Dept.

  3. mohan says:

    if assessee intended to pay more tax even though the delay in filing return when the penalty is more he started to show income below 5lakhs and file return it is the duty of the govt to encourage the people to come out without fear to file the return of income but now it is difficult to advice filing of return


    Plenty has already been said about the harshness of the new provision.
    There is no remedy even if a person is under comma in July or for the Soldiers fighting and losing their lives and limbs for the sake of the Nation.
    Let FM go and sit in Siachen during June, July and let the country witness how he files the ITR within due time.
    No remedy has been incorporate.
    This is Tax Terrorism in its glorious Form

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