Article explains Filing of Income Tax Returns, Who are required to file Income Tax Return?,  ITR filing for some special entities, Time limit for filing of Returns,  Consequences of Late filing of Return, Revision of Income Tax Returns, Defective Income Tax Return u/s 139(9), Processing of Income Tax Return,   Income Tax Assessment Procedure, Notice u/s 142(1), Special Audit u/s 142(2A), Scrutiny Assessment u/s 143(3), Best Judgement / Ex-Parte Assessment u/s 144, Income Escaping assessment u/s 147, Income Tax Appeals & Revision, Appeal with Commissioner (Appeals) – Sec 246A, Revision Application u/s 263, Revision Application u/s 264,  Appeals to Appellate Tribunal u/s 253, Appeal to High Court u/s 260A and Appeal to Supreme Court u/s 261.

A. Filing of Income Tax Returns

Who are required to file Income Tax Return?

Section Assessee Covered Cases
139(1) 1. Company All cases
2. Firm All cases
3. Any other person If the Total Income of an individual for a particular year exceeds the exemption limit (maximum amount which is not chargeable to tax)
Fourth & Fifth Proviso to 139(1) A person,
– being a resident, other than not ordinarily resident in India
– who is not required to furnish return under 139(1)
(a) Who holds any asset (including financial interest in any entity) located outside India, as a beneficial owner; or has a signing authority in any account located outside India , or
(b) or who is a beneficiary of any asset (including any
Sixth Proviso to 139(1) All assessees other than company or firm If total income before giving effect to Chapter VI A deductions and Sec 10(38) exemption exceeds the maximum amount not chargeable to tax

 ITR filing for some special entities:

  1. Charitable & Religious trusts are required to file ITR, if income before giving effect to exemptions u/s 11 and 12 exceeds the maximum amount not chargeable to tax.
  2. Political Parties are required to file ITR, if income before giving effect to exemptions u/s 12A exceeds the maximum amount not chargeable to tax.
  3. Hospitals, medical institutions, colleges and other specified institutions u/s 10; Investor protection fund, Core settlement Guarantee fund, and others, as specified under Sec 139(4C) are required to file ITR, if income before giving effect to exemptions u/s 10 exceeds the maximum amount not chargeable to tax.

Time limit for filing of Returns

S. No. Status of the Taxpayer Due date
1. Any company other than a company who is required to furnish a report in Form No. 3CEB under section 92E (i.e. other than covered in 2 below) September 30 of the assessment year
2. Any person (may be corporate/non-corporate) who is required to furnish a report in Form No. 3CEB under section 92E November 30 of the assessment year
3. Any person (other than a company) whose accounts are to be audited under the Income-tax Law or under any other law September 30 of the assessment year
4. A working partner of a firm whose accounts are required to be audited under this Act or under any other law September 30 of the assessment year
5. Any other assessee July 31 of the assessment year ​

 Consequences of Late filing of Return

  1. Late fees u/s 234F – Such fees has been introduced by Finance Act 2017. The late fees levied is Rs. 5,000 if ITR is filed upto 31st December of the Assessment year and Rs. 10,000 afterwards.
    However, if the total income of assessee does not exceed Rs. 5 Lakhs, then such fees is limited to Rs. 1,000.
  2. As per Sec 139(3) read with Sec 80, if the return is filed after the due date specified, losses cannot be carried forward. However, unabsorbed depreciation & House property losses can be carried forward, even if return is filed after the due date. Also, Sec 80 does not prohibit set-off of losses in the same year. Hence, set-off of losses in same year is allowed, even if return of income is filed after due date
  3. As per Finance Act 2017, religious / charitable trusts shall not get exemption u/s 11 & 12, if ITR filed after due date.
  4. Belated return u/s 139(4) can be filed at anytime by the end of assessment year.
  5. As per prescribed rules, ITR can be filed after due date of belated return (31st March of Assessment year), by applying for condonation of delay u/s 119(2)(b), in case of carry forward of losses & refund claims. However, such condoation shall be given only in case of genuine hardships. (For details refer Circular No. 9/2015)

Revision of Income Tax Returns

  1. Upto AY 2017-18 , revised return could have filed upto 1 year from end of assessment year.
  2. However from AY 2018-19, revised return can be filed at anytime before the end of assessment year or before completion of assessment, whichever is earlier

Defective Income Tax Return u/s 139(9)

  1. ITR is considered defective, unless it is accompanied by:
    1. Return in prescribed form
    2. Tax audit report u/s 44AB
  2. With effect from Finance Act 2016, ITR is not treated as defective, even if self assessment tax, interest u/s 140A has not been paid.

B. Processing of Income Tax Returns

Processing u/s 143(1)

  1. Following adjustments can be made when return is getting processed , when filed u/s 139 or Sec 142(1)(i):
    1. Arithmetical errors
    2. Incorrect claims, which is apparent from any information in return
    3. Disallowance of loss, if carried forward, in case ITR filed after due date
    4. Disallowance of expenditures disallowed in Tax Audit Report
    5. Disallowance of deductions u/s 80IA, 80IC, 10AA, etc, if carried forward, in case ITR filed after due date
    6. Addition of income as per Section Form 16 or Form 26AS, if not taken into account while filing of income tax return.
  2. The above list is exhaustive in nature, hence no other adjustment can be done, while processing of return u/s 143(1)
  3. No adjustment u/s 143(1) can be made unless Intimation u/s 143(1) has been given to assessee.
  4. However, such adjustment is automatically done, if no response is filed by assessee within 30 days of issue of intimation u/s 143(1)
  5. No intimation u/s 143(1) can be sent after expiry of one year from the end of financial year, in which return has been filed
  6. Intimation u/s 143(1) is deemed as Notice of demand u/s 156. Hence, any demand in intimation is to be paid within 30 days.
  7. For Assessment year 2017-18 & onwards, if return is filed having refund claim & case is selected for scrutiny, then refund shall be granted & department cannot stop refund till completion of assessment u/s 143(3). However, to protect interest of revenue, Sec 241A has been introduced, which provides to hold refunds, in the interest of revenue.

Rectification u/s 154

  1. Rectification of mistake apparent from record (i.e. as mistake, in which no two views are possible) can be rectified u/s 154, in case of below :
    1. Any order passed by income tax authority
    2. TDS / TCS Intimation
    3. Intimation u/s 143(1)
  2. Such rectification can be done latest by the expiry of 4 years, from the end of financial year, in which order sought to be amended has been passed. However, it can be passed even after the expiry of said 4 years, if assessee had filed application within time limit & rectification is in favour of the assessee.

C. Income Tax Assessment Procedures

Notice u/s 142(1)

  1. If assessee has not furnished return, within time prescribed u/s 139, till issue of this notice, assessing officer may issue Notice u/s 142(1)(i), requiring him to furnish return within time specified in notice.
  2. Notice u/s 142(1)(ii) is issued for requiring assessee to furnish books of accounts, documents, other information. It can be issued whether ITR has been filed or not. This notice is generally given with Scrutiny notice u/s 143(2), Show cause notice u/s 144, Notice u/s 148 or Notice u/s 153A.

Special Audit u/s 142(2A)

  1. If at any time during assessment proceedings, Assessing officer is of the opinion that, it is necessary to get the books of accounts audited, having regard to the complexity of the case & in the interest of revenue, he may ask assessee to get his accounts audited. However, he has to give assessee reasonable opportunity of being heard before giving such directions.
  2. Audit shall be done by a Chartered accounted nominated by Chief commissioner or commissioner.

Scrutiny Assessment u/s 143(3)

  1. Notice is to be given u/s 143(2), being mandatory to be issued and such notice is to be served upto 6 months from end of financial year, in which return has been furnished
  2. Scrutiny assessment u/s 143(3) cannot be done, if ITR has not been filed.
  3. It cannot result in decrease in taxable income or increase in loss.
  4. For AY 2018-19 Order u/s 143(3) shall be made upto 18 months from end of relevant assessment year (21 months for AY 2017-18)

Best Judgement / Ex-Parte Assessment u/s 144

  1. Best Judgement assessment can be done, if:
    1. Assessee has not filed the income tax return upto issue of show cause notice u/s 144
    2. Assessee fails to comply with notice/s 142(1)
    3. Assessee fails to comply with special audit directions u/s 142(2A)
  2. It can be done basis of information available gathered & available by the assessing officer.
  3. For AY 2018-19 Order u/s 144 shall be made upto 18 months from end of relevant assessment year (21 months for AY 2017-18)

Income Escaping assessment u/s 147

  1. Such an assessment can be done by issue of Notice u/s 148
  2. Time limits for issuing notice u/s 148:
    1. If income escaped is Rs. 1,00,000 or more – 6 years from the end of relevant assessment year
    2. If income escaped is in relation to any asset (including financial asset) located outside India – 16 years from the end of relevant assessment year
    3. Other cases – 4 years from the end of relevant assessment year
  3. Sanctions for issuing Notice u/s 148:
    1. Any notice can be issued upto 4 years from end of relevant assessment year by Joint Commissioner. However, Assistant commissioner / deputy commissioner/ Income tax officer can also issue, if Joint commissioner is satisfied
    2. Upto 6/16 years, by Any assessing officer , if Commissioner of Income tax or Chief Commissioner of income tax is satisfied.
  4. Such notice can be issued, when assessing officer has reasons to believe that income of an assessment year, has escaped assessment.
  5. Following are the cases of deemed escape assessment:
    1. Income tax return not filed & total income exceeds the basic exemption limit
    2. Income tax return has been filed, but no assessment done & income has been understated or losses have been overstated
    3. When assessment has been done, but income has been understated or losses have been overstated
    4. Where person is found to have any asset (including financial interest) outside India
    5. Where the assessee has failed to furnish transfer pricing report u/s 92E
  6. Assessment u/s 147 shall be completed within 9 months from the end of Financial year, in which notice/s 148 has been served on assessee

D. Income Tax Appeals & Revision

Appeal with Commissioner (Appeals) – Sec 246A

  1. Appeal can be filed by aggrieved assessee, against the order passed u/s 143(3), 144, 147, 153A, 154, penalty order u/s 271AAB and other specified sections
  2. Appeal can be filed within 30 days of date of service of notice of demand relating to assessment / penalty or date of payment of tax (Sec 248)
  3. Procedure for filing of appeal
    1. Form No. 35 to be filed
    2. Docs to be submitted – Memorandum of appeal, Statement of facts. Grounds of appeal, Copy of order appealed against, Notice of demand
    3. Copy of challan of payment of prescribed fees
  4. Prescribed fees- If total income or loss of assessee is:
    1. Upto Rs. 100000- Rs. 250
    2. 100001 to Rs. 200000- Rs. 500
    3. More than Rs. 200000- Rs. 1000
    4. Any other case – Rs. 250
  5. Where the assessee has presented an appeal, assessing officer, may subject to some conditions, stay demand till the final disposal of appeal.

Revision Application u/s 263

  1. The commissioner may call for & examine the record of any proceedings of act and if he considers that any order passed by Assessing officer is erroneous, being prejudicial to interest of revenue, he may pass revision order after giving assessee reasonable opportunity of being heard.
  2. The order under this section may be passed upto 2 years from the end of financial year, in which order sought to be revised has been passed.

Revision Application u/s 264

  1. In case any order pass by any authority subordinate to assessing officer (other than order passed u/s 263), any authority subordinate to assessing officer, may on himself or on application filed by assessee, call for any information & pass revision order, after relevant inquiry & collecting information
  2. After revision u/s 263, revision u/s 264 is not possible. However, after revision u/s 264, revision u/s 263 is possible.
  3. Revision u/s 264 is not possible on any issue, if an appeal has been filed to CIT(Appeals).
  4. The order under this section shall be passed within 1 year from end of financial year, in which application u/s 264 is filed by assessee.

 Appeals to Appellate Tribunal u/s 253

  1. Appeal to Income Tax Appellate Authority (ITAT), can be filed against the order of CIT (Appeals) u/s 250, 154, 270A, order of assessing officer, in pursuance of Dispute Resolution Panel.
  2. Appeal to ITAT is to be filed within 60 days of receipt of order, against which appeal is to be filed
  3. Procedure for filing appeal
    1. Form No. 36 is to be filed
    2. Docs to be submitted – Grounds of appeal, Order against which appeal has been filed, order of assessing officer, grounds of appeal & statement of facts before CIT (Appeals)
    3. Copy of challan of payment of prescribed fees
  4. Prescribed fees- If total income or loss of assessee is:
    1. Upto Rs. 100000- Rs. 500
    2. 100001 to Rs. 200000- Rs. 1500
    3. More than Rs. 200000- 1% of assessed income (Maximum- Rs. 10,000)
    4. Any other case – Rs. 500
  5. Income tax Appellate Tribunal is the final Fact finding authority.

Appeal to High Court u/s 260A

  1. Appeal to High court can be filed, against the order of Appellate authority, if high court is satisfied that there exists a substantial question of law.
  2. Commissioner or assessee can file appeal within 120 days from date on which order appealed is received by assessee or commissioner. (extension allowed in genuine cases)

Appeal to Supreme Court u/s 261

  1. Appeal to Supreme court can be filed, against the judgement of High court, in any case, high court certifies to be fit one for appeal to Supreme Court.

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