We can say that the penalty for late filing of income tax return stands increased with effect from 1st April 2018 pursuant to Section 234F of the Income Tax Act, 1961 (‘the IT Act’). In case a person fails to the file the income tax return within the prescribed time limit, he would be liable to pay late fees for such default as per provisions of section 234F of the IT Act.
Under the old provisions i.e. Section 271F of IT Act applicable for income tax returns filed up to Financial Year 2016-17, taxpayers who late file their income tax return could be subject to a penalty of Rs.5000. However, the penalty of Rs.5000 for late filing of income tax return is not automatically levied. In case an Income Tax Officer issues a notice for late filing of income tax return, the taxpayer would have to pay the penalty of Rs.5000. Hence, the penalty for late filing of income tax return is solely based on the discretion of the assessing officer.
The old provisions mentioned under Section 271F was as under –
“271F. Penalty for failure to furnish return of income
“If a person who is required to furnish a return of his income, as required under sub-section (1) of Section 139 or by the proviso 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 five thousand rupees.”
However, with insertion of new Section 234F by the Finance Act, 2017, w.e.f. 01.04.2018, a proviso has been also added to Section 271F to make the effect of Section 271F as null with effect from 1st day of April, 2018.
“Provided that nothing contained in this section shall apply to an 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.”
The aforesaid new Section 234F was inserted by the Finance Act, 2017, w.e.f. 01.04.2018. Section 234F provides that –
“234F. Fee for default in furnishing return of income
(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.”
By analysing the aforesaid provision, the provisions of Section 234F of the IT Act get attracted if the following conditions are satisfied –
1. The assessee is mandatorily required to file the income tax return as per the provision of section 139 of IT Act; and
2. The assessee has either not filed or has failed to file within prescribed time in Section 139(1) of IT Act.
It is also noted that Section 234F of IT Act is applicable to a person i.e. provisions of section 234F of IT Act apply to all the categories of persons, like an individual; HUF; AOP; BOI; company; firm etc., in case the income tax return is filed after respective due dates.
Fee for default in furnishing return of income: – Criteria of late fee has been categories in the following-
Late fees payable in case the total income of the assessee is more than Rs. 5 Lakhs –
1. If the return is furnished on or before the 31st day of December of the assessment year- 5000/-.
2. In any other case- 10,000/-.
Late fees payable in case the total income of the assessee is less than Rs. 5 Lakhs- The maximum amount of fees payable is Rs. 1,000/-.
The plan reading of the aforesaid section 234F of the IT Act may be read as the assessee has to pay maximum amount of fee Rs. 10,000 in any case It means this is the maximum fee for late filing but not mentioned about the maximum filing time. Whether can we understand that return for any financial year can be filed for any delayed period with a maximum amount of fee Rs. 10,000 as per applicable case.
No, this is not so as belated return provisions are existing under Section 139(4) of the IT Act. It means any person can filed his delayed return with maximum penalty as per Section 234F of the IT Act but subject to the filing time provided under Section 139(4) of the IT Act.
The taxpayers need to be mindful of the following amendments made vide Finance Act, 2016 which has been applicable to the filing of the belated income tax return for financial year ended 31 March 2017. Section 139(4) of the IT Act, which deals with filing of a belated income tax return, has been amended to provide that a belated income tax return can now only be filed on or before the expiry of 12 months from the last date of the financial year, as against 24 months permitted earlier. The said amendment is applicable from financial year ended 31 March 2017 and onwards.
The amended Section 139(4) by the Finance Act, 2016, are as under–
*“139(4). Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return of any previous year at time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.”
*substituted by the Finance Act, 2016, w.e.f. 01.04.2017. Prior to the substitution, sub-section (4), as substituted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01.04.1989, read as under:-
“(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year form the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year, the reference to one year aforesaid shall be constructed as a reference to two years from the end of the relevant assessment year.”
Remark: ITR filing deadline for Financial Year 2019-20 has been further extended to December 31, 2020, for most individual taxpayers, from the earlier deadline of November 30, 2020. This is the second time the tax return filing deadline for Financial Year 2019-20 has been extended.
Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.