Have you ever thought that if you do not file your Income Tax Return, can you be prosecuted under the Income Tax Act? Let’s try to find out the answer to this scary question under the Income Tax Act.

Before you move to the relevant section, let’s understand the provision related to the filing of the Income Tax return first. As per the Section 139(1) of the Income Tax Act, the following persons have to mandatorily file their ITR irrespective of amount of income:

1. Any company

2. Any Partnership Firm

3. Any Limited Liability Partnership

4. Any resident who has an asset located outside of India (might include financial interest in some entity as well) OR any resident who retains signing authority for an account based outside India

Prosectution ITRThe due date for the Financial Year 2018-19 (Assessment Year 2019-20) is July 31 2019. Every person must file its ITR for the financial year ending March 31st by July 31st of the same year. If your total income, before deductions under section 10A or section 10B or section 10BA or Chapter VI-A, exceed the “Basic Exemption Limit i.e. Rs. 2,50,000 (Rs. 3,00,000 for senior citizens above 60 years of age and Rs. 5,00,000 for senior citizens above 80 years) then it is mandatory to file your returns on or before the due date.

Who does not need to file returns by July 31? Following Persons do not have to file their ITR by 31st July:

  • Corporate assessee (or tax-payer)
  • Non-corporate assessee whose books of accounts must be audited under the Income-tax provisions
  • Partner of a firm whose accounts must be audited under the Income-tax provisions
  • Tax-payer who is required to furnish a report under section 92E

The date to file the Belated & Revised ITR is 31st March of the subsequent year.

Now the question arises that if a person does not file its ITR, can it be prosecuted vide any provision of the Income Tax Act? The answer is yes, Section 276CC of the Income Tax Act deals with respect to the non-filing of ITR. Section 276CC states that If a person wilfully fails to furnish in due time the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH or the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under clause (i) of sub-section (1) of section 142 or section 148 or section 153A, he shall be punishable,—

(i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds twenty-five hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;

 (ii) in any other case, with imprisonment for a term which shall not be less than three months but which may extend to two years and with fine:

In simple terms Section 276CC states that if any person does not file his ITR “intentionally” by the prescribed dates or on issuance of any notice(s) by the tax authorities, then there may be imprisonment for the minimum period of 3 to 24 months along with the monetary fine. Further if the tax revenue which could escape the assessment in any such case is Rs. 25 Lacs or more, than there is a provision of 2-7 years of rigorous imprisonment along with the monetary fine.

From the forgoing discussion, it’s evident that the filing of the ITR is mandatory under Section 139(1) if your income exceeds the maximum amount not chargeable to tax, i.e. the “Basic Exemption Limit. In case you don’t file your ITR and due to this there is any loss of tax revenue to the government, there would be a possibility where the department can initiate the action proceedings under Section 276CC. Please do not assume that the less than 0.50% cases are being scrutinized these days by the Income Tax Department as every year the department release its Central Action Plan (CAP). Under CAP, each Commissioner of Income Tax is required to identify under his jurisdiction certain number of such wilful defaulters where is the possibility of the tax loss to the department.

Hence let’s take necessary steps to file our ITR before 31st July 2019 to avoid any consequences like of Section 276CC. Please be informed that even if you don’t have outstanding tax liability for the Financial Year 2018-19 (Assessment Year 2019-20) as the same has been discharged either in the form of Advance tax or Tax Deduction at Source, you should file your ITR on or before the due date else you may have to pay the Late fee under Section 234F.

The Income Tax Department can may send assessees who miss the 31st March deadline, a notice which can be found on the assessee’s compliance portal after they log in to the income tax website. So, if we receive any such notice, we should file our ITR in response to the notice. Such notices may also be sent to the assessee on their registered email address, hence its necessary to understand that we should regularly check our registered email inbox & Dashboard on Income tax Compliance Portal.

Even if we miss the 31st March deadline, we should not wait for the notice from the department. To mitigate the risk of prosecution we would discharge tax liability along with interest and late fees for the assessment year in question. Additionally, we should send a letter explaining the reason for delay to the assessing officer. In the case of Karan Luthra Vs ITO* (2018), Delhi High Court held that there is assessee’s failure to furnish return in response to notice under S.142(1), the mere fact that subsequently he furnished the ITR and no amount of tax was due, would not exempt him from the liability to be prosecuted under section 276CC.

*Karan Luthra. v . ITO (2018) 259 Taxman 209/ ( 2019) 175 DTR 258 (Delhi)(HC)

Disclaimer: The information contained in this article is provided for informational purposes only & is not intended to constitute a complete analysis of all tax considerations, hence it should not be construed as legal advice at all on the subject matter.  No recipients of content from the Site, clients or otherwise, should act or refrain from acting on the basis of any content included in the article without seeking the appropriate legal or other professional advice on the particular facts and circumstances

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Member Since: 18 Jun 2019 | Total Posts: 15
Alok is the Co-Founder of "Finance Optima" a name synonymous with bespoke high quality, path-breaking, innovations & trendsetting services in finance , taxation, Investment & Management domain. He is a qualified Chartered Accountant and seasoned finance professional with the experience of c View Full Profile

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