Issue faced in Intimation under section 143(1) with respect to Late Fees under section 234F of Income Tax Act, 1961

Currently the Income Tax authority Centralize Processing Centre (CPC) is issuing intimation for Assessment Year (AY) 2020-21 (FY 19-20) as well as AY 2021-22.   In the intimation generated for AY 2020-21, the CPC is levying the late fee in the case where the tax return was revised for AY 2020-21.

 In this note, we have discussed provisions relating to the same:

There has been an update in the late fees u/s 243F of the Income Tax Act, 1961 (‘the Act’) at the time of filing of late return.

Applicability of Late Fee

Section 234F is Substituted by the Finance Act, 2021, w.e.f. 1-4-2021. As per the updated provisions, where a person, who is required to furnish return of income, fails to furnish it by the due date prescribed under section 139(1), he shall be liable for payment of fee as under:

[u/s 234F(1)]

Amount of total income Fees (in Rs.)
Up to Rs. 5,00,000 1,000
Above Rs. 5,00,000 5,000

u/s 234F(2) it is mentioned that 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.

Observation 1:

– It is important to note that the late fee shall be applicable only if a person fails to furnish return of income within due date prescribed u/s 139(1). This provision is not discussing about the return which is revised u/s 139(5).

– Accordingly, if the return is filed within the due date and then revised return is filed u/s 139(5) then, while processing intimation u/s 143(1), the late fee should not be levied. However, in the intimation issued by the tax authorities, it has been observed that the late fee is being charged.

– Moreover, if any revised return is filed for the latest assessment year i.e. AY 2021-22 then, on the income tax portal, the filing type of such return is appearing as “Original” although the section 139(5) appears along with that. (Screenshot is attached)

– Is it that the tax department is trying to replace the revised return with the original return and accordingly, processing the late fee considering that the return was not filed within due date? This is more of a stretched argument although …we never know if this is system issue in processing intimation or deliberately done… only time will tell.

system issue in processing intimation or deliberately done… only time will tell

Observation 2:

  • The amendment in late fee is brought in the sub section 1 of section 234F i.e. vide Finance Act 2021, the 234F(1) has been substituted.
  • There is another view point available on the Law of Substitution. That is the substituted provision will apply since the beginning when the provision was introduced. Accordingly, the reduced late fee should be applicable for AY 20-21 as well.
  • Moreover, the amendment is not brought in section 234F(2) which says that provision of this section shall apply in respect of return of income for AY 2018-19 onwards.
  • In this case, can we still argue that while processing intimation u/s 143(1) for AY 2020-21, the late fee should be levied as per new substituted provision of Rs 5,000 as against Rs 10,000 prescribed under earlier provision.

Issue relating to late fee under section 234F in Intimation generated u-s 143(1)

Considering the quantum of the late fee, many people might be preferring not to file any grievance or rectification and thereby increasing the revenue of Government by paying the late fees mentioned in the Intimation.  However, person facing such issue can consider to file the grievance and/or rectification application u/s 154 of Intimation issued u/s 143(1).

Reference/Source:

Section 234F, 139 of the Income Tax Act 1961 as amended by Finance Act 2021

Disclaimer:

The information contained herein is of a general nature and does not contain any expert view or opinion. Please refer source documents for detailed information. Although we try to provide accurate information, there can be no guarantee that such information is accurate as of the time it is received or in the future.  We request readers to seek professional advice before arriving at any decision / conclusion after reading of this document. We are not responsible for any loss arising to anyone after referring and relying on this document.

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4 Comments

  1. Sanjay Kumar says:

    Yes. It’s very true I have filed grievances but they say it is correct.
    One more issue is salary arrears relief they are ot giving if 115Bac is opted. If you can write article on same I can provide the annexe details.

  2. Yash arora says:

    One my client faced the same issue, where late fee was charged under section 234F under revise return processing for AY 2020-21. Issue was resolved after filing rectification and greviance

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