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Tax Returns

Filing of Return:

SARAL II FORMS TO BE INTRODUCED EARLY

As per AY 2008-09 Non-auditable accounts are furnished by those businesses, which have annual turnover of up to Rs 40 lakh per annum and those professionals having income up to Rs 10 lakh per annum.

From July 26 onwards taxpayers including salaried class would also be allowed for the first time to file tax returns in 1,000 designated post offices in the country.

For the Assessment Year 2007-08

One-by-Six Scheme was omitted according to the proposal of Finance Bill, which said that no return shall be required to be furnished under the proviso for assessment year 2006-07 and subsequent years. The amendment took effect from 1st June, 2006.

As per Assessment Year 2006-07

It is statutorily obligatory for every person to furnish a return of his total income or the total income of any other person in respect of which he is assessable under the income tax act, in all cases where his total income or the total income of any other person in which he is liable to be assessed exceeds, in any relevant accounting year the maximum amount which is not chargeable to income tax. the return of income must be furnished by the assessee in the prescribed manner by the board from time to time.

Filing of Return - compulsory

If a person is enjoying any of the following item, he/she has to file his/her return.

• Occupation of a House
• Ownership of a motor car
• Expenditure on foreign travel
• Holder of credit card
• Electricity payments in excess of Rs 50,000/annum
• Member of a club - where the entrance fee is more than Rs 25,000/-.

The assessee is obliged to voluntarily file the return of income without waiting for the notice of the assessing officer calling for the filing of the return. The time limit for filing of the return by an assessee if his total income of any other person in respect of which he is assessable exceeds the maximum amount not chargeable to tax shall be as follows:

1. Where the assessee is a company the 30th day of November of the assessment year
2. Where the assessee is a person, other than a company :-
   1. where the account of the assessee are required to be audited under the income tax act or any other law, or in cases where the report of the chartered Accountant is required to be furnished under sections 80HHC or 80HHD i.e.. for deduction in respect of profits retained for export business and also in respect of earnings in convertible foreign exchange, or in case of a cooperative society, the 31st day of October of the assessment year
   2. where the total income includes any income from the business or profession, not being a case falling under sub clause (i), the 31st day of August for the assessment year
   3. in any other case, 30th day of June of the assessment year

The requirements of Income-tax Act making it obligatory for the assessee to file a return of his total income apply equally even in cases where the assessee has incurred a loss under the head 'profit and gains form business and profession' or under the head 'capital gains' or maintenance of race horses. Unless the assessee files a return of loss in the manner and within the same time limits as required for a return of income or by the 31st day of July of the assessment relevant to the previous year during which the loss was sustained, the assessee would not be entitled to carry forward the loss for being set off against income in the subsequent year.

Late Return

Any person who has not filed the return within the time allowed may be file a belated return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, which ever is earlier. However, in case of returns relating to assessment year 1988-89 or any other assessment year, the period allowable is two years.

Revised Return

An assessee who is required to file a return of income is entitled to revise the return of income originally filed by him to make such amendments, additions or changes as may be found necessary by him. Such a revised return may be filed by the assessee at any time before the assessment is made. There is no limit under the income tax Act in respect of the number of time for which the return of income may be revised by the assessee. However, if a person deliberately files a false return he will be liable to be imprisoned under section 277 and the offence will not be condoned by filing a revised return.

Where the return relates to assessment year 1988-89 or any earlier assessment year, the period of limitation is two years from the end of the relevant assessment year.

Defective Return

If the assessing officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within 15 days from the date of such intimation or within such further period as may be allowed by the assessing officer on the request of the assessee. If the assessee fails to rectify the defect within the aforesaid period, the return shall be deemed invalid and further it shall be deemed that the assessee had failed to furnish the return. However, where the assessee is made the assessment officer may condone the delay and treat the return as a valid return.

Signing of Return

The return of income must be signed and verified. In case of an individual

• by the individual himself
• where he is absent from India, by the individual himself or by some person duly authorised by him in this behalf
• where he is mentally incapacitated from attending to his affairs, by his guardian or any person competent to act on his behalf
• where for any other reason, it is not possible for the individual to sign the return, by any person duly authorised by him in this behalf.

Penalty

Under the existing law, penalty for delay in filing of return of income is calculated as a percentage of the shortfall of tax. Where tax has already been deducted at source, or advance tax has been duly paid, no penalty is leviable. It is proposed to amend the law to provide for the penalty of Rs.1000 even in such cases. This provision is targeted towards the salary earners who always had the impression that their liability was over the moment the tax was deducted by the employer.

Section 139 - Return of Income

(1) Every person, 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 1416 and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided that a person, not furnishing return under this sub-section and residing in such area as may be specified by the Board in this behalf by a notification in the Official Gazette, and who at any time during the previous year fulfils any one of the following conditions, namely :-

(i) Is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or

(ii) Is the owner or the lessee of motor vehicle other than a two- wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or

(iv) Has incurred expenditure for himself or any other person on travel to any foreign country,

(v) Is the holder of the credit card, not being an "Add-on" card, issued by any bank or institution; or

(vi) Is a member of a club where entrace fee charged is twenty-five thousand rupees or more : shall furnish a return, of his income during the previous year, on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. Provided further that the Central Government may, by notification in the Official Gazette, specify class or classes of persons to whom the provisions of the first proviso shall not apply,

Explanation 1 : In this sub-section, "due date" means -

(a) Where the assessee is a company, the 30th day of November of the assessment year;

(b) Where the assessee is a person, other than a company, -

(i) In a case where the accounts of the assessee are required under this Act or any other law to be audited or where the report of an accountant is required to be furnished under section 80HHC or section 80HHD or where the prescribed certificate is required to be furnished under section 80R or section 80RR or sub-section (1) of section 80RRA, or in the case of a co-operative society or in the case of a working partner of a firm whose accounts are required under this Act or any other law to be audited, the 31st day of October of the assessment year;

(ii) In a case where the total income referred to in this sub-section includes any income from business or profession, not being a case falling under sub-clause (i), the 31st day of August of the assessment year;

(iii) In any other case, the 30th day of June of the assessment year.

Explanation 2 : For the purposes of sub-clause (i) of clause (b) of Explanation 1, the expression "working partner" shall have the meaning assigned to it in Explanation 4 of clause (b) of section 40.

Explanation 3 : For the purposes of this sub-section, the expression "motor vehicle" shall have the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988).

Explanation 4 : For the purposes of this sub-section, the expression "travel to any foreign country" does not include travel to the neighbouring countries or to such places of pilgrimage as the Board may specify in this behalf by notification in the Official Gazette.

(3) If any person, who has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72 or sub-section (2) of section 73, or sub-section (1) or sub-section (3) of section 74 , or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, 1429 and all the provisions of this Act shall apply as if it were a return under sub-section (1).

(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 from 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 construed as reference to two years from the end of the relevant assessment year.

(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed 1432 and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).

(4B) The chief executive officer (whether such chief executive officer is known as secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed 1433a manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).

(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :

Provided that where the return relates to the 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 construed as a reference to two years from the end of the relevant assessment year.

(6) The prescribed form of the returns referred to in sub-sections (1) and (3) of this section, and in clause (i) of sub-section (1) of section 142 shall, in such cases as may be prescribed, require the assessee to furnish the particulars of income exempt from tax, assets of the prescribed nature value and belonging to him, his bank account and credit card held by him, expenditure exceeding the prescribed limits incurred by him under prescribed heads and such other outgoings as may be prescribed.

(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the returns referred to in this section, and in clause (i) of sub-section (1) of section 142 shall, in the case of an assessee engaged in any business or profession, also require him to furnish the report of any audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, a copy of such report together with proof of furnishing the report, the particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, the names and addresses of his partners, if any, in such business or profession and, if he is a member of an association or body of individuals, the names of the other members of the association or the body of individuals and the extent of the share of the assessee and the shares of all such partners or the members, as the case may be, in the profits of the business or profession and any branches thereof.

(8)(a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then [whether or not the Assessing Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2)], the assessee shall be liable to pay simple interest at fifteen per cent per annum, reckoned 1443 from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source : Provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, 1444 reduce or waive the interest payable by any assessee under this sub-section.

Explanation 1 : For the purposes of this sub-section, "specified date", in relation to a return for an assessment year, means, - (a) In the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later;

(b) In the case of every other assessee, the 30th day of June of the assessment year. Explanation 2 : Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section.

(b) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount of tax on which interest was payable under this sub-section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and -

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;

(ii) In a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(c) The provisions of this sub-section shall apply in respect of the assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references therein to the other provisions of this Act shall be construed as references to the said provisions as they were applicable to the relevant assessment year.

(9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return :

Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.

Explanation : For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :- (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in;

(b) The return is accompanied by a statement showing the computation of the tax payable on the basis of the return;

(bb) The return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;

(c) The return is accompanied by proof of - (i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid;

(ii) The amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974);

(d) Where regular books of account are maintained by the assessee the return is accompanied by copies of - (i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet;

(ii) In the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals;

(e) Where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section;

(f) Where regular books of account are not maintained by the assessee the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.

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Keywords:

taxation, direct taxation, indirect taxation, tax planing, tax, tax returns, late return, revised return, defective return