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Obligation to file return

1. Overview
   Section 139(1) the Income Tax Act, 1961 ("Act") makes it mandatory for every Company to furnish its Return of Income, irrespective of amount of its Total Income/ Loss. As amended by the Finance Act, 2005, from A. Y. 2006-2007, every Firm has also to furnish its Return of Income, irrespective of its Total Income/Loss.
   
   As a result, every Firm would be required to furnish its Return of Income, even if it is:

   • a newly constituted Firm which is yet to start its business, or

   • a Non-Resident Firm, or

   • a Firm which has incurred Losses, or

   • a Firm which has stopped its activities and has become a defunct Firm.

   The requirement of filing the Return of Income would apply to a Firm assessed as such under section 184 of the Act. The requirement would also apply to Firm, which is not assessed as such, on account of non-compliance with the provisions of section 184 of the Act, but which is assessed as an Association of Persons under section 185 of the Act. This aspect should be kept in mind, while filing returns for A.Y. 2005-06.

   Every person liable to file a return u/s. 139(1) shall, on or before the due date, furnish a Return of Income in the prescribed form and verified in the prescribed manner and setting forth such prescribed particulars.

   For list of prescribed Returns, refer Annexure.
    

2. Section 139(1) Provisos
   1st Proviso to section 139(1) provides that if a person is not required to furnish Return of Income under this sub-section and is residing in such area as may be specified by the Board in this behalf by Notification in the Official Gazette, shall furnish a Return by 31st October in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, if he:

   1. incurs expenditure of Rs. 50,000 or more towards consumption of electricity during the previous year, as introduced by The Finance Act, 2005 with effect from A. Y. 2006-2007; or

   2. is in occupation at any time during the previous year, 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

   3. is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle at any time during the previous year, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or

   4. has incurred expenditure for himself or any other person on travel to any foreign country at any time during the previous year; other than Bangladesh,
      Bhutan, Maldives, Nepal, Pakistan and Sri Lanka, or

   5. is the holder of a credit card at any time during the previous year, not being an "add-on" card, issued by any bank or institution; or

   6. is a member of a club at any time during the previous year, where entrance fee charged is Rs. 25,000 or more.

   A subscriber to a cellular telephone is no more required to file the Return with effect from A. Y. 2006-2007, as amended by The Finance Act, 2005, provided he is otherwise not required to file his Return.

   3rd Proviso repeats the requirement of sub-section (1) for Companies and Firms to mandatorily file Return of Income every year, irrespective of amount of Income/Loss.

   As per 4th Proviso inserted to sub-section (1) of section 139 by The Finance Act, 2005, with effect from A. Y. 2006-2007, every Individual or HUF or AOP or BOI, if his Total Income or the Total Income of any other person in respect of which he is assessable, without giving effect to section 10A or 10B or 10BA or Chapter VI-A exceeded the maximum amount which is not chargeable to Income-tax (for A. Y. 2005-2006, the said limit was Rs. 50,000 and for A. Y. 2006-2007, it is Rs. 1,00,000), 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 and verified in the prescribed manner and setting forth such other particulars as may be prescribed.

   Prior to the said amendment also, every such person had to file his Return of Income, provided his Total Income exceeded the maximum amount which was not chargeable to Income-tax, but after claiming the aforesaid exemptions and deductions.

   The said amendment can be explained with the help of an Example. An Individual, having Business Income and/or any other source of Income, has for A. Y. 2006-2007 Gross Total Income of Rs. 1,87,000. He is eligible for deduction under section 80C for Rs. 79,000 and under section 80D for Mediclaim of Rs. 10,000, aggregating Rs. 89,000. The Total Income comes to Rs. 98,000. For A. Y. 2006-2007, his Total Income, without considering the aforesaid deductions, is Rs. 1,87,000 and hence he is obliged to file his Return of Income, though his tax liability is Nil. Therefore, a person may have no liability to file a return for A.Y. 2005/06, but in view of the amendment would be required to file a return for A.Y. 2005-06.

   Explanation 2 to sub-section (1) says that "due date" for following persons is 31st October of the Assessment Year:

   1. a company; or

   2. a person (other than a company) whose Accounts are required to be audited under this Act or under any other law for the time being in force; or

   3. a working partner of a Firm whose Accounts are required to be audited under this Act or under any other law for the time being in force.

   In the case of any other Assessee, due date is 31st July of the Assessment Year.
    

3. Bulk Filing of Returns of Income: Section 139(1A)

   Any Employee may, at his option, furnish his Return of Income for any previous year to his Employer in accordance with Scheme of Bulk Filing of Returns of Income and such Employer shall furnish all Returns of Income received by him on or before the due date in such form, including on a computer readable media and manner as may be specified in that Scheme, and in such case, any Employee who has filed a Return of his Income to his Employer shall be deemed to have furnished a Return of Income under sub-section (1) and the provisions of this Act shall apply accordingly.

   For the purpose, Scheme for Bulk Filing of Returns by Salaried Employees, 2002 and Scheme for Filing of Returns by Salaried Employees through Employer, 2004 have been notified by CBDT vide Notifications dated 24.06.2002 and 12.01.2004 respectively.
    

4. Electronic Furnishing of Returns of Income: Section 139(1B)

   Without prejudice to the provisions of section 139(1), any person, including a Company, may, at his option, on or before the due date, furnish his Return of Income for any previous year in accordance with such Scheme as may be specified by the Board in this behalf by Notification in the Official Gazette and subject to such conditions as may be specified therein, in such form, including on a computer readable media and in the manner as may be specified in that Scheme, and in such case, the Return of Income furnished under such Scheme shall be deemed to be a Return furnished under section 139(1) and the provisions of this Act shall apply accordingly.

   For the purpose; Electronic Furnishing of Return of Income Scheme, 2004 and Furnishing of Return of Income on Internet Scheme, 2004 have been notified by CBDT vide same Notification dated 30.09.2004.
    

5. Electronic Furnishing of Return of Income Scheme, 2004
   The salient features of the Scheme notified by CBDT on 30-9-2004 are as under:

   1. Introduction: Under this Scheme, eligible Assessees can, at their option, file their Returns of Income electronically ("e-Return") through authorised e-Return Intermediaries ("Intermediaries").
       

   2. Eligible Assessees: An eligible Assessee may, at his option, furnish his Return of Income which he is required to furnish under sub-section (1) of section 139 of the Act for the Assessment Year 2004-05 and any subsequent Assessment Year, to an Intermediary who shall digitise the data of such Return and transmit the same electronically to a Server designated for this purpose by the e-Return Administrator, on or before the due date.
      
      An "eligible person" means a person who has been allotted a Permanent Account Number and who is assessed or assessable to tax at any of 60 cities specified in Schedule ‘A’ of the Scheme. Besides four Metropolitan cities, Thane, Pune, Nashik, Nagpur, Panaji, Ahmedabad, Baroda, Gandhinagar, Surat, Rajkot, Hyderabad and Bangalore are also included.
       

   3. Procedure for Filing of Return: An eligible person opting to file his Return of Income under this Scheme shall approach and give his consent to any Intermediary to act as his Agent for the purpose of furnishing his e-Return for the relevant Assessment Year. The Intermediary shall receive the paper Return of Income, along with all its enclosures, duly verified by the Assessee. He will then transmit the data of Return in the prescribed data structure under his Digital Signature at http://Incometaxindiaefiling.gov.in to Income Tax Department. On successful validation of data structure and PAN, the Department will issue an on-line Acknowledgement of the Return. The Intermediary will have to submit signed paper Return to the AO affixing a print out of on-line Acknowledgement within 15 days. The date of on-line Acknowledgement will be deemed to be the date of filing of the Return, provided the paper copy is submitted within 15 days.
       

   4. Revised Return of Income: An eligible person may furnish under this Scheme a revised Return of Income for any Assessment Year under section 139(5), if he has furnished a Return of Income
      for that Assessment Year under the Scheme.
       

   5. Benefits of e-Return:

      1. a. The e-Return shall be processed on priority basis.

      2. b. The refund, if any, due to the Assessee shall be either credited by the AO directly to his bank account, using the Electronic Clearing Services of the Reserve Bank of India or be directly sent to the Assessee.
          

6. Defective Return of Income: Section 139(9)
   Where the AO 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 15 days from the date of such Intimation or within such further period which, on an application made in this behalf, the AO may allow. If the defect is not rectified within the said period, notwithstanding anything contained in any other provision of the Act, the Return shall be treated as an invalid Return and the provisions of the Act shall apply as if the Assessee had failed to furnish the Return.
   
   If the Assessee rectifies the defect after the expiry of the said period but before the Assessment is made, the AO may condone the delay and treat the Return as a valid Return.
   
   For the purpose of section 139(9), a Return of Income shall be regarded as defective, unless all the following conditions are fulfilled:

   1. all the details in the Return of Income have been duly filled in,

   2. the Return is accompanied by Computation of Tax payable on the basis of the Return,

   3. the Return is accompanied by Audit Report under section 44AB and if the said Report was furnished prior to the furnishing of the Return, by a copy of said Report together with proof of furnishing the Report,

   4. the Return is accompanied by proof of all prepaid taxes, including TCS. However, the Return of Income shall not be regarded as defective if (a) a certificate for TDS was not furnished to the person furnishing his Return of Income, or (b) such certificate is produced within 2 years specified under 155(14),

   5. where regular Books of Account are maintained by the Assessee, the Return is accompanied by copies of (i) manu-facturing account, trading account, Profit & Loss Account or, as the case may be, Income & 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,

   6. where the Accounts of the Assessee have been audited, the Return is accompanied by copies of the audited Profit & Loss Account and Balance Sheet and the Audit 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,

   7. 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.
       

7. Interest for Defaults in Furnishing Return of Income under section 234A

   If Return of Income for any Assessment Year is furnished after the due date, or is not furnished, the Assessee shall be liable to pay simple Interest, with effect from 08.09.2003, @ 1.00 % per month or part of a month.

   The Interest shall be for the period commencing on the date immediately following the due date, and:

   1. where the Return is furnished after the due date, ending on the date of furnishing of the Return; or

   2. where no Return is furnished, ending on the date of completion of the assessment under section 144.

   The Interest shall be on the amount of the tax on the Total Income as determined under section 143(1) or on Regular Assessment as reduced by prepaid taxes, if any.

   The Interest payable under sub-section (1) shall be reduced by the Interest, if any, paid under section 140A towards the Interest chargeable under this section.

   Where the Return of Income is required to be furnished pursuant to a Notice under section 148 or section 153A issued after the determination of Income under section 143(1) or after the completion of an assessment under section 143(3) or section 144 or section 147 and if the same is furnished after the expiry of the time allowed under such Notice, or is not at all furnished, the Assessee shall be liable to pay simple Interest, with effect from 08.09.2003, @ 1.00% per month or part of a month.

   The Interest shall be for the period commencing on day immediately following the expiry of the time allowed as aforesaid, and:

   1. where the Return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the Return, or

   2. where no Return has been furnished, ending on the date of completion of the re-assessment or re-computation under section 147 or reassessment under section 153A.

   The Interest shall be on the amount by which the tax on the Total Income determined on the basis of such reassessment or re-computation exceeds the tax on the Total Income determined under section 143(1) or on the basis of the earlier assessment aforesaid.

   Where as a result of an Appellate Order or an order of the Settlement Commission under section 245D(4), the amount of tax on which Interest was payable under this section has been increased or reduced, as the case may be, the Interest shall be increased or reduced accordingly. Where the Interest is increased, the AO 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. Where the Interest is reduced, the excess Interest paid, if any, shall be refunded.
    

8. Penalty for Failure to Furnish Return of Income under section 271F
   If a person who is required to furnish a Return of his Income either under section 139(1) or under any of the provisos thereto fails to furnish it before the end of the relevant Assessment Year, the AO may direct that such person shall pay Rs. 5,000 as Penalty. However, as provided in section 273B, if AO is satisfied that the said failure on the part of the Assessee was for reasonable cause, he can waive the Penalty.
    

9. Penalty under section 271(1)(c) for Concealment of Income or Furnishing Inaccurate Particulars of Income

   If the AO or the CIT (Appeals) or the Commissioner in the course of any Proceedings under the Act is satisfied that any person has concealed the particulars of his Income or furnished inaccurate particulars of such Income, he may direct that such person shall, in addition to tax, pay a sum equal to three times the amount of tax sought to be evaded by reason of the concealment of particulars of his Income or the furnishing of inaccurate particulars of such Income.
    

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