Return of Income and Assessment Procedure

RETURN OF INCOME

The starting point for the assessment of income is furnishing of return of income. Filing of return of income is mandatory for certain category of assessees. Incidental provisions for accompaniments to the return of income, error correction, belated returns have been made. Now filing of the return electronically has been made mandatory for certain category of assessees.

Return of income is the format in which the assessee has to furnish information as to his total income and tax payable. The format for filing of returns by different assessees is notified by the CBDT.

  [SECTION 139(1)]

(1) As per section 139(1), it is compulsory for companies and firms to file a return of income for every previous year.

(2) In case of a person other than a company or a firm, filing of return of income is mandatory, 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 exceeds the basic exemption limit.

(3) Such persons should, 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 other particulars as may be prescribed.

(4) Further, every person, being an individual or an HUF or an AOP or BOI or an artificial juridical person–
– whose total income or the total income of any other person in respect of which he is assessable under this Act during the previous year
– without giving effect to the provisions of section 10A or 10B or 10BA or Chapter VI-A – exceeded the basic exemption limit is required to file a return of his income or income of such other person

(5) For company and certain other assessees like firm having a tax audit, the filing of return in an electronic form is mandatory.(Section 139D)


Due date’ means –

(a) 30th September of the assessment year, where the assessee is –
(i) a company; or
(ii) a person (other than a company) whose accounts are required to be audited under the Income-tax Act, 1961 or any other law in force; or
(iii) a working partner of a firm whose accounts are required to be audited under the Income-tax Act, 1961 or any other law for the time being in force.
(b) 31st July of the assessment year, in the case of any assessee other than those covered in (a) above.

INTEREST FOR DEFAULT IN FURNISHING RETURN OF INCOME [SECTION 234A]

(1) Interest under section 234A is attracted where an assessee furnishes the return of income after the due date or does not furnish the return of income.

(2) The interest is payable for the period commencing from the date immediately following the due date and ending on the following dates –

When the return is furnished after due date: the date of furnishing of the return
Where no return is furnished: the date of completion of assessment

(3) The interest has to be calculated on the amount of tax on total income as determined under section 143(1) or on regular assessment as reduced by the advance tax paid and any tax deducted or collected at source.

OPTION TO FURNISH RETURN OF INCOME TO EMPLOYER [SECTION 139(1A)]

(1) This section gives an option to a person, being an individual who is in receipt of income chargeable under the head “Salaries”, to furnish a return of his income for any previous year to his employer, in accordance with such scheme as may be notified by the CBDT and subject to such conditions as may be specified therein.

(2) Such employer shall furnish all returns of income received by him on or before the due date, in such form, including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media and manner as may be specified in that scheme.




(3) In such a 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).

INCOME-TAX RETURN THROUGH COMPUTER READABLE MEDIA [SECTION 139(1B)]

(1) This sub-section enables the taxpayer to file his return of income in computer readable media, without interface with the department.

(2) Such person may, on or before the due date, furnish a return of income in accordance with such scheme as may be notified by the CBDT, in such form, including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media and manner as may be specified in that scheme.

RETURN OF LOSS [SECTION 139(3)]

(1) This section requires the assessee to file a return of loss in the same manner as in the case of return of income within the time allowed under section 139(1).

(2) Under section 80, an assessee cannot carry forward or set off his loss against income in the same or subsequent year unless he has filed a return of loss in accordance with the provisions of section 139(3).

(3) A return of loss has to be filed by the assessee in his own interest and the non-receipt of a notice from the Assessing Officer requiring him to file the return cannot be a valid excuse under any circumstances for the non-filing of such return.

(4) In particular, a return of loss must be filed by an assessee who has incurred a loss under the heads “profits and gains from business or profession”, “capital gains”, and income from the activity of owning and maintaining race horses taxable under the head “Income from other sources”.

(5) However, loss under the head “Income from house property” under section 71B and unabsorbed depreciation under section 32 can be carried forward for set-off even though the return of loss has not been filed before the due date.



BELATED RETURN [SECTION 139(4)]

(1) Any person who has not furnished a return within the time allowed to him under section 139(1) or within the time allowed under a notice issued under section 142(1) may furnish the return for any previous year at any time –

(i) before the expiry of one year from the end of the relevant assessment year; or

(ii) before the completion of the assessment, whichever is earlier.

(2) Interest is required to be paid under section 234A, as stated above.

RETURN OF INCOME OF CHARITABLE TRUSTS AND INSTITUTIONS [SECTION 139(4A)]

(1) Every person in receipt of income –

(i) derived from property held under a trust or any other legal obligation wholly or partly for a charitable or religious purpose; or

(ii) by way of voluntary contributions on behalf of such trust or institution must furnish a return of income if the total income in respect of which he is assessable as a representative assessee, computed before allowing any exemption under sections 11 and 12 exceed the basic exemption limit.

(2) Such persons should furnish the return in the prescribed form and verified in the prescribed manner containing all the particulars prescribed for this purpose.

(3) This return must be filed by the representative assessee voluntarily within the time limit. Any failure on the part of the assessee would attract liability to pay interest and penalty.

RETURN OF INCOME OF POLITICAL PARTIES [SECTION 139(4B)]

(1) Under this section, a political party is required to file a return of income if, before claiming exemption under section 13A, the party has taxable income.

(2) The grant of exemption from income-tax to any political party under section 13A is subject to the condition that the political party submits a return of its total income within the time limit prescribed under section 139(1).

(3) The chief executive officer of the political party is statutorily required to furnish a return of income of the party for the relevant assessment year, if the amount of total income of the previous year exceeds the basic exemption limit before claiming exemption under section 13A.

REVISED RETURN [SECTION 139(5)]

(1) If any person having furnished a return under section 139(1) or in pursuance of a notice issued under section 142(1), 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 completion of assessment, whichever is earlier.

(2) It may be noted that a belated return cannot be revised. It has been held in Kumar Jagdish Chandra Sinha v. CIT [1996] 86 Taxman 122 (SC) that only a return furnished under section 139(1) or in pursuance of a notice under section 142(1) can be revised. A belated return furnished under section 139(4), therefore, cannot be revised.

PARTICULARS REQUIRED TO BE FURNISHED WITH THE RETURN [SECTION 139(6)]

The prescribed form of the return shall, in certain specified cases, require the assessee to furnish the particulars of –

(i) income exempt from tax

(ii) assets of the prescribed nature and value and belonging to him

(iii) his bank account and credit card held by him

(iv) expenditure exceeding the prescribed limits incurred by him under prescribed heads

(v) such other outgoings as may be prescribed.

DEFECTIVE RETURN [SECTION 139(9)]

(1) Under this sub-section, the Assessing Officer has the power to call upon the assessee to rectify a defective return.

(2) 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 15 days from the date of such intimation. The Assessing Officer has the discretion to extend the time period beyond 15 days, on an application made by the assessee.  

(3) If the defect is not rectified within the period of 15 days or such further extended period, then the return would be treated as an invalid return. The consequential effect would be the same as if the assessee had failed to furnish the return.

(4) Where, however, the assessee rectifies the defect after the expiry of the period of 15 days or the further extended period, but before assessment is made, the Assessing Officer can condone the delay and treat the return as a valid return.

(5) A return can be treated as defective if it is nor properly filled in or the necessary enclosures are not accompanying the return.
Specific defects are only illustrative and not exhaustive – CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust 195 ITR 825.

SCHEME FOR SUBMISSION OF RETURNS THROUGH TAX RETURN PREPARERS [SECTION 139B]

(1) The Tax Return Preparer shall assist the persons furnishing the return in a manner that will be specified in the Scheme, and shall also affix his signature on such return. The “specified class or classes of persons” for this purpose means any person other than a company or a person whose accounts are required to be audited under section 44AB (tax audit) or under any other existing law, who is required to furnish a return of income under the Act.

(2) A Tax Return Preparer can be an individual, other than

(i) any officer of a scheduled bank with which the assessee maintains a current account or has other regular dealings.

(ii) any legal practitioner who is entitled to practice in any civil court in India.

(iii) a chartered accountant.

(iv) an employee of the ‘specified class or classes of persons’.

(3) The Scheme notified under the said section may provide for the following —

(i) the manner in which and the period for which the Tax Return Preparers shall be authorised,

(ii) the educational and other qualifications to be possessed, and the training and other conditions required to be fulfilled, by a person to act as a Tax Return Preparer,

(iii) the code of conduct for the Tax Return Preparers,

(iv) the duties and obligations of the Tax Return Preparers,

(v) the circumstances under which the authorisation given to a Tax Return Preparer may be withdrawn, and

(vi) any other relevant matter as may be specified by the Scheme.

PERMANENT ACCOUNT NUMBER (PAN) [SECTION 139A]

(1) Where any person in the following category has not been allotted a permanent account number (PAN), he should apply to the Assessing Officer within the prescribed time for allotment of a PAN –




(i) Every person whose total income or the total income of any other person in respect of which he is assessable under this Act during any previous year exceeded the basic exemption limit; or

(ii) Every person carrying on any business or profession whose total sales, turnover or gross receipts exceeds or is likely to exceed Rs.5 lakhs in any previous year; or

(iii) Every person who is required to furnish a return of income under section 139(4A); or

(iv) Every person, being an employer, who is required to furnish a return of fringe benefits under section 115WD [Sub-section (1)].

(2) The CBDT had introduced a new scheme of allotment of computerized 10 digit PAN. Such PAN comprises of 10 alphanumeric characters and is issued in the form of a laminated card.

(3) All persons who were allotted PAN (Old PAN) earlier and all those persons who were not so allotted but were required to apply for PAN, shall apply to the Assessing Officer for a new series PAN within specified time.

(4) Once the new series PAN is allotted to any person, the old PAN shall cease to have effect. No person who has obtained the new series PAN shall apply, obtain or process another PAN.

(5) On receipt of allotment of PAN it must be mentioned on all tax payment challans, returns, correspondence.

(6) Where TDS or TCS is made, the person from whom it is made must communicate his PAN to the person
deducting or collecting tax.

(7) Every person receiving any document relating to a transaction prescribed under clause (c) of sub-section (5) shall ensure that the permanent account number or the General Index Register Number has been duly quoted in the document.

Power of Board to dispense with furnishing documents, etc. with the return[Sec. 139C]

(1) The Board may make rules providing for a class or classes of persons who may not be required to furnish documents, statements, receipts, certificates, reports of audit or any other documents, which are otherwise under any other provisions of this Act, except section 139D, required to be furnished, along with the return but on demand to be produced before the Assessing Officer.

(2) Any rule made under the proviso to sub-section (9) of section 139 as it stood immediately before its omission by the Finance Act, 2007 shall be deemed to have been made under the provisions of this section. Filing of return in electronic from [Sec. 139D] : The Board may make rules providing for—

(a) the class or classes of persons who shall be required to furnish the return in electronic form;

(b) the form and the manner in which the return in electronic form may be furnished;

(c) the documents, statements, receipts, certificates or audited reports which may not be furnished along with the return in electronic form but shall be produced before the Assessing Officer on demand;

(d) the computer resource or the electronic record to which the return in electronic form may be transmitted.

RETURN BY WHOM TO BE SIGNED [Section 140]

  • Individual:
  1. by the individual himself;
  2. where he is absent from India, by the individual himself or by some person duly authorised by him in this behalf;
  3. where he is mentally incapacitated from attending to his affairs, by his guardian or any other person competent to act on his behalf; and
  4. 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.
  • Hindu Undivided family:

by the Karta and where the karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family

  • Company:
  1. Managing director or where for any unavoidable reason managing director is not able to sign or where there is no managing director, by any director thereof.
  • Exceptions:
  1.  where the company is being wound up : by the liquidator
  2. where the management of the company has been taken over by the Government : the principal officer thereof
  3. company is not resident in India : a person who holds a valid power of attorney
  • A Firm/Limited liability Partnership : Managing partner or where for any unavoidable reason managing partner is not able to sign and verify the return, or where there is no managing partner, by any partner thereof
  • A Local Authority : The Principal Officer thereof
  • A Political Party : The Chief Executive Officer of such party
  • Any other Association : any Member of the Association or the Principal Officer thereof
  • Any other Person : by that person or by some person competent to act on his behalf

ITR  Forms:

FormsApplicability
ITR – 1Return of Income for Individuals having salary and interest income and no other Income
ITR-2Return of income for Individuals and HUFs having income from any source except from business or profession
ITR-3Return of income for Individuals and HUFs being partners in Firms and not having Proprietary business or profession
ITR -4Return of Income for Individuals and HUFs having Proprietary business or profession.
ITR-5Combined form of Return of Income and Fringe Benefits for Firms/AOP/BOI.
ITR-6Combined Form for Return of Income and Fringe Benefits for Companies
ITR-7Combined Form For Return of Income and Fringe Benefits For Charitable/Religious Trusts, Political parties and other Non-Profit Organisations
ITR-8Stand alone form for Return of Fringe Benefits for persons who are not liable to file Return of income but are liable to file Return of Fringe-Benefits
ITR-VReturn of Income/Fringe Benefits transmitted electronically without digital signatures

SELF-ASSESSMENT TAX PAYMENT [Section 140A]

(1) Where any tax is payable on the basis of any return required to be furnished under section 115WD or section 115WH or section 139 or section 142 or section 148 or section 153A or, as the case may be, section 158BC, after taking into account taxes paid earlier the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.




(2) If assessee fails to pay the whole or any part of such tax or interest or both on self assessment, he shall be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid. Penalty can be imposed on any assessee who is in default.

Read Assessment Procedure in a separate section

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