Section 139 of Income Tax Act 1961 - Late ITR Filing | Taxation for CA Intermediate PDF Download

Introduction

The Income Tax Department of India categorizes an individual's income into five main groups: salary, house property, business, capital gains, and other sources. Every individual earning an income is required to pay taxes to the government and must file their tax returns within a specified deadline. Section 139 of the Income Tax Act of 1961 is structured into various categories to address different types of returns, and it is crucial for every Indian citizen to adhere to these guidelines.

This section delineates the norms and regulations concerning income tax filing, encompassing various scenarios and circumstances. Let's delve into the details below.

What is Section 139(1)?

• Section 139 (1) of the Income Tax Act serves as a guideline allowing taxpayers to submit late returns if they miss the initial deadline. It includes several subsections providing a framework for rectifying delayed Income Tax Returns.

Mandatory Returns Under Section 139(1)

Section 139(1) of the income tax act outlines the compulsory return regulations for filing Income Tax Returns. The subsequent entities are obligated to file their tax returns:

• Individuals
• Hindu Undivided Families (HUFs)
• Companies
• Firms

Income Tax Return Filing Requirements

• Any individual with a total income surpassing the exemption limit must submit their income tax return by the specified deadline.
• All types of entities—private, public, domestic, or foreign—operating in or connected to India are obligated to file returns.
• This includes various types of firms such as LLPs (Limited Liability Partnerships) or ULPs (Unlimited Liability Partnerships).
• Residents possessing assets abroad or entities with authority over accounts located outside India must also file returns.
• HUFs (Hindu Undivided Families), AOPs (Association of Persons), and BOIs (Body of Individuals) need to file if their income exceeds the specified exemption limit.
• Voluntary tax returns are necessary in specific instances as mandated by tax regulations.
• Exemptions exist under Section 139(1c) for certain classes of individuals meeting specific criteria.
• The notification of such exemptions must be presented before each House of Parliament for 30 days during immediate sessions following the notification, becoming effective only upon agreement by both houses.

Filing for Income Tax in the case of a loss

When it comes to filing income tax returns after incurring a loss, certain rules apply under Section 139(3). It is highly beneficial to file for a return in the case of losses as it allows the loss to be carried forward, thereby reducing tax liability in the coming years. Let's delve into the specifics:

• Individual Taxpayer Losses: If an individual taxpayer experiences a loss in the previous financial year, filing a tax return is not obligatory. However, in cases of losses by companies and firms, filing a tax return for the loss is a requirement.
• Company Losses under Specific Heads: If a company incurs a loss under "Profits and Gains of Business and Profession" or "Capital Gains," filing a tax return becomes mandatory if the company intends to carry forward the loss and offset it against future income. This option is only available if the tax return is filed by the due date.
• Losses in "House or residential property": Losses from "House or residential property" can be carried forward even if the tax return is filed after the due date.
• Limitations on Loss Carry Forward: Except for "House and Property" losses, other losses mentioned under Section 142(1) cannot be carried forward, excluding the unabsorbed depreciation value.
• Offsetting Losses: If a loss can be offset against some income in a different category within the same year, the offset is permitted even if the return is filed after the due date.
• Carrying Forward Losses from Previous Years: Losses incurred in previous years can be carried forward if the return is filed by the due dates after evaluating the losses.

Belated Income Tax Return - u/s 139(4)

Timely Tax Return Submission

• Submitting tax returns on time, as required by Section 139(1) of the income tax act, is a crucial practice for all taxpayers, be it individuals or entities.

Opportunity for Belated Returns

• If a taxpayer misses the deadline, they can still file a belated return for previous years until the current assessment year's expiry or the conclusion of the financial year.

Penalty for Delayed Filing

• Failure to file even after the belated return option results in a penalty of 5,000 rupees under Section 271F of the IT Act, 1961.

Conditions for Penalty Avoidance

• The penalty can be avoided if the income didn't necessitate mandatory filing under Section 139(1) and the return was submitted after the original due date.

Revised Income Tax Return - u/s 139(5)

Overview of Revision Process

• The Income Tax Return can be revised under Section 139(5) if errors are found after filing.
• Revision is allowed within the assessment year or before assessment completion.

Frequency of Revision

• There is no limit to the number of times a return can be revised within the specified timeframe.
• Revisions can be made using the same form or a different one.

Procedure of Revision

• Filing a new return withdraws the original one.
• Section 139(5) is applicable for correcting omissions and errors, not intentional falsifications.
• Penalties are imposed for intentional errors or concealment.

It's important to understand that Section 139(5) of the Income Tax Act allows taxpayers to rectify unintentional mistakes in their filed returns. For instance, if a taxpayer mistakenly enters the wrong income figure, they can use this provision to correct it without facing penalties. However, deliberate attempts to conceal income or provide false information are not covered under this section and can lead to penalties. Therefore, the revision process is designed to facilitate genuine errors and ensure accurate reporting of income.

Charitable Trusts - Section 139(4a)

• Individuals may earn income from property held under legal obligations for religious or charitable purposes. This income can also stem from voluntary contributions, as mentioned in sub-section 2(24)(iia).
• When the gross total income surpasses the non-taxable threshold, individuals must file a tax return under Section 139(4A).

Political Parties - Section 139(4b)

• Political parties are required to file an Income Tax return if their total income, primarily sourced from public contributions, exceeds the tax-exempt limit.
• The responsibility of submitting the tax return lies with the Chief Executive Officer or the Secretary and must be done before the due date.

Section 10 with relation to ITR - Section 139(4c) and 139(4d)

In Section 10 of the Income Tax Act of 1961, specific institutions are eligible for benefits related to tax returns. For these institutions, Section 139(4C) and Section 139(4D) are crucial references.

Section 139(4C) pertains to institutions required to file tax returns if their income surpasses the maximum exemption limit, excluding other benefits enjoyed by the institution. The following groups and agencies fall under this category:

• Associations engaged in scientific research
• Institutions or associations under Section 10(23A)
• News agencies
• Institutions under Section 10(23B)
• Educational and Medical Institutions, Universities, and Hospitals

Section 139(4D) states that colleges, universities, and institutions are exempt from filing tax returns concerning income and loss under specific provisions, including Section 31(1)(ii) and Section 35(1)(iii) of the IT Act.

Defective Returns - Section 139(9)

A tax return can be considered defective according to Section 139(9) if essential documents are missing. The taxpayer is responsible for identifying such defects, and notification of a defective return is sent through a simple letter. A 15-day window is provided to rectify the issue by submitting the required documents. This timeframe may be extended if the taxpayer provides valid reasons for the delay. To avoid a defective status, ensure the following documents are included in your file:

• A statement detailing the calculation of taxes owed.
• The tax return filed in the prescribed format.
• Evidence supporting all tax payment claims.
• An audit report under Section 44AB, submitted prior to filing the return.
• Copies of the audit report, balance sheet, and auditor's profit and loss accounts for audited accounts.
• The relevant report for Cost Audit, if applicable.
• For taxpayers without maintained accounting books, a statement listing gross receipts, turnover, bank balances, inventory, cash, debtor/creditor details, expenses, and net profit.
• For those with maintained accounts, mandatory copies include Profit and Loss accounts, Manufacturing and Trading accounts, Balance Sheet, income and expense accounts, personal accounts of partners (for partnerships), personal accounts of members (for AOP/BOI), and proprietor's personal account.

Due Dates

Different individuals receive income through various means, and as a result, Section 139 outlines specific deadlines for filing income tax returns. These deadlines are as follows:

• July 31st: Individuals such as salaried employees, self-employed professionals, freelancers, and consultants who do not require an audit report to validate their accounts must file their tax returns by July 31 of each assessment year.
• September 30th: Business entities, self-employed professionals, and working partners in firms or consultants subject to audit requirements have until September 30th to submit their tax returns.

Form ITR 7

The form ITR 7 has been introduced by the Income Tax Department for individuals, institutions, and entities falling under specific sections of the Income Tax Act. It is crucial for those who need to file their returns under sections 139(4a), 139(4b), 139(4c), and 139(4d). Taxpayers are advised to cross-verify their tax details with Form 26AS or the Tax Credit Statement.

Filing Methods for Form ITR-7

• Paper form submission
• E-Form submission with a digital signature
• Electronic data transmission, followed by submission and verification using Form ITR-V
• Barcoded return submission

Under Section 139(4e), entities can file returns for income from business trusts that are exempted from submitting profit and loss accounts.

Recent Amendments in Section 139 of Income Tax Act

Section 139 of the Income-tax Act has been updated with the following changes:
(i) Modification in subsection (1): The phrase "provisions of section 10A" has been substituted with "provisions of clause (38) of section 10 or section 10A" starting from April 1, 2017.
(ii) Addition in subsection (3): After "sub-section (2) of section 73," the inclusion of "or sub-section (2) of section 73A" has been made.
(iii) Effective from April 1, 2017:

• (a) Replacement in subsection (4): Individuals failing to file a return within the stipulated time under sub-section (1) can submit the return for any previous year before the end of the relevant assessment year or before the assessment is completed, whichever is earlier.
• (b) Substitution in subsection (5): If an individual identifies any omission or error in the return filed under sub-section (1) or sub-section (4), they can file a revised return within one year from the end of the relevant assessment year or before the assessment is completed, whichever is earlier.
• (c) Omission in subsection (9): The removal of clause (aa) from the Explanation.

Section 1: Changes in Return Filing Procedures

• Subsection (4) Modification: Any individual who fails to submit a return within the stipulated time under sub-section (1) is now allowed to file the return for any preceding year before the culmination of the relevant assessment year or before the assessment concludes.
• Subsection (5) Amendment: If an individual, after submitting a return under sub-section (1) or sub-section (4), identifies any omission or incorrect statement, they can now submit a revised return within one year from the end of the relevant assessment year or before the assessment concludes, whichever happens earlier.
• Subsection (9) Revision: The elimination of clause (aa) from the Explanation within subsection (9).

Error Codes in Section 139 of Income Tax Act

• Error Code 14: If a taxpayer enters a negative amount in the gross profits or net profits section of the ITR, it is classified as defective.
• Error Code 8: This error occurs when an individual submits ITR-4S, even if the total presumptive income under section 44AD is below 8% of the Gross turnover.
• Error Code 31: When a taxpayer earns income from profits and gains from business/profession but fails to file a profit and loss statement, this error is triggered.
• Error Code 38: This error arises when the tax amount is determined as payable in the ITR but remains unpaid.