Return of Income and Procedure of Assessment

Home   /   Return of Income and Procedure of Assessment

Table of Contents

1. Submission of Return of Income [Section 139(1)]

Section 139(1) requires that every person,—

(a) being a company or a firm; or

(b) being a person other than a company or a firm, if (i) his total income or (ii) the total income of any other person in respect of which he is assessable under the Income-tax Act, during the previous year, exceeded the maximum amount which is not chargeable to income-tax.

shall, furnish a return of his income or the income of such other person.

Such return of income must be furnished 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.

Return of Income and Procedure of Assessment
Return of Income and Procedure of Assessment

2. Due Date of furnishing Return of Income:

The return of income must be filed in a prescribed form/ specified computer readable media and verified in the prescribed manner, on or before the due date mentioned below: 

(a) where the assessee other than the assessee referred in clause (b) below is—    (i) a company; or    (ii) 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    (iii) a working partner of a firm whose accounts are required to be audited assessment year under this Act or under any other law for the time being in force, 30th November of the assessment year
(b) in case of an assessee who is required to furnish a report of chartered accountant under section 92E relating to an international transaction or specified domestic transaction,30th September of the year
(c) in case of any other assessee,31st July of the assessment year

3. Belated/ Late Return [Section 139(4)] 

Any person who has not submitted his return of income on or before the due date mentioned under section 139(1), he can still file the return of income. Such a return is called belated/late return. 

Belated return can be filed at any time: 

(a) before the end of the relevant assessment year, or 

(b) before the completion of the assessment

whichever is earlier. 

4. Revised Return [Section 139(5)] 

If an assessee, after furnishing the return of income under: 

(a) section 139(1), or 

(b) section 139(4), 

discovers any omission or any wrong statement in the return filed, he may furnish a revised return. Such revised return can be filed at any time: 

(a) before the end of the relevant assessment year, or 

(b) before the completion of the assessment

whichever is earlier.

Example:

if a return of income is filed by the assessee for the assessment year 2019-20 on 15.9.2019 and he afterwards discovers some mistake, he can file a revised return at any time upto 31.3.2020 or before the completion of the assessment,

whichever is earlier

5. Defective or Incomplete Return [Section 139(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 15 days from the date of such intimation. Such time may be extended by the Assessing Officer on an application made by the assessee.

If the defect is not rectified within 15 days, or the extended time so allowed, as the case may be, the return filed by the assessee shall be treated as invalid return and the consequences of the same will be as if no return has been filed by the assessee.

However, if the assessee rectifies the defect even after 15 days, or the extended time, but before the completion of assessment, the Assessing Officer may condone the delay and treat the return as a valid return.

6. Filing Return of Loss [Section 139(3)]

If a person has sustained a loss— 

— under the head “Profits and gains of business or profession” or 

— under the head “Capital Gains” 

— and claims that such loss or any part thereof should be carried forward under section 72 or section 73 or section 73A or section 74 or section 74A, 

then he may furnish a return of loss within the time prescribed under section 139(1) and all the provisions of this Act shall apply as if it were a return under section 139(1). 

It is not mandatory to file a return of loss (except in case of a company or a firm) as there is no taxable income. However, as already discussed under section 80 in the chapter on ‘Set off and carry forward of losses’, losses cannot be carried forward unless the return of loss is submitted on or before the due date1 mentioned under section 139(1) and it is duly assessed. If the return of loss is not submitted or is submitted after the due date, losses cannot be carried forward.

7. Return of income of Charitable Trust and Institutions [Section 139(4A)] 

Every person who is in receipt of the following income for which he is taxable must file a return of income, if  such income (computed before allowing any exemption under sections 11 and 12) exceeds the maximum amount  not chargeable to tax: 

(a) income derived from property held under trust or other legal obligation wholly for or charitable purposes  or religious purposes, or in part only for such purposes; or 

(b) income by way of voluntary contribution on behalf of such trust or institution. 

The return of income must be furnished in Form No. ITR-7 and verified in the prescribed manner containing  all the prescribed particulars. Such return of income must be furnished by the representative assessee within the  time prescribed under section 139(1). 

Due Date of Filing Return of Charitable Trust:

The due date of filing the return of income of charitable  trust shall be 30th September of the assessment year as where the income of a charitable trust, before claiming  exemption under sections 11 to 12 exceeds the maximum amount which is not chargeable to income-tax, its  accounts are required to be audited. If it does not wish to take exemption under sections 11 & 12 then the due date  shall be 31st July of the assessment year. 

8. Return of Income of Political Party [Section 139(4B)] 

The Chief Executive Officer of every political party, shall, if the total income of the political party (computed before allowing exemption under section 13A) exceeds the maximum amount not chargeable to income-tax, furnish a return of such income. It must be submitted within the time period prescribed under section 139(1). 

Some important points:

1. Political party shall not be allowed exemption under section 13A unless it furnishes a return of income for the previous year in accordance with the provisions of section 139(4B) on or before the due date under section 139. [Third proviso inserted by the Finance Act, 2017] 

2. The due date of filing of return of income in case of a political party is 30th September, if it wants to seek exemption under section 13A as in that case audit is compulsory. Otherwise the due date is 31st July. 

3. Although income of a charitable trust or a political party may be exempt but return of income must be filed if their income before claiming exemption under sections 11, 12, 13A exceeds the maximum exemption limit. 

9. Return of Income of Certain Associations and Institutions [Section 139(4C)] 

The following associations or institutions are also required to be furnish a return of income of the previous year if, before giving effect to the exemption allowed section 10, their respective income exceeds the maximum amount which is not chargeable to income-tax: 

(a) scientific research association referred to in section 10(21); 

(b) news agency referred to in section 10(22B);  

(c) association or institution referred to in section 10(23A) which are established in India having as its object the control supervision, regulation or encouragement of the profession of law, medicine, accountancy, engineering or architecture or any other notified profession; 

(ca) person referred to in section 10(23AAA) i.e. a fund established for such purpose as may be notified by the Board for the welfare of employees and their dependants; 

(e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any  university or other educational institution referred to in sub-clause (iiiab) or sub-clause (iiiad) or subclause (vi) or any hospital or other medical institution referred to in sub-clause (iiiac) orsub-clause (iiiae)  or sub-clause (via) of clause (23C) of section 10;

(ea) Mutual Fund referred to in section 10 (23D); 

(eb) Securitisation trust referred to in section 10(23DA); 

(eba) Investor Protection Fund referred to in section 10(23EC) or (23ED); 

(ebb) Core Settlement Guarantee Fund referred to in section 10(23EE); 

(ec) venture capital company or venture capital fund referred to in section 10(23FB); 

(f) trade union referred to in sub-clause (a) or association of trade unions referred to in section 10(24)(b); 

(fa) Board or Authority referred to in section 10(29A); 

(g) body or authority or Board or Trust or Commission (by whatever name called) referred to in section  10(46); 

(h) infrastructure debt fund referred to in section 10(47), 

Such assessee shall file the return of income in the prescribed form and verified in the prescribed manner and  setting forth such other particulars as may be prescribed and all the provisions of the Act shall apply as if it was a  return required to be furnished under section 139(1). 

10. Return of Income/Loss of Certain University or College, etc. [Section 139(4D)] 

Every university, college or other institution referred to in section 35(1)(ii) and (iii) i.e. institutions accepting  donations for scientific research or social or statistical research, which is not required to furnish return of income  or loss under any other provision of this section, shall furnish the return in respect of its income or loss in every  previous year 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 section 139(1).

11. Return of Income of Business Trusts [Section 139(4E)] 

Every business trust, which is not required to furnish return of income or loss under any other provisions of  this section, shall furnish the return of its income in respect of its income or loss in every previous year and all the  provisions of this Act shall, so far as may be, apply if it were a return required to be furnished under section  139(1). 

12. Return of Income of Investment Fund referred to in Section 115UB [Section 139(4F)] 

Every investment fund referred to in section 115UB, which is not required to furnish return of income or loss  under any other provisions of this section, shall furnish the return of income in respect of its income or loss in  every previous year 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 section 139(1).

13. Return of Income by Whom to be Verified (Section-140)

The Return of Income under Section 139 shall be verified:

(1) in the case of an ‘Individual’ —

  1. by the individual himself; or
  2. where he is absent from India, by the individual himself or by some person duly authorised by him on his behalf; or
  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 verify the return, by any person duly authorised by him in this behalf.

In case of (ii) and (iv) above, the person verifying the return should hold a valid power of attorney from the individual to do so, which shall be attached to the return.

(2) in the case of a ‘Hindu Undivided Family (HUF)’—

only by the Karta. However, in the following two cases it can be verified by any other adult member of the family:

  1. where the Karta is absent from India; or
  2. where the Karta is mentally incapacitated from attending to his affairs;

(3) in the case of a ‘Company’ —

  1. by the managing director thereof, or
  2. where for any unavoidable reason such managing director is not able to verify the return, or where there is no managing director, by any director thereof or
  3. in the case of a company being wound up, by the liquidator or
  4. in case of a company whose management has been taken over by the Central Government or the State Government, by the Principal Officer thereof.

However, if the company is non-resident in India, the return may be verified by a person who holds a valid power of attorney from such company to do so;

(4) in the case of a ‘Firm’ —

  1. by the managing partner thereof, or
  2. where for any unavoidable reason, such managing partner is not able to verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor;

(5) in the case of a ‘Limited Liability Partnership (LLP)’—

by the designated partner thereof or where for any unavoidable reason such designated partner is not able to verify the return or where there is no designated partner as such, by any partner thereof;

(6) in the case of a ‘Local Authority (LA)’—

by the principal officer thereof;

(7) in the case of a ‘Political Party (PP)’—

by the chief executive officer of such party (whether such Chief Executive Officer is known as Secretary or by any other designation);

(8) in the case of ‘Any Other Association (AOA)’—

by any member of the association or the principal officer;

(9) in the case of ‘Any Other Person (AOP)’—

  1. by that person or
  2. by some person competent to act on his behalf.

14. Processing of Return of Income/Loss [Section 143(1)]

Where any return has been made under section 139 or in response to a notice under section 142(1), such return shall be processed by the Assessing Officer/Centralised Processing Unit in the following manner: 

  1. The total income or loss shall be computed after making the following adjustments, namely: 
    1. any arithmetic error in the return; 
    2. an incorrect claim, if such incorrect claim is apparent from any information in the return; 
    3. disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under section 139(1); 
    4. disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; 
    5. disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under section 139(1);
    6. addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: 
  2. However, no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018. 
  3. The tax and interest, if any, shall be computed on the basis of total income computed after making above adjustment. 
  4. The sum payable by or the amount of refund due to the assessee shall be determined after giving credit of the following: 
    1. tax deducted at source or any tax collected at source
    2. any advance tax paid. 
    3. any relief of tax allowed under sections 90, 90A and 91. 
    4. any tax paid on self-assessment
  5. An intimation shall be prepared or generated and sent to the assessee specifying the sum payable or the refund due to the assessee. 
  6. Initiation will also have to be sent if loss declared in the return is adjusted although no tax or interest is due to or refundable to the assessee. 
  7. Refund due to the assessee shall be granted to the assessee. 
  8. No intimation will be sent after the expiry of one year from the end of the financial year in which return is made. 
  9. The processing of return under section 143(1) will not be necessary in case where notice under section 143(2) has already been issued for scrutiny of return. However, such return shall be processed before the issuance of an order under section 143(3). 
  10. No intimation will be sent if neither tax is due nor any refund is due to the assessee. The acknowledgement of the return shall be treated as deemed intimation.

15. Self-Assessment of Income (Section-140A)

1. Provisions of Section 140A of Self-Assessment

The provisions of section 140A are given below—

1. Every person, before submitting a Return of Income under:

  • Section 139 or
  • Section 142(1) or
  • Section 148 or
  • Section 153A,

is under an obligation to make a self-assessment of his income and after taking in account the amount of tax, if any, already paid, pay the self-assessment tax, if due.

The assessee shall be liable to pay such tax together with interest and fee payable for any delay in furnishing the return or any default or delay in payment of advance tax.

2. Before submitting the aforesaid return, he is supposed to find out whether any tax and/or interest and/or fee is payable. For this purpose, tax and/or interest and/or fee shall be calculated as follows:

Self-Assessment-Calculation

3. Self-assessment tax so determined shall be deposited by the assessee before submitting return of income. From April 1, 2008, all corporate assessees and other assessees (who are subject to compulsory audit under section 44AB) will have to make electronic payment of tax through internet banking facility offered by authorized banks. Alternatively, these taxpayers can make electronic payment of tax through internet by way of credit or debit cards.

4. The proof of deposit should be submitted along with the return of income (i.e., BSR code of bank, Serial No. of challan, amount of deposit and date of deposit).

5. Where the amount paid by the assessee falls short of the aggregate of tax, interest and fee, as determined above, the amount so paid shall first be adjusted towards interest and fee payable and the balance, if any, shall be adjusted towards tax payable.

2. Procedure for Self-Assessment and Determination of Tax Liability of Self-Assessment:

(A) Tax Liability of Self-Assessment

Determination of the tax liability of self-assessment tax of return of income is explained in the following steps:

  1. Compute the total income;
  2. Calculate the tax payable on the total income at the rates in force;
  3. Add surcharge, if applicable, on tax computed;
  4. Add Health and Education Cess @ 4% ;
  5. From the tax payable, calculated under step (4), deduct the following:
    1. the amount of tax, if any, already paid under any provision of this Act e.g. advance tax
    2. any tax deducted or collected at source; and 
    3. any relief of tax under section 89;
    4. any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a  country outside India; 
    5. any relief of tax claimed under section 90A on account of tax paid in any specified territory outside  India referred to in that section; 
    6. any tax credit claimed to be set off in accordance with the provisions of section 115JAA (MAT  credit) or section 115JD (AMT credit); 
  6. Add interest and fee payable for the following to the Net-tax calculated at step (v): 
    1. Interest for late filing of return under section 234A computed on the amount of the tax on the total  income as declared in the return as reduced by the amount of— 
      1. Advance tax, if any paid 
      2. Tax deducted/collected at source 
      3. Any relief of tax allowed under section 89 
      4. Any relief/deduction of tax allowed under sections 90, 90A and 91
      5. Any tax credit allowed to be set off in accordance with the provisions of section 115JAA (MAT  credit) or section 115JD (AMT credit) 
    2. Interest for default in payment of advance tax under section 234B computed on amount equal to the  assessed tax or the case may be, on the amount by which the advance tax paid falls short of assessed  tax. For meaning of assessed tax see point 2 in box; 
    3. Interest for deferment of advance tax (under section 234C); 
    4. fee for delay in furnishing of return of income as prescribed under section 234F (applicable for return  of income furnished for the assessment year commencing on or after 1.4.2018). 
  7. The above tax, interest and fee payable should be paid as self-assessment tax before filing the return of  income.

(B) Procedure of Self-Assessment Tax of Return

After submission of return of income by the assessee to the Income-tax Department, the process of assessment commences. In some cases, the assessment may be taken up by the Assessing Officer, even though the return of income is not submitted, although the assessee was required to do so. The Assessing Officer can make the assessment in any of the following ways:

(i) Summary Assessment/ Pprocessing of return to determine tax payable or refundableOn the basis of the return of income [u/s 143(1)].
(ii) Scrutiny AssessmentOn the basis of return of income and hearing further additional evidence [u/s 143(3)].
(iii) Best Judgment AssessmentUnder section 144

(C) Best Judgment Assessment [Section 144] 

The Assessing Office shall make an assessment of the total income or loss to the best of his judgement and  determine the tax payable by the assessee, if any person: 

(a) fails to make return under section 139. 

(b) fails to comply with the notice issued under section 142 to file return of income or produce books of  account or furnish such information as required by the Assessing Officer. 

(c) fails to get his accounts audited if directed by the Assessing Officer. 

(d) fails to comply with all the terms of a notice issued under section 143(2).

Tags

Categories

Archives

Translate:

Translate »