Not filing your income tax returns can lead to prosecution, even if you are entitled to a refund. In a recent decision, the Delhi High Court (HC) held the prosecution proceeding stands committed upon non-filing of income tax return within the prescribed due date under section 139 (1) of the Income-Tax Act.
An individual taxpayer had failed to file his income tax return for the Assessment Year (AY) 2003-04 to 2005-06 within the time stipulated under section 139 (1) of the Act.
In addition, he failed to abide by the notices issued under Section 142 (1) (requiring a taxpayer to furnish tax return and certain other information) for non-filing of returns. The assessing officer initiated the prosecution proceedings against the taxpayer as punishable under Section 276CC.
After the lower court ruled against the taxpayer, he went to the high court. The taxpayer said in relation to AY 2004-05 and AY 2005-06, there was no tax due. Instead, he said he paid more tax than he was supposed to and would have got a refund.
The Delhi HC relied on the ruling passed by the Supreme Court in the case of Sasi Enterprises in which it was held prosecution proceedings under Section 276CC stands committed upon failure to file the Income tax return.
The Delhi HC also noted that the taxpayer had disobeyed section 139 (1) of the Act by failing to file the return of income and had not complied with the notices. The Delhi HC, therefore, upheld the orders passed by lower courts.
"Considering the government’s increased focus on compliances, it is important for taxpayers to file their tax return within the prescribed due dates. Where the tax authorities detected and initiated prosecution proceedings, the claim of beneficial provision that the taxpayer cannot be prosecuted when the tax due is not more than Rs 3,000 will not come to the rescue of the taxpayer,” says Kuldip Kumar, partner and leader, personal tax, PwC India.
Tax experts say non-filing of return can lead to prosecution unless a belated return has been filed before detection by the tax authorities. Also, if you have not filed your returns, and there’s a notice, ensure that you respond to the notice in time. The failure to respond to the notice can have consequences.
Under the Section 276CC, if the taxpayer does not file return and fails to respond to income tax notice, he can be imprisoned for three months and up to seven years, depending on the case made against him.
The government has also hiked the penalty for belated filing from this assessment year. Filing your return post the deadline can make you liable to pay a maximum penalty of Rs 10,000.
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If you are late but are still filing the return before December of this year (2018), a penalty of Rs 5,000 will be levied. For returns filed after December 2018, penalty limit will be increased to Rs 10,000. As a relief to small taxpayers, the I-T department has stated that if your total income is not more than Rs 500,000, the maximum penalty levied for delay will only be Rs 1,000.