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Income Tax Practical Procedures in FAQ Style

Saurabh Maheshwari 
on 06 March 2013

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Introduction:

Income Tax has always been a challenge  not only for students, professionals or for Department but also for tribunals and courts. The reason may be the vastness and depth of the provisions of law which makes it sometimes complicated. In this article I am sharing with you the some core procedures in the Income Tax law. Such procedures are returns, assessments, appeals etc. This article is meant to bring conceptual clarity in relation to such core procedures and style of writing is   FAQ one. I hope you will find the same interesting.

Q-1 Who is an assessee?

Ans- Assessee means any ‘person’ who is assessable under the Act in respect of his income and also includes a person against whom some proceedings are being going on under the I.T. Act, 1961.

Further as per sec 2(32),  ‘person’ means an individual, firm, company, HUF, Co-operative society , AOP, BOI, Artificial Juridical Person etc.

Q-2  Who is liable to file Return of Income (ROI)?

Ans-2 In case of an individual, HUF, AOP, BOI, AJP there is a liability to file a return if the Gross Total Income (and not the Total Income) exceeds the maximum amount not chargeable to tax(i.e. Basic Exemption Limit).

But in case of company  ,p’ship firm and persons whose books of accounts are subject to audit under section 44 AB of the I.T Act the filling of return is mandatory irrespective of Gross Total Income.

Q-3  Mode of Filling ROI?

Ans- The following class of persons are mandatorily/compulsorily required to file their return in electronic mode (e-filling).

Those persons are:

1. A company whether Pvt Ltd. or Ltd., whether insurance or banking or electricity or any other commercial and industrial undertaking co. . In short all type of companies are compulsorily required to file their return in electronic mode.

2. A person whose accounts are subject to audit under any law.

For Example- Registered trusts accounts are subject to audit under Bombay Trust Act. Similarly individuals and firms (w.e.f  AY 2013-14) whose turnover exceeds *Rs. 1 crore in case of business and *Rs. 25 lacs in case of a professional are required to get their accounts audited  under section 44AB of the I.T. Act,1961.

*Limit for AY 2013-14.

3. A salaried employee whose total Income exceeds Rs. 10 lacs .

Except above 3 classes of person any other person can file their return either electronically or manually as per their will .But e-filling is most advisable so as to facilitate quicker processing of the return.

Q-4 How to sign the return when filed electronically?

Ans-4 As per Sec 140 A return of Income must be signed by the concerning person, but in e-filling scenario how to comply with sec 140.

Here is the solution,

1. Persons who are required to get their accounts audited under Sec 44AB and companies are compulsorily   required to sign their return digitally using the digital signature certificate issued by authorized certifying authority (n code solutions, Tata Consultancy Services and many more….)

2. If you are not required to sign the return digitally and also don’t want to sign digitally then just file your return at https://incometaxindiaefiling.gov.in/, print the acknowledgement/receipt (from your e-filling a/c), sign it physically and send to CPC(Centralized Processing Cell), Bangalore. But you are required to send such receipt within 120 days of filling the e-return. As soon as your signed copy of acknowledgement receipt of return is received by CPC, Bangalore you will receive an sms on your mobile and also an e-mail for the same, if any provided in the return. It is important to note that those persons who have filed their return by signing digitally are not required to send the signed acknowledgement receipt because he has already signed digitally.

“If you fail to send the signed ack. receipt   , your return will not be processed and it will be deemed that you have failed to file the return.”

Q- 5 What are the due dates (i.e. without being late) for filling Ret of Income (ROI)?

Ans-5 (A) Following   persons are required to file their return on or before ‘September 30’ of the relevant AY:

1. The persons whose accounts are required to be audited under sec 44AB I.T. Act or under any other Act (say Co.Act,1956).

2. Partners of the firm if the accounts of the firm are subject to audit under sec 44AB.

3. Any person who has entered into international transactions(sec92B) with associated enterprises(sec 92A) during the FY, then the due date of furnishing ROI is Nov 30 of the AY.

(B) Persons not falling under (A) above are required to file their return on or before July 31 of the relevant AY. [**But the directors (unlike partners) of company  are required to file the ROI on or before July 31of the relevant AY even when the accounts of the co. are subject to audit under Co. Act,1956.]

Q-6 If a person who could not file his/her return on or before the above mentioned due dates, then can he/she   file after the due dates?

Ans- Yes, the belated return can be filed u/s 139(4) before the expiry of 1 year from the end of the relevant AY. For Example – Mr. Sachin could not file his   return  for AY 2012-13 before his due date which was Sept 30,2012 but he can still file his return before 31.03.2014. However Interest will be payable u/s 234A if belated return is filed if any *self assessment tax is payable by the assessee…….if no self asst. tax then no interest.

*Self Asst tax(SA tax) = Total Tax Payable –(TDS+TCS+ Adv. Tax+ MAT credit).

Q-7 I forgot to claim an expenditure from my Business Income, what to do now?

Ans- The solution is to revise the original return u/s 139(5), a return can be revised before the expiry of 1 year from the end of the relevant AY or *completion of assessment whichever is earlier(*explained later). Most important here to note that the revised return totally replace the original return and in the revised return full particulars are required to be given even if only a single point is revised.

(But revise return has its own risks because AO finds the same attractive for scrutiny but yes if you are honest tax payer then no need to be scared of this fact and revise the return without any fear)

Q-8 Can every return can be revised?

Ans -8 A BIG NO, Only a return filed on or before the due date can be revised “and belated returns cannot be revised”.(As decided in the landmark decision of Supreme Court in case of CIT vs. Kumar Jagdish Sinha)

Further, revision can be made before the expiry of 1 year from the end of the relevant AY or completion of assessment whichever is earlier.

Q- 9 What is meant by return of loss, why is it so essential to file it before due date?

Ans- Return of Loss is not a special type of return   but it is a “Return of Income which has loss under one or more head”.[Sec 139(3)]

For Example- Sun Ltd. in Ret of Income (ROI) for AY 2012-13   has shown losses under Cap. Gain and Business head….it means that company’s Return of Income is Return of Loss.

As per Sec 80 of the Act, if the assessee in the Financial Year (previous year) has incurred losses under Capital Gains or Businesss head (except unabsorbed deprec.) then “the part of losses which could not be set off cannot be carried forward to next AYs if the return of loss is not filed on or before the due date of furnishing of ROI”. It is here important to note that :

1. Even if Return of Loss is not filed on or before due date still Loss under the head House Property and Unabsorbed depreciation will be eligible to carried forward to next Asst years.

2. However Sec 80 cannot restrict the right of the assessee to carry   forward the losses of previous AYs which are b/f in current AY.

For Example- Sun Ltd. in Ret of Income (ROI) for AY 2012-13   has shown losses under Cap. Gain and Business head, also it has some b/f Business loss from Ay 2011-12. The co. could file return before 30the Sept 2012, so it cannot carry forward (the part of loss which could not be set-off ) current year Bus. and CG loss , but nobody can restrict it to c/f any part of b/f(from AY 2011-12)  business loss which could not be set off in the current year.

Q-10  Can a loss be shown in revised return when the original return was filed showing profits?

Ans-Ms. Shreya Ghosal , a professional singer,  filed her  ROI for AY 2012-13 on Sept 25,2012(due date Sept 30,2012) showing  her Total Income Rs.20 lacs consisting of:  

Income from Bus & prof.

10 lacs

Income from HP

10 lacs

Les : Deduction under chapter VI A

Nil

Total Income

20 lacs

Later on Jan 1, 2013 she recollected that a business expenditure of Rs. 25 lacs was not claimed in the

ROI filed on Sept 25,2012. She immediately revised her return u/s 139(5) as:

Now her Business Loss = Rs. 25 lacs(unclaimed  exps.)- Profit before such exps. = 25-10= 15lacs

Revised Statement of Income:

Income from Bus & prof.(loss Rs. 15 lacs)

Nil

Income from HP(after setting off Bus. loss of Rs. 10 lacs)

Nil

Les : Deduction under chapter VI A

Nil

Total Income

NIL

Business Loss to be c/f(15 lacs-10lacs)

5 lacs

Now the ques before us is that has Shreya   justified in declaring loss for the first time in revised return?

Possible Objection of the Assessing Officer:

Return of loss is required to be filed before due date of furnishing of ROI i.e. 30th Sept 2012, but since the assessee filed Ret of Loss on Jan 1,2013 he has not complied with the requirements of sec 80 and hence the current year business loss cannot be allowed to be c/forwarded.

Decision- As per ruling established by the Hon’ble Gauhati High Court in the case of Sunanda Ram Deka v. CIT [1994]-

There is no bar/restriction   in showing the loss for the first time in revised return. The revised return every time replace the original return(or the last revised return, if any) , therefore the revised return claiming loss under Buss. head  is deemed to be filed on Sept 25,2012 and as such the requirements of sec 80 is complied well.

So here the Assessing Officer cannot challenge the revised return filed by Shreya Ghosal.

Q- 11 Can a revised return be further revised?

Ans- The revised return every time replaces the original return (or the last revised return, if any).

Therefore Revised Ret = Original Ret. And Original Return can be revised obviously within time limit of Sec 139(5). Thus, a revised return can be further revised…… (Just for a joke) you can revise the same daily.

Q- 12 What is meant by Defective Return…Is defective and invalid return are same?

Ans- As per Sec 139(9), a return becomes defective when the information required to be furnished compulsorily is   not furnished. For Example: A person subject to tax audit doesn’t fill the annexure relating to Balance Sheet and P&L….but the same is compulsorily required with return, in such a case the return will be treated as defective. Another example, if ROI is not accompanied with Statement o for Computation of Total Income to be treated as defective.

(Practically the software doesn’t allow to  proceed to file return without filling annexure of P&L and B/S).

In Budget 2013, it has been proposed that a return filed without payment or short payment of SA Tax to be treated as defective.(Till today  the return filed without paying SA Tax is not treated as defective) 

A defective return becomes invalid if the defects are not corrected within the time allowed by the Assessing Officer. When return becomes invalid it is deemed that assessee has failed to furnish his return ……..therefore, the assessee may be penalized u/s 271F not exceeding Rs. 5,000. Further a return which is not signed is also treated as invalid.

Therefore, if you e-filed return without signing the return digitally then you must send the acknowledgement receipt  so as to reach CPC, Bangalore within  120 days of e-filling otherwise your return will be treated as invalid and will not be processed.

Q-13 What to do you mean by Summary Assessment?

Ans- [Sec 143(1)]

Summary Assessment is nothing but the computerized processing of returns. This assessment is not a detailed checking of return. It is just to check   arithmetical errors and any incorrect claim made by the assessee or to catch an entry which is inconsistent with other information provided in the return.

For Example- Sahkar Pharma Ltd by mistake claimed Rs. 2 Lacs as TDS instead of actual Rs. 20,000….the assessee’s wrong claim will be picked by the Processing System(obviously with the help of  26AS Tax credit statement). But let’s assume that assessee intentionally  claimed bogus expenditure of salaries Rs. 5 lacs and reduced its business income…will the Sahkar Pharma be caught …obviously no because in summary assessment  no detailed checking is made and prima facie the return is deemed to be true.

 Finally intimation u/s 143(1) is send to assessee showing(taking above example of TDS)

Particulars

As Provided By Tax payer

As calculated u/s 143(1)

Total Income(assumed)

10,00,000

10,00,000

Tax Payable

309,000

309,000

Less: Credit for :

Tax deducted at source(assumed)

200,000

20,000

Self Asst tax paid

109,000

109,000

Net Tax Payable/Demand

Nil

180,000

In case of demand, the intimation can be treated as Notice of demand under sec 156. Accordingly assessee is requested to pay the entire tax demanded within 30 days of receipt of the intimation.

If not satisfied with the demand then you may seek   rectification u/s 154 (explained in next article).  Intimation u/s 143(1) is to be send irrespective the fact that some tax is due from assessee or any refund is due to him or nothing is due from / due to assessee demand is payable. “The logic is that by receiving intimation u/s 143(1) taxpayer at least comes to know that his/her return has been processed.”  

Intimation u/s 143(1) does not make the assessment complete , i.e. Intim u/s 143(1) is not equal to completion of assessment, and revised return can be filed even after receiving the said intimation provided that the same to be in time prescribed in sec 139(5).

Q-14 What are the forms to be used for filling returns by various assessees having different combination of incomes?

Ans – Please visit the link /https://incometaxindiaefiling.gov.in/

I have lot more procedures to share with you…but at the same time don’t want to make article very lengthy so I finish my article here only and will come with scrutiny assessment procedures and appeals  in the next article.

Any sort of queries, comments and suggestions are heartily welcomed.

Thanks for reading

Saurabh Maheshwari

CRO0310510, Ahmedabad

Email:saurabhchokhra92@gmail.com


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