What Can Be Consequences For Filing Late Return?

What are the penalties for filling late I.T. Return i.e. after 31 Oct. 07 in case of HUF firm with turnover of 4 crores. Raj Sharma

Actually , a person who has no tax liability as on the last day of an assessment year can file return up to 31st March of the assessment year concerned without any kind of penalty proceedings. As in your case, there is no penalty upto 31/3/2008 for filing return for Asst Yr 2007-08.But late filing of return may create following problems depending upon situation

• The interest u/s 234A @ 1 may be imposed if there remains tax outstanding at the time of processing u/s 143(1). The provision us/ 234A is as under
  

"234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,

(a) where the return is furnished after the due date, ending on the date of furnishing of the return; or....."

• The unadjusted loss of the year if any which should have been carried forward may not be allowed to be carried forward as per section 139(3) read with section 80 of the I T Act.which is as under
  

"80. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139, shall be carried forward and set off ...............

Section 139(3) says " If any person who has sustained a loss in any previous year under the head Profits and gains of business or profession or under the head Capital gains and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, or sub- section (1) or sub-section (3) of section 74, or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1) , a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1)."

Another Important Point

Since , your turnover is 4 crores , you will have get your accounts audited u/s 44AB of the I T Act. Remember, from assessment year 2007-08 , there is no provision for enclosing the tax audit report with the return , but still you must get your accounts audited and tax audited by 31/10/2007 , otherwise penalty @ .5 % of 4 Crores (2 lakhs) may be imposed on you u/s 271B of the I T Act. which says as under;

271B. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less.

Penalty u/s 271F

The last date of filing a return is one year from the end of assessment year. This is called late filing of return . But A.O may initiate penalty proceeding u/s 271 F for filing return late after 31st March. The maximum penalty is Rs 5000. For example, you can file return up to 31/3/2009 for assessment year 2007-08 .But after 1/4/2008 , A.O may initiate proceeding u/s 271F for imposition of penalty of Rs 5000 for late filing of return.

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Who Are Required to Maintain Books of Accounts ?

Section 44AA along with Rule 6F states

1. Legal,Medical,Architectural,Engineering,Accountancy,Technical Consultancy,Interior Decoration,Authrised Representative before Tribunal ,Film Artist,Company Secretary and Information Technology professionals having gross receipts of Rs 1,50,000 per annum in any one of the three years immediately preceding the previous year.
2. Anyone carrying business or profession , other than 1 above , if total income from business or profession exceeds Rs 1,20,000 or total sales /gross receipt is above Rs 10 Lacs in any one of the three years immediately preceding the previous year.
3. Those persons who avail of Estimated Income Scheme under Section 44AD to 44AE are also required to maintain books of accounts if the profit is shown less than the stipulated under the relevant provision.

Which books ?

Rule 6F prescribes types of books and other documents to be maintained . But the rule provides for specific books only for professionals referred above in point 1. No books of accounts have been prescribed for businesses other than professionals. For persons carrying on business other than professions referred above, the books and other documents are to be maintained so as the A.O is in position to compute his/her/its total income.

For professionals , following books have been prescribed by Rule 6F:

• Cash Book
• Journal , if mercantile system of accounting is followed.
• Ledger
• Carbon copies of bills
• Original bills for expenses exceeding Rs 50

Persons carrying on medical professions have to maintain additional books as under

• (i) a daily case register in Form No. 3C;
• (ii) an inventory under broad heads,as on the first and the last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.

How Long Books To Be Kept
These books have to be kept for six years and as per Rule 6F ,these books have to be necessarily to be kept at the place where profession is carried.

What happens if the books are not maintained?

A penalty of Rs 25,000 can be imposed u/s 271A by the A.O or CIT(A).

Tags: Penalty, Books of Accounts

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A.O Not Empowered to Issue Penalty Notice u/s 271D or 271E.

Advanced Topic
One of my assessees, because of certain business urgencies, accepted a loan in excess of Rs. 20000/- in cash from one known lady [ who is also not an income tax assessee so far] during the previous year 2005-06.Now the AO has issued one show cause notice u/s. 271D in this connection.Learned members may guide me in this matter along with suitable citation of jurisdictional pronouncements, if any, in this regard.

CA SRINIVASAN RM

There are two issues arising from your question :
1. Who can issue a notice initiating penalty u/s 271D of the I T Act.
2.Whether the facts of case shows that the contravention of section 269SS was deliberate and for concealing the income or evading tax.

I feel the A.O has no power to initiate penalty proceeding u/s 271D for simple reason that he is not an authority for IMPOSING penalty. This is unlike other penalty proceeding u/s 271(1)......(b) or (c) . In those cases , not only that the penalty proceeding should emanate from assessment proceeding, but the penalty is imposed by A.O, although approval is required. In case of 271D or 271E, the power to IMPOSE penalty is vested in JCIT/Add.CIT . Hence , he is the authority to be satisfied that the violation is worth an initiation of penalty proceeding.Then That penalty authority shall hear the case and dispose of the proceeding. You should carefully read the order of Tribunal ,Chandigarh in case of Dewan Chand Amrit Lal v. Deputy Commissioner of Income-tax 98 ITD 200[2006]

• "The authority to impose the penalty under these provisions is the Dy. CIT (now Joint CIT). When the Assessing Officer does not have jurisdiction either to initiate or impose penalty under section 271D or 271E, a notice issued by him for making inquiries relating to the contravention of section 269SS or section 269T cannot be construed to be initiation of penalty proceedings by the competent authority. We would like to make it abundantly clear that even if a show-cause notice is issued by the Assessing Officer for imposition of penalty under section 271D or under section 271E that notice would be without any jurisdiction as the Assessing Officer has no authority under law either to initiate or impose the penalty under section 271D or under section 271E. We are, therefore, of the considered view that in the present appeals, at the relevant point of time, the DC1T had the jurisdiction to initiate and impose the penalty under section 271D and, therefore, the limitation under section 275(1)(c) has got to be computed form the date of initiation by the DCIT"

The second issue is of facts. If facts can be brought on record that there indeed was exigency and that no finding whatsoever was there that the said cash received was related to unaccounted income of the assessee . CBDTs Circular No. 387 dated 6-7-1984 is important for buttressing the point why such provision was brought in the Act.Relevant portion of extract is given as under:

• "(xxiv) Prohibition against taking or accepting certain loans and deposits in cash.32.1. Unaccounted cash found in the course of searches carried out by the Income-tax Department is often explained by taxpayers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought into the books of account in the form of such loans and deposits, and taxpayers are also able to get confirmatory letters from such persons in support of their explanation.

• "32.2 With a view to countering this device, which enables taxpayers to explain away unaccounted cash or unaccounted deposits, the Finance Act, 1984, has inserted a new section 269SS in the Income-tax Act debarring persons from taking or accepting, after 30-6-1984, from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan and deposit is Rs. 10,000 or more. This prohibition will also apply in cases where on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), and the amount or the aggregate amount remaining unpaid is Rs. 10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken is Rs. 10,000 or more.

Similarly Section 269T which was introduced much before Section 269SS by the Income-tax (Second Amendment Act), 1981 (38 of 1981) w.e.f. 11-7-1981. While explaining the objects for incorporation of section 269T, the CBDT in Circular No. 345, dated 28-6-1982 indicated as under :

• 2.1 The proliferation of black money poses a serious threat to the national economy and it was considered necessary to take effective steps to contain and counter this major economic evil. The Government have, in recent past, taken several legislative and administrative measures to unearth black money. The Income-tax (Second Amendment) Act, 1981 (hereinafter referred to as the Amending Act) represents another step in the same direction.
• 2.2 It came to Governments notice that a substantial amount of black money was deposited by tax evaders with banks, companies, co-operative societies and partnership firms either in their own names or in benami names. The Income-tax (Second Amendment) Act, 1981, seeks to counter attempts to circulate black money in this manner."

Even Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 where it has been held that penalty is not to be imposed merely because it is lawful to do so and that it should not be imposed if there is only a technical or venial breach of law.

There are favourable judgment of High Courts and tribunal . You may search for those. In my view ,Rajasthan High Court's decision is very much applicable in your case. In case of Commissioner of Income-tax v. Manoj Lalwani [2003] 260 ITR 590 (Raj)the Hon'ble High court held

• "In the present case the Tribunal has found that the assessee is an exporter and was in urgent need of the money for complying with the time bound supplies and, therefore, he took a loan of Rs. 2,50,000 (Rs. two lac fifty thousand) from his brother-in-law Mukesh Manwani. Out of the loan so taken, an amount of Rs. 2,45,000 (Rs. two lac forty-five thousand) was immediately deposited in the Bank, which indicates that the amount of loan, in fact, was received by him from Mukesh Manwani. It was only to meet the emergent need of time bound supplies; the loan was taken as he did not have sufficient time and funds and, that there was no intention to violate the provision of section 269SS of the Act of 1961. The Tribunal, in these circumstances, has arrived at a conclusion that the cash loan was taken by the assessee in the exceptional circumstances and that it is a case of reasonable cause, as a consequence thereof set aside the penalty imposed by the revenue authorities. As we have already held that on a reasonable cause being shown, the assessing authority has jurisdiction not to impose the penalty and, therefore, in our opinion, the Tribunal has acted in accordance with the law in waiving the penalty imposed on the assessee by the revenue authorities."

Further Supreme Court's decison in the case ADI v. Kum. A.B. Shanti [2002] 122 Taxman 574. is an important to understand that the provision contained in the Act that no penalty can be imposed unless assessee is given an opportunity to explain , means that if he explains properly, penalty may not be imposed .The Apex court held as under :

• "It is important to note that another provision, namely, section 273B was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B. If there is a genuine and bona fide transaction and if for any reason the taxpayer cannot get a loan or deposit by account payee cheque or demand draft for some reasons, the authority vested with the power to impose penalty has got discretionary power."

Therefore ,facts need to bring forth to buttress the point that there was neither any black money i.e unaccounted money involved nor the loan was taken in normal circumstances.

Tags: india, penalty, income tax

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