Filing of Return of Income – Section 139

1. What is section 139 of the Income Tax Act, 1961?

• Section 139 of the Income Tax Act, 1961 contains provisions relating to filing of return of income and related requirements.

2. Who are mandatorily required to file a return of income under section 139(1)?

• The following persons are mandatorily required to file their return of income as per section 139(1):
  • Companies and firms
  • Any person other than companies or firms having a total income exceeding the basic exemption limit before giving effect to the provisions of Chapter VI A, section 10(38), 10A, 10B, 10BA, or exemption under section 54, 54B, 54D, 54EC or 54F.
  • Any person who undertakes the following transactions during the previous year:
    • Has deposited an amount exceeding 1 crore in one or more current accounts with a bank or a co-operative bank.
    • Has incurred expenditure for travel to a foreign country exceeding 2 lakhs for himself or for any other person. (refer FAQ no 3)
    • Has incurred expenditure exceeding 1 lakh towards consumption of electricity.

• Any person who holds as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India.
• Any person who is a beneficiary of any asset (including any financial interest in any entity) located outside India.

3. Countries excluded from the scope of expenditure relating to travel to a foreign country

• Neighbouring countries
• Places of pilgrimage as maybe notified by the government for this purpose.

4. Who is a beneficial owner of an asset as per section 139(1)?

• Beneficial owner is any individual who has provided directly or indirectly consideration for an asset for the immediate or future benefit of himself or any other person.

5. Who is a beneficiary of an asset as per section 139(1)?

• Beneficiary is any individual who derives the benefit from the asset during the previous year and the consideration for such an asset has been provided by any person other than such beneficiary.

6. What are the due dates for filing return of income under section 139(1)?

7. What is section 139(3)?

• Section 139(3) of the Income Tax Act, 1961 contains provisions relating to filing of return of income in cases of loss.
• As per section 139(3) any loss suffered by the assessee under the heads PGBP (Profits or gains from business or profession) or capital gain cannot be carried forward to the subsequent years if the return of income has not been furnished within the due date as specified in 139(1). (Refer FAQ no 6).
• However, the same does not apply to loss from house property which can be carried forward even if the return of income is no filed within the due date.

8. What are the types of losses that can be carried forward only when the return of income is filed on or before the due date?

• The following losses can be carried forward only when the return of income is filed before due date
  1. Business loss under section 72(1)
  2. Speculation business loss under section 73(2)
  3. Specified business loss under section 73A (2)
  4. Loss under the head “Capital gains” under section 74(1)
  5. Loss from the activity of owning and maintaining horse under section 74A(3).

9. What are the losses that can be carried forward even when the loss return is filed after the due date?

• House property loss and unabsorbed depreciation (as per section 32) can be carried forward and set off even when the return of Income is filed after the due date.

10. Can a assessee file a return of income after the due date?

• When a person fails to furnish his return on time i.e. within the period allowed under section 139(1) he may file a belated return as per section 139(4) at any time,
  1. Before 3 months prior to the end of the relevant assessment year or
  2. Before Completion of the Assessment

Whichever is earlier.

11. What are the consequences of filing a belated return under section 139(4)?

• If the assessee fails to furnish his return within the prescribed time allowed under section 139(1), the assessee shall be liable to pay
  1. Interest at the rate of 1% per month or part of a month on the tax due as per section 234A.
  2. Late filing fees of Rs.5000 as per section 234F.

Note: Late filing fees shall be limited to Rs.1000 if the total income of the person does not exceed Rs.5 lakh.

12. What is a Revised return? What is the due date of filing a Revised return as per section 139(5)?

• A Revised return is filed by an assessee if he discovers any omission or wrong statement in the return filed under section 139(1) or under section 139(4).

A revised return can be filed at any time-

• Before 3 months prior to the end of the relevant assessment year or
• Before Completion of the assessment

Whichever is earlier.

13. Can a belated return filed under section 139(4) be revised under section 139(5) of Income Tax Act?

• Yes, a belated return filed under section 139(4) can be revised under section 139(5) of Income Tax Act.

14. Can a return revised under section 139(5) be revised again?

• Yes, a return can be revised any number of times within the specified time limit (Refer FAQ no 12 for the time limit).

15. When is a return considered to be defective as per section 139(9)?

A return is considered to be defective in the following cases:

• Annexures, Statement and columns in the return of income have not been duly filled in or
• The Return is not accompanied by the required general and specific details.

16. What are the general and specific details to be disclosed by an assessee in the absence of which a return would be considered as defective as per section 139(9)?

General details:

• Statement showing computation of tax
• Audit Report under section 44AB
• Proof of payment of tax collected in respect of TDS, TCS, advance tax or self-assessment tax.
• Proof of compulsory deposit made under the Compulsory Deposit Scheme
• Audited financial statements and audit report

 Specific details:

• Where regular books of accounts are maintained by the assessee:
  1. Copies of manufacturing account, trading account, P&L a/c or Income and Expenditure account or any other similar account and balance sheet.
  2. In case of proprietary business -Personal account of proprietor
  3. In case of a firm/AOP/BOI- Personal accounts of partners or members
• Where regular books of accounts are not maintained by the assessee:
  1. Statement indicating the turnover, gross receipts, gross profit, expenses and net profit of the business or profession and basis of such computation.
  2. Statement of debtors, creditors, stock-in-trade and cash balance as at the end of previous year.

17. What is the action taken by an AO in case of a defective return?

• Where a return is found to be defective, the Assessing Officer shall intimate such defect to the assessee.
• The assessee should rectify such defect within 15 days from such intimation. However, this period can further be extended on the application made by the assessee.
• If the assesse fails to rectify the defect within the time allowed by the AO, the return shall be considered as a invalid return.

18. What is an Updated return?

• If an assessee fails to furnish a return under section 139(1) or section 139(4) or section 139(5) for an assessment year, he can furnish an updated return of income (as per section 139(8A)) within 24 months from the end of the relevant assessment year.

Note: An assessee can furnish an updated return only once for an assessment year.

19. What are the circumstances in which an updated return cannot be furnished by an assessee?

• An updated return cannot be filed by an assessee in the following cases:
  1. Where the updated return is a return of loss.
  2. Where the return has the effect of reducing the tax liability declared in his original/belated/revised return.
  3. Where the updated return results in refund or increase of refund.

In short, an updated return can be filed by an assessee to disclose any additional income and pay additional tax on it. It cannot be furnished to reduce the tax liability of the assessee or increase the refund due.

20. Is there are penalty or late filing fee for filing updated return?

• The additional tax is based on the regular tax and interest amount.
• If there is no tax or interest during filing of the updated return, no additional tax needs to be paid,
• In other cases,
  1. If the updated return is filed by an assessee within 12 months from the end of the relevant assessment year
     • Additional tax = 25% (Regular tax + Interest)
  2. If the updated return is filed by an assessee after the expiry of 12 months but before the completion of 24 months from the end of the relevant assessment year
     • Additional tax = 50% (Regular tax + Interest)

21. What is the difference between a Revised return or Updated return?

• A Revised return can be filed any number of times by the assessee within the prescribed time, whereas an updated return can be furnished only once for an assessment year.
• A Revised return can be furnished without any payment of additional tax whereas an updated return attracts additional tax under section 140B.
• An Updated return cannot be filed by an assessee for claiming any refund or to reduce any tax liability, whereas a revised return has no such restrictions.