Date Extension Tug Of War

CA Prarthana Jalan has pointed out that it has become an annual ritual for taxpayers and the CBDT to indulge in a “tug of war” for extension of the due date for filing the returns of income. She explains that this sorry state of affairs is because the CBDT invariably delays issuing the relevant ITR Forms and other utilities necessary for filing the returns. The result of the delay by the CBDT is that the taxpayers are deprived of the time contemplated by the statute for preparing the return. The author has pleaded with the CBDT to rise above petty considerations and magnanimously extend the due date without waiting till the 11th hour to do so

Every year’s date extension Tug of War has started between CA’s, lawyers, tax practitioners, trade associations, tax payers on one side and CBDT on another side. Though this time because of new amendments made in Income Tax Act particularly compulsory levy of Fees u/s 234F (though how far it is justified coupled with interest u/s 234A would surely be decided by Hon’ble Courts in the near future) ranging from Rs 1,000/- to 10,000/- for filing of return after due date, the date extension tug of war has started in the July month itself instead of September.

The Tug of war becomes so interesting that even E-fling website takes leave (crashes/goes into maintenance/slows down/unable to handle the load) to witness it.There are representations/tweets from the return filers side in favour of extension and there are press releases from the side of CBDT against the same. Social media gets flooded with all sorts of messages/rumours regarding date extension.

But, this time CBDT should most respectfully, instead of giving reasons of not extending the date because of revenue loss/delay in time for scrutinising returns, in-efficiency of professionals/taxpayers should suo-motto and well in advance extended the 31st July date/30th September date and should not repeat its habit of doing it at fag end of 31ST July/30th September or may be on 1st August/1st October or thereafter and should also re-consider the dates of sec 139(1) keeping the present scenario in mind.

In the year 2015, various High Courts across the country had acted as referee in the date extension Tug of war on account of various writs filed.
Hon’ble Delhi High Court in the case of AVINASH GUPTA Versus UNION OF INDIA & ORS had held as under:-

“……There appears to be no justification for delay beyond the assessment year in prescribing the said forms. Accordingly, though not granting any relief to the petitioner for the current assessment year, the respondents are directed to, with effect from the next assessment year, at least ensure that the forms etc. which are to be prescribed for the Audit Report and for filing the ITR are available as on 1st April of the assessment year unless there is a valid reason therefor and which should be recorded in writing by the respondents themselves, without waiting for any representations to be made. The respondents, while doing so, to also take a decision whether owing thereto any extension of the due date is required to be prescribed and accordingly notify the public.”

Thus, to meet the justice CBDT was directed to issue all the ITR Forms/Utility/Tax Audit Report on 1st April of the relevant Assessment year and reason for delay should be recorded in writing without waiting for any representation.

But this year CBDT had notified ITR Forms vide Notification No. 16/2018-dated 3rd April 2018. As per the Income Tax Efiling website itself- Schema of ITR 1 was released on 14th April,2018, ITR-2 on 15th May, ITR-3 on 18th May, ITR-4 on 10th May, ITR-5 on 21st May, ITR-6 on 26th May and ITR -7 on 27th May (original dates and not updated dates). Excel,Java utilities were issued separately. The last updated dates of excel, java and schema is 13th July, 2018 as on date of penning down of this article and many more updations would surely follow.

The due date mentioned in sec 139(1) itself gives 4 months to non-audit assessee’s to file returns and 6 months for audit assessee’s to file return. These dates were fixed giving stipulated time to the assessee’s for preparing and furnishing their return of Income and audit report. But, practically does the assesse really get 4 months or 6 months?

Till 31st May the TDS returns are filed and till first week of June does form 26AS gets updated, provided no technical or human error is there in feeding of TDS entries and the TDS returns have been filed. Salary class mostly gets Form 16 till June itself.So it is from June that proper filing happens.Till last year the returns of July deadline were filed till March along with interest u/s 234A as applicable.But due to levy of compulsory fees the returns that were filed till March will now have to be filed till July, 31.

In July 31 returns approx 80% of the returns are of honest salary class taxpayers, whose tax is already deducted by the respective employers. As per the official statistics, for assessment year 2016-17, 1.89 crore salaried individuals had filed I-T returns and paid total tax of Rs 1.44 lakh crore, which works out to average tax payment of Rs 76,306 per individual salaried taxpayer.Individuals and Hindu Undivided Families (HUFs) are required to file returns using either of forms ITR 1, ITR 2, ITR 3 or ITR 4. Last year more than 64 million returns were filed only in these 4 forms, which is roughly 96 percent of total returns filed by all taxpayers, including corporate taxpayers and trusts.

These are those honest and common people for whom the fees of 1000 to 10000 actually matters a lot. So technically the work of March has to be finished within 2 months i.e June and July. Any error/omission would result in either making the return defective or creating wrong demand on the filer by the CPC.

Till last year when major portion of 6 months of the professionals were devoted in auditable assessee’s TAR/Return now the focus has been shifted to non-auditable assessee’s till 31st July. GST compliance/filing is a great task for the professionals apart from Income Tax. GST and its match with the Income Tax data and the effect of ICDS is also now an integral part of preparing of returns. So even in audit cases i.e 30th September is also a very short span available to fulfil the compliance.

If return is not filed in time than department has also started launching prosecution under Section 276CC of the Income Tax Act. The tax officers are now liable to examine every such case of non-filer to arrive at a decision whether a particular case was fit for prosecution under section 276CC. If so, the further necessary action is to be taken expeditiously.

It is not that the professionals or tax payers don’t want to do compliance or to contribute their respective portion in form of tax to govt treasury and to be partner in nation building but what is necessary is that taxpayer gets sufficient time to file his/her/its Income Tax Returns and do not have to indulge in date extension tug of war year after year. It is necessary that any kind of permanent solution is provided and the dates of July 31 and September 30 do needs a re-consideration now.