What if the due date of Audit & ITR filing is Not Extended?
January 10, 20220 Comments
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What if the due date of Audit & ITR filing is Not Extended?
The due date of filing the audit report was extended to 15th January for certain categories of the taxpayers who are required to get the books of accounts audited under the Income Tax Law. Further, the due date of filing of Income Tax Return (ITR) was also extended to 15th February 2021 for all such taxpayers who are required to get the books of account audited under the provision of Income Tax Act-1961 or under any other law. [For other categories of the taxpayers, the due date of filing ITR was 31st December 2021 which is already over and no extension was given though there was strong demand from various sectors of the business].
Amidst the technical glitches at the income tax portal, the 3rd wave of corona is also picking up and many taxpayers are still finding it difficult to comply with the extended due date. The question arises as to what would be the impact if the taxpayers failed to file the audit report within the extended due date of 15th Jan 2022 or failed to file the ITR till 15th Dec 2021. Let us know about it:
Impact of Non-Filing of Audit report by 15th January 2022:
Taxpayers with Business Income: a) Audit is mandatory if the turnover exceeds the prescribed limit or if the minimum percentage of profit is not offered for taxation. There is Penalty if taxpayers fail to get the books of accounts audited & uploaded at the income tax return portal before the due date. Penalty in such a case is ½% of the turnover or the gross receipts, subject to a maximum penalty of Rs. 1, 50,000.
However, it may be noted that section 273B gives power to the Income Tax Authorities to waive the penalty if there is a “Reasonable Cause” for such failure. The past experience shows that the medical issues in the family, fire, theft, etc have been considered by the authorities as reasonable cause for non levy of the penalty. Even the court have condoned the delay in filing of audit report for the following reasons:
a) Resignation of the Tax Auditor resulting in delay of the audit report
b) Death of the partner, directors, Accountants, etc taking care of the accounts division.
c) Labour issues like strike, lockout, sealing or attachment of the factory
d) Natural Calamities, pandemics, etc.
In my considered opinion, if anyone is adversely affected by the corona & not able to get the books of accounts audited then such businessmen need not take the penalty on health and mind. The authorities considering the situation and facts have been kind enough to condone the delay. It may be noted that this penalty is not automatic. It is applicable only if the authorities impose the penalty after verifying the explanations & reasons for delay in getting the books of accounts audited. In the past, Income Tax Authorities & judiciary have carried the human touch so as to drop the penalty as there is no revenue loss to the Government Treasury due to delay in uploading the audit report.
Audit Report of the Trust: Normally, trust registered with the income tax department can only avail the benefit of deduction towards “Application of Income”. However, the benefit of application is subject to the condition that the audit report is uploaded within the due date which is now 15th January 2022 for FY 2021-22. Trust / NGO must carefully note that the non- uploading of the trust audit report will result in denial of the benefit of “Application of Income” which is surely going to carry disastrous consequences for few trusts doing remarkable charitable activities. All such trust must ensure that the audit report is uploaded at the income tax portal at the earliest.
About the Applicability of the due date of 15th February 2022::
The due date of filing the Income Tax return is 15th February 2022 (& was not 31st December 2021) for following categories of the person:
Person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or
Partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force
Individual / HUF/ Firms who are required to get the books of accounts audited u/s 44AB of the Income Tax Act-1961.
Since the trust and co-operative societies are required to get the books of accounts audited under their respective laws, the due date of filing the ITR in such a case is 15th February 2021 and was not 31st December 2021 which is already over.
Impact of Non filing of ITR by 15th February 2022:
No Deduction to Credit Co-operative Society U/s 80P, , Biodegradable waste unit U/s 80JJA, New employee deduction u/s 80JJAA [Section 80AC]: All the taxpayers who wish to claim deduction towards its profit U/s 80P (applicable to societies including credit societies), U/s 80JJA towards profit of units engaged in degradable waste, U/s 80JJA towards weighted deduction of new employee engaged, U/s 80PA in respect of profit of producers companies, etc, have to ensure the filing of the income tax return within due date. If the return is not filed within the due date then the benefit of profit/deduction shall not be available to the taxpayers.
[Section 80AC was introduced by the Finance Act 2017] The effect of the amendment is that if you wish to claim a deduction under Chapter VIA under the heading ‘C-Deductions in respect of certain incomes’ then return has to be filed within due date].
Late filing Fees: If income tax return couldn’t be filed by the taxpayers for whom the due date was 15th Feb for any reasons whatsoever then the taxpayers can file the belated return till 31.03.2022. Though the process of filing a belated return is the same as that of filing the original return within the due date, the late filing would be subject to late filing fee. If the total income does not exceed Rs 5 lakh, the maximum late fee would be Rs 1,000/- only. However, if the total income exceeds Rs. 5 Lakh then the late fee would be Rs. 5000/-. [It may be noted that the highest late fee was reduced from Rs. 10,000/- to Rs. 5000/- by the Finance Act-2021 w.e.f. 01.04.2021]. It may be noted that the late fee is not applicable if the total income of the persons does not exceed the basic exemption limit not chargeable to tax.
b) For company– Filing of income tax return filing is mandatory even if it is not carrying out any business activities or even if there is no income. The minimum late fee of Rs. 1000/- would be applicable for such a company fails to file the income tax return within the due date which is 15th Feb 2022.
It may be noted that there is no power to waive the late filing fees even if there is a reasonable cause for such delay.
Interest U/s 234A: For all the belated returns, the taxpayer would be liable to pay the tax along with interest @ 1% per month u/s 234A if there is any tax due on the basis of returned income.
No Benefit of carry forward of Loss: It may be noted that under the Indian income tax Act, losses under any head of income (other than income from house property), can be carried forward only if the tax return is filed within the due date. However, taxpayers can carry forward the loss under the head income from house property, even if the tax return is filed after the due date. In short, to avail the benefit of carry forward of the loss, the filing of the return within the due date is mandatory.
Delay in Receiving Refunds: If any refund is due to the taxpayers due to excess TDS/TCS/Advance tax payment, then the earlier return filing ensures earlier refund of the excess tax amount.
Return filed with error at the last minute- Can it be revised now?
It may be noted that if after filing the income tax return, taxpayers realizes that there is some error in reporting the incomes or some deductions/claims were not availed of in the return then it is possible to file a revised return. The last date of filing revised returns for FY 2020-21 will be 31st March, 2022.
In The Tax Talk Dated 03/01/2021, I have already discussed the applicability of interest U/s 234A, delay in getting the refunds & non availability of the benefit of carry forward of loss if the return is filed belated. Above are some of the instances of non compliance with the provision of income tax law within the due date. Not just compliance, but time bound compliance is what is the expectation of the department.
Though everyone is hopeful for extension of date but the non extension of the deadline of 31st December 2021 has made it clear that no one can bank upon the date extension.