Penalty and Prosecution for Non-filers of Income Tax Return : Tax Department

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Reading Time: 3 minutes| (Last Updated On: February 8, 2019)

Penalty and Prosecution for non filers of Income Tax Returns

Penalty and prosecution for non filers of income tax returns With an exponential increase observed in the number of non-filers of income tax returns in past few years, the I-T Department of India has decided to impose a penalty and initiate prosecution in order to ensure compliance in such cases. The number of non-filers with potential tax liabilities has taken a huge leap from 22.09 lakh in 2014 to 58.95 lakh in 2015 whereas it was 12.19 lakh in 2013. Following these statistics, the I-T Department has decided to take stringent actions against non-compliance of filing income tax returns.

“Ensuring compliance from identified non-filers with potential tax liabilities is key to widening of tax base,” said the Income Tax Department’s Central Action Plan for 2016-17, presented at the recent conference of tax officials.

Hence, in order to prioritize action on non-filers with potential tax liabilities, a pilot project named non-filers monitoring system (NMS) has been implemented by the Income-Tax Department. The number of non-filers of income tax returns has been thrown up by NMS.

“Action under sections 271F (penalty for non-filing of return of income) and 276CC (prosecution for non-filing of return of income) should be taken in appropriate cases,” it said.

“Under Section 271F, if a person who is required to furnish a return of his income, as required under sub-section (1) of section 139, fails to furnish such return before the end of the relevant assessment year, he shall be liable to pay, by way of penalty, Rs 1,000 to Rs 5,000.”

Under Section 276CC of the Income Tax Act which provides for prosecution for non-filing of return of income, the non-filer shall be punishable with rigorous imprisonment of 3 months to 7 years and a fine. Hence, The tax officers have been provided with the list of cases for further processing under section 276CC. As per the Action Plan, the tax officers shall be 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”.

This step is deemed to be mandatory for conveying a strong message and improvising overall compliance to direct tax laws. Also, as per the statistics are shown by the Action Plan an increase in the pendency of cases before CIT(A) from 2.32 lakh to 2.58 lakh has been observed hence, the disposal target has been set at 1.33 Lakh cases for the current fiscal. Almost half of the direct tax to be collected will come from Mumbai and Delhi circles alone hence, the Direct tax collection target for 2016-17 has been pegged at Rs 8.47 lakh crore.Penalty and prosecution for non filers of income tax returns

As different practices in different regions, as well as trade and industries, are followed by assessees, instructions has been given to each Principal CIT/CIT by I-T Department to prepare and regularly review and update ‘Statement on Strategy of Assessment’ for their respective charge, with a focus on the quality of assessment.

“The Department expressed concern over Rs 62,233.14 crore demand outstanding on account of short payment, short deduction, late payment interest and late filing fees.”

Though the huge demand lying in the records is a matter of serious concern, it is also
an opportunity to augment revenue collections. The reason behind not pursuing the demand relating to ‘Short deduction’ might be that the deductee might have paid the taxes.

“However, other defaults, particularly of short payment, late deduction interest, late payment interest, late filing fee, interest u/s 220(2) are clearly liabilities of the deductor that have arisen based on the information furnished in the respective statements and corresponding matching with the challans reported by the banks must be acted upon appropriately,” it added.

Hence, team Setindiabiz strongly recommends our readers to file their Income Tax returns before the due date in order to avoid severe penal consequences imposed by Income Tax Department of India. Setindiabiz is a venture of KPS Corporate Consultants Private Limited that provides comprehensive CA, CS and Advocate services under one roof. For further queries on Income Tax Return filing or any other financial service you can Call us on +91-8010660055, our dedicated team of experienced professionals shall be glad to assist you.Penalty and prosecution for non filers of income tax returns

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