income tax return

Case BriefsHigh Courts

Gauhati High Court: Parthivjyoti Saikia, J., addressed the instant appeal under Section 173 of the Motor Vehicles Act, 1988 against the judgment and award dated 30-08-2016 which had been filed for enhancement of award.

The facts of the case were such that on 07-07-2013, one Bimal Kr. Saikia (the deceased) was waiting for a bus on NH-37. He was standing left side of the road in order to take the bus ride back home when the vehicle bearing registration No. AS-01/K-8766 knocked down the deceased. The deceased was immediately shifted to Civil Hospital at Nagaon but he succumbed to his injury there. It was alleged that the accident took place because of the rash and negligent driving of the aforesaid vehicle.

On the basis of the Income Tax return for the financial year 2013-14, the Tribunal had assessed the monthly income of the deceased as Rs 12,619 only and the age of the deceased had been stated as 40 years. The applicant contended that the future prospect of the deceased should have been held at 40% only by the Tribunal and not 50%. Regarding the consortium, funeral expenses, loss of care and guidance for children, the appellant had relied on the decision of Supreme Court in National Insurance Company Limited v. Praynay Sethi, (2017) 16 SCC 680, the appellant submitted that on the aforesaid heads the claimant was entitled to Rs 70,000 only.

The Bench opined that the monthly income of the deceased had been rightly assessed at Rs 12,619. The Court reiterated,

“Being beneficial legislation, in a claim case under the Motor Vehicle Act strict proof of Income Tax Return may not be mandatory in all circumstances.”

Holding that the Tribunal had committed an error because, the deceased being below 40 years of age, only 40% should have been added as future prospect. Regarding compensation under the loss of consortium head, financial expenses head and loss of care and guidance for children head, the Bench held that all together for these three heads the claimants were entitled to Rs 70,000 only.

Hence, the Court held that the claimant was entitled to Rs 21,90,040 only. The appeal was allowed and the appellant was directed to pay Rs 21,90,04 only to the claimant.[Oriental Insurance Co. Ltd. v. Nitanjali Devi Saikia, 2021 SCC OnLine Gau 648, decided on 18-03-2021]

Kamini Sharma, Editorial Assistant has reported this brief.

Appearance before the Court by:

For the Petitioner: Adv. R D Mozumdar

For the Respondent: Adv. A J Sarma

Op EdsOP. ED.

“Death and taxes in life are certain, knowing how to pay only your fair share is third.”

                                                                                                                                       Yvette D.

Income Tax Return (‘ITR’), an annual record of income, enables a taxpayer to declare his income, expenses, tax liability, deductions, savings, investments, etc. during the applicable Fiscal Year [i.e. Financial Year (‘FY’) – a period from April 1 to March 31]. This annual record is to be mandatorily submitted to the Indian revenue authorities in a prescribed format, known as the ITR form. In India, tax on income for individuals, is levied at slab rates i.e. lower income is taxed at a lower rate and higher income at a higher rate. This is also known as vertical equity i.e. people with higher income are placed higher up the ladder and therefore are required to shell out more taxes compared to those with lower income who are placed at the lower end of the ladder. The Income Tax Act, 1961[1] (‘the Act’) and the related rules cast a legal obligation on every individual to file ITR, wherein the total income for the year exceeds the basic exemption limit of INR 2.5 lakhs, which is not chargeable to income tax as per the applicable provisions. However, in case of companies, there is no such basic exemption limit and it becomes mandatory to file the ITR annually.

An assessee, in simpler terms, means a person by whom any tax or any other sum of money is payable under the Act. The total income of an assessee for the FY/Previous Year (‘PY’) is taxable in the relevant Assessment Year (‘AY’). For example, the total income for PY 2019-20 (i.e. from
April 1, 2019, to March 31, 2020) is taxable in  AY 2020-21.

Why taxes are levied? Can the Government collect the taxes arbitrarily?

One of the primary reasons for levy of taxes in India, is that it constitutes the basic source of revenue for the Government, which is further utilised to meet the expenses for development purposes like
health care, infrastructure, provision of education, defence, etc. and public welfare.

  • Article 265 of the Constitution of India, lays down that “No tax shall be levied or collected except by authority of law”.
  • Parliament and State Legislatures are empowered to makes laws on the matters enumerated in the 7th Schedule by virtue of Article 246 of the Constitution of India.
  • The 7th Schedule to Article 246 contains 3 lists which enumerate the matters under which Parliament and the State Legislatures have the authority to make laws for the purpose of levy of taxes.
  • One of the 3 lists is the ‘Union List’, on the matters of which, only Parliament has the exclusive power to make laws.
  • Entry 82 of the ‘Union List’ has given the power to Parliament to make laws on taxes on income other than agricultural income.

Article 265 –> Article 246 –> 7th Schedule –> Union List –> Entry 82 –>Income Tax

Therefore, the Government derives its powers to frame laws on taxes directly from the Constitution of India.

IMPORTANCE OF ITR FILING

The ITR serves as an income proof and is very critical for the following reasons:

  1. Claiming refunds or deductions: Deductions are one of the ways to reduce the overall tax liability and save unnecessary tax leakage. By filing ITRs, a person can get refund of Tax Deducted at Source (‘TDS’) subject to certain conditions.
  2. Carry forward of losses: In situations wherein losses have been incurred for a particular year, even then the ITR should be filed so that the assessee can carry forward the losses to set off against the gains of the subsequent years, subject to certain conditions. This is one of the efficient ways to reduce the burden of tax in the forthcoming years.
  1. Visa Processing: Foreign consulates often ask for ITRs of past few years, at the time of visa process. Thus, it becomes an important document while travelling overseas.
  1. Government Tender: Individuals that plan to start their own business and are required to fill government tenders, have to furnish ITR of preceding years. It serves as a proof of financial status and acts as a check on timely payment of obligations.
  1. Fee/Prosecution for non-filing or late filing of ITR: Under the Act, non-filing or late filing of ITR can attract a fee of INR 1,000 if the total income does not exceed INR 5 lakhs. In other circumstances, a penalty of INR 5,000 or INR 10,000 is levied (as the case may be), leading to legal implications for the taxpayers who are mandatorily required to file as per the provisions. Further, a willful failure to furnish ITR in due time may lead to rigorous imprisonment of 3 months to 7 years and fine.

MODES OF TAX COLLECTION

Some of the important modes of collecting taxes from taxpayers are in the form of TDS, Advance Tax and Self-Assessment Tax. The taxes are deductible from the total tax due from the assessee. Additionally, every person whose estimated tax liability for the year is INR 10,000 or more shall pay tax in advance i.e. advance tax subject to few exceptions. Advance tax also known as ‘pay-as-you-earn’ refers to paying a part of the taxes before the end of the FY rather than paying the complete amount at the end of the FY. This helps the Government to get a constant flow of income throughout the year and is beneficial for the assessee to avoid any interest on taxes for late payment.

The assessee, while filing ITR, needs to pay Self-Assessment Tax under Section 140-A of the Act, if tax is due on the total income as per his ITR after adjusting, inter alia, TDS, relief of tax, tax credit, advance tax, etc. However, it is to be noted that a senior citizen of age 60 years or above who does not have any income chargeable under the head “Profits and Gains of Business or Profession” is not liable to pay advance tax and can discharge their tax liability (other than TDS) by payment of Self-Assessment Tax.

EXEMPTIONS VIS-À-VIS DEDUCTIONS: A CONUNDRUM

One of the common conundrum that exists among the taxpayers is the difference between deductions and exemptions. Not all that one earns is taxed in India. Yes! The Government provides exemptions which are applicable on certain types of income, such as agriculture income is exempt from income tax in India. The various items of income that are mentioned in Section 10 of the Act are excluded from the total income of an assessee and hence are known as exempted incomes.

Now, what if the income earned by the individual is not exempted? Is there still a ray of hope? Yes, of course. There are certain other incomes which are included in the Gross Total Income but are wholly or partly allowed as deductions while computing the total income.

Rent paid – claim exemption or deduction

One of the most common exemption/deduction claimed by an assessee is for the rent paid while filing ITR. This can be availed by using House Rent Allowance (‘HRA’) under Section 10(13-A) of the Act or deduction of rent paid under Section 80GG of the Act. HRA is an allowance granted by an employer to its employee towards payment of rent for residence of the employee. Tax exemption on HRA can be claimed on satisfaction of certain conditions. Whereas, Section 80GG of the Act provides relief to those individuals who do not receive HRA.

ITR FORMS AND THEIR APPLICABILITY

Certain sections of society consider the ITR process to be cumbersome. However, it is of significant importance to consider that people with different income levels/sources are required to file different ITR forms. Every individual is not required to provide detailed information and calculations. For example, a salaried employee who earns a modest salary and has no other source of income except salary, the government has provided a plain-vanilla ITR form which actually becomes a child’s play. The assessee has to judiciously ascertain the ITR form applicable as follows:

TABLE: ITR FORMS[2]

ITR 1

(Sahaj)
  • For individuals having income from salaries, one house property, other sources (interest etc.) and;
  • Having total income up to INR 50 lakhs;
  • It is not applicable to directors of a company or shareholders in an unlisted company.
ITR 2
  • For individuals and HUFs

[3] not carrying out business or profession under any proprietorship.
ITR 3
  • For individuals and HUFs having income from a proprietary business or profession.
ITR 4 (Sugam)
  • For presumptive income from Business and Profession;
  • Not for an individual who is either Director in a company or has invested in unlisted equity shares.
ITR 5
  • For persons other than:

(i) Individual,
(ii) HUF,
(iii) Company, and
(iv) Person filing Form ITR-7.
ITR 6
  • For companies other than those claiming exemptions under Section 11 of the Act.
ITR 7
  • For persons including companies required to furnish return under Sections 139(4-A) or 139(4-B) or 139(4-C) or 139(4-D) or 139(4-E) or 139(4-F) of the Act.

ITR can be filed either online or offline. The introduction of online or electronic filing (‘E-filing’) portal has made the ITR filing comparatively swifter and easier compared to earlier days making it a child’s play.

FORM 26 AS: A CONSOLIDATED FORM

Form 26AS is a consolidated annual tax statement that reflects details of TDS, Tax Collected at Source, Advance Tax, Self-Assessment Tax, against the taxpayer’s Permanent Account Number (PAN). Basically, it is the record of all the transactions (certain to some conditions) made or done against one’s individual PAN. The Budget for 2020-21 further revised Form 26AS with an aim to provide a more comprehensive profile of the taxpayer which would include all high value transactions like the details provided by banks and financial institutions too.[4] This is to enhance the flow of information between the taxpayers and the tax authorities. As a result, all the information is available and collected in a consolidated form that is Form 26AS. This in turn facilitates correct ITR filing as the assessee can cross-check the details of income and taxes, thereby making Form 26AS a very important document while filing ITR. For instance, if the employer quotes an incorrect PAN of any employee, TDS deducted will not be reflected in the employee’s Form 26AS. Further, certain high value transactions are also reported in Form 26AS now thus, bringing everything under the Government scanner now.

 CONCLUSION

 Filing ITR is a legal, moral and social duty of every citizen of the country. It provides a platform to the assessee to claim refund of taxes already paid, apart from other reliefs and act as a basis for the Government to determine the revenue generated in the country and accordingly form public welfare policies. The number of registered users on the Income Tax India E-filing Portal as of August 31, 2020 was 9.47 crores[5] out of approximately 138 crores of population. Now, any individual can easily file ITR by visiting www.incometaxindiaefiling.gov.in and creating own income-tax account simply using their PAN. Considering the Covid-19 pandemic and with a view to providing immediate relief to the business entities and individuals, in a press release dated July 17, 2020, the Ministry of Finance stated that the Income Tax Department refunded INR 71,229 crore to more than 21.24 lakh taxpayers. The last date to file ITR for AY 2019-20 was September 30, 2020 which has been extended to November 30, 2020[6] and for AY 2020-21 it was November 30, 2020, which has been extended till December 31, 2020[7]. It is observed that the citizens consider the whole procedure of ITR filing, to be tedious, however, it is undeniable that India is moving towards creating an easier, simpler and efficient tax system with the introduction of e-filing and newly introduced tax reforms.

*Author is an Economics graduate and also holds a Master’s degree in Economics. Currently, in her final year of LLB (Symbiosis Law School, Pune) wherein she secured merit scholarship for holding first rank in her batch. Author has undergone numerous internships with certain renowned law firms like Khaitan & Co. and L&L Partners, New Delhi. The views expressed in this article are solely of the author and does not relate to the views of any other person or firm.

[1] Income Tax Act, 1961

[2] incometaxindia.gov.in

[3]HUF stands for Hindu Undivided Family

[4] Union Budget 2020-21, Ministry of Finance, Government of India

[5] https://www.incometaxindiaefiling.gov.in/moreStatistics

[6] F.No. 225.150/2020-ITA-II, dated 30-9-2020

[7] CBDT issues Press Release for extension of due dates for filing Income tax Returns and Tax Audit Reports under the Income Tax Act, 1961 for AY 2020-21, dated 25-10-2020.

COVID 19Hot Off The PressNews

Last date to file Income Tax Return for the Financial Year 2018-2019 has been extended to 30-06-2020.

Aadhaar-PAN linking date has been extended to 30 June 2020 from 31 March 2020.

 Last date for filing March, April and May 2020 GST returns has been extended to 30 June 2020.

Payment under ‘Sabka Vishwas’ scheme extended.

Customs clearance an essential service, till 30 June, 2020 and will be working 24*7.

Mandatory requirement of holding board meetings is relaxed by a period of 60 days.

Government is considering to suspending Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code (IBC), at a later stage, if the current situation continues beyond six months.

There shall not be any minimum balance requirement fee (in bank accounts).

Debit card holders who withdraw cash from any bank’s ATM can do it free of charge for the next 3 months.

Insolvency & Bankruptcy Code default limit has been increased from Rs 1 lakh to Rs 1 crore.

[Source: Media]

Hot Off The PressNews

The due date for filing of Income Tax Returns for Assessment Year 2019-20 is 31-07-2019 for certain categories of taxpayers. Upon consideration of the matter, the Central Board of Direct Taxes (CBDT) extends the ‘due date’ for filing of Income Tax Returns from 31-07-2019 to 31-08-2019 in respect of the said categories of taxpayers.

[Press Release dt. 23-07-2019]

Ministry of Finance

Case BriefsHigh Courts

Punjab and Haryana High Court: Kuldip Singh, J. modified the claim allowed by the Tribunal on the ground that the deceased was maintaining her family.

An appeal was filed by the claimant against the award made by Motor Accident Claims Tribunal, Karnal.

Facts of the case were that car accident took place which was driven by Jagdish Lal Ahuja i.e. Claimant 1 at very moderate speed. When they reached downside the railway overbridge a jeep being driven by Respondent 1 came at a very fast speed in a rash and negligent manner from the opposite side. Respondent 1 could not control the Jeep and hit the motorcycle of one Sandep Kumar and then Trax Jeep lost the control and hit the car. Deceased received multiple injuries. She succumbed to the injuries at Civil Hospital, Karnal. It was claimed that the deceased was earning Rs 16,000 to Rs 20,000 per month. Because of the death of the deceased, the claimants were deprived of the income of the deceased. In the reply, the respondent denied the fact that the accident took place due to the negligence of the jeep driver. The insurance company also denied the claim. The Tribunal held that the accident took place due to rash and negligent driving of the driver of the jeep but the Tribunal relied upon the income tax return for the year 2002-2003 and applied the multiplier of 8 and ordered the compensation amount accordingly. Thus aggrieved by the order of compensation an appeal was preferred by the claimant.

High Court opined that the Tribunal erred in discarding the income tax return for the year 2002-2003 only on the ground that it was filed after the death of the deceased. The Tribunal did not appreciate that the income tax authorities did not accept this return to be correct. The court also opined that as deceased was about 55 years old at the time of the accident, the multiplier of nine was to be applied. On the question that the dependents were eligible for the compensation, reliance was placed upon the case of Gujarat SRTC v. Ramanbhai Prabhatbhai, 1987 AIR (SC) 1690, in which various observations were made to press that the claimants being legal heir are entitled to compensations. It was further opined that as it cannot be assumed that unit is still running and as there was a loss of management on account of the death of the deceased who was looking after the entire affair and was supporting the family the multiplier of 9  should be applied. Thus the claim of Rs 11,95,000 was ordered to be payable along with the interest at 7.5 percent.[Jagdish Lal v. Ram Chander, 2019 SCC OnLine P&H 1175, decided on 11-07-2019]

Business NewsNews

Constitutional validity of Aadhaar has been upheld by the Supreme Court of India in September 2018. Consequently, in terms of Section 139AA of Income Tax Act., 1961 and order dated 30-6-2018 of the Central Board of Direct Taxes, Aadhaar-PAN linking is mandatory now which has to be completed till 31.3.2019 by the PAN holders requiring filing of Income Tax Return.

Procedure for Aadhaar PAN linking has been published vide notification no. 7 dated 29-6-2017 by Pr. Director General of Income Tax(Systems).

Income Tax Department

Hot Off The PressNews

Kerala High Court: In the writ petition filed by Prasanth Sugathan, legal director of the SFLC, the Court passed an interim order allowing the petitioner to file his Income Tax Return manually without quoting the Aadhaar number.

The petitioner had challenged the mandatory requirement to quote Aadhaar number or enrollment ID for filing Income tax returns as per Section 139AA of the amended Income Tax Act, 1961. He had argued that the partial stay granted by the Supreme Court in Binoy Viswam v. Union of India, 2017 SCC OnLine SC 647,  in compulsory linking of PAN and Aadhaar would be futile if assesses were forced to quote their Aadhaar number while filing IT returns.

On 09.06.2017, the bench of Dr. A.K. Sikri and Ashok Bhushan, JJ had in Binoy Viswam v. Union of India, 2017 SCC OnLine SC 647, upheld the validity of Section 139AA of Income Tax Act, 1961 that makes the linking of Aadhaar Card to the Permanent Account Number (PAN) mandatory and said that the provision is neither discriminatory nor it offends equality clause enshrined in Article 14 of the Constitution. As per the order of the Court, those who have already enrolled themselves under Aadhaar scheme would comply with the requirement of sub-section (2) of Section 139AA of the Act. Those who still want to enrol are free to do so. However, those assessees who are not Aadhaar card holders and do not comply with the provision of Section 139(2), their PAN cards be not treated as invalid for the time being.

Source: CNN-News18