MATHUR SIR CLASSES – HOWRAH | GIRISH PARK

DIRECT TAX FINAL SUGGESTION

Q1. Write short note on-
(a) Belated Return
(b) Best Judgement Assessment
(c) Revised Return
(d) Interest Payable U/S 234 B
(e) Fee in Default U/S 234F
Q2. What is PAN? State whether quoting PAN is mandatory
Q3. What is defective return? Who is liable to pay Advance tax?
Q4. Explain the provision of Tax Act relating to deduction of tax at Source (TDS) from salary
& horse races.
Q5. State the relevant provisions of scrutiny assessment.
Q6. Discuss whether it is necessary to submit return where the asseesee incurs a loss in any
P.Y.
Q7. Return of Income, Filing of Income tax return, Consequence for not filing return within
due date.

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ANSWERS
Q1. Belated Return [Section 139 (4)]:
Or, can a belated return be revised?
Or, what is the time limit and conditions for submitting a belated return?
Answer: A return submitted after the due date under Section 139 (1) or after the time
allowed under a notice issued under Section 142 (1) is known as “Belated Return”.
In this case, the assessee may furnish the return for any P.Y at any time before the completion
of the assessment, whichever is earlier.

• Consequences of Belated Return:

i. Loss (other than House property loss) cannot be carried forward.
ii. Levy of Interest under Section 234A @ 1% for the period.
iii. Exemption/ Deduction under Section 10 A, 10 B, 80 IA, 80 IAB, 80 IB, 80 IC, 80 ID and 80IE
are not available.
iv. Under Section 234 F a fee of Rs. 5000 to Rs. 10000 may be Levied.
Belated Return cannot be revised under Section 139 (5). However, w.e.f., 1.4.2017, income
tax return for the A.Y 2017 -18 and onwards filed under Section 139 (1) or 139 (4) can also
be revised.

• Revised Return [Section 139(5)]

If a person having furnished returns U/S 139 (1) or, U/S 142 (4), discovers any omission or any
wrong statement therein, he may furnish a revised return at any time before the end of the
relevant A. Y. or before the completion of assessment, whichever is earlier.

• Additional consideration:
i) For the assessment year 2017 – 2018 and onwards, returns can be revised at any time before
the end of the relevant Assessment year or before the completion of the assessment,
whichever is earlier.
ii) Only a return filed under Section 139 (1) or belated return filed under Section 139 (4) can
be revised.
iii) A return of income filed pursuant to notice under Section 142 (1) of Act cannot be revised
under Section 139 (5).
iv) A revised return under Section 139 (5) can be further revised with in the same specified
time, if the assesses discovers any ‘omission or wrong statement’, in such return.
v) Section 139 (5) applies to cases of “omission or wrong statements” and not to be cases of
“False Statement”.

• Defective/ Incomplete Return [under Section 139(9)]

Where the Assessing Officer (AO) considers that the return of income furnished by the
assessee is defective, he many intimate the defects to the assessee and give him an
opportunity to rectify the defect within a period of 15 days from the date of such information.
If the defect is not rectified within the period of 15 days of such information, then an
application being made by the assesses, the AO, at his discretion may extend the time for
rectification of defects.

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A return of income shall be regarded as defective in the following cases:

i) The annexures, statements and columns in the return of income have not been duly filled.
ii) Computation statement.
iii) Audit Report under Section 44AB (Report and proof.)
iv) Proof of Tax Payment (TDS, TCS, Advance Tax)
v) Proof of Deposit (Compulsory deposit if any)
vi) Audited Financial Statements (P/L, B/S, Auditor’s report)
☛ Summary Assessment [Section 143 (1)]
Where a return has been submitted under Section 139 or in response to a notice under Section
142(1); the A.O. can complete the assessment without passing a regular assessment order or
calling the assessee.
The process through which returns can be adjusted and tax liability or refund can be checked
is known as “Summary Assessment” w.e.f., 01.04.2008. The following procedure follow for
summary assessment:
1) Correction of arithmetical mistakes and adjustment of incorrect claim through
Centralized processing of return [under Section 143(1)(a)]
a) Any arithmetical errors in the return.
b) An incorrect claim which is apparent from any information in the return.
c) Disallowance of loss claimed.
d) Disallowance of expenditure.
e) Disallowance of deduction claimed under Section 10 AA, 80 – IA, 80 – IAB, 80 – IB, 80 –
IC, 80 – ID or 80 – IE.
f) Addition of income appearing in from 26 AS, 16 A, or 16.
2) Computation of tax, interest and fee due [Section 143(1)(b)]
3) Determination of sum, payable by or refund due to, the assesses [Section 143(1)(c)] [As
computed in the above point (2)]
4) Intimation to the assessee [under Section 143(1)(d)]
5) Where no intimation is required [explanation (b), Section 143(1)]
6) Time limit for intimation: The time limit for sending intimation under Section 143(1) to the
assessee is one year from the end of the financial year in which the return is made.

☛ Best Judgment Assessment Section – 144

An estimation of income or loss of the assessee by the A.O. to the best of his judgment
considering all relevant materials, which may have been gathered is known as the “Best
judgment assessment”.
There are two types of best judgment assessment:
1) Compulsory assessment: Compulsory assessment is when the A.O. finds non – cooperation
by the assessee or finds him to be a defaulter in supplying information to the Department.
2) Optional assessment: When the A.O. is dissatisfied with the validity of the accounts given
by the assessee or where no regular method of accounting has been followed by the assessee,
it is known as “Optional assessment”.

The Provision of Section 144 for best judgment assessment is applicable under the following
circumstances: -
a) The assessee fails to make the return required under Section 139(1) and has not made a
return or a revised return under Section 139(4) or Section 139(5).

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b) The assessee fails to comply with all the terms of a notice issued under Section 142(1) or
144(2A).
c) The assessee, having made a return, fails to comply with all terms of a notice under Section
143(2).
142(2A) = Audit of A/c.
142(1) = 115 WD.

Refund: No refund can be granted in the case of best judgment assessment.

Remedies: i) The assessee can file an appeal under Section 24 6 A.
ii) Make an application to the joint commissioner for revision under Section 264.
☛ Interest for default in payment of Advance tax (Section 234B)
Every assessee needs to pay Advance tax within the P. Y. If his amount of tax liability is Rs.
10000 or more. If such payment is not made at all or the amount is paid less than 90 % of the
liability, then the assessee is liable to pay interest under Section 234(B)
1) When the assessee fails to pay Advance tax.
2) Advance tax is less than 90 % of the assessed tax
• Rates of interest: Simple interest @ 1% for every month or part of the month (Rounded)
• Period of interest: For the period from 1st April of the relevant A.Y. to the date of
determination of total income under Section 143 (1) or regular assessment.
• Amount on which interest is payable.
a) Advance tax not paid or
b) Less than 90% of assessed tax.
• Computation of interest: Amount on which interest is payable × 1% = □ × no. of months
from 1st April till date.

☛ Fees for default in furnishing return of income [Section 234F]

Effective from the assessment year 2018-19, if an assessee fails to furnish return of income
within due date as prescribed under Section 139(1), then as per Section 234F, he will be
required to pay fee as under:
(a) Rs.5000 if return is furnished on or before 31 December of assessment year.
(b) Rs.10,000 in any other case. However, if total income of the person does not exceed Rs. 5
lakhs, then fee payable shall be Rs.1000.

• Q2. Permanent Account Number (PAN) [Section 139A]:

PAN is a unique 10 characters Alphanumeric code or identifier issued by the Income Tax
Department of India under the supervision of the CBDT to all the judicial entities identifiable
under the income Tax Act, 1961.

• Primary purpose of the PAN:

2. To bring universal identification to all financial transactions.
3. To prevent tax evasion by keeping track of monetary transactions.

• Types of PAN:
1. PAN card for individuals: PAN card for individual is used to keep track and link all financial
transactions that may attract tax.
2. PAN card for companies: The PAN card for a company has no photograph on it and on
Date of Birth, the date of registration of the company/ organizations is mentioned.

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3. PAN card for foreign citizens in India: All foreign citizens who wish to do business in India
are required to obtain PAN card. But the application Form for foreigners is Form 49 AA.

• Structure of PAN:
PAN is of 10 characters and is selected on a mechanized basis by the Income Tax Department.
For example, if PAN of any person is B F Z P K 7 1 8 9 H, then it has been selected on the
following basis.
BFZ P K 7189 H
Random Category of First letter of Sequential no Random
alphabetic series the assesses. the applicant from 0001 to alphabet.
running from AAA is surname. 9999.
to ZZZ.

Category
A = AOP, B = BOI, C = Company,
F = Firm, G = Government, H = HUF,
L = Local authority, J = Artificial Juridical Person, P = Individual,
T = Trust, E = LLP.

• Transaction in which a PAN can be Quoted under Section 139 A (5):

1. Matters relating to Interest of revenue:
(i) Return / correspondence tax challan, any other matter in the interest of revenue.
2. All quarterly returns of TDS / TCS (w.e.f., 1.6 2006)
3. Transactions in assets:
a. Sale or purchase of immovable property in excess of Rs.50,00,000.
b. Sale or purchase of more vehicle other than two-wheeler.
4. Transaction with Banks:
a. Fixed Deposit in excess of Rs. 50000 with Bank or post office savings Bank.
b. Deposit of cash in any Bank A/c of Rs. 50,000 or more on any day.
c. Purchase of pay order (Draft Rs. 50,000 or more by depositing cash).
5. Transaction in Securities/ Bonds/ Mutual funds etc.:
a. Purchase of Mutual funds of Rs. 50000 or more
b. Opening a DMAT A/c /Mutual fund A/c
c. Purchase of RBI Bonds/ Company Debenture Rs.50,000 or more.
d. Sale or Purchase of Shares/ Debentures etc.
6. Others:
a. Sales tax registration.
b. Application of credit cards.
c. Hotel bill exceeding Rs. 25,000.
d. Cash expenses exceeding Rs. 25,000 towards foreign travel.

• Person exempt from quoting PAN:

The provisions of Section 139 A for quoting PAN will not apply to the following class of
persons:
i. Non- residents referred to Section 2 (30).
ii. Central Government / State Government / Consular offices in transaction where they
are payers.

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iii. Persons who have agricultural income and are not in receipt of any other income
chargeable to tax.
Q3.
☛ Advance Tax / Advance Payment of Tax (Section 207 – 211 – 218 – 219)
Advance tax means payment of tax within the P. Y. in which the income is earned. Advance
payment of tax is one of the modes for discharging tax liability by an assessee. This scheme is
also known as “pay as you earn” scheme where the assesses pays such advance tax on his
estimated current income in a number of instalments during the P.Y. It applies to all categories
of income.

☛ Assessee liable to pay Advance tax (Section 208)

Any assessee who has a tax liability of Rs. 10000 or more computed on the income earned
during the P. Y. needs to pay Advance tax. It means that if the tax on the income of the current
previous year is Rs. 10000 or more than the assessee has to pay the tax within the P.Y.
According to the Section 207, this provision is not applicable to an individual resident in
India who (w.e.f. 2012 – 2013)

☛ Q4. Tax Deduction at Source

Under the income tax Act, the tax liability of a person arises in the P. Y. in respect of the income
of that year. But the tax on such income is payable by way of deduction or collection at source
or advance payment or both. Under the scheme of tax deduction also known as TDS (Tax
deduction at source)

☛ TDS on Salaries (Section 192)

1. The employer shall deduct tax from salaries of all the employees, if the income from salaries
exceeds Rs. 250000, Rs. 300000, Rs. 500000 for individuals who are less than 60 years or
above.
2. Such TDS is deducted at the time of payment of salaries.
3. TDS is deducted at the average rate of tax payable by the employee on his estimated income
under the head salaries. This average is computed in the basic of the prescribed rates in force
for the F.Y, in which the payment of salary is made to the employee.
4. An employee can get exemption from TDS if he applies to the A. O. in Form 13.
5. When an assessee is employed in more than one concern, he needs to submit the necessary
details of all such salary income and TDS in Form 12B to any of the employers according to his
choice.

☛ TDS on Interest on Securities (Section 193)

By whom tax is to be deducted: The person for paying to a resident interest on securities
shall be deduct the tax.
When the tax is to be deducted: Tax is to be deducted at the time of credit of such income to
the account of the payee.
How much tax is to be deducted: Tax is to be deducted at the rate in force on A/c of interest
payable. If payee does not provide PAN then rate shall be 20%.

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☛ TDS on winning from Horse Race [Section (194 BB)]

1) Person responsible to deduct tax: Any person being licensed by the Government or being
a licensed bookmaker, paying a sum exceeding Rs. 10000 by way of winning from Horse Race
is response to deduct TDS.
2) Time of TDS: At the time of payment.
3) Rate of deduction of tax: TDS deducted @ 30% plus Surcharge plus health and education
cess @ 4 %.
Q5. Scrutiny Assessment u/s 143 3
Where the Assessing Officer considers it necessary to ensure that the assessee has not -.
understated his income; or
declared excessive loss; or
under paid the tax,
he can make a scrutiny in this regard and gather such information and evidence as he deems
fit. And on the basis of such information and evidence so collected, he shall pass an
assessment order. Such order shall be treated as regular assessment order.
Conditions for Scrutiny Assessment
• A return has been furnished u/s 139 or in response to a notice u/s 142(1); and
• Assessing Officer considers it necessary or expedient to ensure that the assessee has not
understated his income, declared excessive loss or under-paid the tax.

Q6. Following assessee need to file return of income irrespective of income or loss
(a) A Company
(b) A firm
(c) A university/College/other institution referred to on Sec.35(1)(ii) or (iii) A assessee
other than above is not compulsorily required to furnish return of loss. However, the
following losses cannot he carried forward if the return of loss is not submitted within
the time allowed u/s 139(1)-
a. Business loss (speculative or otherwise)
b. Capital loss
c. Loss from the activity of owning and maintaining race horses.
d. Loss from business specified u/s 35AD
Notes-
A. Loss declared in belated return cannot be carried forward. However, set-off of losses
of current year is not prohibited while computing the total income, even if the return
of loss is filed after the due date.
B. Delay in filing the return of loss may be condoned in certain cases
C. Unabsorbed depreciation u/s 32 and loss under the head "Income from house
property" can be carried forward even if the loss return is filed after the due date u/s
139(1).

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☛ Q7. Consequence for not filing return within due date

1. Under 27IF, w. e. f. A.Y 2018 -2019, Section 234F has been Inserted to provide for a fee
for delay in furnishing of return for the A.Y. 2018-2019 and onwards in the case where the
return is not filed within the due dates specified under Section 139 (I).
The fee shall be:
a) Rs. 5000 after due date but on or before the 31st day of December of the A.Y.
b) Rs. 10000 in any other case. However, where the total income does not exceed Rs.
5,00,000, the amount of fee shall not exceed Rs. 5,000.
2. Interest under Section 234 A shall be charged at 1% per month or part thereof on tax
payable in self – assessment
3. The benefit of carry forward of losses under Section 72/73/74/74A is lost.
4. The right to revised the return of income under Section 139 (5) is lost.

☛ Due Date for filing return of Income [Explanation 2 to Section 139(I)]

A return should be filed on or before the following due date (of respective assessment year):
Assessee Due Date
• Where the assessee is required to furnish a report in form th
30 November
3CEB u/s 92E pertaining to international transaction(s)
• Where the assessee is a company not having international 31th October
transaction(s)
• Any other assessee
⎯ Where accounts of the assessee are required to be audited 31th October
under any law
⎯ Where the assessee is a partner in a firm and the accounts of 31th October
the firm are required
⎯ In any other case 31th July

☛ Relevant forms of Return / Form / for Filing Return of Rule 12(I)

Assessee Form No.
1. For individual having income from salary /House property
(not being brought forward loss from P.Y), Income from ITR – 1 (SAHAJ)
other sources (except winning from lotteries, Horse race)
2. For individuals and HUF’s not having business or ITR – 2
professional income.
3. For individuals or HUF’s being Partner’s in firm and not ITR – 3
carrying out business or under any proprietorship.
4. For individuals or HUF’s having Income from a proprietary ITR – 4
business or profession.
5. For individuals or HUF’s deriving Business income (Section ITR – 4S (SUGAM)
44 AD and 44 AE)
6. For firms AOP’s and BOI or other person (if ITR – 7 is ITR – 5
applicable)
7. For company other than companies Claiming exemption ITR – 6
under Section 11.

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8. For persons including companies Required to furnish return ITR – 7

under Section 139 (4 A)/ (4 B)/ (4C)/ (4 D) / (4 E)/ (4 F).
9. Where the date of the return of Income in Form ITR – 1, ITR
– 2, ITR – 3, ITR – 4, ITR – 5, ITR – 6 is transmitted electronically ITR – V
without digital signature.

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