The Central Board of Direct Taxes (“CBDT” or “Department”), issued a circular No. 3/2020 on 13th July 2020 for all the taxpayers regarding the verification of pending ITRs. CBDT announced a one-time relaxation for the taxpayers for the verification of pending Income tax-returns for AY 2015-16 onwards. This relaxation is given for ITRs which are pending for processing and further action due to non-verification of the same by the taxpayer.
1. Rationale behind the decision of relaxation for verification of Income Tax return
This massive step by the CBDT is being considered as a big relief for the taxpayers, given that many taxpayers will now be able to save their ITRs from being declared as Non-est.
Moreover, the whole ITR process can now be completed with proper verification of ITR-V form. According to the ministry of finance it has been brought to their notice that many ITR returns are marked pending with CPC over non-=filing of signed copy of ITR-V or incomplete verification of the same through OTP or Aadhar Number.
Therefore, the department has decided to give one time relaxation for verification of pending tax returns from AY 2015-16 onwards.
2. Modes of Income tax return Verification
Income tax returns are required to be filed with digital signature of taxpayers. However, in case Income Tax Return is not filed with digital signatures, then a taxpayer is required to verify his ITR within 120 days from date filing of ITR. Income tax portal provides for following 6 options for verification.
The taxpayers will have to follow any one of the given modes below for the verification process:-
- Using Aadhaar OTP
- By logging into e-filling account through net banking
- EVC through bank account number
- EVC using the Demat Account (for those who’ve demat account)
- Through Bank ATM
- Sending a signed hardcopy (physical copy) of ITR-V via post to Central Processing Centre (CPC), Bengaluru
3. Last date to complete verification of pending ITRs
To resolve bulk data of pending ITRs, CBDT has granted one time opportunity for resolving grievances of the taxpayers related to earlier year ITRs of AY 2015-16 onwards and to regularize the ITRs which are either declared as Non-est or which are still appearing as pending for verification.
Therefore, CBDT has opened the one time window till 30th September 2020 to complete verification for all the income tax returns that are pending for verification. And for this purpose the person has to follow any one of the methods mentioned above. In case the taxpayer chooses to send the physical copy of signed ITR-V form to CPC, Bangalore, then it must reach CPC Bengaluru by 30th September 2020.
However, This relaxation is not applicable in the cases, where the income tax department has taken recourse/resort to other measures for ensuring filing of tax return by the taxpayer concerned after declaring the return as Non-est.
4. Last date of sending intimation for processing of Income tax return
CBDT has also increased the time limit of processing of filed Income tax returns till 31st December 2020. Earlier the time of intimation was directed by the second proviso to sub-section (1) of Section 143 of the Act. There is no change in the intimation processing procedure.
Incomplete verification has resulted in non-issuance of Income tax refunds claimed by the taxpayer in his ITR. Therefore, this measure will also result in issuance of long pending refunds. In such case, the calculation of interest will be done according to the provision of 244A(2) of Income Tax Act, 1961.
5. Consequence ITR-V form not submitted with in extended time
If the taxpayer fails to verify its ITR-V and does not regularize his/her returns, then action will be taken as provided under Income Tax Act for non-filing of returns.
Following actions can be taken for non-filing of ITRs:
- Levy of Penalty
- under Section 234F of the Income-tax Act,1961:, Penalty for INR 10,000 will be levied for non-filing of ITRs for Assessement year commencing on or after 01.04.2018.
- Under section 271F of Income Tax Act: Assessing officer may direct taxpayer to pay penalty of INR 5,000 for assessment years ending on 31.03.2018.
- Applicability of Interest @ 1% per month: Filing late returns will lead to interest on the unpaid tax under section 234A of the Act at the rate of 1% per month. The interest will be calculated on the outstanding tax and will gradually increase with days delayed in filing the returns. The taxpayer loses certain perks and privileges with the delay that he is entitled to.
The relaxation announced by CBDT can benefit a large number of taxpayers, who could not verify their past ITRs unwittingly.
6. How submitting ITR-V for previous year would benefit the taxpayer
Apart from avoiding penalties and prosecution under Income Tax Act, filing of proper ITR may also benefit a taxpayer in following ways:
- Issuance of pending Income Tax Refunds: Income tax refunds are issued post processing of ITR under section 143(1) of the Act and processing is initiated after completion of verification. Therefore, verification of pending ITRs will results in release of long pending refunds.
- Increases credibility of Assessee: For various business purposes such as Tender submission, Loan, Bank Overdrafts etc. income tax returns of earlier year is a prerequisite. Therefore, processing of pending ITRs may solve various such issues.