RETURN OF INCOME

The Income-tax Act, 1961 contains provisions for filing of return of income.
Return of income is the format in which the assessee furnishes information as to
his total income and tax payable. The format for filing of returns by different
assessee is notified by the CBDT. The particulars of income earned under
different heads, gross total income, deductions from gross total income, total
income and tax payable by the assessee are generally required to be furnished in
a return of income. In short, a return of income is the declaration of income and
the resultant tax by the assessee in the prescribed format.
COMPULSORY FILING OF RETURN OF INCOME [SECTION 139(1)]
(1) As per section 139(1), it is compulsory for companies and firms to file a
return of income or loss for every previous year on or before the due date in the
prescribed form.
(2) In case of a person other than a company or a firm, filing of return of
income on or before the due date is mandatory, if his total income or the total
income of any other person in respect of which he is assessable under this Act
during the previous year exceeds the basic exemption limit.
(3) Every person, being a resident other than not ordinarily resident in India
within the meaning of section 6(6), who is not required to furnish a return under
section 139(1), would be required to file a return of income or loss for the
previous year in the prescribed form and verified in the prescribed manner on or
before the due date, if such person, at any time during the previous year, -
(a) holds, as a beneficial owner or otherwise, any asset (including any
financial interest in any entity) located outside India or has a signing authority
in any account located outside India; or
(b) is a beneficiary of any asset (including any financial interest in any entity)
located outside India.
However, an individual being a beneficiary of any asset (including any financial
interest in any entity) located outside India would not be required to file return
of income under this clause, where, income, if any, arising from such asset is
includible in the income of the person referred to in (a) above in accordance
with the provisions of the Income-tax Act, 1961
(4) Further, every person, being an individual or a HUF or an AOP/BOI,
whether incorporated or not, or an artificial juridical person -
whose total income or the total income of any other person in respect of which
he is assessable under this Act during the previous year
without giving effect to the provisions of Chapter VI-A or section
54/54B/54D/54EC/54F1exceeded the basic exemption limit, is required to file a
return of his income or income of such other person on or before the due date in
the prescribed form and manner and setting forth the prescribed particulars.
(5) Any person other than a company or a firm, who is not required to furnish
a return under section 139(1), is required to file income-tax return in the
prescribed form and manner on or before the due date if, during the previous
year, such person –
(a) has deposited an amount or aggregate of the amounts exceeding
` 1 crore in one or more current accounts maintained with a banking company or
a co-operative bank; or
(b) has incurred expenditure of an amount or aggregate of the amounts
exceeding ` 2 lakh for himself or any other person for travel to a foreign
country; or
(c) has incurred expenditure of an amount or aggregate of the amounts
exceeding ` 1 lakh towards consumption of electricity; or
(d) fulfils such other prescribed conditions
(6) All such persons mentioned in (1) to (5) above should, on or before the
due date, furnish a return of his income or the income of such other person
during the previous year in the prescribed form and verified in the prescribed
manner and setting forth such other particulars as may be prescribed.
RETURN OF LOSS [SECTION 139(3)]
(1) This section requires the assessee to file a return of loss in the same
manner as in the case of return of income within the time allowed u/s 139(1).
(2) Section 80 requires mandatory filing of return of loss u/s 139(3) on or
before the due date specified u/s 139(1) for carry forward of the following
losses -
(a) Business loss u/s 72(1)
(b) Speculation business loss u/s 73(2)
(c) Loss from specified business u/s 73A(2)
(d) Loss under the head “Capital Gains” u/s 74(1)
(e) Loss from the activity of owning and maintaining race horses u/s 74A(3)
(3) Consequently, section 139(3) requires filing of return of loss mandatorily
within the time allowed u/s 139(1) for claiming carry forward of losses
mentioned in (2) above.
(4) However, loss under the head “Income from house property” u/s 71B and
unabsorbed depreciation u/s 32 can be carried forward for set-off even though
return of loss has not been filed before the due date.
(5) A return of loss has to be filed by the assessee in his own interest and the
non- receipt of a notice from the Assessing Officer requiring him to file the
return cannot be a valid excuse under any circumstances for the non-filing of
such return.

BELATED RETURN [SECTION 139(4)]

Any person who has not furnished a return within the time allowed to him under
section 139(1) may furnish the return for any previous year at any time -
(i) before the end of the relevant assessment year; or
(ii) before the completion of the assessment, whichever is earlier.
REVISED RETURN [SECTION 139(5)]
If any person having furnished a return under section 139(1) or a belated return
under section 139(4), discovers any omission or any wrong statement therein,
he may furnish a revised return at any time –
(i) before the end of the relevant assessment year; or
(ii) before completion of assessment, whichever is earlier.

DEFECTIVE RETURN [SECTION 139(9)]

(1) Under this section, the Assessing Officer has the power to call upon the
assessee to rectify a defective return.
(2) Where the Assessing Officer considers that the return of income
furnished by the assessee is defective, he may intimate the defect to the assessee
and give him an opportunity to rectify the defect within a period of 15 days
from the date of such intimation. The Assessing Officer has the discretion to
extend the time period beyond 15 days, on an application made by the assessee.
(3) If the defect is not rectified within the period of 15 days or such further
extended period, then the return would be treated as an invalid return. The
consequential effect would be the same as if the assessee had failed to furnish
the return.
(4) Where, however, the assessee rectifies the defect after the expiry of the
period of 15 days or the further extended period, but before assessment is made,
the Assessing Officer can condone the delay and treat the return as a valid
return.
(5) A return of income shall be regarded as defective unless all the following
conditions are fulfilled, namely:
(a) The annexures, statements and columns in the return of income relating to
computation of income chargeable under each head of income, computations of
gross total income and total income have been duly filled in.
(b) The return of income is accompanied by the following, namely:
(i) a statement showing the computation of the tax payable on the basis of
the return.
(ii) the report of the audit obtained under section 44AB (If such report has
been furnished prior to furnishing the return of income, a copy of such report
and the proof of furnishing the report should be attached).
(iii) the proof regarding the tax, if any, claimed to have been deducted or
collected at source and the advance tax and tax on self-assessment, if any,
claimed to have been paid. (However, the return will not be regarded as
defective if (a) a certificate for tax deducted or collected was not furnished
under section 203 or section 206C to the person furnishing his return of income,
(b) such certificate is produced within a period of 2 years).
(iv) the proof of the amount of compulsory deposit, if any, claimed to have
been paid under the Compulsory Deposit Scheme (Income-tax Payers) Act,
1974;
(c) Where regular books of account are maintained by an assessee, the return
of income is accompanied by the following -
(i) Copies of manufacturing account, trading account, profit and loss account
or income and expenditure account, or any other similar account and balance
sheet;
(ii) The personal accounts as detailed below -
(1) Proprietary business or profession. The personal account of the proprietor
(2) Firm, association of persons or body of individuals personal accounts of
partners or members.
(3) Partner or member of a firm, association of persons or body of
individuals partner’s personal account in firm member’s personal account in
the association of persons or body of individuals.
(d) Where the accounts of the assessee have been audited, the return should
be accompanied by copies of the audited profit and loss account and balance
sheet and the auditor’s report.
(e) Where the cost accounts of an assessee have been audited under section
148 of Companies Act, 2013, the return should be accompanied by such report.
(f) Where regular books of account are not maintained by the assessee, the
return should be accompanied by -
(i) a statement indicating
(1) the amount of turnover or gross receipts,
(2) gross profit,
(3) expenses; and
(4) net profit of the business or profession;
(ii) the basis on which such amounts mentioned in (i) above have been
computed,
(iii) the amounts of total sundry debtors, sundry creditors, stock-in- trade and
cash balance as at the end of the previous year.
 Types of Assessment
I. Self- assessment –u/s 140A
Before submitting returns assessee is supposed to find whether he is liable for
any tax or interest. For this purpose this section has been introduced in Income
tax act.
Self-Assessment Tax is the balance tax that an assessee pays on the income that
has been assessed, only after taking the TDS as well as advance tax into
consideration before he or she files the return of income
Where any tax is payable on the basis of any return required to be furnished
under section 139 or section 142 or section 148 or section 153A, after
deducting:
i. Advance tax Paid, if any
ii. TDS/TCS
iii. Relief
iii. MAT credit.
Then assessee shall pay tax & interest before furnishing return and proof of
such payment will be accompanied with return of income.

II. Summary assessment

Assessment under section 143(1) is like preliminary checking of the return of
income. Under this section, Income tax department sent intimation u/s 143(1) in
which comparative Income Tax computation [i.e. as provided by Tax payer in
Return of Income and as computed u/s 143(1)] is sent by Income Tax
Department. At this stage no detailed scrutiny of the Return of Income is carried
out. At this stage, the total income or loss is computed after making the
following adjustment (if any), namely-
i. Any arithmetical error in the return,
ii. An incorrect claim, if such incorrect claim is apparent from any information
in the return;
iii. Disallowance of loss claimed, if return of the previous year for which set off
of loss is claimed was furnished beyond the due date specified under section
139(1);
iv. Disallowance of expenditure indicated in the audit report but not taken into
account in computing the total income in the return;
v. Disallowance of deduction claimed under section 10AA, 80-IA, 80-IAB, 80-
IB, 80-IC, 80-ID, or section 80-IE, if the return is furnished beyond the due date
specified under section 139(1);
vi. Addition of income appearing in form 26AS or form 16A or Form 16 which
has not been included in computing the total income in the return;

III. Scrutiny Assessment:

Scrutiny assessment refer to the examination of a return of income by giving
opportunity to the assessee to substantiate the income declared and the
expenses, deduction, losses, exemptions, etc. claimed in the return with the help
of evidence.
During the course of scrutiny, the assessing officer gets opportunity to conduct
enquiry as he deemed fit from the assessee and from third parties. The exercised
is aimed at ascertaining whether the income in the return is correctly shown by
the assessee and whether the claims for deductions, exemptions etc. are
factually and legally correct.
If any omission, discrepancies, inaccuracies, etc. comes light to as a result of
examination, the assessing officer makes his own assessment of the assessee’s
taxable income after taking into consideration all the relevant facts. These
assessments are made under section 143(3) of the income tax act.
The case selected for Scrutiny Assessment can be of by two types - i.e. (1)
Manual scrutiny cases and (2) Compulsory Scrutiny cases.
IV. Best Judgment Assessment
Section 144 of Income tax act, 1961 speaks about Best Judgment Assessment.
In the best judgment assessment, an assessing officer makes an assessment
based on his best reasoning. Assessee should neither be dishonest in his
assessment nor have a vindictive attitude. There are two types of Best Judgment
Assessment:
a. Compulsory best judgment assessment: It is done when assessing officer
finds that there is an act amounting to non co-operation by the assessee or where
assessee is found to be a defaulter in supplying information to the department.
b. Discretionary best judgment assessment: It is done in cases where
assessing officer is dissatisfied with the authenticity of the accounts given by
the assessee or where no regular method of accounting has been followed by the
assessee.
The process of Best Judgment Assessment is applied in conformity with the
Principle of Natural justice. As per the provision of Section 144 of the Income
Tax Act, 1961, the Assessing officer is supposed to make an assessment of the
income of an assessee to the best of his Judgment in the following cases:
If the person fails to make return u/s as required 139(1) and has not made a
return or a revised return under sub-section (4) or (5) of that section; or
If any person fails to comply with all the terms of a notice under section 142(1)
or fails to comply with the direction requiring him to get his account audited in
terms of section 142(2A); or
If any person after having filed a return fails to comply with all the terms of a
notice under section 143(2) requiring his presence or production of evidence
and documents; or
If the Assessing officer is not satisfied about the correctness or the completeness
of the accounts of assessee or if no method of accounting has been regularly
employed by the assessee
V. Protective assessment
Though there is no provision in the income tax act authorizing the levy of
income tax on a person other than whom the income tax is payable, yet it is
open to the authorities to make a protective or alternative assessment if it is not
ascertainable who is really liable to pay the tax among a few possible persons.
In making a protective assessment, the authorities are merely making an
assessment and leaving it as a paper assessment until the matter is decided (as to
whom the asset owned by) one way or another.
Further more, a protective order of assessment can be passed but not a
protective order of penalty must, however be noted that while protective
assessment is permissible, a protective order for recovery is not permissible.

VI. Re-Assessment (or) Income escaping assessment

Re-assessment is carried out if the Assessing officer has reason to believe that
any income chargeable to tax has escaped assessment for any assessment year.
i. Scope of assessment u/s 147 The objective of carrying out assessment u/s 147
is to bring under the tax net, any income which has escaped assessment in
original assessment. Here, Original assessment means an assessment u/s 143(1)
or 143(3) or 144 and 147 (as the case may be).
ii. Procedure of assessment u/s 147
a. For making assessment u/s 147, the assessing officer has to issue notice u/s
148 to the taxpayer and has to give him an opportunity of being heard.
b. If the Assessing officer has reason to believe that any income chargeable to
tax has escaped assessment for any assessment year, then he may, subject to
provisions of section 148 to 153, access to re-assess such income and also other
income chargeable to tax which has escaped assessment and which comes to his
notice subsequently in the course of proceeding under this section.
c. Items which are the subject matters of any appeal, reference or revision can
not be covered by the Assessing officer under section 147.
POWERS OF OTHER INCOME TAX AUTHORITIES:

Powers of the Income Tax Authorities vary with the nature of the position
acquired. Given below are the various tax authorities along with the powers
they hold under that position.

Director General/ Director:

The Director General/ Director, appointed by the Central Government, are
required to perform such functions as maybe assigned by the Central
Government, are required to perform such functions as may be assigned by the
Central Board of Direct Taxes. This position enjoys the following powers under
different provisions of the Act:
a. To give instructions to the Income-Tax officers
b. To enquire or investigate into concealment
c. To search and seizure
d. To requisite books of account
e. To survey
f. To make any enquiry

Commissioners of Income Tax:

Commissioners are appointed by the Central Government. Generally, they are
appointed to head income-tax administration of a specified area. A
commissioner may exercise powers of an assessing officer. It has the power to
transfer any case from one or more assessing officers to any other assessing
officer. It can grant approval for an order issued by the assessing officer. Prior
approval is required for reopening of an assessment. Its, also, has the power to
revise an order passed by an assessing officer in addition to many other powers
as given in the Income Tax Act, 1961.
Commissioner (Appeals):
Commissioners of Income-Tax (Appeals) are appointed by the Central
Government. It is an appellate authority vested with the following judicial
powers:
a. Power regarding discovery, production of evidence etc.
b. Power to call information.
c. Power to inspect registers of companies.
d. Power to set off refunds against tax remaining payable.
e. Power to dispose of appeals.
f. Power to impose penalty.

Joint Commissioners:
Joint Commissioners are appointed by the Central Government. The main
function of the authority is to detect tax- evasion and supervise subordinate
officers. Under the different provisions of the Act, the Joint Commissioner
enjoys the power to accord approval to adopt fair market value as full
consideration, instruct income tax officers, exercise powers of income tax
officers, the power to call information, to inspect registers of companies, to
make any enquiry among other powers.

Income-Tax Officers:
While Income-Tax officers of Class I services are appointed by the Central
Government, Income-tax Officers of Class II services are appointed by the
Commissioner of Income-Tax. Powers, functions and duties of Income-Tax
officers are provided in many sections, some of which are Power of search and
seizure, Power of assessment, Power to call for information, Power of Survey
etc.
Inspectors of Income-Tax:
They are appointed by the Commissioner of Income-Tax. Inspectors of Income-
Tax have to perform such functions as are assigned to them by the
Commissioner or any other authority under whom they are appointed to work.

THE SCOPE OF EXERCISE OF THE POWERS GIVEN TO THE

INCOME-TAX AUTHORITIES: (General Powers)

The Income Tax Act, 1961 specifies the scope of the powers handed to the
income-tax authorities. Given below are some of the important powers of the
Income Tax Authorities and their scope as given in the Sections provided under
the Income Tax Act, 1961:
i. Power to Transfer Cases [Section 127]:
CBDT can transfer the case from Assessing Officer to another A.O. subordinate
to him after giving a reasonable opportunity of being heard to the concerned
assessee. However, no opportunity of being heard shall be required if the case is
to be transferred from one A.O. to another A.O. within the same city, town or
locality. Disputes regarding jurisdiction shall be resolved by the concerned
CCIT or CIT on mutual understanding. However, for any disagreement, the
matter shall be referred to CBDT and CBDT shall resolve the dispute by way of
issuing a notification in the Official Gazette of India.

ii. Opportunity of Being Reheard [Section 129]:

Whenever, an Income Tax Authority ceases to exercise jurisdiction over a
particular case and is being succeeded by another Income Tax Authority, then
the successor Income Tax Authority shall continue the pending proceeding from
the same stage at which it was left over by the predecessor Income Tax
Authority. There shall be no requirement on the part of the successor Income
Tax Authority to reissue any notice already issued by his predecessor.
However, if the concerned assessee demands that before the successor Income
Tax Authority continues the proceeding, he shall be given an opportunity of
being reheard to explain his case to the successor Income Tax Authority, then in
such case, an opportunity of being reheard has to be given to the assessee.
(However, such an opportunity of being reheard is required to be given only if
the concerned assessee demands for it and not otherwise).The time of A.O. lost
in giving such opportunity of being reheard to the assessee, shall be excluded
while calculating time limit to complete the assessment.

iii. Discovery, Production of Evidence etc. [Section 131]:

The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner,
Commissioner (Appeals), the Chief Commissioner and the Dispute Resolution
Panel referred to in section 144C have the powers vested in a Civil Court under
the Code of Civil Procedure, 1908 while dealing with the following matters:
(i) discovery and inspection;
(ii) enforcing the attendance of any person, including any officer of a banking
company and examining him on oath;
(iii) compelling the production of books of account and documents; and
(iv) issuing commissions

iv. Search and Seizure [Section 132]:

Today it is not hidden from income tax authorities that people evade tax and
keep unaccounted assets. When the prosecution fails to prevent tax evasion, the
department has to take actions like search and seizure. Under this section, wide
powers of search and seizure are conferred on the income-tax authorities. The
provisions of the Criminal Procedure Code relating to searches and seizure
would, as far as possible, apply to the searches and seizures under this Act.
Contravention of the orders issued under this section would be punishable with
imprisonment and fine under section 275A.
v. Power to Requisition Books of Account etc. [Section 132A]:
Where the Director or the Director-General or Commissioner or the Chief
Commissioner in consequence of information in his possession, has reason to
believe that (a), (b), or (c) as mentioned under section 132(1) and the book of
accounts or other documents or the assets have been taken under custody by any
authority or officer under any other law, then the Chief Commissioner or the
Director General or Director or Commissioner can authorize any Joint Director,
Deputy Director, Joint Commissioner, Assistant Commissioner, Assistant
Director, or Income tax Officer to require the authority to provide sue books of
account, assets or any documents to the requisitioning officer, when such officer
is of the opinion that it is no longer necessary to retain the same in his custody.

vi. Application of Retained Assets [Section 132B]:

This section provides that the seized assets can be appropriated against all tax
liabilities of the assessee. However, if the nature of source of acquisition of
seized assets is explained satisfactorily by the assessee, then, such assets are
required to be released within a period of 120 days from the date on which last
of the authorisations for search under section 132 is executed after meeting any
existing liabilities. For this purpose, it has been provided that the assessee
should make an application to the Assessing Officer within a period of 30 days
from the end of the month in which the asset was seized. The assessee shall be
entitled to simple interest at ½% per month or part of a month, if the amount of
assets seized exceeds the liabilities eventually, for the period immediately
following the expiry of 120 days from the date on which the last of the
authorisations for search under section 132 or requisition under section 132A
was executed to the date of completion of the assessment under section 153A or
under Chapter XIV-B.
vii. Power to call for information [Sections 133]:
The Commissioner The Assessing Officer or the Joint
Commissioner may for the purpose of this Act:
(a) Can call any firm to provide him with a return of the addresses and names of
partners of the firm and their shares;
(b) Can ask any Hindu Undivided Family to provide him with return of the
addresses and names of members of the family and the manager;
(c) Can ask any person who is a trustee, guardian or an agent to deliver him
with return of the names of persons for or of whom he is an agent, trustee or
guardian and their addresses;
(d) Can ask any person, dealer, agent or broker concerned in the management of
stock or any commodity exchange to provide a statement of the addresses and
names of all the persons to whom the Exchange or he has paid any sum related
with the transfer of assets or the exchange has received any such sum with the
particulars of all such payments and receipts;

viii. Power of Survey [Section 133A]:

The term 'survey' is not defined by the Income Tax Act. According to the
meaning of dictionary 'survey' means casting of eyes or mind over something,
inspection of something, etc. An Income Tax authority can have a survey for the
purpose of this Act. The objectives of conducting Income Tax surveys are:
(a)To discover new assessees;
(b) To collect useful information for the purpose of assessment;
(c) To verify that the assessee who claims not to maintain any books of accounts
is in-fact maintaining the books; (d)To check whether the books are maintained,
reflect the correct state of affairs.
Power to Collect Certain Information [Section 133B]:
For the purpose of collection of information which may be useful for any
purpose, the Income tax authority can enter any building or place within the
limits of the area assigned to such authority, or any place or building occupied
by any person in respect of whom he exercises jurisdiction.

ix. Power to Inspect Registers of Companies [Section 134]:

The Assessing Officer, the Joint Commissioner or the Commissioner (Appeals),
or any person subordinate to him authorised in writing in this behalf by the
Assessing Officer, the Joint Commissioner or the Commissioner (Appeals), as
the case may be, may inspect and if necessary, take copies, or cause copies to be
taken, of any register of the members, debenture holders or mortgagees of any
company or of any entry in such register.

x. Other Powers [Sections 135 and 136]:

The Director General or Director, the Chief Commissioner or Commissioner
and the Joint Commissioner are competent to make any enquiry under this act
and for all purposes they shall have the powers vested in an Assessing Officer in
relation to the making of enquiries. If the Investigating officer is denied entry
into the premises, the Assessing Officer shall have all the powers vested in him
under sections 131(1) and (2). All the proceedings before Income tax authorities
are judicial proceedings for purposes of section 196 of the Indian Penal Code,
1860, and fall within the meaning of sections 193 and 228 of the Code. An
income-tax authority shall be deemed to be a Civil Court for the purposes of
section 195 of the Criminal Procedure Code, 1973.