Income Tax 2025

Appearance

Failure to furnish returns of income. ​

479(1) ​

If a person wilfully fails to furnish in due time the return of income, which is required to be furnished under section 263(1), or by notice given under sections 268(1) or 280, he shall be punishable,—

  • (a) in a case, where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds twenty- five lakh rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and shall also be liable to fine;
  • (b) in any other case, with imprisonment for a term which shall not be less than three months but which may extend to two years and shall also be liable to fine.

479(2) ​

A person shall not be proceeded against under sub-section (1) for failure to furnish in due time the return of income under section 263(1) for any tax year, if––

  • (a) the return is furnished by him before the expiry of one year from the end of the tax year or a return is furnished by him under section 263(6) within the time provided in that section; or
  • (b) the tax payable by such person, not being a company, on the total income determined on regular assessment, as reduced by the advance tax or self-assessment tax, if any, paid before the expiry of one year from the end of the tax year, and any tax deducted or collected at source, does not exceed ten thousand rupees.
Explanation

Section Summary: ​

This section deals with penalties for wilful failure to file income tax returns on time, as required under specific sections of the Income Tax Act. It outlines the consequences, including imprisonment and fines, for non-compliance. The section also provides exceptions where penalties will not apply if certain conditions are met.

Key Changes: ​

  1. Stricter Penalties: The new law introduces rigorous imprisonment for severe cases (where tax evasion exceeds ₹25 lakh), with terms ranging from 6 months to 7 years, along with fines. For less severe cases, imprisonment can range from 3 months to 2 years.
  2. Exceptions Added: The law now provides specific scenarios where penalties will not apply, such as filing returns within one year of the tax year-end or if the tax liability (after adjustments) is below ₹10,000.

Practical Implications: ​

  1. For Taxpayers:
    • Severe Consequences: Wilful failure to file returns can lead to imprisonment, especially in cases involving significant tax evasion.
    • Relief for Small Taxpayers: If the net tax liability (after deducting advance tax, TDS, etc.) is less than ₹10,000, no penalties will apply.
  2. For Businesses: Companies must ensure timely filing of returns to avoid harsh penalties, as the law does not provide the ₹10,000 exemption for companies.
  3. For Compliance: Taxpayers must be diligent in filing returns on time or within the grace period of one year to avoid penalties.

Critical Concepts: ​

  1. Wilful Failure: This refers to a deliberate or intentional act of not filing returns, as opposed to an accidental or unintentional omission.
  2. Regular Assessment: This is the final tax liability determined by the tax authorities after reviewing the taxpayer’s return and other documents.
  3. Advance Tax/Self-Assessment Tax: These are taxes paid by the taxpayer before filing the return, either as advance tax or during self-assessment.
  4. Interaction with Other Laws: This section works in conjunction with Sections 263(1), 268(1), and 280, which mandate the filing of returns under specific circumstances.

Compliance Steps: ​

  1. File Returns on Time: Ensure returns are filed within the due date specified under Section 263(1) or as per notices issued under Sections 268(1) or 280.
  2. Check Tax Liability: If the net tax liability (after deducting advance tax, TDS, etc.) is below ₹10,000, penalties may not apply, but filing is still required.
  3. Use Grace Period: If returns are not filed on time, file them within one year of the tax year-end to avoid penalties.
  4. Maintain Records: Keep documentation of advance tax, TDS, and self-assessment tax payments to support claims of reduced tax liability.

Examples: ​

  1. Case 1: Mr. A wilfully fails to file his income tax return for FY 2023-24. The tax evaded is ₹30 lakh. Under Section 479(1)(a), he could face rigorous imprisonment for 6 months to 7 years and a fine.
  2. Case 2: Ms. B fails to file her return but files it within one year of the tax year-end. No penalties will apply under Section 479(2)(a).
  3. Case 3: Mr. C’s net tax liability after deducting advance tax and TDS is ₹8,000. Even if he files late, no penalties will apply under Section 479(2)(b).
  4. Case 4: A company fails to file its return, and the tax liability exceeds ₹25 lakh. The company’s officers could face imprisonment and fines, as the ₹10,000 exemption does not apply to companies.