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January 15, 2021

6 Reason why Govt will not further extend the due date of filing ITR

by CA Shivam Jaiswal in Income Tax

6 Reason why Govt will not further extend the due date of filing ITR

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. With an ever-increasing corona virus cases, lockdown was considered as an only solution to flatten the curve. However, the measures which were implemented to avoid a human disaster, have in turn led to the birth of several issues such as unemployment, recession, hindrance to economic growth, financial instability and so on. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions.

An income tax return (ITR) is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability. The deadline for filing Income Tax Return for corporate and other assessee’s who are to get their accounts audited under Income Tax Act 1961 or under any other law for the time being in force is 30th September and for others, it is 31st July every year as have been prescribed under the Act. With the ongoing COVID -19 pandemic a lot of income tax due dates were extended. As a result, instead of July 31, 2020, the due date of filing return was first extended up to November 30, 2020, then to December 31, 2020 and finally to January 10, 2021.

Even after the extension provided, tax professionals and businesses were expecting government to be lenient regarding income tax return and tax audit due date extension. Many representations were made to government, amid all this CBDT through a detailed order u/s 119 of the Income Tax Act, 1961 dated 11.01.2021 clarified that there would be no further extension of tax audit due dates. All the representations for further extension of due dates were rejected by Government vide this order.

Why will the Government not extend the due date of filing ITR further?

1) Extensions already provided before

  • Instead of July 31, 2020, the due date of filing return was first extended up to November 30, 2020, then to December 31, 2020 and finally to January 10, 2021.
  • It was apparent from the extensions provided before that the Government had not only considered representations of various stakeholders but was also proactive in providing relaxation to the taxpayers by extending due dates regularly.

2) Indian Government provided more extension than most COVID hit countries

  • A look at the relaxation of similar nature provided by other economies globally made it clear that the Government of India was very empathetic to the needs of the taxpayers as compared various other countries.
  • Also, no other country had extended the due dates as much as India.
  • Even countries which were comparatively worse hit by COVID-19, like the USA, UK etc., have provided no or lesser extensions in due dates.

3) Filing of ITR’s is essential for the IT Department

  • The Government was proactive in analysing the situation and providing relief to assessee’s.
  • However, it should also be appreciated that filing of tax returns/audit reports were essential part of the obligations of assessee and could not be delayed indefinitely.
  • Many functions of the Income-tax Department started only after the filing of the returns by the assessee.

4) Important Source of Revenue

  • Filing of tax returns by assessee also results in collections of taxes either through payment of self-assessment tax by the assessee or by the subsequent collection by the department post processing or assessment of the tax returns.
  • The tax collections significance, increased in these difficult times and Government of India needs revenue to carry out relief work for poor and other responsibilities.
  • Any delay in filing returns affected collection of taxes and other welfare functions of the state for the vulnerable and weaker sections of society which is funded through the revenue collected.

5) Adverse effect on the return filing discipline of taxpayers

  • Sufficient time was already been given to taxpayers to file their tax returns and a large number of taxpayers had already filed their returns of income.
  • Any further extension would adversely affect the return filing discipline and shall also cause injustice to those who have taken pains to file the return before the due date.
  • It would also postpone the collection of revenue thereby hampering the efforts of the Government to provide relief to the poor during these COVID times.

6) More ITR’s filed this year than previous year

  • The CBDT order also provided t the data of returns filed for AY 2020-21 up to 10th January 21 and number of returns filed for AY 2019-20 up to its last date i.e., 31st August 2019.
  • For AY 20-21 ITRs filed up to last date (10.01.2021) were 5,95,15,322 while for AY 19-20 ITRs filed up to last date (31.08.2019) were 5,61,79,905.
  • The order concludes that as per above data it is clear that the number of returns filed this year for AY 20-21 for which extension is being requested, has already exceeded the number of returns filed last year up to its last due date of 31.08.2019.

Therefore, the government is of the opinion that there is no requirement of any further extension since the number of returns filed this year has already been more than last year filed ITRs. It is always considered a prudent action to file one’s income tax return on time. More than any other benefit, being on the right side of law helps. It is recommended to keep the income tax department informed about one’s income and taxability. This communication is only possible when one files their ITR.

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