Budget 2022: Penalty of Rs. 5,000 for Non-filing of Income Tax Returns; CBDT to Provide Relaxation to Persons Facing Genuine Hardships

Finance Minister Nirmala Sitharaman is presenting her fourth Union Budget in Parliament in a paperless manner, like she did last year. Domestic and foreign investors, as well as other interest groups such as farmers, crypto investors, worried middle class and business organizations, as well as MPs, will be watching the Budget address closely.

The Union Finance Minister, Nirmala Sitharaman, submitted the Finance Bill 2022 in Parliament, which suggested empowering the Central Board of Direct Taxes (CBDT) to grant relaxations to designated persons encountering genuine challenges in filing income tax returns within the statutory timeframe.

A person who fails to furnish a return of income under section 139 within the stipulated time is liable to pay a fine of five thousand rupees, according to Section 234F of the Act, which is found in Chapter XVII-F. Currently, clause (a) of sub-section (2) of section 119 of the Act does not explicitly address this provision.

The Board has the authority under Section 119 of the Act to issue orders, instructions, and directions to other income-tax authorities in order to ensure that the Act is properly administered. Clause (a) of sub-section (2) of the said section gives powers to the Board to provide relaxation of provisions of certain sections of the Act such as 115P, 115S, 115WD, 139, 1211, 234A, 234B, 234C, 234E, etc.by way of general or special orders, in respect of any class of incomes or class of cases, for the purpose of proper administration of the work of assessment or collection of revenue or initiation of proceedings for the imposition of penalties and such other issues, in public interest.

While this section serves as a deterrent to those who fail to comply with the Act’s obligations, it also has the unintended consequence of levying a fee on those who have genuine difficulty filing a return of income within the specified time frame, such as members of the armed forces stationed in remote areas without access to the necessary infrastructure.

As a result, it is proposed to insert section 234F and include it in the list of sections mentioned in clause (a) of sub-section (2) of section 119 of the Act, to enable the Board to issue such orders or instructions as it deems fit, taking into account the genuine hardships faced by certain classes of persons in filing returns of income and not to impose a fee for a default which is beyond their control. The new rule will go into effect in April 2022.