Missed Filing ITR-U on 31st March: Can you go to Jail?

The deadline for filing an updated income tax return, or ITR-U, for the financial year 2020-21 (AY 2021-22) was March 31, 2024. This deadline has now passed. If you missed the deadline and there was an error in your previously filed ITR, or there was misreported income or under-reporting of income, it cannot be corrected by filing ITR-U.

It was the last opportunity for taxpayers to correct these errors by paying up to a 50% penalty; but, the income-tax department may catch them at any time and levy a penalty of up to 200%.

In a recent case, the Delhi High Court sentenced a woman to imprisonment for failing to file an income tax return (ITR). The lady was required to file an ITR but had failed to do so.

[Read: Women sentenced to jail for not Filing ITR by Delhi Court]

The tax authorities wanted imprisonment to dissuade other taxpayers from noncompliance. Tax rules allow for imprisonment for purposeful conduct such as failure to file a return, concealing of income, making false declarations, and so on.

So, if a person files an ITR but does not file an ITR-U, he or she cannot be imprisoned because filing an ITR-U is optional. If any unreported income is detected, the tax authorities may seek imprisonment for concealment of income.

Failure to act on it may result in the tax department issuing a notice of attachment of the individual’s properties. If the tax department is unable to retrieve the funds, a request for arrest might be filed. Imprisonment is the last resort.

Both ITR-U and revised ITR allow you to revise your declared income; the difference is in two aspects: the tax penalty and the time restriction for filing. ITR-U can only be submitted in specific circumstances and after paying a penalty of up to 50% of the tax avoided. The revised ITR requires no penalty tax to be paid at the time of filing. Furthermore, updated ITRs can be filed up to nine months after the original year of filing.

A taxpayer has approximately nine months from the end of the financial year to file an updated ITR. Once the window for revising a submitted ITR had closed, he had no way to fix or remedy the return. This resulted in a position in which if any unreported income was discovered by the tax authorities, he would face a high tax rate and penalty. As a result, the government introduced ITR-U for any taxpayer who discovers that such income has been underreported or that an excessive deduction has been claimed. He can now declare the additional income in ITR-U. This will also assist in reducing tax-related lawsuits.

If eligible, the filing deadline for ITR-U is within 24 months of the end of the relevant assessment year.

According to tax professionals, there are just a few circumstances in which an individual may be permitted to file ITR-U after the deadline.

In some situations, persons may have missed filing the ITR-U while being eligible to do so. Under these conditions, and with a valid reason, an individual may file an ITR-U along with a condonation form under Section 119(2)(b).

The crucial aspect to remember here is that the condonation application request must be made at the time of filing the ITR-U.

In circumstances where the ITR-U filing date has passed, keep in mind that if the ITR-U is not filed with the condonation form, the concerned officer may issue a notice under section 148. After this, the tax can be paid or disputed; nevertheless, after the notice is issued, the matter will be scrutinized and treated differently.