Section 139 of Income Tax Act, 1961

In India, the Income Tax department has categorised incomes of Indian taxpayers into five broad classifications based on the source of the income. These 5 categories are - 

• Salary

• Business

• House property

• Capital gains

• Other sources

 

As an earning individual in India, you are required to pay income taxes to the government of India. There are also deadlines that you need to adhere to in order to ensure that your taxes are filed on time. Oftentimes, defaulting on these deadlines will result in penalties or you’ll have to make late filings. 

 

Section 139 of the IT Act, 1961 offers a guideline on how taxation of late filing of various Income Tax Returns are to be treated. Section 139 of the It Act, 1961 is relevant when taxpayers have failed to file their income tax returns within the stipulated time period. Section 139 comes with multiple divisions like Section 139 (1), Section 139 (3) and likes that deal with a specific situation or instance. 

Section 139 of Income Tax Act acts as a framework for filing defaulted returns that the taxpayer has not filed for the same within the set timeline. There are a number of sub-sections under Section 139 of the IT Act, 1961. Section 139 of Income Tax Act is designed to offer means to rectify non-submission of Income Tax returns within the stipulated timeline.

There are a number of sub-sections under Section 139 of the Income Tax Act, 1961. Here’s an explainer on the subsections to help you understand them a little bit better. 

Section 139 (1)

Section 139(1) offers a framework on how mandatory return policies when filing the Income Tax Return must be dealt with. Let’s take a look at all the entities that are required to file their Income Tax returns:

• Indian taxpayers whose total income is over the basic exemption limit will be required to file their income tax return.

• Firms, including: 

  1. ULP (Unlimited Liability Partnership)

  2. LLP (Limited Liability Partnership)

• Any domestic, public, private, or foreign entities that are either doing business in India or located in India.

• Residents who have assets that are outside India. This also includes entities that retain authority for an account that’s based outside of India.

• Voluntary Tax Returns are applicable in cases wherein individuals and entities are not under any compulsion to file IT returns.

• Every AOP (Association of Persons), HUF (Hindu Undivided Family) and BOI (Body of Individuals) will be required to file an ITR if their income goes beyond the prescribed exception limit.

Section 139(3)

Section 139(3) provides a framework on how income tax returns are to be dealt with in case relevant and eligible business entities or individuals have suffered a loss. In case you have incurred a loss during the last financial year as an individual, filing income tax returns is not required. On the other hand, companies or firms that have experienced a loss are required to file income tax returns. The provisions for the same are as follows:

• In case the loss comes under the heading - ‘Profits and Gains of Business and Profession’ or under ‘Capital Gains’, then Income Tax returns filing will be compulsory. This is applicable when the firm wants to carry forward its loss and set it off against prospective income.

• This loss can be carried forward even if the Income Tax returns are filed post its due date, provided that the loss has been incurred under the heading - ‘Residential Property or House’.

• This option is available only if the Income Tax Return filing is done within the prescribed due date.

• Loses other than losses filed under ‘House Property’ will not be carried forward. It’s important to note that non-offset depreciation can be carried forward.

• Losses incurred during previous years may also be carried forward in case the returns of these losses were filed on time and losses were assessed. 

• In case you set off the loss against other income categories during the same year, then the offset will be allowed even if the return is submitted post the due date.

• It’s important to file ITR for your loss as it allows you to carry your losses forward, this will help you bring down your tax liability in future.

Section 139(4)

Income Tax authorities provide you with a due date for filing Income Tax returns, or ITR. If for whatever reason, you do not file your tax returns within the stipulated time period, or within the time period as mentioned in a notice issued under Section 142(1), you can still file a belated return under Section 139(4). As per  Section 139(4), any taxpayer can file belated returns, given that the belated filing falls within a period of one year from the end of the relevant assessment period or prior to the end of the assessment, whichever is earlier.

Penalty Under Section 139(4) of the Income Tax Act

If you end up defaulting on your income tax returns within the current assessment year as well, you may be charged with a penalty of ₹5,000 under Section 271F of the Income Tax Act. However, no penalty shall be levied if filing is not mandatory for your income as per the provisions of Section 139(1).

Section 139(5)

Section 139(5) under Section 139 of Income Tax Act offers a framework to deal with revised returns. However, this provision is only applicable if you filed your ITR in time. Let’s assume you realise after filing your returns that there’s been an omission or mistake in your ITR filing, then you can take advantage of this provision to revise your Income Tax returns to rectify these errors under Section 139(5). But, it’s important to note that late returns cannot take advantage of this provision.

 

You can revise your return at any point during the year or during the relevant assessment period, whichever is earlier. You can choose to revise your ITR using the original ITR documents or using a fresh one. 

 

An important point to note is that the provision for returns will be allowed only where there are genuine mistakes. If you end up using this provision maliciously, you may be fined for omission, intentional mistake and fraudulent filing.

Section 139(4a)

Section 139(4a) under Section 139 of Income Tax Act deals with Income Tax returns of religious trusts or charitable trusts. Under this section, Income Tax Return filing will be  required for all individuals and applicable entities who have received income from any property that is being retained under trusts and other legal obligations. 

Section 139(4b)

Section 139(4b) under Section 139 of the IT Act offers guidance on how income from political parties should be furnished. Under this section, political parties must file Income Tax returns if the entire income is over the upper limit of the IT exemption limit. The aggregate income calculated for this reason should exclude the effects of provisions under Section 13(A). 

Section 139(4c) and Section 139(4d)

Section 139(4c) and Section 139(4d) of the IT Act offer a framework for the treatment of Income Tax returns of specific entities by providing them with the opportunity to claim some IT benefits under Section 10 of the Income Tax Act, 1961. Income Tax returns under Section 139(4c) deals with institutions and organisations that are legally obligated to file tax returns in case the amount realised by these institutions is over the upper limit of exemption of tax. This does not include other exemption benefits that can be enjoyed by eligible institutions. An Income Tax returns under Section 139(4c) must be filed by: 

• Association that are engaged in scientific research

• Associations or institutions prescribed under Section 10(23A)

• Institutions indicated under Section 10(23B)

• News agencies

• Educational institutions, university, hospitals

Section 139(4f)

Every investment fund that’s been mentioned under Section 115UB, that is not expected to file Income Tax returns or losses under this heading, should file an Income Tax return with regard to its loss or income for the previous year. 

Section 139(9)

Section 139(9) of the IT Act deals with defective returns of income. A tax return will be considered defective if the filling is missing important documents and proofs. The assessee will be informed about the missing documents and will be given the chance to rectify these defects in case the return is considered defective. However, this rectification should be done within a period of fifteen days starting from the day of the intimation. If the taxpayer requests for extension through an application, then an extension will be provided as well.

Section 139 of Income Tax Act has different subsections that deal with various kinds of tax returns filed by individuals, entities and institutions as well as different scenarios of mistakes and delays in filing returns. Therefore, a few due dates are set for this section for such individuals and entities according to which the returns have to be filed.

 

Mentioned below are the due dates for Section 139 of Income Tax Act 1961:

 

Due date for filing income tax returns under Section 139 is July 31. 

If you are not required to audit your books of account, ensure that you file your ITR before July 31 of every assessment year. If you fall under any of these categories, file your ITR on or before July 31: 

• Paid with a wage

• Self-employed

• A consultant or freelancer

 

On the other hand, if you are legally required to audit your books of account, ensure that you file income tax returns before September 30 of every assessment year. If you fall under any of these categories, file your ITR on or before September 30: 

• You own a business entity

• You are a self-employed person 

• You are a working professional

• A working partner employed with a firm 

• You are a consultant, who is required to conduct an audit of his/her accounting book

ITR Form 7 is released by the IT Department. It is related to Section 139 of Income Tax Act, 1961 as it is applicable to all the institutions, individuals and entities that are required to file ITR under Sections Sections 139(4a), 139(4b), 139(4c) and 139(4d). ITR Form 7 can be filed in any of the following manners with the Income Tax department:

• Electronically with digital signature

• Electronically transmitting data that will be followed by submitting of verification of the return in the ITR-V Form

• In paper form

• Furnishing return that is bar-coded

As mentioned above, a notice of defective return is given to a taxpayer when they have not filled all the necessary information or documents required. When such a defect is found by the IT department, they issue a defective return notice under Section 139(9) of the IT Act. A taxpayer gets 15 days of time from the date of receiving this notice to rectify these defects in the return. Here is a step-by-step guide on how to file the defective return under Section 139(9).

1. Go to the official website of the income tax at http://www.incometaxindiaefiling.gov.in/ and login with your User ID and Password and Date of Birth/Date of Incorporation.

2. Select the ‘E-File’ section in response to notice under Section 139(9).

3. After successful validation, a new screen will be displayed if there is any defective notice issued to you.

4. Click on the ‘Submit’ button under the response column to submit your response.

5. If the AO has issued any defective notice, a different screen will be displayed after clicking ‘E-File’ in response to notice Under Section  139(9).

6. Select the relevant ITR form from the drop-down and attach an XML file. Once it is done, click on ‘Submit’. A success message will appear.

7. If a defective notice has been issued by the CPC, a different screen will appear post clicking on ‘E-File’ in response to notice Under Section  139(9).

8. Select the ‘Yes’ option available under the column ‘Do you agree with the defect?’. Select the ITR form and upload the respective XML file. If you are not in agreement with the defect, click ‘NO’. In such a scenario, you will have to justify under the ‘Assessee Remarks’ column for the disagreement.

9. If the value under the Error Code column is ‘31’ and you have opted ‘No’ under the column ‘Do you agree with defect?’, you will have to provide some additional information that is asked on the screen. Click on ‘Submit’ once the process is done.

10. If the assessee selects ‘Yes’ or ‘NO’ in the drop-down list displayed under ‘Details for Error Code 31’ table, i.e. if the company is FII/FPI, the assessee will have to provide further necessary details as displayed on the screen. Once it is done, click on ‘Submit’.

11. Upon successful submission of the response, a success screen is displayed.

12. You can also see the response submitted by clicking ‘View’ under the response column.

13. To know the details of the submitted response, click on ‘Transaction Id’.

There are different forms of error codes under Section 139 of Income Tax Act, 1961. They have a list of defects for the assessee for receiving defective return notice. Here is a look at some of the error codes under Section 139 of Income Tax Act, 1961.

• Error Code 14

ITR is treated as a defective return when the assessee provides a negative amount in gross profit or net profit sections.

• Error Code 8

If the total income under Section 44AD is less than 8% of gross turnover/gross receipt and the assessor submits ITR-4S, it will be treated as a defective return.

• Error Code 31

It is displayed when a taxpayer is having income under the head “Profits and Gains of Businesses and Profession”, but has not filled the Balance Sheet and Profit and Loss Account.

• Error Code 38

This code is shown when tax is determined as payable in the return of income filed but not paid.

Section 139 of Income Tax Act, 1961 offers a framework on how late filing of various Income Tax Returns are to be treated. Section 139 of  Income Tax Act, 1961 is relevant when taxpayers who have failed to file their income tax returns within the stipulated time period. Section 139 comes with multiple divisions like Section 139 (1), Section 139 (3), Section 139(4), Section 139(5), Section 139(4a), Section 139(4b), Section 139(4c) and Section 139(4d), Section 139(4f) and Section 139(9).