If you are stuck in such a situation, here is what to do.

Mr. Rohan Mehra, a young software developer from the city of Anandpur, recently found himself in a state of anxiety regarding his tax compliance. He began his career with a startup, “NextGen Innovations,” in the financial year 2020-21. During that year, his total income was below the basic exemption limit, and under the impression that he had no tax liability, he did not file an Income Tax Return (ITR). In the following financial year, 2021-22, he received a significant promotion, and his annual salary package increased to ₹9 Lakhs, bringing him well within the taxable bracket. Unfortunately, due to a heavy workload and lack of awareness, he missed the due date for filing his ITR for that year as well. He is now concerned about the potential penalties and legal actions he might face from the Income Tax Department for not filing his returns for two consecutive years.

Advice in such cases

Facing a situation like Mr. Mehra’s can be stressful, but taking prompt and correct action is key. Here is some general advice:

• Gather all your financial documents. This includes your Form 16 from your employer, bank account statements, details of any investments or home loans, and any other documents related to your income and potential deductions.
• Calculate your tax liability for the missed years. You must also calculate the applicable interest for the delay in payment under the relevant sections of the Income Tax Act.
• Pay any outstanding tax and interest immediately through the official income tax portal. This is a crucial step to show your intent to comply.
• Explore the option of filing an Updated Return (ITR-U), which allows taxpayers to correct omissions or errors in their original returns within a specified timeframe.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

The Income Tax Act, 1961, governs all matters related to income tax in India. The key sections applicable in this scenario are:

• Section 139(1): This section mandates the filing of an ITR for any individual whose total income exceeds the basic exemption limit before claiming deductions.
• Section 139(8A): This section provides for filing an “Updated Return” (ITR-U). A taxpayer can file an ITR-U within 24 months from the end of the relevant assessment year, even if they have not filed any return previously. However, this comes with the payment of additional tax.
• Section 234F: This section imposes a late filing fee for not filing the ITR by the due date. The fee can be up to ₹5,000, depending on the income level and the delay.
• Section 234A: This section levies interest on the unpaid tax amount for the period of delay in filing the ITR.
• Section 276CC: This is a serious provision that deals with prosecution for willful failure to furnish a return of income. If the tax sought to be evaded exceeds a certain limit, it can lead to imprisonment. However, this is typically invoked in cases of deliberate and significant tax evasion, not mere oversight.

If you are the complainant

In tax matters, the “complainant” is the Income Tax Department, which acts on behalf of the government. If you receive a notice from the department regarding non-filing of ITR, you are the respondent or assessee. Here is what you should do:

• Do not ignore the notice. A notice from the Income Tax Department is a legal document that requires a timely response.
• Read the notice carefully to understand the reason it was issued, the information requested, and the deadline for response.
• Gather all the documents and information required to formulate a proper reply.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
• Draft and submit a comprehensive response within the stipulated time, either electronically through the portal or as directed in the notice.

If you are the victim

In this context, you are the assessee who has defaulted. To mitigate the consequences, you should act proactively and responsibly.

• Acknowledge the oversight and take immediate steps to rectify it. This includes paying the due tax with interest and filing the appropriate return (ITR-U).
• Maintain a clear record of all actions taken, including payment challans, copies of the filed returns, and any correspondence with the tax department.
• Cooperate fully with the tax authorities if they initiate any proceedings or ask for further information.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

Typically, the police have no direct role in cases of simple non-filing or late filing of income tax returns. These are civil matters handled by the Income Tax Department. Police involvement is extremely rare and would only occur if the Income Tax Department initiates criminal prosecution for willful tax evasion under Section 276CC of the Income Tax Act. For this to happen, the department must prove in court that the failure to file was a deliberate act to evade a substantial amount of tax. For most individuals who have simply missed the deadline due to oversight, the matter is resolved through penalties, interest, and proper filing, without any police intervention.

FAQs people normally have

What evidence is required?

To rectify the situation and respond to any notice, you will need to provide evidence of your income and taxes paid. Key documents include:

• Form 16 (TDS certificate from your employer).
• Bank account statements for the relevant financial year.
• Proof of any other income, such as from investments or rent.
• Documents supporting any deductions you wish to claim (e.g., investment proofs under Section 80C, health insurance receipts, home loan statements).
• Challans (receipts) for any tax, interest, or penalty paid by you.

How long will the investigation take?

The timeline for resolving such a case varies. If you proactively file an Updated Return (ITR-U) and pay all dues, the matter may be closed upon processing of the return. If the Income Tax Department issues a notice, the process is called an “assessment.” You will be required to submit a response and documents. The assessing officer will review your submissions and pass an assessment order. This process can take several months to over a year, depending on the complexity of the case, the workload of the officer, and your cooperation.

Advocate Sudhir Rao, Supreme Court of India