CBDT’s extended deadline: A lifeline not to be missed

On the last two days of December, the Central Board of Direct Taxes (CBDT) showed some mercy and extended three key due dates, which were supposed to end on December 31. The due date for filing belated and revised returns was extended to comply with the Bombay High Court’s interim directions, while the third pertaining to an amnesty scheme was also shifted purely at the department’s own discretion. 

Amnesty offer

The Union Budget 2024-25 tabled in last July introduced one more direct tax resolution scheme – ‘Direct Tax Vivad Se Vishwas Scheme, 2024’ - to reduce income-tax litigations. The taxpayers who have pending disputes and appeals, including writs and special leave petitions whether filed by the taxpayer or the tax department as of July 22, 2024, before the Commissioner of Income Tax – Appeals, Income Tax Appellate Tribunal, High Courts and Supreme Court, can settle their long pending disputes by paying only arrears of tax amounts and avail a waiver of interest and penalty to a certain extent. 

As per the scheme, where the pending case in respect of disputed tax and pendency has risen after January 31, 2020, the tax payer was required to pay 100 per cent of the disputed tax on or before December 31, 2024 (now extended to January 31, 2025), and thereafter 110 per cent.

If the pending case in respect of disputed tax and pendency arose prior to January 31, 2020, the tax payer is required to pay 110 per cent of the disputed tax on or before the deadline and thereafter 120 per cent.

However, if the pending case in respect of disputed interest, penalty, fee and the pendency happened after  January 31, 2020, 25 per cent of such disputed interest, penalty and fee by on or before the deadline, and thereafter 30 per cent.

If the same arose prior to January 31, 2020, 30 per cent of disputed interest, penalty and fee by on or before the deadline, and thereafter 35 per cent. 

In certain cases, the taxpayer is also eligible to pay only 50 per cent of the tax demand, which is otherwise payable by him/her as mentioned above. However, disputes relating to wealth tax, securities transaction tax, commodity transaction tax, equalisation levy or Google tax are not eligible to avail the benefit of the resolution, under this amnesty scheme. Disputes relating to search and seizure, prosecution, and undisclosed income/assets located overseas, proceedings initiated under other laws are also not eligible.  

On December 30, 2024, the CBDT extended that due date to January 31, 2025, from December 31, 2024, and thereafter,​ an additional 10 per cent tax and 5 per cent interest, penalty and fee as the case may be. As per​ the latest reports, around 2.7 crore direct tax demands totalling about Rs. 35 lakh crore are pending before various appellate forums.

Revised and belated return 

Due to a change in income tax returns utility and technical modifications on July 5 2024, taxpayers whose total income did not exceed Rs. 7 lakh under the new regime were unable to claim a statutory rebate in cases of capital gains, etc. provided under Section 87A of the Income Tax Act, 1961, for the assessment year 2024-25 though eligible. Prior to July 5, there was no bar in law to claim the rebate as such.   

To counter this, Mumbai-based ‘the Chamber of Tax Consultants’ approached the Bombay High Court. On December 20, after hearing both sides, the court in its interim order held that software utilities/instructions issued by the tax department cannot override the substantive right to the rebate. Any action or inaction on the part of tax authorities that limit the ability of taxpayers to avail of this statutory benefit is arbitrary and a violation of the ‘rule of law’. The court has directed CBDT to extend the due date for filing the revised and belated returns of those required to file by December 31, 2024, at least until January 15, 2024, to ensure that all eligible taxpayers exercise their right and claim the tax rebate as such.  

On December 31, 2024, the CBDT extended the due date of filing of revised and belated returns to January 15, 2025, from December 31, 2024. Subsequently, the department has released updated utilities for Form ITR-2 and Form ITR-3 to claim the rebate, if eligible. 

Do note that only resident individual taxpayers, who are eligible to claim relief under Section 87A but were unable to claim earlier, will be allowed. Further, the belated returns will attract applicable penalties as usual.  

More worries for non-filers

As per media reports, over the last 20 months the income tax department has collected Rs. 37,000 crore from individuals who had taxable income but failed to file their returns and who claimed zero income despite having substantial expenditures and tax obligations. Out of that, Rs. 1,320 crore was received from individuals who had high-value transactions. Evidently the income tax department is going after non-return filers. 

The extended deadlines have given taxpayers who wish to end their tax disputes or those who filed but were unable to claim the rebate and also non-filers, an excellent window to settle their disputes out of the court, to claim and file their due returns accurately and avoid inevitable complications. 

(The author is Founder & CEO of Shree Tax Chambers)