Rule 12 – Income Tax Rules 1962 | Return of Income

Table of the contents

1. The Statutory Background
2. Validity of Return Forms
3. e-Filing of Return
4. Due dates for filing returns under section 139(1)
5. Form of return of income (as amended up to 28-3-2022)
6. Filing of audit report with return of income

Check out Taxmann's Master Guide To Income Tax Rules | 2022 which covers an in-depth Rule-wise commentary on the Income Tax Rule 1962 in a simplified language. It incorporates all amendments up to IT (Second Amdt.) Rules 2022. It also covers a gist of all Circulars & Notifications issued by the Dept. & Income-tax Compliances, which are to be done in each Rule.

1. The Statutory Background

1.1 Under section 139 of the Act, the following persons shall, on or before the prescribed due date, furnish a return of their income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed:

• • • Compulsory filing of income-tax return in relation to assets located outside India – In the case of a resident person (but other than not ordinarily resident), it is mandatory to furnish return of income if he/it at any time during the previous year, –

a. holds (as a beneficial owner or otherwise) any asset (including financial interest in any entity) located outside India or has signing authority in any account located outside India, or

b. is a beneficiary in any asset (including any financial interest in any entity) located outside India.

For any person (may be individual or a person other than individual) who satisfies the above two conditions, furnishing of return has become mandatory, irrespective of the fact whether the person has taxable income or not.

Exception – The above provisions shall not apply to an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India where, income, if any, arising from such asset is includible in the income of the person referred to in (a) (supra).

Beneficial owner – In respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person.

Beneficiary – In respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary.

• • • Resident or non-resident – Section 139(1) applies to all persons whether they are resident or non-resident—Pannalal Nandlal Bhandari v. CIT [1961] 41 ITR 76 (SC). Obligation to file return under section 139 cannot simply disappear merely because a person may be entitled to claim benefit of a DTAA—Castleton Investment Ltd., In re [2012] 211 Taxman 282 (AAR – New Delhi).
    • Political parties – Political parties are under a statutory obligation to file return of income in respect of each assessment year in accordance with the provisions of the Income-tax Act and the total income for this purpose has to be computed without giving effect to provisions of section 13A—Common Cause A Registered Society v. Union of India [1996] 85 Taxman 600 (SC).
    • Liquidator – Under the Companies Act, a liquidator is not exempt from making an income-tax return on business managed by him for the beneficial winding up of the company—CIT v. Official Liquidator of the Agra Spg. & Wvg. Mills Co. Ltd. [1934] 2 ITR 79 (All.).
    • Charitable trust – Submission of return by charitable trust is essential even if its income is exempt—Lala Gopi Mal Kuthiala Trust v. ITO [1962] 46 ITR 436 (Punj.). If the total income of a charitable trust (without claiming exemption under sections 11, 12 and 13A) exceeds the maximum amount not chargeable to tax, then submission of return by the trust is essential.

Rule 12 prescribes the forms in which the returns must be furnished.

1.2 Exemption from filing return u/s 139(1C) – See Annex 1.5.

1.3 Effect of filing return of income – In State of Karnataka v. Selvi J. Jayalalitha [2017] 78 taxmann.com 161 (SC) it was held that income-tax returns and orders would not ipso facto either conclusively prove or disprove charge of disproportionate assets (acquisition of assets disproportionate to known sources of income) and can at best be pieces of evidences which have to be evaluated along with other materials on record.

In the said case it was held that where income tax returns relied upon by defence as well as orders passed in proceedings pertaining thereto had been filed/passed after charge-sheet had been submitted, neither income tax returns nor orders passed in proceedings relatable thereto, either definitively attested lawfulness of sources of income of accused persons or were of any avail to them to satisfactorily account disproportionateness of their pecuniary resources and properties as mandated by section 13(1)(e) of the Prevention of Corruption Act, 1988.

It was further held that submission of income tax returns and assessments orders passed thereon, would not constitute a complete defence against a charge of acquisition of assets disproportionate to known lawful sources of income as contemplated under Prevention of Corruption Act and that further scrutiny/analysis thereof was imperative to determine as to whether offence as contemplated by Prevention of Corruption Act was made out or not.

1.4 Obligation to file return and DTAAs – In Castleton Investment Ltd., In re [2012] 24 taxmann.com 150/211 Taxman 282 (AAR – New Delhi) it was held that section 139 insists that every person, being a company, firm or a person other than a company or firm if its or his total income exceeds the maximum amount, which is not chargeable to income-tax, has to file a return of income. A company, which is entitled to claim the benefit of a DTAC, might have an income exceeding the maximum amount which is not chargeable to tax under the Act. On the language of section 139, such a person is bound to file a return of income. When a person claims the benefit of a DTAC, that person is invoking section 90(2) to do so. In other words, a person, earning an income that is chargeable to tax under the Act, has to make a claim by invoking section 90(2) for getting the benefit of a DTAC. So, even if he would be entitled to seek relief under the DTAC, he has to seek it and that would be during the consideration of his return of income or at best while filing his return. If so, the obligation under section 139 cannot simply disappear merely because a person may be entitled to claim the benefit of a DTAC.

1.5 In case of firms – In Sasi Enterprises v. Asstt. CIT [2014] 41 taxmann.com 500/222 Taxman 78 (SC), it was held that a firm is independently required to file return of income; merely because partners of firm in their individual returns disclosed that no return had been filed by firm due to non-finalisation of books of account, would not nullify liability of firm to file its return as per section 139(1).

2. Validity of Return Forms

In Om Prakash Tewari v. UOI [2007] 163 Taxman 199 (All.), it was held that new return Forms for assessment year 2007-08, introduced by Government, are applicable for year in question only and, there­fore, as an interim measure, if returns were filed by petitioners and assessees in Saral 2D Form, same shall be entertained by authorities and shall not be rejected on ground that same were not in prescribed Forms ITR-1 to ITR-8.

In All Gujarat Federation of Tax Consultants v. UOI [2007] 163 Taxman 196 (Guj.), it was held that Notification No. SO 762(E), dated 14-5-2007 introducing new return Forms could not be quashed on ground that new tax return Forms introduced by said notification are so complicated that it is impossible for a genuine taxpayer to file returns with sup­porting details.

In Jodhpur Chartered Accountant Society v. Union of India [2007] 212 CTR (Raj.) 373, it was held that no prejudice was going to be caused to the Department if the assessees were allowed to submit return in Saral 2D Forms. If the returns were filed by the assessees of the State by submitting Saral 2D Forms, the same shall be entertained by the authorities and the same shall not be rejected on the ground that the same were not in the prescribed new Forms.

In Union of India v. Income-tax Bar Association, Lucknow [2008] 169 Taxman 38 the Supreme Court held that whether the return should be filed in a particular Form is not the business of the Court. It is for the statutory authority to decide the same. In that case the Supreme Court observed that though the High Court had permitted the assessees to file income-tax returns in Form Saral 2D, instead of Forms ITR-1 to ITR-8, due to paucity of time and non-availability of adequate number of forms, since time for filing return in prescribed Form had been extended, impugned order was to be set aside and all the assessees, who had already filed return in Form Saral 2D pursuant to the impugned order, were to be directed to file return in the prescribed Form till the extended date.

In Sujata Grover v. CIT [2014] 45 taxmann.com 36/223 Taxman 44 (Mag.)(Punj. & Har.) it was held that filing of income-tax return with an office which has no concern or connection with assessment of income of the assessee, in law, would amount to no filing of return under section 147, read with section 148.

3. e-Filing of Return

In Crawford Bayley & Co. v. Union of India [2011] 16 taxmann.com 323/[2012] 204 Taxman 598 (Bom.) for relevant assessment year, the assessee-firm uploaded its return of income on official website of Department. It received an electronically

generated mail from Department acknowledging e-filing of return of income. Subsequently, in accordance with instructions of Department, the assessee posted a copy of ITR-V Form duly signed by one of its partners. Said Form was remitted by ordinary post since instructions of Department specifically stipulated that ITR-V Form should only be sent by ordinary post. The assessee received a communication stating that said Form had not been received at Centralized Processing Centre. Hence, once again the assessee submitted a copy of Form which was transmitted by ordinary post. Finally, by impugned communication, the assessee was informed that return of income filed in electronic format had been treated as invalid on ground that ITR-V Form had not been received by Central Processing Centre of Department. It was held that since assessee had furnished adequate material before Court in support of its contention that having filed return electronically, it had also submitted ITR-V Form by ordinary post, impugned communication was to be set aside by permitting assessee to file a verification of return before Assessing Officer within a period of one week from date of order.

In Elecon Packpet v. ITO [2011] 15 taxmann.com 351/[2012] 49 SOT 402 (Chd. – Trib.) the assessee had e-filed its original return of income in which no deduction under section 80-IC was claimed. However, the said deduction was claimed in the revised return. The explanation of the assessee in this regard was that it had claimed the deduction under section 80-IC in the original return of income but due to computer system error, the same was not reflected in the return. The Assessing Officer, however, rejected the explanation and refused to allow deduction under section 80-IC. It was held that the Assessing Officer had not pointed out any default in furnishing of the audit report under section 44AB. No reference was made to non-fulfilment of conditions for claiming deduction under section 80-IC by non-furnishing of details of the audit report. Further, the assessee had within the prescribed period revised its return of income and had corrected the error in the original return of income. Therefore, the assessee could not be said to have not fulfilled the provisions of section 80-IC in furnishing the return of income prescribed under section 139(1), keeping in mind that this was first year of e-filing of return of income by the assessee. In view of the above, the appeal of the assessee was to be allowed.

In Court On Its Own Motion v. CIT [2013] 31 taxmann.com 31 (Delhi) a public interest litigation was filed alleging numerous difficulties faced by income-tax assessees after implementation of computerization and central processing of returns. To remove such difficulties, mandamus were issued by the Delhi High Court regarding (i) maintenance of register for receipt and disposal of rectification applications under section 154; (ii) procedure prescribed under section 245 to be followed by CPC before making adjustment of refund payable with existing demand; (iii) past adjustments, where procedure under section 245 had not been followed; (iv) interest under section 244A to be allowed when assessee is not at fault; (v) uncommunicated intimation under section 143(1); (vi) verification and correction of unverified TDS in Form 26AS and unmatched challans, within a time period to be fixed; (vii) credit of TDS to an assessee when tax deducted has been deposited with revenue but incorrect particulars have been uploaded by deductor.

Samir Narain Bhojwani v. Dy. CIT [2020] 115 taxmann.com 70 (Bom.) it was held that procedure of filing electronic return as per section 139D read with rule 12 cannot bar assessee from making claim which he was entitled to; assessee was directed to make representation before CBDT where he was not able to reflect set off of loss available in terms of section 72 in prescribed return of income in electronic form.

In Shapoorji Pallonji & Co. (P.) Ltd. v. Dy. CIT [2016] 76 taxmann.com 92 (Bom.) it was held that where the Assessing Officer was unable to process return due to system failure, the senior most officers of department would address issue on war-footing to ensure that the system runs efficiently so that the return could be processed and, refund, if any, could be granted.

In Tata Projects Ltd. v. Dy. CIT [2017] 88 taxmann.com 325 (Bom.) it was held that whenever returns are transferred by Central Processing Centre to the Assessing Officer for processing, if returns cannot be processed immediately because of lack of availability of proper software, or because of technical difficulties in functioning of software, the Commissioner ought to permit the Assessing Officer to process returns manually. Where software is not provided to deal with returns of a particular year, there is no embargo imposed by law which prevents the Assessing Officer from processing returns manually.

In Sumanchandra G. Mehta v. ITO [2013] 33 taxmann.com 25/60 SOT 21 (URO) (Mum. – Trib.) it was held that where there was clerical mistake in e-return, Assessing Officer should rectify such mistake.

In E.K.K. & Co. v. Asstt. CIT [2012] 27 taxmann.com 111/[2013] 144 ITD 636 (Cochin – Trib.) the assessee uploaded return of income electronically on 25-9-2009 and claimed to have posted acknowledgement Form ITR-V on 5-10-2009. However, said acknowledgement was received at CPC, Bangalore on 29-11-2010, i.e., beyond period of 120 days as stipulated in scheme of e-filing. However, for relevant assessment year 2009-10, specified period was extended up to 31-12-2010. It was held that since acknowledgement was received by CPC within extended period, for all practical purposes, date of filing return would relate back to date on which return was electronically uploaded, i.e., 25-9-2009, and it could not be contended that date of receipt of Form ITR-V by CPC would be date of receipt of return.

In Dwarkadas G. Panchmatiya v. Asstt. CIT [2015] 57 taxmann.com 2/153 ITD 625 (Mum. – Trib.) it was held that in terms of Electronic Furnishing of Return of Income Scheme 2007, assessee would be deemed to have furnished valid return of income if duly verified form ITR-V is filed within 15 days after e-filing of return; if ITR-V is filed thereafter, no deduction for section 80-IB, etc. would be allowed.

In Himanshu Nalin Kaji v. Dy. CIT [2015] 60 taxmann.com 70/155 ITD 41 (Mum.-Trib.) it was held that inadvertent mistake of not mentioning short-term capital gain in a column of ITR 4 is not fatal to assessee’s claim for concessional rate of tax under section 111A.

In Fibres & Fabrics International (P.) Ltd. v. Dy. CIT [2016] 72 taxmann.com 87/160 ITD 102 (Bang. – Trib.) it was held that return of income could not be declared as invalid for belated receipt of Form ITR-V.

In Luxury Goods Retail (P.) Ltd. v. Dy. CIT [2017] 83 taxmann.com 186/165 ITD 490 (Mum. – Trib.) it was held that when assessee could not file return electronically within due date due to technical reasons but manual return was filed within due date as specified under section 139(1), benefit of set off and carry forward of losses could not be denied.

4. Due dates for filing returns under section 139(1)

The due dates prescribed for filing returns under section 139(1) for various categories of persons/situations are as follows:

The prescribing of different dates for companies and other cate­gories of assessees was held as not violative of article 14 of the Constitution – N. Vinodkumar & Co. v. Union of India [1999] 237 ITR 502 (Kar.).

4.1 When due date falls on a holiday – Where the due date falls on a day on which the income-tax office is closed, it has been clarified that the return can be filed on the next day afterwards on which the office is open, and that the return so filed will be treated as a return filed in time for all purposes. – CBDT Circular No. 639, dated 13-11-1992 [Annex 12.1].

4.2 Extending the due date in special circumstances – Under section 119(2)(a) of the Act, the CBDT is empowered to relax the provisions of section 139 under certain specified special circum­stances, and also correspondingly relax the requirement of levy of interest under section 234A/234B/234C.

5. Form of return of income (as amended up to 28-3-2022)

Form of return of income, as per rule 12(1), shall be as under :

(a) in the case of a person being an individual who is a resident other than not ordinarily resident and where the total income includes income chargeable to income-tax, under the head,—

(i) “Salaries” or income in the nature of family pension as defined in the Explanation to clause (iia) of section 57; or

(ii) “Income from house property”, where assessee does not own more than one house property and does not have any brought forward loss or loss to be carried forward under the head; or

(iii) “Income from other sources”, except winnings from lottery or income from race horses and does not have any loss under the head, be in Form SAHAJ (ITR-1) and be verified in the manner indicated therein:

The provisions of (a) shall not apply to a person who,—

(I) has assets (including financial interest in any entity) located outside India;

(IA) has signing authority in any account located outside India;

(IB) has income from any source outside India;

(IC) has income to be apportioned in accordance with provisions of section 5A;

(ID) has claimed deduction under section 57, other than deduction claimed under clause (iia) thereof;

(IE) is a director in any company;

(IF) has held any unlisted equity share at any time during the previous year;

(IG) is assessable for the whole or any part of the income on which tax has been deducted at source in the hands of a person other than the assessee;

(II) has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91;

(III) has agricultural income, exceeding five thousand rupees;

(IV) has total income, exceeding fifty lakh rupees;

(V) has income taxable under section 115BBDA;

(VI) has income of the nature referred to in section 115BBE;

(VII) is a person in whose case tax has been deducted under section 194N; or

(VIII) is a person in whose case payment or deduction of tax has been deferred under sub-section (2) of section 191 or sub-section (1C) of section 192;

(b) in the case of a person being an individual [not being an individual to whom clause (a) applies] or a Hindu undivided family where the total income does not include income under the head business or profession, be in Form No. ITR-2 and be verified in the manner indicated therein;

(c) in the case of a person being an individual or a Hindu undivided family, who is a resident other than not ordinarily resident, or a firm, other than limited liability partnership firm, which is a resident deriving income under the head “Profits or gains of business or profession” and such income is computed in accordance with special provisions referred to in section 44AD, section 44ADA and section 44AE of the Act for computation of such income, be in Form SUGAM (ITR-4) and be verified in the manner indicated therein:

The provisions of (c) shall not apply to a person who,—

(I) has assets (including financial interest in any entity) located outside India;

(IA) has signing authority in any account located outside India;

(IB) has income from any source outside India;

(IC) has income to be apportioned in accordance with provisions of section 5A;

(ID) is a director in any company;

(IE) has held any unlisted equity share at any time during the previous year;

(IF) has total income, exceeding fifty lakh rupees;

(IG) owns more than one house property, the income of which is chargeable under the head “Income from house property”;

(IH) has any brought forward loss or loss to be carried forward under any head of income;

(IJ) is assessable for the whole or any part of the income on which tax has been deducted at source in the hands of a person other than the assessee;

(II) has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91;

(III) has agricultural income, exceeding five thousand rupees;

(IV) has income taxable under section 115BBDA;

(V) has income of the nature referred to in section 115BBE; or

(VI) has income of the nature specified in clause (vi) of sub-section (2) of section 17 on which tax is payable or deductible, as the case may be, under sub-section (2) of section 191 or sub-section (1C) of section 192;

(d) in the case of a person being an individual or a Hindu undivided family other than the individual or Hindu undivided family referred to in clause (a) or clause (c) or clause (ca) and having income under the head business or profession, be in Form No. ITR-3 and be verified in the manner indicated therein;

(e) in the case of a person not being an individual or a Hindu undivided family or a company or a person to which clause (g) applies, be in Form No. ITR-5 and be verified in the manner indicated therein;

(f) in the case of a company not being a company to which clause (g) applies, be in Form No. ITR-6 and be verified in the manner indicated therein;

(g) in the case of a person including a company whether or not registered under section 25 of the Companies Act, 1956 (1 of 1956), required to file a return under sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) of section 139, be in Form No. ITR-7 and be verified in the manner indicated therein.

6. Filing of audit report with return of income

Rule 12(2) provides that returns shall not be accompanied by a statement showing the computation of the