Not verifying your income tax returns might have serious consequences

Refunds get blocked, losses aren't carried forward, and you could face a penalty

September 30 was the last date for verifying your pending income-tax returns (ITR) for the past several assessment years. If you have failed do so despite an extension, you could face the heat from the I-T department.

Taxpayers need to meet four stages of compliance. Says Vivek Jalan, partner, Tax Connect Advisory Services: “Pay income tax, prepare and submit an I-T return on the tax filing portal, verify the return, and then get it processed by the I-T department. At times, taxpayers do not verify their returns. This could be an oversight on their part. Overburdened tax professionals don’t ensure their clients do so. Sometimes, it is because their Aadhaar and mobile number are not updated, or there is a delay in sending the hard copy of ITR-V.” 

Relaxation was given: The Central Board of Direct Taxes (CBDT) had, via a circular dated July 13, allowed a one-time relaxation for verification of returns for specified years. “Individuals whose returns were not verified for assessment years (AY) 2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 could verify them by September 30, 2020,” says Gopal Bohra, partner, NA Shah Associates.

Not everyone was eligible for this relaxation. “It did not apply to cases where during the above-mentioned period, the department has already issued a notice or taken measures to ensure filing of returns after declaring such returns as invalid,” says Jalan. 

The consequences: If you missed the deadline, there will be consequences. Says Naveen Wadhwa, deputy general manager, Taxmann: “If the taxpayer fails to verify the return within the prescribed time, it is treated as invalid and the consequences of non-filing of return follow.” ITR has to be ideally verified within 120 days of uploading the return. The department processes the return only after it has been verified.  

Your tax refund could get blocked. Says Jalan: “A penalty could be levied for not filing ITR. The loss declared in the ITRs will not get carried forward.” The I-T department could even issue a tax notice.

If you have successfully filed and verified the return within the time prescribed for one year and missed it for another, then the refund will be issued after processing the return you filed and interest under Section 244A may be allowed on such refund, even if you have missed filing for one year. Says Wadhwa: “However, no interest will be granted for the period of delay attributable to the assessee.”

What can you do now? Recourse is available under Section 119(2)(b) of the I-T Act. It lets you admit an application or claim exemption, deduction, refund or any other relief after the expiry of the period also, provided you can prove that a genuine hardship prevented you from verifying the return. The taxpayer can file for condonation of delay. Says Jalan: “However, no condonation application for claim of refund or loss will be entertained beyond six years from the end of the assessment year for which the application or claim is being made.”