Submit Income Tax Audit Report Today To Avoid Penalties

The Centre has extended the deadline to file income tax audit reports for FY 2023-24. Originally set for September 30, the new October 7 deadline offers businesses and professionals a reprieve. Experts warn that further extensions are unlikely.

Union Minister Dr Jitendra Singh was grateful for the extension in response to a request made by the “Associated Chamber of Commerce & Industries, Udhampur”. On social media platform X, Mr Singh thanked Finance Minister Nirmala Sitharaman for granting the extension and "conceding the request and issuing the orders accordingly."

Assessment Year 2024-25. Thank you Smt Nirmala Sitharaman ji @nsitharaman for conceding the request and issuing the orders accordingly.
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— Dr Jitendra Singh (@DrJitendraSingh) September 30, 2024

Why was the deadline extended?

Gaurav Gupta, Managing Partner of S G Taxman Solutions, explained that this year's extension stemmed from technical issues related to the exemption from using Digital Signatures for small business owners and professionals, particularly proprietorship firms. "Systems and processes were facing technical glitches," Mr Gupta said, as per the Economic Times. 

With GST numbers tied to PAN data, the government anticipated a significant volume of tax audits and expected system overloads near the original deadline.

Consequences of missing the October 7 deadline

SR Patnaik, Partner (Head - Taxation) at Cyril Amarchand Mangaldas, warned that failing to meet the extended deadline could result in penalties. “The tax audit should have been completed by September 30, and filing can be done by October 7. Missing this deadline can lead to penalties under the Income Tax Act, 1961,” Mr Patnaik said, as per ET. 

Specifically, non-compliance with Section 44AB may incur a penalty of 0.5 per cent of total sales, turnover, or gross receipts, or Rs 1.5 lakh, whichever is lower.

For those required to undergo a tax audit, it is essential to file the audit report before submitting their income tax return (ITR). If this isn't done, the ITR will be considered defective. The deadline for filing ITRs, if a tax audit is applicable, is October 31, 2024.

Consequences of missing the ITR deadline

According to Parveen Kumar, Partner at Dewan PN Chopra & Co, missing the ITR deadline will force taxpayers to file a belated return, which can only be submitted until December 31 of the relevant assessment year. 

Filing a belated ITR comes with several consequences:

• A late fee under Section 234F of Rs 1,000 (or Rs 5,000 if the declared income exceeds Rs 5 lakh)
• Interest on outstanding taxes
• Inability to carry forward losses to future years

Mr Kumar also explained that not filing an ITR, even if a tax audit report has been submitted, can lead to serious repercussions:

• A penalty of Rs 5,000 by the assessing officer under Section 271F
• Interest charges under Section 234A for outstanding tax
• A notice for reassessment under Section 148 for detailed scrutiny of income
• Losses, such as business or capital losses, cannot be carried forward
• In severe cases, prosecution may be initiated by the Income Tax Department for significant tax liabilities.

Meanwhile, there is speculation that the overall ITR deadline could be extended further, possibly to November 7, 2024, given the upcoming Diwali festivities.