Govt cracks down on shell companies, removes exemptions from ITR filing

New Delhi, Feb 12: Seeking to crack down on shell companies, the government has proposed to remove exemption available to firms with tax liability of up to Rs 3,000 from filing income tax returns beginning next fiscal.
The Union Budget 2018-19 has rationalised the IT Act provision relating to prosecution for failure to furnish returns.Thus, a managing director or a director in charge of the company during a particular financial year could be liable for prosecution in case of any lapse in filing IT returns for any financial year beginning April 1.
“The income tax department would now track investments by these companies. Also, the focus will be on those firms that show less profit and also those who file IT returns for the first time,” a senior finance ministry official said. There are around 12 lakh active companies in the country, out of which about 7 lakh are filing their returns, including annual audited report, with the ministry of corporate affairs. Of this, about 3 lakh companies show ‘nil’ income.
Section 276CC of the Income Tax Act provided that if a person wilfully fails to furnish in due time the return of income, he shall be punishable with imprisonment and fine. However, no prosecution could be initiated if the tax liability of an assessee does not exceed Rs 3,000. The government has amended the provision with effect from April 1, 2018 and removed the exemption available to companies. (Agencies)