Defective Returns and Consequences under the New Law
A return of income may be filed on time, yet still be treated as invalid if it is defective. Under the new income-tax law, defective returns are no longer treated casually. They are system-flagged, time-bound, and carry real consequences if not cured promptly.
Understanding what makes a return defective and how to respond is essential for every taxpayer.
What Is a Defective Return
A return is considered defective when it does not comply with statutory requirements or lacks mandatory information.
Common defects include:
Incomplete or incorrect return forms
Missing financial statements or audit reports
Mismatch between income declared and schedules filled
Failure to furnish required annexures or disclosures
Errors in tax payment or verification
A defective return is not rejected immediately. The law provides an opportunity to rectify.
Notice of Defective Return
When a defect is identified, the tax department issues a notice electronically, specifying the nature of defect and granting a limited time period to rectify it.
This notice is system-generated and strictly time-bound. Ignoring it is a serious mistake.
If the defect is cured within the prescribed time, the return is treated as valid.
Consequences of Non-Rectification
Failure to rectify a defective return within the allowed period results in the return being treated as invalid.
An invalid return is deemed as not filed at all.
Consequences include:
Loss of return filing status
Loss of carry forward of losses
Late filing fees and interest
Exposure to penalty proceedings
Increased scrutiny risk
In practical terms, non-rectification can undo the entire compliance effort.
Defective Return vs Invalid Return
A defective return is a curable error.
An invalid return is a legal failure.
The distinction matters because once a return becomes invalid, subsequent corrective options become severely restricted.
Increased Automation under the New Law
Under the new law, defect detection is largely automated. System checks now cross-verify:
AIS and TIS data
Tax payment challans
Audit applicability
Schedule consistency
What earlier required manual review is now identified instantly.
Best Practices to Avoid Defective Returns
To prevent defective return notices:
Select the correct ITR form
Ensure all mandatory schedules are filled
Verify tax payments and challans
Upload audit reports before filing return
Cross-check disclosures with AIS and Form 26AS
Prevention is significantly cheaper than correction.
Conclusion
Under the new income-tax law, defective returns are not procedural inconveniences. They are compliance warnings.
Timely response to defect notices preserves return validity and statutory benefits. Ignoring them can result in irreversible consequences.
A valid return is not just filed. It is filed correctly.
Written by:
Abhishek Gupta
Chartered Accountant
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