Answer

1. F

   Facts

   If there was genuinely no taxable income, the tax sought to be evaded is nil, which weighs against prosecution. But you must show it with accounts. Not filing also means the losses cannot be carried forward.

2. P

   Provisions and law

   • Sec 276CC (now Sec 479)Prosecution for wilful failure to file a return on time; jail of 3 months to 2 years, or 6 months to 7 years where tax evaded exceeds ₹25 lakh
   • Sec 80 (now Sec 121)Business and capital losses can be carried forward only if the loss return is filed by the Sec 139(1) due date
   • Sec 44AB (now Sec 63)Tax audit where turnover or receipts cross the limits
3. A

   Analysis

   Prepare simple accounts for each year and show the losses with bank statements and GST returns. Explain that no tax was payable, which supports the absence of wilful evasion. Under Sec 80 (now Sec 121), business losses of years without a timely return are not carried forward. If turnover crossed audit limits, an audit default may also be raised, so check that.

4. C

   Conclusion

   1. 1Prepare accounts for each unfiled year.
   2. 2Show losses with supporting documents.
   3. 3File returns where a route is open.
   4. 4Reply explaining no tax was payable.

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.