Updated Income Tax Return under section 139(8A)

Budget 2022 has shown the commitment of the Government to move strongly towards digitalization and one such measure towards this direction is the introduction of the concept of “Updated Income Tax Return” in the Income Tax Act, 1961. Updated Return is a step towards reducing litigation and bringing more transparency to the tax system. Due to the focus on digitalization and automation of processes, the tax authorities are having huge information and data available with them. The income tax department may issue notices to the taxpayers if such information is not disclosed by them in their returns. But this will again result in a time-consuming process in assessments and a plethora of pending litigations. Therefore, the Government has come out with this concept of “Updated Return” to motivate the taxpayers to voluntarily disclose any income which could not be disclosed in the original or revised or belated return after paying some additional tax. In this article, we will discuss the provisions of newly inserted section 139(8A) and section 140B in this regard.

What is Updated Income Tax Return

Any person, whether such person has filed or not filed his original return or belated return or revised return, shall be eligible to file the updated return of his own or for such person in respect of whom he is assessable under the Income Tax Act, 1961. Such updated return can be furnished within 24 months from the end of the relevant assessment year.

Some people are wrongly interpreting that ‘Revised Return’ has been replaced by the ‘Updated Return’. Please note that the concept of ‘Revised Return’ continues to exist in the Act and there is no change in the time limits of filing original, belated, or revised returns. Original returns shall be filed by 31^st July, 31^st October, and 30^th November, as the case may be. Similarly, the time limit for filing a belated or revised return shall be before 3 months prior to the end of the relevant assessment year or before the completion of the assessment, which is earlier. Let’s start with the reading of newly inserted section 139(8A) and analysis the provisions of the ‘Updated Return’.

Section 139(8A)

“Any person, whether or not he has furnished a return under sub-section (1) or sub-section (4) or sub-section (5), for an assessment year, may furnish an updated return of his income or the income of any other person in respect of which he is assessable under this Act, for the previous year relevant to such assessment year, in the prescribed form, verified in such manner and setting forth such particulars as may be prescribed, at any time within 24 months from the end of the relevant assessment year.”

Analysis:

Who can file Updated Return

Section 139(8A) states that any assessee can furnish the updated return in the prescribed form duly verified by him.
Updated Return can be furnished even if the original or belated return has not been furnished by the assessee.

Time limit for filing Updated Return

The time limit for filing ‘Updated Return’ shall be 24 months (2 years) from the end of the relevant assessment year.

For example: For the Financial Year 2021-22, the assessment year ends on 31-03-2023. Thus, Updated Return can be furnished by the assessee up to 31-03-2025.

“Provided that the provision of this subsection shall not apply, if the updated return, -

(a) Is a return of loss; or

(b) Has the effect of decreasing the total tax liability determined on the basis of return furnished under sub-section (1) or sub-section (4) or sub-section (5); or

(c) Results in a refund or increases the refund due on the basis of return furnished under sub-section (1) or sub-section (4) or sub-section (5),

Of such person under this Act for the relevant assessment year

Analysis:

When updated return cannot be filed

In the following cases, Updated Return cannot be filed by the assessee:

If the Updated Return is a Return of Loss
If the Updated Return has the effect of reducing tax liability originally declared by the assessee in his original/ belated/ revised return
Where the Updated Return results in refund or increase in refund

This clearly depicts that any assessee can file Updated Return only to disclose any income which he could not disclose earlier in his/her return and pay additional tax thereon. The assessee cannot file Updated Return to reduce his/her tax liability or increase the refund due.

Who is not eligible to file Updated Return

A person shall not be eligible to file Updated Return in the following cases:

Cases where Updated Return cannot be filed

Instances of Search or Survey:

If search or survey is initiated in any previous year, the assessee cannot file an updated return for the relevant assessment year to such previous year and also for preceding two assessment years in the following circumstances:

Where search u/s 132 has been initiated against any person or books of accounts or other documents or any assets are requisitioned u/s 132A
Where a survey has been conducted u/s 133A (except TDS survey)
Notice has been issued regarding any money, bullion, jewelry, or valuable article or thing, seized or requisitioned in case of any other person belonging to such person
Notice has been issued regarding any books of accounts or documents, seized or requisitioned u/s 132 or 132A in the case of any other person, pertains to or relates to such person.

Note: The above proviso is inserted to avoid the assessees to take undue advantage of the provisions of ‘Updated Return’ in case of search or survey proceedings initiated against them or in case of any other person where any documents or books or valuables are found to be belonging to such assesee.

Instances other than Search or Survey:

In the following cases, the assessee will not be allowed to file Updated Return for the relevant assessment year:

Where the assessee has filed updated return for such assessment year
Where proceedings for assessment/ reassessment/ revision of income is pending or has been completed for the relevant A.Y.
In case the A.O. is in possession of information under PMLA Act, Black Money Act, Benami Act, or SFEM Act and such information is communicated to the assessee before filing updated return u/s 139(8A)
Where any information has been received under the agreement referred to in section 90 or section 90A in respect of such person and the same has been communicated to him before furnishing of Updated Return u/s 139(8A)
Any prosecution proceedings under Chapter XXII have been initiated prior to the date of filing of Updated Return
In case of persons notified by the Board

** The above amendment is effective from 01-04-2022.

Note: It has been provided that an Updated Return shall be defective unless it is not accompanied by the proof of payment of tax under section 140B. So, it is important to discuss section 140B about the tax implications of filing an Updated Return.

Additional Tax on Updated Return u/s 140B

Section 140B has been inserted to provide for the mechanism of computation of additional tax, interest, etc. required to be paid while filing the Updated Return u/s 139(8A). Following are the main provisions of section 140B:

Section 140B provides that where no return of income (original or belated) has been furnished by the assessee, the assessee shall be liable to pay the following before filing Updated Return:

(a)Tax due on his total income
(b) Interest for default or delay in payment of advance tax
(c) Late fees for filing of return
(d) Additional tax in accordance with the mechanism provided in section 140B.

Similarly, where the assessee has already furnished return of income (original/ belated), he shall before filing the Updated Return, be liable to pay:

(a) Tax due on the additional income declared
(b) Interest on delay or default in deposit of advance tax in respect of additional income declared
(c) Additional tax in accordance with the mechanism provided in section 140B

How to calculate additional income tax in Updated Return

Additional Tax shall be 25% of the aggregate of tax and interest payable in Updated Return, if the Updated Return is furnished after the expiry of the time limit of filing revised or belated return but before completion of 12 months from the end of the relevant A.Y.
Additional Tax shall be 50% of the aggregate of tax and interest payable in Updated Return, if the Updated Return is furnished after the expiry of 12 months from the end of the relevant A.Y. but before completion of 24 months from the end of the relevant A.Y.
Additional Tax shall include surcharge and cess on such additional tax
To give effect to the provisions of Updated Return, consequential amendments have been also made for levy of interest u/s 234A, 234B & 234C on additional tax (assessed tax) declared in the Updated Return.
Further, consequential amendments have also been made in sections 144, 153 & 276CC.
The Board has been given the powers the issue guidelines for the purpose of removing difficulties in giving effect to these provisions.

Read Related Article:

Income Tax on Crypto Currency in India

About Author: The author of this article is CA Naveen Goyal. He is having an experience of more than 15 years in the field of Direct Taxation as well as Indirect Taxation. You can post him for further queries: ca.naveen80@gmail.com

Disclaimer: The above article is meant only for educational purposes and therefore, Taxwink is not responsible for any loss or damage caused to any person on account of the above information. Readers are requested to act diligently and under consultation with any professional before applying the information contained in this article.

Quick Links