Now file updated Income tax return within 2 years from the end of relevant assessment year | Detailed Discussion | Budget 2022

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Till now we have been filed Original income tax return u/s 139(1), belated income tax return u/s 139(4), revised income tax return u/s 139(5) or rectified income tax return u/s 154 of the Income tax return.

Now, Ministry of finance has in Budget 2022, introduced a new sub-section 8A under section 139 for providing facility of filing updated Income tax return by a taxpayer within 24 months from the end of relevant assessment year.

This facility has been announced by the Income tax department to reduce assessment and litigation so that people can voluntarily disclose any income which come to their notice from AIS or any other source after the Income tax return was filed and all due date were expired.

The relevant extract of the new proposed section for updated return is as under:

Section 139(8A) is as under:

“(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 (herein referred to as the relevant 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 twenty-four months from the end of the relevant assessment year: Provided that the provision of this sub-section shall not apply, if the updated return,–– (a) is a return of a 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 refund or increases the refund due on the basis of return furnished under under sub-section (1) or sub-section (4) or sub-section (5), of such person under this Act for the relevant assessment year: Provided further that a person shall not be eligible to furnish an updated return under this sub-section, where–– (a) a search has been initiated under section 132 or books of account or other documents or any assets are requisitioned under section 132A in the case of such person; or(b) a survey has been conducted under section 133A, other than sub-section (2A) of that section, in the case such person; or(c) a notice has been issued to the effect that any money, bullion, jewellery or valuable article or thing, seized or requisitioned under section 132 or section 132A in the case of any other person belongs to such person; or(d) a notice has been issued to the effect that any books of account or documents, seized or requisitioned under section 132 or section 132A in the case of any other person, pertain or pertains to, or any other information contained therein, relate to, such person, for the assessment year relevant to the previous year in which such search is initiated or survey is conducted or requisition is made and two assessment years preceding such assessment year: Provided also that no updated return shall be furnished by any person for the relevant assessment year, where–– a) an updated return has been furnished by him under this sub-section for the relevant assessment year; or(b) any proceeding for assessment or reassessment or recomputation or revision of income under this Act is pending or has been completed for the relevant assessment year in his case; or(c) the Assessing Officer has information in respect of such person for the relevant assessment year in his possession under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 or the Prohibition of Benami Property Transactions Act, 1988 or the Prevention of Money-laundering Act, 2002 or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and the same has been communicated to him, prior to the date of furnishing of return under this sub-section; or(d) information for the relevant assessment year has been received under an agreement referred to in section 90 or section 90A in respect of such person and the same has been communicated to him, prior to the date of furnishing of return under this sub-section; or(e) any prosecution proceedings under the Chapter XXII have been initiated for the relevant assessment year in respect of such person, prior to the date of furnishing of return under this sub-section; or(f) he is such person or belongs to such class of persons, as may be notified by the Board in this regard.”;. (ii) in sub-section (9), in the Explanation, after clause (c), the following clause shall be inserted, namely:––“(ca) the return is accompanied by the proof of payment of tax as required under section 140B, if the return of income is a return furnished under sub-section (8A).  The important points to note from the above section are as under: Who can file the updated return?Anyone can file the updated return irrespective of whether the person has filed original return or belated return or revised return and even if the person has not filed the return.  When can an updated return be not filed by a person or in which situation a person cannot file updated return?A person will not be able to file an updated return in the following situation:1. When there is a loss in the updated return filed or2. There is a reduction in total tax liability as compared to original tax liability in return filed under section 139(1), 139(4) and 139(5).3. There is a refund or increase in refund by filing of updated return. Further, the following person cannot file updated return:1. If a search or survey has been conducted on such person.2. A notice has been issued under section 132 or 132A to question or requisition books of accounts or money, jewelry or any valuable thingfor the relevant previous year and previous two years.3. If the updated return has been filed once.4. If any assessment or proceedings is initiated in assessee’s case.5. Assessing officer has any information under Benami Act, FEMA act, prevention of money laundering act etc. and such information has been communicated to assessee before filing updated return.6. Any information has been received under section 90 or 90A and such information was communicated to assessee before filing updated return.7. Any prosecution has been initiated in case of assessee. Thus, prima facie it can be seen that the updated return can be filed only if assessee is liable to pay any additional tax but not in case if assessee is claiming any loss or refund. 

However, it is interesting to note that section 139(8A) doesn’t rejects or disallow a person who is filing return with zero loss, zero tax and zero refund. Thus, if a person wishes to file return with normal income upto 500000 he can now simply do that by filing updated return and a small amount of late fees.

  We shall discuss about additional tax or fees one would be required to pay for filing Updated Income tax return in our upcoming post. The above amendment will take effect from 01.04.2022 and should accordingly apply from AY 2021-22. To read Finance Bill 2022 CLICK HERE. 

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