India is growing at an accelerated pace and people are undertaking multiple financial transactions. The Income Tax Department has established a robust framework for reporting taxpayers’ transactions. In this context, some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. To provide an opportunity to correct such errors, The Government has come up with a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within 2 years from the end of the relevant assessment year. For Instance: – For Assessment year 2022-23 last date for filing an updated return will be 31st March 2025.
Presently, if the department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication. Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return. Full details of the proposal are given in the Finance Bill. It is an affirmative step in the direction of voluntary tax compliance.
Provisions for filing of updated return and rationalization of the provision
Section 139 of the Act is related to the provisions for filing of Income Tax Return by taxpayers.
Section 139(1) of the Act casts responsibility on the taxpayer to furnish a return within a definite time period or up to a particular date, that is, the due date which as per this section means:
| S. No. | Assessee | Date of filing of return |
| (a) | who is a company or a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force | 31st day of October of the A.Y. |
| (b) | who is required to furnish a report under section 92E | 30th day of November of the A.Y. |
| (c) | any other assessee | 31st day of July of the A.Y. |
Alternatively,
Section 139 (4) of the Act facilitates filing of a belated return after the expiry of due date, if such return is furnished
- before 3 months prior to the end of the relevant assessment year (i.e. up to 31st December) or
- before the completion of the assessment,
- whichever is earlier.
Similarly,
Section 139 (5) of the Act provides the taxpayer an opportunity to revise the return filed under sub-section (1) or sub-section (4) in case of any omission or wrong statement,
- after due date, which is to be filed 3 months before the end of the assessment year (i.e. up to 31st December) or
- before the completion of the assessment,
- whichever is earlier.
Hence, the object of section 139 of the Act is to give reasonable time to the taxpayer to file a correct statement of his income within the duration specified under the Act.
This provision provides an additional time of approximately 5 months to an individual assessee, 2 months to a company/auditable case and 1 month to an assessee who enters into an international transaction or specified domestic transaction respectively, in a financial year to file belated or revised return. This additional timeline for filing a revised/belated return may not be adequate when we factor in utilization of huge information and data available coupled with the “nudge approach” that motivates the taxpayer towards the desired objective of voluntary tax compliance, starting with filing of correct tax returns
Hence, it is proposed to introduce a new provision in section 139 of the Act for filing an updated return of income by any person, whether he has filed a return previously for the relevant assessment year, or not. The proposal for updated return over a period longer than that is provided in the existing provisions of the Income-tax Act would on the one hand bring the use of huge data with the IT Department to a logical conclusion resulting in additional revenue realization and on the other hand, it will facilitate ease of compliance to the taxpayer in a litigation free environment.
Hence, it is proposed that the taxpayers may be given some more time under the Act to file particulars of their income for a previous year in an updated return. Payment of additional tax by persons opting to furnish their returns in the newly provided timelines is also required. It is proposed that an amount equal to 25 % or 50 % as additional tax on the tax and interest due on the additional income furnished would be required to be paid. The following amendments to the Act are proposed for incorporating the above provisions: –
I) A new sub-section (8A) in section 139 is proposed to be introduced to provide for the furnishing of updated return under the new provisions
in section 139, ––
(a) It is proposed to insert sub-section (8A) in section 139 of the Act to provide that:
(i) Any person, whether or not he has furnished a return under sub-section (1), 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 the Act, for the previous year relevant to such assessment year, within 24 months from the end of the assessment year. Such return shall be furnished in the prescribed form and manner and shall contain prescribed particulars For Instance: – For Assessment year 2022-23 last date for filing an updated return will be 31st March 2025.
The section will not apply where results in decreasing the total tax liability
(ii) The proposed sub-section (8A) of section 139 shall not apply, if the updated return, is a return of a loss or has the effect of decreasing the total tax liability determined on the basis of return furnished under sub-section (1), subsection (4) or sub-section (5) or results in a refund or increases the refund due on the basis of return furnished under sub-section (1), sub-section (4) or subsection (5), of such person under the Act for the relevant assessment year.
Ineligible to furnish an updated return in the following clauses
(iii) A person shall not be eligible to furnish an updated return under the proposed sub-section (8A) of section 139, if: ––
(a) search has been initiated under section 132 or books of account, 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 subsection (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.
This provision is 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.
(iv) Also, 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 the proposed subsection (8A) of section 139 of the Act for the relevant assessment year, or
(b) any proceeding for assessment or reassessment or recomputation or revision of income under the 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 Prevention of Money Laundering Act, 2002 or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 or the Prohibition of Benami Property Transactions Act, 1988 or The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and the same has been communicated to him, prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act, or
(d) information for the relevant assessment has been received under an agreement referred to in sections 90 or 90A of the Act in respect of such person and the same has been communicated to him, prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act, or
(e) any prosecution proceedings under Chapter XXII have been initiated for the relevant assessment year in respect of such person, prior to the date of his filing of return under the proposed sub-section(8A) of section 139 of the Act, or
(f) he is a person or belongs to a class of persons, as may be notified by the Board in this regard.
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Disclaimer: The information given in this document has been made on the basis of the budget introduced. It is based on the analysis and interpretation of applicable laws as on date. The information in this document is for general informational purposes only and is not legal advice or a legal opinion. You should seek the advice of the legal counsel of your choice before acting upon any of the information in this document. Under no circumstances whatsoever, we are not responsible for any loss, claim, liability, damage(s) resulting from the use, omission or inability to use the information provided in the document.
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