Budget 2021- Rationalisation of the provision relating to processing of returned income and issuance of notice under sub-section (2) of section 143 of the Act

The existing provisions of clause (a) of sub-section (1) of section 143 of the Act provides that at the time of processing of return of income made under section 139, or in response to a notice under sub-section (1) of section 142, the total income or loss shall be computed after making the adjustments specified in clauses (i) to (vi) therein.

It is proposed to amend the following provisions of sub-section (1) of section 143 of the Act,-

(i) Amend sub-clause (iv) of clause (a) of sub-section (1) of the section 143 of the Act, to allow for the adjustment on account of increase in income indicated in the audit report but not taken into account in computing the total income.

(ii) Amend sub-clause (v) of clause (a) of sub-section (1) of the section 143 of the Act so as to give consequential effect to amendment carried out in section 80 AC vide Finance Act, 2018.

(iii) Amend the provisions of section 143 to reduce the time limit for sending intimation under sub-section (1) of section 143 of the Act from one year to nine months from the end of the financial year in which the return was furnished.

Consequently, it is also proposed to reduce the time limit for issue of notice under sub-section (2) of section 143 of the Act from six months to three months from the end of the financial year in which the return is furnished.

These amendments will take effect from 1st April, 2021

[Clause 34]

Text of the Relevant Clause of the Finance Bill 2021

Clause 34 of the Bill seeks to amend section 143 of the Income-tax Act relating to assessment.

Sub-clause (iv) of clause (a) of sub-section (1) of section 143 of the said Act provides for adjustment on account of disallowance of expenditure indicated in the audit report but not taken into account in calculating the total income of the assessee.

It is proposed to amend the said sub-clause so as to allow for the adjustment on account of increase in income indicated in the audit report but not taken into account in computing the total income.

Sub-clause (v) of clause (a) of sub-section (1) of the said section provides that any deduction admissible under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, shall be allowed if the return of income is furnished on or before the due date specified under sub-section (1) of section 139 of the Act.

It is proposed to amend the said sub-clause so as to provide that any deduction admissible under section 10 AA or under any of the provisions of Chapter VIA under the heading “C.—Deductions in respect of certain incomes” shall be allowed, if the return of income is furnished on or before the due date specified under the sub-section (1) of section 139 of the said Act.

It is also proposed to amend the said section so as to reduce the time limit specified for sending intimation under sub-section (1) from one year to nine months and to reduce the time limit for sending notice under sub-section (2) from six months to three months from the end of the financial year in which the return is furnished.

These amendments will take effect from 1st April, 2021.

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