Karnataka State Chartered Accountants Association (R) presents a crucial matter to the Commissioner of Income Tax, highlighting challenges in processing updated returns under Section 139(8A) of the Income-tax Act, 1961.
Before delving into the matter at hand, it’s essential to understand the context. Prior to the Finance Act, 2022, assesses had a limited timeframe until 31st December of the assessment year to file a revised or belated return. Recognizing the constraints posed by this timeframe and the complexities of reconciling vast amounts of information, the Finance Act, 2022 introduced Section 139(8A).
This pivotal amendment ushered in the concept of an “updated return,” extending the compliance window beyond prior filings. The primary objective is to enhance compliance flexibility for taxpayers, minimizing litigation through the payment of additional tax, separate from the normal tax.
Challenges Faced:
Despite lauding the government’s efforts in granting additional time for filing returns, operational challenges have emerged:
- Delay in Processing Returns: The Central Processing Centre (CPC) initiated batch processing in December 2023/January 2024 for all updated returns, contributing to significant delays. This delay, coupled with the potential for additional tax liability, poses a considerable burden on taxpayers.
- Error in Processing Returns: Intimations under Section 143(1) of the Act reveal consistent and noteworthy variances in the computation of tax payable. Rather than providing a detailed analysis covering various tax components, intimations present only consolidated figures, causing financial distress for taxpayers who have already paid additional tax and interest.
- Missing Detailing: Unlike regular cases, intimations for updated returns lack a detailed breakdown, making it exceedingly challenging for taxpayers to comprehend the underlying reasons for discrepancies. This absence of comprehensive explanations further aggravates the complexity of the situation.
Representation:
In light of these pressing challenges, KSCAA seeks intervention and guidance to address the issue effectively. The association urges the Commissioner to implement the following measures:
- Expedite Processing of Updated Returns: Initiate an accelerated processing mechanism to alleviate delays and ensure timely compliance. This proactive approach will significantly contribute to the overall efficiency of the tax processing system.
- Rectifying Errors in Computation: Immediately rectify inaccuracies in the computation of tax payable and promptly issue revised intimations under Section 143(1) of the Act. This is crucial to rectify discrepancies and ensure accurate representations of taxpayers’ financial obligations.
- Full Disclosures in Intimations: Issue intimations under Section 143(1) of the Act with comprehensive and detailed disclosures. Providing a detailed breakdown of discrepancies in these communications will greatly assist taxpayers in understanding and addressing the issues, fostering transparency in the process. These disclosures should be on par with disclosures in intimation for regular returns.
KSCAA earnestly requests the Commissioner’s guidance to direct the concerned authorities at the Central Processing Centre to prioritize and ensure the accurate processing of updated returns filed under Section 139(8A) of the Act. This intervention is not only pivotal to alleviate the financial difficulties faced by taxpayers but also to bolster confidence in the tax system, reaffirming the government’s commitment to safeguarding taxpayers’ rights.
In consideration of the hardships caused, the members of Karnataka State Chartered Accountants Association, on behalf of the entire Chartered Accountants community and the trade and industry in the state of Karnataka, appeal to the Commissioner to kindly consider the above request.
*****
KARNATAKA STATE
CHARTERED ACCOUNTANTS ASSOCIATION (R)
To,
Commissioner of Income Tax,
CPC, Bengaluru
Date: 16th January 2024
SUBJECT: REPRESENTATION REGARDING PROCESSING OF UPDATED RETURN FILED UNDER SECTION 139(8A) OF THE INCOME-TAX ACT, 1961
The Karnataka State Chartered Accountants Association (R) (in short ‘KSCAA’) is an association of Chartered Accountants, registered under the Karnataka Societies Registration Act, in the year 1957. KSCAA is primarily formed for the welfare of Chartered Accountants and represents before various regulatory authorities to resolve the professional problems faced by Chartered Accountants and the business community.
In the past, we have written to your good selves many times populating various issues, challenges and hardships being faced by taxpayers and Chartered Accountants and suggesting possible solutions on the same. Herein, we are presenting before your good selves for your kind consideration, an issue regarding processing of updated returns filed under Section 139(8A) of the Income-tax Act, 1961 (“the Act”).
Introduction:
Prior to the Finance Act, 2022 an assessee had the option to file a revised or belated return up to 31st December of the assessment year. Due to this, an assessee had just 1 – 5 months (depending on the original due date of filing of return) to revise or file a belated return. Knowing the limitations of this timeframe, and considering the vast amount of information and data at hand to be reconciled, it became apparent that additional flexibility was necessary for filing/revising returns beyond 31st December without provoking legal action.
Considering the above, the Finance Act, 2022 introduced a pivotal amendment through Section 139(8A) of the Act, ushering in the concept of an “updated return”. This innovative provision extends the compliance window, irrespective of any prior filings, as long as certain conditions are met. The primary objective behind this amendment is to enhance the ease of compliance for taxpayers within a framework that minimizes litigation by paying additional tax apart from the normal tax.
Challenges faced:
While acknowledging and lauding the government’s efforts in granting additional time to taxpayers for filing their returns, we currently confront several operational challenges, namely:
- Delay in processing returns
The Central Processing Centre (“CPC”) has initiated processing of updated returns in the month of December 2023/ January 2024 for all updated returns on a batch basis. While the due date for filing updated return for FY 2019-20 was 31 March 2023, numerous returns have remained unprocessed, contributing to delays in the system, which can result in enormous interest in case there is additional tax liability.
- Error in processing returns
Given that CPC has started processing updated returns since December 2023/January 2024, intimation under Section 143(1) of the Act, are being issued. It is observed that there is a consistent and noteworthy variance in the computation of tax payable as per the intimation issued. Further, instead of providing a comprehensive analysis covering tax, interest, adjustment of advance tax, TDS, and TCS, the intimations present only consolidated figures for heads of income and the total tax payable. This conspicuous lack of detailed information hinders our ability to pinpoint the precise reasons behind the disparities in tax computation. This has led to erroneous demands being raised. These erroneous demands have caused considerable financial distress upon taxpayers who have already discharged additional tax and interest.
- Missing Detailing
Interestingly, while intimation issued under Section 143(1) of the Act, in regular cases are characterized by a detailed breakdown and meticulous explanation of discrepancies, intimations for updated returns lacks this comprehensive approach. The absence of a detailed breakup of discrepancies in these intimations makes it exceedingly challenging for taxpayers to comprehend the underlying reasons for such discrepancies, further aggravating the complexity of the situation.
These challenges underscore the urgency for a comprehensive review and resolution of the processing issues associated with updated returns. Addressing these concerns promptly is crucial.
Representation:
In light of the aforementioned challenges, we respectfully seek your intervention and guidance to address this issue by implementing the following measures:
- Expedite Processing of Updated Returns
Initiate an accelerated processing mechanism for updated returns to alleviate delays and ensure timely compliance. This proactive approach will contribute to the efficiency of the overall tax processing system.
- Rectifying Errors in Computation
immediately rectify inaccuracies in the computation of tax payable, and promptly issue revised intimations under Section 143(1) of the Act. This is essential to rectify discrepancies and ensure accurate representations of taxpayers’ financial obligations.
- Full Disclosures in Intimations
Issue intimations under Section 143(1) of the Act with comprehensive and detailed disclosures. Providing a detailed breakdown of discrepancies in these communications will greatly assist taxpayers in understanding and addressing the issues, fostering transparency in the process. These disclosures should be on par with disclosures in intimation for regular returns.
We earnestly request your guidance to direct the concerned authorities at the Central Processing Centre to prioritize and ensure the accurate processing of updated returns filed under Section 139(8A) of the Act. Your intervention is pivotal not only to alleviate the financial difficulties faced by taxpayers but also to bolster confidence in the tax system, reaffirming the government’s commitment to safeguarding taxpayers’ rights. We trust in your commitment to upholding the principles of fairness, justice, and efficient tax administration.
Taking into consideration the hardships caused, we the members of Karnataka State Chartered Accountants Association, on behalf of the entire Chartered Accountants community and also on behalf of the trade and industry in the state of Karnataka appeal to your good selves to kindly consider our above request.
Yours sincerely,
For Karnataka State Chartered Accountants Association Rs
| CA. Sujatha G President | CA. Sunil Bhandary Secretary | CA. Babitha G Chairperson, Representation Committee |
Cc to:
1. Smt. Nirmala Sitharaman, Hon. Union Minister of Finance and Corporate Affairs, Government of India
2. Shri. Pankaj Choudhary, Hon’ble Minister of State, Finance.
3. Shri. Sanjay Malhotra, Hon’ble Revenue Secretary
4. Shri Nitin Gupta, Chairperson, Central Board of Direct Taxes
5. Smt. Chaitali P, PCCIT, Karnataka and Goa
Author Bio
Tax is already discharged before the due date of filing of return. However, forgot to file ITR. There is no tax liability is pending as on the date of filing ITR-U. Whether Additional Tax of 25% is required to pay? If yes, why ?