Telangana HC Upholds Rejection of Updated Return During Pending Scrutiny Assessment

Mohammed Kaleem Ullah Vs Principal Chief Commissioner of Income Tax (Telangana High Court)

Telangana High Court Upholds Rejection of Updated Return During Pending Scrutiny Assessment Mohammed Kaleem Ullah vs Principal Chief Commissioner of Income Tax & Another W.P. No. 40361 of 2025 | Telangana High Court | Decided on 05.01.2026

The Telangana High Court has clarified the scope of Section 139(8A) of the Income-tax Act, 1961, holding that an assessee cannot file an updated return once assessment proceedings have commenced or are pending. The Court dismissed a writ petition challenging an assessment order where the taxpayer sought permission to file an updated return after his case had already been selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS) system.

The judgment highlights the statutory limitations imposed by the third proviso to Section 139(8A) and reinforces that the updated return mechanism cannot be invoked after scrutiny proceedings are underway.

Introduction

In Mohammed Kaleem Ullah vs Principal Chief Commissioner of Income Tax & Another, the Telangana High Court examined whether an assessee could seek permission to file an updated return under Section 139(8A) after receiving scrutiny notices and during the pendency of assessment proceedings.

The petitioner argued that the Finance Act, 2025 had extended the time limit for filing updated returns from 24 months to 48 months and that a recent CBDT Press Release encouraging taxpayers to revise incorrect deduction claims should also benefit him.

The Court, however, held that the statutory bar contained in Section 139(8A) squarely applied once assessment proceedings had commenced.

Case Background

The petitioner’s return for Assessment Year 2024-25 was selected for scrutiny under CASS.

The Income Tax Department issued:

• Notice under Section 143(2);
• Notice under Section 142(1);

seeking explanations regarding deductions and exemptions claimed in the return.

During the proceedings, the petitioner requested permission to file an updated return under Section 139(8A) of the Income-tax Act.

The Assessing Officer rejected the request and proceeded with assessment under Sections 143(3) and 144B.

The assessment order dated 22.12.2025 disallowed various exemptions and deductions claimed by the assessee.

Disallowances Made by the Assessing Officer

The assessment order disallowed:

The Assessing Officer also initiated penalty proceedings under Section 270A(9)(a) for alleged under-reporting of income.

Key Legal Issue

The principal issue before the Court was:

Whether an assessee can file an updated return under Section 139(8A) after scrutiny assessment proceedings have commenced and are pending?

Petitioner’s Arguments

The petitioner contended that:

• He was a salaried employee.
• Certain exemptions and deductions had been claimed inadvertently.
• Section 139(8A), as amended by the Finance Act, 2025, allows filing of updated returns within 48 months from the end of the relevant assessment year.
• The relevant period had not expired.
• The CBDT Press Release dated 23.12.2025 encouraged taxpayers to review and revise incorrect deduction claims.
• Therefore, he should be permitted to file an updated return and correct the claims.

Revenue Department’s Arguments

The Income Tax Department opposed the writ petition and submitted that:

• The petitioner’s case had already been selected for scrutiny under CASS.
• Notices under Sections 143(2) and 142(1) had already been issued.
• Assessment proceedings were pending and subsequently completed.
• Clause (b) of the third proviso to Section 139(8A) specifically prohibits filing of updated returns once assessment proceedings are pending or completed.
• The CBDT Press Release was intended only for identified taxpayers under the NUDGE campaign and primarily related to Assessment Year 2025-26.

Court’s Observations

1. Section 139(8A) Contains a Specific Statutory Bar

The Court examined Section 139(8A) and particularly clause (b) of the third proviso.

The provision expressly states that no updated return can be filed where:

Any proceeding for assessment, reassessment, recomputation, or revision of income is pending or has already been completed.

The Court held that this provision directly applied to the petitioner’s case.

2. Scrutiny Proceedings Had Already Commenced

The petitioner’s case had already been selected for scrutiny through CASS.

Notices had been issued and assessment proceedings were actively underway before the request for filing an updated return was made.

Therefore, the statutory embargo under Section 139(8A) became operative.

3. Extension to 48 Months Does Not Override Statutory Restrictions

The Court noted that the Finance Act, 2025 extended the period for filing updated returns from 24 months to 48 months.

However, this extension does not override the specific restrictions contained in the provisos to Section 139(8A).

The extended timeline is available only where the statutory conditions are satisfied.

4. CBDT Press Release Was Not Applicable

The Court examined the CBDT Press Release dated 23.12.2025.

It observed that:

• The press release was aimed at identified taxpayers under the “Non-intrusive Usage of Data to Guide and Enable (NUDGE)” initiative.
• Such taxpayers were specifically contacted through SMS and e-mail.
• The petitioner was not shown to be part of the identified taxpayer category.

Accordingly, the press release could not override the statutory provisions or confer any additional right upon the petitioner.

5. Assessing Officer Acted Correctly

The Court held that:

• The Assessing Officer rightly rejected the request to file an updated return.
• The assessment proceedings had already commenced.
• The statutory prohibition under Section 139(8A) clearly applied.

Therefore, no legal infirmity existed in the assessment proceedings.

Final Judgment

The Telangana High Court held that:

√ An updated return under Section 139(8A) cannot be filed once assessment proceedings are pending or completed.

√ The petitioner’s request was correctly rejected by the Assessing Officer.

√ The CBDT Press Release dated 23.12.2025 did not apply to the petitioner’s case.

√ The petitioner remains free to challenge the assessment order through the statutory appellate mechanism.

Accordingly, the writ petition was dismissed.

No order as to costs was passed.

Author’s Analysis

1. Important Clarification on Updated Returns

The judgment clearly explains that the updated return mechanism is not available indefinitely merely because the statutory filing window remains open.

The restrictions contained in the provisos are equally important.

2. Scrutiny Proceedings Close the Door on Section 139(8A)

Once a taxpayer’s case enters scrutiny assessment proceedings, the option of filing an updated return is generally unavailable.

Taxpayers must therefore act proactively before the Department initiates scrutiny.

3. Extension to 48 Months Is Not Absolute

Many taxpayers assume that the Finance Act, 2025 amendment grants an unrestricted 48-month opportunity.

This ruling clarifies that the extended period remains subject to statutory disqualifications.

4. CBDT Administrative Initiatives Cannot Override the Statute

The Court reaffirmed that departmental campaigns and press releases cannot supersede the express provisions of the Income-tax Act.

Statutory restrictions remain controlling.

5. Emphasis on Timely Tax Compliance

The ruling serves as a reminder that taxpayers should promptly review and correct returns before receiving scrutiny notices or commencement of assessment proceedings.

Practical Takeaways

√ Updated returns under Section 139(8A) cannot be filed once assessment proceedings are pending or completed.

√ The 48-month filing period is subject to statutory conditions and exceptions.

√ Selection under CASS scrutiny can bar the filing of an updated return.

√ CBDT campaigns encouraging voluntary corrections do not override statutory restrictions.

√ Taxpayers should review deduction and exemption claims before scrutiny proceedings commence.

√ Assessment disputes should thereafter be pursued through the appellate process rather than through updated returns.

Conclusion

The Telangana High Court in Mohammed Kaleem Ullah vs Principal Chief Commissioner of Income Tax reaffirmed that Section 139(8A) cannot be used as a corrective mechanism after scrutiny assessment proceedings have begun. The Court held that the statutory bar contained in the third proviso to Section 139(8A) prevents filing of updated returns once assessment proceedings are pending or completed.

Key Takeaway: While the law now permits filing of updated returns for up to 48 months, taxpayers must exercise that option before scrutiny or assessment proceedings commence, as the statutory prohibition becomes operative once the assessment process is underway.

FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT

Learned counsel Ms. Himangini Sanghi appears for the petitioner.

Ms. Bokaro Sapna Reddy, learned Senior Standing Counsel for Income Tax Department, appears for the respondents.

2. The present writ petition relates to the assessment year 2024-2025 wherein the petitioner, who is the assessee, has assailed the assessment order dated 22.12.2025 passed after his case was selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS) as per the notice under Section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as, “the Act”). In response to the notice dated 13.08.2025 issued under Section 142(1) of the Act, the petitioner requested to file the updated Income Tax Return (ITR) under Section 139(8A) of the Act, which was rejected and the Assessing Officer, however, proceeded with the assessment under Section 143(3) read with Section 144B of the Act and disallowed exemptions under Section 10 of the Act and the deduction claimed in the ITR as per the chart contained at para 4.8 of the assessment order, which is extracted hereunder:

“4.8 Conclusion drawn:-

Based on the material available on records and submission of the assessee dated 26/08/2025, 03/12/2025 and 14/12/2025, it is concluded that the assessee has failed to furnish documentary evidences in support of the following amount of exemption and deductions claimed in the ITR for the year under consideration:

In view of the above facts, an exemption of Rs.4,01,869/- claimed under the provision of Section 10 of the Act and deduction of Rs.10,25,000/- claimed in the ITR are disallowed and added back to the total income of the assessee for the relevant assessment year. Further, penalty proceedings u/s 270A(9)(a) of the Act is also initiated separately for under reporting of income in consequence of misreporting thereof.”

3. The penalty proceedings under Section 270A(9)(a) of the Act were also directed to be initiated for under-reporting of income. Separate computation of income and demand notice under Section 156 of the Act was issued. The assessment order has been challenged on the ground that the Assessing Officer refused to allow filing of updated return in terms of Section 139(8A) of the Act.

4. During the course of submissions, learned counsel for the petitioner has also referred to the Press Release dated 23.12.2025, wherein the identified taxpayers were intimated through SMS and e-mail and they have been given an opportunity to review their ITRs, verify the correctness of their deductions and exemption claims and revise their returns, if required, within the prescribed time by 31^stDecember, 2025.

5. Learned counsel for the petitioner prays that the petitioner may also be allowed to file the updated return in view of the Press Release issued by the Department of Revenue, Central Board of Direct Taxes, dated 23.12.2025. The assessment order was passed on 22.12.2025. It is submitted that the petitioner is a salaried employee and had disclosed other income which were not related to his employment in Form-16.

The proceedings for assessment were issued on account of alleged exemption and deduction claimed inadvertently by the petitioner. Under Section 139(8A) of the Act, the assessee can file the updated return of his income within forty-eight months from the end of the relevant assessment year, which period has not yet elapsed. Therefore, learned counsel for the petitioner submits that the petitioner may be granted an opportunity to file the updated return in terms of Section 139(8A) of the Act and the Press Release dated 23.12.2025, as the case of the petitioner relates to the assessment year 2024-2025. The Press Release also refers to the updated returns filed for assessment years 2021-2022 to 2024-2025. Therefore, it would be applicable to the case of the petitioner.

6. On the other hand, learned Senior Standing Counsel for Income Tax Department submitted that the impugned assessment order has been passed under Section 143(3) read with Section 144B of the Act as the case of the petitioner was selected for scrutiny under CASS upon notice under Section 143(2) of the Act and later on notice under Section 142(1) of the Act by assessing the income of the petitioner disallowing exemptions and impermissible deductions claimed. It is submitted that the petitioner can file an updated return before such proceedings were initiated. Reference is also made to sub-clause (b) of third proviso to Section 139(8A) of the Act. It is submitted that the Press Release dated 23.12.2025 is restricted to the identified taxpayers for the assessment year 2025-2026 and not for the previous assessment year to which the case of the petitioner belongs. The petitioner has the remedy of appeal which he may avail taking all grounds of law and facts.

7. We have heard learned counsel for the parties and taken note of the relevant material placed on record. We have also perused the impugned assessment order and the relevant provisions of the Act as amended and applicable to the case of the petitioner. We have also perused the Press Release.

8. The case of the present petitioner was taken up for scrutiny vide notice under Section 143(2) of the Act on account of large deductions claimed under Section 80G of the old tax regime. Under the unamended Section 139(8A) of the Act, 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 the 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. The expression “twenty-four” of the unamended Section 139(8A) of the Act has been substituted by “forty-eight” by the Finance Act, 2025 with effect from 01.04.2025. Section 139(8A) of the Act along with the first, second and third provisos which are material for consideration in the facts of the case are quoted hereunder:

“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 (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 forty-eight 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 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 of 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 any assessment year 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 (13 of 1976) or the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988) or the Prevention of Money-laundering Act, 2002 (15 of 2003) or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 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:”

9. A bare reading of clause (b) of the third proviso to sub-section (8A) of Section 139 of the Act indicates that no updated return shall be furnished by any person for the relevant assessment year where 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. This provision squarely applies to the case of the present petitioner since the proceeding for assessment or re-assessment was pending. The petitioner had not ventured to file the updated return before issuance of notice under Section 143(2) of the Act or the assessment proceedings under Section 143(3) read with Section 144B of the Act by the impugned order dated 22.12.2025.

10. In such a case, the request for filing of the updated return was rightly rejected by the Assessing Officer and the assessment order was passed after disallowing exemptions and deductions on merits. On a bare reading of the Press Release dated 23.12.2025, it is apparent that it is applicable to the cases of identified taxpayers for the assessment year 2025-2026. The recital made at para 4 thereof indicates that for the previous assessment years 2021-2022 to 2024-2025, the identified taxpayers had updated their ITRs and paid more than Rs.2,500 crores of taxes. In the present case, the petitioner is not an identified taxpayer, who had been requested through SMS or e-mail under the “Non-intrusive Usage of Data to Guide and Enable (NUDGE)” campaign to correct such errors. Moreover, in view of the pendency of the assessment proceedings upon being selected for scrutiny assessment, in terms of clause (b) of third proviso to Section 139(8A) of the Act, such an opportunity to file the updated return cannot be allowed to the petitioner. The petitioner had not invoked the said provision before his case was selected for scrutiny assessment, as such we do not find any error in the impugned order refusing the request of the petitioner for filing the updated return. The petitioner, however, has the remedy of appeal. He may take all such grounds of law and facts on merits before the appellate authority as is permissible in law.

11. In view of the facts and circumstances and for the reasons recorded above, we do not find any ground to interfere in the impugned order.

12. The writ petition is accordingly dismissed. There shall be no order as to costs.

Miscellaneous applications pending, if any, shall stand closed.