Update Return under section 139(8A)

Updated Return Under Income Tax Act,1961

Q1. What was the main Objective of introduce the Updated Return & how its helps to the taxpayers?

√ Promoting Voluntary Tax Compliance and Reducing Litigation

Need of Updated Return

Why We need of Updated Return?? We already have provision of Revised Return.

√ Section 139(5), 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 or before the completion of assessment, whichever is earlier. 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

√ But Updated returns bring with the intention that to motivates the taxpayer towards the desired objective of VOLUNTARY TAX COMPLIANCE, starting with filing of correct tax returns

√ On the one hand bring 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

Q2. What is the process of filing of Updated Income Tax Return?

√ Finally, provision of filing an updated income tax return has been introduced in income tax with effect from 01.04.2022, by inserting section 139(8A) of the act

√ An assessee, whether he has filed or not, an income tax return (whether it be the original return, the belated return or the revised return), may now furnish an updated return of income, within two years from the end of relevant assessment year

For e.g.: For the AY 2022-23 (i.e., FY 2021-22), the updated return could be filed up to 31st March, 2025. Also, the updated return can be furnished only once for an assessment year

Note. Non applicability of section 139(8A),

The updated return cannot be filed If it,

a) is a return of loss or,

b) has the effect of decreasing the tax liability determined as per previously filed return or,

c) results in refund or increases the refund determined as per previously filed return.

Q3. Who is not eligible to furnish an “UPDATED RETURN”?

Elaborating on the ineligible situation, A person shall not be eligible to file an updated return for the relevant assessment year and any year preceding to that, if in the relevant previous year –

• Search has been commenced under section 132 of the Act & The survey has been conducted against such person under 133A of the Act or sub-section (2A) of the Act
• Books of accounts/other documents/ any assets are requisitioned or
• 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
• a notice has been issued to the effect that any books of account or documents, seized or requisitioned in the case of any other person, pertains/relates to him

For e.g.: If search has been initiated against the person in FY 2022-23, then the updated return cannot be filed for the relevant AY 2023-24 or any preceding assessment year.

Q4. Conditions on which Updated return cannot be filed for the year in respect of which

A) Any assessment/reassessment/re-computation/revision of income is pending or has been completed

B) Prosecution proceedings have been initiated

C) The assessing officer has any information about the assessee, under double taxation avoidance agreements or under the following acts, which has already been communicated to him, prior to the filing of such return

“Specified person” in specified circumstances like ongoing assessment, search and seizure, information under

• Black money (undisclosed foreign income and assets) and imposition of tax Act ,2015 (BMA)
• The smugglers and foreign exchange manipulators (forfeiture of property) Act, 1976
• The prevention of money-laundering Act, 2002
• The prohibition of Benami property transactions Act, 1988

Q5. Elaborate the Case where filing of updated return is mandatory for subsequent years too

If any person has originally filed a return of loss for any previous year, duly within the time allowed for filing the original return, then he shall be allowed to furnish an updated return, if the updated return is a return of income, irrespective of the time limit of two years from the end of relevant assessment year. However, in such a case, the assessee will have to furnish an updated return for each subsequent previous year, if

A) such loss or even the unabsorbed depreciation has been carried forward or

B) tax credit in in respect of tax paid on deemed income relating to certain companies or tax credit for alternate minimum tax is to be reduced as a consequence of filing the updated return.

Note: Tax on Updated Return

• The taxation norms in case of an updated return would however be somewhere different form the normal income tax return.
• The assessee will have to pay an “additional income-tax” along with the tax and interest computed to be payable, if filing an updated return.

The tax subjected to pay would be calculated post to consideration of the below-mentioned points:

(I) the amount of advance tax, if any

(Ii) any TDS or TCS

(Iii) any relief of income tax claimed under section 89

(Iv) any relief of foreign tax claimed u/s 90 or 91

(V) any relief of foreign tax claimed u/s 90A

(Vi) any tax credit claimed to be set off u/s 115JAA or section 115JD.

These updated returns would indeed come with the proof of payment of these taxes, additional tax, interest, and fee

Q6. What are the Drawbacks of the Updated Return U/S 139(8A)?

• The additional tax rate imposed is much more and this results in the higher rise of the tax liability.
• This utility has been given by the government towards the people who seek to show the additional income with respect to the original return but this would not permit the assessee to diminish his or her income which is on the other side of the interest of the assessee.

Conclusion

At this, one may conclude that the introduction of provision for filing an updated return would result in avoidance of litigation to a good extent.

If any income has been left to be reported by the assessee in the return originally filed or the revised return, then the updated return results in an opportunity to rectify such mistake.

Otherwise, assessment proceedings would have been initiated against him, which the assessee always wants to avoid, as he will have to incur the consulting fees of professionals for responding the proceedings and then will pay the tax on that income on the conclusion of such proceedings