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The Finance Act, 2022 has introduced a new provision for furnishing of updated return by inserting a new sub-section (8A) in section 139 of the Income Tax Act. The newly inserted section, if to be put in simple words, says if a person has not furnished an original or belated or revised return under the provisions of Income Tax, then he may furnish an updated return within twenty four months from the end of the assessment year. The section also says that the provisions of the updated return shall not apply if the updated return is a loss or decreases the total tax liability, or results in refund or increases the refund on the basis of original/revised/belated return filled, as the case may be. Thus the provisions of updated return will only apply in cases where the updated statement is going to beneficial for the revenue. The cases where the taxpayer has deposited extra tax or claimed less refund than eligible, he is not allowed to avail the newly inserted provisions.

The provisions also clearly says the updated return shall be considered as defective unless such return is accompanied by the proof of payment of tax as required under the proposed section 140B. The important point to be noted in the proposed section 140B is that the taxpayer is not only liable to pay the tax due together with interest and fee payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, but he needs to also discharge additional tax for availing the scheme of updated return.

The additional tax, payable at the time of furnishing the return under sub-section (8A) of section 139, shall be equal to twenty-five per cent of aggregate of tax and interest payable, as determined by the provisions, if such return is furnished after expiry of the time available under sub-section (4) or sub-section (5) of section 139 and before completion of period of twelve months from the end of the relevant assessment year.  However, if such return is furnished after the expiry of twelve months from the end of the relevant assessment year but before completion of the period of twenty-four months from the end of the relevant assessment year, the additional tax payable shall be fifty per cent of aggregate of tax and interest payable, as determined by the provisions of the Income Tax.

Updated Income Tax Return- A Boon Or A Bane

So at first the Government is not giving an option to file the updated return, if such return is beneficial for the taxpayer. And on second instance where the taxpayer who wants to avail the provisions of the updated return, he needs to discharge an exorbitant amount of additional tax which is equal to twenty five per cent or fifty per cent of aggregate of tax and interest payable, as the case may be. It will be interesting to see that how many of the taxpayers avail this option with such high percentage of additional tax levied under the provisions of section 140B.

The plight of the taxpayer doesn’t necessarily ends here. The government has also made a corresponding amendment in section 153 of the Act where sub-section (1A) has been inserted which says that “Notwithstanding anything contained in sub­section (1), where a return under sub-section (8A) of section 139 is furnished, an order of assessment under section 143 or section 144 may be made at any time before the expiry of nine months from the end of the financial year in which such return was furnished”. This implies that the time limit for making the assessment has been increased correspondingly in case where the taxpayer avail the option of furnishing an updated return. The additional amount of tax of twenty five per cent or fifty per cent, as the case may be, along with the facility provided to the revenue for making the assessment under section 143 or section 144 after the end of the financial year is going to be a nightmare for the honest taxpayers.

However an interesting point to be noted is that no such amendment has been made in section 149 for the issuance of notice under section 148 in order to make income escaping assessment under section 147. The time limit under section 149 is still three years from the end of relevant assessment year, where the income which has escaped assessment is less than fifty lakh rupees. With an option of furnishing an updated return within twenty four months from the end of the assessment year, it will be interesting to see that whether time limit under section 149 will still remain three years from the end of relevant assessment year in cases where the taxpayer has filled an updated return under the provisions of sub-section (8A) of section 139. Unless and until there is a circular from the government it would definitely be considered a welcome step for minimizing the hardships to the taxpayers in cases of notices for assessment under section 147.

The new amendment will take place from 1st April 2022. The forms regarding such updated return is yet to come into picture and it would be worth to see that how many taxpayers try their hand with this newly inserted provision considering an exorbitant amount of additional tax. The updated return furnish would also allow the proper officer an extended time for making the assessments under section 143 or section 144 which again could turn out to be a loss making situation for the taxpayers. This is completely a new provision in the history of Income Tax and one can only hope that in future necessary amendments would be carried out to make it beneficial from the taxpayer’s point of view too.

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One Comment

  1. GANDHI MOHAN BHARATI says:

    I am anxiously awaiting a “FUTURE TAX RETURN”: a ITR un which you may guess and file ITR for furter years with a proviso to pay 50% Tax and if found incorrect whether plus or minus will attract another 50% addition Tax and 500% penalty. Jai Ho

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