Can Updated Return Be Filed After Notice Under Sections 143(2), 148A or 148?

Summary: The article analyses the Updated Return mechanism under Section 139(8A) of the Income-tax Act in light of the amendments introduced by the Finance Acts, 2025 and 2026. It explains that the Updated Return scheme encourages voluntary disclosure of omitted income by allowing taxpayers to pay tax, interest and additional income-tax instead of waiting for departmental action. The Finance Act, 2025 extended the filing period from 24 months to 48 months from the end of the relevant assessment year, while the Finance Act, 2026 introduced provisions governing Updated Returns in reassessment proceedings under Sections 148A and 148. The article notes that the position regarding scrutiny proceedings under Section 143(2) remains unchanged, and an Updated Return cannot ordinarily be filed once assessment proceedings are pending. It further discusses the interaction between the existing statutory restrictions and the newly inserted reassessment provisions, highlighting interpretational issues that may require future clarification while emphasizing that eligibility depends on statutory conditions and the stage of proceedings.

Updated Return under Section 139(8A): Whether It Can Be Filed After Issue of Notice under Sections 143(2), 148A or 148? – A Comprehensive Analysis after the Finance Acts, 2025 and 2026

Introduction

The introduction of the Updated Return under section 139(8A) of the Income-tax Act, 1961 marked a significant shift in India’s tax administration towards voluntary compliance. Introduced by the Finance Act, 2022, the provision provides taxpayers with an opportunity to rectify omissions or under-reporting of income by voluntarily offering additional income to tax, even after the expiry of the time available for filing a revised return under section 139(5). The legislative philosophy underlying this provision is that an honest taxpayer who subsequently discovers an omission should be encouraged to make a true and complete disclosure by paying the applicable tax, interest and additional income-tax, instead of waiting for detection by the Income-tax Department.

Unlike a revised return, which enables correction of bona fide mistakes or omissions within the prescribed period, an Updated Return is essentially a revenue-generating compliance mechanism. It is intended only to increase the taxable income or tax liability and not to reduce tax liability, claim additional deductions or seek a refund. Consequently, section 139(8A) is accompanied by several statutory restrictions designed to ensure that the provision remains a tool for voluntary compliance rather than a means of revising completed tax positions.

The Updated Return regime has undergone substantial changes in a short span of time. The Finance Act, 2025 extended the time limit for furnishing an Updated Return from twenty-four months to forty-eight months from the end of the relevant assessment year, thereby providing taxpayers a significantly longer period to voluntarily regularise tax defaults. Thereafter, the Finance Act, 2026 introduced important amendments governing the interaction between section 139(8A) and the reassessment provisions contained in sections 148A and 148 with effect from 1 March 2026. These amendments have materially altered the statutory framework and have given rise to several important interpretational issues concerning the availability of an Updated Return once reassessment proceedings are initiated.

While the amendments relating to reassessment proceedings are new, the legal position concerning scrutiny assessments under section 143(2) continues to remain substantially unchanged. Accordingly, it becomes necessary to examine the scope of section 139(8A) in the context of scrutiny assessments as well as reassessment proceedings in the light of the recent legislative amendments.

This article examines the statutory scheme of section 139(8A), the changes brought about by the Finance Acts, 2025 and 2026, and the legal position regarding the filing of an Updated Return after issuance of notices under sections 143(2), 148A and 148.

Evolution of the Updated Return Scheme

Prior to the insertion of section 139(8A), the Income-tax Act did not provide any statutory mechanism enabling a taxpayer to voluntarily disclose additional income after the expiry of the time prescribed for filing a revised return. Consequently, any omission discovered after the limitation period generally resulted in reassessment proceedings, penalties and avoidable litigation.

To encourage voluntary compliance and improve tax certainty, the Finance Act, 2022 inserted sub-section (8A) in section 139, enabling any person to furnish an Updated Return on payment of the applicable tax, interest and additional income-tax. The provision represented a shift from a purely enforcement-oriented approach to a compliance-oriented framework by allowing taxpayers to regularise omissions without waiting for departmental action.

Initially, the facility was available only up to twenty-four months from the end of the relevant assessment year. Considering the positive response received from taxpayers and tax professionals, the Finance Act, 2025 enlarged the period to forty-eight months. This amendment substantially widened the scope of voluntary compliance and aligned the Updated Return scheme with the objective of promoting truthful tax reporting.

The Finance Act, 2026 introduced another important dimension by specifically addressing the availability of an Updated Return during reassessment proceedings under sections 148A and 148. These amendments indicate the Legislature’s intention to integrate the Updated Return mechanism with the reassessment framework while preserving the integrity of the reassessment process.

Legislative Objective

The scheme of section 139(8A) demonstrates that Parliament intended to encourage taxpayers to make voluntary disclosures before omissions are detected by the Department. The provision seeks to reduce prolonged litigation, improve tax collections and foster a culture of voluntary compliance.

However, the Legislature has consciously ensured that the facility is not capable of misuse. Accordingly, section 139(8A) contains several statutory disqualifications. An Updated Return cannot be used as a mechanism for claiming a refund, reducing tax liability, increasing carried forward losses or undoing positions already accepted in earlier returns. Likewise, once specified departmental proceedings have commenced or information has already reached the Department, the law restricts or regulates the availability of the Updated Return.

Thus, section 139(8A) strikes a careful balance between encouraging voluntary disclosure and preventing abuse of the provision after detection by the tax authorities.

Who Can Furnish an Updated Return?

Section 139(8A) is couched in wide terms. It permits any person, whether or not he has furnished a return under section 139(1), a belated return under section 139(4) or a revised return under section 139(5), to furnish an Updated Return in the prescribed form.

Accordingly, the facility is available not only to taxpayers who have already filed their original return but also to those who have omitted to furnish any return for the relevant assessment year, subject to the fulfilment of the statutory conditions.

The provision is therefore significantly wider than the revised return mechanism under section 139(5). Nevertheless, the right to furnish an Updated Return is not absolute and remains subject to the numerous statutory restrictions contained in the provisos to section 139(8A).

Time Limit for Furnishing an Updated Return

The Finance Act, 2025 has substantially liberalised the scheme by extending the time limit for filing an Updated Return from twenty-four months to forty-eight months from the end of the relevant assessment year.

Accordingly, an Updated Return may now be furnished within forty-eight months from the end of the relevant assessment year, provided none of the statutory disqualifications apply.

For example, the last dates for filing an Updated Return are presently as under:

The extension of the limitation period should not, however, be construed as conferring an unconditional right to file an Updated Return. The availability of the provision continues to depend upon fulfilment of all the statutory conditions prescribed under section 139(8A).

Nature of an Updated Return

An Updated Return differs fundamentally from both an original return and a revised return.

An original return is filed in discharge of the statutory obligation under section 139(1). A revised return enables rectification of omissions or wrong statements discovered after filing the original return. In contrast, an Updated Return is intended primarily to facilitate voluntary disclosure of additional taxable income.

Consequently, the Legislature has specifically prohibited filing of an Updated Return where it results in a loss, increases the amount of loss, reduces the tax liability already determined or results in a refund or enhancement of refund. The provision is therefore entirely revenue-positive in character.

Tax Liability on Filing an Updated Return

The facility of filing an Updated Return carries significant financial consequences. Section 140B requires payment of the normal income-tax together with applicable surcharge, health and education cess, interest under the relevant provisions and, where applicable, fee under section 234F.

In addition, the assessee is liable to pay additional income-tax. Following the amendments made by the Finance Act, 2025, the additional income-tax payable depends upon the period after the end of the relevant assessment year within which the Updated Return is furnished. The rate is 25 per cent where the Updated Return is filed within twelve months, 50 per cent where filed after twelve months but within twenty-four months, 60 per cent where filed after twenty-four months but within thirty-six months, and 70 per cent where filed after thirty-six months but within forty-eight months.

The legislative intent is evident. The opportunity for voluntary disclosure is accompanied by an increasing financial cost, thereby encouraging taxpayers to regularise omissions at the earliest possible stage.

Statutory Restrictions

Although section 139(8A) is a beneficial provision, the right to furnish an Updated Return is circumscribed by several statutory restrictions.

Broadly, an Updated Return cannot be furnished where it results in a loss or refund, where an Updated Return has already been filed for the same assessment year, where specified search or survey proceedings have been initiated, where prosecution has commenced, where certain information has already been communicated to the assessee under specified laws or international information exchange mechanisms, or where the assessee falls within a class of persons notified by the Central Board of Direct Taxes.

Most importantly, the fourth proviso to section 139(8A) provides that an Updated Return cannot ordinarily be furnished where any assessment, reassessment, recomputation or revision proceeding is pending or has already been completed for the relevant assessment year. This restriction assumes considerable significance while examining the effect of scrutiny proceedings under section 143(2), as well as the subsequent amendments made by the Finance Act, 2026 in relation to reassessment proceedings.

Effect of Notice under Section 143(2)

One of the most frequently encountered practical issues is whether an assessee can furnish an Updated Return after receipt of a notice under section 143(2).

In our considered view, the answer continues to be in the negative.

A notice under section 143(2) signifies that the Assessing Officer has selected the return for scrutiny and intends to examine its correctness through a regular assessment under section 143(3). Upon issuance of a valid notice under section 143(2), assessment proceedings become pending before the Assessing Officer.

Since the fourth proviso to section 139(8A) expressly prohibits furnishing of an Updated Return where any assessment proceeding is pending for the relevant assessment year, the statutory bar comes into operation immediately upon commencement of scrutiny proceedings. The subsequent extension of the time limit to forty-eight months by the Finance Act, 2025 does not dilute this restriction.

Accordingly, where a notice under section 143(2) has been issued, the assessee cannot ordinarily avail the benefit of filing an Updated Return. Any omission or additional income must thereafter be disclosed during the course of the assessment proceedings themselves and cannot be regularised through section 139(8A).

Finance Act, 2026 – A Paradigm Shift in Reassessment Proceedings

The Finance Act, 2026 has introduced three significant provisos to section 139(8A), effective from 1 March 2026, which directly impact the availability of an Updated Return in reassessment proceedings under sections 148A and 148. These amendments represent one of the most important developments in the Updated Return regime since its introduction in 2022.

Prior to these amendments, the statutory position was comparatively straightforward. Since the fourth proviso to section 139(8A) prohibited furnishing of an Updated Return where any assessment, reassessment, recomputation or revision proceeding was pending or had been completed, the commencement of reassessment proceedings ordinarily rendered the assessee ineligible to furnish an Updated Return. The Finance Act, 2026 has now introduced specific provisions dealing with notices under sections 148A and 148, thereby creating a separate statutory framework for reassessment cases.

However, the amendments have also given rise to certain interpretational issues because the newly inserted provisos are required to be read harmoniously with the existing fourth proviso. Accordingly, a careful analysis of each amendment is necessary.

Restriction Where Notice under Section 148A is Issued

The Finance Act, 2026 inserted a proviso providing that no Updated Return shall be furnished where a notice to show cause under section 148A has been issued after thirty-six months from the end of the relevant assessment year.

The legislative intent behind this amendment appears to be to prevent an assessee from neutralising reassessment proceedings initiated after the normal three-year period by filing an Updated Return after receipt of a notice under section 148A. In such cases, Parliament has consciously withdrawn the option of voluntary compliance through section 139(8A).

The amendment, therefore, specifically targets reassessment proceedings initiated after the expiry of thirty-six months from the end of the relevant assessment year.

Relief Where Proceedings are Dropped under Section 148A(3)

The Legislature has simultaneously introduced a beneficial safeguard for taxpayers.

The next proviso provides that the above restriction shall not apply where the Assessing Officer passes an order under section 148A(3) determining that it is not a fit case for issuance of notice under section 148.

Thus, where the show-cause proceedings culminate in favour of the assessee and the Assessing Officer declines to initiate reassessment, the statutory embargo created by the preceding proviso ceases to operate.

Subject to satisfaction of the remaining conditions contained in section 139(8A), the assessee may thereafter become eligible to furnish an Updated Return.

This amendment demonstrates that the legislative intent is not to permanently deprive the assessee of the benefit of section 139(8A), but only to prevent its misuse during specified stages of reassessment proceedings.

Updated Return Pursuant to Notice under Section 148

The most significant amendment introduced by the Finance Act, 2026 is the insertion of another proviso expressly providing that an Updated Return may be furnished in pursuance of a notice under section 148 within the period specified in such notice, and that where such Updated Return is furnished, the assessee shall not file any other return in response to that notice.

This amendment marks a substantial departure from the earlier statutory framework.

For the first time, Parliament has expressly recognised the concept of an Updated Return being furnished in response to a notice under section 148. The newly inserted proviso also clarifies that such Updated Return itself shall constitute the return in response to the reassessment notice, thereby avoiding duplication of compliance.

The amendment appears to recognise that even after reassessment proceedings have formally commenced, voluntary disclosure should continue to be encouraged, albeit upon payment of enhanced tax consequences prescribed by law.

Harmonious Construction of the New Provisos

While the amendments are undoubtedly beneficial, they also raise an important issue of statutory interpretation.

The fourth proviso to section 139(8A), which existed even prior to the Finance Act, 2026, continues to provide that no Updated Return shall ordinarily be furnished where any assessment, reassessment, recomputation or revision proceeding is pending or has been completed.

At first glance, this appears to be inconsistent with the newly inserted proviso permitting an Updated Return pursuant to a notice under section 148, because reassessment proceedings would ordinarily be regarded as pending upon issuance of such notice.

A harmonious construction of the provision suggests that the newly inserted proviso relating to section 148 is intended to operate as a specific statutory exception to the general embargo contained in the fourth proviso. Such an interpretation gives meaningful effect to every proviso inserted by Parliament and avoids rendering the latest amendment otiose.

However, it must also be acknowledged that the statutory language is capable of giving rise to more than one interpretation. The precise interplay between the fourth proviso and the newly inserted provisos may ultimately require clarification by the Central Board of Direct Taxes or judicial interpretation.

Until such clarification becomes available, taxpayers and professionals should exercise appropriate caution while advising upon the availability of the Updated Return mechanism in reassessment proceedings.

Enhanced Tax Liability under Section 140B

The Finance Act, 2026 has not merely enlarged the scope of the Updated Return mechanism; it has also increased the financial consequences in cases where the Updated Return is furnished pursuant to a notice under section 148.

Apart from payment of the normal income-tax, surcharge, health and education cess and applicable interest, the assessee is required to pay the additional income-tax prescribed under section 140B. The Finance Act, 2026 further provides for an additional levy in such reassessment cases, thereby making the cost of compliance significantly higher than an ordinary Updated Return.

The legislative policy is evident. While Parliament intends to facilitate voluntary disclosure even after issuance of a notice under section 148, such compliance is accompanied by a higher fiscal burden so that delayed disclosure does not become economically advantageous.

Practical Implications

The amendments introduced by the Finance Act, 2026 have considerably altered the advisory approach that tax professionals are required to adopt.

Where a notice under section 143(2) has been issued, the legal position remains substantially unchanged. Since scrutiny assessment proceedings become pending upon issuance of the notice, an Updated Return cannot ordinarily be furnished thereafter.

In reassessment cases, however, the position has become more nuanced. The statutory provisions now distinguish between proceedings under section 148A and proceedings initiated by issuance of notice under section 148. The newly inserted provisos indicate that Parliament has consciously created a separate statutory regime governing Updated Returns in reassessment matters.

Consequently, every reassessment case now requires careful examination of the stage of proceedings, the applicability of the newly inserted provisos, the time elapsed from the end of the relevant assessment year, and the consequential tax implications under section 140B before advising the assessee regarding the availability of an Updated Return.

Conclusion

The Updated Return scheme under section 139(8A) continues to be one of the most significant voluntary compliance measures under the Income-tax Act. The amendments introduced by the Finance Acts, 2025 and 2026 demonstrate the Legislature’s continuing endeavour to encourage truthful tax compliance while safeguarding the interests of the Revenue.

The extension of the limitation period from twenty-four months to forty-eight months has substantially enlarged the opportunity for voluntary disclosure. At the same time, the Finance Act, 2026 has introduced a calibrated framework governing reassessment proceedings under sections 148A and 148.

The position relating to scrutiny assessments under section 143(2) remains substantially unchanged, and an Updated Return cannot ordinarily be furnished once scrutiny assessment proceedings have commenced. In contrast, the newly inserted provisos now specifically regulate the availability of an Updated Return in reassessment proceedings, including circumstances where a notice under section 148 has been issued.

Although the legislative intent underlying the amendments appears to be clear, certain aspects concerning the interaction between the fourth proviso and the newly inserted provisos may require authoritative clarification. Until such clarification emerges, tax professionals should carefully evaluate the statutory provisions before advising taxpayers in reassessment cases.

The amendments reaffirm that the Updated Return is not merely a procedural facility but an integral component of the voluntary compliance framework under the Income-tax Act. Its availability, however, depends not only upon the limitation period but also upon the precise stage of proceedings and the statutory conditions prescribed under section 139(8A).

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Disclaimer: This article is intended solely for academic discussion, professional awareness and guidance. The views expressed are the personal views of the author. The provisions relating to section 139(8A), sections 148A and 148, and section 140B have recently undergone significant amendments by the Finance Acts, 2025 and 2026, and certain aspects of their interaction may be capable of more than one interpretation. The discussion contained herein is based on the statutory provisions as enacted up to the Finance Act, 2026. Readers are advised to examine the relevant provisions of the Income-tax Act, the Rules, Explanatory Memorandum, Notes on Clauses, CBDT Circulars and applicable judicial precedents before taking any decision or acting upon the views expressed in this article. The author shall not be responsible for any loss or consequence arising from reliance placed on this article without obtaining independent professional advice.