Till 31.01.2022 we had heard of terms like Original Return, Revised return and Belated Return, but with Finance Bill 2022 came a new concept of Return which is named as Updated Return.
Prima facie it seems that the concept of “Updated Return” is brought into the picture to increase the Government Revenue. You will also agree with it by the end of this article.
Before proceeding into the main concept let us quickly go through the existing Section 139 for better understanding.
Section 139 of the Act is related to the provisions for filing of Income Tax Return by taxpayers.
Time limit for Original Return
Sub-section (1) of section 139 of the Act casts responsibility on the taxpayer to furnish a return within a definite time period or up to a particular date, that is, the due date which as per this section means:
- for an assessee who is a company or a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force, it is 31st day of October of the assessment year;
- for an assessee who is required to furnish a report under section 92E, it is 30th day of November of the assessment year; and
- for any other assessee, it is 31st day of July of the assessment year.
Time Limit for Belated Return
Sub-section (4) of section 139 of the Act facilitates filing of a belated return after the expiry of due date, if such return is furnished before 3 months prior to the end of the relevant assessment year or before the completion of assessment, whichever is earlier.
Time Limit for Revised Return
Sub-section (5) of section 139 of the Act 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.
On reading the above exisiting timelines we can infer that the object of section 139 of the Act is to give reasonable time to the taxpayer to file a correct statement of his income within the duration specified under the Act.
Still why is there a new concept of Updated Return?
These existing provisions provide 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.
This additional timeline for filing a revised/belated return may not be adequate when we factor in utilization of huge information and data available coupled with the “nudge approach” that motivates the taxpayer towards the desired objective of voluntary tax compliance, starting with filing of correct tax returns.
Hence, it is proposed to introduce a new provision in section 139 of the Act for filing an updated return of income by any person, whether he has filed a return previously for the relevant assessment year, or not.
What is Updated Return and related proposals?
A new sub-section (8A) in section 139 is proposed to be introduced to provide for furnishing of updated return under the new provisions.
Any person, whether or not he has furnished a return under sub-section (1), 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 the Act, for the previous year relevant to such assessment year, within twenty-four months from the end of the assessment year. Such return shall be furnished in the prescribed form and manner and shall contain prescribed particulars.
How it will increase the Revenue of the Government?
To understand this, a few conditions are proposed to be inserted in this sub-section (8A), which are as follows:
The proposed sub-section (8A) of section 139 shall not apply, if the updated return, is a return of a loss or has the effect of decreasing the total tax liability determined on the basis of return furnished under sub-section (1), sub-section (4) or sub-section (5) or results in a refund or increases the refund due on the basis of return furnished under sub-section (1), sub-section (4) or sub-section (5), of such person under the Act for the relevant assessment year.
So it can be easily concluded
- An updated return can only be filed if it results in the assessment of additional tax liability – that is, if the update reduces your tax outgo, or results in a return of loss, you cannot file it.
- Essentially, an updated return cannot result in a decrease of the income you reported in your original or revised return.
- If you file the updated return within 12 months of the end of the relevant assessment year, you will be liable to pay 25% as additional tax on the tax and interest due on the additional income furnished.
- If you do file the updated return between 12 and 24 months of the end of the relevant assessment year, the additional tax liability will increase to 50%.
Restrictions on filing Updated Return in a few cases
A person shall not be eligible to furnish an updated return under the proposed sub-section (8A) of section 139, if:
- search has been initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of such person, or
- a survey has been conducted under section 133A, other than sub-section (2A) of that section, in the case such person, 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, or
- 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.
This provision is for the assessment year relevant to the previous year in which such search is initiated or survey is conducted or requisition is made and two assessment years preceding such assessment year.
Also, no updated return shall be furnished by any person for the relevant assessment year, where,
- an updated return has been furnished by him under the proposed sub-section (8A) of section 139 of the Act for the relevant assessment year, or
- any proceeding for assessment or reassessment or re-computation or revision of income under the Act is pending or has been completed for the relevant assessment year in his case, or
- the Assessing Officer has information in respect of such person for the relevant assessment year in his possession under the Prevention of Money Laundering Act, 2002 or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 or the Prohibition of Benami Property Transactions Act, 1988 or The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and the same has been communicated to him, prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act, or
- information for the relevant assessment has been received under an agreement referred to in sections 90 or 90A of the Act in respect of such person and the same has been communicated to him, prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act, or
- any prosecution proceedings under Chapter XXII have been initiated for the relevant assessment year in respect of such person, prior to the date of his filing of return under the proposed sub-section(8A) of section 139 of the Act, or
- he is a person or belongs to a class of persons, as maybe notified by the Board in this regard.
When Updated Return can be declared Defective?
It has also been proposed to amend sub-section (9) of section 139 to provide that a return filed under the proposed sub-section (8A) of the said section 139 shall be defective unless such return is accompanied by the proof of payment of tax as required under the proposed section 140B.
The author can also be reached at cagyatigupta@gmail.com
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