UPDATED INCOME TAX RETURN

[Mr. M. GOVINDARAJAN]

Filing of return

Section 139 (1) of the Income Tax Act, 1961 (‘Act’ for short) provides that every company, being a company or a firm or being a person other than the company or firm has to file income tax return if the income exceeds Rs.2,50,000/- (exempted from income tax).

Section 139 (4) of the Act provides that any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before three months prior to  the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. 

Section 139(5) of the Act provides that if any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

Updated return

Section 38 of the Finance Act, 2022 brings an amendment to section 139.  The amendment inserted a new sub section (8A) to section 139.  The newly inserted sub section (8A) provides for filing updated income tax returns.  For the purposes of this section the Income Tax Rules have also been amended vide Notification No. GSR 325(E), dated 29.04.2022. (with effect from 29.04.2022).

Section 139(8A) provides that 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 this Act, for the previous year relevant to such assessment year, at any time within 24 months from the end of the relevant assessment year.

Non applicability

Section 139 (8A) is not applicable 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) or sub-section (4) or sub-section (5); or
• 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

Ineligibility

A person shall not be eligible to furnish an updated return under this sub-section, where-

• 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
• 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,

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.

No updated return shall be furnished by any person for the relevant assessment year, where-

•  an updated return has been furnished by him under this sub-section for the relevant assessment year; or
• any proceeding for assessment or reassessment or re-computation or revision of income under this 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 Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976; or
•  the Prohibition of Benami Property Transactions Act, 1988; or
•  the Prevention of Money-laundering Act, 2002; or
•  the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

and the same has been communicated to him, prior to the date of furnishing of return under this sub-section; or

• information for the relevant assessment year has been received under an agreement referred to in section 90 (agreement with foreign countries or specified territories) or section 90A (adoption by Central Government of agreements between specified associations for double taxation relief)  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
• any prosecution proceedings under the Chapter XXII (offences and penalties) 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
• he is such person or belongs to such class of persons, as may be notified by the Board in this regard.

Updated return in case of loss

If any person has sustained a loss in any previous year and has furnished a return of loss in the prescribed from within the time allowed under sub-section (1) and verified in the prescribed manner and containing such other particulars as may be prescribed, he shall be allowed to furnish an updated return where such updated return is a return of income. 

If the loss or any part thereof carried forward under Chapter VI (aggregation of income and set off or carried forward of loss)  or unabsorbed depreciation carried forward under section 32 (2) or tax credit carried forward under section 115JAA (tax credit in respect  of tax paid on deemed income relating to certain companies) or under section 115JD (tax credit for alternate minimum tax) is to be reduced for any subsequent previous year as a result of furnishing of return of income under this sub-section for a previous year, an updated return shall be furnished for each such subsequent previous year.

Form

The return of income to be furnished by any person, eligible to file such return under the sub-section (8A) of section 139, relating to the assessment year commencing on the 1st day of April, 2020 and subsequent assessment years, shall be in the Form ITR-U and be verified in the manner indicated therein.

Who may file the return?

The newly inserted Rule 12AC provides that the return of income shall be furnished by a person, mentioned below-

• Individual, or Hindu undivided family or a firm or limited liability partnership or an association of persons or a body of individuals, whether incorporated or not, or a local authority or an artificial juridical person in whose case accounts are required to be audited under section 44AB of the Act or a Company or a political party required to furnish a return in Form ITR-7 – to be filed Electronically under digital signature.
• Individual, or Hindu undivided family, or firm, or limited liability partnership, or an association of persons or a body of individuals, whether incorporated or not, or a local authority or an artificial juridical person, or a person required to file a return under sub-section (4A) or sub-section (4B) [return by political parties] or sub-section (4C) [return by research association etc.] or sub-section (4D) [return by University and colleges]  of section 139, other than a person mentioned above by-

• Electronically under digital signature;
• Transmitting the data electronically in the return under electronic verification code.

Security

The Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the return in the manner specified above.

Reasons for updating income

One of the following are the reasons to be specified in Form ITR – U for filing updated income-

• Return previously not filed;
• Income not reported correctly;
• Wrong heads of income chosen;
• Reduction of carried forward loss;
• Reduction of unabsorbed depreciation;
•  Reduction of tax credit under section 115JB(special provision for payment of tax by certain companies)/115JC (special provisions for payment of tax by certain persons other than a company);
• Wrong rate of tax;
• Others.

Proof for payment of tax

The return shall be accompanied by the proof of payment of tax as required under section 140B, if the return of income is a return furnished under sub-section (8A).

Tax on updated return

The Finance Act, 2022 inserted a new section 140B for the purpose of calculation tax payable for updated tax return. 

Section 140B(1) of the Act provides that where no return of income under sub-section (1) or sub-section (4) of section 139 has been furnished by an assessee and tax is payable, on the basis of return to be furnished by such assessee under sub-section (8A) of section 139.  The following shall be taking into account,-

• the amount of tax, if any, already paid as advance tax;
• any tax deducted or collected at source;
• any relief of tax claimed under section 89;
• any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India;
• any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section; and
• any tax credit claimed to be set off in accordance with the provisions of section 115JAA or section 115JD.

Section 140B (2) provides that where, return of income under sub-section (1) or sub-section (4) or sub-section (5) of section 139 (referred to as earlier return) has been furnished by an assessee and tax is payable on the basis of return to be furnished by such assessee under sub-section (8A) of section 139,-

• after taking into account,-

• the amount of relief or tax referred to in sub-section (1) of section 140A (self assessment) , the credit for which has been taken in the earlier return;
• tax deducted or collected at source, in accordance with the provisions of Chapter XVII-B (deduction at source) , on any income which is subject to such deduction or collection and which is taken into account in computing total income and which has not been included in the earlier return;
•  any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India on such income which has not been included in the earlier return;
• any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section on such income which has not been included in the earlier return;
• any tax credit claimed, to be set off in accordance with the provisions of section 115JAA or section 115JD,which has not been claimed in the earlier return; and
• as increased by the amount of refund, if any, issued in respect of such earlier return.

Payment of tax

The assessee shall be liable to pay such tax together with interest and fee payable under any of the provisions of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, along with the payment of additional income-tax computed before furnishing the return and the return shall be accompanied by proof of payment of such tax, additional income-tax, interest and fee.

Additional income tax payable

The additional income-tax (which includes surcharge and cess, by whatever name called, on such tax) payable at the time of furnishing the return under sub-section (8A) of section 139 shall be equal to,-

• 25% of aggregate of tax and interest payable, as determined in sub-section (1) or sub-section (2), as the case may be, 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 the period of 12 months from the end of the relevant assessment year; or
• 50% of aggregate of tax and interest payable, as determined in sub-section (1) or sub-section (2), as the case may be, 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.

Interest payable

The interest payable under section 234B shall be computed on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid falls short of the assessed tax.   The expression ‘assessed tax’ is defined as the tax on the total income as declared in the return to be furnished under sub-section (8A) of section 139.  For calculation of interest the following shall be taken into account-

• the amount of relief or tax referred to in sub-section (1) of section 140A, the credit for which has been claimed in the earlier return;
• ax deducted or collected at source, in accordance with the provisions of Chapter XVII-B, on any income which is subject to such deduction or collection and which is taken into account in computing such total income, which has not been included in the earlier return;
• any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section on such income which has not been included in the earlier return;
• any tax credit claimed, to be set off in accordance with the provisions of section 115JAA or section 115JD, which has not been claimed in the earlier return; and

 as increased by the amount of refund, if any, issued in respect of such earlier return. 

Time limit to pass order

The newly introduced Section 153B (1A) provides that 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.