November 2022

New Provisions for Filing an Updated Return of Income

P. N. Shah | Arti Shah
Chartered Accountants

BACKGROUND

In this year’s Budget, the provisions of Section 139 of the Income-tax Act have been amended effective from 1st April, 2022. The effect of this amendment is that an assessee can file a revised or updated return within two years of the end of the relevant assessment year. In Paras 121 and 122 of the Budget Speech delivered by the Finance Minister on 1st February, 2022, it is stated as under:

“121. India is growing at an accelerated pace and people are undertaking multiple financial transactions. The Income tax Department has established a robust frame work of reporting of tax payer’s transactions. In this context, some taxpayers may realise that they have committed omissions or mistakes in correctly estimating their income for tax payment. To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This Updated Return can be filed within two years from the end of the relevant assessment year.

122. Presently, if the department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication. Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return. Full details of the proposal are given in the Finance Bill. It is an affirmative step in the direction of Voluntary tax Compliance.”

Reading the amendments in the Income-tax Act, it will be noticed that several conditions are attached to these provisions. In this Article, the new provisions for filing revised or updated returns of income are discussed.

FILING RETURN OF INCOME

Section 139(1) of the Income-tax Act provides that the assessee, depending on the nature of his income, has to file his returns before the due date i.e. 31st July (Non-Audit cases), 31st October (Audit cases) and 30th November (Transfer Pricing Audit cases). If an assessee has not filed his return before the due date, he can file the same on or before 31st December u/s 139(4). Earlier, this time limit was up to 31st March. If the assessee has filed his return of income before the due date, he can revise the return u/s 139(5) on, or before 31st December. Earlier this was possible on or before 31st March. In a case where the assessee was entitled to claim refund of tax, prior to 1st September, 2019, he could apply for the refund within one year from the end of the assessment year. This time has also been curtailed, and an application for a refund can be made u/s 239 by filing the Return of Income as provided in Section 139.

FILING AN UPDATED RETURN OF INCOME

The Finance Act, 2022 has amended Section 139 by inserting sub-section (8A) w.e.f. 1st April, 2022. This sectio

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