The Finance Bill of 2022 has introduced the concept of “updated” income tax return vide section 139(8A) of the Income-tax Act, 1961 (‘the Act’).
The CBDT has notified Form ITR-U to be used for filing the updated return. This return is to be filed within 2 years from the end of the relevant assessment year. So, for example, an updated return pertaining to FY 2020-21 has to be furnished within 31st March, 2024.
APPLICABILITY
An updated return can be filed in following scenarios:
Return previously not filed where tax is payable
Errors in the previous filed returns leading to tax liability
Previously loss return was filed and error/ omission have the effect of making the return as return of income
Reduction in loss
Reduction in unabsorbed depreciation
Reduction on tax credit carried forward under section 115JAA/ 115JD
WHEN CAN AN UPDATED RETURN NOT BE FILED?
An updated return CANNOT be filed in following scenarios:
The return to be filed is a return of loss
The return to be filed will reduce the previously computed tax liability
The updated return would result in a refund or increase in refund
Updated return has already been filed for the relevant assessment year
Search or survey or prosecution proceedings are initiated against the taxpayer for the relevant assessment year
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
The Assessing Officer has information for the relevant assessment year in his possession under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (13 of 1976) or the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988) or the Prevention of Money-laundering Act, 2002 (15 of 2003) or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015) and the same has been communicated to taxpayer, prior to the date of furnishing of return
Information for the relevant assessment year has been received under an agreement referred to in section 90 or section 90A in respect of the taxpayer and the same has been communicated to him, prior to the date of furnishing of return
Any prosecution proceedings under the Chapter XXII have been initiated for the relevant assessment year prior to the date of furnishing of return
Assessee is such person or belongs to such class of persons, as may be notified by the Board in this regard
ADDITIONAL INCOME TAX
If the updated return is filed within 12 months from the end of the relevant assessment year, the penalty in the form of additional income-tax shall be 25% of the extra dues. If the return is filed after 12 months but before 24 months from the end of the relevant assessment year, the additional income-tax shall be 50% of the extra dues.
COMPUTATION OF INCOME-TAX– Section 140B
1) WHERE NO RETURN HAS BEEN FILED PREVIOUSLY
The tax that is payable based on the updated return shall be computed after considering the following:
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 reduction of tax claimed under section 90 and 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 specific territory outside India referred to in that section
Any tax credit claimed to be set off in accordance with the provisions of section 115JAA or section 115JD
The assessee shall be liable to pay such tax together with the interest and fee under any provisions of this Act, for any delay in furnishing the return or default or delay in payment of advance tax, along with the payment of additional income tax (25%/50%), before furnishing the return AND the return shall be accompanied by proof of payment of such tax, additional income tax, interest and fee.
2) WHERE RETURN OF INCOME HAS BEEN FILED PREVIOUSLY
The tax that is to be payable based on the updated return shall be computed after considering the following:
The amount of relief or tax referred to in section 140A(1), the credit for which has been taken in the earlier return
Tax deducted or collected on income taken into account computing the total income, which has not been included in the earlier return
Any relief of tax or deduction of tax claimed under section 90 or 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 specific territory outside India referred to in that section on such income which has not been included in the earlier return
Any tax claimed, to be set off in accordance with the provisions of S.115JAA or S.115JD which has not been claimed in the earlier return
Increased by the amount of refund, if any, issued in respect of such earlier return
The assessee shall be liable to pay such tax together with the interest and fee under any provisions of this Act, for any delay in furnishing the return or default or delay in payment of advance tax, along with the payment of additional income tax (25%/50%), as reduced by the amount of interest paid under the provisions of this act in the earlier return, before furnishing the return AND the return shall be accompanied by proof of payment of such tax, additional income tax, interest and fee. For the purpose of computation of additional income tax, tax shall include surcharge, and cess.
NIL TAX RETURN
An interesting scenario emerges post introduction of updated return. Whether in the case of persons who are required to file a return but do not have any tax liability, can they file such return under section 139(8A)?
The scenario of liability to file tax return however not having to pay taxes can illustratively arise where the taxpayer’s:
Gross total income is more than INR 2,50,000 however due to chapter VIA deductions total income is below threshold
Total income is more than threshold limit however there is no tax payable due to rebate
Total income is more than threshold limit however there is no tax payable due to setoff of tax liability against equal amount of TDS credit (Eg. 192B cases)
It could be gathered from our discussion above that section 140B requires tax to be paid prior to filing of the updated return and the return should be accompanied by the proof of payment of such tax, additional income tax, interest and fee.
Now, in scenarios wherein there is no tax payable however there is liability to file income-tax return, the tax payer might seek to set right his compliance by using the window under updated return. There are two view-points which emerge.
One is that such return can be filed under section 139(8A) since the section does not categorically prohibit filing of updated return where no further tax is to be paid, the proof of payment is required in section 140B which is only procedural. Also, the section was enacted with perspective to encourage voluntary tax compliance and hence filing of return in such cases should be allowed. Even otherwise, late fee under section 234F is payable and this coupled with additional income-tax on late fee can be discharged and updated return filed with proof of payment.
The second view being that given the intent with which section has been enacted – ie., additional revenue realization for government and reporting of additional income which may have been missed/ omitted, it would be difficult to suggest that updated return can be used to set right the non-compliance in filing of return. The utility for ITR-U is yet to be released which could help conclude on the above aspect however, it would be in best interest of all stakeholders involved that CBDT clarifies this aspect at the earliest.
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