All about new ‘Updated Return’ in Income tax

Finance bill 2022 has introduced a new section 139(8a) and 140(b) which provides the assessee an opportunity to correct any errors or omissions through the filing of an updated return within two years from the end of the relevant assessment year along with the payment of additional tax and interest if any.

The sole objective of introducing this section is to reduce litigations and compliance in the income tax. Currently, the revised return can be filed within 9 months from the end of a financial year, after that the assessee does not have any option to correct the mistakes, errors, or omissions that may have been made in the original ITR unintentionally.

It leads to unnecessary litigations on the part of the IT department and assessee just because the assessee did not have any option to go through any other route to rectify the return. To cater to this problem section 139(8a) and 140b was introduced through finance bill 2022.

Let us look at what sections 139(8a) and 140b say and analyse the same:

Section 139(8a):

Any person, whether or not he has furnished a return under section 139 (1)/(4)/(5), for an assessment year, (herein referred to as the relevant assessment year), may furnish an updated return for the previous year relevant to such assessment year, in the form as may be prescribed, at any time within twenty-four months from the end of the relevant assessment year.

For example, if anyone wants to file an updated return for FY 2021-22, he can file the same by 31st March 2025 i.e., within 24 months from AY 2022-23.

Provided that the provision of this subsection shall not apply if:

The updated return is a return of a loss; or

• The updated return has the effect of decreasing the total tax liability; or
• The updated return results in a refund or increases the refund due on the basis of return filed earlier; or
• A search has been initiated or books of accounts/ documents /assets are requisitioned under section 132A; or
• A survey has been conducted under section 133A; or
• A notice has been issued to the effect of seizure or requisition under section 132 or 132A; or
• An updated return has already been furnished under this subsection; or
• Any proceeding for assessment/reassessment/re-computation/revision of income under this Act is pending or has been completed for the relevant assessment year in his case; or
• The AO has information in respect of such person for the relevant AY in his possession under:

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976

The Prohibition of Benami Property Transactions Act, 1988

The Prevention of Money-laundering Act, 2002

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 subsection; or

• Information for the relevant assessment year has been received under an agreement referred to in section 90/90A in respect of such person and the same has been communicated to him, prior to the date of furnishing of return under this subsection; 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 furnishing of return under this subsection.

Section 140(b):

Where no return of income under section 139(1)/(4) has been furnished by an assessee and tax is payable, on the basis of a return to be furnished by such assessee under section 139(8a), after taking into account the tax already been paid by the assessee in form of TDS, Self-assessment tax, Advance tax, relief under section 89/90/91 and any other tax credits.

In such case, the assessee shall be liable to pay such tax together with interest and fee payable, and additional tax under any of the provisions of this act before furnishing the return and the return shall be accompanied by proof of payment of such tax, additional income tax, interest, and fee.

Additional Tax amount to be calculated as below:

• If the return is filed after the expiry of the due date for revised return or belated return, but before a period of twelve months from the end of the relevant assessment year, then 25% of the aggregate of tax and interest payable.
• If the return is filed after the expiry of twelve months from the end of the relevant assessment year but before the expiry of twenty-four months at the end of the relevant assessment year, then 50% of the aggregate of tax and interest payable.