Insertion of new section 140B under Income Tax Act

FINANCE BILL 2022: INSERTION OF SECTION 140B

A New Section 140B has been inserted in Direct Taxation by Finance Minister in the Budget 2022 for the tax to be paid to file a return under the proposed provisions i.e. Section 139(8A) of the Income Tax Act. As per this new clause, a Taxpayer will be allowed to file an ‘Updated Return’ to file Pending Return or correct the Omissions and Errors that are reported in the Original Return. The Time limit for filing the Updated Return is within two years from the end of the relevant assessment year.

For Example: – The due date for filing Updated Return for F.Y.2021-22 i.e. A.Y.2022-23 will be 31st March 2024. The above amendment will come into effect from 1st April 2022

What are the Eligibility Criteria to file the updated return?

If there is an omission or error in the filing of the original return or belated return relevant year.
The filing will result in additional tax liability
The income cannot be decreased

Restrictions on filing Updated Return:-

A Tax Payer shall be restricted from filing Updated Return as per Section 139(8A) if

1. The updated return has been furnished for the relevant assessment year, OR

2. If there is any ongoing or completed proceeding for Assessment or Reassessment or Recomputation or Revision of Income under Income Tax Act for relevant Assessment Year, OR

3. The Assessing Officer has information in respect of the Tax Payer 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 Provision of Benami Property Transaction Act, 1998 or The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and the same has been communicated to the Tax Payer prior to the date of filing the Updated Return, OR

4. If any information for the relevant Assessment Year under section 90 or 90A(DTAA) has come to the notice of Assessing Officer and the same has been communicated to the Tax payer before filing of Updated Return, OR

5. If any proceeding for Offences or Prosecution under Income Tax Act, 1961 has been initiated for the relevant Assessment Year prior to filing the Updated Return.

Penalties For Filing Updated Return:-

The Penalties for filing an Updated return depend upon the period in which it is filed. This can be understood from the following:-

1. If the return is filed within 12 months from the end of relevant Assessment Year, the Taxpayer would be liable to pay a penalty which will be equal to 25% of total tax to be paid in updated return and interest thereon OR

2. If the return is filed after 12 months but before completion of 24 months from the end of relevant Assessment Year, the Taxpayer would be liable to pay a penalty which will be equal to 50% of total tax to be paid in updated return and interest thereon

Important points to be considered before filing the updated return:

In view of the proposed Sub-Section (8A) of section 139, New Section 140B, consequential amendments in Section 144 (Scrutiny Assessment), Section 153 (Assessment in case of Search and Seizure), Section 234A (Interest for delay in Filing return), Section 234B and 234C (Interest related to Payment of Advance Tax) and 276CC (Imprisonment in case of failure in filing the return) have also been made.
A Taxpayer shall keep in mind that he won’t be eligible for any refund if opting for Updated Return.
While filing Updated Return, the Interest and Late fees will be applicable as it is in normal cases, but it will also include an additional liability which is mentioned above under the Penalties head.