Budget 2022: New Rule does not Allow These Taxpayers to Update Income Tax Returns

Individuals will be able to update their income tax returns (ITR) within two years of the end of the relevant assessment year by paying a 25-50 percent additional tax on interest, as suggested in Budget 2022. Individual taxpayers who have missed the deadline to file an amended income tax return will benefit from this. However, fine print in Budget documents suggests that some taxpayers will be unable to revise their tax returns.

Individual taxpayers will not be permitted to use this facility if the amended return results in a lower total tax burden, income tax refund, or increase in income tax refunds for the most recent income tax return filed (original/filed), according to the budget memorandum.

Similarly, ITRs for any year pending or finished by the income-tax department for assessment, reassessment, recomputation, or revision of income will not be eligible under this new rule.

“The proposed Section 139(8A) is intended to allow legitimate taxpayers to file an updated tax return if comprehensive information of certain incomes could not be included in the tax return due to a lack of time allotted for filing a belated/ amended tax return or for any other cause. The chance to comply is not meant for taxpayers who are currently under investigation by the IRS or who have already taken advantage of this opportunity once in a financial year “ EY’s Tax Partner, People Advisory Services, Shalini Jain, agreed.

According to the Budget Memorandum, the proposed sub-section (8A) of section 139 will not apply if the updated return is a loss return or has the effect of reducing the total tax liability determined on the basis of return furnished under sub-section (1), subsection (4), or subsection (5), or results in refund or increases the refund due on the basis of return furnished under sub-section (1), subsection (4), or subsection (5), of such person under the Act for the releasable property.

Under the proposed sub-section (8A) of section 139, a person is not eligible to file an updated return if: ––

(a) In the case of such a person, a search has been begun under section 132, or books of account, other documents, or any assets have been requisitioned under section 132A, or

(b) in the instance of such a person, a survey has been performed under section 133A, other than paragraph (2A) of that section, or

(c) in the case of any other person, a notice has been given stating that any money, bullion, jewellery, or valuable article or thing seized or requisitioned under section 132 or section 132A belongs to such person, or

(d) a notice has been issued stating that any books of account or documents seized or requisitioned under section 132 or section 132A in the case of any other person relate to, or any other information included therein, such person.

This clause applies to the assessment year preceding the year in which the search, survey, or request is begun, as well as the two assessment years preceding such assessment year.

In addition, no amended return shall be submitted by any individual for the relevant assessment year unless, and only if, the following conditions are met:

(a) He has filed a revised return for the relevant assessment year under the proposed paragraph (8A) of section 139 of the Act, or

(b) for the relevant assessment year in his case, any process for assessment, reassessment, recomputation, or revision of income under the Act is underway or has been completed, or

(c) the Assessing Officer has information in his possession for the relevant assessment year 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 Prohibition of Benami Property Transactions Act, 1988, or The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, and that information has been communicated to him prior to the date of his assessment.

(d) prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act, information for the relevant assessment has been obtained under an arrangement referred to in sections 90 or 90A of the Act in respect of such person and has been conveyed to him, or

(e) any prosecution proceedings under Chapter XXII in respect of such person have been begun prior to the date of his filing of return under the proposed sub-section(8A) of section 139 of the Act for the relevant assessment year, or

(f) he is a person or a member of a group of people, as the Board may have determined.