Possibility of Revising ITR after receiving Income Tax Notice

Filing income tax returns can be complicated and error-prone at times, resulting in a tax notice from the income tax department, which is frequently seen negatively. However, keep in mind that it does not necessarily indicate difficulty; it might simply be a hint that you need to amend a mistake on your tax return.

The ability of taxpayers to revise their income tax returns after getting a tax notice is a commonly discussed topic. Yes, the answer is yes.

The Income Tax Act, Section 139(5), allows taxpayers to modify their IT returns. Even after getting a tax notice, taxpayers can use this provision to fix any discrepancies in their IT returns that were accidental errors or omissions. You have one year from the end of the relevant assessment year or until the conclusion of the assessment year, whichever comes first, to revise it.

Taxpayers who find an error, omission, or incorrect statement in their initial return u/s 139(1) or delayed return u/s 139(4) of the Income Tax Act, 1961 (hence referred to as the ‘IT Act’) may file a revised return u/s 139(5) of the IT Act. It is important to note that such revised return can be submitted at any time three months before the end of the relevant assessment year (for example, 31 December 2023 in respect of Assessment Year 2023-24, i.e. for Financial Year 2022-23) or before the assessment is completed, whichever comes first.

Section 139(5) states that a return may be changed at any time until the end of the relevant Assessment Year or the completion of the assessment, whichever comes first. The term assessment refers to evaluations conducted under sections 143(3) and 144. Only on the day of order service is assessment stated to be finished. The issuance of a notice does not constitute completion of the assessment, and thus a revised return must be filed, provided that the time restriction for filing, i.e., December 31 of the AY, has not expired.

As a taxpayer, you must read the tax notice carefully. The tax authorities may send different notifications under different parts of the Income Tax Act depending on the severity of the error or omission in your original return. A notice under Section 143(1), for example, might be issued for minor inconsistencies. A notice under Section 143(2), on the other hand, may suggest the necessity for scrutiny assessment, meaning that your tax return requires extensive analysis.

If you receive a tax notice owing to an income mismatch or inappropriate tax deduction, revising your ITR may be a smart way to correct the problem. You can update both online and paper income tax returns, but save a revised return receipt for future reference. If you require clarity on any part of updating your tax return, you must consult with a tax specialist.

If there is additional income subject to taxation resulting in an increased tax liability, a “updated return” as introduced by Finance Act 2022 can be submitted within two years following the end of the relevant assessment year (AY), subject to payment of an additional amount (25% or 50% of tax and interest depending on the timelines). However, it is crucial to remember that the revised return cannot be filed in certain circumstances, such as where an assessment process for the tax year is underway.

Furthermore, a taxpayer is given the opportunity to reveal any additional income by filing a return in response to a reassessment letter from the income tax officer, if the Revenue authorities consider the income has eluded assessment.

However, it is important to remember that receiving a tax notice should not be reason for alarm or concern. Instead, look at it as an opportunity to correct errors in your previous income tax return.