A taxpayer can file an updated return within 24 months from the end of the relevant assessment year, as opposed to a belated return (filed beyond due date) or revised return (for making corrections) that can be filed three months before the end of the relevant assessment year or completion of assessment, whichever is earlier. The timeframe is longer, but several sections of taxpayers are unable to file updated returns. Hence, taxpayers are hoping for suitable amendments in the forthcoming Budget.
The first proviso section 139 (8A) prohibits filing of an updated return if it is a loss-return or has the effect of decreasing the total tax liability or increasing the refund due to the taxpayer. The Chamber of Tax Consultants (CTC) in its pre-Budget memorandum candidly states that this is advantageous only to the revenue authorities.
Ironically, it is not possible for a taxpayer to even reduce a loss claimed in an earlier I-T return. “Let us assume that the loss as per original return was Rs 10 crore and the taxpayer (for instance a startup entity) wants to file an updated return declaring a reduced loss of say Rs 8 crore. In such a situation also, due to the language of the first proviso, as it continues to be a loss-return, filing an updated return is not permissible,” explains Ketan Vajani, chartered accountant and former CTC president.
Vajani also states that updated returns should be permitted to be filed when the taxpayer has earlier genuinely missed making a claim for an eligible deduction. To discourage a complacent approach and take care of the processing cost of such a return, a nominal filing fee could be charged.
The Bombay Chartered Accountants Society (BCAS) suggests a longer timeframe for filing the updated return. Filing should be possible for all the years for which re-opening of an assessment is permissible, states, said, Ameet Patel, chartered accountant and ex-president of BCAS.
An updated return can be filed on payment of steep additional tax amounting to 25% or 50% of the differential tax (depending on the filing delay of within one year or beyond, from the end of the relevant assessment year). “To encourage voluntary compliance, this needs to be reduced. Progressively incremental tax rates may be provided based on the years of delay for instance 5% for an updated return filed within one year, 10% if filed within two years, 15% if filed within three years and so on,” Patel said.