Budget 2022-23 promotes Voluntary compliance and reduced Litigation

Budget 2022-23 promotes Voluntary compliance and reduced Litigation

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Budget 2022-23 proposed to introduce a new sub-section i.e. Sub-section 8(A) to section 139 whereby taxpayer will be provided with a benefit to file updated return within 24 months from end of relevant assessment year.

As per existing provisions, every person (including companies, firms, individual taxpayers etc.) have an obligation to file Income tax return within specified timelines ((for instance, individual (who is not required to get this accounts audited) require to submit Income tax return by 31st July of the relevant assessment year)) but just in case if a person is not able to file return within timelines, then Government still gives them a chance to file return after due date but it is to be filed within 3 months before the end of the assessment year or before the completion of assesment whichever is earlier. Here, the basic objective of this extended benefit under this provision i.e. section 139(4) to give reasonable time or we can say, a reasonable opportunity to file Income Tax return even if a person miss to file return within specified due date.

The above is the case, where assessee has not filed the return within due date, however, Tax authorities also gives an opportunity to taxpayers to correct their Income Tax return if in case a person has already submitted his Income tax return but there is an error or any omission in his return, and in such a case, a person can revise the return within 3 months before the end of relevant assessment year or before completion of assessment.

As per proposed provision, taxpayers provided with additional time to update their Income tax return. This provision would give benefit to the taxpayers, whether they have filed their VAT return or no return has been submitted. The government expects that it will not only add more revenue to the government but also it will give fair chance to the taxpayers to update their Income Tax return and also it will avoid litigation for ease of compliance.

As per proposal, amount equal to 25% or 50% as an additional tax on tax and interest due would required to be paid. It means this benefit will add additional tax cost to the taxpayers.

The important point to consider here, that this provision would not be applicable if the return is an loss return or it has an effect of decreasing the total tax liability. This means government would like to give this benefit only if it would result in additional income to the government.

Furthermore in following cases, the taxpayer would not be eligible to get the benefit of the proposed provision:

If search has been initiated under section 132 or if it the case of requisition under 132A.
A survey has been conducted under section 133A other than sub-section (2A).
If person already submitted updated return under this section itself.
if any proceeding for assessment or re-assessment or re-computation or revision of income under the act is pending or has been completed for the relevant assessment year.
If assessing officer has the information in respect of such person for relevant assessment year in his possession under 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 the same has been communicated to him, 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 received under an agreement referred to in sections 90 or 90A of the Act in respect of such person and the same has been communicated to him, prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act
any prosecution proceedings under Chapter XXII have been initiated for the relevant assessment year in respect of such person, prior to the date of his filing of return under the proposed sub-section(8A) of section 139 of the Act.
He is a person or belongs to a class of persons, as maybe notified by the Board in this regard.

The assessee is required to pay tax due on the income and interest due. Further, assessee will be required to pay additional at the rate 25% if the assessee filed the updated return within 12 months from the end of relevant assessment year. Thereafter, if assessee filed VAT return after 12 months but within 24 months then additional tax would require to pay at the rate 50%.

Source: memo.pdf (indiabudget.gov.in)

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