The deadline to file an updated income tax return or ITR-U for FY 2020-21 (AY 2021-22) was March 31, 2024. This deadline is now over. If you have missed this deadline and there was any error in your previously filed ITR or there was any misreported income or under-reporting of income, now it cannot be fixed through the filing of ITR-U. It was the last opportunity for taxpayers to fix these errors by paying up to 50% penalty, however, now the income-tax department may catch them any day and impose up to 200% penalty.

According to Ankit Jain, partner, Ved Jain & Associates, a CA firm, “Once the ITR-U deadline is over, the option to make any further corrections are not available to the taxpayer.”

Can you go to jail for not filing ITR-U though being eligible?

In a recent case, Delhi High Court gave a judgment where a woman was sentenced to imprisonment on account of non-filing of income tax return (ITR). The lady was liable to file ITR but had failed to do so. “The tax authorities had sought the imprisonment as a means to deter other taxpayers from non-compliance. Under the tax laws, a person can be sentenced to imprisonment for deliberate acts of failure to file a return, concealment of income, making false statements, etc. So, a person who has filed his ITR but does not file an ITR-U cannot be imprisoned since filing of ITR-U is not mandatory. However, if any underreported income is discovered, the tax authorities may seek imprisonment for concealment of income,” says Jain.

According to Alay Razvi, Partner, Accord Juris LLP, a Hyderabad-based law firm, the income-tax department can issue a notice to the taxpayer for not filing ITR, or mis/underreporting of income, among other issues. “Upon failure to act upon it, the tax department can issue a notice of attachment of the properties which are in the name of the individual. In the event, the tax department is unable to recover the money, a request for the arrest can be made. Imprisonment is the last resort,” says Razvi.

ITR-U or revised ITR?

Both ITR-U and revised ITR allow you to revise the declared incomes, however, the difference lies in two aspects: tax penalty and time limit to file. ITR-U can only be filed in certain specified cases and after paying a penalty of up to 50% of the tax evaded. Revised ITR has no penal tax to be paid at the time of filing it. Further, revised ITR can be filed up to nine months after the year in which the original ITR was filed.

According to Jain, a taxpayer today has around nine months after the end of the financial year to file a revised ITR. Once this window to revise a filed ITR had ended, there was no option for him to correct or rectify the return. This led to a situation where if any underreported income came to light to the tax authorities, he would be liable to a high rate of tax and penalty. Hence the Government introduced ITR-U for any taxpayer who notices that any such income has been underreported or any excess deduction has been claimed. He now has the option to declare that additional income in ITR-U. This will also help reduce tax litigation. The deadline for filing ITR-U, if eligible, is within 24 months from the end of the relevant assessment year for which ITR-U is intended to be filed.

When can ITR-U be filed even after deadline for doing so is over

Tax lawyers say that there are few cases where an individual may be able to file ITR-U even after the deadline to do so is over.”There are cases where individuals may have missed on filing ITR-U though eligible for filing it. Under these circumstances and with a valid reason, an individual can file ITR-U along with a condonation form under section 119(2)(b),” says Razvi.

The important point to note here is that the condonation application request must be given at the time of filing of ITR-U. “In cases where the deadline to file ITR-U is over it must be remembered that If ITR-U is not filed along with the condonation form, the concerned officer can issue notice under section 148. After this either the tax can be paid or disputed, but, once the notice is issued, the case would fall under scrutiny and shall be treated differently,” says Razvi.

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