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CMA Final · Direct Tax Laws and International Taxation · Return of Income

Kavya Ltd. furnished a return of loss on time for tax year 2026-27 declaring a business loss of Rs 10,00,000. Later it wishes to furnish an updated return that reduces the loss to Rs 6,00,000. No proceedings, search or notices are pending. Which view is correct under section 263(6) as amended?

The updated return is allowed. Where a return of loss was filed within the due date, an updated return is permitted if it is a return of income or reduces the loss. Reducing the loss from Rs 10 lakh to Rs 6 lakh satisfies this amended condition.

  1. ANot allowed, because an updated return cannot be a return of loss in any case
  2. BAllowed, because where a return of loss was filed in time, an updated return that has the effect of reducing the loss is permittedCorrect
  3. CAllowed only if the updated return converts the loss into positive income
  4. DNot allowed, because an updated return cannot be filed once an original return of loss exists

Explanation

Section 263(6)(b)(i) states clause (a) continues to apply where a loss was sustained, the return of loss was furnished by the due date, and the updated return is a return of income or has the effect of reducing the loss. Clause (c)(i) bars loss returns except in this case. Hence reduction from 10 lakh to 6 lakh is permitted; the first option ignores the amended exception.

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