TaxTMI 
TaxTMI 
The New Framework for Reassessment Notices, Balancing Revenue Powers and Taxpayer Rights : Clause 281 of Income Tax Bill, 2025 Vs. Section 148A of the Income-tax Act, 1961
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....ow. This legal commentary will analyze Clause 281 in detail, explore its objectives, dissect each of its sub-clauses, and compare and contrast it with the existing framework u/s 148A of the Income-tax Act, 1961. The analysis will also highlight the practical implications for stakeholders and suggest areas where further clarity or reform may be warranted. Objective and Purpose The legislative intent behind Clause 281, much like Section 148A, is to balance the powers of the tax authorities to reopen assessments with the rights of taxpayers to procedural fairness. Historically, the reopening of assessments under the Income-tax Act was often criticized for being arbitrary and lacking transparency. The Supreme Court and various High Courts have repeatedly underscored the necessity of affording the assessee a reasonable opportunity to be heard before initiating reassessment proceedings. The introduction of a structured pre-notice procedure is a response to these judicial pronouncements and policy considerations. It aims to: * Ensure that taxpayers are informed of the reasons for reopening their assessments. * Provide an opportunity to explain or rebut the AO's information befor....
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.... minimum or maximum period is prescribed in the provision itself, leaving it to be specified in the notice (subject to rules or judicial interpretation). Sub-section (3): Consideration of Reply and Approval of Specified Authority The Assessing Officer shall, on the basis of material available on record and taking into account the reply of the assessee furnished under sub-section (2), if any, pass an order with the prior approval of the specified authority determining whether or not it is a fit case to issue notice u/s 280. This sub-section provides for a decision-making process that is both reasoned and subject to supervisory oversight. Key features: * The AO must consider both the material available on record and the assessee's reply. * The AO must pass an order determining whether it is a fit case to issue a notice u/s 280. * Prior approval of the specified authority is required before the notice can be issued, introducing a check on the AO's discretion. Sub-section (4): Exceptions to the Pre-notice Procedure The provisions of this section shall not apply to income chargeable to tax escaping assessment for any tax year in the case of an assessee, where the Asse....
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....n which suggests" that income chargeable to tax has escaped assessment. The language is substantially similar, reflecting the same threshold for initiating the process. * Clause 281: Applies to "the relevant tax year." * Section 148A: Refers to "the relevant assessment year." This difference is largely terminological, with "tax year" and "assessment year" being functionally equivalent in context. 2. Opportunity of Being Heard and Show Cause Notice Both provisions require the AO to serve a show cause notice to the assessee, providing an opportunity to respond before issuing a notice for reassessment. * Clause 281(1): Mandates a show cause notice and opportunity of being heard. * Section 148A(1): Similarly requires a show cause notice, to be accompanied by the information suggesting escapement of income. There is no substantive difference in the requirement for a pre-notice opportunity. 3. Accompaniment of Information and Reply Period * Clause 281(2): The notice must be accompanied by the information, and the reply period is "as specified in therein." * Section 148A(1)-(2): The notice must be accompanied by the information, and the reply period is "as may be specifie....
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....nes in Clause 281 could be a double-edged sword: it offers flexibility but may also lead to delays or disputes over procedural fairness. 8. Conducting Inquiry * Section 148A (earlier versions): Specifically allowed the AO to conduct an inquiry, with the prior approval of the specified authority, before issuing the show cause notice. * Clause 281: Does not explicitly mention the conduct of inquiry prior to issuing the show cause notice, focusing instead on the possession of information and the opportunity to be heard. The absence of an explicit inquiry provision in Clause 281 may limit the AO's ability to gather further information before issuing the notice, unless this is addressed elsewhere in the Bill or through rules. Ambiguities and Potential Issues in Interpretation * The absence of prescribed timelines in Clause 281 may lead to challenges regarding unreasonable delay or insufficient time for reply. * The scope of "information which suggests" income has escaped assessment remains open to interpretation and may be a fertile ground for litigation. * The definition and role of "specified authority" is not clarified within Clause 281, requiring reference to other ....