TaxTMI 
TaxTMI 
Reforming Assessment Timelines of assessment, reassessment, and recomputation of income : Clause 286 of the Income Tax Bill, 2025 Vs. Section 153 of the Income-tax Act, 1961
X X X X Extracts X X X X
X X X X Extracts X X X X
....afeguarding taxpayer rights against protracted litigation or delayed tax proceedings. The time limits prescribed serve as a check on the revenue authorities, compelling them to act within a fixed period and thus upholding the principles of natural justice and certainty in tax administration. Section 153 of the Income-tax Act, 1961, which Clause 286 seeks to replace or reform, has historically governed similar time limitations. However, the 2025 Bill's approach, as reflected in Clause 286, is more structured, tabular, and arguably more granular in its demarcation of different scenarios triggering the commencement and computation of limitation periods. This commentary undertakes a detailed, provision-wise analysis of Clause 286 and juxta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a tabular format that delineates: * Nature of proceedings or orders * Trigger date for computation of limitation * Specific time limit for completion This approach enhances clarity, minimizes interpretational disputes, and facilitates easier compliance and administration. 2. Provision-wise Analysis Sl. No. Nature of Proceedings Trigger Date Time Limit 1 Assessment order u/s 270(10) or 271 End of the financial year succeeding the relevant tax year One year 2 Assessment order u/s 270(10) or 271, where an updated return is filed u/s 263(6) End of the financial year in which updated return furnished One year 3 Assessment order pursuant to return furnished in consequence of order u/s 239(3)(b) End of the fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such order received by AO Two months This granular categorization ensures that each scenario is addressed with a tailored time frame, reducing ambiguity. 3. Extension for Transfer Pricing References Sub-section (2) provides that where a reference is made to the Transfer Pricing Officer (TPO) for determination of arm's length price u/s 166(1), the time limit is extended by twelve months. This mirrors the complexity associated with transfer pricing matters, where international transactions may require more time for analysis and adjudication. 4. Exclusion of Periods from Limitation Calculation Sub-section (3) lists a comprehensive set of scenarios where certain periods are to be excluded from the computation of the limitation perio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceedings before the Settlement Commission (now Interim Board for Settlement) and ensures at least one year is available post-abatement, aligning with the need for adequate time to complete complex, previously stayed assessments. Sub-section (7) provides that if the limitation period ends before the end of the month (after excluding certain periods), it is extended to the end of the month, ensuring administrative convenience. 6. Deeming Provisions for Income Exclusion and Attribution Sub-section (8) clarifies that where, by an appellate or court order, income is excluded from one year or one person and attributed to another, the assessment of such income in the other year or person is deemed to be made in consequence of or to give effect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment Orders: * Section 153(1) (1961 Act): Prescribes a general time limit (now twelve months for AY 2022-23 onwards) from the end of the assessment year for completion of assessments u/s 143/144. * Clause 286(1)(1): Time limit is one year from the end of the financial year succeeding the relevant tax year, which is functionally similar but structurally clearer. * Updated Returns: * Section 153(1A): Twelve months from end of FY in which updated return filed. * Clause 286(1)(2): One year from end of FY in which updated return furnished. * Reassessment Proceedings: * Section 153(2): Twelve months from end of FY in which notice u/s 148 served. * Clause 286(1)(4): One year from end of FY in which notice u/s 280 served (presu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der treaties * GAAR references * Search/requisition periods However, Clause 286's list is more systematically organized and updated to reflect new provisions and processes. 4. Minimum Residual Periods Both provisions ensure a minimum of sixty days must be available after exclusions, with extension mechanisms. Clause 286 explicitly extends this to TPO proceedings and to the end of the month in certain cases, reflecting recent amendments and administrative needs. 5. Abatement and Revival of Proceedings Both provisions deal with abatement of Settlement Commission proceedings and revival of assessments, ensuring at least one year is available post-abatement. The language in Clause 286 is updated to reflect the transition from the S....