TaxTMI 
TaxTMI 
Statutory mechanism for the modification and revision of demand notices : Clause 290 of Income Tax Bill, 2025 Vs. Section 156A of Income-tax Act, 1961
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....correct and current tax liability, especially in the context of insolvency proceedings. The provision is of particular significance in the evolving landscape of insolvency law and tax administration in India, where the intersection of insolvency resolution and tax recovery has required legislative clarity. This commentary analyzes Clause 290 in detail, examining its objectives, structure, legal implications, and practical impact. It also conducts a comparative analysis with the existing Section 156A of the Income-tax Act, 1961, which was introduced by the Finance Act, 2022, and addresses similar issues. Through this analysis, the commentary aims to elucidate the nuances of both provisions, highlight areas of continuity and change, and disc....
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....fore, addresses a critical gap in the law and aligns the tax regime with the evolving insolvency landscape. Detailed Analysis of Clause 290 of the Income Tax Bill, 2025 1. Structure and Components of Clause 290 Clause 290 is structured into two sub-clauses: * Sub-clause (1): Mandates the AO to serve a modified notice of demand specifying the sum payable, if any, in cases where a prior demand notice has been issued u/s 289 and the amount is subsequently reduced by an order of the Adjudicating Authority under the IBC. The modified notice is to be treated as a notice u/s 289, with all attendant legal consequences. * Sub-clause (2): Provides for further revision of the modified notice in cases where the order of the Adjudicating Authorit....
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....": The phrase is broad and could be subject to interpretation. It is likely intended to cover all monetary exactions under the Act, but clarity could be enhanced by illustrative examples or further definition. * Interaction with Recovery Proceedings: The provision does not explicitly address the status of ongoing recovery proceedings or actions taken prior to the issuance of the modified notice. It is presumed that such actions would be aligned with the revised demand, but explicit clarification may be beneficial. 4. Relationship with Section 289 Clause 290 operates in conjunction with section 289, which governs the issuance of demand notices under the proposed 2025 Act. By deeming the modified notice as a notice u/s 289, the provision ....
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....by the Finance Act, 2022, is the current statutory provision governing the modification and revision of demand notices in cases where tax liability is altered by orders under the IBC. Its structure and content closely mirror those of Clause 290, reflecting a continuity of legislative approach. Section 156A provides that where a demand notice has been issued u/s 156 and the sum payable is reduced by an order of the Adjudicating Authority under the IBC, the AO shall modify the demand and serve a fresh notice. Further, if the order is modified by the NCLAT or Supreme Court, the notice is to be revised accordingly. 2. Structural and Substantive Comparison Aspect Clause 290 of the Income Tax Bill, 2025 Section 156A of the Income-tax Act,....
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....ng of the Income Tax Bill, 2025, and does not reflect any substantive change. * Language and Drafting: Minor differences in language and drafting may exist, but the operative effect is substantially the same. * Transitional Application: Section 156A applies to demands issued under the 1961 Act, while Clause 290 will apply to demands under the new regime post-enactment. 5. Policy and Legal Implications The replication of Section 156A in Clause 290 underscores the importance attached by the Legislature to ensuring that tax demands are responsive to insolvency outcomes. It also reflects a policy decision to maintain continuity and avoid legal uncertainty during the transition to the new Act. From a legal perspective, the mechanism enhan....