TaxTMI 
TaxTMI 
Assessing Officer's Duty to Notify Losses : Clause 291 of the Income Tax Bill, 2025 Vs. Section 157 of the Income-tax Act, 1961
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.... Income-tax Act, 1961. Both provisions are situated within the broader procedural architecture governing assessment, with the primary objective of ensuring that losses eligible for carry forward and set-off are properly quantified, recognized, and communicated to the assessee. This commentary examines Clause 291 in detail, elucidates its objectives, analyzes its provisions, and compares it with the existing Section 157, highlighting both continuities and departures. The analysis will also address practical implications and potential interpretative challenges, situating these provisions within the evolving policy landscape of Indian income tax law. Objective and Purpose The legislative intent underlying both Clause 291 and Section 157 is t....
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.... entitled to have carried forward and set off such loss under the provisions of the said sections. Key Elements of Clause 291 * Mandatory Notification: The AO is under a statutory obligation to notify the assessee, by a written order, of the amount of loss computed for specified purposes. * Relevant Sections: The loss must be computed for the purposes of sections 111(1), 111(2), 112, 113(2), or 115(1) of the Bill, which correspond to various heads of loss (e.g., business loss, capital loss, etc.). * Conditions Precedent: Notification is required only if, during assessment: * (a) A loss is established in the computation of total income; * (b) The assessee is statutorily entitled to carry forward and set off such loss under the rel....
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....n: The provision does not clarify whether the notification of loss is appealable or subject to rectification, though general principles of assessment orders would likely apply. Practical Implications Clause 291 has significant implications for taxpayers, tax practitioners, and the tax administration: * Taxpayer Rights: The written notification secures the taxpayer's right to carry forward and set off losses, which can have material impact on future tax liabilities. * Compliance Burden: Taxpayers must ensure that losses are properly claimed and substantiated during assessment, as only notified losses can be carried forward. * Administrative Efficiency: For the tax department, the provision provides a clear procedural step, reduci....
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....74 (capital loss), and 74A (loss from race horses) of the 1961 Act. * Clause 291 refers to new section numbers (111, 112, 113, or 115) in the 2025 Bill, which may or may not correspond exactly to the old sections in terms of scope or substance. * Legislative Modernization: * The 2025 Bill appears to consolidate and possibly rationalize the categories of losses, potentially reflecting policy changes or simplification efforts. * Procedural Clarity: * Section 157 has been the subject of extensive judicial interpretation, clarifying issues such as the timing and form of notification, rectification, and appeals. Clause 291, being new, may initially lack such interpretive clarity. * Omitted Provisions: * Section 157 explicitly refer....
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....essees must ensure that all relevant losses are properly claimed and substantiated during assessment proceedings, as subsequent rectification may not always be possible. * Transition to the new regime will require careful attention to changes in section references and eligibility criteria. For Tax Authorities * Clause 291 reinforces the duty of the AO to issue timely written notifications, which must be incorporated into assessment procedures and training. * Clear documentation and communication with taxpayers will be critical to minimize disputes and litigation. For Legal and Tax Professionals * Advisory services must adapt to the new section references and any substantive changes in eligibility or computation of losses. * Prac....