TaxTMI 
TaxTMI 
TaxTMI 
Time Limitation in Search Assessments : Clause 296 of the Income Tax Bill, 2025 Vs. Section 158BE of the Income-tax Act, 1961
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.... procedure, with strict timelines to ensure both administrative efficiency and safeguard taxpayer rights. The transition from the 1961 Act to the proposed 2025 Bill is not merely a matter of legislative modernization; it reflects an attempt to address practical challenges, incorporate judicial pronouncements, and harmonize assessment procedures with contemporary tax administration needs. This commentary undertakes a detailed analysis of Clause 296, elucidating its provisions, legislative intent, and practical implications. It then presents a comparative evaluation with Section 158BE, highlighting both continuity and change, and examining the rationale and possible consequences of any divergences. The analysis is structured to facilitate a ....
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....ed within twelve months from the end of the month in which the last of the authorisations for search was executed, or requisition was made. This sets a clear, unambiguous timeframe for completion. * This is in line with the principle of legal certainty and mirrors the approach in Section 158BE, albeit with some differences in the reference period (discussed below). Sub-section (2): Extension for Reference u/s 166(1) Where, during the assessment or reassessment of the total income for the block period, a reference u/s 166(1) is made, the period for completion is extended by twelve months. This recognizes the reality that references (potentially to Transfer Pricing Officers or other authorities) can consume considerable time. * It ensur....
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....her Person' Cases Mirroring sub-section (2), if a reference u/s 166(1) is made in 'other person' cases, the assessment period is extended by twelve months. Sub-section (7): Excluded Periods from Limitation Computation A comprehensive list of circumstances is set out, during which the limitation clock is stopped. These include: * Stay of proceedings by court order (until certified copy of vacation of stay is received). * Period for exchange of information under international agreements (capped at one year). * Time taken in reopening or rehearing proceedings u/s 244(2). * Time taken for audits or inventory valuations directed u/s 268(5), including periods where such directions are challenged in court. * Time for refer....
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....ons of Clause 296, by prescribing clear timelines and exclusions, have significant practical ramifications for various stakeholders: * For Taxpayers: There is greater certainty regarding the closure of assessment proceedings, protection from protracted litigation, and assurance that the assessment process will not be unduly prolonged due to factors beyond their control. * For Tax Authorities: The Assessing Officer is afforded a reasonable but finite window to complete complex assessments, with built-in flexibility for circumstances such as court-ordered stays, references to expert authorities, and international information exchange. * For the Judiciary: The explicit enumeration of excluded periods and the mechanism for extensions redu....
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....tension. This reflects the increasing complexity and frequency of cross-functional references in modern tax administration. 4. Exclusion for Transfer of Seized Material Both provisions exclude (up to 180 days) the period from initiation of search/requisition until the seized items are handed over to the jurisdictional Assessing Officer. This is a direct carryover, indicating continued recognition of practical administrative delays. 5. 'Other Person' Assessments Section 158BE(3) and Clause 296(5) both set the limitation for assessments of 'other persons' (i.e., those not directly searched but implicated by material found) at twelve months from the end of the month/quarter in which notice is issued. Both also allow for ext....
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....ion. * Updated Cross-References: The 2025 Bill updates all cross-references to align with the new numbering and structure, but the underlying concepts are preserved. * Advance Rulings: Both provisions now recognize applications to the Board for Advance Rulings, reflecting recent changes in the institutional framework for advance tax rulings. * Procedural Streamlining: The 2025 Bill consolidates and clarifies certain procedural aspects, possibly reducing ambiguities that have led to litigation under the 1961 Act. 9. Potential Ambiguities and Issues While the provisions are comprehensive, certain areas may still give rise to interpretational disputes: * Commencement of Exclusions: The precise date from which exclusions begin (e.g., ....