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    Intimation of loss: AO must issue written notification to enable carry forward and set-off of assessed losses.
    Clause 291 requires the Assessing Officer to notify the assessee by written order of the amount of loss computed for specified loss heads where a loss is established during assessment and is eligible for carry forward and set-off under the Bill; the written notification is the formal basis for claiming loss benefits in subsequent years, while the clause omits an express timeline, remedies for non-notification, and explicit treatment of appeal or rectification.
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    Modification of tax demand notices: AO must revise demands to reflect insolvency orders and subsequent appellate modifications.
    Clause 290 requires the Assessing Officer to serve a modified demand notice treated as a demand under the restructured Act where an earlier demand is reduced by an order under the Insolvency and Bankruptcy Code, covering tax, interest, penalty, fine or any other sum, and mandates further revision if the insolvency order is altered on appeal.
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    Notice of demand: modernised formal notice and deferment for start up share compensation, aligning tax timing with liquidity events.
    Notice of demand is the statutory precondition for recovery: Clause 289(1) mandates issuance in a prescribed form for any payable sum following an order; Clause 289(2) deems certain system-generated intimations equivalent to notices to streamline automated recovery; Clause 289(3) defers tax on specified securities or sweat equity for eligible start-up employees until defined liquidity or employment-trigger events, thereby aligning tax payment timing with cash realization.
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    Rectification of assessments: new provision expands AO authority to amend orders for subsequent events and compliance.
    Clause 288 consolidates and prescribes time-bound powers for Assessing Officers to amend assessment orders when subsequent judicial, administrative or factual events render original assessments incorrect, covering partner/AOP adjustments, recomputation for carry-forward losses, capital gains recharacterisation, foreign tax credit, TDS credit timing, transfer pricing amendments and related categories, with generally four-year limitation periods and an emphasis on digital procedural integration.
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    Rectification of mistakes apparent from the record: updated authority scope, procedural safeguards, and prescribed timelines ensure corrective relief.
    Clause 287 empowers income-tax authorities to rectify mistakes apparent from the record by amending orders and specified intimations, subject to the exclusion of matters already considered in appeal or revision. Rectification may be initiated suo motu or on application, but any amendment increasing liability requires prior notice and a reasonable opportunity to be heard and must be made by written order. Reductions of liability trigger refund obligations, increases trigger prescribed demand notices, and the power is constrained by a prescribed limitation period and a statutory timeline for disposal of applications.
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    Time limits for tax assessments clarified: tabular framework sets fixed periods, exclusions and minimum residual time for authorities.
    Reform replaces narrative limitation provisions with a tabular, scenario-based regime specifying trigger dates and fixed completion periods-generally one year for routine assessments and reassessments-with special shorter windows for modifications. The draft adds a twelve-month extension for transfer pricing references, an exhaustive list of periods to be excluded from limitation computations (stays, reopenings, treaty exchanges, GAAR references, valuation reports, advance rulings, search handovers, etc.), and safeguards ensuring minimum residual time for authorities, end-of-month extensions, and abatement/revival protections to preserve procedural continuity.
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    Tax rate parity: reassessment must use original-year rates, allowing dropping of proceedings if no extra liability.
    Clause 285 requires tax in assessments, reassessments or recomputations for escaped income to be charged at the rates that would have applied had the income been originally assessed; allows the Assessing Officer to drop reassessment proceedings if the assessee demonstrates that inclusion of the alleged escaped income would not increase tax liability and that the original assessment was not impugned under specified appellate or revision provisions; and bars the assessee from reopening matters concluded by certain specified orders once a claim to drop proceedings is made.
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    Sanction authority centralization for reopening assessments shifts approval to Additional/Joint Commissioners, reducing prior higher level oversight.
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    Giving effect to appellate findings: reassessment notices may issue despite limitation, subject to safeguards preventing reopening time barred years.
    Clause 283 (Income Tax Bill, 2025) and Section 150 (Income tax Act, 1961) permit issuance of assessment, reassessment or recomputation notices to give effect to a finding or direction in appellate, revisional or judicial orders, explicitly including tribunals and Approving Panel directions in the 2025 Bill. Both provisions preserve a limitation safeguard: notices cannot be issued if, when the original order (or reference to the Approving Panel) was made, the relevant year's assessment was already time barred. Notices must show a direct nexus to the operative finding or direction and remain subject to procedural requirements.
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    Limitation periods for reassessment notices extended and a minimum cooling-off period introduced, retaining high-value reopening threshold.
    Clause 282 restructures limitation periods for notices under sections 280 and 281 by extending both standard and extended windows for reopening, retaining a high-value threshold that requires the Assessing Officer to possess books, documents or other evidence of substantial escapement, and by introducing a mandatory minimum cooling-off period before any notice may be issued; it does not explicitly replicate earlier exclusions for time spent in show-cause proceedings, court stays, or special provisions for foreign assets, creating potential interpretive gaps.
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    Pre-notice hearing requirement: show cause with disclosed information, supervisory approval required before reassessment notices.
    Clause 281 requires that where the AO has information suggesting income has escaped assessment, the AO must serve a show cause notice accompanied by that information, allow the assessee to reply within the period specified, and, after considering the record and any reply, obtain prior approval of the specified authority before passing an order on whether to issue a notice under section 280. The clause omits explicit timelines, does not define the specified authority within the clause, and provides broader exceptions to the pre-notice requirement.
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    Reassessment notice reform: information-driven reopening with prescribed timelines and mandatory higher-level approval to ensure procedural safeguards.
    Clause 280 requires the AO to issue a notice with a copy of the relevant order before reassessment, sets a maximum three-month period to furnish a prescribed, verified return, treats timely returns as equivalent to original returns while disallowing that status for belated filings, mandates that issuance be predicated on "information" suggesting escapement, and requires prior approval of a specified authority where information derives from centralized schemes, Approving Panel directions, or judicial/quasi-judicial orders.
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    Reassessment powers expand to permit assessment of escaped income and collateral issues even where certain procedural steps were missed.
    Clause 279 empowers the Assessing Officer to assess or reassess income and recompute losses, depreciation and other allowances where income escaping assessment is identified, substitutes "tax year" for "assessment year," and, while making AO's powers subject to sections 280-286, permits assessment of other issues that emerge during proceedings even if specified procedural sections were not complied with, thereby prioritising substantive tax determination over technical procedural infirmities.
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    Timing of income recognition: interest on compensation taxed on receipt; escalation claims taxed on reasonable certainty of realisation.
    Clause 278 deems interest on compensation or enhanced compensation taxable in the tax year of actual receipt, treats escalation claims and export incentives as income when reasonable certainty of realisation is achieved, and taxes specified incomes under section 2(49)(w) on receipt if not earlier charged, thereby aligning taxability with receipt or demonstrable certainty and aiming to prevent timing gaps while leaving factual application issues like allocation and evidentiary standards to further guidance.
    Act RulesBills
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    Inventory valuation rules require ICDS aligned costing, inclusion of statutory levies, and category wise securities valuation for tax computation.
    Inventory and securities for tax purposes must be valued in accordance with ICDS: inventory at the lower of actual cost or net realisable value, purchases, sales and inventory adjusted to include any tax, duty, cess or fee actually paid or incurred to bring goods or services to present location and condition; illiquid or unquoted securities at actual cost and regularly quoted securities at the lower of cost or NRV, with securities compared category wise and special treatment for scheduled banks and public financial institutions subject to prudential guidelines.
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    Method of accounting: mandatory consistency and binding tax standards lead to AO power to assess by best judgment.
    Clause 276 permits either the cash or mercantile system for computing income provided the system is regularly followed, authorises the Central Government to notify binding Income Computation and Disclosure Standards for classes of assessees or income, and empowers the Assessing Officer to disregard accounts and make a best judgment assessment where accounts are incorrect or incomplete, the accounting method is not regularly followed, or notified ICDS are not applied.
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    Dispute Resolution Panel mechanism: statutory draft-order review with binding, reasoned directions and strict timelines for tax variations.
    Clause 275 establishes a DRP mechanism requiring the AO to forward draft assessment orders with prejudicial variations to eligible assessees; assessees have thirty days to accept or object. The DRP, a collegium of three senior officers, may issue written, reasoned directions (confirming, reducing, or enhancing variations) within nine months; such directions are binding on the AO. The clause updates cross-references, vests rule-making power in the Board, and excludes specified proceedings and persons, while omitting an explicit statutory scheme for faceless DRP proceedings.
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    Impermissible avoidance arrangements: GAAR procedure mandates reference, Approving Panel review, and binding directions with safeguards.
    Clause 274 creates a multi-stage GAAR procedure: the Assessing Officer may refer suspected impermissible avoidance arrangements to the Principal Commissioner/Commissioner, who must notify the assessee and allow objections; absent or unsatisfactory responses permit directions or escalation to an independent Approving Panel. The Approving Panel, composed of a High Court judge, a senior revenue officer, and an academic, may summon evidence, hold hearings, and issue binding directions within set timelines; such directions are final under the Act, subject only to constitutional judicial review.
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    Faceless assessment set as statutory default under proposed bill, expanding electronic non-contact tax assessments and procedural framework.
    Clause 273 makes faceless assessment the statutory default for specified assessments, empowers the Board to define applicability, establishes a National Faceless Assessment Centre with Assessment, Verification, Technical and Review Units, assigns distinct functions to each unit to minimize discretion, mandates electronic communications via the NFAC, and contemplates transfers to the jurisdictional officer where faceless procedure is unsuitable, with procedural details to be prescribed by the Board.

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      Due Compliance with Section 138C(4) of the Customs Act, 1962 for Admissibility of Electronic Records (Computer Printouts) in Customs Proceedings

      27 January, 2026

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      This note presents a concise research digest of the judicial decision, summarising the key issues, findings, and outcome. The judgment is analysed in the context of its factual background, issues framed, and conclusions reached by the Court.

      2025 (9) TMI 76 - Supreme Court

      Case Snapshot

      A set of statutory appeals under Section 130E of the Customs Act, 1962 arose from an order of the appellate tribunal which had set aside a customs adjudication primarily on the ground that electronic evidence relied upon by the department was inadmissible due to alleged non-compliance with Section 138C(4) of the Customs Act, 1962.

      The core controversy concerned what constitutes due compliance with the certificate requirement under Section 138C(4) when computer printouts and electronic records are sought to be tendered in evidence in proceedings under the Customs Act, 1962. The Court held that, on the facts, there was due compliance in substance, and therefore the tribunals approach was erroneous. The matter was remanded to the tribunal for decision on grounds other than Section 138C(4).

      Material Facts

      The respondents (referred to as the importers/assessees) were engaged in importing branded food items and selling them in the domestic market. The department carried out searches of business and residential premises and collected material, including electronic records retrieved from electronic devices.

      The departments case was that, while filing Bills of Entry for the imported goods, the importers failed to declare the actual RSP/MRP at which goods were being sold to ultimate consumers. It was alleged that a lower RSP/MRP was declared, resulting in evasion/short payment of customs duty.

      A show cause notice was issued proposing recovery of differential duty (a substantial demand), along with interest and penalty, and proposing confiscation of imported goods. The adjudicating authority confirmed the proposals by an order-in-original and imposed interest and penalties.

      On appeal, the appellate tribunal allowed the assessees appeals and set aside the adjudication order. The tribunals principal basis was that the electronic documents (computer printouts and related electronic records) relied upon by the department could not be admitted in evidence due to non-compliance with Section 138C(4) of the Customs Act, 1962. The tribunal also noted that contentions were raised regarding Section 138B of the Customs Act, 1962, but it did not decide those issues as it allowed the appeals solely on Section 138C(4).

      In further appeal by the revenue, the record placed before the Court included contemporaneous records of proceedings relating to extraction and printing of electronic data from external storage devices and electronic devices, bearing signatures of persons associated with the assessees, and statements recorded under Section 108 of the Customs Act, 1962 acknowledging the printouts and their authenticity/presence during printing. It was also material that such statements were not retracted and were not disputed in the reply to the show cause notice, to the extent relevant for the Section 138C(4) compliance issue.

      Issue Involved

      Whether the appellate tribunal erred in holding that the department failed to comply with Section 138C(4) of the Customs Act, 1962 for admitting and relying upon computer printouts/electronic records, and whether, on the facts, the available record of proceedings and Section 108 statements could amount to due compliance with Section 138C(4) even in the absence of a certificate in the strict format.

      Decision

      The Court partly allowed the revenues appeals. The tribunals order was set aside. The assessees appeals before the tribunal were restored and remanded for rehearing on grounds other than Section 138C(4) of the Customs Act, 1962.

      The Court expressly clarified that the tribunal must rehear the appeals on their own merits, without being influenced by the Courts observations, and that the Courts observations were confined only to the issue of Section 138C(4) of the Customs Act, 1962.

      Key Observations

      1. Textual requirement under Section 138C(4) of the Customs Act, 1962

      Section 138C(4) of the Customs Act, 1962 requires that where it is desired to give a statement in evidence by virtue of Section 138C, a certificate should (a) identify the document and describe the manner of its production, (b) give particulars of the device involved to show production by a computer, and (c) deal with matters related to the conditions mentioned in Section 138C(2). The certificate must purport to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or management of the relevant activities.

      2. Statutory linkage with the Indian Evidence Act framework for electronic evidence

      The Court considered Sections 65A and 65B of the Indian Evidence Act, which provide that the contents of electronic records may be proved in accordance with Section 65B, and that a computer output is deemed to be a document admissible in proceedings if Section 65B conditions are satisfied.

      The Court treated Section 65B(4) of the Indian Evidence Act as pari materia to Section 138C(4) of the Customs Act, 1962, and therefore drew interpretive support from the approach to Section 65B(4) as discussed by the Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal and Others (citations not stated here for compliance reasons).

      3. Mandatory character and the impossibility maxims

      While recognising that the certificate requirement is mandatory in principle, the Court referred to the established maxims impotentia excusat legem and lex non cogit ad impossibilia to explain that the law does not compel the impossible. The Court noted that the application of these principles depends on facts and circumstances, including whether a party has done everything possible to comply and whether obtaining the certificate depends on factors beyond its control.

      4. Due compliance need not mean a strict-format certificate in every case

      On the facts, the Court held that there was due compliance with Section 138C(4) of the Customs Act, 1962. The Court reasoned that due compliance should not be understood to mean that a particular certificate stricto sensu in the exact format must necessarily be on record in every case. Instead, the contemporaneous records of proceedings concerning extraction/printing of data, coupled with statements recorded under Section 108 of the Customs Act, 1962 acknowledging the printouts and their authenticity/presence during printing, were held sufficient to constitute due compliance in substance for the limited purpose of Section 138C(4).

      5. Non-retraction and non-dispute as reinforcing factors (limited to Section 138C(4))

      The Court emphasised that the Section 108 statements were not retracted at any point, and even in the reply to the show cause notice, the contents of such statements were not disputed. The Court treated this as relevant to the question of due compliance with Section 138C(4). However, the Court cautioned that this was only for the limited purpose of assessing Section 138C(4) compliance.

      6. Evidentiary value in other contexts and the role of Section 138B

      The Court specifically observed that the evidentiary value of Section 108 statements in any other proceedings would have to be considered in accordance with law, including compliance with Section 138B of the Customs Act, 1962. The remand direction preserved the tribunals role to consider other grounds (including those not examined earlier) on their own merits.

      7. Certificate format not determinative where authenticity is not in dispute

      The Court also relied on the proposition that a certificate not given in a prescribed format would not per se make it invalid, particularly when authenticity of the marked documents is not in dispute. This observation supported the conclusion that the tribunal was not justified in rejecting the electronic material solely on a rigid view of the certificate requirement, given the nature of the record and acknowledgments available.

      Practical Relevance

      1. For customs investigations and adjudication

      The decision indicates that, in proceedings under the Customs Act, 1962, the certificate requirement under Section 138C(4) is central, but compliance may, in appropriate factual settings, be assessed substantively rather than by insisting on a single formal document labelled as a certificate. For departmental practice, contemporaneous documentation of extraction/printing processes and clear identification of devices and outputs assume importance.

      2. For assessees contesting electronic evidence

      Where the challenge is founded on Section 138C(4), the decision suggests that acknowledgments recorded during proceedings and statements under Section 108 may be treated as relevant to whether the statutory conditions have been met in substance. At the same time, the decision preserves the possibility of contesting evidentiary value on other statutory grounds where applicable, including the procedural requirements tied to statements under Section 138B.

      3. For appellate strategy and remand outcomes

      Tribunals may be required to avoid disposing of appeals solely on a narrow evidentiary objection when the record may show substantive compliance, and to adjudicate remaining grounds. Remand in such cases underscores that the Section 138C(4) issue may not be outcome-determinative once due compliance is found, shifting focus to other merits/issues raised but not previously decided.

      4. Interface with Sections 65A and 65B of the Indian Evidence Act

      By treating Section 138C(4) of the Customs Act, 1962 as pari materia to Section 65B(4) of the Indian Evidence Act, the decision reinforces a harmonised approach to electronic evidence in fiscal adjudication. Practitioners should therefore assess both the statutory wording of Section 138C(4) and the generally accepted interpretive approach to Section 65B(4) when framing objections or supporting admissibility of electronic records.

       


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      2025 (9) TMI 76 - Supreme Court

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