Rationalization of provisions relating to assessment and reassessment

The Finance Act, 2021 amended the procedure for assessment or reassessment of income in the Act with effect from the 1st April, 2021. The said amendment modified, inter alia, sections 147, section 148, section 149 and also introduced a new section 148A in the Act. In cases where search is initiated under section 132 of the Act or books of account, other documents or any assets are requisitioned under section 132A of the Act, on or after 1st April, 2021, assessment or reassessment is now made under sections 143 or 144 or 147 of the Act after the Finance Act, 2021.

2. As part of the government’s policy related to simplification of procedures under the Act, it is proposed to––

(i) insert a new proviso to the effect that requirement for approval to issue notice under section 148 shall not be required to be taken by the Assessing Officer if he has passed an order under 148A(d) with prior approval in that case stating that the income is escaping assessment.

(ii) to omit the requirement of approval of specified authority in clause (b) of section 148A.

These amendments will take effect from 1st April, 2022.

3. To correct the inadvertent drafting errors and align the provisions with the intent of the section, following amendments are proposed,

(i) in section 148 to omit the word flagged from clause (i) of Explanation 1,

(ii) in clause (ii) of Explanation 2 to section 148 to omit the reference of subsection (5) of section 133A made therein.

These amendments will take effect from 1st April, 2022.

(iii) in Explanation 2 of section 148 to omit the reference to three assessment years preceding the assessment year relevant to the year of search;

(iv) in section 153B by inserting sub-section (4) to provide that nothing contained in the said section shall apply to any search initiated under section 132 or requisition made under section 132A on or after the 1st day of April, 2021.

(v) in the first proviso of sub-section (1) of section 149 to provide that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of section 149 or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021.

These amendments will take effect retrospectively from 1st April, 2021.

 4. In order to align the scheme of search assessments with the intent of the Act, it is proposed to––

(i) amend sub-section (8) of section 132 to make the provisions of that section also applicable to assessment or reassessment or recomputation under subsection (3) of 143 or section 144 or section 147, as the case may be,

(ii) amend clause (i) of sub-section (1) and sub-section (4) of section 132B to provide that these provisions shall also apply to assessment or reassessment or recomputation.

These amendments will take effect from 1st April, 2022.

(iii) insert a new section 148B to provide that no order of assessment or reassessment or recomputation under the Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, in respect of assessments consequent to search, survey and requisition to reduce avoidable inaccuracies.

This amendment will take effect from 1st April, 2022.

(iv) amend section 153, by inserting a new clause to provide for exclusion of the period of limitation for the purpose of assessment, reassessment or recomputation, ( not exceeding one hundred eighty days) commencing from the date on which a search is initiated under section 132 or a requisition is made under section 132A and ending on the date on which the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing seized under section 132 or requisitioned under section 132A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee, in whose case such search is initiated or such requisition is made or to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to or to whom any books of account or documents seized or requisitioned, pertains or pertain to, or any information contained therein, relates to ;

 (v) amend section 153B, by inserting a new clause to provide for exclusion of the period ( not exceeding one hundred eighty days) commencing from the date on which a search is initiated under section 132 or a requisition is made under section 132A and ending on the date on which the books of account or other documents, or any money, bullion , jewellery or other valuable article or thing seized under section 132 or requisitioned under section 132A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee, in whose case such search is initiated under section 132 or such requisition is made under section 132A.

These amendments will take effect retrospectively from lst April, 2021.

(vi) amend the definition of “specified date” in clause (a) Explanation to section 271AAB to make it also applicable to a notice issued under section 148 in case where search is initiated on or after 1st April, 2021.

This amendment will take effect from 1st April, 2022.

5. In order to bring clarification in the existing provisions and to align them with the intent of the Act, it is proposed to––

(i) clarify what constitutes information under Explanation 1 to section 148 so as to include any audit objection, or any information received from a foreign jurisdiction under an agreement or directions contained in a court order, or information received under a scheme notified under section 135A etc.

(ii) to amend the clause (b) of sub-section (1) of the section 149 to provide that a notice under section 148 shall be issued only for the relevant assessment year after three years but prior to ten years from the end of the relevant assessment year where the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented,

(a) in the form of an asset; or

(b) expenditure in respect of a transaction or in relation to an event or occasion; or

 (c) an entry or entries in the books of account, which has escaped assessment amounts to or likely to amount to fifty lakh rupees or more.

(iii) insert a new sub-section (1A) in section 149 to provide that notwithstanding anything contained in sub-section (1) of the said section, where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1) of the said section, has escaped assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1) of the said section, notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be. (iv) to provide that the provisions of the section 148A shall not apply in cases where the Assessing Officer has received any information regarding the scheme notified under section 135A, pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.

These amendments will take effect from lst April, 2022.

[Clauses 35, 36, 44, 45, 46, 47, 48, 49 and 73]

 

Assessment and reassessment procedures clarified, aligning search linked notices, limitation exclusions and officer level safeguards. Proposed amendments streamline assessment and reassessment procedure by removing duplicate approval requirements for notices under section 148 where an order under section 148A(d) exists, correcting drafting errors in section 148 explanations, extending search/requisition consequences into assessments under sections 143(3), 144 and 147, prescribing officer level approval norms for post search orders, excluding a capped period from limitation where material is seized or requisitioned, and clarifying the meaning of information and threshold conditions for issuing section 148 notices.