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    Assessing Officer's Duty to Notify Losses : Clause 291 of the Income Tax Bill, 2025 Vs. Section 157 ...
    Statutory mechanism for the modification and revision of demand notices : Clause 290 of Income Tax B...
    Examination of Notice of Demand Provisions in Indian Tax Statutes : Clause 289 of the Income Tax Bil...
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    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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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    Executive power to frame tax administration schemes may reshape processes while raising delegation and legal certainty concerns.
    Clause 532 empowers the Central Government to notify schemes for any purpose under the Act to eliminate taxpayer-authority interface and optimize resources; it authorises modification or suspension of statutory provisions by notification to implement schemes, permits amendment of existing schemes for transitional continuity, and requires notifications be laid before Parliament, thereby enabling broad administrative reconfiguration through subordinate legislation while raising delegation, transparency, and legal certainty concerns.
    Act RulesBills
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    Sanction authority centralization for reopening assessments shifts approval to Additional/Joint Commissioners, reducing prior higher level oversight.
    Clause 284 appoints Additional Commissioners, Additional Directors, Joint Commissioners, or Joint Directors as the sole authorities to grant sanction for notices under sections 280 and 281, replacing the earlier tiered sanction regime. It removes temporal thresholds and higher level approvals formerly applied to older or complex cases, centralizes decision making, omits explanatory and delegation provisions present in the prior framework, and may therefore streamline administration while raising concerns about reduced oversight, interpretive ambiguity, and possible increased litigation.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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.
    Act RulesBills
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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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      Corporate Laws

      Small Industries Development Bank of India versus M/s. Sibco Investment Pvt. Ltd- Legal Position of NBFC in a civil suit.

      2 June, 2022

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      2022 (1) TMI 170 - Supreme Court

      Legal Position of NBFC in a civil suit.

      Section 45 MB of the RBI Act 1934. - Power of bank to prohibit acceptance of deposit and alienation of assets, Section 45 MC - Power of Bank to file winding up petition.

      Section 35A of the Banking Regulation Act, 1949 vests power in the RBI to give directions to banks and can take action, "to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company"

      A conjoint reading of the statutory provisions, makes it abundantly clear that for ‘public interest’ the RBI is empowered to issue any directive to any banking institution, and to prohibit alienation of an NBFC’s property.

      The term ‘Public interest’ has no rigid definition. It has to be understood and interpreted in reference to the context in which it is used. The concept derives its meaning from the statute where it occurs, the transaction involved, the state of society and its needs.

      It is not necessary for RBI to mention a specific provision before issuing directions, for it to have statutory consequences. All that is required is the authority under the law, to issue such direction.

      Therefore the RBI under Section 45-MB of the RBI Act, 1934 and 35-A of the Banking Regulation Act, 1949 has the requisite authority to issue the communication dated 09th June, 1997. Now the omission by the RBI to mention any enabling provision, doesn’t change the nature and status of the direction.

      The statutory arrangement and interpretation persuades to hold that actions in furtherance of grounds of ‘public policy’ by the RBI was justified, for issuing the Notification dated 10.04.1997. The notification itself clearly mentioned that it is issued for the benefit of "depositors and creditors" of CRB Capital.

      The actual status of the RBI Notification would have a bearing on the claim against the defendant in the suit and subsequent proceeding/s. The plaintiff, as can be noted, always had the option of challenging its legality but they have never specifically challenged those in the Suit. In a way the plaintiff " waived its right" by not challenging the RBI notification then/at that past point of time in the suit proceedings.

      The principle of waiver/acquiescence is applicable here.

      When the legality of the RBI Notification is not under challenge, relief can’t be granted in the Suit without determining its "legality". This in our perception can by itself, put a quietus on the issue at hand - the plaintiff cannot be granted parity with its predecessor-in-interest, Shankar Lal Saraf, who was paid interest which accrued in July, 1997 despite the RBI directive of 09.06.1997.

      The defendant defended this fallacy/aberration by clarifying that the payment to Shankar Lal Saraf was made before the defendant was in receipt of the RBI directive.

      Hence, the plaintiff cannot claim any advantage for themselves or parity with its predecessor-in-interest, on this cause. It amounted to sub-silencio acceptance.

      Suit barred by constructive res judicata.

      The cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata.

      Section 441(2) of the Companies Act, 1956 reveals that winding-up proceedings other than voluntary winding-up, are said to have commenced from the date of presentation of petition - A conjoint reading of Section 531 and 441(2) of the Companies Act, 1956 prima facie reveals that any transfer of property by or against a company in involuntary winding up, the suspect spell for deemed fraudulent transaction is six months before presentation of the winding up petition.

      In the present case, the petition for winding-up was submitted by RBI on 22.05.1997 and admittedly, the transfer in Shankar Lal Saraf’s favour was executed in February, 1997. The defendant’s contention as to the transfer being in the suspect spell, may be deemed fraudulent, cannot be rejected. 

      A question arose whether the present suit is barred by Constructive res judicata- It being decided that the cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court/court of first instance, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata.

      This narrative makes us understand that a NBFC governed by the Banking  Regulation Act, 1949 and the  Reserve Bank of India Act, 1934 along with Section 531 and 441(2) of the Companies Act, 1956 is too subject to the common law principles and the Code of Civil Procedure, 1908 when in a civil suit before a Court of law.

       


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      2022 (1) TMI 170 - Supreme Court

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      ActsIncome Tax