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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...
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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.
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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.
    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.
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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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    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.
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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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      Amendments to the Code of Civil Procedure, 1908 by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002 upheld by the Supreme Court.

      9 June, 2022

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      2002 (10) TMI 796 - Supreme Court

      Amendments  to the Code of Civil Procedure, 1908 by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002 upheld by the Supreme Court.

      Certain writ petitions have been filed seeking to challenge Amendments made to the Code of Civil Procedure, by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002.

      Writ Petition (civil) 496 of 2002 was filed by Salem Advocate Bar Association and after notice was issued the petitioner sought leave of this Court to withdraw the writ petition. The court declined the request to withdraw the writ petition. The petition had been filed in public interest.


      The amendments sought to be made by the above amendment acts (Amendment Act 46 of 1999 and Amendment Act 22 of 2002) have been challenged but the hon'ble apex court refused to strike down the aforesaid amendments on the ground that there was no infirmity in the same.

      Summons to the Defendant within 30 days.

      A clarification was sought on an amendment made to Section 27 dealing with summons to the defendant. It has to be done within 30 days from the date of the institution of the suit. The hon'ble court clarified that object of this section is to avoid long delay in issue of summons for want of steps by the plaintiff. If all that is required to be done by a party is duly performed then compliance has been done by the party and no fault can be attributed to the party. The objective being, if a party concerned has taken steps to file the process fee along with completing the other formalities which are required to enable the court to issue the summons then such a party is not at fault.

      Arbitration, Conciliation, Judicial Settlement and Mediation.

      Section 89 introduced in the Code of civil procedure, 1908:

      It speaks of settlement of disputes outside the court through arbitration,conciliation, judicial settlement including settlement through Lok Adalat and mediation. Held that it being imperative that resort should be had to Alternative Dispute Resolution Mechanism with a view to bring to an end litigation between the parties at an early date. The parties shall follow the procedures as provided by the mechanism and accordingly appropriate rules be framed with regard to mediation.

      The ADR mechanism is successful in most of the countries but if a matter is not settled through conciliation or mediation or judicial settlement despite efforts being made, the case will ultimately go to trial.

      Section 89 is a new provision and even though arbitration or conciliation has been in place as a mode for setting the disputes, this has not really reduced the burden on the courts. Thus the court suggested that certain modalities have to be framed to make this amendment work. It being suggested to form a Committee to ensure that the amendments made become effective and result in quicker dispensation of justice.
      Any creases which require to be ironed out can be identified and apprehensions which may exist in the minds of the litigating public or the lawyer's clarified.

      A model case management formula as well as rules and regulations which should be followed while taking recourse to the ADR (Alternative Dispute Resolution) is referred to in Section 89. The model rules, with or without modification, which are formulated may be adopted by the High Courts concerned for giving effect to Section 89(2)(d).

      Intra Court Appeal.

      Section 100A which deals with intra-court appeals was absolutely fine as opined by the hon'ble court. No prejudice would be caused to the litigants by not providing for intra-court appeal, even where the value involved is large. The High Court by Rules, can provide that the Division Bench will hear the regular first appeal. A further right of appeal where the amount involved is nominal to a Division Bench will be increasing the workload of courts unnecessarily.

      Rejection of the Plaint.

      Order 7 Rule 11 to which Clauses (e) and (f) have been added which enable the court to reject the plaint where it is not filed in duplicate or where the plaintiff fails to comply with the provisions of Rule 9 of Order 7. There may not be an automatic rejection of the plaint at the first instance. The court should give an opportunity to rectify the defect and if the same not being done the court will have the liberty or the right to reject the plaint.

      Examination of Chief of the Witnesses.

      Order 18, Rule 4 has been substituted and Sub-rule (1) provides that in every case examination-in-chief of the witnesses shall be on affidavits and copies thereof shall be supplied to the opposite parties by the party who calls them for evidence.

      It being contended that it may not be possible for the party calling the witness to compel the witness to file an affidavit. It often happens that the witness may not be under the control of the party who wants to rely upon his evidence and that witness may have to be summoned through court.

      Order 16 Rule 1 provides for list of witnesses being filed and summons being issued to them for being present in court for recording their evidence. Rule 1A, on the other hand, refers to production of witnesses without summons where any party to the suit may bring any witness to give any evidence or to produce documents.

      Held by the apex court, reading the provisions of Order 16 and Order 18 together it appears to us that Order 18 Rule 4(1) will necessarily apply to a case contemplated by Order 16 Rule 1A, i.e. where any party to a suit, without applying for summoning under Rule 1 brings any witness to give evidence or produce any document. In such a case, examination-in-chief is not to be recorded in court but shall be in the form of an affidavit.

      Held that whether a witness shall be directed to file affidavit or be required to be present in court for recording of his evidence is a matter to be decided by the court in its discretion having regard to the facts of each case.

      Evidence of a witness to be taken by the Court or by the Commissioner.

      Order 18 Rule 4(2) gives the court the power to decide as to whether evidence of a witness shall be taken either by the court or by the Commissioner.

      An apprehension was raised to the effect that the court has no discretion and once it decides that the evidence will recorded by the Commissioner then evidence of other witnesses cannot be recorded in court.

      The hon'ble bench did not agree to the above contention. The Court has a discretion to either record the evidence in Court or through Commissioner or either of them.

      Order 18 Rule 4(3) provides that the evidence may be recorded either in writing or mechanically in the presence of the Judge or the Commissioner. The use of the word 'mechanically' indicates that the evidence can be recorded even with the help of the electronic media, audio or audio-visual, and whenever the evidence is recorded by the Commissioner it will be advisable that it should be done simultaneously,at least an audio recording of the statement of the witnesses so as to obviate any controversy at a later stage.

      Held by the court that Rule 17A has been deleted by the Amendment Act, 2002 with a view that unnecessarily applications are not filed primarily with a view to prolong the trial. The contention of the counsel as to deletion may cause hardship to the litigants was not accepted by the hon'ble court.

      Memorandum of Appeal.

      Rule 9 which was inserted in Order 41 states of "Registry of memorandum of appeal". The court from whose decree an appeal lies shall entertain the memorandum of appeal and shall endorse thereon the date of presentation and shall register the appeal in a book of appeal kept for that purpose. This book be called the register of appeal.
      It being a clear proposition of law that an appeal is to be filed under Order 41 Rule 1 in the court in which it is maintainable.

      Order 41 Rule 9 contemplates that a copy of memorandum of appeal which has been filed in the Appellate Court should also be presented before the court against whose decree the appeal has been filed and endorsement thereof shall be made by the decreeing court in a book called the Register of Appeals.

      The intention of the Legislature being that the court against whose decree an appeal has been filed should be made aware of the factum of the filing of the appeal which may or may not be relevant at a future date.

      Now just because a memorandum of appeal is not filed under Order 41 Rule 9 will not, to our mind, make the appeal filed in the appellate court as a defective one.

      The hon'ble court  hoped that the amendments made in the Code of Civil Procedure would help in expeditious disposal of cases in the trial courts and the appellate courts.

      The hon'ble apex court further held, that a copy of the judgment of the present matter/writ petition be sent to the Registrars of all the High Court’s so that necessary action can be taken by the respective High Courts and any writ petition pending in those High Courts can be formally disposed of.

      Thus the amendments made to the Code of Civil Procedure, 1908 by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002 were upheld/guarded by the hon'ble apex court in the present Writ Petition (civil) 496 of 2002.

      Procedure is an enabling tool to achieve the objectives of equity and justice. It may not be easy to challenge the same by way of invoking the writ jurisdiction/s.

       

       


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      2002 (10) TMI 796 - Supreme Court

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