Provisions relating to reassessment proceedings – Budget 2023
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, assessment or reassessment is now made under section 147 of the Act for all the relevant years prior to the year in which the search was conducted or requisition was made after the Finance Act, 2021. Further, the provisions of re-assessment proceedings were rationalized by amendments made vide Finance Act, 2022.
2. Amendments have been proposed in the provisions relating to conduct of reassessment proceedings under the Act to further streamline them and facilitate their conduct and completion in a seamless manner. It has been proposed that the section 148 of the Act may be amended to provide that a return in response to a notice under section 148 of the Act shall be furnished within three months from the end of the month in which such notice is issued, or within such further time as may be allowed by the Assessing Officer on a request made in this behalf by the assessee. However, any return which is furnished beyond the period allowed in the section 148 to furnish such return of income shall not be deemed to be a return under section 139 of the Act. As a result, the consequential requirements viz. notice under sub-section (2) of section 143 etc. would not be mandatory for such returns.
3. Further, section 149 of the Act provides the period of limitation for issuance of notice under section 148 of the Act for commencement of proceedings under section 147 of the Act. It is imperative to note here that in case of a search action under section 132 of the Act, requisition under section 132A of the Act and cases for which information emanates from the above proceedings are deemed to be information under section 149 of the Act and there is no requirement for proceedings under section 148A of the Act to be conducted prior to re-opening the cases in these cases.
4. In cases where survey under section 133A of the Act is conducted, the Assessing Officer is deemed to have information for the purposes of section 148 of the Act but proceedings under section 148A of the Act need to be conducted prior to issuance of notice under section 148 of the Act. It has been seen that in the cases where the aforementioned search, requisition or survey proceedings are conducted after 15th March of a financial year, there is extremely little time to collate this information and issue a notice under section 148 or show cause notice under section 148A(b) of the Act. Moreover, the search is conducted by the Investigation Wing and the notice is required to be issued by the Assessing Officers.
5. However, evidence of tax evasion may be reflected in the statements recorded or documents seized or impounded etc. during such action before 31st March, but issuance of notice related to such information or search may go beyond the time limitation provided due to the procedure involved. Therefore, important information related to revenue leakage cannot be proceeded on due to the paucity of time for searched conducted and information obtained as a consequence of these searches in the last few days of any financial year. Accordingly, it has been proposed to insert a proviso in the said section to provide that in cases where a search under section 132 is initiated or a search for which the last of the authorization is executed or requisition is made under section 132A, after the 15th March of any financial year a period of fifteen days shall be excluded for the purpose of computing the period of limitation for issuance of notice under section 148 and the notice so issued shall be deemed to have been issued on the 31st day of March of such financial year.
6. It is also proposed to insert another proviso in the section 149 of the Act to provide that in cases where the information deemed to be with the Assessing Officer emanates from a statement recorded or documents impounded under summons or survey, as the case may be, on or before the 31st day of March of a financial year, in consequence of, a search initiated or last of the authorization executed under section 132 or a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation for issuance of notice under section 148 and the show cause notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year. It has also been provided that the impounding or the recording of the statement in consequence of the search or the search itself should be before the 31st March only. Only extension has been provided for the time consumed in the procedure for issuance of notice under section 148 or 148A, as the case may be.
7. Section 151 of the Act contains provisions relating to the specified authority who can grant approval for the purposes of sections 148 and 148A of the Act. The said section provided that the authority would be the Principal Chief Commissioner and where there is no Principal Chief Commissioner, the Chief Commissioner shall give approvals beyond a period of three years.
8. It was seen that the clause (ii) of the said section was resulting in misinterpretation as well as confusion with regards to the specified authority for the cases where re-opening was being done after three years from the relevant assessment year. Therefore, to clarify the position of law in this regard, an amendment has been proposed to provide that the specified authority under clause (ii) of section 151 of the Act shall be Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
9. At the same time, to give further clarity with regards to the specified authority a proviso is proposed to be inserted in the section 151 to provide that while computing the period of three years for the purposes of determining the specified authority the period which has been excluded or extended as per the provisos in section 149 of the Act from the time limit for issuance of notice under section 148 of the Act shall be taken into account.
6. These amendments will take effect from the 1st day of April, 2023.
[Clauses 69, 70 & 71]
Extract of relevant clause of Finance Bill 2023
Clause 69 of the Bill seeks to amend section 148 of the Income-tax Act relating to issue of notice where income has escaped assessment.
The said section, inter alia, provides that before making the assessment, reassessment or recomputation under section 147 of the Act, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable.
It is proposed to amend the said section to provide that such return shall be furnished in a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee.
It is further proposed to insert a third proviso in the said section to provide that any return of income, required to be furnished by an assessee under this section and furnished beyond the period allowed shall not be deemed to be a return under section 139.
These amendments will take effect from 1st April, 2023.
Clause 70 of the Bill seeks to amend section 149 of the Income-tax Act relating to time limit for notice.
It is proposed to amend sub-section (1) of the said section to insert the provisos after the second proviso to provide that for cases referred to in clause (i), (iii) and (iv) of the Explanation 2 to section 148 where a search is initiated under section 132 or a search under section 132 for which the last of the authorisations is executed or requisition is made under section 132A, after the 15th March of any financial year and the period for issue of notice under section 148 expires on 31st March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st March of such financial year.
The proposed fourth proviso provides that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st March of a financial year, in consequence of, a search under section 132 which is initiated or a search under section 132 for which the last of the authorisations is executed or a requisition is made under section 132A, after the 15th March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st March of such financial year.
It is also proposed to amend the sixth proviso in the said sub-section to provide that where immediately after the exclusion of the period referred to in the fifth proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A does not exceed seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.
These amendments will take effect from 1st April, 2023.
Clause 71 of the Bill seeks to amend the section 151 of the Income-tax Act relating to sanction for issue of notice.
It is proposed to amend clause (ii) of the said section to provide that the specified authority for the purposes of section 148 and section 148A shall be the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.
It is further proposed to insert a proviso in the said section so as to provide that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149.
These amendments will take effect from 1st April, 2023.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
69. Amendment of section 148.
In section 148 of the Income-tax Act, –
(a) for the words “such period, as may be specified in such notice”, the words “a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee” shall be substituted;
(b) after the second proviso and before Explanation 1, the following proviso shall be inserted, namely:–
“Provided also that any return of income, required to be furnished by an assessee under this section and furnished beyond the period allowed shall not be deemed to be a return under section 139.”.
70. Amendment of section 149.
In section 149 of the Income-tax Act, in sub-section (1),–
(I) after the second proviso, the following provisos shall be inserted, namely:–
“Provided also that for cases referred to in clauses (i),
(iii) and (iv) of Explanation 2 to section 148, where,–
(a) a search is initiated under section 132; or
(b) a search under section 132 for which the last of authorisations is executed; or
(c) requisition is made under section 132A,
after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year:
Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,–
(a) a search under section 132 which is initiated; or
(b) a search under section 132 for which the last of authorisations is executed; or
(c) a requisition made under section 132A,
after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:”;
(II) in the sixth proviso, for the words “less than seven days”, the words “does not exceed seven days” shall be substituted.
71. Amendment of section 151.
In section 151 of the Income-tax Act,–
(a) in clause (ii), the words “where there is no Principal Chief Commissioner or Principal Director General,” shall be omitted;
(b) after clause (ii), the following proviso shall be inserted, namely:–
“Provided that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149.”.
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