The article discusses major structural and procedural changes introduced under the proposed Income Tax Act, 2025 compared with the Income Tax Act, 1961, particularly regarding reporting obligations, PAN compliance, faceless assessments, and revisionary powers. A significant amendment under Rule 237 of the Income-tax Rules, 2026 expands the Statement of Financial Transactions (SFT) regime by mandating reporting of gifts of immovable property where the stamp duty value exceeds ₹45 lakh, even if no consideration is paid. PAN-related provisions have also been overhauled, including mandatory PAN for cash deposits or withdrawals above ₹10 lakh annually, removal of foreign travel reporting requirements, and introduction of simplified PAN correction forms PAN CR-01 and PAN CR-02 with compulsory Aadhaar linkage. The faceless assessment framework under Section 273 strengthens technology-driven scrutiny through NFAC, Assessment Units, Verification Units, and Technical Units using AI-based allocation systems. Further, Sections 377 and 378 redefine revisionary powers, clarifying standards for erroneous assessments and strengthening the Department’s authority while retaining taxpayer safeguards developed through judicial precedents.
Series III- Few important changes with respect to the Income Tax Act 2025 (ITA 2025) in comparison to Income Tax Act 1961 (ITA 1961)
Section 508 of ITA 2025 Vs Section 285BA of ITA 1961
Rule 237 of ITR 2026 Vs Rule 114E of ITR 1962
Form 165 of ITA 2025 Vs Form 61A, 61B of ITA 1961
Obligation to furnish statement of financial transaction or reportable account.
Rule 237, Income-tax Rules, 2026 – Reporting of Gifts of Immovable Property
The Income-tax Rules, 2026 introduce a significant expansion in the Statement of Financial Transactions (SFT) framework through Rule 237, by expressly bringing gifts of immovable property within the reporting net. This marks a clear shift towards comprehensive tracking of high-value transactions, including those undertaken without consideration.
Taxpayers and advisors must be mindful that, high-value property gifts can no longer remain under the radar. Proper documentation of relationship and intent becomes critical.
Legal Framework
Rule 237 mandates specified reporting entities to furnish details of prescribed transactions in the SFT. While the framework broadly corresponds to the earlier reporting regime, a key addition is the inclusion of transactions involving receipt of immovable property without consideration.
Transaction Now Covered
The rule specifically covers:
a. Receipt of immovable property by way of gift
b. Where no consideration is paid
c. And the stamp duty value is ₹45 lakh or more
This brings within scope transactions that were previously outside the structured reporting mechanism.
Reporting Authority
The obligation to report such transactions is cast upon Registrar / Sub-Registrar or Authority responsible for registration of immovable property.
Section 262 of ITA 2025 Vs Section 139A of ITA 1961
Rule 158, 159 of ITR 2026 Vs Rule 114, 114B of ITR 1962
Form 93, Form 94 Vs Form 49A,
Form 95, Form 96 Vs 49AA,
Form 97 Vs Form 60
PAN CR 01, PAN CR 02 Vs Correction form under ITA 1961
Cash Deposits & Withdrawals: Replaces the former ₹50,000/day limit. PAN is now mandatory if total cash deposits or withdrawals exceed ₹10 lakh in a financial year.
Insurance Premiums: Replaces the older ₹50,000 yearly threshold. PAN is now required for all insurance policies, regardless of the premium amount.
Motor vehicle now includes two wheelers, motor cycles
Immovable property threshold limit increased from 10 lacs to 20 lacs
Hotel/ events payments threshold increased from INR 50,000 to INR 1,00,000
Following transactions are removed from Rule 159
Foreign travel and foreign currency payments
Demonetisation specific provisions being redundant now
Purchase of bank drafts/ bankers cheques/ pay orders
Prepaid payment instruments
Key changes in New PAN Correction Form applicable from 1st April 2026:
Effective April 1, 2026, the CBDT has introduced new, simplified forms for PAN corrections (PAN CR-01 for individuals; PAN CR-02 for non-individuals). These forms streamline updates to name, address, date of birth, and parents’ names, requiring mandatory Aadhaar linkage and supporting documentation, available through Protean and UTIITSL.
Key Changes and Forms (Effective April 1, 2026):
PAN CR-01: New form for individuals (citizens, NRI, etc.) for changes or correction in PAN data.
PAN CR-02: New form for non-individual entities (companies, firms, trusts, etc.) for data updates.
Mandatory Aadhaar: Aadhaar number is required for all applicants (except exempted categories), with a copy of the Aadhaar card as proof.
Parent’s Name Selection: The form explicitly requires selecting whether the father’s or mother’s name should be printed on the card.
Mobile and email: It is now compulsory for all applicants to provide an active mobile number and email ID in the “Contact Details” section.
Submission Methods: Forms can be submitted electronically via Nsdl e-gov or UTIITSL, or physically at TIN-FCs.
Supporting Documents: Any changes in data must be accompanied by relevant, legally valid proofs (e.g., Marriage Certificate, Gazette Notification for name change).
Section 273 of ITA 2025 Vs Section 144B of ITA 1961
Rule 176 of ITR 2026
Faceless scheme under the new Act/ Rules:
Introduction:
Faceless assessment under Section 273 of the Income-tax Act, 2025, read with Rule 176 of the Income Tax Rules, 2026, represents a centralised, technology-driven framework with no physical interface between the assessee and the tax authorities.
The Procedure is largely driven through Rule 176. In the old provisions, the procedure was codified in Sec 144B of the Income Tax Act 1961.
The assessment, reassessment or recomputation under section 270(10) or section 271 or section 279, as the case may be, in respect of cases as specified by the Board under section 273(2), shall be made in a faceless manner, in accordance with the procedure in this rule.
NFAC:
The process is administered through the National Faceless Assessment Centre (NFAC), which acts as the single point of contact for issuing notices, receiving responses, allocating cases, and serving final orders.
AU, VU, TU:
The assessment function is carried out by the Assessment Unit (AU), which is responsible for identifying issues, calling for information, analysing material on record, and framing the draft as well as the final assessment order. Where verification of facts is required, the AU makes a reference to the Verification Unit (VU), which undertakes inquiries, examination of records, and third-party confirmations. In cases involving specialised issues such as legal interpretation, valuation, transfer pricing, or accounting standards, the matter may be referred to the Technical Unit (TU) for expert inputs. This structured segregation of functions ensures objectivity and reduces individual discretion.
Procedure:
The proceedings are initiated through a notice, to which the assessee is required to respond within the time specified in the notice, as no fixed statutory timeline is prescribed. During the course of assessment, the AU examines the material available on record and, where any adverse variation is proposed, a show cause notice is issued providing the assessee with a final opportunity to respond. The assessee primarily presents its case through written submissions, though a personal hearing may be requested through video conferencing, which is granted in accordance with the prescribed procedure.
Technology integration:
A defining feature of the faceless regime is the integration of technology into the assessment process. Cases are assigned through an automated allocation system using algorithm-based tools, including artificial intelligence and machine learning, to ensure randomised allocation and optimal utilisation of resources. In a case where a variation is proposed in the income or loss determination proposal or the draft order, and an opportunity is provided to the assesse by serving a notice calling upon him to show cause as to why the assessment should not be completed as per such income or loss determination
proposal, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority of the relevant unit.
Further, draft assessment orders are subjected to an automated examination tool, which applies standardised parameters to review the order and reduce the scope for subjectivity, thereby promoting consistency in decision-making.
Conclusion:
Overall, the faceless assessment framework establishes a system-driven, multi-layered process aimed at enhancing transparency, efficiency, and accountability.
At the same time, it places significant reliance on timely and comprehensive written submissions, with procedural timelines being governed by the notices issued during the course of proceedings rather than any fixed statutory prescription.
Section 377 of ITA 2025 Vs Section 263 of ITA 1961
Revision of orders under the New Income Tax Act:
Section 377: Revision of Orders Prejudicial to Revenue
This section replaces Section 263 of the 1961 Act. It is a “watchdog” provision allowing the Department to reopen cases where the tax officer’s order was too lenient due to error.
The Two-Pronged Test: To invoke this, the order must be (a) Erroneous and (b) Prejudicial to the interests of the Revenue. One cannot exist without the other.
The “Inquiry” Standard: The 2025 Act codifies that an order is “erroneous” if the Assessing Officer (AO) failed to make necessary inquiries or verifications that a “reasonable” officer would have made.
Scope of “Prejudicial”: It isn’t just about less tax being paid; it includes cases where the AO applied the law incorrectly, ignored Board (CBDT) circulars, or ignored binding court rulings.
The Outcome: The Commissioner can:
Modify or enhance the assessment.
Cancel the order and direct a fresh assessment (remand).
Time Limit: Generally 2 years from the end of the financial year in which the original order was passed.
The guardrails built by decades of judicial wisdom—mandating the coexistence of “erroneous” and “prejudicial” elements, the protection of plausible views, and the necessity of independent application of mind—will continue to protect taxpayers from arbitrary administrative revisions in the new era of the 2025 Act.
Under Section 263(1) of the 1961 Act, the provision read: “The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer… is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard… pass such order thereon as the circumstances of the case justify…”.
Under Section 377(1) of the 2025 Act, the text has been condensed to read: “The Competent Authority may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer… is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard… pass such order thereon as the circumstances of the case justify…”.
The primary difference lies in the replacement of the long list of specific tax authorities with the unified term “Competent Authority.
Section 378 of ITA 2025 Vs Section 264 of ITA 1961
Section 378: Revision of Other Orders (Assessee’s Remedy)
This replaces Section 264 and is a discretionary, “justice-oriented” power used to grant relief to taxpayers.
Nature of Power: It is a revisionary power for the benefit of the assessee. The Commissioner cannot use Section 378 to increase your tax liability.
Pathways to Initiate:
Suo Motu: The Commissioner can act on their own.
On Application: You can apply if you’ve missed an appeal deadline or discovered an error in your favor (e.g., you forgot to claim a deduction).
The “No Appeal” Rule: You cannot use Section 378 if:
The time for filing an appeal to the CIT(A) or ITAT hasn’t expired (unless you waive your right to appeal).
An appeal is already pending.
Cost: A flat fee of ₹500 for applications.
Limitation: Must be filed within 1 year from the date the order was communicated to you.
Transitional Provisions (The “Bridge” between 1961 and 2025)
The 2025 Act includes specific logic to handle the handover from the 1961 Act:
Grandfathering of Old Orders: If an order was passed under the 1961 Act (pre-April 2025/2026), the revisionary powers of the old Sections 263/264 apply, even if the revision happens after the new Act starts.
Limitation Clock: The time limits prescribed in the 1961 Act are preserved for old cases. For example, if you had two years to revise an order under the old law, the 2025 Act won’t suddenly shorten or lengthen that specific window.
Jurisdiction Continuity: Commissioners appointed under the old Act are automatically deemed authorized to exercise powers under Sections 377 and 378 for their respective jurisdictions.
Legal Precedents: The 2025 Act is a “re-codification.” Therefore, landmark judgments (like Malabar Industrial Co. for Sec 263) continue to be the primary guide for interpreting what “erroneous and prejudicial” means under Section 377.
Key Difference to Note:
The 2025 Act seeks to reduce litigation by being more explicit about what constitutes a “lack of inquiry,” making Section 377 slightly more powerful for the Department than the old Section 263.
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