CBDT issues Instruction No. 01/2022 regarding Implementation of Hon. Supreme Court’s Judgment in Union of India vs. Ashish Agrawal dated 04.05.2022
Instruction No. 01/2022 | Dated: 11th May, 2022
F. No 279/Misc./M-51/2022-ITJ
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
ITJ Section
New Delhi
Subject: Implementation of the judgment of the Hon’ble Supreme Court dated 04.05.2022 (2022 SCC Online SC 543) (Union of India v. Ashish Agarwal) — Instruction regarding
1. Hon’ble Supreme Court, vide its judgment dated 04.05.2022 (2022 SCC Online SC 543), in the case of Union of India v. Ashish Agarwal has adjudicated on the validity of the issue of reassessment notices issued by the Assessing Officers during the period beginning on 1st April, 2021 and ending with 30th June 2021,within the time extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [hereinafter referred to as “TOLA”] and various notifications issued thereunder (these reassessment notices hereinafter referred to as “extended reassessment notices”).
2. These extended reassessment notices were issued by the Assessing Officers under the provision of section 148 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) following, the procedure prescribed under various sections pertaining to reassessment namely sections 147 to 151, as they existed prior to their amendment by the Finance Act, 2021 (hereinafter referred to as “old law”). With effect from l April 2021, the old law has been substituted with new sections 147-151 (hereinafter referred to as the “new law”).
3. Hon’ble Supreme Court has held that these extended reassessment notices issued under the old law shall be deemed to be the show cause notices issued under clause (b) of section 148A of the new law and has directed Assessing Officers to follow the procedure with respect to such notices. It has also held that all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available. Hon’ble Supreme Court has passed this order in exercise of its power under Article 142 of the Constitution of India.
4. The implementation of the judgment of Hon’ble Supreme Court is required to be done in a uniform manner. Accordingly, in exercise of its power under section 119 of the Act, the Central Board of Direct Taxes (hereinafter referred to as “the Board”) directs that the following may be taken into consideration while implementing this judgment.
5.0 Scope of the judgment:
5.1 Taking into account the decision of the Hon’ble Supreme Court in various paragraphs. It is clarified that the judgment applies to all cases where extended reassessment notices have been issued. This is irrespective of the fact whether such notices have been challenged or not.
6.0 Operation of the new section 149 of the Act to identify cases where fresh notice under section 148 of the Act can be issued:
6.1 With respect of operation of new section 149 of the Act, the following may be seen:
- Hon’ble Supreme Court has held that the new law shall operate and all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available.
- Sub-section (I) of new section 149 of the Act as amended by the Finance Act, 2021 (before its amendment by the Finance Act, 2022) reads as under:-
149. (1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b):
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing 0fficer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Provided 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 such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (12) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:
- Hon’ble Supreme Court has upheld the views of High Courts that the benefit of new law shall be made available even in respect of proceedings relating to past assessment years. Decision of Hon’ble Supreme Court read with the time extension provided by TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that point.
6.2 Based on above, the extended reassessment notices are to be dealt with as under:
(i) AY 2013-14, AY 2014-15 and AY 2015-16: Fresh notice under section 148 of the Act can be issued in these cases, with the approval of the specified authority, only if the case falls under clause (b) of sub-section (1) of section 149 as amended by the Finance Act, 2021 and reproduced in paragraph 6.1 above. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (ii) of that section.
(ii) AY 16-17, AY 17-18: Fresh notice under section 148 can be issued in these cases, with the approval of the specified authority, under clause (a) of sub-section (1) of new section 149 of the Act, since they are within the period of three years from the end of the relevant assessment year. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (i) of that section.
7.0 Cases where the Assessing Officer is required to provide the information and material relied upon within 30 days:
7.1 Hon’ble Supreme Court has directed that information and material is required to be provided in all cases within 30 days. However, it has also been noticed that notices cannot be issued in a case for AY 2013-14, AY 2014-15 and AY 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Hence, in order to reduce the compliance burden of assessees, it is clarified that information and material may not be provided in a case for AY 2013-14, AY 2014-15 and AY 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Separate instruction shall be issued regarding procedure for disposing these cases.
8.0 Procedure required to be followed by the Assessing Officers to comply with the Supreme Court judgment:
8.1 The procedure required to be followed by the Jurisdictional Assessing Officer/Assessing Officer, in compliance with the order of the Hon’ble Supreme Court, is as under:
- The extended reassessment notices are deemed to be show cause notices under clause (b) of 148A of the Act in accordance with the judgment of Flon’ble Supreme Court. Therefore, all requirement of new law prior to that show cause notice shall be deemed to have been complied with.
- The Assessing Officer shall exclude cases as per clarification in paragraph 7.1 above.
- Within 30 days i.e. by 2nd June 2022, the Assessing Officer shall provide to the assessees, in remaining cases, the information and material relied upon for issuance of extended reassessment notices.
- The assessee has two weeks to reply as to why a notice under section 148 of the Act should not be issued, on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year. The time period of two weeks shall be counted from the date of last communication of information and material by the Assessing Officer to the assessee.
- In view of the observation of Hon’ble Supreme Court that all the defences of the new law are available to the assessee, if assessee makes a request by making an application that more time be given to him to file reply to the show cause notice, then such a request shall be considered by the Assessing Officer on merit and time may be extended by the Assessing Officer as provided in clause (b) of new section 148A of the Act.
- After receiving the reply, the Assessing Officer shall decide on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148 of the Act. The Assessing Officer is required to pass an order under clause (d) of section 148A of the Act to that effect, with the prior approval of the specified authority of the new law. This order is required to be passed within one month from the end of the month in which the reply is received by him from the assessee. In case no such reply is furnished by the assessee, then the order is required to be passed within one month from the end of the month in which time or extended time allowed to furnish a reply expires.
- If it is a fit case to issue a notice under section 148 of the Act, the Assessing Officer shall serve on the assessee a notice under section 148 after obtaining the approval of the specified authority under section 151 of the new law. The copy of the order passed under clause (d) of section 148A of the Act shall also be served with the notice u/s 148.
- If it is not a fit case to issue a notice under section 148 of the Act, the order passed under clause (d) of section 148A to that effect shall be served on the assessee.
Tanay Sharma
DCIT(OSD), ITJ-I
Author Bio
This CBDT Instruction is in the teeth of the provisions of law as well as the clear dicta of the Supreme Court. As per my analysis, the two major shortcomings of the instructions are as follows, and both are vis-a-vis the time limit for re-opening of assessment under Section 148:
1. With respect to A.Y. 2013-14 and 2014-15, the instruction says that Notices under 148 can be issued if the quantum of tax alleged to have escaped assessment is more than 50 Lakh Rupees, since now as per 149(1)(b), the time limit for re-opening of assessment has been increased to 10 years. This instruction, is in direct conflict to the proviso to Section 149, which clearly states that irrespective of the new time limit under Section 149(1)(b), if assessment could not be re-opened on the 1st of April, 2021 under the unamended or old provisions of Section 149 (as it stood prior to the Finance Act, 2021), then re-assessment notices cannot be issued under Section 148 under the amended provisions. Since under the old provisions, the time period of 6 years (at the max) for A.Y. 2014-15 expired on 31.03.2021, therefore, beyond then, no re-assessment proceedings can be opened under the new provision. The logic stems from the legal principle that once the time limit has already elapsed before the coming into force of the new provisions extending time limits, then merely because of such change in law, rights of the assessee cannot be adversely affected.
2. Similarly, the instruction states that A.Y. 2016-17, 2017-18 can be re-opened even if quantum of escapement is less than 50 Lakhs since, the time limit under new 149(1)(a) i.e., of three years has not expired. With respect to A.Y. 2016-17 and A.Y. 2017-18, the time limit of three years elapsed on 31.03.2020 and 31.03.2021 respectively, therefore re-assessment proceedings for escapement of less than Rs. 50 Lakhs cannot be initiated. This further finds support from the fact that the Hon’ble Supreme Court has also unequivocally clarified in its judgment that the benefit of the new provisions shall be available in respect of previous assessment years.
The CBDT had issued said instructions by arbitrarily applying the provisions of the Relaxation Act to the provisions of the Act as amended by the Finance Act, which is neither permissible in law, nor on facts. Simply, on facts, the Notifications dated 31.03.2021 and 27.04.2021 issued in exercise of powers under Section 3 of the Relaxation Act, vide which the time lines for issuing Notices under 148 were increased to 30.04.2021 and 30.06.2021 respectively, clearly through a Explanation clarify that the extensions shall apply only to the provisions of the Income Tax Act, as it stood PRIOR to the amendments brought about vide the Finance Act, 2021. Thus, it leaves no room for any doubt that EVEN IF legally, the provisions of the Relaxation Act could be applied to the FINANCE ACT, 2021, then too the CBDT has not exercised such power vis-a-vis the amended provisions. Thus, the instructions are clearly contrary to law and/or facts.
very well interpreted sir
Great
Unable to understand how AY 16-17 is within a period of 3 years to issue notice u/s 148? as mentioned in para 6.2(ii). can anybody explain