Reopening of Assessments Section 147 w.e.f. 01.04.2021

“Explore the changes in the law for reopening assessments under Section 147 from April 1, 2021. Understand the salient features, time limits, and what to do if you receive Notice u/s 148A(b). Get expert insights for effective navigation.”

The Finance Act, 2021 had changed the law applicable to the reopening of assessments with effect from 1^st April, 2021. Relevant sections are sections 147 to 151.

This Article discusses –

• The Salient Features of the New Law
• Time Limit for completing the Reassessment
• What should we do if we receive Notice u/s 148A(b)

> The Salient Features of the New Law

• Section 147 does not use the phrase reason to believe that any income has escaped assessment. Therefore, now reason to believe that any income has escaped assessment is not necessary.
• No notice can be issued u/s 148 unless there is information which suggests that income has escaped assessment.
• Explanation 1 and Explanation 2 inserted in section 148
• Explanation 1 to section 148 provides the statutory definition of “information which suggests that the income has escaped assessment”.
• Explanation 2 talks about that in cases of search, survey and requisition NO information as defined in Explanation 1 to section 148 is required by the AO to issue notice u/s 148.
• Section 148A inserted which talks about conducting inquiry and providing opportunity before issue of notice u/s 148
• Time limit for issuing notice u/s 148:-

a) General cases – 3 years

b) Where income escaped in the form of asset / expense / entry is more than Rs. 50 lakhs – 10 years

c) For undisclosed foreign asset there is no separate category

> Time Limit for completing the Reassessment

Where the notice u/s 148 is served on or after the 1^st April, 2019, No order of assessment, reassessment or recomputation shall be made u/s 147 after the expiry of twelve months from the end of the financial year in which the notice u/s 148 was served.

> What should we do if we receive Notice u/s 148A(b)

• The notice must be issued by the AO
• Check whether the Notice is pertaining to AY 2016-17 and subsequent years – the reason by virtue of first proviso to the new section 149, reopening of assessment for any assessment year prior to AY 2016-17 would be time barred and bad in law. So, under the new law, the notices u/s 148 read with section 148A(b) have to be in relation to AY 2016-17 and for later years.
• Check whether the information provided by the AO along with the Notice u/s 148A(b) meets the said definition.
• Check whether the Notice is properly approved by the specified authority as laid down in section 151.
• Check whether you have provided with at least 7 days to respond to the Notice.
• You must raise objections to the notice in your reply, if you find any defects and or shortcomings. On the basis of the merits of the case, you should file your detailed submission and ask the AO to provide an opportunity of a personal hearing before the AO passes the order u/s 148A(d).

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