The Central Board of Direct Taxes (CBDT), the policy making body for income-tax and corporate tax, have come out with a detailed guidelines for reassessment of Income-Tax Returns.
These guidelines have come after the Supreme Court held re-assessment order issued under Section 148 of the Income-Tax Act as valid. There are approximately 90,000 such notices. Section 148 deals with the Issue of notices where income has escaped assessment while it was substituted by a new section (came into effect from April 01, 2021) 148A. Now, the apex court has said all the reassessment notices issued u/s 148 of the Act on/after April 1, 2021 will be deemed to have been issued under Section 148A of the Income-Tax Act, 1961
As per the guidelines, any case where notice u/s 148 has been issued pursuant to search, seizure and survey action on or after April 1, 2021, will be selected for compulsory scrutiny. Notice will be served for faceless assessment. The selection will be completed by May 31, while the notice will be served by June 30. Similarly, search and seizure cases under other sections (153A, 153C and 143-3) of the Income-Tax Act will also be selected for compulsory scrutiny. The Section 153A prescribes time limit for completion of assessment, reassessment and recomputation, Section 153C deals with assessment of income of any other person, and the Section 143(3) talks about computation and related demand or refund.
The guidelines says the cases pertaining to survey u/s 133A will be picked up for compulsory scrutiny. However, cases where books of accounts, documents etc. not impounded or returned income is not less than returned income of preceding assessment year will not be excluded from scrutiny. Section 133A deals with the power of survey.
Addition to earlier assessment years
In cases involving addition in an earlier assessment year(s) on a recurring issue of law or fact, the assessing officers will prepare a list of such cases and notice will be issued for faceless assessment. Similarly, for cases that are related to specific information on tax evasion, a list will be prepared and notice for faceless assessment will be issued.
Earlier this month, a division bench of the Supreme Court said all notices issued under old Section 148 will be deemed to have been issued under Section. 148A and the present order will be applicable PAN INDIA. This ruling was made on the special review petition filed by the Centre after three of the High Courts - Delhi, Allahabad and Rajasthan — have quashed the notices running into hundreds and hundreds while Chattishgarh High Court held them correct.
The Supreme Court has been refraining to invoke extra-ordinary constitutional power in tax matters and interpreting tax laws based on statute book, as it stands. In cases challenging validity of reassessment proceedings, the Apex Court has till now been taking a strict interpretation holding income-tax proceedings to be bad in law and void ab initio, if the relevant notice/order initiating reassessment proceedings is issued without jurisdiction or without following the due process prescribed under law or is barred by limitation.
However, considering the large number of cases, which might escape assessment of tax due to quashing of such reassessment notices issued on/after 01st April 2021, and its potential tax impact on the exchequer, the Supreme Court took an exception in the present case and considered it fit to invoke Article 142, holding that if these notices issued u/s 148 are quashed at the threshold itself, without giving an opportunity to the Income-tax department to examine the cases on merits and to determine, whether any income has actually escaped assessment, it will not render complete justice to income-tax department.