CA Umesh Sharma
Arjuna (Fictional Character): Krishna, we know that we will have a hot summer this year but what is the cause of heat faced in in the Income Tax world?
Krishna (Fictional Character): Arjuna,there is too much discussion going on regarding the validity of notices issued between 01-04-2021 and 30-06-2021 u/s 148 of the Income Tax Act for reassessment proceedings. The income tax department had issued notices u/s 148 for reassessment proceedings. CBDT's notification No. 20/2021, dated 31-03-2021extended the last for issuance of notice u/s 148 upto 30.06.2021. The Assesses challenged the validity of such notices in High Courts and relief was granted to Assesses to which Special Leave Petition was filed by CBDT.
Supreme Court by using Article 142 of Constitution has passed an order validating such notices and they shall be deemed to have been issued under section 148A of the Income Tax Act, as substituted by the Finance Act, 2021. Such Notices shall be treated as show cause notices in terms of section 148A(b) of the Income Tax Act.
Arjuna: Krishna, please explain the provisions of section 148 of the Income Tax Act.
Krishna: Arjuna, Where the Assessing Officer has reason to believe that income changeable to tax has escaped assessment, he may reopen the relevant assessment, after recording his reasons for doing so, by issuing a notice u/s 148. The time limit for issuing such a notice upto 31.3.2021 was 4 years from the end of the relevant assessment year if income escaping assessment is less than Rs.1 Lac and 6 years if income escaping assessment is Rs.1 Lac or more.
However, the provisions of section 148 were substituted by the Finance Act, 2021 w.e.f 01-04-2021 according to which notice can be issued only after the Assessing Office has material in hand suggesting that income has escaped assessment and prior approval as mentioned in section 148A of the Act have been obtained by the Assessing Officer. Also, notice under section 148 have to be issued only before 3 years from the end of the relevant assessment year. However, the notice can be issued before 10 years only if the Assessing officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, which has escaped assessment amounts to or is likely to amount to Rs.50 Lacs or more for that year.
Arjuna: Krishna, what are important points highlighted in the Supreme Court Judgement?
Krishna: Arjuna, the Judgement of Supreme court can be summarized as follows:
- The Court has validated the Reassessments notices which were issued after 01-04-2021.
- Reassessment Notices for AY 2013-14 and 2014-15 shall be considered as invalid by virtue of first proviso to Section 149.
- Notices for AYs 2015-16, 2016-17 & 2017-18 shall survive only if the alleged escaped income represented in the form of an asset, exceeds Rs 50 lakhs, in each of such assessment year.
- Notices for AY 2018-19 and onwards, have already been issued under new provisions and as such were not the subject matter of consideration in the SC judgment.
Arjuna: Krishna, what should one learn from this?
Krishna: Arjuna, the Supreme court has passed a judgment of a taxation case using special powers under article 142 of Constitution which means this judgment shall apply PAN India basisand has given the judgement taking into consideration the loss to the department. For those taxpayers who thought that they were relieved by high court's order will now have to face reassessment proceeding. It is said that "Suraj ki kirano aur aur kanoon ke haatho se bachna Mushkil hain" and this saying is now making sense after the judgement of Supreme Court.
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