The Central Board of Direct Taxes has asked field officers not to issue reassessment notices for assessment years 2013-14, 2014-15 and 2015-16 where income escaping from tax is less than Rs 50 lakh and gave instruction to officers on the procedure to comply with the recent Supreme Court judgment relating to the issue of reassessment notices after March 31, 2021.
The apex court on May 4 held that notices issued for reassessment under the unamended section 148 after April 1, 2021, shall be deemed to be issued under section 148A in Finance Act 2021.
Approximately 90,000 renotices under section 148 of the were issued by the department after April 1, 2021, which led to more than 9,000 writ petitions before various high courts , challenging the validity of the notices as the Finance Act 2021 introduced sweeping changes relating to the reassessment procedure, effective from April 1, 2021.
Among the key changes was the introduction of section 148A where assessing officers before issuing notices has to give an opportunity to the taxpayer to be heard. Further, the time limit for the reopening of cases was brought down to three years and in serious tax evasion cases, assessment can be reopened only when concealment of income is more than Rs 50 lakh.
After the Supreme Court judgment, income tax officers sought clarification from the CBDT on the matter given that the apex court had set a timeline of 30 days for the assessing officers to provide information to the assessees supporting the reassessment.
The CBDT subsequently in its instruction on May 11, 2022, said that for AYs 2013-14, 2014-15, and 2015-16, fresh notices under section 148 can be issued only if the income escaping assessment is or likely to be more than Rs 50 lakh, as per section 149(1) amended through Finance Act 2021.
For AYs 2016-17 and 2017-18, fresh notices can be issued under section 148 since they are within the period of three years from the end of the relevant assessment year.
The CBDT further laid down procedures that are required to be followed by assessing officers to comply with the apex court judgement.
By June 2, 2022, the assessing officer will have to provide to the assessees the information and material relied upon for issuance of extended reassessment notices. The assessee will have two weeks to reply as to why a notice under section 148 should not be issued. If the assessee needs more time and makes a request to file a reply to the show cause notice, it has to be considered on merit by the assessing officer. Within a month of receiving a reply, the assessing officer will have to pass an order on the basis of material available on record including the reply of the assessee.
“This is a much welcome circular by CBDT providing clarity to both taxpayers and tax officials. A lot of cases for AYs 2013-14, 2014-15, and 2015-16 for small taxpayers are expected to be dropped,” said Nangia & Co. LLP partner Shailesh Kumar.
Following the apex court verdict, advocate Narayan Jain said that taxpayers who had got relief from any High Court may face difficulties.
CBDT move
No reassessment notices for AY 2013-14 to 2015-16, if disputed sum less than Rs 50 lakh
Do’s and don’ts set for re-opening old cases in later years
Decision in response to SC judgment