Reassessment circumstances: Taxman seeks readability after SC upholds 90,000 I-T notices


The Supreme Court docket‘s resolution to uphold 90,000 Revenue Tax (I-T) reopening notices appears to have opened a pandora’s field. Tax officers throughout the nation have reached out to the Central Board of Direct Taxes (CBDT) to clear the fog on a slew of questions which haven’t any prepared solutions.

Will there be faceless reassessments of those circumstances or the reassessments can be carried out by the jurisdictional officers who’ve all the knowledge pertaining to numerous circumstances? Can notices be issued for evaluation years (AY) 2015-16, 2016-17 and 2017-18 for circumstances which have escaped revenue beneath Rs 50 lakh? Can notices be in any respect issued for AY2013-14 and AY2014-15?

Earlier the tax workplace might return to 6 years if undisclosed revenue was greater than ₹1 lakh and the assessee performed some half in concealing the knowledge. The legislation was modified in April 2021. Now, the I-T division can reopen 10-year-old tax returns if whole revenue which has escaped tax is greater than ₹50 lakh and reassess three-year-old issues if revenue which slipped out of the tax internet is lower than ₹50 lakh. The legislation that got here into impact from April 1, 2021, nevertheless, had a carve-out: the circumstances which could not be reopened earlier, cannot be reassessed below the brand new legislation.

All these notices which had been challenged earlier than the Supreme Court docket had been issued between April 1 and June 30 below part 148 provisions (coping with reopening tax returns) of the I-T Act.

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Greater than 10,000 writ petitions had been filed in numerous excessive courts difficult the motion of the tax workplace on primarily two grounds: first, the amended legislation required the division to offer an assessee the chance to answer the preliminary discover earlier than popping out with the reassessment order; second, many assessees, together with a few of the massive company homes believed that the carve-out offered within the modification restrains the tax workplace from reassessing sure previous years.

As an example, in a discover despatched on April 1, 2021 (i.e, AY2022-23), the division can return so far as AY2016-17 however not earlier than that below the previous legislation; due to this fact, the argument was that consistent with the carve-out the brand new legislation can’t be used to reopen tax returns filed for AY2015-16 or AY2014-15. Nevertheless, on Might 4, 2022, the apex court docket invoked its extraordinary powers below Article 142 of the Structure. Whereas the court docket upheld reassessment notices issued after March 31, 2021 it directed the division to observe the brand new legislation.

Now, whereas the notices had been despatched by the respective jurisdictional officers, a gazette notification of March 29, 2022, directed all reassessments to observe the faceless mode. “So now the query is ought to faceless evaluation officers deal with the issues? Or, ought to or not it’s finished by the JAOs (jurisdictional evaluation officers)? There are different unanswered questions. Instantly after the court docket ruling, the officers’ physique took up the matter with CBDT. The problems needs to be resolved shortly as time is operating out as a result of assessees must be communicated by June 2 – i.e. a month from the date of the Supreme Court docket ruling,” stated a tax officer. An assessee has to answer inside a fortnight from the receipt of such communication.

“Within the current case loads of components have come into play – previous reassessment provisions and new ones launched from April 1, 2021 and their interaction on the very foundation for reopening circumstances, timelines for discover issuances, time barring, and so forth together with what has been held by the Hon’ble Supreme Court docket. One solely hopes that due processes are adopted, and taxpayers are given correct alternative to clarify their case and consideration is given to their responses such that circumstances are usually not determined in a rush and in a mechanical method,” stated Ashish Mehta, companion on the legislation agency Khaitan & Co.

A few of the assessees are understood to be considering submitting evaluate petition.

The notices issued within the first few months of economic 12 months 2021-22 had been based mostly on data from different assessing officers, different authorities businesses just like the Enforcement Directorate, investigation wing of the I-T division and INSIGHT, a tax division portal which comes up with names of tax evaders after algorithmic scanning of information.

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