Cbdt Issues Guide On Sc-backed Tax Notices

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NEW DELHI : The Central Board of Direct Taxes (CBDT) has issued a set of instructions explaining to tax officials how to implement a Supreme Court order, issued earlier this month, which upheld income reassessment notices issued to multiple ratepayers under a former provision.

The CBDT explained that the scope of the Supreme Court’s order applies to all reassessment notices issued between April and June 2021 under the prior reassessment provision, whether or not they were challenged in court. .

CBDT clarified that notices cannot be issued for the 2013-14, 2014-15 and 2015-16 tax years if the income that escaped assessment for those years is likely to be less than 5000000.

“Therefore, in order to reduce the compliance burden on assessees, it is clarified that information and documents cannot be provided in a case for AY 2013-14, AY 2014-15 and AY 2015-16, if the unassessed income in this case for that year is or is likely to be less than five million,” CBDT said in an instruction.

Mint reviewed a copy of the direction issued late Wednesday.

An email sent to the Department of Finance seeking comment on the story on Thursday went unanswered at press time.

CBDT also said that separate instructions will be issued regarding the procedure for resolving these cases.

The Income Tax Department had issued several reassessment notices during the period April to June 2021 based on the prior reassessment provision – Section 148 of the Income Tax Act – using the additional time granted under the Tax and Other Laws (Relieving and Amending Certain Provisions) Act 2020 which was enacted during the pandemic.

These notices, however, have led to litigation as new reassessment provisions – Sections 148A and 149 – which came into force on April 1, 2021, have redefined the procedure for reviewing reassessment cases. These provisions required the tax administration to give taxpayers the opportunity to be heard on information indicating that taxable income had escaped assessment. In addition, the Income Tax Officer must obtain prior approval from the Principal Chief Commissioner.

In addition, the new provisions stipulated that reassessment can be carried out in cases where three years have elapsed after the assessment but not ten years, only if the income which escaped the assessment was greater than five million.

The Supreme Court upheld notices issued under the previous reassessment provision as notices issued under the new section 148A, but clarified that taxpayers will have full defenses under the new framework. That is, in cases where the notice is issued after three years of the tax year, but within ten years, then the a five million threshold on unassessed income will apply.

The new reassessment framework was announced by Finance Minister Nirmala Sitharaman in her Union Budget Speech for 2021-22 to streamline the reassessment and reduce the uncertainty surrounding it for taxpayers. The provisions reduced the time limit for reopening the assessment to three years from the previous six years, but allowed a window for reopening cases beyond three years up to ten years when the amount of tax escaped is greater than 5000000.

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