Finance Bill 2022: Amendments in Reassessments Provisions

Ashish M. Shaji

23 Feb, 2022

The Finance Bill 2022 has proposed for numerous amendments to the Income Tax Act 1961. These amendments can have a significant impact on the taxpayers. Amendments have been proposed in the reassessment provisions as well under the Income Tax Act, and our main focus will be on that today.

Assessment/Reassessment under Income Tax Act

Every individual who earns needs to mandatorily submit return of income to the income tax department, if the earning is chargeable to tax. The income tax return is scrutinised by the tax department. This process of scrutinising the return of income is called assessment.

This assessment may also include reassessment under Section 147 of the Income Tax Act if the Assessing Officer (AO) has a reason to believe that any income chargeable to tax has escaped assessment. The IT Department has the authority to assess, re-assess or recompute income when there is a likelihood of escapement of the same.

There may be cases where there may not be escapement of whole income from assessment but only a part of it. In such cases, the assessing officer has the authority to assess or reassess such income or recompute the loss or allowance. The provisions of assessment or reassessment are specified under Sections 147 to 153. 

Major Amendments proposed in the reassessment provisions

Non-requirement of seeking approval from the specified authority

The Finance Act 2021 had inserted Section 148A wherein the assessing officer must first conduct an enquiry and provide an opportunity to the taxpayer of being heard before issuing notice. After considering the reply of the assessee, he should then decide based on the material facts available whether reassessment provisions should be invoked or not.

The notice under this section can only be issued after complying with the procedural requirements specified in Section 148A. When the assessing officer passes an order after obtaining the approval from the prescribed authority to proceed with the reassessment provisions, the order would be issued along with the notice issued under Section 148.

Now the finance bill has proposed to insert a proviso to Section 148, which provides that when the order has been passed under Section 148(d), the assessing officer won’t have to seek the approval from the specified authority for the issuance of notice under Section 148.

Conducting enquiry before issuing reassessment notice

When an enquiry is conducted before reassessment provision is invoked, the assessing officer is required to take prior approval from the specified authority. Moreover, the order passed under Section 148(d) also requires taking the prior approval. However, in order to provide the opportunity of being heard to the assessee covered in clause (b) Section 148A shall be at the absolute discretion of the assessing officer.

The Finance Bill 2022 also proposes to insert clause (d) in proviso to section 148A wherein if the assessing officer obtain any information under Section 135A through faceless collection of information scheme, then he doesn’t require complying with the Section 148A.

Prior approval of Additional Commissioner or Additional Director or Joint Commissioner or Joint Director

The Finance Bill 2022 states that no order for assessment or reassessment or recomputation can be passed by an assessing officer who is below the rank of Joint Commissioner in respect of an assessment year(s) where it is covered in the list of instances laid down in Explanation 2 to Section 148 without the prior approval of Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.

Under the following cases, when the assessment is done by issuance of notice under Section 148, such assessment or reassessment order should be approved by the authorities mentioned above when the order is passed by an assessing officer who is below the rank of Joint Commissioner-

• In case where a search has been initiated under Section 132 or books or account or other documents are requested under Section 132A on or after 1 April, 2021, in the case of an assessee;
• In case where a survey is done under Section 133A and a survey done in respect of expenditure incurred for an event, function, ceremony etc. on or after 1 April, 2021, in the case of an assessee;
• In case where the assessing officer believes that any money, bullion, jewellery or any other valuable article or thing seized or asked under Section 132/132A from any other person on or after 1 April 2021 belongs to assessee and he has taken prior approval from principal commissioner or CIT;
•  In case where the Assessing officer believes that any books of account or documents, seized or called for under Section 132/132A in case of other person on or after 1 April 2021 relates to the assessee or any information contained therein relates to assessee and the prior approval from PCIT or CIT has been taken.

Time limit for issuance of notice

The Finance Bill 2022 has proposed to raise the scope for issuing notice under Section 148 by making reference to the aggregate of income that has escaped assessment to 50 lakh rupees that was confined to a particular assessment year earlier.

The Finance Bill 2022^[1] proposes substituting clause (b) to Section 149(1). It states that an assessing officer may issue notice for the reopening of the assessment if he has books of account or other documents or other evidence in his possession which reveal that the income chargeable to tax showcased in the form of an asset or an expenditure pertaining to a transaction or event or occasion or any entry or entries in books of account that has escaped assessment, is or is likely to be 50 lakh rupees or more.

Search Assessments

The Finance Act 2021 had changed the assessment methodology in search assessment cases, thereby made it clear that the provisions of Section 153A and 153C shall not apply in case where a search under Section 132 or requisition under Section 132A was made after March 31, 2021.

The Finance Bill 2022 has proposed to insert sub-section 4 to Section 153B, and the time limit to complete such assessments has already been prescribed in Section 153.

Conclusion

Both reassessment and search assessment has been brought within the ambit of reassessment. However, setting aggregate monetary limit at 50 lakh rupees with extended time limit for reopening of the assessment could be a bad idea for taxpayers considering the fact that survey under Section 133A may lead to reopening of assessment for 10 preceding previous years.

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