With the Supreme Court upholding the reassessment notices issued before the amendment to the Income Tax Act through the Finance Act, 2021, taxpayers will have a time period of two weeks to respond to the notices sent by the tax department, experts said.
According to the top court’s judgment, the assessing officer will, within 30 days from May 4, provide the respective assesses the information and all relevant material which was relied upon to send the income tax recovery notice to them. Following the receipt of the notice, the assesses will have up to two weeks to respond to the notice, said Maneet Pal Singh, partner at accounting firm I.P. Pasricha & Co, said.
Around 90,000 notices were issued under the old Section 148 even after passage of Finance Act 2021. They were appealed in high courts of Delhi, Calcutta, Bombay, where the courts quashed the reassessment notices. “All such notices issued beyond the limitation period of 31st March, 2021 shall now be valid and thousands of taxpayers who had been served with a notice shall have to prepare themselves for the reassessment proceedings,” Singh said.
The ruling now also implies that all reassessment notices hereon issued under Section 148 of the Act will be deemed to have been issued under Section 148A, as amended earlier this year. Section 148 of the Income-Tax Act deals with notice in case the income chargeable to tax has escaped assessment for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.
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Section 148A, on the other hand, deals with conducting inquiry, providing opportunity of being heard to the assessee. Before issue of notice under Section 148, the assessing officer has to provide an opportunity of being heard to the assessee, by serving him a notice to show cause with the time being not less than seven days and not exceeding thirty days from the date on which such notice is issued. As per the time limitation clause, a notice cannot be issued in normal scenarios if three years have elapsed since the end of the relevant assessment year. However, notice beyond three years can be taken up only if there is evidence that the taxpayer has evaded an assessment of taxable income of at least Rs 50 lakh. In certain cases, notice can be issued beyond 3 years but only up to 10 years from the end of the relevant assessment year.
On Wednesday, a two-judge Supreme Court Bench of Justices M R Shah and B V Nagarathna held that the notices issued to assessees after the cut-off date of March 31, 2021 will be deemed valid under the new section 148 (A) of the Income Tax act as a one time measure.
Tax experts said that the reassessment proceedings are not revived in all the 90,000 cases, but as way forward to the ruling, all reassessment notices will be deemed to have been issued under the amended section.
“If the reassessment notices are considered to be valid even under the new amended law, then taxpayers will now need to be ready to file their ITR in response to the reassessment notice and be ready with all the necessary records, documents and explanations for questions expected to be asked by Income tax authorities in relation to these reassessment proceedings,” Rakesh Nangia, chairman, Nangia Andersen India, said.
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