Offices Not To Issue Reassessment Notices To Small Taxpayers, Instructs CBDT

The CBDT has directed that information and materials be provided in all cases within 30 days. However, it has also been noticed that notices cannot be issued in a case for AY 2013–14, AY 2014–15, and AY 2015–16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than Rs. 50 lakhs.

Hence, in order to reduce the compliance burden of assessees, it was clarified that information and materials may not be provided in a case for AY 2013–14, AY 2014–15, and AY 2015–16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than Rs. 50 lakhs. A separate instruction shall be issued regarding the procedure for disposing of these cases.

The supreme court in the case of Union of India v. Ashish Agarwal has adjudicated on the validity of the issue of reassessment notices issued by the Assessing Officers during the period beginning on April 01, 2021 and ending on June 30, 2021, within the time extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and various notifications.

These extended reassessment notices were issued by the Assessing Officers under the provision of section 148 of the Income-tax Act, 1961, following the procedure prescribed under various sections pertaining to reassessment, namely sections 147 to 151, as they existed prior to their amendment by the Finance Act, 2021. With effect from April 1, 2021, the old law has been substituted with new sections 147–151.

The Supreme Court ruled that extended reassessment notices issued under the old law were deemed to be show cause notices issued under clause (b) of section 148A of the new law, and directed Assessing Officers to follow the procedure with regard to the notices.It has also been held that all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available.

The CBDT stated that the extended reassessment notices are deemed to be show cause notices under clause (b) of 148A of the Income Tax Act in accordance with the judgement of the Supreme Court. Therefore, all requirements of the new law prior to that show cause notice shall be deemed to have been complied with.

"Within 30 days, i.e., by June 02, 2022, the Assessing Officer shall provide to the assessees, in remaining cases, the information and material relied upon for the issuance of extended reassessment notices," the CBDT instructed.

The assessee has two weeks to reply as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year. The time period of two weeks shall be counted from the date of the last communication of information and material by the Assessing Officer to the assessee.

All the defences of the new law are available to the assessee. If the assessee makes a request by making an application that more time be given to him to file a reply to the show cause notice, then such a request shall be considered by the Assessing Officer on merit and time may be extended by the Assessing Officer.

After receiving the reply, the Assessing Officer shall decide, on the basis of material available on record, including the reply of the assessee, whether or not it is a fit case to issue a notice under section 148. The Assessing Officer is required to pass an order under clause (d) of section 148A of the Act to that effect, with the prior approval of the specified authority of the new law. This order is required to be passed within one month from the end of the month in which the reply is received by the assessee. In case no such reply is furnished by the assessee, then the order is required to be passed within one month from the end of the month in which the time or extended time allowed to furnish a reply expires.

If it is a fit case to issue a notice under section 148, the Assessing Officer shall serve on the assessee a notice under section 148 after obtaining the approval of the specified authority under section 151 of the new law. The copy of the order passed under clause (d) of section 148A of the Act shall also be served with the notice under section 148.

If it is not a fit case to issue a notice under section 148 of the Act, the order passed under clause (d) of section 148A to that effect shall be served on the assessee.

Instruction No. 01/2022

Dated: 11/05/2022

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