The Income Tax Department has asked field offices to not issue reassessment notices for 2012-13, 2013-14 and 2014-15 fiscal years to small taxpayers wherein the income escaping from tax is less than Rs 50 lakh.
Issuing an instruction on implementation of the apex court judgement regarding notices sent beyond the three-year reassessment period, the department said that for FY16 and FY17 where the timeline for issue of such notices falls within the 3 years, tax officers will issue show-cause notices and provide information to taxpayers for initiating reassessment proceedings within 30 days.
Central Board of Direct Taxes (CBDT) asked tax officers to give taxpayers two weeks’ time to respond to such notices, which can be further extended at taxpayer’s request in genuine cases.
The Supreme Court had earlier this month ruled in favour of the I-T Department and upheld all reassessment notices issued on/after April 1, 2021– reopening assessments going back to up to 6 years.
The government had in Budget last year (2021-22) reduced the reopening time for I-T assessments to 3 years from 6 years.
However, the tax department sent out a host of notices for reopening assessments which goes back to even beyond 3 years. These notices were then challenged in several high courts and the I-T Department then appealed to the Supreme Court to uphold such notices.
Nangia & Co LLP Partner Shailesh Kumar said in order to provide clarity both to tax officials and taxpayers and to ensure directions of the Supreme Court are interpreted and implemented uniformly in all the 90,000 odd cases across India, CBDT has issued this much needed instruction.
“This is a much welcome circular by CBDT providing clarity to both taxpayers and tax officials. Lot of cases for AYs 2013-14, 2014-15 and 2015-16 for small taxpayers are expected to be dropped… except in exceptional cases, where extended timeline for assets worth Rs 50 lakh of more is invoked,” Kumar said.
AMRG & Associates Senior Partner Rajat Mohan said this circular would clarify all the issues emanating from the controversy created around reassessments by Finance Act 2021 and after effects of the apex court judgement.
“SC ruling read with the recent instruction would compel numerous to get the reassessments completed for notices issued from April to June 2021,” Mohan said.
AKM Global Tax Partner Sandeep Sehgal said CBDT has issued instructions to the officers to supply material to taxpayers for reasons for reopening so that they could respond accordingly within 2 weeks.
“The timelines are aggressive for taxpayers. Further, where the escaped income is lower than Rs 50 lakh for certain years, no material will be provided by the tax officers as they would not proceed further with these cases. Suitable defences u/s 148A would also be available to the taxpayers wherever it is applicable,” Sehgal said.
Dhruva Advisors Partner Sandeep Bhalla said each case will need to be further evaluated as to whether it is a ‘fit case’ for reopening by the field officers unlike reopening of assessments mechanically.
“It really becomes imperative for taxpayers grappling with the reassessment controversy to evaluate their tax positions and carefully strategize the defences available under the new law,” Bhalla said.