Income tax scrutiny assessment is stressful and re-assessment is extra stressful.

With an objective to reduce litigations, bring more clarity, transparency and ease of doing business to all the taxpayers, Finance Act 2021 revamped re-assessment regime and introduced new provisions. 

Journey of these new provisions and issues it brought along till date are highlighted as follows:

New provisions are applicable w.e.f. 1 April 2021. Wherein, time limit for reassessment has  been reduced from 6 years to 3 years

(10 years where the tax officer has evidence that income escaping the assessment in the form of an Asset is INR 50 lakhs or more)

Central Board of Direct Taxes extended this time limit of 31st March to 30th June 2021 citing Covid-19 issues etc.

During this period of 3 months, tax department issued notices to large number of taxpayers including foreign investors, funds etc.

Taxpayers challenged these notices by filing writ petitions across various jurisdictions;

Allahabad High Court, Rajasthan High Court, Delhi High Court and Calcutta High Court ruled in favour of taxpayers that new tax regime did not empower income tax department to reopen cases after 31 March 2021 i.e. delegated authority cannot override the Act by making provisions inconsistent with the Act. 

However, on contrary Chhattisgarh High Court ruled in favour of income tax department.

Now the income tax department has challenged the order of Allahabad High Court in Supreme Court and matter is pending for adjudication.

Given the above and keeping in mind an objective of introduction of new regime, it is imperative that Finance Ministry should ‘clarify’ its stand and choose the side.
#tax #supremecourt #reassessment #litigation #budget2022