Introduction

We are pleased to present the latest edition of Tax Street – our newsletter that covers all the key developments and updates in the realm of taxation in India and across the globe for the month of August 2021.

  • The 'Focus Point' covers an overview of the new re-assessment proceedings under the provisions of the Finance Act, 2021.
  • Under the 'From the Judiciary' section, we provide in brief, the key rulings on important cases, and our take on the same.
  • Our 'Tax Talk' provides key updates on the important tax-related news from India and across the globe.
  • Under 'Compliance Calendar', we list down the important due dates with regard to direct tax, transfer pricing and indirect tax in the month.

We hope you find our newsletter useful and we look forward to your feedback. You can write to us at taxstreet@nexdigm. com. We would be happy to hear your thoughts on what more can we include in our newsletter and incorporate your feedback in our future editions.

Warm regards,
The Nexdigm (SKP) Team

Focus Point

Finance Act 2021: New Procedure of Re-assessment Proceedings

Re-assessment proceedings generally empower the Revenue Authorities to tax the income which has escaped assessment. The proceedings also cover the assessments where income is being assessed for the first time under the provisions of the Income Tax Act, 1961 (Act). The Finance Act 2021 has revamped the provisions of re-assessment proceedings with effect from 1 April 2021. With the amendment by Finance Act 2021, the procedure prescribed under the Apex Court Judgment, in the case of GKN Driveshafts (India) Limited vs ITO [(2003) 259 ITR 19 (SC)], has been codified in law to a larger extent. Read ahead for an overview of the new re-assessment proceedings under the provisions of the Act.

Information - A prerequisite

Under the new provisions, possession of information with the Assessing Officer (AO) is a prerequisite for initiating the assessment/re-assessment proceedings. Information has been defined to mean:

  • Information flagged in accordance with risk management strategy
  • Audit Objection by Comptroller and Auditor General

Furthermore, under the following cases, AO shall be deemed to have information with him for the three years immediately preceding the year in which search is initiated/books of accounts or other documents are requisitioned, or survey is conducted in the case of the taxpayer/money, bullion or jewelry or any other article or thing or books of accounts, etc. are seized in case of any other taxpayer:

  • Search is initiated under Section 132 or books of accounts, other documents or other assets are requisitioned under Section 132A in the case of the assessee, on or after 1 April 2021;
  • A survey is conducted under Section 133A on or after 1 April 2021 other than TDS survey or survey in respect of expenses on account of any function/ceremony/event;
  • AO is satisfied, with prior approval of PCIT/CIT, that money, bullion, jewelry, or other valuable article or thing, seized under Section 132 or requisitioned under Section 132A in the case of any other person on or after 1 April 2021, belongs to the taxpayer;
  • With prior approval of PCIT/CIT, that any books of accounts or documents seized under Section 132 or requisitioned under Section 132A in the case of any other person on or after 1 April 2021 belong to the taxpayer.

In common parlance, the term 'information' is very expansive and would include almost any data/ document/asset/ observation available.

Inquiry before issuance of Notice for Re-assessment- Section 148A

Upon having such information, the AO shall:

  • conduct the inquiry with respect to the information in his possession, which suggests the escapement of income, with prior approval;
  • issue show-cause notice, with prior approval, to the taxpayer as to why a notice initiating the assessment/ re-assessment proceedings under Section 148 be not issued, basis the information and inquiry conducted;
  • consider the reply furnished by the taxpayer;
  • pass the order, with prior approval, deciding as to whether it is a fit case for re-assessment or not.

The above procedure of pre-inquiry will not be applicable in the following cases:

  • Search is initiated under Section 132 or books of accounts, other documents or other assets are requisitioned under Section 132A in the case of the assessee, on or after 1 April 2021;
  • AO is satisfied, with prior approval of PCIT/CIT, that money, bullion, jewelry or other valuable article or thing, seized under Section 132 or requisitioned under Section 132A in the case of any other person on or after 1 April 2021, belongs to the taxpayer;
  • AO is satisfied, with prior approval of PCIT/CIT, that any books of accounts or documents seized under Section 132 or requisitioned under Section 132A in the case of any other person on or after 1 April 2021 belong to the taxpayer.

Assessment/Re-assessment Proceedings

Post the above procedure, the assessment would be initiated and/or completed under Section 147 of the Act. New provisions of Section 147 are sans most of the provisos/ explanations provided under the erstwhile provisions of Section 147 of the Act.

A brief snapshot of the new re-assessment regime is given hereunder:

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To read the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.