CBDT issues guidelines to execute the Supreme Court decision regarding reassessment notices

The Supreme Court on the 4th of May, 2022 passed an order that overruled the decisions of the High Courts. As per the order the notices issued after 1st of April 2021, were valid under Section 148A of the Income tax Act 1961.

The reassessment notices issued after 1st of April 2021 were issued under the unamended provisions of Section 147 and hence the taxpayers contested it and high courts seconded it. But the Supreme court sought middle ground and upheld the validity of the notices.

Now the Central Board of Direct Taxes (CBDT) has issued guidelines that must be followed by tax officers (TO) to implement the instructions of the Supreme Court.

• It is explained that the judgement applies to all cases where extended reassessment notices have been issued even if the notices were challenged.
• For the new Section 149 of the Act to be operational, the instructions are as follows

Category-1

Section 149(1)(b) of the Act, as amended by Finance Act, 2021 refers to all cases where notices can be issued after 3 years but not later than 10 years from the relevant AY. The TO must be in possession of books of accounts or other documents or evidence that must show that the income chargeable to tax represented in the form of asset, amounts or is likely to amount to INR 5m or more for that year.

Applicable Assessment Years - AY 2013-14, AY 2014-15 and AY 2015-16

Actionable - Fresh notices under Section 148 of the Act can be issued with the approval of specified authority (Specified authority under section 151 of the Act under the new law will be the prescribed authority)

For cases where the amount is less than INR 5m, the TOs must exclude the cases and separate instructions will be issued by the CBDT.

Category-2

Section 149(1)(a) of the Act, as amended by Finance Act 2021, specifies the cases where notices can be issued within 3 years from the end of the relevant AY except cases covered under Section 149(1)(b) of the Act.

Applicable Assessment Years - AY 2016-17 and AY 2017-18

Actionable - Fresh notices under Section 148 of the Act can be issued with the approval of specified authority (Specified authority under section 151 of the Act under the new law will be the prescribed authority)

Under the amended provisions the extended reassessment notices issued under the erstwhile reassessment provisions will be deemed to be show cause notices. They will deemed to have complied with all the requirements of the new law.

• The guidelines also provide various time limits to be adhered by the TO's and taxpayers, which are as follows:
  • For providing reasons for issuance of extended reassessment notices - Within 30 days of the Supreme Court decision that is 2nd of June 2022.
  • For taxpayers to reply against the information and material provided by TO - Within 2 weeks from the date of the last communication by TO of the information and material to the taxpayer. The taxpayer can seek extension by making an application seeking more time to reply, the TO can consider the same on merits.
  • For passing disposal order by TO -
    • If the reply is received from the taxpayer within one month from the end of the month in which the reply is received by the TO
    • If the reply is not received from the taxpayer within one month in which the time or extended time allowed expires.
• Issuance of notice under Section 148 of the Act
  • If fit case for issue of notice under section 148 of the Act - notice will be served to the taxpayer after obtaining the approval of the specified authority under section 151 of the new law along with the copy of the disposal order.
  • In other cases - disposal orders will be served to the taxpayer.