In the coming months, the Income Tax Department might be re-opening some cases under the Income-tax (I-T) Act. Guided by a Supreme Court (SC) order issued in April, the Central Board of Direct Taxes (CBDT) has sent out comprehensive instructions to the tax officials in this regard.
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The CBDT instructions, dated August 23, which are aimed at ensuring a uniform practice, state that there will be no reopening and reassessment of completed cases only where the decision of the appellate authorities has become final.
Though this instruction provides some relief, the coming months may see the reopening of past cases and reassessments in several instances by the I-T department where the money involved is significant.
“The silver lining to the CBDT instruction is that it has decided to not touch at least those cases where no appeal is pending before the appellate authorities and the proceedings have attained finality before the SC decision in Abhisar Buildwell (the lead case heard in April),” Times of India quoted Deepak Joshi, an SC advocate, as saying.
In its April order, the apex court had held that the I-T officials cannot make any addition to a taxpayer’s income during a reassessment proceeding under section 153-A of the I-T Act, in the absence of any incriminating material.
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The Supreme Court had, however, further held that reassessment could be resorted to through the reassessment procedure under section 147/148 if the conditions therein were fulfilled—such as giving the taxpayer the right to be heard.
“In simple words, for the rest of the taxpayers, it’s another round of future litigation possibly running into decades,” Joshi said while speaking on the CBDT’s instruction.
Under section 148 (old regime), those cases of income that has escaped assessment could be reopened by the I-T officer could reopened, given it should date back to six years.
Under section 148A (introduced by the Finance Act, 2021), cases dating back to ten years can be reopened only if the income that has escaped assessment is over Rs 50 lakh and if a proper process is followed.
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CBDT’s instructions provide that the monetary limits applicable at present would apply while reopening assessment of earlier years.
