Amendments made by The Finance Act, 2023

The Finance Bill 2023 received presidential assent on 31/3/2023, accordingly Finance Act 2023 is made applicable for the Financial year 2023-24. The Bill was introduced in Lok Sabha on 24th March, 2023 wherein 127 amendments relating to Income Tax Act were made. The Finance Act, 2023 has made as many as 127 amendments relating to Income Tax. We are analysing some of the amendments in this article.

Exemption on LIC Receipts withdrawn if Premium exceeds Rs 5 lakhs. [Sec 10(10D) proviso 6 & 7, read with Sec 56(2)(xiii)]: Clause (10D) of section 10 provides for income-tax exemption on the sum received under a life insurance policy, including bonus on such policy. At present there is a condition that the premium payable for any of the years during the terms of the policy should not exceed ten percent ual capital sum assured.W.e.f. Asst. Year 2024-25 where any sum is received, including the amount allocated by way of bonus, at any time during the previous year, under a Life Insurance Policy/policies shall not qualify for exemption u/s 10(10D) if the aggregate premium paid in any year on such policy exceeds Rs. 5 lakh. This provision shall apply to the policies which are taken on or after 1st April, 2023. The receipts in respect of policies taken before 1st April 2023 shall continue to be exempt. While computing income for such policy the aggregate amount of premium paid on the policy shall be reduced from the total receipts. Sec 56(2)(xiii). However, the sum received on the death of the insured shall not be taxed u/s 10(10D).
Rationale for amendment: The legislative intent of providing exemption u/s 10(10D) has been to further the welfare objective by subsidising the risk premium for an individual’s life and providing benefit to small and genuine cases of life insurance coverage. However, over the years it has been observed that several high net worth individuals were misusing the exemption provided u/s 10(10D) by investing in policies having large premium contributions and claiming exemption on the sum received under such life insurance policies. In order to prevent the misuse of exemption under the said clause, Finance Act, 2021, had amended section 10(10D) to, inter-alia, provide that the sum received under a ULIP (barring the sum received on death of a person), issued on or after the 01.02.2021 shall not be exempt if the amount of premium payable for any of the previous years during the term of such policy exceeds Rs 2,50,000

In order to curb such misuse, Finance Act, 2023 has provided to tax income from insurance policies (other than ULIP for which provisions already exists) having premium or aggregate of premium above Rs 5,00,000 in a year. Income will however be exempt if received on the death of the insured person. This income shall be taxable under the head “income from other sources”. Deduction shall be allowed for premium paid, if such premium has not been claimed as deduction earlier. The amended provision shall apply for policies issued on or after 1st April, 2023.

These amendments will take effect from 1st April, 2024 and will accordingly apply to the assessment year 2024-25 and subsequent assessment years.

The amendments will effect the high net worth individuals, and therefore there has not been any opposition.
SPECIAL AUDIT / INVENTORY VALUATION: AO is already empowered to direct for special audit u/s 142(2A). W.e.f. AY 2023-24, the AO has been further empowered to direct for inventory valuation in the course of any proceedings, with the prior approval of PCCIT/CCIT/PCIT/CIT, during the course of any proceedings, AO may direct the assessee to get inventory valued by a cost accountant nominated by PCCIT/ CCIT/PCIT/CIT. Such direction can be given after the assessee has been allowed a reasonable opportunity of being heard. Section 142(2D) provides that expenses of and incidental to such inventory valuation shall be determined by the PCCIT/CCIT/PCIT/CIT in accordance with the prescribed guidelines and where any direction for audit or for inventory valuation is issued by the A.O. on or after 1st June, 2007, the expenses of, and incidental to, such inventory valuation (including remuneration of the cost accountant) shall be paid by the Central Government. Earlier in case of direction of audit issued prior to 1st June, 2017 the expenses were to be borne by the assessee. As there were grievances of misuse of giving directions for special audit, it was provided that the expenses will be paid by the Central Government. Further, the time taken for inventory valuation shall be excluded for computing time limit u/s 153 for the completion of assessment.Reasons for amendment: The reason as stated in the Explanatory memorandum is to prevent permanent deferral of taxes through undervaluation of inventory. Assessees are required to maintain books of account for the purposes of the Income tax Act. The Central Government has notified the Income Computation and Disclosure Standards (ICDS) for the computation of income. ICDS-II relates to valuation of inventory. Section 148 of the Companies Act 2013 also mandates maintenance of cost records and its audit by cost accountant in some cases.
In order to ensure that the inventory is valued in accordance with various provisions of law, section 142 has been amended relating to Inquiry before assessment.

The amendments in section 142 and 153 will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-2024 and subsequent assessment years.

The power for inventory valuation has been given to the Cost Accountant while the power for special audit remains with Chartered Accountant.
CAPITAL GAINS
1. 1. Consideration received to include receipt by way of cheque or draft or any other mode in case of Joint Development Agreement u/s 45(5A) :
    1. U/s 45(5A) the capital gain is taxable in the year in which competition certificate is received and for computing full value of consideration market value of the property increased by consideration received in cash is taken. However, interpretation was taken that the consideration received by way of cheque or draft or any other mode of payment will not be considered for computing full value of consideration. The Finance Act, 2023 has clarified that w.e.f. AY 2024-25 the receipts by way of cheque or draft or any other mode of payment shall also be considered for computing full value of consideration.
    2. The background for amendment is Alignment of provisions of section 45(5A) with TDS provisions of section 194-IC: The existing provisions of section 45(5A), inter alia, provide that on the capital gain arising to an assessee (individual and HUF), from the transfer of a capital asset, being land or building or both, under a Joint Development agreement (JDA), the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. Further, for computing the capital gains amount on this transaction, the full value of consideration shall be taken as the stamp duty value of his share, as increased by the consideration received in ‘cash’. It has been noticed that the taxpayers are inferring that any amount of consideration which is received in a mode other than cash, i.e., cheque or electronic payment modes would not be included in the consideration for the purpose of computing capital gains chargeable to tax u/s 45(5A). According to the Government, this is not in accordance with the intention of law as is evident from the provisions of section 194-IC which, inter alia, provides that tax shall be deducted on any sum by way of consideration (other than in kind), under the agreement referred to in section 45(5A), paid to the deductee in cash or by way of issue of a cheque or draft or any other mode. Accordingly, the provisions of section 45 has been amend so as to provide that the full value of consideration shall be taken as the stamp duty value of his share as increased by any consideration received in cash or by a cheque or draft or by any other mode.
    3. This amendment will take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.
    The amendment made in section 45(5A) is in the nature of clarifying the intention of the legislature.
  2. Interest on house building loan allowed as deduction u/s 24(b) or under chapter VIA not to be considered as cost of acquisition or cost of improvement [Sec 48(ii) proviso]: W.e.f. AY 2024-25 the cost of acquisition of the asset or the cost of improvement thereto shall not include the deductions claimed on the amount of interest u/s 24(b) or under the provisions of Chapter VIA.Background and objective of amendment is Prevention of double deduction claimed on interest on borrowed capital for acquiring, renewing or reconstructing a property. Under the existing provisions, the amount of any interest payable on borrowed capital for acquiring, renewing or reconstructing a property is allowed as a deduction under the head “Income from house property”. Section 48, inter alia, provides that the income chargeable under the head “Capital gains” shall be computed, by deducting the cost of acquisition of the asset and the cost of any improvement thereto from the full value of the consideration received or accruing as a result of the transfer of the capital asset. According to the Government, it has been observed that some assessees have been claiming double deduction of interest paid on borrowed capital for acquiring, renewing or reconstructing a property. Firstly, it is claimed in the form of deduction from income from house property u/s 24, and in some cases the deduction is also being claimed under other provisions of Chapter VIA . Secondly while computing capital gains on transfer of such property the same interest also forms a part of cost of acquisition or cost of improvement u/s 48.
    In order to prevent this double deduction, a proviso has been inserted after clause (ii) of the section 48 so as to provide that the cost of acquisition or the cost of improvement shall not include the amount of interest claimed u/s 24(b) or Chapter VIA. This amendment shall take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.
    
    The amendment made in section 48(ii) is in the nature of clarifying the intention of the legislature and to curb the practice of claiming deductions for same interest under various provisions of the Income tax Act.
  3. Capital gain from Specified mutual fund or Market Linked debenture will be considered as Short Term Capital Gain [Section 50AA]: W.e.f. AY 2024-25 new section 50AA has been inserted which provides that where the capital asset is a Specified mutual fund or Market Linked Debenture, the full value of consideration received or accruing as a result of the transfer or redemption or maturity of such debenture as reduced by––
    1. the cost of acquisition of thedebenture; and
    2. the expenditure incurred wholly and exclusively in connection with such transfer or redemption or maturity,
    3. – shall be deemed to be the capital gains arising from the transfer of a short-term capital asset irrespective of period of holding of debenture.
Further, no deduction shall be allowed in computing the income chargeable under the head “Capital gains” in respect of any sum paid on account of securities transaction tax

“Market Linked Debenture” means a security, by whatever name called, which has an underlying principal component in the form of a debt security and where the returns are linked to the market returns on other underlying securities or indices, and includes any security classified or regulated as a market linked debenture by the SEBI.

“Specified Mutual Fund” has been defined in Explanation (ii) below section 50AA to mean a mutual fund by whatever name called, where not more than 35 per cent of its total proceed is invested in the equity shares of domestic companies. It has been provided that the percentage of equity shareholding held in respect of the Specified Mutual Fund shall be computed with reference to the annual average of the daily closing figures.

Background of amendment is to make Special provision for taxation of capital gains in case of Market Linked Debentures. It has been noticed by the Government that variety of hybrid securities that combine features of plain vanilla debt securities and exchange traded derivatives are being issued through private placements and listed on stock exchanges. It is seen that such securities differ from plain vanilla debt securities. ‘Market Linked Debentures’ are listed securities. These are currently being taxed as long- term capital gain at the nominal rate of 10% without indexation. However, these securities are in the nature of derivatives which are normally taxed at applicable rates. Further, they give variable interests as they are linked with the performance of the market.

In order to tax the capital gains arising from the transfer or redemption or maturity of these securities as short-term capital gains at the applicable rates, new section 50AA has been inserted to treat the full value of the consideration received or accruing as a result of the transfer or redemption or maturity of the “Market Linked Debentures” as reduced by the cost of acquisition of the debenture and the expenditure incurred wholly or exclusively in connection with transfer or redemption of such debenture, as capital gains arising from the transfer of a short term capital asset.

This amendment will take effect from the 1st day of April, 2024 and shall accordingly, apply
in relation to the assessment year 2024- 25 and subsequent assessment years.

The investors in market linked debentures will have to pay more tax that is tax on slab rate instead of just 10 per cent because the capital gains arising from the transfer of “Market Linked Debentures” will be considered as Short Term Capital Gains.
1. Exemption/deduction u/s 54 or 54F limited to 10 Crores [Third Proviso to Section 54(1), 54(2) and 2nd Proviso to Section 54F and 54F(2)]: W.e.f. AY 2024- 25 if an assessee for claiming deduction/ exemption u/s 54 of 54F purchases or constructs a new house property for a consideration exceeding Rs 10 crores, the investment/consideration shall be deemed to be 10 crores. Similarly, the assessee can make a deposit of maximum Rs 10 Crores under Capital Gain Account Scheme.The object of amendment is to limit the roll over benefit u/s 54 and section 54F. The existing provisions of section 54 and section 54F allow deduction on the Capital gains arising from the transfer of long-term capital asset if an assessee, within a period of one year before or 2 years after the date on which the transfer took place purchased any residential property in India, or within a period of 3 years after that date constructed any residential property in India. For section 54, the deduction is available on the long-term capital gain arising from transfer of a residential house if the capital gain is reinvested in a residential house. In section 54F, the deduction is available on the long term capital gain arising from transfer of any long term capital asset except a residential house, if the net consideration is reinvested in a residential house. It has been observed by the Government that claims of huge deductions by high-net-worth assessees are being made under these provisions, by purchasing very expensive residential houses, which is defeating the very purpose of these sections.
  In order to prevent this, a limit has been imposed on the maximum deduction that can be claimed by the assessee u/s 54 and 54F to Rs.10 crore. It has been provided that if the cost of the new asset purchased is more than Rs. 10 crore, the cost of such new asset shall be deemed to be Rs. 10 crores
  
  These amendments will take effect from the 1st April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.
  
  The claim of deductions being made by high-net-worth assessees has been obviously limited and it does not affect Aam taxpayer. Therefore no opposition was seen in Parliament or otherwise.
2. Cost of acquisition and cost of improvement of all intangible self- generated assets or any self-generated right shall be Nil [Section 55(1)(b)(1) and 55(2)(a)]: W.e.f. AY 2024-25, the cost of acquisition or improvement of all self-generated intangible assets or any right shall be deemed to be nil. Prior to the amendment cost of acquisition or improvement of self-generated Goodwill, right to manufacture, produce or process any article or thing, right to carry any business or profession, tenancy rights, stage carrier permits or loom hours were deemed to be nil. However, sale of self- generated intangible assets or rights were not liable to capital gain in view of Supreme court decision of CIT v. B C Srinivasa Setty 128 ITR 294 (SC).The purpose of bringing amendment is defining the cost of acquisition in case of certain assets for computing capital gains. The existing provisions of the section 55, inter alia, defines the ‘cost of any improvement’ and ‘cost of acquisition’ for the purposes of computing capital gains. However, there are certain assets like intangible assets or any sort of right for which no consideration has been paid for acquisition. The cost of acquisition of such assets is not clearly defined as ‘nil’ in the present provision. This has led to many legal disputes and the courts have held that for taxability under capital gains there has to be a definite cost of acquisition or it should be deemed to be nil under the Income tax Act. Since there is no specific provision which states that the cost of such assets is nil, the chargeability of capital gains from transfer of such assets has not found favour with the Courts.
  Therefore, amendment has been made in sec. 55(1)(b) and sec. 55(2)(a) to define the term ‘cost of acquisition’ and ‘cost of improvement’ of such assets, so as to provide that the ‘cost of improvement’ or ‘cost of acquisition’ of a capital asset being any intangible asset or any other right ( other than those mentioned in the said sub-clause or clause, as the case may be) shall be ‘Nil’.
  
  This amendment will take effect from the 1st April, 2024 and shall accordingly, apply in relation
  to the assessment year 2024-25 and subsequent assessment years.
  
  The Government has made a successful effort to curb the effect of decisions favourable to taxpayers by specifically providing that intangible assets or any sort of right for which no consideration has been paid for acquisition, the cost of acquisition of such assets shall be considered as ‘nil’.
3. No capital gain on transfer of a capital asset being an interest in a Joint Venture (JV), held by a public sector company, in exchange of shares of a company incorporated outside India by a foreign government, in accordance with laws of that foreign government – Section 47(xx):W.e.f. AY 2023-24, the capital gain arising from transfer of a capital asset being an interest in a Joint Venture (JV), held by a public sector company, in exchange of shares of a company incorporated outside India by a foreign Government by the Government of a foreign State in accordance with the laws of that foreign State, shall not be chargeable to tax as the exchange of shares shall not be considered as transfer. Further the cost of acquisition of such shares shall be deemed to be cost of acquisition of the interest in JV. The amendment is effective form 1st April, 2023 that is assessment year 2023-24.
  The amendment is likely to benefit ONGC Videsh Limited (OVL) whose interest in JV in Russia having production sharing agreement with Russian Government in respect of certain oil fields was recently swapped with shares of new Russian company in accordance with decree issued by the Russian President. The swap was made to address difficulties arising out of existing operator being unable to operate the oilfields due to sanctions on Russia after outbreak of war with Ukraine.
REASSESSMENT
1. Period of 3 months provided to file return under sec. 148: W.e.f. 1.4.2023, a return in response to a notice u/s 148 is to be furnished within three months from the end of the month in which such notice is issued, or within such further time as may be allowed by the Assessing Officer on a request made in this behalf by the assessee. In case the assessee furnishes the return of income beyond the time allowed, it shall not be treated as a return under sec. 139 and as such notice under sec 143(2) will not be required to be issued in such cases.Background for amendment relates to extension of time for furnishing Income Tax Return u/s 148. The Finance Act, 2021 had modified, inter alia, sections 147, section 148, section 149 and also introduced a new section 148A. In cases where search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A, assessment or reassessment is now made u/s 147 for all the relevant years prior to the year in which the search was conducted or requisition was made after amendment made by the Finance Act, 2021. Further, the provisions of re- assessment proceedings were rationalized by amendments made vide Finance Act, 2022.
  Amendments have been made in the provisions relating to conduct of reassessment proceedings to further streamline them and facilitate their conduct and completion in a seamless manner. Section 148 has been amended to provide that a return in response to a notice u/s 148 shall be furnished within three months from the end of the month in which such notice is issued, or within such further time as may be allowed by the Assessing Officer on a request made in this behalf by the assessee. However, as per third proviso to sec. 48 inserted by the Finance Act, 2023 w.e.f. 1st April, 2023, any return which is furnished beyond the period allowed in the section 148 to furnish such return of income shall not be deemed to be a return u/s 139. As a result, the consequential requirements viz. notice under sub-section (2) of section 143 etc. would not be mandatory for such returns.
  
  The amendments will take effect from the 1st day of April, 2023.
2. For search or survey conducted after 15 March of a financial year, 15 days grace period allowed for issuing notice under sec. 148 or 148A(b) – sec. 149 : Where a search under sec. 132 is initiated or last of the authorisation is executed or requisition made under sec. 132A after 15 March of a financial year, and the period for issue of notice u/s 148 expires on 31 March of such financial year, a period of 15 days shall be excluded for the purpose of computing the period of limitation and the notice issued u/s 148 in such case shall be deemed to have been issued on 31 March of such financial year. That means in such a case, the notice under sec. 148 may be issued by 15 April and it shall be deemed to have been issued on 31 March where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded u/s 131 or section 133A, on or before 31 March of a financial year, in consequence of a search under sec. 132 which is initiated or a search under sec 132 for which last of authorisation is executed or requisition made under sec 132A, after 15 March of a financial year, the notice under sec 148A(b) may be issued by 15 April and it shall be deemed to have been issued on 31 March.5th proviso has been inserted in section 149 to provide that for computing the period of limitation as per sec. 149 the time or extended time allowed to the assessee, as per show cause notice issued under sec. 148A(b) or the period during which the proceeding u/s 148A is stayed by an Order or Injunction of any Court, shall be excluded. (5th proviso to sec. 149)
  In 6th proviso has been inserted to provide that where immediately after the exclusion of the period referred to in the 5th proviso to sec. 149 the period of limitation available to the Assessing Officer for passing an Order under sec. 148A(d) does not exceed 7 days, such remaining period shall be extended to 7 days and the period of limitation under sec. 149(1) shall be deemed to be extended accordingly.
  
  Background of amendment: Section 149 provides the period of limitation for issuance of notice u/s 148 for commencement of proceedings u/s 147. It is imperative to note here that in case of a search action u/s 132, requisition u/s 132A and cases for which information emanates from the above proceedings are deemed to be information u/s 149 and there is no requirement for proceedings u/s 148A to be conducted prior to re- opening the cases in these cases. In cases where survey u/s 133A is conducted, the Assessing Officer is deemed to have information for the purposes of section 148 but proceedings u/s 148A need to be conducted prior to issuance of notice u/s 148 in such cases. It has been seen that in the cases where the aforementioned search, requisition or survey proceedings are conducted after 15th March of a financial year, there is extremely little time to collate this information and issue a notice u/s 148 or show cause notice u/s 148A(b) . Moreover, the search is conducted by the Investigation Wing and the notice is required to be issued by the Assessing Officers. However, evidence of tax evasion may be reflected in the statements recorded or documents seized or impounded etc. during such action before 31st March, but issuance of notice related to such information or search may go beyond the time limitation provided due to the procedure involved. Therefore, important information related to revenue leakage cannot be proceeded on due to the paucity of time for searched conducted and information obtained as a consequence of these searches in the last few days of any financial year.
  
  Accordingly, a proviso has been inserted in section 149 to provide that in cases where a search u/s 132 has been initiated or a search for which the last of the authorization is executed or requisition is made u/s 132A, after the 15th March of such financial year, a period of 15 days shall be excluded for the purpose of computing the period of limitation for issuance of notice u/s 148 and the notice so issued shall be deemed to have been issued on the 31st March of such financial year.
  
  Section 151 contains provisions relating to the specified authority who can grant approval for the purposes of sections 148 and 148A . The said section provided that the authority would be the Pr. CCIT and where there is no Pr. CCIT, CCIT shall give approvals beyond a period of three years. Clause (ii) of section 151 was resulting in misinterpretation as well as confusion with regards to the specified authority for the cases where re-opening was being done after 3 years from the relevant assessment year. Therefore, to clarify the position of law in this regard, amendment has been made to provide that the specified authority under clause (ii) of section 151 shall be Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
  
  At the same time, to give further clarity with regards to the specified authority a proviso is proposed to be inserted in the section 151 to provide that while computing the period of three years for the purposes of determining the specified authority the period which has been excluded or extended as per the provisos in section 149 from the time limit for issuance of notice u/s 148 shall be taken into account.
  
  4.5 CCIT or DGIT can grant approval for the purpose of sec 148 or sec 148A even if Pr CCIT or Pr DGIT exists [sec 151]:
  
  W.e.f. 1.4.2023, Pr CCIT, Pr DGIT, CCIT and DGIT are specified authorities for granting approval for issuing of notices or passing of order under sec. 148A(b), 148A(d) or sec 148 where notice is issued after the expiry of 3 years from the end of relevant assessment year. Prior to the amendment Pr DGIT, Pr CCIT were the specified authorities. CCIT or DGIT were specified authorities where Pr DGIT, Pr CCIT did not exist. For computing the period of 3 years, the period for which the time limit has been extended under third, fourth, fifth proviso or extended by sixth proviso to sec 149(1) shall be excluded. At the same time, to give further clarity with regards to the specified authority a proviso has been inserted in section 151 to provide that while computing the period of three years for the purposes of determining the specified authority the period shall be computed after taking into account the period of limitation as excluded or extended as per the 3rd, 4th or 5th or extended by 6th provisos in section 149.
  
  Background of amendment: Section 151 contains provisions relating to the specified authority who can grant approval for the purposes of sections 148 and 148A. The said section provided that the authority would be the Pr. CCIT and where there is no Pr CCIT, the CCIT shall give approvals if more than 3 years have elapsed from the end of the relevant assessment year. It was seen that the clause (ii) of the said section was resulting in misinterpretation as well as confusion with regards to the specified authority for the cases where re-opening was being done after three years from the relevant assessment year. Therefore, to clarify the position of law in this regard, an amendment has been made to provide that the specified authority under clause (ii) of section 151 shall be Pr. CCIT or Pr. DGIT or CCIT or DGIT.
Time limit for completion of assessment or reassessment including assessment in case of updated return raised to 12 months from 9 months [Sec. 153(1)/(3)/ (3A)/(5)/(6)]:
1. The time limit for competition of assessment w.e.f. assessment year 2022- 23 shall be 12 months from the end of the relevant assessment year in which the income is first assessable (For the assessment year 2021-22, the time limit for competition of assessment was 9 months).
2. W.e.f. 01-04-2023, the time limit for completion of assessment u/s 143 or u/s 144 in case of an updated return u/s 139(8A) shall expire on the end of 12 months from the end of the financial year in which updated return is furnished. Prior to the amendment time limit was 9 months from the end of the financial year in which updated return was furnished.
3. Section 153(3A) has also been inserted w.e.f. 01/04/2023 to provide that where an assessment or reassessment is pending on the date of initiation of search u/s 132 or making of requisition u/s 132A, the period available for completion of assessment or reassessment, as the case may be, shall be extended by 12 months in following cases:
  1. in a case where such search is initiated u/s 132 or such requisition is made u/s 132A;
  2. in the case of an assessee, to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to;
  3. in the case of an assessee, to whom any books of account, other documents seized or requisitioned pertains or pertain to, or any information contained therein, relates to or any assets
4. W.e.f. 01-04-2023 the time limit prescribed for competition of order in pursuance of an order of CIT/PCIT passed u/s 263/264, shall also apply for passing order in pursuance of order passed by Pr CCIT/ CCIT u/s 263 or 264.Background of amendments is to provide for Alignment of timeline provisions u/s 153 considering the fact that the time presently allowed to Assessing Officer for making assessment or reassessment which, inter alia, includes making investigations, giving assessee opportunity of hearing, bringing on record any material relevant to the case, analysing judicial positions of various legal matters etc. is not sufficient. Further, with the Faceless Assessment, different aspects of the assessment are carried out by different units viz. Assessment Unit, Verification Unit, Technical Unit and Review Unit. Therefore, a lot of co-ordination is required between the different units in every scrutiny assessment and adequate time is essential for a rational and speaking order.
  Further, vide Finance Act, 2021 the section 263 was amended to enable Pr. CCIT and CCIT to also pass an order of revision u/s 263. However, the time line provided in section 153 u/s 153(3), (5) and (6) to pass an order of assessment or reassessment or order u/s 92CA by the Transfer Pricing Officer does not refer to the orders so passed by Pr. CCIT or CCIT. Therefore, section 153(3) has been amended to provide that the provision of the said sub-section (3), (5) and (6) shall also be applicable to order u/s 263 or section 264, passed by Pr. CCIT and CCIT or Pr. CIT or CIT, as the case may be.
  
  It may also be noted that prior to the Finance Act, 2021 in cases where search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A, assessment was made in the case of assessee, or any other person, in accordance with the special provisions of sections 153A, 153B and 153C that deal specifically with such cases. The section 153A provided that an assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years, as given in section 153A, and for the relevant assessment year or years pending on the date of initiation of the search u/s 132 or making of requisition u/s 132A, as the case may be, shall abate. The scrutiny proceedings would later on be re-opened under the provisions of section 153A, so that correct assessment of income subsequent to a search operation can logically be concluded based on the information available as a result of the search.
  
  Vide Finance Act, 2021 the provisions of sections 147 and others relating to re- assessment proceedings were amended providing that search assessments were to be carried out under the provisions of section 147. However, the current provisions relating to reassessment do not provide for abatement or revival of any assessment or reassessment proceedings pending on the date of search u/s 132 or requisition u/s 132A. As a result, the information available in a search, which has a bearing on the pending scrutiny proceedings may not be effectively used due to the limitation of such proceedings.
  
  Further, even if the last of the authorizations have been executed in the relevant search case, the seized material etc. are transferred to the Assessing Officer only after some time owing to the pre-assessment processing of such material and data. Further, the Assessing Officer also needs to carry out investigation and gather evidence to compute the income of the assessee as a result of the search or requisition proceedings. Therefore, there was a need to allow the Assessing Officer to conduct proper scrutiny of the case on the basis of seized material and investigation made and align the dates of limitation for completion of reassessment proceedings for all the assessment years under scrutiny consequent to a search u/s 132 or requisition u/s 132A.
  
  In view of the above, section 153(3A) has been inserted to provide that where an assessment or reassessment is pending on the date of initiation of search u/s 132 or making of requisition u/s 132A, the period available for completion of assessment or reassessment, as the case may be, u/s 153(1), (1A), (2) and (3), the time shall be extended by twelve months in a case of an assessee where such search is initiated u/s 132 or such requisition is made u/s 132A or in the case of an assessee to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to or in the case of an assessee to whom any books of account or documents seized or requisitioned pertains or pertain to, or any information contained therein, relates to.
  
  These amendments will take effect from the 1st day of April, 2023.
  
  The time line for making assessment or reassessment are extended in view of the real need and is welcome step.
NEW TAX REGIME HAS BECOME “DEFAULT REGIME” [Section 115BAC(6)]
1. New Tax Regime now default Tax Regime: W.e.f. AY 2024-25, the alternative tax regime u/s 115BAC has been made the default tax regime for an individual/ HUF/AOP/BOI/artificial juridical person. However in case there is no income form Business or profession, the option can be exercised to change from one Regime to another Regime. [Prior to the amendment, from AY 2021-22 to AY 2023-24, the regular tax regime was the default regime while an assessee has an option to opt for alternative tax regime].
2. Standard deduction from salary u/s 16(ia), Deduction from family pension u/s 57(iia) and Employer’s contribution to Agniveer Corpus Fund u/s 80CCH(2) shall now be available under new tax regime also [Section 115BAC(1A)]: W.e.f. AY 2024-25, standard deduction from salary u/s 16(ia), standard deduction from family pension u/s 57(iia) and employer’s (Central Government) contribution to Agniveer Corpus Fund u/s 80CCH(2) shall be available as deduction from gross total income under new tax regime. Deduction u/s 80CCD(2) and Section 80JJAA shall continue to be allowed.
3. The above-mentioned rates shall apply to all individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person referred to in section 2(31)(vii), unless an option is exercised u/s 115BAC. Thus, rates given in section 115BAC(1A) are the default rates. Further, the income-tax payable in respect of the total income of the person [other than a person who has exercised an option u/s 115BAC(6)], shall be computed without allowing any exemption or deduction as mentioned in section 115BAC(2)(i). However, standard deduction u/s 16(i), deduction in respect of income in the nature of family pension u/s 57(iia) and deduction in respect of the amount paid or deposited in the Agniveer Corpus Fund u/s 80CCH(2) shall be allowed for the purposes of computing income u/s 115BAC(1A).
4. If an option is exercised u/s 115BAC(6), then nothing contained in section 115BAC(1A) shall apply in respect of such person. The option is required to be exercised, –
  1. on or before the due date specified u/s 139(1) for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years; or
  2. along with the return of income to be furnished u/s 139(1) for such assessment year, in case of a person not having income from business or profession.
5. A person having income from business or profession who has exercised the above option of shifting out of the regime provided u/s 115BAC(1A) shall be able to exercise the option of opting back to the regime u/s 115BAC(1A) only once. However, a person not having income from business or profession shall be able to exercise this option every year.
6. In respect of income chargeable to tax u/s 115BAC(1A), the “advance tax” for FY 2023-24 shall be increased by surcharge, computed, in the case of every individual or Hindu undivided family or association of persons, or body of individuals, whether incorporated or not, or every artificial juridical person referred to in section 2(31)(vii), as may be applicable. However a person having total income (excluding the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A ) exceeding Rs. 2 crore, shall pay surcharge only @ 25% of such “advance- tax”; In case where the provisions of section 115BAC((1A) are applicable and the total income includes any income by way of dividend or income under the provisions of section 111A, section 112 and section 112A, the rate of surcharge on the “advance- tax” in respect of that part of income shall not exceed 15 per cent.
7. Further, in the case of an AOP consisting of only companies as its members, and having its income chargeable to tax u/s 115BAC(1A), the rate of surcharge on the “advance-tax” shall not exceed 15 per cent.The provisions of section 15BAC have been modified with a view that the taxpayers are motivated to adopt the new tax regime as per policy of the Government.

SEARCH & SEIZURE
1. Search officer can now take assistance of any person or entity approved by the Pr. CCIT or the CCIT or Pr. DGIT or DGIT [Section 132(2)]: Prior to the amendment, authorised officer in the course of search was entitled to take assistance of any police office or any officer of the Central Government or both. However, w.e.f. 01.04.2023 search officer can also take assistance of any person or entity like digital forensic professionals, valuers, archive experts, locksmith, carpenters etc. during the search with the approval of Pr. CCIT or the CCIT or Pr. DGIT or DGIT.
2. Search officer can now take assistance of any person or entity or any registered valuer approved by the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General [Section 132(9D)]: W.e.f. 01.04.2023, search officer can also take assistance of any person or entity or a valuer registered by or under any law, during the search or within 60 days from the date on which the last of the authorisations for search was executed with the approval of Pr. CCIT or the CCIT or Pr. DGIT or DGIT. Prior to the amendment, authorised officer was entitled to take assistance of a Valuation officer referred to Section 142A.

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