Trust Deficit Remains
The present dispensation, in its first term also, initiated several measures under the Ease to do Business which can be termed as confidence building measures among the tax payers and investor community. Late Shri Arun Jetly as Finance Minister stated that “Litigation is a scourge for a tax friendly regime and creates an environment of distrust in addition to increase the compliance cost of the tax payers and administrative cost for the Government.” With the observation Dispute Resolution Scheme was introduced. Similarly, the Hon’ble Finance Minister Smt. Nirmala Sitharaman also, in her budget speech for the Fiscal Year 2020-21 had initiated several measures which had brought fresh breeze into the economy, especially assesses were happy that certain measures are being initiated as a confidence building measures. The Direct Taxes Vivad se Vishwas Act, 2020 (DTVSVA) was one of such measures. The COVID-19 pandemic has disrupted lives and livelihoods of many. The Government in a proactive manner introduced stimulus to revive the economy in the month of May, 2020. These were serious and sincere efforts on the part of the Government to do handholding of the business entities going through rough times. The sufficiency of the same may be a matter of debate. The initial response to the DTVSVA was lukewarm, but, the momentum picked up over a period of time. The assesse found the DTVSV a very beneficial scheme to end the uncertainty of litigation. The Hon’ble Prime Minister in the month of August, 2020 launched a very ambitious and much needed Faceless assessment and appeal proceedings before CIT(A). The tax professional fraternity welcomed it as this was a freedom from the long waiting periods in the income tax department to attend the assessment proceedings.
The Hon’ble Finance Minister in her budget speech on 1st February, 2021 in paras 153 and 154 stated as under:
Honourable Speaker, presently, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years. As a result, taxpayers have to remain under uncertainty for a long time.
I therefore propose to reduce this time-limit for re-opening of assessment to 3 years from the present 6 years. In serious tax evasion cases too, only where there is evidence of concealment of income of Rs. 50 lakh or more in a year, can the assessment be re-opened up to 10 years. Even this reopening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department.
The above quoted statement along with above mentioned measures definitely made a difference at the ground level. New scheme to reopen the assessment was introduced by substituting existing sections 147 to 151 and 153 to 153C vide sections 35 to 43 of the Finance Act, 2021. As per the law applicable from 1st April, 2021 no notice can be issued under section 148 if three years have elapsed from the end of the relevant assessment year. The re-opening can take place in certain cases where the AO has in his possession evidence which reveals income chargeable tax more than Rs. 50 lakhs has escaped assessment where three years have elapsed but not more than ten years have elapsed. These new provisions were welcomed by all concerned as the tax assessments will reach finality in shorter period of time in comparison to earlier provision.
However, the euphoria generated by the new provisions was short lived. The departmental authorities started issuing notices under section 148 of the Income tax Act, 1961 post 1st April, 2021 under the garb of extended time limits under section 3 of The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The Notification dated 31st March, 2021 extended the time limits to 30th April, 2021. The Explanation in para (A) clarified that the notices issued in the extend time period will be governed by the statutory provisions as they stood before the Finance Act, 2021 came into operation. The validity of these notices issued under section 148 as well as the Notifications issued by the CBDT are under challenge before various High Courts. The Courts will determine the legality of the notices I am not concerned about the same over here. As far as faceless appeal proceedings are concerned, making any comment on the same is rather pre mature. However, it is not the same with respect to faceless assessment proceedings. The assesses have been thrust with unreasonably huge demand by passing arbitrary orders in blatant breach of rules of natural justice.
I want to discuss much larger issue which I out lined in the beginning i.e. the initiative taken by the government of confidence building measures. The same has suffered in this process. It may not out of place to mention here that the professional organisations made several representations seeking extension deadlines for several compliances on the ground that in tier-I and tier-II cities the public transport is not available to the staff hence hardship faced by the professionals. The CBDT was not considerate. This very approach on the part of the highest body of tax administration makes the assesses and the tax professionals skeptical about the implementation of the well-intended assesse friendly tax policies. The gains made in reducing the litigation by introducing DTVSVA have been lost. It seems tax administration is not keen to start a regime in which the assesse is certain about his tax liability. If the above observation is not true then we professionals will be very happy. But, the scale at which the notices are issued and the manner in which the faceless assessment orders are passed it is difficult believe that the same is a coincidence.
In the month of April we had come up with this year’s first issue of Tax companion. Now it’s time for the next issue. The energetic research team has put together certain important and relevant case laws for the benefit of professionals. I hope the same is of assistance to the readers. I thank the members of the research team for their efforts. I am grateful to the senior professionals, who are part of the Editorial team, for sparing their valuable time to edit the present issue. I request all my professional brothers to continue following the COVID-19 appropriate practices as the pandemic is not yet over. The experts say the Third Wave is round the corner. Prevention is the best cure if not the only one.