The Hon’ble Finance Minister Smt. Nirmala Sitharaman presented the Finance Bill, 2022 on 1st February, 2022. The proposals of Budget for the Fiscal year 2022-23, by and large, have been appreciated by the experts in the field of Macro-economics and industry. Especially, everyone appreciated that the Hon’ble Finance Minister resisted the temptation, to use the budget proposals, as tool to further electoral gains in the fourth coming elections for the five state assemblies. The increased allocation for CAPEX definitely sends a message that the Government is serious about spending which yields tangible infra assets. While doing this the Hon’ble Finance Minister consistently followed the advice of great Tamil sage Thiruvalluvar “A King / Ruler is the one who creates and acquires wealth, protects and distributes it for common good. [Hon’ble Finance Minister’s speech paragraph 148 (2021) 430 ITR (St.) 54]
This happy trend comes to an abrupt halt once we look into the fine print of the Finance Bill, 2022 proposals pertaining to direct taxes. The Hon’ble Finance Minister has nullified several court decisions by proposing amendments to the existing provisions of the Income tax Act, 1961. Clause 9 of the Finance Bill, 2022 proposes to insert an Explanation to section 14A of the Income Tax Act, 1961. This amendment is applicable retrospectively. The provisions of section 14A of the IT Act have generated substantial litigation as the dividend was exempt in earlier years. The proposed explanation is not in good taste. There are similar provisions proposed in the Finance Bill, 2022. However, I don’t intend to deal with the same as senior and esteemed professionals are dealing with the various provisions of the Finance Bill, 2022 in this issue of our the journal. I am not able to resist sharing my concerns with you all with respect to the amendments proposed in section 149 of the Income tax Act,1961. I would like to recall the Hon’ble Finance Minister’ speech which proposing to amend the provisions pertaining to the reopening of the assessment.
“Reduction in time for Income tax Proceedings.
Honorable Speaker, presently, an assessment can be reopened up to 6 years and in serious tax fraud cases for up to 10 years. As a result, tax payers have to remain under uncertainty for a long time.
I therefore propose to reduce this time limit for reopening 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 reopened 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.” [(2021) 430 ITR (St.) 55]
The Amendment proposed in the Finance Bill, 2022 dilute the above mentioned object of the Hon’ble Finance Minister. The claim of restricting the time limit to reopen an assessment from 6 years to 3 years may get substantially diluted due to the proposed amendments in the Finance Bill, 2022.
I thank all the professionals who have contributed to this issue of the AIFTP-Journal on a very short notice. The knowledge shared by the esteemed authors will be of great help to all the professionals to understand the provisions of Finance Bill, 2022.