CA Kinjal Bhuta

1. Alignment of time line provisions u/s. 153:
   1. Extension of time period to complete assessments from 9 months to 12 months.

      Section 153 specifies various time limits for completion of assessment and re-assessment and re- computation proceedings under the Income Tax Act, 1961. This section is amended quite often in last few years from Finance Act, 2016 to bring down the time limit to complete assessments and thereby being more. The sub- section ( 1 ) of this section provides the time limit for order of assessment under section 143 or section 144 of the Act. Prior to Finance Act, 2016 the time limit was 21 months from the end of the assessment year in which the income was first assessable. This time period of 21 months was gradually reduced to 18, 12 and 9 months. Currently, the time period for all assessments of AY: 2021-22 and thereafter is 9 months from the end of the assessment year in which the return is first assessable.

      Finance Act, 2022 introduced a new sub- section ( 1 A) in section 153 of the Act to provide that in case of updated returns which are filed u/s. 139 (8A), an order of assessment or reassessment under section 143 or section 144 of the Act to be passed before the expiry of 9 months from the end of the financial year in which such return was furnished. Whereas for the normal assessments u/ s. 143 ( 3 ) and 144

      the time period is counted from the end of the assessment year in which return is first assessable, for updated returns, the assessments needs to be completed within 9 months from the end of financial year in which return is filed.

      However, one thing is common in both of the above mentioned assessment completion limits, which is the period is computed as 9 months from the end of relevant assessment or financial year as the case may be. The first step-stone for commencing the assessment proceedings is issuance of notice u/s. 143(2) which can be served to the assessee upto 3 months from the end of the relevant assessment year. With the overall reduced time limits, effectively in many situations the actual period to conduct and complete assessment proceedings was reduced to 6 months after excluding 3 months available to issue notice u/s. 143(2). To complete the entire proceedings within 6 months was a challenge especially under the faceless regime where there are layers of authorities are prescribed. In the recent past, it has been observed that there are several cases where the assessment orders passed are not well reasoned or the assessee is not given sufficient opportunity to make replies to notices due to paucity of time and rush to complete assessments before the stipulated due dates. A lot of grievances and appeals were filed in the past regarding this issue of providing sufficient opportunity to response.

      Therefore, the time available for completion of assessment relating to the assessment year commencing on or after the 1st day of April, 2022 shall be twelve months from the end of the assessment year in which the income was first assessable. Consistent with the above, the time available for completion of assessment proceedings in the case of an updated return is also proposed to be increased to 12 months from the end of the financial year in which such return is furnished.

   2. Amendment to provide timeline for orders passed by PCCIT and CCIT u/s. 263.

      Section 263 of the Act was amended to enable Principal Chief Commissioner (PCCIT) and Chief Commissioner (CCIT) to also pass an order of revision under the said section like CIT. However, the current section which provides time line in section 153 to pass an order of assessment or reassessment or order under section 92CA by the Transfer Pricing Officer does not refer to the orders so passed by PCCIT or CCIT u/s. 263 or 264. Therefore, Section 153 is amended to provide that the provision of sub-sections (3), (5) and (6) shall also be applicable to such revision orders passed by PCCIT or CCIT also.

   3. Extension of time period by 12 months for assessments in case of search and seizures.

      The Finance Act, 2021 brought a paradigm shift in re- assessment proceedings by providing a complete new set of provisions for such assessments. One significant change made is that even the assessments pursuant to search and seizure operations is now also covered under the ambit of Section 147 i.e. reassessments. Earlier, these assessments post search and seizure were covered by a complete code from sections 153A to 153C. As per section 153A and 153C, if there was

      any assessment which was pending on the date of initiation of search, the same was abated. Abated assessments are carried on as a regular assessment taking into account the information available as a result of search operations. However, these sections 153A and 153C cease to operate now as the same are covered u/s. 147.

      The current provisions of the Act relating to reassessment do not provide for abatement or revival of any assessment or reassessment proceedings pending on the date of search under section 132 of the Act or requisition under section 132A of the Act. 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. It takes some time to transfer the relevant files of search operations and seized material to the Assessing officer who shall be authorized to conduct the assessment proceedings. 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, so as to give enough time to the Assessing Officer to conduct such scrutiny assessments, a new sub- section 3( A) is introduced to section 153, which provides that the period available for completion of assessment or reassessment, under the said sub-sections (1), (1A), (2) and (3) of the said section shall be extended by twelve months in a case of an assessee where such search is initiated under section 132 or such requisition is made under section 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.

   4. Reference of assessments in case of updated returns:

      The updated returns were introduced in the last Finance Act. A parallel amendment was also brought to ascertain time limits for completions of assessments of such updated returns. However, reference of the said assessments was not evenly given in the entire section 153. To align this anomaly, reference to sub-section (1A) is now provided in sub-sections (3), (4), (6) as well as in the first proviso to Explanation 1 of section 153.

      These amendments will take effect from the 1st day of April, 2023.

2. Rationalisation of reassessment proceedings:

   The Finance Act, 2021 amended the procedure for assessment or reassessment of income in the Act with effect from the 1st April, 2021. The said amendment modified, inter alia, sections 147, section 148, section 149 and also introduced a new section 148A in the Act.

   1. Extension in filing return of income in pursuance to notice u/s. 148:

      Under the existing provisions, the period to file return of income in pursuance to notice under section 148 is subjective as ‘specified in the notice’ issued for re-opening, which is generally one month from the date of the receipt of the notice as per current practice. This period to file return of income is increased to three months from the end of the month in which the notice is issued or such period as may be allowed by Assessing Officer on basis of application made by the assessee. It is also provided that if the return of income is filed under this section beyond the time period allowed, then it shall not be deemed to be return under section 139.

      In the current scenario, many a times the re- assessment procedures were delayed

      because the assessee would not have filed a return of income. Unless the return of income was not filed, the notice u/s. 143(2) which is mandatory to begin re-assessment provisions could not be issued. This would delay the entire process and drag the matter towards the due date. As a consequence of this amendment, it would mean that no notice under section 143(2) shall be required to be issued for such returns filed beyond the time limit. However, there may be also be perceived that, section 234A regarding interest for default in furnishing of return of income, would also not apply in such cases.

   2. Extending time limit by 15 days in case of search and survey related assessments:

      In cases where search is initiated under section 132 of the Act or books of account, other documents or any assets are requisitioned under section 132A of the Act, assessment or reassessment is now made under section 147 of the Act. Under the existing provisions, the Assessing Officer is required to conduct a procedure of enquiry as prescribed in section 148A prior to issuance of notice under section 148. The provisions of section 148A is not applicable in case of search initiated under section 132 or where assets, documents or books are requisitioned under section 132A. However, for survey under section 133A, the proceedings under section 148A are required to be conducted prior to issuance of notice.

      When such search, requisition or survey proceedings are conducted after 15th March of a financial year, there is very little time to collate the information and issue a notice under section 148 or show cause notice under section 148A(b) of the Act. 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. As mentioned in the explanatory memorandum to the Finance Bill, that due to these practical time crunch, important information related to revenue leakage cannot be proceeded on for searched conducted and information obtained as a consequence of these searches in the last few days of any financial year.

      Therefore, Section 149 (1) is amended to add a proviso to extend time limits by 15 days in the following two scenarios:

      1. In case where the search, requisition or survey proceedings are conducted after 15th March of a financial year expiring as on 31st March of the said financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation for issuance of notice under section 148 of the Act and it will be deemed that the notice is issued on 31st March of such financial year.
      2. In cases where the information emanates from statement recorded or documents impounded under section

         131 or section 133 A on or before 31st March of the financial year, in consequence of search or search for which last authorisations is executed or under search requisition which is done so after 15th March of such year, a period of fifteen days shall be excluded from computing the time l imit for issuance of notice under section 148 and also for show cause notice under section 148A(b) shall be deemed to be issued as on 31st March of the financial year.

   3. Increasing the authorities for sanction u/s. 151:

      Section 151 provides the sanctioning authority for the issue of notice under section

      148. Under the existing provisions, sanction is required from PCCIT or PDGIT in case re-opening is beyond three years from the end of the relevant assessment year. Only in a case where PCCIT or PGDIT is not available, sanction from CCIT or DGIT could be obtained. Now it is provided that, re- opening can be done by CCIT or DGIT also when re-opening is beyond period of three years along with PCCIT and PGDIT.

      In arriving at the time limits of period of three years for sanction under section 151(i), the provisions to section 149(1) regarding extended period of 15 days or extensions owing to stay or injunction of any court shall be excluded.

      These amendments will be effective from 1st April, 2023.

3. Assistance to authorized officer during Search & Seizure.
   1. Section 132 of the Act makes provisions

      related to search and seizure. The section makes detailed provisions for powers of income-tax authority during the search and seizure proceedings, procedure to be followed, requisition of services of other officers for assistance, examination of books of account or other documents, procedure for custody of evidence, provisional attachment etc. The section also provides the timelines to be followed by the income- tax authority during and post search proceedings.

      Under the existing provisions of section 132 , it is provided that authorised search officers may requisition services of police officer or any officer of

      Central Government to assist him during the search. Due to digitisation of transactions with advent of technology in the current times, the search process has become complex and requires specific domain experts. Therefore, the amendment substitutes sub-section

      (2) of section 132 to provide that the authorised officers can also requisition services of any other such person as may be approved by PCCIT or CCIT or PDGIT or DGIT in accordance with procedures to be prescribed.

   2. Under the existing provisions of sub- section (9D), the authorised officer can make a reference to valuation officer under section 142A. The sub-section is substituted to provide that reference can be also made to any other person or entity or valuer registered under any law in force as may be approved by PCCIT, CCIT, PDGIT or DGIT for

      estimating the fair market value of the property in the prescribed manner and to submit a report of such reference within 60 days.

      Due to the limitation of using same administrative officers, there was limitation in case of investigations and related requirements during search and seizure. The need of these amendments was felt perhaps with the innovative ways in which the details, documents and other evidences are stored by organisations. These provisions are definitely in l ine with the modern economy and the newer structures in which businesses operate these days. In the coming time, one can predict better outcomes of search operations with these operational liberties offered under

      the Act. These above two amendments will be effective from 1st April 2023.

   3. With the amendment made in Finance Act, 2021, the assessment for the search cases are now covered under the new section 147 and section 153A and 153B are no more applicable. Section 153B provides for execution of the ‘last of authorisation for search’ based on which the time l imit of conclusion of re- assessments are determined. An explanation has been added to section 132 to bring the provisions of last authorisation in its ambit as it was provided in section 153B. This is the same explanation which was earlier in section 153B which states that last authorisation in case of search would be the last panchnama drawn in relation to any person in whose case the warrant of authorisation of search has been issued. Further, in a case where requisition is made u/s.132A, the last authorisation would be the accrual receipt of the books of account or other documents or assets by the authorisation officer.

      This amendment is effective retrospective from 1st April, 2022.

4. Modification of direction related to faceless Schemes and e-proceedings.

   Various e-proceedings and faceless schemes

   were introduced in the last few years under the powers given by the provisions introducing such schemes. These sections had incorporated time l imits to issue directions under such schemes for timely implementation.

   Section	Schemes introduced	Limitation period to bring directions under existing law
   135A- Faceless collection of information	E-Verification Scheme, 2021	31.03.2022
   245MA- Dispute Resolution Committee	E-Dispute Resolution Scheme, 2022	31.03.2023
   245R- E-advance rulings	E-advance rulings Scheme, 2022	31.03.2023
   250- Faceless Appeals	Faceless Appeal Scheme, 2021	31.03.2022
   275-Faceless Penalty	Faceless Penalty Scheme, 2022	31.03.2022

   Any amendment or adjustments which may be required in the schemes announced could not be made due to the limitation period specified in the section. To overcome any such implementation issue, a proviso is added in all the above sections enabling Central Government to amend any directions issued under these sections if it was issued before the limitation period.

   These amendments are retrospectively effective from 1st April, 2022 for sections 135A, 250 and 274 and from 1st April, 2023 for sections 245MA and 245R.

5. Clarification regarding advance tax for filing updated returns.

   The Finance Act, 2022 inserted sub-section (8A) in section 139 of the Act enabling the furnishing of an updated return by taxpayers

   up to two years from the end of the relevant assessment year subject to fulfilment of certain conditions as well as payment of additional tax. For the determination of the amount of additional tax on such updated return section 140 B was inserted in the Act. The sub-section (4) of the section 140B provides for the computation of interest under section 234B of the Act on the tax on updated return. The said sub-section

   (4) provides that interest payable under section 234B of the Act shall be computed on an amount equal to the assessed tax or the amount by which the advance tax paid falls short of the assessed tax. This had an implication, that interest was payable only on the difference of the assessed tax and advance tax.

   Further, the sub-clause (i) of the clause (a) of the sub-section (4) provides that advance tax which has been claimed in earlier return of income shall be taken into account for computing the amount on which the interest was to be paid. Therefore, in order to clarify the provisions of the sub-section (4) of section 140B of the Act, amendment has been made that interest payable under section 234B shall be computed on an amount equal to the assessed tax as reduced by the amount of advance tax, the credit for which has been claimed in the earlier return, if any. This amendment will take effect retrospectively from the 1st day of April, 2022.

   Overall most of the above amendments made in the Finance Bill, 2023 are to provide clarifications or to rationalize the existing provisions so as to enable better administrative functions. However, one thing which can be ascertained from these amendments, is that the authorities are aware of various intricate issues pertaining to ground realities and practical difficulties. An attempt to clarify and simply the law, is an effort in right direction.