[Opinion] Budget 2024 | Rationalization of Re-Assessment Provisions
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- 3 Min Read
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- Last Updated on 5 September, 2024
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CA Tanmay Jain – [2024] 165 taxmann.com 816 (Article)
The Finance Act, 2021, with the intent of reducing litigation and promote ease of doing business, revamped the provisions of re-assessment proceedings, comprising section 147 to section 151 of the Income-tax Act, 1961 (IT Act). In actual practice, however, the new provisions regulating re-assessment has resulted in an increase in litigation with over 9,000+ Writ Petitions1 having been filed since the introduction of the new provisions.
In view of the above and considering the representations received from the taxpayers, the Finance (No. 2) Bill, 2024 proposed to rationalize the erstwhile re-assessment provisions to smoothen and ease the process. The Finance (No. 2) Bill, 2024 has now been enacted and the President’s assent has been received on 16 August 2024.
Few of the key changes introduced vide the Finance (No. 2) Act, 2024 are discussed below.
Revision of timeline for issue of reassessment notice
The timeline for issue of notice for re-assessment under section 148 of the IT Act in cases where the income escaping assessment amounts to or is likely to amount to INR 50 lakhs or more is reduced from 10 years from the end of the relevant Assessment Year to 5 years and 3 months. Further, where the income escaping assessment is below INR 50 Lakhs, no notice can be issued related to a particular Assessment Year if 3 years and 3 months have lapsed from the end of said Assessment Year. The timelines for issuance of re-assessment notice available under the erstwhile provisions vis-à-vis the timelines revised vide the Finance (No. 2) Act, 2024 is encapsulated below:
| Particulars | Erstwhile Provisions | Amended Provisions |
| Income escaping assessment in the form of any asset or expenditure or transaction or entry < INR 50 lakhs | 3 years from the end of AY | 3 years & 3 months from the end of AY |
| Income escaping assessment any asset or expenditure or transaction or entry > INR 50 lakhs | 10 years from the end of AY | 5 years & 3 months from the end of AY |
Further, the erstwhile re-assessment provisions do not prescribe any timelines for the issuance of show cause notice under section 148A of the IT Act before commencement of re-assessment proceedings. The Finance (No. 2) Act, 2024 provides that the show cause notice under section 148A of the Act cannot be issued beyond:
- 3 years from the end of the relevant Assessment Year in normal cases;
- 5 years from the end of the relevant AY, if the income escaping assessment amounts to INR 50 Lakhs or more.
Under the erstwhile provisions, the taxpayers face challenges in recalling the income/ deductions claimed, retrieving supporting documents, reconciling the statements etc. where the case is picked up for re-assessment after several years. Hence, this is a welcome move by the government since it will help in significantly reducing the hardship that the taxpayers face where the case is picked up for re-assessment for upto 10 years.
In addition to the above, the Finance (No. 2) Act, 2024 also provides that reassessment notices can be issued based on the information received by the assessing officer under a scheme for faceless collection of information which is yet to be notified.
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