[Opinion] The Reassessment Procedure Effective From 1.4.2021 – Certain Aspects

CA P.V.R. Prabhakar – [2024] 158 taxmann.com 101 (Article)

1. Introduction:

The present re-assessment procedure, comprising S. 147 to S. 151, was introduced by the Finance Act, 2021 with the intent of reducing litigation and to promote ease of doing business. The present scheme is intended to formalize statutorily certain well settled judicial principles in regard to initiation of reassessment proceedings. Before proceeding to analyze some of its aspects, it is worthwhile to look into these well settled judicial principles under the pre-existing law briefly before proceeding to examine whether these principles are still valid to the extent specific mention is not made through legislation.

2. Law Relating To Initiation of Reassessment Proceedings Prior To 1.4.2021

As per the guidelines laid down by the Honourable Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2002] 125 Taxman 963/[2003] 259 ITR 19, as explained and amplified in several decisions including SABH Infrastructure Ltd. v. Asstt. CIT [2018] 99 taxmann.com 409/[2017] 398 ITR 198 (Delhi), the procedure for challenging reassessment proceedings as per judge made law is as follows.

I. The Assessing Officer is required to issue the notice u/s.148 of the I.T.Act,1961 ,in accordance the procedure prescribed in ss.149 to s.151 .

II. Such a notice can straight away challenged in writ proceedings if there is an absolute lack of jurisdiction in issuing that notice.

III. Otherwise, the assessee should first comply with the notice u/s.148 by filing the return of his income and then only ask for reasons and also copies of order sheets containing approvals obtained from appropriate higher authority.

IV. The Assessing Officer should furnish to the assessee reasons and copies of order sheets as requested within reasonable time . Where the reasons make a reference to another document, whether as a letter or report, such document and/or relevant portions of such report should be enclosed along with the reasons.

V. Within reasonable time after obtaining the information, the assessee should file objections against the reopening to the Assessing Officer.

VI. Again within reasonable time and before proceeding with reassessment, the Assessing Officer should dispose of the objections filed by the assessee through a speaking order. The exercise of considering the assessee’s objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed.

VII. Against such order the assessee can invoke writ jurisdiction if the question involved is purely of law.

VIII. Otherwise also, the assessee, while filing the appeal against the order of reassessment, can raise the issue of validity of the reassessment proceedings in the appeal proceedings.

3. Present Reassessment Scheme

3.1 S. 148A(a) postulates that the Assessing Officer may make enquiry in relation to the “information” with him . As in the pre-existing law, s.148A only requires prima facie findings and does not require conclusive or definitive findings . It interesting to note that the word “may” is used in s.148A(a) which contemplates enquiry before issuing notice u/s.148A(b). Nevertheless, the Assessing Officer should do some preliminary enquiry to avoid future wastage of time and resources of the Revenue and protracted proceedings . The only exemption from the need to make enquiry is there when the case involves search and seizure operations u/s.132 or requisition u/s. 132A.

3.2 S.148A(b) requires issuance of notice to the assessee along with information . Keeping in view the object and intent behind s.148A it appears that in all other cases the Assessing Officer shall make necessary enquiries to ensure that the notice u/s.148A(b) contains accurate information Assessee can request the Assessing Officer in s.148A proceedings for materials, documents and statements on oath etc. which formed basis for issuance of notice . It is then the Assessing Officer’s duty to supply the same to the assessee – Vinod Lalwani v. Union of India [2023] 146 taxmann.com 204/455 ITR 738 (Chhattisgarh)

3.3 S.148A( c) requires the consideration of the assessee’s response to the notice u/s.148A(b)

3.4 Sub s. (d) of.S.148A provides for an order to be passed by the Assessing Officer to convey his decision after obtaining prior approval from the appropriate authority The Assessing Officer has to make the decision on the basis of the “material” available on record as well as the reply of the assessee.

3.5 The phrase “if the Assessing Officer has reason to believe” is removed in the present substituted s. 147. However, First Proviso of S.148, which is in force now, states that a notice u/s 148 for reopening the assessment cannot be issued unless the Assessing Officer has “information” which suggests that the income chargeable to tax has escaped the assessment. Assessing Officer has to take the approval from specified authorities before reopening the assessment. To re-open the assessment the “information” must be factual, supported by evidences. On getting the information, the Assessing Officer must apply his mind to the information to decide whether information received is enough in the light of evidences to reopen the assessment. Under the present provisions, the term “information” in Explanation 1 to S. 148 cannot be lightly resorted to so as to re-open assessment. Thus, the “information” which suggests the escapement of income is merely a starting point of further proceedings but not the end in itself for concluding the escapement of income and so it cannot be the basis of the order u/s. 148A(d). Whether it is “information to suggest” under amended law or “reason to believe” under erstwhile law the benchmark of “escapement of income chargeable to tax” still remains the primary condition to be satisfied before invoking powers u/s.147. Merely because the Revenue classifies a fact already on record as “information” may vest it with the power to issue a notice of re-assessment u/s. 148A(b) but would certainly not vest it with the power to issue a re-assessment notice u/s. 148 post an order u/s. 148A(d) [Divya Capital One (P.) Ltd. v. Asstt. CIT [2022] 139 taxmann.com 461/445 ITR 436 (Delhi)

3.6 Thus, the above procedure and intention cannot be diluted by the Assessing Officer by merely stating that information is received on “insight portal”. He is required to go beyond that information. As stated supra . It’s a beginning and not the end in itself for concluding escapement of income. To that extent the proceedings u/s. 148A is a quasi judicial proceedings and not merely an administrative exercise. In the event of challenge by the assessee, the onus will be on the Assessing Officer to prove that he actually carried out an enquiry in the matter. In GAS Secure Solutions India (P.) Ltd. v. Asstt. CIT [2023] TIOL-121-HC-DEL-IT as the notice u/s 148A(b) was issued even without conducting an enquiry, as required u/s. 148A(a), the same was quashed

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