BlogSec.148A: Is confusion still persist between 148 or 148A?

September 2, 2021by Kavita Arora
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The Finance Act 2021 introduced a new section 148A in furtherance to section 148 for starting step of escaped assessment/reassessment u/s 147. As per earlier section 148, before commencing any reassessment, Jurisdictional Assessing officer (JAO) needs to draft his “reasons to believe” to open the assessment/reassessment u/s 147 as a statutory obligation on the it. Reasons to believe recorded by the JAO is always a question of debate or can say is subjective matter. Therefore, if reasons to believe is not recorded before issuance of Notice u/s 148 or reasons recorded becomes invalid whole assessment will be dropped.

Section:148 Issue of notice where income has escaped assessment. (Earlier Provision exist upto 
31st March 2021) 
(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing 
Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be 
specified in the notice, a return of his income or the income of any other person in respect of which he is 
assessable under this Act during the previous year corresponding to the relevant assessment year, in the 
prescribed form and verified in the prescribed manner and setting forth such other particulars as may be 
prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were 
a return required to be furnished under section 139 : 
Provided that in a case— 
(a)  …………….and 
(b)  ……………..: 
Provided further that in a case— 
(a)  …………………, and 
(b)  ………………... 
Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or 
the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 
2005 in response to a notice served under this section. 
(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons 
for doing so. 
Finance Act , 2021 has also amend the old provision of Section 148 with the new provision reproduced as 
below:  
Section 148: Issue of notice where income has escaped assessment.(w.e.f. 01st April 2021) 
Before making the assessment, reassessment or recomputation under section 147, and subject to the 
provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a 
copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within 
such period, as may be specified in such notice, a return of his income or the income of any other person 
in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other 
particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly 
as if such return were a return required to be furnished under section 139: 
 
Provided that no notice under this section shall be issued unless there is information with the Assessing 
Officer which suggests that the income chargeable to tax has escaped assessment in the case of the 
assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the 
specified authority to issue such notice. 
 
Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing 
Officer which suggests that the income chargeable to tax has escaped assessment means,— 
I.any information flagged in the case of the assessee for the relevant assessment year in 
accordance with the risk management strategy formulated by the Board from time to time; 
II.any final objection raised by the Comptroller and Auditor General of India to the effect that the 
assessment in the case of the assessee for the relevant assessment year has not been made in 
accordance with the provisions of this Act. 

Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,—

  1. any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;
  2. any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act.

Explanation 2.—For the purposes of this section, where,—

  1. a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or
  2. a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or
  3. the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
  4. the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee,

the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.]

Section:148A. Conducting inquiry, providing opportunity before issue of notice under section 148.

The Assessing Officer shall, before issuing any notice under section 148,—

  1. conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
  2. provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
  3. consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
  4. decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

Provided that the provisions of this section shall not apply in a case where,—

(a)  a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b)  the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c)  the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.

Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.]

Considering the severe conditions of Covid-19, CBDT had notified The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) on 29th September 2020 after receiving the Hon’ble President’s assent. The TOLA seeks to enact legislative amendments in direct and indirect tax laws, which were introduced by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (Ordinance). Taking into consideration various due dates including due date for issue of notice u/s 148, having time-line till 31st March 2021 is also extended till 30th June 2021 by issuing various Notification time to time (20/2021, 38/2021).

However, New section 148 read with section 148A as introduced by Finance Act 2021, is also comes in to effect from 01st April 2021. Now the question here is that whether the extension given by the specific power by TOLA will prevail or the New provision given by the FA 2021. But adhering the TOLA, JAO has issued notices u/s 148 without complying with the statutory compliance as laid down in section 148A or writ petitions as also filed to check the intricacies of TOLA with the new sections 148 r.w.s. 148A.

Hon’ble Calcutta High Court in the writ petitions of Bhagaria Properties and Investments (P) Ltd vs. Union of India. In WPO/244/2021, vide order dated 15.7.2021, restrained the Revenue from proceeding any further on the basis of notices dated 29.5.2021 and 28.6.2021issued u/s 148 of the Act for AY 2014-15 and 2015-16 on the ground that the mandatory provisions of section 148A inserted w.e.f. 1.4.2021 have not been followed. Reliance has been placed on following cases, which are sub-judice:

  1. Armada D1 (P.) Ltd. v. Dy. CIT [WP (L) No. 11766 of 2021, dated 3-6-2021
  2. Tata Communications Transformation Services Ltd. v. Asstt. CIT [2021] 128 taxmann.com 247 (Bom.)
  3. Sahil International v. Asstt. CIT [2021] 128 taxmann.com 161
  4. Mon Mohan Kohli v. Asstt. CIT [W.P. (C) No. 6176 of 2021, dated 7-7-2021]

In the present case was impugned till 09th September 2021.

Further, CBDT vide notification dated 82/2021 amending the rule 12 (1) & (5), that deals with “Return of income”;

Relevant portion of sub-rule (1) after amendment shall read as “The return of income required to be furnished under sub-section (1) or sub- section (3) or sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) or sub-section (4E) or sub-section (4F) of section 139 or clause (i) of sub-section (1) of section 142 or section 148 or section 153A relating to the assessment year commencing on the 1st day of April, 2021 shall… “;

Also amends Rule 12(5) which shall now read as “Where a return of income relates to the assessment year commencing on the 1st day of April, 2020 or any earlier assessment year, it shall be furnished in the appropriate form as applicable in that assessment year”

Key Takeaways

Now, considering the above situation the question arise here whether the CBDT has power to override the provision of Finance act. Relaxation given by the TOLA gives the specific power to extend the date till 30th June 2021. Therefore, reading in that context there is no iota of doubt that has a power to do or not. But considering the intricacies of TOLA with Section 148 r.w.s. 148A effective from 01st April 2021, Final position will be taken once High court pronounced its judgement on above issues. Though it would be a fair situation that Government issue a clarification and Hope these controversies comes to an end.

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The article has been contributed by
 
Sr. Manager-Direct Tax 
Further, we shall be happy to assist in case of any clarifications. For a deeper discussion, feel free to revert us at services@knmindia.com 

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Kavita Arora

KNM Management Advisory Services Pvt. Ltd.Corporate Office
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