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2.3 Difference with old provision of section 147
93
PROVISION
Para 4.2
4.2 The provision
Conducting inquiry, providing opportunity before issue of notice under section 148. “148A. The Assessing Officer shall, before issuing any notice under section 148, — (a) 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; (b) 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); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) 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.
Para 4.3 CONDUCTING INQUIRY BEFORE ISSUE OF NOTICE U/S 148 94
Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.”.
4.3 The provision in brief
Before issue of notice u/s 148, in certain cases, the AO has to take following steps(i) To examine the information as to whether it fulfils the conditions of section 148. (ii) To conduct inquiries, wherever required, with prior approval of specified authority. (iii) Such inquiry has to be in respect of information which suggests that income chargeable to tax has escaped assessment. (iv) After carrying out inquiries, the AO has to provide opportunity of being heard to the assessee. (v) For this purpose, he has to issue a show cause notice asking the assessee to explain as to why notice u/s 148 be not issued against him on the basis of information which suggest that income chargeable to tax has escaped assessment and (b) and on the basis of result of inquiries, if any conducted by him. (vi) Such notice has to be issued with prior approval of specified authority. (vii) He has to give time of not less than 7 days but not more than 30 days to the assessee for furnishing his explanation. (viii) He may extend the time for furnishing the explanation on an application made by the assessee in this behalf. (ix) To consider the reply, if any, submitted by the assessee in respect of show cause notice. (x) To decide on the basis of material available on record, including the reply furnished by the assessee, whether it is a fit case for issue of notice u/s 148 or not. (xi) Such decision has to be made by passing an order (in writing). (xii) This order has to be passed within one month from the end of the month in which time or extended time allowed to the assessee to furnish reply expires. (xiii) Prior approval of the specified authority has to be taken before passing such order. (xiv) Above procedure of carrying out inquiries, issuing show cause notice and passing order u/s 148A(d) is not required to be followed in following cases-
95 CHARGE OF ESCAPEMENT OF INCOME IN A NOTICE U/S 148A(b) Para 4.4
i. In cases of searches carried out u/s 132(1) on or after 01-042021. ii. In requisition cases u/s 132A, where books of accounts or other documents or assets are requisitioned on or after 01-04-2021. iii. In search/requisition cases where the AO is satisfied with the prior approval of PCIT/CIT that money, bullion, jewellery or other valuable article or thing seized in the search/requisition (against person searched) carried out after 01-04-2021, or requisitioned u/s 132A after 01-04-2021 belongs to “other person”. iv. In search/requisition cases where the AO is satisfied with the prior approval of PCIT/CIT that books of account or documents seized in the search/ requisition (against person searched) carried out on or after 01-04-2021 or requisitioned u/s 132A on or after 01-04-2021 pertains to or pertain to, or any information contained therein relate to the “other person”. (xv) Specified authority for the purposes of this section is the authority referred to in section 151.
The notice issued u/s 148A must contain information that income chargeable to tax has escaped assessment. There must be some material supporting allegation of escapement of income. A bald assertion about escapement of income is not sufficient to validate issuance of notice u/s 148A. Therefore, wherever AO receives information about a transaction such as cash deposited in bank, mere fact of deposit of cash will not lead to inference that cash so deposited was of income character and that it was chargeable to tax in the hands of the assessee in the relevant assessment year. The inference of the AO that an income equal to deposit in bank has escaped assessment of income, proceeds on the fallacious assumption that the bank deposits constitute undisclosed income and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. The AO has to put up some more material after carrying out inquiries that cash deposits may be undisclosed income of the assessee and hence income chargeable to tax has escaped assessment2 . Thus, no reopening is permissible merely for verifying the source of cash deposited in the bank particularly when AO did not contend that said cash
2. Based on Bir Bahadur Singh Sijwali v. ITO [2015] 53 taxmann.com 366/68 SOT 197 (Delhi - Trib.)(URO); Amrik Singh v. ITO [2016] 70 taxmann.com 26/159 ITD 329 (Asr. - Trib.);
Gurpal Singh v. ITO [2016] 71 taxmann.com 108/159 ITD 797 (Asr. - Trib.).
Para 4.5 CONDUCTING INQUIRY BEFORE ISSUE OF NOTICE U/S 148 96
deposits were not reflected in the return of income3. The verification part must be done before issuing SCN u/s 148A. So also, reopening only on the basis that there are huge cash withdrawals towards purchases and the SCN (reasons recorded earlier) did not indicate that any income chargeable to tax has escaped assessment cannot be sustained4 . When information about cash deposited in bank is received by the AO, it is his duty to examine whether said cash deposit is reflected in return or not. Without examining the information about cash deposit as to whether it reflects income chargeable to tax or not, reopening will not be justified5 . Now even issue of notice u/s 148A(b) may not be justified. Issuing notice u/s 148 cannot be sustained when explanation of the assessee that source of cash deposit post demonetisation was withdrawal of cash from the same bank and the withdrawals and deposits closely matched was not considered by the AO6 . Even in cases where recomputation is required on account of grant of excessive depreciation allowance, loss, deduction or relief, charge of escapement of income would be necessary for acquiring jurisdiction u/s 147.
4.5 Whether section 148A covers the concept of reasons recorded and procedure laid down by Hon’ble Apex Court in GKN Driveshafts (India) Ltd. v. ITO7
Under new law there is no requirement anymore for recording reasons, supplying to them to the assessee, inviting objections from him and passing an order disposing of such objections before proceeding to make reassessment. Such procedure has been practically incorporated in section 148A which provides that, before issue of notice u/s 148, the AO is required to carry out inquiries u/s 148A, if required , with prior approval of specified authority, provide an opportunity of being heard, consider the reply furnished by the assessee to the show cause notice issued by the AO and pass an order u/s 148A(d) with prior approval of specified authority within the time limitation provided thereunder. Thus, if an assessee has objection as to whether (i) there is an income chargeable to tax (ii) such income has escaped assessment or (iii) any recomputation of loss, depreciation allowance or any other allowance or deduction is required (iv) AO has correctly assumed jurisdiction to issue notice u/s 148, (v) a particular issue on which ld. AO
3. Sunrise Education Trust v. ITO [2018] 92 taxmann.com 74 (Guj.). 4. ITO v. Amit K. Shah [2016] 71 taxmann.com 256/159 ITD 767 (Ahd. - Trib.). 5. CIT v. Indo Arab Air Services [2015] 64 taxmann.com 257 (Delhi). 6. Based on Swati Malove Divetia v. ITO [2018] 98 taxmann.com 447 (Guj.). 7. [2002] 125 Taxman 963/259 ITR 19 (SC).
97
PROCEDURE U/S 148A
Para 4.7
intends to issue notice u/s 148 is covered in appeal, reference or revision, he can raise such objections in the reply to be furnished in response to show cause notice issued u/s 148A(b). Thus, order u/s 148A(d) would have all the trappings of reasons recorded, objections raised by the assessee and disposal of such objections through speaking order which is required to be enclosed with the notice u/s 148.
4.6 Application of procedure u/s 148A
Procedure laid down u/s 148A is applicable in following two circumstances. They are(i) When AO receives information, which falls within Explanation 1 to section 148. It is mentioned in the Explanation 1 that for the purposes of issuance of notice u/ss 148 and 148A, the information with the AO which suggest that income chargeable to tax has escaped assessment means (i) the information which is flagged in the case of the assessee for the relevant assessment year as per Risk Management Strategy formulated by the CBDT from time to time and (ii) any final objection raised by C&AG to the effect that assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of the Act. This procedure is to be followed for all ten relevant assessment years. (ii) Where survey operation is carried out u/s 133A, in case of the assessee on or after 01-04-2021. Even though, carrying out survey is treated as deemed information with the AO which suggest that income chargeable to tax has escaped assessment in the case of the assessee for three assessment years immediately preceding the assessment year relevant to the previous year in which search, or requisition is made, but procedure laid down u/s 148A has to be followed for all the ten years including three initial relevant assessment years. It may be noted that procedure laid down u/s 148A will not be applicable in cases of search and requisitions carried out on or after 01-04-2021 in the cases of “person searched” and in the cases of “other person” as covered in clauses (a), (b) and (c) of Proviso to section 148A.
4.7 Table to show where the procedure u/s 148A is required to be followed
Following table shows in which cases procedure u/s 148A is required to be followed:
Para 4.8 CONDUCTING INQUIRY BEFORE ISSUE OF NOTICE U/S 148 98
Section Limitation to issue no149(1)(a) tice u/s 148
Three initial RAYrs
Whether procedure u/s 148A is required to be followed
149(1)(b) From fourth to Tenth RAYrs
Whether procedure u/s 148A is required to be followed
Explanation 1 to section 148
Explanation 2 to section 148 (deemed information) Survey search Requisition Search/requisition - other person Provided AO is satisfied with prior approval of PCIT/CIT on conditions in clauses (iii) and (iv) Yes Yes No No No
Yes Yes No No No
4.8 Kind and scope of inquiries, AO can do u/s 148A(a)
Section 148A(a) gives power to the AO to conduct any inquiry, if required, with prior approval of specified authority, with respect to the information which suggest that the income chargeable to tax has escaped assessment. Such inquiries can be carried out in respect of information covered in Explanation 1 of section 148 and in respect of survey cases (whether covered under deemed information or not). These inquiries may be(i) Verification from own records of the assessee. (ii) Verification from other AO. (iii) Verification with various statutory statements filed by the assessee and other taxpayers. (iv) Verification from other Departments such as GST, SEBI. (v) Verification from books of account by summoning books. (vi) To exercise power u/s 131(1) read with sub-section (2) to collect information, to record statements, to compel the production of books or other documents or to issue commissions.
New Law Relating To REASSESSMENT
AUTHOR
: D.C. AGRAWAL , AJAY KUMAR AGRAWAL PUBLISHER : TAXMANN DATE OF PUBLICATION : AUGUST 2021 EDITION : 1ST EDITION ISBN NO : 9789391596002
Rs. 1295
Description
This book is a comprehensive commentary on the Reassessment provision under the Income-tax Act, as introduced by the Finance Act, 2021. It features an exhaustive discussion on both fundamental concepts and issues arising under the new law of reassessment combined with essential commentary on statutory provisions and the jurisprudence. It also includes cross-references to other chapters wherever implications need to be understood entirely to assist the reader. The objective of this book is as follows: u [Amendments made by the Finance Act 2021] To provide a general idea about the amendment through
Finance Act, 2021 in the provisions relating to reassessment u [Insight into Provisions] To provide an insight into various provisions through a simple and understandable explanation u [Condition for Deeming Provisions/Procedure] To highlight the conditions under which deeming provision of section 148 can be applied, or procedure contained in section 148A can be followed u [Case Laws under the Old Law] To highlight to what extent propositions upheld by the Courts under the old law can be applied under the new law u [Revision u/s 263 in Reopened Cases] To highlight the circumstances under which revision u/s 263 in reopened cases can be done u [Penal Provisions] To highlight the circumstances under which penal provisions in relation to escaped income can be invoked. The Present Publication is the Latest Edition, authored by D.C. Agarwal & Ajay Kumar Agarwal, as amended by the Finance Act 2021, with the following noteworthy features: u [FAQs] for quick answers to 100+ selected questions relating to assessment/reassessment u [Easy-to-Understand Commentary in Article Format with a focus on Implications] This book is prepared in the form of an easy-to-understand commentary in an article format, and it also provides guidance in understanding the implications of the new law on reopening of completed assessments u [Understanding Concepts such as Inquiry, Jurisdiction Issues, etc.] It will be helpful to understand the new concept of inquiry before the issue of notice u/s 148 of Income-tax Act for reopening of assessment, and implications and jurisdiction issues arising during its implementation u [Scope & Limitation of ‘Deemed Information’] The new concept of deemed information contained in section 148, its scope and limitation has been explained in a very lucid manner u [Interplay of Section 149 & Deemed Information] The book also helps the reader to understand the scope and limitation of section 149 and its effect on deemed information u [Discussions on Terms which have a Broad Interpretation] The book features thorough discussion on the scope of expressions such as: n ‘Suggest’ n ‘Books of Accounts’ n ‘Other Documents’ n ‘Evidence’ n ‘Asset’ n ‘Dumb Information’ u It also seeks to share the intricacies and issues arising from the implementation of the new law and their solutions
