Taxpublishers.in - Monday Corner Answer to the Quiz for the week (01 Apr 2024)

Share via Whatsapp 76 Views

Back to Monday Corner


Quiz for the week (01 Apr 2024): Micheal LLP was subjected to a survey under section 133A on 4th June, 2023. The assessee-firm has been filing the return of income promptly every year. The survey team found undisclosed income ranging between Rs.10 lakhs to Rs. 15 lakhs in every assessment year, from the asst.year 2013-14 onwards. State briefly the eligibility for reopening the assessment consequent to survey. Will your answer be different in case it was a search under section 132 instead of survey under section 133A? Best Answer : For the query posed, reference to section 149 is required. No notice under section 148 shall be issued for the relevant assessment year if 3 years have elapsed from the end of the relevant assessment year where the income escaping assessment does not exceed Rs.50 lakhs. [Section 149(1)(a)]. Clause (b) of section 149(1) says that a notice under section 148 could be issued for a period if not more than 10 years have elapsed from the end of the relevant assessment year(s) where the incomes which have escaped assessment is Rs.50 lakhs or more in aggregate. The incomes so escaping assessment but chargeable to income-tax are represented in the form of (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account. The proviso to section 149(1) says that no notice under section 148 shall be issued for the assessment year beginning on or before 1st day April, 2021 if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of it being beyond the time limit specified under section 153A(1)(b) or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021. Therefore, if a notice under section 148 or section 153A or section 153C could not have been issued for the relevant assessment year preceding the assessment year 2021-22 as per the provisions which remained before the commencement of the Finance Act, 2021 then notice under section 148 could not be issued for those assessment years. The further proviso to section 149(1) says that the provisions of sub-section (1) shall not apply in a case where notice under section 153A or section 153C read with section 153A is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or before the 31st day of March, 2021. Which means that where a search has been initiated or a requisitioned has been made before 31st day of March, 2021 in such of those cases section 149(1) would not apply obviously because section 153A and section 153C would apply and not the provisions relating to reassessment. Section 149(1) prior to its substitution by the Finance Act, 2021 (w.e.f. 01.04.2021) provided for reopening of assessment for a maximum period of 6 assessment years from the end of the relevant assessment year where the income which has escaped assessment was Rs.1 lakh or more. The Finance Act, 2021 enhanced the time limit to 10 assessment years from the end of the relevant assessment year if the income escaping assessment was Rs.50 lakhs or more for that assessment year. The Finance Act, 2022 substituted clause (b) of section 149(1) to provide the aggregate amount of income escaping assessment to Rs.50 lakhs for 10 assessment years instead of its reference to single assessment year which was there previously by usage of the words "Rs.50 lakhs or more for that year" . It is stated in the query that the undisclosed income was ranging between Rs.10 lakhs to Rs.15 lakhs for each of the assessment year right from the assessment year 2013-14 onwards. Applying clause (b) of section 149(1) prior to its substitution by the Finance Act, 2021 the escapement of income could be subjected to reassessment for a period of 6 years from the end of the relevant assessment year. Therefore, for the previous year 2013-14 the time limit of 6 years from the end of the assessment year 2014-15 would be time-barred after 31.03.2021. Hence, it cannot be subjected to reassessment proceedings. For the assessment years 2015-16 and 2016-17 notice could not be issued for reassessment as the aggregate of income escaping assessment would not exceed Rs.50 lakhs since it is stated in the query that the undisclosed income ranged between Rs.10 lakhs to Rs.15 lakhs per annum. For the assessment year 2017-18 onwards notice for reassessment could be issued since the aggregate of income escaping assessment exceed Rs.50 lakhs i.e assessment year 2017-18 to assessment year 2023-24 (7 assessment years). Where the proceedings are covered by section 132: Being a search case, the time limit for issue of notice under section 153A prior to its amendment by the Finance Act, 2021 was 10 years from the end of the relevant previous year. Therefore, notice can be issued from the assessment year 2013-14 onwards. However, if the aggregate of income escaping assessment is less than Rs.50 lakhs then the time limit for reassessment would be available from the assessment year 2020-21 onwards. Since the query says escapement of income chargeable to tax ranges between Rs.10 lakhs to Rs.15 lakhs every year, it is presumed that the aggregate income escaping assessment exceeded Rs.50 lakhs and therefore notice could be issued from the assessment year 2013-14 onwards.

Quiz for the week (01 Apr 2024):

Micheal LLP was subjected to a survey under section 133A on 4th June, 2023. The assessee-firm has been filing the return of income promptly every year. The survey team found undisclosed income ranging between Rs.10 lakhs to Rs. 15 lakhs in every assessment year, from the asst.year 2013-14 onwards.

State briefly the eligibility for reopening the assessment consequent to survey. Will your answer be different in case it was a search under section 132 instead of survey under section 133A?

Best Answer :

For the query posed, reference to section 149 is required.

No notice under section 148 shall be issued for the relevant assessment year if 3 years have elapsed from the end of the relevant assessment year where the income escaping assessment does not exceed Rs.50 lakhs. [Section 149(1)(a)].

Clause (b) of section 149(1) says that a notice under section 148 could be issued for a period if not more than 10 years have elapsed from the end of the relevant assessment year(s) where the incomes which have escaped assessment is Rs.50 lakhs or more in aggregate. The incomes so escaping assessment but chargeable to income-tax are represented in the form of (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account.

The proviso to section 149(1) says that no notice under section 148 shall be issued for the assessment year beginning on or before 1st day April, 2021 if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of it being beyond the time limit specified under section 153A(1)(b) or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021.

Therefore, if a notice under section 148 or section 153A or section 153C could not have been issued for the relevant assessment year preceding the assessment year 2021-22 as per the provisions which remained before the commencement of the Finance Act, 2021 then notice under section 148 could not be issued for those assessment years.

The further proviso to section 149(1) says that the provisions of sub-section (1) shall not apply in a case where notice under section 153A or section 153C read with section 153A is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or before the 31st day of March, 2021. Which means that where a search has been initiated or a requisitioned has been made before 31st day of March, 2021 in such of those cases section 149(1) would not apply obviously because section 153A and section 153C would apply and not the provisions relating to reassessment.

Section 149(1) prior to its substitution by the Finance Act, 2021 (w.e.f. 01.04.2021) provided for reopening of assessment for a maximum period of 6 assessment years from the end of the relevant assessment year where the income which has escaped assessment was Rs.1 lakh or more. The Finance Act, 2021 enhanced the time limit to 10 assessment years from the end of the relevant assessment year if the income escaping assessment was Rs.50 lakhs or more for that assessment year. The Finance Act, 2022 substituted clause (b) of section 149(1) to provide the aggregate amount of income escaping assessment to Rs.50 lakhs for 10 assessment years instead of its reference to single assessment year which was there previously by usage of the words "Rs.50 lakhs or more for that year"

It is stated in the query that the undisclosed income was ranging between Rs.10 lakhs to Rs.15 lakhs for each of the assessment year right from the assessment year 2013-14 onwards.

Applying clause (b) of section 149(1) prior to its substitution by the Finance Act, 2021 the escapement of income could be subjected to reassessment for a period of 6 years from the end of the relevant assessment year. Therefore, for the previous year 2013-14 the time limit of 6 years from the end of the assessment year 2014-15 would be time-barred after 31.03.2021. Hence, it cannot be subjected to reassessment proceedings.

For the assessment years 2015-16 and 2016-17 notice could not be issued for reassessment as the aggregate of income escaping assessment would not exceed Rs.50 lakhs since it is stated in the query that the undisclosed income ranged between Rs.10 lakhs to Rs.15 lakhs per annum.

For the assessment year 2017-18 onwards notice for reassessment could be issued since the aggregate of income escaping assessment exceed Rs.50 lakhs i.e assessment year 2017-18 to assessment year 2023-24 (7 assessment years).

Where the proceedings are covered by section 132: Being a search case, the time limit for issue of notice under section 153A prior to its amendment by the Finance Act, 2021 was 10 years from the end of the relevant previous year. Therefore, notice can be issued from the assessment year 2013-14 onwards. However, if the aggregate of income escaping assessment is less than Rs.50 lakhs then the time limit for reassessment would be available from the assessment year 2020-21 onwards. Since the query says escapement of income chargeable to tax ranges between Rs.10 lakhs to Rs.15 lakhs every year, it is presumed that the aggregate income escaping assessment exceeded Rs.50 lakhs and therefore notice could be issued from the assessment year 2013-14 onwards.