Enlargement of Scope of Reopening Qua Finance Act, 2022
The Finance Act, 2022 has carried out various amendments to section 148. The learned author elaborates such amendments and takes critical view of them.
One of the most litigated provisions under the Income Tax Act, 1961 can well be recognized having due recourse to the provisions of section 147 which was completely overhauled and revamped to further make it more compatible with the legislative measure and to reduce litigation in a faceless regime of assessment/appeal. Section 148 was recasted with effect from 1-4-2021 and substituted by the Finance Act, 2021 to provide defined parameters constituting information so as to invoke the provisions at the very outset against the assessee concerned. Adequate safeguards were also introduced by way of insertion of section 148A into the statutory legs with effect from 1-4-2021.
2. What Constitutes Information within the extended meaning of 148
Section 148 provides that notice thereunder can be issued earlier there is information assessing officer which is suggests that income chargeable to tax has escaped assessment.
The expression information has since not been defined by the Income Tax Act, 1961, however the same is capable of being addressed and assigned wide meanings so as to bring the subject within the measure of tax. Section 148 as it stood as on 1-4-2021 banked upon the gamut of 2 explanations of which Explanation 1 stands discussed in the present write-up. Explanation 1 appended to the provision specifically states that for the purpose of enforcing any action under the provisions of section 148 and section 148A, the information in possession of the assessing officer must mean and suggest inference as to escapement of income falling broadly within two fold parameters:-
(a) Information flagged in the case of the assessee for the relevant assessment year keeping in view the risk management strategy formulated by the Board from time to time meaning thereby different parameters/strategy for different years carved out from the Board,
(b) Any final objection raised by the Comptroller and Auditor General of India to the effect that assessment in the case of the assessee has not been made in accordance with the provisions of the Act in force.
Finance Act, 2022 introduced significant amendment to the provisions of explanation 1 appended to section 148 by totally re-casting the impact of parameters giving rise to the provisions enforceable against the assessee concerned. Suitable amendment introduced by way of re-vamping explanation 1 by the Finance Act, 2022 stands produced below for ready reference.
(ii) in Explanation 1:--(a) in clause (i), the word 'flagged' shall be omitted; (b) for clause (ii), the following clauses shall be substituted, namely: '(ii) any audit objection 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; or (iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv) any information made available to the assessing officer under the scheme notified under section 135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court.';