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Time period for issuance of notice under section 148 under new regime wef 1.4.2021. As per substituted section 149 wef 1.4.2021
As per substituted section 149, no notice shall be issued for the relevant assessment year if:
(a) 3 years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) below
(b) If 3 years, but not more than 10 years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to INR 50 Lakhs or more for that year.
Explanation to section 149: “Asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.
148A response period is excluded while computing limitations under section 149
The time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded while computing limitations period for issuance of notice under section 148
Where immediately after the exclusion of the period u/s 148A as above, the period of limitation available to the AO for passing an order under 148A(d) is less than 7 days, such remaining period shall be extended to 7 days and the period of limitations under section 149(1) shall be deemed to be extended accordingly.
Comparison with old provision before 1.4.2021
Time limit to issue notice under the new regime (Amended vide Finance Act, 2021)
If reopening is proposed to be made within 3 years from end of relevant assessment year-
No condition, reopening possible irrespective of the amount of income that has escaped assessment
If reopening is proposed to be made after 3years but within 10 years from end of relevant assessment year
Condition: Reopening possible only if AO has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to INR 50 lakhs or more for that year.
Time limit to issue notice under the earlier regime (prior to Finance Act, 2021)
Reopening was possible within 6 years from end of relevant assessment year in normal circumstances
Exceptions:
Reopening possible within 4 years in below cases:
If income chargeable to tax which has escaped assessment is less than Rs. 1 lakh.
If assessment framed earlier u/s 143(3) and assesses has disclosed fully and truly all material facts in the assessment [proviso to section 147] [except where income relates to asset located outside India]
Reopening possible within 16 years from end of relevant assessment year if the income in relation to an asset (including financial interest in any entity) located outside India has escaped assessment.
Note: 16 years limit is not prescribed under the new provisions since the cases pertaining to undisclosed assets outside India are intended to be covered under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
Impact of proviso to section 149
The proviso to substituted section 149 read as under:
“Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:”
The above proviso requires taking into account the time limit as per 149(1)(b) as it stood prior to Finance Act, 2021 which read as under:
“149. (1) No notice under section 148 shall be issued for the relevant assessment year,-
(a)If four years have elapsed form the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);
(b)If four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;
(c)If four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.”
Even if asset located outside India, the test to be considered is that whether reopening was possible within 6 years (not 16 years)
Impact of proviso to section 149
Two interpretations are possible in respect of proviso to section 149 as under:
Interpretation 1 (as it appears from plain reading of the provisions):
The usage of the expression ‘at that time’ circles back to the time when notice is being issued – It is at such point when one is required to apply the test whether notice could have been issued as per erstwhile provision of section 149(1)(b)
Accordingly, benefit of 10 years to be effectively available for AY 2022-23 and subsequent assessment years.
For AY 2021-22 and earlier assessment years, notice can be issued only within 6 years from the end of the relevant assessment year.
Interpretation 2 (as it appears is/was intended):
Under this interpretation, the test is whether the assessment year could have been reopened as per the erstwhile provision of section 149(1)(b) as on 31.03.2021 or not
Accordingly, under this interpretation, the benefit of 10 years should be available to the Department from AY 2014-15 onwards since it the last assessment year that could have been opened as on 31.03.2021.
Proviso to section 149(1) states that provisions of this sub section shall not apply in a case , where a notice u/s 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 .
149(2) says that the provisions of sub section (1) as to the issue of notice shall be subject to the provisions of section 151 of the Act.
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