[Opinion] New Scheme of Reassessment under the Income Tax Act

CA Manish Harchandani – [2023] 148 taxmann.com 170 (Article)

Abstract

In this article, the author has attempted to analyze the provisions of the new scheme of reassessment in the light of judgement of CIT v. Jet Airways (I) Ltd. [2010] 195 Taxman 117/[2011] 331 ITR 236 (Bom.) and other judgement (which infact were relevant for the old regime of the reassessment) in which it was concluded that once additions have not been sustained/made on the issues forming part of notice issued under section 148 of the Income Tax Act, 1961, no further addition can be made to the issues found subsequently in the course of proceedings under section 147 of the Income Tax Act, 1961. Now, it is important to analyze that whether the ratio/interpretation laid down in those judgements still are relevant in the new regime of reassessment as introduced by the Finance Act, 2021.

Introduction

The erstwhile provision of section 147 provides that

“If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section…”

Various High Courts and Tribunal had concluded that the AO has reason to believe, that any income chargeable to tax has escaped assessment, for any assessment year, and it was found, that the section puts no bar on the powers of the AO, to put to tax, any other income, chargeable to tax, which has escaped assessment, and which subsequently comes to his notice, in the course of the proceedings, but then, the prefixing words “and also”, which succeeded “any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income”. This expression was found to be making clear, that existence of the income, for which the AO formed belief, to have escaped assessment, is a precondition, for including any other income chargeable to tax, escaping assessment, and coming to the notice of the AO subsequently, in the course of the proceedings. Thus, unless and until such income, as giving rise to form belief, for escaping assessment, continues to exist, and constitutes a subject-matter of assessment, under s.147 “no other income” coming to the notice of the AO, during the course of the proceedings, can be roped in.

Indeed, the above interpretation was valid for the old regime. However, it is relevant to analyze the new regime in context of such ratio. Does the ratio laid down by various High Courts is still hold good in context of new regime? In the reading of the Author, the answer is yes, in fact, in the reading of the author, the ratio of said judgements has been deeply incorporated in the new regime. So, let’s analyze the provisions of the new regime of reassessment.

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