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Amendments and Changes in Time Limits by Finance Bill, 2021

amendments-and-changes-in-time-limits-by-finance-bill-2021

There are numerous amendments or changes related to the reduction in time limit in respect of furnishing of Return of income u/s 139(4) or 139(5) of the Income Tax Act, 1961 (“Act”), Assessments including reassessment u/s 147, changes in time limit for processing of return and sending Intimation u/s 143(1), reduction in time limit to issue notices for scrutiny assessment, time limit for completion of assessments, scrapping settlement commission and setting up of DRP and Faceless ITAT are proposed by the Finance Bill, 2021.

Finance Bill, 2021 has amended the time limit and due date of various provisions related to compliances and actions from the authorities which are discussed in this article.


Before we discuss the amended provisions in detail, a brief outlook of the amendments are discussed below-

Filing of Return

It is proposed that the last date for filing of belated or revised returns of income u/s 139(4) or 139(5), as the case may be, be reduced by three months. Further, the Board has been given powers to resolve the grievances of the taxpayers on account of a defective return.

Assessment

It is proposed to reduce the time limit for sending intimation under section 143(1) from one year to nine months. It is also proposed to reduce the time limit for issue of notice under section 143(2) from six months to three months from the end of the financial year in which the return is furnished.

Income Escaping Assessment

New set of laws on reopening of assessment u/s 147 is proposed. Search and Survey cases are proposed to be assessed under new section 147. Consequently, section 153A, section 153B and section 153C are proposed to be abolished. 

Faceless Income Tax Appellate Tribunal (ITAT)

In order to provide a transparent tax appellate mechanism, it is proposed to make the Income Tax Appellate Tribunal faceless and jurisdiction-less. A National Faceless Income- tax Appellate Tribunal Centre shall be established and all the communication between the Tribunal and the appellant shall be made electronically. Wherever personal hearing is needed, it shall be done through video-conferencing.

Dispute Resolution Committee (DRC)

For reducing litigation and to give an impetus to the dispute resolution for small taxpayers, a Dispute Resolution Committee is proposed to be constituted. A taxpayer having taxable income up to Rs. 50 lakh and disputed income up to Rs. 10 lakh shall be eligible to approach the Committee. For ensuring efficiency, transparency and accountability, the procedure of the Committee will be conducted in a faceless manner.


Consequently, the Settlement Commission shall be discontinued from 01.02.2021. However, the pending cases shall be decided by an Interim Board if opted by the applicant.


    Extension of Due Date for filing return of income under section 139 in some cases


    (A) Extension of the due date to the spouses governed by Portuguese Civil Code as per section 5A of the Act


    Section 139 of the Act contains provisions in respect of the filing of return of income for different persons or class of persons. The said section also provides the due dates for filing of original, belated and revised returns of income for different classes of the assessee.


    Sub-section (1) of the section provides for the filing of the original return of income for any assessment year. Explanation 2 of the said section specifies the due-dates for filing of original return for a different class of persons. 


    The sub-clause (iii) of clause (a) of the said Explanation 2 provides that the due date for filing of original return of income for the partner of a firm whose accounts are required to be audited under the said Act or under any other law for the time being in force shall be 31st day of October of the assessment year.  


    Section 5A of the Act provides for taxation of spouses governed by the Portuguese Civil Code. On account of this provision, any income earned by a partner of a firm whose accounts are required to be audited shall be apportioned between the spouses and included in their total income, if section 5A applies to them. 



    Since the total income of a partner can be determined after the books of accounts of such a firm have been finalised, the due dates of partners are already aligned with the due date of the firm. Thus, the due date for filing of original return of income of such partner is 31st October of the assessment year. However, this relaxation is not there for the spouse of such a partner to whom section 5A of the Act applies. 


    Therefore, it is proposed that the due date for the filing of the original return of income be extended to 31st October of the assessment year in case of the spouse of a partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force if the provisions of section 5A apply to them.


    Applicability date of the amendment: These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.


    (B) Extension of the due date to the partner of a firm which is subject to Transfer Pricing Audit under section 92E of the Act


    Similarly, in the case of a firm which is required to furnish a report from an accountant for entering into an international transaction or specified domestic transaction, as per Section 92E of the Act, the due date for filing of original return of income is the 30th November of the assessment year. Since the total income of such partner can be determined after the books of accounts of such firm have been finalised,  it is proposed that the due date of such partner be extended to 30th  November of the assessment year.


    Applicability date of the amendment: These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.



    For this purpose, Clause 32 of the Finance Bill, 2021 has amended Section 139(1) as follows-


    Amendment of section  139.


    32. In section 139 of the Income-tax Act,––


    (a) in sub-section (1), in Explanation 2,–


    (i) in clause (a), in sub-clause (iii),  after the words “any other law for the time being in force”, the words, figure and letter “or the spouse of such partner if the provisions of section 5A applies to such spouse” shall be inserted; 


    (ii) in clause (aa), after the words “an assessee”, the words “, including the partners of the firm being such assessee,” shall be inserted; 


    Amended Provisions of Section 139(1) Explained


    Clause 32 of the Bill seeks to amend section 139 of the Income-tax Act relating to return of income. 


    The said section provides for the filing of return of income for different persons or class of persons and time-limits for doing so. 


    It is proposed to amend sub-clause (iii), in clause (a), in Explanation 2, in sub-section (1) of the said section so as to provide that the due date for filing return of income for the spouse of the partner of a firm, if the governed by the provisions of section 5A of the said Act, shall be 31st October of the assessment year.

     

    It is further proposed to amend clause (aa) of the said Explanation  so as to provide that the due date for filing of return of income for partners of a firm, which is required to furnish report referred to in section 92E, shall be 30th November of the assessment year


    Changes in Section 139(9) related to notifying defects or defective returns in Section 139(9)


    Finance Bill, 2021 has amended the provisions of section 139(9) of the Act. Sub-section (9) of section 139 of the Act lays down the procedure for curing a defective return. 


    It provides that in case a return of income is found to be defective, the Assessing Officer will intimate the defect to the assessee and give him a period of 15 days or more to rectify the said defect and if the defect is not rectified within the said period, the return shall be treated as an invalid return and the assessee will be considered to have never filed a return of income. 


    The Explanation to the sub-section lists the conditions in which a certain return of income shall be considered to be defective. 


    Representations have been received that the aforesaid conditions create difficulties for both the taxpayer and the Department, as a large number of returns become defective by application of the said conditions. This has resulted in a number of grievances. It has been represented that the conditions given in the said Explanation may be relaxed in genuine cases.


    Therefore, it is proposed that a proviso be inserted to the said Explanation empowering the Board to specify, vide notification that any of the above conditions shall not apply for a class of assessee or shall apply with such modifications, as may be specified in such notification

    Applicability date of the amendment: These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.


    For this purpose, Clause 32 of the Finance Bill, 2021 has amended Section 139(9) as follows-


    Amendment of section  139.


    32. In section 139 of the Income-tax Act,––


    (a) ….;


    (b) ….; 


    (c) ….; 


    (d) in sub-section (9), in the Explanation, the following proviso shall be inserted, namely:–

     

    “Provided that the Board may, by notification in the Official  Gazette,  specify that any of the conditions specified in clauses (a) to (f) to the Explanation shall not apply to such class of assessees or shall apply with such modifications, as may be specified in such notification.”.


    Amended Provisions of Section 139(9) Explained


    Clause 32 of the Bill seeks to amend section 139 of the Income-tax Act relating to return of income. 


    The said section provides for the filing of return of income for different persons or class of persons and time-limits for doing so. 


    It is proposed to insert proviso before the Explanation to sub-section (9) of the said section so as to provide that the Board may specify, by notification, that any of the conditions specified in clauses (a) to (f) of the said Explanation shall not apply to such class of assessees or shall apply with such modifications, as may be specified in such notification. 


    Reduction of Due Date for furnishing Belated Return u/s 139(4) and Revised Return u/s 139(5)


    Finance Bill, 2021 has reduced the due date or time limit for filing belated or revised return of income from the existing due dates. The curtailment of due dates of filing of return is applicable for belated return u/s 139(4) and revised return u/s 139(5).


    Sub-sections (4) and (5) of section 139 of the Act contain provisions relating to the filing of belated and revised returns of income respectively. The belated or revised returns under sub-sections (4) and (5) respectively of the said section at present could be filed before the end of the assessment year or before the completion of the assessment whichever is earlier. 


    With the massive technological upgrade in the Department where the processes under the Act are moving towards becoming faceless and jurisdiction-less, the time taken to conduct and complete such processes has greatly reduced. 


    Therefore, it is proposed that the last date for filing of belated or revised returns of income, as the case may be, be reduced by three months. 


    Thus the belated return or revised return could now be filed three months before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier


    Applicability date of the amendment: These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.


    Also Read:

    Extension of Due Date for Filing of Return of Income, Section 139 Amended: Finance Bill 2021

    Revision/Reduction in Due Date /Time Limit for Revised and Belated Return, Defective Return u/s 139(9) provisions amended: Finance Bill 2021


    For this purpose, Clause 32 of the Finance Bill, 2021 has amended Section 139(4)/(5) as follows-


    Amendment of section  139.


    32. In section 139 of the Income-tax Act,––


    (a) ….


    (b)  in  sub-section  (4),  for  the  words  “return  for  any previous year at any time before”, the words “a return for any previous year at any time within three months prior to” shall be substituted; 


    (c) in sub-section (5), for the words “he may furnish a revised return at any time”, the words “he may furnish a revised return at any time within three months” shall be substituted; 


    Amended Provisions of Section 139(4)/(5) Explained


    Clause 32 of the Bill seeks to amend section 139 of the Income-tax Act relating to return of income. 


    The said section provides for the filing of return of income for different persons or class of persons and time-limits for doing so. 


    It is proposed to amend sub-section (4) of the said section so as to provide that any person who has not furnished a return of income within the due date as per sub-section (1) of the said section may furnish a return for any previous year at any time within three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. 


    It is also proposed to amend sub-section (5) of the said section so as to provide that a return of income filed under sub-sections (1) or (4) can be revised at any time within three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.


    Note: The Memorandum explaining the provisions of the Finance Bill, 2021 has stated the objective for curtailing the period for filing of belated as well as revised return. Accordingly, it states that due to massive technological upgrade in the Department where the processes under the Act are moving towards becoming faceless and jurisdiction-less, the time taken to conduct and complete such processes has greatly reduced. Therefore, it is appropriate to reduce the return filing time so that the proceedings can be completed at the earliest.

     

    An assessment year ends on March 31.

     

    Accordingly, it is stated in the Memorandum that it is proposed that the last date for filing of belated or revised returns of income, as the case may be, be reduced by three months. Thus, henceforth, any belated or revised return can be filed by December 31.

     

    But the amended provisions of section 139(4) and section 139(5) has been worded differently which goes contrary to the desired objectives. On a plain reading of the wordings of the amended provisions, it appears that a belated return or a revised return of a previous year cannot be filed till the month of December of the assessment year and the same has to be filed only within the last three months of the assessment year, that is to say, in the period from the month of January to March of the assessment year. This is not the intention. Actually, with the amendment, the law has not been changed. The amendment has only restricted the period of filing of belated and revised return.

     

    It is suggested to suitably amend the provisions while passing the Finance Bill, 2021 so that the intended provisions gets introduced.


    Allowing prescribed authority to issue a notice under section 142(1)(i)


    Section 142 of the Act provides for the conduct of inquiry before assessment. 


    Clause (i) of sub-section (1) of the said section gives the Assessing Officer the authority to issue a notice to an assessee, who has not submitted a return of income, asking for submission of return.


    This is necessary to bring into the fold of taxation non-filers or stop filers who have transactions resulting in income. However, this power can be currently invoked only by the Assessing Officer


    The Central Government is following a conscious policy of making all the processes under the Act, where the physical interface with the assessee is required, fully faceless by eliminating person to person interface between the taxpayer and the Department. 


    In line with this policy, and in order to enable centralized issuance of notices etc. in an automated manner, it is proposed to amend the provisions of clause (i) of the sub-section (1) of section 142 to empower the prescribed income-tax authority besides the Assessing Officer to issue a notice under the said clause. 


    Applicability date of the amendment: This amendment will take effect from 1st April, 2021.


    For this purpose, Clause 33 of the Finance Bill, 2021 has amended Section 142(1) as follows-


    Amendment of section  142.


    33. In section 142 of the Income-tax Act, in sub-section (1), in clause (i), after the existing proviso, the following proviso shall be inserted, namely:–


    “Provided further that a notice under this sub-section for the purposes of this clause may also be served by the prescribed income-tax authority,”. 


    Amended Provisions of Section 139(4)/(5) Explained


    Clause 33 of the Bill seeks to amend section 142 of the Income-tax Act relating to inquiry before assessment. 


    Clause (i) of sub-section (1) of the said section empowers only the Assessing Officer to serve notice to an assessee requiring him to file return of income. 


    It is proposed to insert the second proviso in the said clause so as to empower the prescribed income-tax authority also to serve notice under clause (i) of sub-section (1) of the said section for the purposes of that clause. 


    Changes in the time limit to Process the return and send the Intimation u/s 143(1)


    Section 143 deals with the assessment procedure after a person files his return of income.


    The second proviso to section 143(1) provides the time limit within which Intimation is required to be sent to the assessee. The existing second proviso to section 143(1) provides that such intimation shall be sent within a period of one year from the end of the financial year in which the return is made.


    Hence, if a return for the AY 2020-21 is filed in August 2020 then the Intimation shall be required to be sent by 31st March 2022. The FY for the month of August 2020 ends on 31st March 2021 and the period of one year ends on 31.03.2022.


    One should note that a person can file a belated or revised return for the AY 2020-21 till 31st March 2021. Thus if a person files a belated return on 31.03.2021, the department is required to process the return and send the Intimation by 31.03.2022. 


    Thus the department is getting one year time to process the return and send the Intimation.


    It is proposed to amend the second proviso of section 143(1) to reduce the time limit for sending intimation under sub-section (1) of section 143 of the Act from one year to nine months from the end of the financial year in which the return was furnished.


    The period of one year is now reduced to 9 months to process the return and send the Intimation. However, there is no change in the base period from where the period of 1 year or 9 months is required to be computed i.e. from the end of the FY in which return is furnished.


    Thus if the return of income for the AY 2021-22 is furnished in August 2021, then the return shall be required to be processed by 31st December 2022. The FY for the month of August 2021 ends on 31st March 2022 and the period of 9 months ends on 31.12.2022.


    One should note that a person can file a belated or revised return for the AY 2021-22 till 31st December 2021. Thus if a person files a belated return on 31.12.2021, then also the department is required to process the return and send the Intimation u/s 143(1) by 31.12.2022. 


    Thus the department is getting one year time to process the return and send the Intimation from the last prescribed date of furnishing of return u/s 139. Overall, there is a reduction of 3 months after the proposed amendment. After the proposed amendment, the time is reduced to December 2022 otherwise it would have been 31.03.2023.


    Note: Even though there is a reduction in the time limit to process the return and send the Intimation by 3 months, there is actually no change in the actual time available to the department which is one year. The department is still getting 1 year time to process the return and send the Intimation u/s 143(1). This is because the time limit to process the return is computed from the end of the FY in which return is furnished under pre-amended and post-amended scenarios. There is no change in the base, the change is happening due to a reduction in the time limit to the taxpayers to furnish the belated/revised return.


    Applicability date of the amendment: This amendment will take effect from 1st April, 2021.


    For this purpose, Clause 34 of the Finance Bill, 2021 has amended Section 143(1) as follows-


    Amendment of section  143.


    34. In section 143 of the Income-tax Act,— 


    (a) in sub-section (1),–– 


    (i) in the second proviso, for the words “one year”, the words “nine months” shall be substituted; 



    Amended Provisions of Section 143(1) Explained


    Clause 34 of the Bill seeks to amend section 143 of the Income-tax Act relating to assessment.


    It is proposed to amend the said section so as to reduce the time limit specified for sending intimation under sub-section (1) from one year to nine months from the end of the financial year in which the return is furnished. 


    Changes in the time limit to send the Scrutiny Assessment Notice u/s 143(2)


    Section 143 deals with the assessment procedure after a person files his return of income.


    Section 143(2) provides for the issue of scrutiny assessment notice to a person who has furnished the return under section 139 or in response to a notice under section 142(1) by the Assessing Officer. The proviso to section 143(2) prescribes the time limit within which the scrutiny assessment notice is required to be sent to the assessee.

    It states that the scrutiny assessment notice under section 143(2) shall be served on the assessee within a period of six months from the end of the financial year in which the return is furnished.


    Hence, if a return for the AY 2020-21 is filed in August 2020 then the scrutiny assessment notice under section 143(2) shall be required to be served on the assessee by 30th September 2021. The FY for the month of August 2020 ends on 31st March 2021 and the period of six months ends on 30.09.2021.


    One should note that a person can file a belated or revised return for the AY 2020-21 till 31st March 2021. Thus if a person files a belated return on 31.03.2021, the department is required to serve the scrutiny assessment notice under section 143(2) for the AY 2020-21 by 30.09.2021. 


    It is proposed to amend the proviso of section 143(2) to reduce the time limit for serving scrutiny assessment notice under sub-section (2) of section 143 of the Act from six months to three months from the end of the financial year in which the return was furnished.


    The period of six months is now reduced to 3 months for sending scrutiny assessment notice under section 143(2). However, there is no change in the base period from where the period of six months or 3 months is required to be computed i.e. from the end of the FY in which return is furnished.


    Thus if the return of income for the AY 2021-22 is furnished in August 2021, then scrutiny assessment notice under section 143(2) shall be served by 30.06.2022. The FY for the month of August 2021 ends on 31st March 2022 and the period of 3 months ends on 30.06.2022.


    One should note that a person can file a belated or revised return for the AY 2021-22 till 31st December 2021. Thus if a person files a belated return on 31.12.2021, then also the department is required to send the scrutiny assessment notice under section 143(2) by 30.06.2022. 


    Thus the department is getting 6 months time to send the scrutiny assessment notice under section 143(2) from the last prescribed date of furnishing of return u/s 139. Overall, there is a reduction of 3 months after the proposed amendment. After the proposed amendment, the time is reduced to June 2022 otherwise it would have been 30.09.2022.


    Note: Even though there is a reduction in the time limit to serve the scrutiny assessment notice under section 143(2) by 3 months, there is actually no change in the actual time available to the department which is 6 months. The department is still getting 6 months time to send the scrutiny assessment notice under section 143(2). This is because the time limit to process the return is computed from the end of the FY in which return is furnished under pre-amended and post-amended scenarios. There is no change in the base, the change is happening due to a reduction in the time limit to the taxpayers to furnish the belated/revised return.


    Applicability date of the amendment: This amendment will take effect from 1st April, 2021.


    For this purpose, Clause 34 of the Finance Bill, 2021 has amended Section 143(1) as follows-


    Amendment of section  143.


    34. In section 143 of the Income-tax Act,— 


    (a) ….

    (b) in sub-section (2), in the proviso, for the word “six”, the word “three” shall be substituted. 



    Amended Provisions of Section 143(2) Explained


    Clause 34 of the Bill seeks to amend section 143 of the Income-tax Act relating to assessment.


    It is proposed to amend the said section so as to reduce the time limit for sending a notice under sub-section (2) from six months to three months from the end of the financial year in which the return is furnished. 


    Scope of prima facie adjustment with Audit Report u/s 143(1)(a) increased


    Section 143(1)(a) of the Income-tax Act, 1961 (`Act’) provides for making certain adjustments in the amount of income or loss shown by the assessee in his income tax return on the basis of prescribed criteria before processing the return u/s 143(1).


    One of the adjustments that can be made at the time of processing under of return under section 143(1) is “disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return.” This is contained in section 143(1)(a)(iv). This adjustment was introduced in the Act vide Finance Act, 2016.


    This sub-clause (iv) requires adjustment or addition in the returned income with the amount of expenditure which is indicated in the tax audit report but was not considered while computing the total income by the assessee.


    However, there is no provision in the law under which the addition of income reported in the tax audit report but not considered by the assessee in his return of income could be made while processing the return. Therefore, it is felt necessary to plug the drawback and to empower the CPC to make an adjustment for any increase in income due to mismatch in the income disclosed in the tax audit report and income computed in the income-tax return of the assessee while processing the return of Income under section 143(1).


    It is now proposed to amend the following provisions of sub-section (1) of section 143 of the Act to amend sub-clause (iv) of clause (a) of sub-section (1) of section 143 of the Act, to allow for the adjustment on account of increase in income indicated in the audit report but not taken into account in computing the total income.


    Read Also: Adjustment for Increase in Income reported in Audit Report Under Section 143(1)(a)


    Applicability date of the amendment: This amendment will take effect from 1st April, 2021.


    For this purpose, Clause 34 of the Finance Bill, 2021 has amended Section 143(1) as follows-


    Amendment of section 143.


    34. In section 143 of the Income-tax Act,— 


    (a) in sub-section (1),–


    (i) …..; 


    (ii) in clause (a),–


    (I) in sub-clause (iv), for the words “disallowance of expenditure indicated”, the words “disallowance of expenditure or increase in income indicated” shall be substituted; 

    ……


    Amended Provisions of Section 143(1) Explained


    Clause 34 of the Bill seeks to amend section 143 of the Income-tax Act relating to assessment.  


    Sub-clause (iv) of clause (a) of sub-section (1) of section 143 of the said Act provides for adjustment on account of disallowance of expenditure indicated in the audit report but not taken into account in calculating the total income of the assessee


    It is proposed to amend the said sub-clause so as to allow for the adjustment on account of increase in income indicated in the audit report but not taken into account in computing the total income


    Amendment in Section 143(1)(a)(v) to disallow Deduction under Part-C of Chapter VI-A


    In section 143(1), another amendment is proposed in sub-clause (v) of Section 143(1)(a) to substitute the sections “sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE” with “section 10AA or under any of the provisions of Chapter VI-A under the heading “C.-Deductions in respect of certain incomes”. Part-C  of Chapter VI-A covers Section 80H to Section 80TTB of the Act.


    Sub-clause (v) of clause (a) of sub-section (1) of the said section provides that any deduction admissible under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, shall be allowed if the return of income is furnished on or before the due date specified under sub-section (1) of section 139 of the Act. 


    Applicability date of the amendment: This amendment will take effect from 1st April, 2021.


    For this purpose, Clause 34 of the Finance Bill, 2021 has amended Section 143(1) as follows-


    Amendment of section 143.


    34. In section 143 of the Income-tax Act,— 


    (a) in sub-section (1),–


    (i) …..; 


    (ii) in clause (a),–


    (I)....; 

    (II) in sub-clause (v), for the words, figures and letters “sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if”, the words, figures and letters ‘section 10AA or under any of the provisions of Chapter VI-A under the heading “C.-Deductions in respect of certain incomes”, if’ shall be substituted;


    Amended Provisions of Section 143(1) Explained


    Clause 34 of the Bill seeks to amend section 143 of the Income-tax Act relating to assessment.  


    It is proposed to amend the said sub-clause so as to provide that any deduction admissible under section 10 AA or under any of the provisions of Chapter VIA under the heading “C.—Deductions in respect of certain incomes” shall be allowed, if the return of income is furnished on or before the due date specified under the sub-section (1) of section 139 of the said Act.


    Amendment to reduce Time limit for completion of assessment u/s 153


    Section 153 of the Act contains provisions in respect of time-limit for completion of assessment, reassessment and re-computation under the Act. 


    The sub-section (1) of the said section provides that the time-limit for passing an assessment order under section 143 or 144 of the Act shall be 21 months from the end of the assessment year in which the income was first assessable. 


    However, this time limit had earlier been curtailed in order to improve the efficacy and efficiency of the Department to give effect to computerization of processes under the Act.


    As a result, the time limit for completion of assessment proceedings under sections 143 or 144 of the Act was reduced to 18 months for A.Y. 2018-19 and 12 months for A.Y. 2019-20 and subsequent assessment years vide the Finance Act, 2017.


    Since then, the assessment procedure has been completely overhauled by the introduction of the Faceless Assessment Scheme, 2019


    The assessment procedure is now conducted in a completely faceless and jurisdiction-less way where all internal and external communication is made electronically and different aspects of the assessment procedure like verification, scrutiny of books of accounts etc. are carried on by different units. The person-to-person interface between the taxpayer and the Department has been eliminated. This team-based approach for assessment with a dynamic jurisdiction is technologically driven and very efficient. 


    Thus, the time required for completion of assessment procedure needs to be further reduced.


    The benefits of a shorter time period for scrutiny proceedings are manifold. On the one hand, it reduces the compliance burden on the taxpayers who find it easier to explain matters pertaining to a recent previous year which also improve the ease of doing business. On the other hand, it enhances the ability of the Department to detect and bring to tax any leakages of revenue as the instances of tax evasion come to the notice of the Department within a shorter span of time.


    Hence, it has been proposed that the time limit for completion of assessment proceedings may be reduced further by three months. Thus the time for completing assessment is proposed to be nine months from the end of the assessment year in which the income was first assessable, for the assessment year 2021-22 and subsequent assessment years


    Time limit for completion of assessment as per section 153

    Assessment Year

    Time Limit

    Last Date of assessment Completion

    AY 2017-18

    21 months from the end of the assessment year

    31.12.2019

    AY 2018-19

    18 months from the end of the assessment year

    30.09.2020

    AY 2019-20

    12 months from the end of the assessment year

    31.03.2021

    AY 2020-21

    12 months from the end of the assessment year

    31.03.2022

    AY 2021-22

    9 months from the end of the assessment year

    31.12.2022


    The timeline of a taxpayer, say a company, for the AY 2021-22 is given below-

    Previous Year

    2020-21

    Assessment Year

    2021-22

    Due Date of ITR filing

    31.10.2021

    Last date upto which return can be filed belatedly or revised

    31.12.2021

    Processing of return and sending Intimation u/s 143(1)

    31.12.2022

    Time Limit to issue scrutiny Notice u/s 143(2)

    30.06.2022

    Time Limit to complete the assessment u/s 143(3)

    31.12.2022


    Thus immediately after the filing of return, the company will start receiving notices for the assessment if the same is taken up for scrutiny assessment. And almost within one year, the assessment will be completed. One thing to be noted here is that the last date to process the return and to complete the scrutiny assessment is the same. In the given example above, the date is 31.12.2022 in both the cases.


    Applicability date of the amendment: This amendment will take effect from 1st April, 2021


    For this purpose, Clause 34 of the Finance Bill, 2021 has amended Section 143(1) as follows-


    Amendment of section 153.


    41. In section 153 of the Income-tax Act, in sub-section (1), after the second proviso, the following proviso shall be inserted, namely:– 


    “Provided also that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “nine months” had been substituted.”.


    Amended Provisions of Section 153(1) Explained


    Clause 41 of the Bill seeks to amend section 153 of the Income-tax Act relating to time limit for completion of assessment, reassessment and recomputation. 


    The said section provides for the time-limit for completion of assessment, reassessment and recomputation in certain cases mentioned therein. 


    It is proposed to amend sub-section (1) of the said section to insert the third proviso so as to provide that for the assessment year commencing on or after the 1st April, 2021, the time limit for making an assessment order under sections 143 or 144 shall be reduced from the existing twenty-one months to nine months from the end of the assessment year in which the income was first assessable.


    Substituted section 147 for Income escaping assessment or Reassessment 


    The law related to income escaping assessment or reassessment has been overhauled and all the old provisions have been substituted with the new provisions.


    In order to reduce compliance burden, the time-limit for re-opening of assessment is being reduced to 3 years from the current 6 years from the end of the relevant assessment year. Re-opening up to 10 years is proposed to be allowed only if there is evidence of undisclosed income of Rs. 50 lakh or more for a year. Further, it is proposed to completely remove discretion in re-opening and henceforth re-opening shall be made only in cases flagged by system on the basis of data analytics, objection of C&AG and in search/survey cases. 


    Further, in order to bring certainty in income tax proceedings at the earliest, it is also proposed to reduce the time limits for general assessment or processing of income tax return by three months and also for filing of returns.


    Read more on New Substituted Section 147 for Reopening/Reassessment and Search Assessments



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