The Budget has further corrected inadvertent drafting errors, brought clarity, and aligned the provision with the intent of the section.
The government had introduced a faceless tax assessment regime with effect from April 2021. However, there were several procedural lapses and often the assessment orders were passed without providing the taxpayers an opportunity for physical hearing. In fact, several courts ruled in favour of the taxpayers quashing the assessment orders completed under the faceless regime on the basis of natural justice.
Learning from these experiences, the Union Budget has endeavoured to remove the inefficiencies in the faceless scheme. It has proposed various amendments under Income Tax Act to streamline the assessment procedures, litigation provisions and correct certain drafting errors.
Faceless assessment
The Budget proposed to abolish the RFAC and abridge the number of reviewing authorities. In case of complex matters, it is proposed to grant authorities the power to request for a special audit. Specific provision has been introduced for granting an opportunity for personal hearing to taxpayers upon request. Also, the Budget proposes to extend the scope of faceless assessment by including reassessment proceedings.
The government has realised that some procedural lapses are inevitable in coordinating multiple units. Accordingly, it proposes to repeal the provision of declaring assessment void in case of contravention of procedure prescribed under the Act. Also, it proposed to defer implementation of faceless proceedings for transfer pricing cases, DRP and ITAT until March 31, 2024 so that procedures can be implemented in the wisdom of faceless assessment.
Repetitive appeals
The Budget has proposed to expand the scope of repetitive appeals by the tax department present under the current law. As per the proposal, if a case on an identical question of law is pending in appeal before the jurisdictional high court or the Supreme Court in case of any taxpayer, the filing of appeal against the order of Appellate Tribunal or Commissioner (Appeals) by the department in case of another assessee for any assessment year shall be deferred till such question of law is decided by the Jurisdictional High Court or Supreme Court. This will help to reduce the time and resources required to litigate the matter and help declutter the judicial system.
The Finance Act, 2021 had also revamped the procedure for reassessment of income under the Act. The said amendment modified, inter alia, Section 147, Section 148, Section 149 and also introduced a new Section 148A under the Act.
Rectification of errors
The Budget has further corrected inadvertent drafting errors, brought clarity, and aligned the provision with the intent of the section. An amendment has been proposed to correct the drafting error for the cases which can be re-opened under the extended time limit of 10 years. The Budget proposes to rectify errors by including cases which have escaped assessment on account of over reporting of expenditure, or expenditure incurred in relation to an event or occasion, or entries in books of account which have an impact on the taxpayer’s income.
These proposed amendments will aid in providing more clarity to the tax assessment procedures, reduce unproductive use of time and resources and build confidence among taxpayers for a fair assessment.
The writer is partner, Nangia Andersen LLP. Inputs from Devang Beria.
