170000 Reassessment by next March; Target set by Income Tax Department

The Income Tax (IT) department can complete the reassessment of 170 thousand ‘notices’ by March 2025, issued from March 2021 to March 2024 for income not declared under past assessment years.

CBDT (Central Board of Direct Taxes) reopened around 600,000 cases of reassessment during the above-mentioned period of three years, for a mismatch found in the income reported in ITR in comparison with income details available with the tax department. Out of these, about 430 thousand notices assessments have been made and orders on them have also been issued, according to a top officer who had direct knowledge of the developments stated.

The amount involved could not be determined, although rough assumptions give an indication that it could be more than a thousand crore rupees.

“These notices are for various assessment years, right from 2014-15 to 2022-23. Some of these were getting time-barred”, explained the official.

As earlier mentioned, these notices were given under Section 148 of the Income Tax Act, which concerns the reopening of past assessments. Consequently, the majority of the total reassessment notices went to persons with incomes above Rs.50 lakhs.

Section 148 provision provides a right to an IT officer to reopen or review cases of income evasion dating back six years. Under Section 148A (introduced by the Finance Act of 2021), cases that are more than a decade old might be revived if the income that has escaped assessment exceeds Rs.50 lakh.

However, if the case is below Rs.50 lakh, it cannot serve notice if three years have elapsed after the end of the relevant assessment year.

In specific, according to the guidelines by the CBDT, the current financial constraints would still apply to re-opening assessments even for the preceding years.

If an assessing officer has reason to believe that any income chargeable to tax has been omitted from the income-tax return of the assessee, she or he will issue reassessment notices to the assessee and make a reassessment in relation to the assessee’s Income tax return for any assessment year.

In the judgment of 2022, the Supreme Court supported the IT department decision and affirmed all the reassessment notices, that were issued on or after April 1, 2021 – reopening assessments going back up to six years.

This remarkable ruling came after several notices that were challenged in several high courts, and then the IT department further filed appeals before the Supreme Court to sustain such notices.

However, the taxman has issued reassessment notices to small taxpayers whose income escaped tax was less than Rs.50 lakh for the financial years 2012-13, 2013-14, and 2014-15, respectively.

The Supreme Court had ruled that reassessment might be pursued through the reassessment method under Section 147/148 if the conditions mentioned in Section 147/148 were satisfied, including providing an opportunity to be heard by the taxpayer.

Subsequently, the CBDT, through a directive, announced that they should adopt a standard format in cases where reopening is being pursued. It reveals that matters that have been disposed of by an appellate authority or court will not be reopened.