The new reassessment regime was brought into the Income-tax Act, 1961 (‘IT Act’) by way of the Finance Act, 2021, with the rationale of overhauling the existing regime, so as to reduce litigation and enable ease of business for the tax payer. However, the recent trend seems to suggest the contrary.

Even in cases where scrutiny assessments have been completed, show-cause notices under Section 148A of the IT Act are being issued across the board and Orders under Section 148A(d) of the IT Act are being passed in a mechanical manner, without dealing with the contentions of the assessee. There have been cases where even during ongoing assessments, notices under Section 148A have been issued or notices have been issued on the same date as the passing of the Assessment Order.

In such cases, although past experience dictates that any case law relied upon by the taxpayer will be brushed aside by the Income-tax Department on the premise that the same was rendered in terms of the erstwhile regime, however, in our opinion especially in cases of completed assessments, the fundamental plea of ‘change of opinion’ would still hold fort.

The recent trend reflects that Courts are reluctant to entertain Writ Petitions challenging Orders passed under Section 148A(d) of the IT Act whilst directing the assessees to take their pleas during the course of assessment. The Courts have observed that even if the Order passed under Section 148A(d) of the IT Act is non-speaking, the same not being a final adjudication^[1] can be addressed during the course of assessment. However, there have also been cases where Courts have issued notice, where on facts, the Petitioner could showcase a good prima-facie case.^[2]

In our opinion, adherence to the new provisions should be strict. The fundamental condition of ‘income chargeable to tax escaping assessment’ still exists and, hence, there must be a nexus between the ‘information’ suggesting that ‘income chargeable to tax has escaped assessment’. In the absence thereof, assumption of jurisdiction under Section 147 or 148 would be void, irrespective of the alleged information. For example, in a case where an assessee suo-moto disallows a payment for non-deduction of tax, a reassessment based on information that this assessee has not deducted taxes on a payment, will be without jurisdiction, as the corresponding expense has already been disallowed during the computation of income. Thus, mere information is not enough and something more being an evidence of ‘income escaping assessment’ is material for initiating such proceedings.

Hence, objections filed under Section 148A(b) of the IT Act should be as exhaustive as possible, duly corroborated by all evidences and should clearly evidence that the information relied upon does not lead to a conclusion that any income has escaped assessment. Upon rejection of such objections, if facts so warrant, the assessee may invoke the writ jurisdiction of the jurisdictional High Court. Filing of such detailed objections would only strengthen the case of the taxpayers before the Courts.

[1] Gulmuhar Silk Pvt. Ltd. v ITO, order dated April 7, 2022 in WP(C) No. 5787/2022 (Delhi High Court).

[2] Bharat Heavy Electricals Ltd v PCIT, order dated April 25, 2022 in WP(C) No. 6482/2022 (Delhi High Court).