In several cases the notices have been issued basis objections raised in audit reports while in others the grounds are related to escapement of income that is liable to be taxed. Sources added that a significant number of notices have been issued as the tax department has only a month before these become time-barred.
“The IT department has started issuing notices seeking to reassess income tax liability of taxpayers for these financial years, scrutinizing the income tax returns filed by taxpayers for these years,” said Shailesh Kumar, partner at Nangia & Co LLP.
The finance ministry has changed the law for reassessment proceedings from this year onwards in the Union Budget 2021. In general, an assessing officer cannot issue a notice if three years have elapsed from the end of the relevant assessment year. The time-limit was earlier six years.
“Reassessment notices have to be issued before the expiry of statutory time limits. Keeping in view the intent of the government to reduce tax litigation, it is likely that focus will be on high tax transactions or big mis-matches, rather than smaller tax payers,” said Vikas Vasal, national managing partner, tax at Grant Thornton Bharat.
In cases where the assessing officer has evidence which reveals income escaping assessment, in form of an asset, amounts to or is likely to amount to Rs 50 lakhs or more, notice can be issued beyond the three-year limiting period but not beyond 10 years from the end of the relevant assessment year.
The law change was supposed to come into effect from April 1, 2021 which meant that notices were to be issued by March 31, 2021. But income tax authorities have extended the time limit to April 30, 2021, leading to a flurry of notices to companies, businesses and professionals, wherever the requirement of reassessment has been determined.