Notices u.s. 148 issued after 31.03.2021 in old formats and not in accordance with new provisions for reassessment – preliminary objections can be made.

[DEV KUMAR KOTHARI]

Notices u.s. 148 issued after 31.03.2021 in old formats and not in accordance with new provisions for reassessment – preliminary objections can be made.

Recently many assesses have received notices u.s. 148 which are issued after 01.04.2021 (the date when new provisions came into force). These notices are not as per new provisions and procedures.

Notices are also vague and incomplete. From notices it is not clear whether return of income filed earlier has been considered or not. Notices says about assessment  and reassessment both and assessment or reassessment of income and loss both. Means there is lack of specific act which AO want to take.

We find in some cases assesses have challenged such notices and Courts have stayed their operation for some time and matters are fixed for hearing and the present position is uncertain.

Therefore, author suggest strategy to file a preliminary objection and then depending on development in the matter and response from AO  further objection can be filed if AO provide copy of recorded reasons, if not, a ROI as per original ROI can be filed and request can be made for copy of recorded reasons then on receipt objections can be filed.

A draft letter for preliminary objection is appended below, that can be suitably modified.

Dated:  26.07.2021       send by email and by speed post both

LETTER HEAD  OF ASSESSEE WITH PAN, AADHAR, CIN   ETC.

Before the The Assessing Officer                                       

XXXXX

Dear Sir,

PAN:                     AY: 2013-14

Notice dated:    25/06/2021  u.s. 148 vide DIN & Notice No :

I did not receive any notice in email or in post / received notice     on  /  . Just noticed notice  when my accountant could  logged in to my account on 22.07.21 the  above  notice came to my knowledge according to which you have    asked   me   to deliver a return of income in response to your notice because you believe that there is escapement of income within meaning u/s 147.

Notice is not is not  as per law w.e.f. 01.04.2021

Notice is dated 25.06.2021 that is after coming into force of new provisions of substituted sections 147, 148 , 149 ,151 , amended S. 151A  , 153 ,  153A , 153C  and newly inserted  section 148A all these relates to new procedure and new limitations for reassessment.. All these changes are w.e.f. 01.04.2021.

I also find that the notice is not in accordance with law and procedure as applicable from 01.04.2021 for reassessment as per amended provisions. Amended provisions are clearly applicable from 01.04.2021 and apply to the notice issued by you after the effective date.

Entire reassessment proceedings, which starts from recording of reasons and issue of notice  is a procedural aspect and therefore amended provisions are applicable when steps for reassessment is initiated on or after the effective date of amendment i.e. 01.04.2021 ( and it is not from AY 2021-22 as per notes to clauses in the Finance Bill 2021).

Considering purposes of substituted provisions, the new provisions should also apply to any pending proceedings for reassessment, which might have been initiated before 01.04.2021.

In view of new substituted provisions w.e.f. 01.04.2021 the notice is time barred also.

Therefore the notice appears to be void ab initio. I request you to examine this aspect and  inform to me your views on this aspect so that un-necessary proceedings need not to take place and valuable time of all concerned is saved for productive work.

 Kindly examine this aspect so that un-necessary proceedings can be avoided to save valuable time of tax authorities and tax payers.

I hope that you will agree to the above aspect of new provisions and new limitations and drop notice to save valuable time of tax authorities and assessee both.

Without prejudice to the above, I submit that contents of your notice is reproduced in a table format in left column, and in right column my observations are given:

From the notice	Brief observations and requests of assessee
Whereas I have reasons to believe that your Income chargeable to Tax for the Assessment Year 2013-14 has escaped Assessment within the meaning of section 147 of the Income Tax Act, 1961	There is no reference of ITR filed by me online on  .2013 and original assessment order/ intimation dt.        .2014 and also records from which you have reason to believe about escapement of my  income. Kindly inform to me the reasons and record relied for assumption of escaped income. When original return is not considered , how a reason of escapement of income can be formed?
I, therefore, propose to assess/ re-assess the income/ loss for the said Assessment Year	What you want to do that is whether you propose to assess or re-assess is not clear , it is also not clear that whether you propose to assess or reassess income or loss. This indicates that while issuing notice  you have not at all considered my ROI in which all prescribed disclosures were made by me and the ROI was processed and no notice u.s. 143.2 was issued, that means assessment was made as per ROI.
and I hereby require you to deliver to me within 30 days from the service of this notice, a return in the prescribed form for the said Assessment Year	Without  considering  my ROI, how a fresh ITR can be asked from assesse is not understandable because first of all income disclosed by assessee must be checked to find out if there was any need to scrutinize it. If no need to scrutinize was found and no notice was issued u.s. 143.2  then it means that within wide scope of S.143.2 it was not found necessary or expedient to scrutinize ROI.
This notice is being issued after obtaining the necessary satisfaction of the PCIT, xxx	Kindly provide me a copy of the said satisfaction and order of Ld. PCIT and also recorded reasons, or other working and material if any, based on which such satisfaction was derived by the PCIT.

On perusal of  your notice, it is observed that it is silent about any new tangible material or new source of information based on which you have formed such a belief about escapement of income within meaning u/s 147.

Your notice is also silent about nature and amount of income which you believe to have escaped assessment within meaning u/s 147.

Therefore, your notice is totally vague and incomplete.

The notice is also not accompanied with copy of  recorded reasons, order or recording of the satisfaction of PCIT   as mentioned in your notice.

Without prejudice to the above, I submit that on receipt of your notice I had caused careful review and re-consideration of my original return of income, computation and  details in ROI and my accounts .  I find that there is no case of escapement of taxable income or tax within meaning u/s 147 in their broadest sense.

I had furnished all prescribed particulars which form basis of my income as per ROI, and in this cases  processing of ITR, intimation  and self-assessment is deemed to be assessment made by AO also because no notice has been issued u.s. 143.2 within very wide scope for issue of such notice u.s. 143.2.  Once limitation to issue a notice u.s. 143.2 is over it means that Ld. AO has not found any reason and has  formed a belief that scrutiny is not necessary for examination of very vast aspects for which he could  have  issue notice if he found that the ROI requires any further  scrutiny or enquiry. The language used is ‘shall serve on the  assessee  a notice….’. This , means that when no notice was issued u.s. 143.2 the AO has not found any expediency to scrutinize the ROI and issue a notice for that purpose.

On my   part there was full and true disclosure of my income and particulars of    income in prescribed manner and also all related information in prescribed manner and form were furnished. As per understanding of law which I had with help of concerned persons there is no escapement of any income.

Therefore, apparently reassessment notice is not to  reassess escaped  income, if any,  as may be believed by you subsequent to original assessment  or intimation u/s 143.1  but to make a review of original assessment. Such review is not at all permissible.

When assesse had furnished ITR, and AO did not issue notice u.s.  143.2 it means that an opinion was formed that the ITR does not require further enquiry or scrutiny within very wide scope provided in the Act. Then without any new tangible material, reassessment cannot be made as it will amount to review.

A notice for reassessment cannot be made in lieu of assessment of an ITR already filed by assesse.

Therefore, as appears from the notice,  proposed action of  yours  to  ask me to furnish a return of  my total income  is   not  based on any new tangible material or new information and it will amount to review that too based  on mere  suspicion and change of opinion, if at all.

Since your notice is silent about what you propose to do that is  assess income or assess loss or reassess income or reassess loss,  therefore the notice is incomplete and invalid. The assessee must be made aware as to what the AO has in his mind and what he propose to do – assess or reassess  income or loss. 

I would also like to draw your kind attention to the following ruling given by the Hon’ble Supreme Court of India in the case of COMMISSIONER OF INCOME TAX, DELHI VERSUS M/S. KELVINATOR OF INDIA LIMITED [2010 (1) TMI 11 - SUPREME COURT] :-

“One needs to give a schematic interpretation to the words ‘reason to believe’ failing which, we are afraid, Sec. 147 would give arbitrary powers to the AO to re-open assessments on the basis of “mere change of opinion”, which cannot per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess.”

“One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, the AO has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.

Your re-opening is not only contrary to the above Supreme Court Ruling, but is also contrary to the spirit of Circular No. 549 dated 31.10.1989 (1990) 82 CTR (St) 1, whereby the amendment made by the Direct Tax Laws (Amendment) Act, 1987 were re-amended by the Direct Tax Laws (Amendment) Act, 1989 so as not to give arbitrary powers to the AO to reopen past assessments on mere change of opinion.

In view of provisions applicable, as amended w.e.f. 01.04.2021 also  the notice issued by you and process followed is not as per law.

Therefore, I have preliminary objections to the notice u/s 148. Kindly consider my preliminary objections and drop reassessment proceedings in the interest of justice and to avoid un-necessary litigation and wastage of valuable time of tax authorities and tax payers.

Just based on experience of my consultants I apprehend that it may be that you have issued notice due to mere suspicion, surmise and conjecture and bias on some issue which is not at all applicable in my case..

In case you still consider that there is a fit case to reassess my income,  I again  deny the same and object to the same and submit that my original return may be treated as return in response to your notice u/s 148 because I firmly  believe that there was no failure on my part to disclose my income and relevant information.

Request to provide copy of recorded reasons and order sheets satisfaction etc:

I request you to kindly provide me copy of (a) recorded reasons  (b)  copy of order sheet of the AO  (c) copy of order sheet of the Pr. CIT and (d) copy of satisfaction as noted by the Pr. CIT  (e) other relevant documents so that I can file my objections  to the proceedings for reassessment and you can consider the same and pass an order on the objections, before further  proceeding for reassessment, as may be  required under law.

This will save time of tax officers, because  I am  confident that my  objections will make it clear that there is no justifiable case of continuing  reassessment proceeding and you can drop reassessment proceeding without  going into formality of filing of ITR, issue of notices,  hearing and assessment etc.

In view of the above, if you kindly provide  recorded reasons, it will be very useful for our review of entire matter. In this regard we  rely  on judgment in the case of MITHLESH KUMAR TRIPATHI VERSUS COMMISSIONER OF INCOME-TAX. [2005 (11) TMI 28 - ALLAHABAD HIGH COURT]. The High Court had  considered GKN DRIVESHAFTS (INDIA) LTD. VERSUS INCOME-TAX OFFICER AND OTHERS [2002 (11) TMI 7 - SUPREME COURT]. Honorable Allahabad  High Court has suggested providing copy of reasons with the notice u/s 148 itself (or soon thereafter as may be the case)  to expedite the proceedings, and to full fill principal of natural justice.

The High court observed and held on the following lines:

1. The authority to give notice for reassessment is derived from section 148(2) of the Income-tax Act, 1961.
2. The statute confers jurisdiction and empowers the Assessing Officer under section 148(2) expressly requires “recording of reasons” which has a definite purpose (and is not a mere formality on paper),
3. The purpose is  to avoid arbitrariness or biased or mala fide action by the taxing authorities.
4. Section 148(2) is silent regarding communication of reasons.
5. The provision has to be interpreted in a manner which makes it meaningful and purposive.
6. Keeping the object of the Legislature in mind, the courts, including the Supreme Court, have interpreted the section by laying down that reasons have to be communicated, as otherwise the same will remain a mere formality with no ultimate purpose or object to be served.
7. There is also nothing in section 148(2) of the Act indicating expressly or otherwise, that an assessee can ask for reasons to be communicated only after he has filed a “revised return” in response to the notice under that section.
8. The recording of reasons and “obtaining approval” to give notice may be “administrative action” but the very act of giving notice backed by good and valid reasons under section 148(2) of the Act is a quasi-judicial function.
1. If reasons are supplied along with the notice under section 148(2), it will obviate unnecessary harassment to the assessee as well as to the Revenue by avoiding unnecessary litigation which will save courts also from being involved in unproductive litigations.
10. Above all it will be in consonance with the principles of natural justice.

Respectfully following the same kindly provide me copy of  recorded reasons and opportunity to file objections without filing ITR in response of your notice so that I can file objections and you can consider the same and decide to drop proceeding or to proceed with the same based on my original ITR which has not been acted upon and which I propose to treat as ROI in response to notice us. 148.

Thanking you,

Yours faithfully,

Assessee