Reduction in the time limit for completing an assessment

The time limit for completion of assessment, reassessment and re-computation and for passing an order under section 143 or 144 commonly referred as ‘Scrutiny assessment’ was earlier 33 months from the end of the relevant financial year, which was curtailed to 30 months for FY 2017-18 and 24 months for FY 2019-20 and subsequent assessment years. Due to computerisation, this time limit is being further reduced by 3 months. Thus, scrutiny assessments shall be completed within 21 months from the end of the financial year. Thus, for example, the timeline for FY 2021-22 would be as follows, considering all amendments in assessment proceedings:

Year-end – March 31, 2021

The due date for filing return – July 31, 2021 / October 31, 2021 (4 or 7 months)

Processing of return and notice under 143(2) – December 31, 2021 (9 months)

Last date to file belated/revised return – December 31, 2021 (9 months)

Last date for scrutiny assessment – December 31, 2022 (21 months)

The last date for income escaping or search assessments – March 31, 2025 (if income escaped is less than INR 50 lakh) or March 31, 2033. (4 years or 11 years)

Time to file a belated return or revise return reduced by three months

The belated or revised returns at present can be filed before the end of the assessment year i.e. 12 months period from the end of a financial year, or before the completion of the assessment whichever is earlier. With the massive technological upgrade in the Department, the processes are becoming faceless and jurisdiction-less and the time taken to conduct and complete such processes has reduced. Therefore, the last date for filing of belated or revised returns of income is reduced by three months. Thus, the belated return or revised return can now be filed up to 9 months after the end of the relevant financial year or before the completion of the assessment, whichever is earlier. E.g. for FY 2020-21, the original return has to be filed by July 31, 2021 (non-audit assessee) or October 31, 2021 (in cases where the audit is applicable) and the belated or revised return has been filed maximum by December 31, 2021.

Processing of return and notice under section 143(2)

Intimation under 143(1) is issued by adjusting the increase or decrease in income specified under the section. Amendment has been made to automatically make following adjustments while processing returns: 1) increase in income as indicated in audit report but not taken into account in returns 2) provisions of section 80AC whereby no tax holiday is allowed if the return is not filed by the due date.

The time limit for processing return and issue of notice under section 143(2) is now reduced to nine months (earlier one year) from the end of the relevant financial year.

Income escaping assessment and search assessments

Due to advancement of technology, the department is now collecting all relevant information related to transactions of taxpayers from third parties vide statement of financial transaction or reportable account. Similarly, information is also received from other law enforcement agencies. Thus, the corporate tax services department can now flag returns based on such data collected using computer technologies and artificial intelligence. Therefore, income escaping assessments and search assessments shall not be initiated after a period of four years from the end of the relevant financial year, if the income escaped is less than INR 50 lakh. In such other cases where undisclosed income exceeds the aforesaid limit, the period shall be limited to eleven years from the end of the relevant financial year. Earlier these limits were seven years and seventeen years respectively from the end of the financial year to which they relate. However, these limits shall not apply to proceedings already initiated before March 31, 2021.

Further, all notices for income escaping assessment and search assessments shall be issued only after approval from Principal Commissioner/Director of Income Tax (PCIT/PDIT), if period lapsed is four or fewer years. In other cases, the notice shall require prior approval from Principal Chief Commissioner/Director of Income Tax (PCCIT/PCDIT). Besides, if a Comptroller and Auditor General of India (C&AG) raises any objections in case of assessment of an assessee, the same shall also be considered as information and proceedings shall be initiated thereon.

Change in due date for filing return for partners of a firm

In case of a firm which is required to furnish an accountant’s report for entering transfer pricing transactions as per section 92E, the due date for filing original return of income is November 30. However, the total income of partner of such a firm can be determined only after the books of accounts of such firm have been finalised. Thus, the due date for filing of returns by such partners is extended to November 30.

TDS/TCS on non-filer at higher rates

New sections 206AB and section 206CCA have been introduced to provide for a higher rate of tax deduction at source (TDS) or tax collection at source (TCS) respectively where the counterparty has not filed income tax returns for immediately preceding two consecutive financial years where the time limit for filing returns has expired, and the aggregate amount of TDS and TCS deducted and collected exceeds INR 50,000 in each of these two specified financial years. The rate of TDS or TCS in such cases shall be twice the existing rate or 5% whichever is higher. This section shall not apply where the tax is required to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N. These provisions shall be effective from July 1, 2021. The Government wants more and more people to file their tax returns and place this burden on businesses transacting with such persons.

Authority to issue the notice for inquiry under section 142(1)(i)

Currently, the inquiry under section 142(1)(i) before initiating assessment can be initiated by an Assessing Officer. Since the Government is following a conscious policy of making all the processes fully faceless by eliminating person to person interface, section 142(1)(i) is being amended to prescribe a new authority for issuing notice for inquiry as the same shall be automated through computers and centrally issued. The detailed notification shall follow subsequently.

Faceless appeals to Income Tax Appellate Tribunal (ITAT)

To ensure that the reforms initiated by the department to reduce human interface reach the next level, it is imperative to launch a faceless scheme for ITAT proceedings on the same line as faceless appeal scheme, to reduce the cost of compliance, increase transparency and also even work distribution at different benches. Thus, necessary provisions are being amended to provide for the constitution of faceless income tax appellate tribunals.