Revised IT Section 149: Time limit for Notice (Reduced from 6 to 3 years)

Section 149 of the Income Tax Act, 1961 relating to Time Limit for Notice has been amended/ substituted, by the Finance Act 2021, with effect from AY 2021-22, to reduce time limit for re-opening of assessment proceedings from 6 years to 3 years.

To reduce the compliance burden and uncertainty for taxpayers, Section 149 has been amended to reduce the Time Limit for re-opening of Income Tax Proceedings to 3 years, as opposed to the existing limit of 6 years, except in the cases of serious tax evasion of Rs. 50 lacs or more, where the existing limit of 10 years will be maintained subject to approval of the Principal CCIT, i.e. cases where there is evidence of concealment of income of Rs. 50 lakh or more in a year, the assessment proceedings can still be re-opened, upto 10 years, subject to approval of the Principal Chief Commissioner, the highest level of the Income Tax Department.

Provided, however, that no notice u/s 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01/04/2021, if such notice could not have been issued at that time because it was beyond the time limit prescribed under clause (b), as it stood immediately before the commencement of the Finance Act, 2021.

Furthermore, the provisions of this section shall not apply in cases where a notice u/s 153A or 153C read with section 153A is required to be issued in relation to a search initiated u/s 132 or books of account, other documents, or any assets requisitioned u/s 132A on or before 31/03/2021, and the time or extended time allowed to the assessee, as per show-cause notice under clause (b) of section 148A; or the period during which the proceeding u/s 148A is stayed by an order or injunction of any court shall be excluded; and where, immediately after such exclusion, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation in clause (d) shall be extended to seven days.

Further, to eliminate discretion in re-opening assessments, they will be done only in cases flagged by the system based on data analytics, C&AG objections, and search/ survey cases.

It may be noted that Finance Act 2021 has amended/ substituted/ inserted Sections 147, 148, 148A, 149 and 151 of the Income Tax Act 1961 with regard to reduction of Time Limit for re-opening of income tax proceedings, applicable with effect from 01/04/2021 (AY 2021-22).

Section 149: Time limit for Notice (as Substituted by the Finance Act 2021)

Section 149 of the Income Tax Act, 1961 has been substituted/ revised, vide Section 43 of the Finance Act, 2021, applicable w.e.f. 01/4/2021 (AY 2021-22), as under:

“(1) No notice under section 148 shall be issued for the relevant assessment year,-

(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01/04/2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:

Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before 31/03/2021:

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.

Explanation.- For the purposes of clause (b) of this sub-section, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.”