Submission requesting for deferment of timeline for completing assessments for 3 successive Assessment Years under the Income Tax Act, 1961

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Submission requesting for deferment of timeline for completing assessments for 3 successive Assessment Years under the Income Tax Act, 1961

Tejasvi

@tejasvi

July 8, 2021

Public Policy

2646

S.153 of the Income Tax Act, 1961 (IT Act) provides the period within which the assessment has to be completed and the last date for passing assessment order is to be calculated under the said section by reference to period of 12/18/21 months as provided in the section for different assessment years. Further, in case a reference is made to the Transfer Pricing Officer under S. 92CA (TP cases) during the course of assessment proceedings, the time limit mentioned hereinabove is further extended by 12 months.

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and subsequent circulars/ notifications issued in this regard, have provided the following time limit for completion of assessment:

Time limit for completion of assessment for AY 2017-18 in TP cases is September 30, 20211;
Time limit for completion of assessment for AY 2018-19 in both TP and Non-TP cases is September 30, 2021;
Time limit for completion of assessment for AY 2019-20 for non-TP cases is also September 30, 20212.

Accordingly, the revenue department will have to conclude the assessment proceedings for the following AY by September 30, 2021:

AY 2017-18 - for TP cases,
AY 2018-19 - for TP cases as well as non-TP cases
AY 2019-20 - for non-TP cases.

Coinciding of timelines for completion of assessment for 3 AYs would not only be a burden on the taxpayers but may also result in additional workload on the revenue authorities, considering the COVID-19 situation.

The country is now gradually resuming normalcy post the lockdowns imposed in wake of second wave of COVID-19. In such a scenario, focus of businesses would be on evaluating and adopting course correction measures to restore their business operations back on the growth trajectory. Deadline for closure of assessments for 3 years would lead to an added pressure on the finance teams of the businesses, amidst implementation of various other business strategies.

Further, taxpayers would be in the midst of closure of statutory audit for the Financial Year 2020-21 in the run up for meeting various tax and corporate law compliance timelines. Bundling up of assessments timelines, which involves an extensive fact finding and data collation exercise, may cause undue hardships and may lead to unwarranted penal consequences for non-compliance or untimely compliance of assessment notices.

In view of the above, we have made a submission to Ministry of Finance on July 7, 2021 requesting them to defer the timelines for AY 2018-19 and AY 2019-20 in a staggered manner (say to December 2021 and March 2022 respectively). This will provide respite and clarity to the taxpayers in these challenging times.

We will keep you posted on further developments in this regard.

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Tejasvi