New Block Assessment Scheme – Analysis and Critique
- The Finance (No. 2) Act of 2024 has introduced significant changes to the assessment provisions concerning searches and requisitions under sections 132 and 132A of the Income Tax Act-1961. The old block assessment scheme has been reintroduced under new regulations, which are described as a ‘simplification and rationalisation’ measure. The amendments aim to address problems with the current search assessment scheme, such as multiple assessments and prolonged assessment processes, which lead to increased litigation costs and lack of coordinated investigation.
- The old block assessment scheme was previously discontinued by the Finance Act of 2003 for similar reasons. However, the re-introduced block scheme appears to present similar issues, with certain provisions being ambiguous and prone to legal challenges. For instance, the inclusion of evidence from surveys in the computation of undisclosed income is not clearly defined and may lead to disputes.
- Moreover, the potential conflicts arising from the use of survey information for assessments, especially in cases of unabated assessments, create further complexity. The treatment of information gathered through third-party surveys and its relevance to the tax assessment of the assessee also adds to the confusion.
- There are also uncertainties regarding the treatment of revised income declarations in the context of abated assessment years, which may result from various factors including judicial decisions. The timeframe for filing a return for the block period, especially when the search is ongoing, presents practical challenges for the taxpayers.
- The prescribed time limits for completing assessments under the new block scheme appear to be unrealistic and may lead to rushed assessments, especially considering the practical complexities involved in finalizing appraisal reports and centralizing cases.
- The conflicting timeframes for completing assessments in 132A cases, based on the making and receipt of requisition, pose practical challenges and may require retrospective amendments to ensure realistic timeframes.
- Additionally, the provisions for undisclosed income of any other person and the issuance of satisfaction notes by the Assessing Officer present potential areas of ambiguity and could benefit from clearer guidelines and timeframes to avoid undue delays and uncertainties.
In conclusion, while the new block assessment scheme was introduced with the intention of streamlining the assessment of search cases and reducing litigation, certain provisions and timeframes present practical and legal challenges that need to be addressed for the scheme to achieve its intended objectives.
By
S. C. Gupta
Retired Chief Commissioner of Income Tax