Retrospective clarifications on re-assessment and invalidation of tax orders

The annexure to the FM’s speech makes it clear that retrospective ‘ clarifications’ and not amendments are being introduced owing to differing judgements by courts. Two of these clarifications will impact a wide range of taxpayers, be it corporates, or individuals.

These relate to issue of notice for re-assessment by the jurisdictional assessing officer (tax officer) and issue of issue of assessment orders without a Document Identification Number (DIN).




According to Gautam Nayak, tax partner at CNK & Associates, the issue on whether the notice for reassessment under section 148 is to be issued by the tax officer or the officer attached to the faceless assessment unit is pending before the apex court in over 1,600 cases. The clarification that the tax officer can issue the reassessment notice comes into force retrospectively from April 1, 2021.

He explains, “In Hexaware Technologies case, the Bombay High Court had taken the view that the notice issued by the tax officer was invalid, as it had to be issued by the faceless assessment officer. While this view was followed by many other high courts, the Delhi High Court in T K S Builders and the Calcutta High Court in Triton Overseas had taken a contrary view, that both JAO and FAO had concurrent jurisdiction to issue such notice.”

On the second point, a tax official explained that many high value assessment orders have been invalidated owing to a technical lapse of not having a DIN quoted on that order. This is now remedied and the clarification applies from Oct 1, 2019.

“The Bombay and Delhi High Courts had taken the view, on the basis of a circular issued by the Central Board of Direct Taxes (CBDT), that absence of DIN on an assessment order rendered the assessment invalid and non-est. The law is now being amended, as a clarificatory amendment, that an assessment shall not be regarded as invalid due to mistake, defect or omission in quoting of a computerised DIN, if the assessment order is referenced by DIN in any manner. Therefore, if a DIN is issued by a separate letter in respect of such order, the order would not be invalid merely because the DIN is not mentioned on the order itself,” explains Nayak.

Sheetal Shah, tax partner at EY-India views it as a step towards litigation management by neutralising technical disputes that have long clogged tax administration. “By clarifying jurisdiction for reassessment notices and validating DIN‑based assessments despite minor defects, with retrospective clarifications, the budget proposals signal a pragmatic shift in tax administration that prioritises intent over inadvertent technical lapses,” she said.

Chartered accountant Ketan Vajani is vocal in his views, “The retrospective ‘clarifications’ proposed are against the principle of equitable justice. The matter is already before the Supreme Court at an advanced stage. One of the parties before the apex court is the government. This amendment has the effect of one of the parties declaring the result of a pending battle in its own favour. It is absolutely inappropriate to come out with a retrospective clarification and nullify the effect of earlier favourable rulings. There are many cases decided by various courts in favour of the taxpayers, these cases may now be revisited and this will result in not only tax but also interest in the hands of genuine taxpayers.”