CBDT Circular Reg Reopening U/s 147 Of Past Assessments Due To Increase In Current Year’s Turnover

The CBDT has issued Circular No. 40/2016 dated 9th December 2016 directing Assessing Officers not to reopen assessments of earlier years u/s 147 of the Act merely because there is an increase in turnover of the present year because of the adoption by the assessee of digital means of payment. The CBDT has pointed out that such move would cause “undue harassment” to the taxpayers

Circular No. 40/2016
Government of India
Ministry of Finance
Department of Revenue (CBDT)
North Block, New Delhi, the 9th of December, 2016

Subject: – Directions under section 119 of the Income-tax Act, 1961-regd.-

Recent initiatives of the Government to curb the black economy in the country has encouraged people to shift towards digital mode of payment while making financial transactions. By adopting digital mode of payment, no financial transactions would remain undisclosed and consequently an enhanced turnover of business might get reflected in the books of accounts. Under the circumstances, an apprehension has been raised that increased turnover in the current year may lead to reopening of earlier years’ cases involving lower turnover u/s 147 of the Income-tax Act, 1961 (‘Act’) by the Assessing Officer causing undue harassment to tax payers.

2. It is hereby clarified that reopening of cases u/s 147 of the Act is feasible only when the Assessing Officer “has reason to believe that any income chargeable to tax has escaped assessment for any assessment year” and not merely on the basis of any reason to suspect. Mere increase in turnover, because of use of digital means of payment or otherwise, in a particular year cannot be a sole reason to believe that income has escaped assessment in earlier years. Hence, Assessing Officers are advised not to reopen past assessments in cases merely on the ground that the current year’s turnover has increased.

3. The above may be brought to the notice of all for necessary and strict compliance.

4. Hindi Version to follow.
(Rohit Garg)
Director ITA.II, CBDT

2 comments on “CBDT Circular Reg Reopening U/s 147 Of Past Assessments Due To Increase In Current Year’s Turnover
  1. there shall be a limit of ‘reason to believe’ paradigm. which is mostly misused to extract bribes for themselves and the coteries so the hon CBDT needs to ensure if any officer misuses ‘reason to believe’ if found to be bad in law, he need to be discharged from service, as public service never means ‘harassment’ on tax payers is my take.

  2. vswami says:

    Quite a sensible and welcome move, with commendable forethought, to set at rest any apprehensions in the minds of the honest taxpayers community , conceding the well settled position in law. It is to be expected that the clear-cut directive is taken a conscious note of by the field officers and scrupulously followed /abided by.
    In the context, the officers need to be equally made aware and their actions should be closely monitored in the matter of /against any attempt at reopening u/s 147 /148, based on an incorrect understanding of and any likely confusion to be guarded against in regard to the correct implications of the scheme of things as embodied in all the related provisions; mainly, sub-sections (1), (2) and and (3) of section 143, required to be read together as a composite code, not in isolation.

    For an appreciation of the viewpoints shared in an attempt at a critical analysis thereof, attention may be invited to the material in public domain; among others, @ 2016 (85) Kar. L.J. pg. 1-16


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