Finance Minister Nirmala Sitharaman is scheduled to move a series of amendments to the Finance Bill, 2026 in the Lok Sabha on Wednesday focusing primarily on easing reassessment procedures, providing greater certainty to tax proceedings, and reducing long-pending litigation under the Income-tax framework.
The changes come as the country prepares for the full rollout of the new, simplified Income-tax Act, 2025, which replaces the six-decade-old 1961 Act from April 1. The Notice of Amendments, containing over 30 entries, introduces retrospective clarifications and prospective relaxations aimed at minimising technical challenges to tax orders and giving both taxpayers and the revenue department more operational flexibility.
Minimum response time
The minimum time allowed for responding to a notice under Section 148 has been proposed to increased to 30 days from the date of issuance of the notice. This provision will apply retrospectively from March 30. Additionally, the government proposes to introduce a mechanism allowing reassessment notices to be issued at any time to give effect to findings or directions from appellate authorities, tribunals, or courts.
Such notices, however, must be issued within three months from the end of the quarter in which the certified copy of the order is received by the jurisdictional Principal Commissioner or Commissioner. To protect the validity of past and future assessments, the amendments clarify that approvals granted by income-tax authorities during assessment or reassessment proceedings are essentially administrative and supervisory in nature.
These approvals will not be invalidated due to insufficiency of reasons recorded, defects in form, manner of authentication, or even the absence of a digital signature when granted electronically. Similar protections have been extended through a new Section 522, which states that returns, assessments, notices, or other proceedings shall not be treated as invalid merely because of mistakes, defects, or omissions, provided they are in substance in conformity with the intent of the Act.
The provision also shields assessments from challenges based on errors in quoting the computer-generated Document Identification Number (DIN), as long as the order references it. These retrospective validations, some dating back to 2021 or even 2019, are expected to substantially reduce litigation arising from technical grounds that have frequently led to the quashing of orders by courts in recent years.
The amendments also propose to bring relief on interest liabilities. From April 1, 2027, no interest under Section 220 will be charged on demands raised solely on account of penalties levied under Section 270A in fresh assessments or reassessments. Certain recovery-related provisions under Section 222 have been omitted, and changes have been made to facilitate smoother transitions between the old and new Income-tax Acts.
On the appellate front, the Income Tax Appellate Tribunal (ITAT) will now be required to send copies of its orders electronically to the jurisdictional Principal Commissioner or Commissioner through a designated portal. Time limits for further appeals, references, or revisions will apply accordingly. The Tribunal’s powers under Section 413 have also been expanded to include appointing a receiver for the management of an assessee’s movable and immovable properties.
