Clarificatory Amendments to Address Jurisdictional and Procedural Uncertainty: Budget 2026

 

Introduction:

The Finance Minister has, in the budget, attempted to lay to rest several direct tax controversies that have been burdening the Apex Court, High Courts and the tax tribunals with substantial litigation.

This has been proposed through a slew of clarificatory amendments that are intended to clarify the law retrospectively.

Validity of documents without DIN:

One such issue concerns the validity of notices and orders issued without a Document Identification Number (DIN), as mandated under CBDT Circular No. 19/2019 dated 14 August 2019. Courts have differed on whether absence of a DIN is a procedural lapse or renders the proceeding invalid. As the DIN requirement flows from an executive circular and not the statute, the dispute raises the legal question of whether non-compliance with administrative instructions can nullify otherwise valid statutory actions. To address this, a new section 292BA is proposed to clarify that proceedings shall not be invalid merely due to absence of quoting of a DIN, if otherwise in accordance with the Act.

Assessments by JAO vis a vis FAO:
Another controversy relates to initiation of reassessment proceedings under the faceless regime. Notifications issued under section 151A led to conflicting High Court rulings on whether reassessment under sections 147 and 148 could be initiated by the jurisdictional Assessing Officer (JAO) or only by a faceless Assessing Officer (FAO). As delegated legislation cannot override substantive statutory powers, a new section 147A is proposed to be inserted retrospectively to expressly recognise the authority of the jurisdictional Assessing Officer and override inconsistent notifications, thereby validating past proceedings.

Time bar for certain TP cases:
 some Disputes have also arisen under the special assessment procedure in section 144C, applicable to non-residents and transfer pricing cases. The provision mandates issuance of a draft assessment order, with a right to approach the Dispute Resolution Panel (DRP). While sections 153 and 153B prescribe an overall time limit of 12 months for completion of assessments, section 144C prescribes specific timelines for finalisation after the draft order stage. To remove ambiguity, it is proposed to clarify that sections 153 and 153B apply only up to issuance of the draft order, and final assessments will be governed exclusively by the timelines in section 144C, even if these extend beyond the general limitation period.

As these issues go to the validity of proceedings, adverse judicial outcomes could result in large-scale annulment of assessments on technical grounds alone. Accordingly, retrospective clarificatory amendments-including insertion of sections 147A and 292BA and clarification of the interaction between sections 144C, 153 and 153B-are proposed to remove ambiguity, validate proceedings, and ensure certainty in tax administration.