Section 148A- All About Section 148A of the Income Tax Act

Newly inserted section 148A now specifically requires the Assessing Officer to issue a notice if they decide to initiate re­assessment. Therefore, a procedure has been laid down for the Assessing Officer under section 148A, which must be adhered to after 1st April 2021.

What is section 148A, and what does it mean for taxpayers?

In Budget 2021, the government introduced Section 148A in the Income Tax Act. Suppose the income tax officer has information that the taxpayer has escaped income for any assessment year on which tax is payable. In that case, the new provision requires that the income tax officer provide a chance for the taxpayer to explain their case before issuing notice. Under section 148A, the assessee gets a chance to be heard by the officer.

An assessing officer has to give not less than seven days but not more than 30 days to the assessee for furnishing his explanation. 

After assessing the taxpayer’s reply, the income tax officer shall decide whether it is a fit case to issue notice for income escaping assessment. If the income tax officer decides to reopen the case, a copy of the order and a notice (under Section 148) must be issued to the taxpayer. 

As per the time limitation clause, a notice cannot be issued in normal scenarios if three years have elapsed since the end of the relevant assessment year. However, notice beyond three years can be taken up only if there is evidence that the taxpayer has evaded an assessment of taxable income of at least Rs 50 lakh. However, notice can be issued beyond three years but not after 10 years from the end of the relevant assessment year.

The income tax officer shall obtain the approval of specified authority before conducting any such enquiries, providing an opportunity to the taxpayer, or passing such an order. 

However, none of the above is applicable  in search or requisition cases.

How is Section 148A different from Section 148 of the IT Act?

Section 148 requires that the income tax officer issue a notice to the taxpayer if there is a ‘reason to believe’ by the income tax officer that the taxpayer has escaped reporting any income in the relevant assessment year. After issuing the notice, the income tax officer may assess or reassess or re-compute the total income for such a year under Section 147 of the Income Tax Act.

However, with effect from 1st April 2021, the income tax officer shall now follow the procedure prescribed under the new provision Section 148A before issuing such notice. The new provision requires that the income tax officer conduct an inquiry or provide the taxpayer with an opportunity to be heard in relation to the information that indicates that the income chargeable to tax has escaped assessment. The income tax officer must obtain prior approval of a specified authority before issuing such notice.

Different notices which individual taxpayers can receive from the income tax authorities

Conclusion

Since Section 148A is effective from 1st April 2021, any notice issued to the taxpayer under Section 148 after the said date, without following the procedure under Section 148A (i.e. without giving an opportunity of being heard) would be invalid and contrary to the provisions of the Income Tax Act.