Assessment or Reassessment Notice Under Section 148 of the Income Tax Act

The time limit to re-open income tax assessment cases has been reduced to 3 years from 6 years. Also, in case of serious tax evasion, the assessment can be reopened until 10 years, only when concealment of income is more than 50 lakh.

As per Section 147 of the Income Tax Act, 1961, the Income Tax Department has the power to reassess an individual’s previously filed income tax returns. The Assessing Officer could pick your income tax return for reassessment subject to some pre-defined criteria by sending a notice under section 148 for income Escaping Assessment.

1. Reasons to receive a notice under Section 148

An individual could receive a notice under section 148 in case the assessing officer believes that such individual’s income chargeable to tax might have escaped assessment. In case the individual has proof supporting his belief, the AO would record his reasons in writing and send the individual notice under section 148. The assessing officer can’t just change his mind and go for re-investigation without a valid reason.

In case the assessee has disclosed all the documents and correct information during the original assessment, the Assessing Officer cannot send a notice to the assessee for reassessing the same documents. Some facts or new documents which show that the income has escaped assessment should come into the light. In case the new information or documents come to light indicating that the individual has concealed income, then the AO could take action against such assessee under section 147 and 148.

2. Who can issue a notice under Section 148

Section 151(1) of the Income Tax Act, 1961 contains the provisions for issue of notice:

(i) No notice would be issued by an Assessing Officer under section 148, after expiry of four years from the end of relevant AY (assessment year), unless Principal Chief Commissioner or Principal Commissioner or Chief Commissioner or Commissioner is satisfied, on reasons recorded by the AO, that it’s a fit case for issuing such notice.

(ii) In cases other than the one mentioned above, no notice would be issued by an Assessing Officer under section 148, where AO is below the rank of a Joint Commissioner unless Joint Commissioner is satisfied, on reasons recorded by such AO, that it’s a fit case for issuing such notice.

(iii) For the purposes of above (i) and (ii), Principal Chief Commissioner or the Principal Commissioner or the Chief Commissioner or the Joint Commissioner the Commissioner, depending on the case, being satisfied on reasons recorded by AO about the fitness of the case for issuing notice under section 148 of the Income Tax Act, need not issue the notice by himself.

3. Time limit to issue a notice under Section 148

Section 149 of the Income Tax Act, provides that the notice under section 148 could be issued within a period of 4 years from the end of relevant AY (assessment year) in case the income so escaped doesn’t exceed INR 1 lac. In case the income so escaped is more than INR one lac the notice under the said section could be issued within a period of 6 years from the end of relevant AY subject to provisions contained in section 151.

The notice under section 148 could be issued within a period of 16 years from the end of relevant AY in case the income that has escaped assessment relates to assets located outside India.

Further, if assessment has been completed under section 143(3) or 147 no further action could be taken under section 147 after expiry of 4 years from end of relevant AY unless income chargeable to tax has escaped assessment for such AY due to failure on assessee’s part to file the return under section 139 or 142 or 148 or fully and truly disclosing all the material facts required for the assessment, for that AY.

4. Replying to notice under Section 148

The key thing to bear in mind is to not to take the notice lightly. In case you receive the notice under section 148, please follow the below-mentioned pointers:

• Firstly, check the notice for reasons to believe which are recorded by the assessing officer for issuing the notice under section 148. If the notice doesn’t include the reasons, then you could request the assessing officer to send a copy of the recorded reasons.
• In case you’re satisfied with reasons to believe which was recorded by the assessing officer, file the return at the earliest. In the case already filed, send the copy to the assessing officer.
• In case you’re filing the income tax return in response to notice issued under section 148, ensure that you file it after performing proper due diligence that you declare all your income and expenses carefully. In case you miss reporting any of your income correctly then it could result in unnecessary penalties.
• If you believe that notice isn’t served validly or reasons provided by the assessing officer for opening assessment under section 147 aren’t proper then you could challenge the validity of such notice before the assessing officer or higher authorities.
• In case you win your case, the Court would halt your assessment proceedings. However, in case the decision doesn’t go in your favour, then the assessing officer could proceed with the reassessment.