Section 148 Of The Income The Tax Act: Reasons, Time Limit And Information For Issuing Notice

Income Tax

Have you recently received a notice from the Income Tax Department stating that your previously filed ITRs will be reassessed? 

Well, under Section 147 of the Income Tax Act, the IT Department of India has every right to reassess the previous income tax returns of taxpayers. However, this is only applicable if an Assessing Officer (AO) finds out that despite being subject to taxation, any income of the taxpayer has escaped assessment. In such cases, the AO can issue a notice and intimate the concerned person regarding this under the purview of Section 148 of the Income Tax Act. 

Keep reading to acquire a clear understanding of this section!

Also read: Section 154 of the Income Tax Act

Reasons for Issuing a Notice u/s 148 of ITA

As mentioned earlier, the notice can be issued to the assessee if an AO believes that his/her taxable income has not been assessed according to the IT Act guidelines. However, in that case, the designated officer needs to have valid reasons for doing so. Some instances in which an AO can send a notice to the taxpayer are given below:

• In case an Assessing Officer believes that the taxable income has escaped assessment, he/she must possess some kind of concrete evidence stating that. Without proper evidence and just on the basis of mere suspicion, he/she cannot send a notice to an assessee. 
• In case the materials submitted by assessees seem to be based on superficial reasoning and understanding, the AO needs to have solid reasons to believe that the taxpayer tried to evade a particular year’s assessment.
• If an AO receives some new information or documents that show that a particular assessee did conceal income, the officer can send a notice under Section 148 of the Income Tax Act. 

While this particular section of the IT Act allows Assessing Officers to issue a notice for evading assessment, there are certain clauses they need to keep in mind. Let’s check them out. 

• AO cannot issue such notices after the expiry of 3 years from the time that particular assessment year ended. However, certain exceptions are also available in such cases. For instance, if the Principal Commissioner or Chief Commissioner finds the AO’s reasons logical, he/she can issue a notice. 
• In case an Assessing Officer holds a rank that is lower than a Joint Commissioner, he/she will not be able to issue such a notice u/s 148 of ITA. In this case, too, if the Joint Commissioner thinks that the reasons are strong enough to issue a notice to the assessee, an AO can go ahead with that.
• An AO cannot produce such notices on the basis of information available on documents that the taxpayer submitted earlier when the assessment was going on. This is only applicable when taxpayers present new information afterwards. 
• Every Assessment Officer who is in charge of such cases must state the reasons for reassessment in writing. He/she needs to submit strong evidence as well. 

Now that you are aware of all the conditions and necessary reasons for issuing a notice under Section 148 of the Income Tax Act let’s check the time limit for this.

Time Limit for Producing a Notice u/s 148 of ITA

As stated earlier, it is necessary for an AO to issue the notice within 3 years from the end of that particular assessment year. This is applicable if the income escaped does not go beyond Rs. 1 lakh. However, in case the concealed income exceeds Rs. 50 lakh, an Assessment Officer can issue a notice u/s 148 within 10 years from the end of that relevant AY. 

Note that if such reassessments are already carried out under Section 143(3), the AO cannot issue further notices u/s 147. That said, he/she can issue a notice in the following cases: 

• The taxpayer did not furnish the ITR under Section 139.
• The taxpayer didn’t submit ITR following the issuance of notice u/s 142 and Section 148(1).
• The taxpayer did not submit information or data that were necessary for the assessment in that specific AY.

In the case of the scenarios mentioned above, if an AO issues a notice u/s 148, the assessee must submit certain information. 

Information Taxpayers Need to Provide after Receiving Notice u/s 148

Here are some details an assessee must provide once he/she receives a notice from the designated officer under Section 148 of Income Tax Act:

• Income Tax Returns 
• ITR of any other individual except the taxpayer deemed accessible according to clauses of this specific section of ITA. Also, the income tax returns should be of the year prior to that relevant AY. 

A taxpayer needs to submit these details within 30 days of receiving the notice. In case of providing ITR of any other assessable individual, he/she needs to follow the set format as per norms of Section 148. 

Also read: Section 194 of the Income-tax Act

Final Words

In case you receive such a notice under Section 148 of the Income Tax Act, make sure the information the AO is asking for is submitted within that stipulated period. File your income tax returns and obtain a copy of the reasons for issuing that notice. 

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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.