Section 148 of Income Tax Act
Have you recently received a notice from the Income Tax Department stating that your previously filed ITRs will be reassessed? That is probably because of issues pertaining to tax compliance. According to the Section 148 of the Income Tax, if an individual’s taxable income has bypassed assessment, an Assessing Officer has the right to issue a notice of reassessment to ensure tax compliance.
This blog talks about Section 148 of Income Tax Act and the provisions for reassessment in detail.
Reasons for Issuing a Notice under Section 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 Section 148 of ITA 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.
Also Read: Income Tax Assessment
Who can Issue the Notice under Section 148?
The power to issue notice is mentioned under section 151(1) of the Income Tax Act, 1961. These notices are sent to people who have escaped assessment or reassessment of taxable income. Only a few people have the authority to issue notices on specific conditions and they are:
- The Assessment Officer (AO) can issue notice only within a period of three years from the end of the relevant Assessment Year (AY). This is possible only if the Principal Chief Commissioner/Commissioner/Chief Commissioner is satisfied on the reasons recorded by the AO for issuing the notice.
- An Assessing Officer who has a rank above the assistant Commissioner or Deputy Commissioner is authorised to issue a notice. This is the case only if the Joint Commissioner approves of it. The Joint Commissioner must be satisfied with the reason given by the AO. The reason must be valid.
- If it is a case other than those mentioned above, the AO can issue a notice even if his/her rank is below the Joint Commissioner or three years have passed since the relevant assessment is over.
Also read: Section 154 of the Income Tax Act
Powers Given to an Assessing Officer under Section 148
Under section 148 of the Income Tax Act, the Assessing Officer has been bestowed with the power to assess or reassess taxable income that might have been missed and has not been assessed according to the guidelines of the Income Tax Act.
Suppose the Assessing Officer has any valid reason to suspect that the assessee has avoided assessment of any taxable income. In that case, the Assessing Officer can utilise his/her power of assessment as well as reassessment as per the provisions laid out under Section 147 through Section 153.
Duties & Rights of the Assessee as per Section 148
In case an assessee receives a notice from the Assessing Officer for avoiding assessment of taxable income, the assessee must do the following:
- The assessee will be required to file an income tax return for the income avoided for the said assessment year.
- After filing the return, the assessee can ask for a copy that states the reason behind the Assessing Officer issuing the notice to him or her under section 148.
- If the assessee does not find the reason behind the issuance of the notice satisfactory, he or she can file an objection challenging the issuance of the notice.
- The assessee must give a valid reason for challenging the issuance of the notice according to section 148.
- If the Assessing Officer dismisses the assesse’s claim, then the assessee can request the Assessing Officer to provide separate reasons.
- The assessee can file a writ petition in the high court, challenging the lawfulness of the notice issued by the Assessing Officer even before the assessment or reassessment is complete.
- An assessee can even file a writ petition to challenge the lawfulness of the issuance of the notice after the assessment is complete and the matter is under appeal.
To file the writ petition, the assessee has to provide proof for the following:
- Requested a copy of the reasons stated by the Assessing Officer for issuing the notice.
- Filed an objection against the reasons given by the Assessing Officer.
- Requested the Assessing Officer to give reasons for dismissing the assesse’s objection.
- Questioned the lawfulness of issuing the notice.
Also Read: Who is Considered as Income Tax Assessee Under the Income Tax Act?
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.
Things to Remember While Replying to a Notice under Section 148
The following things must be considered before replying to a notice under section 148 of the Income Tax Act, 1961:
- The assessee must try finding out the reason why the Assessing Officer has issued a notice. If no such reason is available, request a copy of it.
- If the reasons given by the Assessing Officer are justifiable, then the assessee must immediately file tax returns. If the tax has already been paid, a copy must be submitted to the Assessing Officer.
- Every taxpayer must be careful while filing a return so that no income or expenses are forgotten. If this is not taken care of, it might lead to legal penalties.
All the pointers mentioned above should be kept in mind, and individuals must ensure that their income is assessed each assessment year to avoid any tax complications.
Also Read: Section 147 of Income Tax Act
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.
FAQs
Ans: Here is a list of different types of notices an assessee may receive as per Income Tax Law:
1. Under Section 131 (1A) of ITA, in case the taxable income of that person is concealed.
2. Under Section 156 of ITA, for notice of demand.
3. Under Section 143(3), in case of scrutiny assessment.
4. Under Section 139(9), in case of defective ITR.
5. Under Section 148 and 147, in case the taxable income escaped assessment.
6. Under Section 142(1), in case of preliminary enquiry prior to an assessment.
7. Under Section 245, in case of adjustment of refund against the tax demand.
Ans: In case an Assessment Officer finds irregularities in taxes, he/she can issue a notice regarding reassessment. Reassessment u/s 148 for any asset outside India must occur within 16 years after the end of that assessment year.
Ans: In case of a revision, the newer return will replace the original one under Section 148. Additionally, the date of filing income tax returns will be the same as that of the original filing date.
Ans: If you find the reasons mentioned by the Assessing Officer in a notice to be inaccurate, you can challenge it. You have a right to file a writ petition challenging the legality of that notice before the respective High Court.
Ans: An Assessing Officer must collect material evidence against a taxpayer before he/she can issue a notice under this section. Suspicion alone cannot be grounds to issue such a notice. The materials offered as evidence should resonate with any reason to doubt a taxpayer’s intention of evading taxes.
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