This article is written by Daisy Jain, a law student at the Institute of Law, Nirma University. This article gives you an overview of Section 148 of Income Tax Act, 1961. It also talks about the reassessment considerations while issuing a notice under Section 148.

It has been published by Rachit Garg. 

Introduction 

The Income Tax Department (IT) has the authority to review an income tax return previously filed by any individual under Section 147 of the Income Tax Act, 1961 (IT Act or ITA). By issuing a notice under Section 148 for income avoiding assessment, the Assessing Officer may accept your ITR for reassessment considerations if such stated circumstances are met. Let’s talk more about the assessment and reassessment notices issued pursuant to Section 148 of the Income Tax Act. According to Section 148 of the Income Tax Act, if a person’s taxable income has evaded the IT department’s assessment, an Assessing Officer will issue a notice to provide the appropriate documentation to demonstrate that they are in compliance with tax laws. The essential features of this Section of the ITA are summarised in this article. So, if you’re interested in learning more, keep reading!       

Understanding Section 148 of Income Tax Act, 1961

Being a diligent citizen, you paid your taxes and are now at ease. Nevertheless, there’s a likelihood you could not have mentioned all of your sources of income. Akin to this, a small percentage of people can purposefully decide not to reveal all of their incomes, minimize their taxes, and therefore dodge paying taxes. The law has put in place the necessary safeguards to monitor such instances. One such safeguard provided by our legislators is Section 148 of the Income Tax Act, 1961. 

The IT department must notify any income tax computation that hasn’t been recalculated or reassessed in accordance with Section 148 of the IT Act. The assessee would be contacted by an Assessing Officer, according to this provision. The issuance of notification in cases where any income has avoided recomputation or reassessment is covered under this Section. According to this Section, an Assessing Officer must inform the concerned assessee by providing him or her with a notice requesting the following information: 

• His/her tax returns for income.
• The income tax returns of a person other than the questioned assessee who was found to be liable for assessment under this Act in the year preceding the pertinent assessment year.

Either within a 30-day notice period or within a time frame that has been expressly indicated in the Assessing Officer’s notice, the assessee will be expected to submit his or her income returns. The assessee will be expected to produce the income returns of any other assessable persons in the manner and format that have been authorized and confirmed in accordance with the Act’s provisions, as well as any other pertinent information that may be expected to be supplied. The Assessing Officer would explain his reasoning before sending any notification to the concerned assessee.

Any taxable income that may have slipped unnoticed and has not been assessed in accordance with the specified standards of the Income Tax Act may be assessed or reassessed by an Assessing Officer under Section 148. The Assessing Officer may exercise his or her right to conduct an income assessment or reassessment in accordance with the rules outlined in Sections 147 through 153 if there is any reason to believe that an assessee’s taxable income may have escaped assessment.

Who can issue a notice under Section 148 of Income Tax Act

The following are the factors that determine the eligibility criteria for issuing a notice under Section 148 of the Income Tax Act, 1961: 

• An Assessing Officer with a level lower than a Deputy Commissioner is ineligible to give a taxpayer a notice. This is consistent with the clause listed in Section 151(1). Additionally, it is referenced in Section 147 or Section 143(3). However, if a Joint Commissioner finds that an Assessing Officer’s justification is credible, the AO may notify the concerned taxpayer.
• After four years have passed since the end of the intended assessment year, an Assessing Officer is not permitted to issue a notice. Nevertheless, if a Principal Chief Commissioner decides that the justifications offered by an AO are sufficient for issuing a notice, an Assessing Officer may send a notice to the taxpayer.
• Principal Chief Commissioner, Principal Commissioner, or Joint Commissioner are not permitted to submit a notification on their own in either scenario (1) or (2), even though they believe the justifications gathered by an AO to be sufficient for doing so.

Timeframe to issue a notice under Section 148 of Income Tax Act 

Keep in mind that a notice of tax evasion might be given to a taxpayer within the following timeframe:

• In accordance with Section 149, an Assessing Officer may send a notice within 4 years after the end of an assessment year in question if a person fails to report a taxable income of 1,00,000 to the IRS.
• Re-assessment is still acceptable up to three years after the end of the assessment year in concern if a taxpayer avoids a taxable income of over one million rupees. On the basis of the rules outlined in Section 151, a representative will issue this notice.
• If a person receives income from resources outside of India, an assessment is still legitimate for up to 16 years.
• An AO cannot send a notification to a taxpayer in accordance with Section 147 if an assessment or reassessment has been finished relying on Section 147 or Section 143(3) and 4 years have passed since the end of the assessment year in concern. However, take note that an Officer has the following authority to issue a notice:

1. A taxpayer skips filing their income tax returns in accordance with Section 139, 148, or 142(1).  
2. A person lacks to provide factual information required for determining the tax liability.

Reasons for issuing a notice under Section 148 of Income Tax Act

• If the Assessing Officer has cause to think that your income that was subject to tax has evaded assessment, you may get a notification under Section 148. If he has evidence to back up his claims, he will put them in writing and issue you a notice in accordance with section 148. The AO cannot just choose to reopen your case without providing any justification.
• The AO cannot give you a notice for the reassessment of the identical documents if you provided accurate information and documents during the initial assessment. There must be some fresh evidence—new documents or facts—demonstrating that income has evaded taxation. He may initiate legal proceedings against you under Sections 147 and 148 if fresh information surfaces that indicates you have hidden some money.
• The Assessing Officer shall mandatorily record and give reasons why he or she believes the assessee is evading the assessment of income pursuant to the issuing of any notice to an assessee under Section 148.
• If there is no evidence or information to support the assertion that the assessee has disguised a significant amount of income or that the assessee needs to be further examined, the statement will not be taken into consideration as a valid basis to send a notice to the assessee under Section 148. Such justifications will be characterized as imprecise and vague.
• The Assessing Officer cannot serve a notice to an assessee relying only on a disagreement in viewpoint or perception until new and pertinent information or data is given to the Assessing Officer. If an assessee has revealed all pertinent data related to his or her taxable income as well as revealed and given fact-based data, which has resulted in the finalisation of his or her assessment or reassessment, the Assessing Officer will not have cause to assume or sincerely doubt the assessee in the inquiry.
• Relying on documentation and actual facts that the assessee has already submitted over the course of the assessment, the Assessing Officer cannot merely make a fresh judgement and send a notice to the assessee. Only after the Assessing Officer has been given additional information or documentation can a notice be issued.
• The Assessing Officer, however, will have full power to send a notice to the infringing assessee under Section 147/148 if any data or specifics have been either covered up or not revealed by the assessee in an inquiry and such an intervention has come to the Assessing Officer’s notice at a later stage.

What to do if you have been issued a notice under Section 148 of Income Tax Act

The process that should be followed after a notice has been given under Section 148 has been set forth by the Supreme Court. The following are the stages:

• The assessee may submit a new return with the actual income in accordance with the notification. Income may be equal to or greater than what the assessee reported in the initial return.
• The assessee may write to the Assessing Officer and request that the returns submitted in accordance with Section 139(1) be regarded as returns submitted in response to the Section 148(1) notice. 
• The assessee may request justification for the issuance of the notice under section 148 after the returns have been submitted. The assessment proceedings and the finalised assessment judgment may be invalidated if such justifications are not given (CIT v. Jagat Talkies Distributors, 2017).
• The assessee also has the option to challenge the notice, and the Assessing Officer is required by spoken order to resolve those concerns (Simaben Vinod Rai Ravani v. ITO, 2017).
• If the Assessing Officer rejects the assessee’s concerns, he must wait four weeks before moving forward to give the assessee time to take corrective steps and dispute the denial decision.
• The assessee may submit an application under Section 144A to the additional/joint commissioner if the Assessing Officer does not resolve the concerns and initiate assessment processes.
• The assessee may participate in the assessment process without disagreement and may file a review against the assessment order with the Commission (Appeals).

Replying to notice under Section 148 of Income Tax Act 

The most important thing to remember is not to take notice carelessly. Please abide by the following instructions if you get a notice under Section 148:

• Look at the notice to see if there are any grounds for belief that the Assessing Officer documented when issuing the notice in accordance with section 148. You could ask the Assessing Officer to submit a copy of the documented justifications if the notice does not include them.
• If you have good cause to accept what the Assessing Officer reported, file the return as soon as possible. Submit the copy to the Assessing Officer in the previously filed case.
• If you are submitting an income tax return in reply to a notification under Section 148, make sure you do your thorough research and accurately state all of your expenses and earnings. If you fail to accurately disclose any of your revenue, it could lead to needless fines.
• You may contest the legitimacy of such a notice before the Assessing Officer or higher officials if you think that the notice was not formally charged or that the reasons given by the Assessing Officer for initiating the assessment under Section 147 are incorrect.
• The Court would stop the assessment process if you won your case. Nevertheless, the evaluating Officer may move forward with the reassessment if the verdict is not in your favour.

Conclusion 

Thus, it can be inferred that in cases where an income has eluded re-computation or assessment, the IT Department may send a notification in accordance with Section 148 of the Income Tax Act. The Assessing Officer must, nevertheless, have verifiable proof that the assessee avoided having their income for the relevant assessment year assessed.

Frequently Asked Questions 

What is Section 148 of Income Tax Act reassessment notice?

If an income escaping assessment is made on an already filed income tax return and it satisfies the requirements, it is known as a Section 148 reassessment notification.

Is it possible to challenge a Section 148 notice of reassessment of income tax?

If you are confident that the justifications given are false, you may question the reliability of an income tax reassessment notice.

What is the deadline for reopening Section 148 Income Tax reassessment cases?

Following the Union Budget of 2021, the window for reopening Section 148 income tax reassessment cases has been reduced from six years to three years for any income exceeding Rs. 50 lakh.

What occurs if a tax reassessment is found to be incorrect?

If you successfully contest the legality of an income tax reassessment under Section 148, the Court will halt any legal action taken against you.

References 

• https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2015/102120000000041054.htm
• https://taxguru.in/income-tax/revised-guideline-issue-section-148-notice.html
• https://indiankanoon.org/doc/159328346/
• https://indiankanoon.org/doc/81051535/

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