Section 148 of Income Tax Act

If income has not been properly assessed, section 148 allows authorities to send notice to taxpayers. It implies that the assessing officer believes that the taxpayer has not completely disclosed their income or that the representation of income has been inaccurate. If so, the officers can initiate proceedings under this section.

The Finance Act of 2022 introduced section 148A of the Income Tax Act, which necessitates that the assessing authority conducts an inquiry and provides the taxpayer an opportunity to explain their case before a notice is issued u/s 148.

Under sec 148A(b) of the Income Tax Act, the respective authority will have to issue a notice to the taxpayer and give information and negative material that indicates that the income has evaded assessment. The taxpayer can respond to sec 148A(b) of the Income Tax Act with their evidence and material.

After taking into consideration the response of the taxpayer, the tax authority determines whether or not to issue a notice for reassessment. If the case must be reopened a copy of the order and notice under section 148 to the taxpayer.

Typically, a notice cannot be issued if three years have passed since the conclusion of the relevant assessment year. However, if there is proof of tax evasion of at least ₹50 lakhs, a notice beyond three years but within 10 years from the conclusion of the relevant assessment year can be issued.

The assessing officer will need to provide the taxpayer with all the information and material with notice u/s 148A of the Income Tax Act or the Show Cause Notice.

Here are the situations under which a notice can be issued u/s 148 of the ITA:

• The Assessing Officer has evidence material against the taxpayer who has escaped income assessment in a particular financial year. A notice cannot be issued simply on suspicion.

• Materials that have been shared with the Assessing Officer must showcase reasons to doubt the taxpayer’s intention to evade income assessment for a specific year. Additionally, all information provided must pertain to the case.

• Before the issuance of a notice u/s 148 of the ITA, the Assessing Officer will have to submit relevant reasons in writing explaining why the taxpayer in question is believed to have escaped income assessment.

Aside from the aforementioned reasons, the notice issued u/s 148 must be backed by a pre-set provision.

A notice u/s 148 of the ITA cannot be issued for the relevant assessment year after:

Normal time limit: Three years from the conclusion of the relevant assessment year

Specified time limit: Before 10 years from the end of the relevant assessment year and the Assessing Officer and the income evidence amounts to more than ₹50 lakhs and has not been taxed

A notice will only be issued only if the following conditions are met for the relevant assessment year:

• Returns have been filed by the taxpayer u/s 139.

• The taxpayer has not filed the IRT after having received a notice u/s 142 or 148(1).

• The taxpayer must have provided complete and accurate information that is necessary for completing the assessment of the particular year.

Understanding section 148A of the Income Tax Act time limit can assist the taxpayer in appropriately responding to the obligation. This can help avoid any penalty under the section 148 of Income Tax Act.

If no response is made to the notice under section 148, the Assessing Officer is at liberty to assess with the information they possess. They can estimate your income and evaluate it accordingly. If you disagree, you can file an appeal with the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal.

Here is the process to respond to notice u/s 148 of the ITA:

• Check the notice for reasons to believe that are provided by the Assessing Officer for issuance of the notice u/s 148. If the reasons have not been outlined, then you can ask the authority to provide a copy of the reasons.

• A response to the notice has to be provided within 30 days. The response can be given either by filing a return or with a written response to the Assessing Officer with evidence and information.

• If the ‘reason to believe’ is accurate, file ITR at the earliest. If the return has already been filed, share a copy of the ITR with the Assessing Officer.

• When filing ITR by responding to section 148, ensure proper due diligence and declaration of income and expenses. Failing to report the income can lead to unnecessary penalties.

• If the notice is invalid, then it can be challenged before the assessing authorities or higher authorities.

• If you win your case, the court will halt the assessment proceeding. Otherwise, the assessment proceeding continues.

Section 148 of the ITA is designed to uphold fairness and compliance in the taxation system by reopening cases where income has escaped assessment. To avoid penalties under Section 148 of the Income Tax Act, taxpayers must exercise vigilance by maintaining accurate records and fulfilling their tax obligations.

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