Notice under Section 148 of the Income Tax Act: Assessment or Reassessment Notice u/s148

Income Tax Notice Alert: The Income Tax Department has been issuing notices to taxpayers regarding House Rent Allowance (HRA) exemptions claimed under Section 10(13A) where TDS was not deducted on rent paid, as required under Section 194-IB. If you have received such a notice, it is crucial to take corrective action to avoid potential penalties. File Updated Return

Before making the assessment, reassessment, or recomputation, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable. The assessee is required to produce the details of his/her income tax returns within such period as may be specified in such notice by the assessing officer. A return of his income or the income of any other person in respect of which he is assessable under this Act In the case that the assessee needs to provide income tax returns of any other assessable person, then he or she has to provide them in the format specifically mentioned as per provisions of the act, with any other information to be provided with the detailed information. Before issuing a notice, the Assessing Officer will not state the reason for the notice given to the assessee in question.

What is Section 148?

The Income Tax Department can send a notice to the taxpayer under section 148 if he/she deems that the taxpayer’s income has not been assessed properly. In other words, if the assessing officer has a reason to believe that some income has escaped assessment, he/she can send a notice under section 148 to the taxpayer.

Why do you Receive a Notice Under Section 148 of the Income Tax Act?

There are numerous reasons under Section 148 for the issuance of a Notice to an assessee by an assessing officer, some of them are given below:-

• Before issuing any notice u/s 148, the assessing officer must have reason to believe that any income chargeable to tax has escaped assessment along with strong evidence. Without proof, the officer can’t produce a notice based on suspicion.
• A solid link must be presented, linking the material presented to the assessing officer with a reason to believe that the assessee has tried to evade assessment for the particular year in question.
• The information provided to the assessing officer should be of utmost relevance to the particular and not be based on any superficial reasoning and understanding.
• Before issuing the notice, the assessing officer must provide in writing why he/she thinks that the assessee in question has tried to evade the assessment of income.
• Simply stating and doubting that the assessee is hoarding a large sum of money without providing proof, reason, and information to back up the claim will not be considered a valid reason to issue a notice under Section 148.
• Unless any new information or reason is presented to the assessing officer, he or she can’t issue a notice to the assessee purely based on a difference of understanding. The assessment officer shall have no reason to suspect the assessee if he/she has provided disclosure regarding the particulars related to his/her taxable income and disclosed the practical and factual information that has led to his/her completion of his her assessment and reassessment.
• The Assessment officer cannot issue a notice based on the facts and information gained by reading the documents and information that the assessee has already submitted during the course of the assessment. The Assessing Officer can only issue a notice if and only if he/she has been presented with the new information and not by reading it by himself/herself.
• If any fact or information arises, which has been disclosed previously relevant to the assessment in question, the assessing officer can immediately issue a notice under Section 147/148, even if the information has come to notice in a later period.

Who is Authorized to Issue a Notice Under Section 148?

As per the rules and regulations stated under Section 148 of the Income Tax Act 1961, the following persons are authorized to issue a notice to the assessee who has escaped assessment or reassessment of taxable income under the following conditions:-

• No Assessing Officer currently ranked below the rank of Assistant Commissioner or Deputy Commissioner will be permitted to issue a notice under Section 148. This is in line with the provisions regarding any assessment that has been carried out for the assessment year of relevance under sub-section (3) of Section 143 or Section 147. This can only be circumvented by the Joint Commissioner, provided he or she is content that the reasons given by the Assessing Officer are valid enough for the issuance of any notice to the assessee.
• No supply of notice to the associate assessee will be manifested following the expiration of a three year period from the conclusion of the assessment year in question. This may otherwise be circumvented solely by the Chief Commissioner of Commissioner, provided he or she is content that the explanations given by the Assessing Officer are valid enough to send a notice to the assessee.
• For any cases that don't seem to be lined underneath Section 151, sub-section (1), the associate Assessing Officer is ready to issue a notice to the associate assessee as per Section 148 if:
  • His or her rank or position is below that of a Joint Commissioner.
  • The four-year period following the conclusion of the assessment year of connectedness has terminated.
• Note that the Joint Commissioner may solely circumvent this, provided he or she is content that the explanations given by the Assessing Officer are valid enough for the issuance of a notice to the assessee in question.

What is the Time Limit to Issue a Notice to an Associate Assessee Under Section 148?

As per the provisions given under Section 149, notices issued under Section 148 will manifest over the subsequent time frames:

• No notice under section 148 shall be issued for the relevant assessment year.
  (a) Normal time limit - Three years from the end of the relevant assessment year.
  (b) Specified time limit- if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of
  
  • An asset;
  • Expenditure in respect of a transaction or in relation to an event or occasion; or
  • An entry or entries in the books of account which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more

The Assessing Officer will solely issue a notice if any taxable income has been proved to have evaded assessment for the relevant year for the subsequent reasons:

• The assessee should have furnished his or her returns under Section 139.
• The assessee didn't furnished his or her returns following the issuance of a notice under Section 142, sub-section (1) of Section 148.
• The assessee should have given full and complete revelation with regard to any info, factual information, or particulars that are needed for the completion of the assessment for that relevant year.

How to Respond to the Notice Received Under Section 148?

Here’s how you can respond to the notice u/s148 -

• Step 1. First, check the notice to see if the Assessing Officer has recorded reasons for issuing it under Section 148. If the notice does not include the reasons, request a copy from the Assessing Officer.
• Step 2. You must respond to the notice within 30 days. You can do this by filing a return or providing a written reply with all necessary details and proofs.
• Step 3. If you agree with the reasons given by the Assessing Officer, file your return as soon as possible. If you have already filed, send a copy to the Assessing Officer.
• Step 4. When filing a return in response to a Section 148 notice, ensure you accurately declare all your income and expenses to avoid penalties.
• Step 5. If you believe the notice is invalid or the reasons for reopening the assessment under Section 147 are not valid, you can challenge it before the Assessing Officer or higher authorities.
• Step 6. If you win your case, the Court will stop the assessment proceedings. If you lose, the Assessing Officer will continue with the reassessment.

What is the Provision of Section 148 if the Assessee Does not Furnish Income Tax Return?

If the assessee does not furnish the Income Tax return within the timeframe underlined in the notice issued under Section 148 by the presiding Assessing Officer, the assessee shall be made to pay interest under Section 243(3) for late filing of the Income Tax return or for not filing of Income Tax return, if the income has already been determined under Section 143(1) or if the income if the assessment has already been done under Section 144 or Section 147.
Contrarily, if the assessee hadn’t furnished any return with respect to any assessment year and no assessment of such year has been done under Section 144. The interest of late filing of return in response to notice under Section 148 shall be levied on the assessee under Section 234(1) instead of Section 234(3).

Duties and Rights Of The Assessee After The Receipt Of Notice Under Section 148

• It is imperative for the taxpayer to fulfill their obligation of filing tax returns for any income that may be considered as "Income Escaping" for the relevant assessment year.
• Subsequent to the submission of tax returns, the taxpayer holds the entitlement to request a copy of the notice elucidating the rationale behind the Assessing Officer's decision to issue the notice under Section 148.
• Should the taxpayer find the grounds provided in the notice unsatisfactory or unfounded, they possess the right to file an objection challenging the validity of the notice.
• The taxpayer is required to substantiate their objections with valid reasons and question the legality of the notice issued under Section 148.
• If the Assessing Officer refutes the taxpayer's contentions, the taxpayer still maintains the right to demand separate justifications for the dismissal.
• Additionally, the taxpayer retains the option to lodge a writ petition with the appropriate High Court, contesting the legality and validity of the notice issued under Section 148, even prior to the completion of assessment or re-assessment.
• Even subsequent to the conclusion of the assessment and during the appeal process, the taxpayer reserves the right to file a writ petition with the relevant High Court, challenging the legality and validity of the notice under Section 148.
• The taxpayer must furnish evidence demonstrating the following actions: a. Soliciting a copy of the reasons provided by the Assessing Officer for issuing the notice under Section 148. b. Lodging an objection to the reasons presented by the Assessing Officer. c. Requesting the Assessing Officer to justify the dismissal of their objections. d. Contesting the legality of the notice's issuance.

Reopening of Income Tax Assessment Cases

As part of the Union Budget 2021, there has been a notable amendment regarding the time limit for reopening income tax assessment cases. Formerly set at six years, this period has now been curtailed to three years. However, in instances where substantial tax evasion is suspected, assessments can be reopened for a duration of up to ten years. It's important to note that this extended period applies only if the concealed income surpasses Rs. 50 lakh.

Furthermore, in the event that an assessee raises objections to the reassessment notice issued by the Assessing Officer, the officer is obliged to provide detailed reasons for rejecting these objections. This ensures transparency and allows the assessee to understand the basis upon which their objections have been dismissed.

The rationale behind reducing the time limit for reopening income tax assessment cases is to streamline tax administration, enhance compliance, and provide clarity and certainty to taxpayers. Moreover, the provision for an extended reassessment period in cases of significant tax evasion aims to deter tax evasion and ensure that individuals or entities attempting to evade taxes are held accountable.

Overall, these amendments are intended to promote fairness, efficiency, and integrity within the income tax assessment process while safeguarding the interests of both taxpayers and the revenue authorities.

Things to Consider While Replying to a Notice Under Section 148

You have two options to address the notice: either submit a tax return or send a written response to the Assessing Officer, including all necessary details and evidence. If you agree with the reasons provided by the assessing officer, promptly submit your tax return.

When responding to a notice issued under Section 148 of the Income Tax Act, 1961, individuals must consider several crucial factors to ensure compliance and address any potential legal implications effectively:

• Understand the Reasons for the Notice: Begin by comprehensively understanding the reasons behind the issuance of the notice by the Assessing Officer (AO). If the reasons are not explicitly stated in the notice, individuals have the right to request a copy for clarity and transparency.
• Promptly File Tax Returns: If the reasons provided in the notice are deemed justifiable, it is imperative to promptly file tax returns to avoid any legal complications. If tax returns have already been filed under Section 148, individuals should ensure to submit a copy of the returns to the AO in a timely manner to facilitate the assessment process.
• Exercise Caution and Diligence in Filing Returns: Exercise utmost caution and diligence while filing income tax returns. Any omission or incorrect reporting of expenses or income could lead to legal penalties. It is essential to ensure that all relevant information is accurately reported to prevent any discrepancies during the assessment.
• Familiarize with Section 148 Provisions: Familiarize yourself with the provisions outlined in Section 148 of the Income Tax Act to mitigate potential legal complexities. Understanding the legal framework governing reassessment proceedings can help individuals navigate the process more effectively and ensure compliance with relevant regulations.
• Regular Assessment: While Section 148 allows for the reassessment of income for certain reasons, it is advisable for individuals to get their income assessed each assessment year. Proactive assessment helps individuals remain tax compliant and minimizes the likelihood of facing inconveniences or legal challenges in the future.

How Can Tax2win Help You Respond to an Income Tax Notice?

Received a tax notice from the Income Tax Department? Don’t worry—Tax2win’s got your back! Here's how we make it stress-free:

• Expert Guidance: Get personalised assistance from our team of experienced CAs and tax professionals.
• Detailed Notice Analysis: We decode the notice to help you understand exactly what the IT Department wants.
• Right Documentation: We help identify and compile all necessary documents needed for your reply.
• Drafting Accurate Responses: Our experts prepare clear, compliant, and timely replies to avoid penalties.
• Complete Compliance: We ensure your response aligns with tax laws to reduce the chances of further queries.

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