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Section 148 of Income Tax Act

According to Section 147 of the Income Tax Act, the Department of Income Tax can reassess a taxpayer’s previous ITRs. The designated officer can select a taxpayer’s ITR to reassess it as per pre-defined guidelines. It is initiated by sending a notice under the purview of Section 148 of the Income Tax Act for income escaping assessment. 

What is Section 148? 

Section 148 of the Income Tax Act mentions that any tax calculation that has not been reassessed will be notified by the tax department. It also states that an IT Assessing Officer Will contact the assessee in question.

In other words, this section of Income Tax Act is concerned with issuing a notice when an income was not reassessed. 

Ideally, as per its provisions, assessing officers inform concerned assessees by sending a notice to furnish the following –

  • Assessee’s income returns. 
  • ITR of an individual who is not the concerned assessee.

One must note that said assessee has to provide income tax returns within a month of the notice period or within a period that has been clearly mentioned in the received notice. 

If an assessee provides the ITR of some other individual who can be assessed, he/she must submit tax returns in a manner as prescribed and substantiated by provisions of ITA. At the same time, they have to provide other required particulars to streamline the process better. 

Nonetheless, before issuing any notification, the concerned Assessing Officer will convey his/her reasons for issuance. 

Reasons to Issue a Notice Under Section 148

A notice under Section 148 of the Income Tax Act can be issued under the situation where-

  1. The Assessing Officer possesses material evidence against the assessee who has evaded income assessment in a given year. No notice shall be issued based on suspicion. 
  2. Materials provided to the Assessing Officer must resonate with reasons to doubt an assessee’s intent to escape income assessment in a given year and that any information shared with the Officer is absolutely relevant to the case.
  3. Before issuing any notice under Section 148 of Income Tax Act 1961, the Assessing Officer has to record suitable reasons in writing, stating why the assessee in question is believed to have evaded income assessment.

Nevertheless, besides these reasons, the issuance of a notice under Section 148 has to be backed by a pre-set provision. 

Provisions for Issuance of a Notice Under Section 148

Ideally, Section 151(1) of ITA contains all provisions for the issuance of notice –

  1. In case 4 years have passed from the end of the relevant assessment year, the Assessing Officer cannot issue a notice under Income Tax Section 148. However, an exception can be made if the Chief Commissioner, Principal Commissioner, or Principal Chief Commissioner is satisfied with the assessing officer’s reasons. 
  2. Besides the above-mentioned case, the Assessing Officer cannot issue a notice under Section 148 when he/she is holding a rank lower than a Joint Commissioner. Regardless, an exception can be made if the Joint Commissioner is satisfied with the recorded reasons. 
  3. In either (i) or (ii) the Principal Commissioner, Chief Commissioner, Principal Chief Commissioner, or Joint Commissioner may not issue the notice on their own, even when they are satisfied with the reasons recorded by the assessing officer. 

When can a Notice Be Issued Under Sec 148?

As per Section 149 of ITA, a notice under Sec 148 of Income Tax Act is issued within 4 years from the end of the assessment year in question. However, in such a case, the income should not have exceeded Rs. 1 lakh. 

If the total escaped income is more than Rs. 1 lakh, then a notice can be issued within 6 years from the end of the assessment year in question. Nevertheless, the same has to be carried out as per the provisions of Section 151.

Alternatively, when the unassessed income comprises assets located outside India, a notice can be issued within 16 years from the assessment year in question. 

Further, no action can be taken post 4 years from the relevant year if the assessment has been completed under section 143(3) or 147. However, the same can be accounted for if the taxable income escaped for the given assessment year is due to the assessee’s inability to file Income Tax Return

Things to Consider While Replying to a Notice

Taxpayers need to keep these in mind while replying to a notice –

  • Check the reasons provided that have driven the Assessing Officer to issue a notice under Section 148.
  • In case no reasons are provided, one can request the Assessing Officer to provide a copy of it. 
  • Once satisfied with the reasons provided by the said assessing officer, the taxpayer has to file ITR. Given that the taxpayer has already filed returns, he/she should send a copy of it to the concerned assessing officers. 
  • When filing an ITR against the issuance of a notice under Sec 148, the taxpayer in question should proceed to file it after declaring all of his/her income and expenses accurately. It is because under-reporting or misreporting income leads to unnecessary penalties. 

Nonetheless, if one believes that the reasons for serving this notice are not valid or improper under Section 147, then said taxpayer can challenge it before higher authorities. 

Notably, when a taxpayer wins his/her case, the authority in question may stop the assessment proceedings. Nevertheless, one must note that this decision may not always favour said taxpayer. In such cases, the Assessing Officerhas the authority to continue to reassess. 

There are several provisions under Section 148 of Income Tax Act regarding the issuance of a notice. It will come in handy for taxpayers to become aware of them in advance to eliminate the need to go through trials and other related legal formalities. However, the best way to avoid such hassles entirely includes getting income assessed every year without fail.

Reopening Income Tax Assessment Cases

The Union Budget of 2021 had decided to shorten the time restriction for reopening income tax assessment cases from six years to three years and in the case of substantial tax evasion. It may be reopened for ten years, only if the income concealed is more than Rs. 50 lakhs.

Section 148 of Income Tax Act - FAQs

Q1. In how many years can a reassessment under Section 148 take place when out of the country?

When there are any irregularities in taxes related to assets outside of India, Section 148 income taxes can take place in 16 years from the end of the relevant assessment year.

Q2. What is a reassessment notice under Section 148?

A section 148 reassessment notice is an assessment done on an older filed income tax return if it meets the conditions of an Income Escaping Assessment.

Q3. What will happen if tax reassessment is false?

When you have challenged the validity of an income tax reassessment under Section 148 and you also turn out to win the case, all of the legal proceedings against you will be stopped.

Q4. What is the tenure limit to open tax reassessment case again, under Section 148?

After the Union Budget of 2021, it is stated that the time limit to reopen income tax under Section 148 is ten years for any income that is more than Rs.50 lakhs.

Q5. Can I challenge a reassessment income Tax notice under Section 148?

Yes, you can challenge the validity of an income tax reassessment notice.

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