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.
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 –
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.
A notice under Section 148 of the Income Tax Act can be issued under the situation where-
Nevertheless, besides these reasons, the issuance of a notice under Section 148 has to be backed by a pre-set provision.
Ideally, Section 151(1) of ITA contains all provisions for the issuance of notice –
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.
Taxpayers need to keep these in mind while replying to a notice –
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.
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.