A Comprehensive Guide about Section 148 of the Income Tax Act

section 148 of income tax act — (Source: cawizard.com)

Section 148 of the Income Tax Act states that if an individual's taxable income has escaped assessment from the IT department, an Assessing Officer will issue a notice to furnish necessary documents to prove that they are tax compliant. This article summarises the vital aspects of this Section of ITA. So if you are curious to know about it, keep scrolling!

What Is Section 148 of the Income Tax Act?

As per Section 148 of the Income Tax Act, an Assessing Officer can issue a notice to taxpayers if their income escapes from the computation. They need to offer the following documents:

Income tax returns of an assessee
An individual's income tax return besides the assessee

Remember, an assessee must furnish income tax returns within 30 days or a date specified in a notice.

Who Qualifies to Issue a Notice Under Section 148 of the Income Tax Act?

The following pointers summarise eligibility criteria to issue a notice under Section 148 of the Income Tax Act:

An Assessing Officer holding rank below Deputy Commissioner is not eligible to issue a notice to a taxpayer. This aligns with the provision specified in Section 151 (1). It is also mentioned under sub-section (3) of Section 147 or Section 143.

However, if a Joint Commissioner considers a reason provided by an Assessing Officer as valid, then AO can issue a notice to the taxpayer in question.

An Assessing Officer cannot issue a notice after the expiry of 4 years from the conclusion of the proposed assessment year. However, an Assessing Officer can issue a notice to the taxpayer if a Principal Chief Commissioner finds that reasons provided by an AO are fit for issuing a notice.
In either case (1) or (2), Principal Chief Commissioner, Principal Commissioner, or Joint Commissioner may not send a notice on their own, based on the fact that they considered reasons collected by an AO fit for issuing a notice.

What Are the Factors to Consider Before Issuing a Notice Under Section 148?

An Assessing Officer considers the following factors before issuing a notice to the taxpayer in question:

An Assessing Officer will issue a notice based on genuine evidence to prove that a taxpayer's taxable income has escaped the assessment for the given assessment year.
The Assessing Officer must mandatorily provide written notice before sending a notice. This written notice must state the reason to suspect a taxpayer in question for income tax evasion from assessment.
Suppose a taxpayer has furnished necessary documents and additional information which completed his or her re-assessment or assessment. In that case, an Assessing Officer cannot issue a notice based on differences in opinions.
An Assessing Officer can issue a notice if he or she finds any new information besides the ones provided to him or her.
A taxpayer may fail to disclose any information related to his or her taxable income. In that case, Section 148 of the Income Tax Act and Section 147 authorise an AO to issue a notice to that individual.

Timespan Within Which Officials Can Issue a Notice Under Section 148

Note the following timespan within which an official can issue a notice to a taxpayer for tax evasion:

According to Section 149, if an individual evades a taxable income of ₹ 1,00,000 from assessment, an Assessing Officer can send a notice within 4 years from the conclusion of an assessment year in question.
If a taxpayer evades a taxable income beyond ₹ 1,00,000, re-assessment remains valid up to 3 years from the conclusion of the assessment year in question. An official will issue this notice based on the provisions mentioned in Section 151.
An assessment remains valid for up to 16 years if an individual earns an income from assets outside India.
If a re-assessment or assessment is completed based on Section 147 or Section 143(3), and 4 years have expired from the end of the assessment year in question, an AO cannot issue a notice to a taxpayer as per Section 147. However, note that an officer can send a notice based on the following reasons:
- A taxpayer fails to submit his or her income tax returns as per Section 139, 148 or 142(1); or,
- An individual fails to disclose factual information needed for assessing the taxable of the assessment.

Things to Consider While Replying to a Notice Under Section 148

Consider the following factors to reply to a notice issued under section 148 of Income Tax Act 1961:

Firstly, find the reasons which induced an AO to send a notice. If reasons are not available, individuals can request a copy of the same.
In case individuals find the reasons justifiable, they need to file tax returns immediately to avoid legal issues. If they have already filed tax returns under Section 148, they must submit a copy to an AO.
Be careful while filing income tax returns. Missing out on any expenses or income may lead an individual to face legal penalties.

Keep the pointers about Section 148 of the Income Tax Act in mind to avoid legal complexities. However, individuals must get their income assessed every assessment year to remain tax compliant to avoid such inconvenience.

Frequently Asked Questions

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What is the timeframe for which the re-assessment is applicable on evading ₹ 50,00,000 or more from the assessment?

According to the Union Budget 2021, Nirmal Sitharaman proposed that if an individual evades ₹ 50,00,000 lakh or more from tax assessment, the re-assessment will remain valid for up to 10 years.

Can a taxpayer challenge the validity of the notice under Section 148 of the Income Tax Act?

A taxpayer may find the reasons stated by an AO to assess taxable income invalid. In that case, he or she can challenge such notice before a higher authority or an Assessing Officer. If he or she wins the case, the Court may cease the assessment of taxable income. However, if the taxpayer fails in that court proceeding, an AO can proceed with the re-assessment.