Section 148 of Income Tax Act about Notice Under Assesssment

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!

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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?

As per section 151, The following pointers summarise eligibility criteria to issue a notice under Section 148 of the Income Tax Act:

If the notice issue by AO within 3 year from the end of the relevant assessment year with the prior approval of CIT or PCIT or DIT or PDIT.
If the notice issue by AO after 3 year from the end of the relevant assessment year with the prior approval of PCCIT or PDGIT, where there is no PCCIT or PDGIT then prior approval of CCIT or DGIT.

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, Notice u/s 148 shall be issue
- Up-to 3 year from the end of relevant assessment year or
- Up to 10 years from the end of the relevant assessment year, the Assessing Officer must possess books of account, documents, or evidence indicating the presence of taxable income. This income should be in the form of an asset or expenditure related to a transaction, event, occasion, or entry/entries in the books of account. Additionally, the escaped income should equal or exceed fifty lakh rupees, or have the potential to reach that amount.

In other words, if the Assessing Officer has substantial evidence suggesting the existence of significant undisclosed income, even if more than three years have passed since the end of the relevant assessment year, a notice under Section 148 can still be issued within ten years.

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.

FAQs about Section 148 of Income Tax Act

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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.

What is the purpose of Section 148 of the Income Tax Act?

Section 148 of the Income Tax Act pertains to the issuance of notices for reopening of assessments. Its primary purpose is to empower the income tax authorities to reassess a taxpayer's income and make necessary adjustments if they have reason to believe that income has escaped assessment. This section provides a legal framework for initiating proceedings for reassessment in cases where there is a valid reason to do so.

How to determine the revised tax payable after a section 148 notice?

Upon receiving a notice and order under Section 148, the taxpayer must file a revised income tax return for the relevant assessment year within the time specified in the notice. During the reassessment process, it is important to compute the revised tax liability accurately. Using an income tax calculator at this stage can help estimate the updated tax payable based on the revised income, deductions, and applicable tax rates.