Section 148 of Income Tax Act 1961: Notice and Reply

Section 148 of the Income Tax Act 1961 gives the income tax department the power to issue a notice for the reassessment of income tax returns. This notice can be issued if the income tax department has reason to believe that an individual or entity has not fully disclosed their income or has underreported it. If you receive a notice under Section 148, it is important to understand what it means and how to respond. In this article, we will discuss Section 148 of Income Tax Act 1961: Notice and Reply.

What is a Notice under Section 148?

A notice under Section 148 is a notice for the reassessment of income tax returns. This notice can be issued up to four years from the end of the assessment year for which the original return was filed. If the income tax department has reason to believe that an individual or entity has not fully disclosed their income or has underreported it, they can issue a notice under Section 148.

Reasons for receiving notification under Section 148

An individual could receive a notice under section 148 where the Assessing Officer believes that the taxable income of such an individual may have escaped assessment.

The AO records his reasons in writing and sends an individual notice under Section 148 if there is evidence to support his belief. The Assessing Officer cannot just change his mind and go for a fresh inquiry without a valid reason.

When the assessee has corrected the information and disclosed all the documents in the original assessment, the assessee cannot send for a re-assessment of the same documents. Some facts or new documents should come to light that show that the income has escaped assessment.

If new information or documents come to light indicating that the person in question has concealed income, the AO may take action against the person so assessed under Sections 147 and 148.

Provisions on the issuance of notification under Section 148

The Assessing Officer will issue notice only if any taxable income is proved to have evaded assessment in the relevant year for the following reasons:

• The assessee should have submitted his returns under Section 139.
• The assessee did not file his return after the notification according to Section 142(1) of Section 148.
• The assessee should provide a complete disclosure in respect of any information, factual information, or particulars which are required to complete the assessment for the relevant year.

In an ideal case, Section 151, sub-section 1 of the ITA contains all the provisions for issuing notices–

• In case 4 years have elapsed since the end of the relevant assessment year, the assessee cannot issue a notice. However, an exception may be made if the Chief Commissioner, Chief Commissioner, or Chief Commissioner is satisfied with the reasons of the Assessing Officer.
• The Assessing Officer cannot issue a notice under Section 148 if he is lower in rank than the Joint Commissioner, except in the above case. Notwithstanding this, an exception may be made if the Joint Commissioner is satisfied with the reasons recorded.
• In either case (i) or (ii), the Chief Commissioner, the Chief Commissioner, the Principal Chief Commissioner, or the Joint Commissioner shall not himself issue the notice even if he is satisfied with the reasons recorded by the Assessing Officer.

Time limit for issuing notice to an associate assessee under Section 148

According to the provisions of Section 149, notices issued under Section 148 will take effect within the following time frames:

No notification under Section 148 is issued for the relevant assessment year.

• Normal period – three years from the end of the relevant assessed year.
• Prescribed period – if three years have elapsed since the end of the relevant assessment year but not more than ten years, unless the Assessing Officer has in his possession the books of account or other documents or evidence to show that the billed income is taxable, represented in the form of-
• asset;
• Expenses in connection with a transaction or connection with an event or occasion; or
• The entry in the books which escaped assessment amount or are likely to amount to fifty lakh rupees or more.

Reply to the notice under Section 148 of Income Tax Act 1961

There are two ways to respond to the notice under Section 148. The first option is to file a return in response to the notice. The second option is to file a written reply explaining why you disagree with the notice. It is important to note that the reply should be filed within the stipulated time mentioned in the notice. If you fail to respond within the stipulated time, the income tax department may initiate further action against you.

If you agree with the notice, you can file a revised return and pay any additional tax that may be due. It is important to note that interest and penalties may also be applicable on the additional tax due. If the income tax department decides to hold a hearing, you should attend the hearing and present your case. It is advisable to have a tax professional or a chartered accountant represents you at the hearing.

If you disagree with the notice, you should file a written reply explaining why you disagree with the notice. The reply should be backed by documentary evidence and should be filed within the stipulated time mentioned in the notice. The income tax department will review your reply and may issue a revised assessment order based on the information provided. If you are not satisfied with the revised assessment order, you can file an appeal with the relevant appellate authority.

It is important to note that failure to respond to the notice under Section 148 can have serious consequences. The income tax department may initiate penalty proceedings, prosecute you for tax evasion, or even attach your assets. It is therefore important to respond to the notice in a timely and appropriate manner.

Things to remember while replying under Section 148 of the Income Tax Act

If you receive a notice under Section 148 of the Income Tax Act, it is important to respond in a timely and appropriate manner. Consider below points:

• Review the notice carefully: Carefully review the notice and understand the reason why it has been issued.
• Gather necessary documents: Gather all the necessary documents, such as bank statements, income tax returns, and other financial records.
• Consult a tax professional: Consult a tax professional or a chartered accountant to understand the implications of the notice and to help you respond appropriately.
• Respond to the notice: You can respond to the notice in two ways – you can either file a return in response to the notice, or you can file a written reply explaining why you disagree with the notice.
• File a revised return: If you agree with the notice, you can file a revised return and pay any additional tax that may be due.
• Attend the hearing: If the income tax department decides to hold a hearing, attend the hearing and present your case.

Final words

Summarily we can say that a notice under Section 148 of the Income Tax Act 1961 can be issued by the income tax department for the reassessment of income tax returns. If you receive a notice under Section 148, it is important to understand the reason why it has been issued and to respond in a timely and appropriate manner. By following the steps outlined above, you can ensure that you respond appropriately and minimize any potential liability.