Income Escaping Assessment Under Section 147/148 of Income Tax Act

Section 148 stands for reassessment or income escaping assessment. Nowadays income tax department is scrutinizing more returns under Section 148 of the Income Tax Act. So we are here to discuss about section 148 of the Income Tax Act, 1961.

Article explains Time limit for issuance of notice u/s 148, Issuance of show cause notice before initiating proceedings u/s 148, Service of notice is irrelevant for notice under section 148, Issuance of notice to file a return under section 148, Request AO to provide reasons for reopening under section 148, Filing of objection against reopening of the case, AO shall accept of reject the objection before proceeding further,Option of filing writ petition if not satisfied and Time limit for completion of assessment/ reassessment under section 147. We will be discussing what should be done if you receive notice u/s 148.

Time limit for issuance of notice u/s 148

Section 149(1) provides time limit for notice u/s 148 of the income tax act as under:

Notice under section 148 shall be issued for the relevant assessment year,—

(a) up to four years from the end of the relevant assessment year, if the escaped income is less than four years

(b) up to six years from the end of the relevant assessment year,if the escaped income amounts to or is likely to amount to one lakh rupees or more for that year;

(c) up to sixteen years from the end of the relevant assessment year, if the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.

Issuance of show cause notice before initiating proceedings u/s 148

Before initiating proceedings u/s 148, Assessing Officer generally issue a show cause notice why proceedings u/s 148 should not be initiated. We should always comply with such notice for the satisfaction of Assessing Officer and to avoid initiation of proceedings u/s 148 of the Income Tax Act.

Service of notice is irrelevant for notice under section 148

Assessing Officer shall issue notice u/s 148 on or before the end of the financial year i.e., 31^st March. Generally we get confused between issuance of notice and service of notice. Section 147 speaks about issuance of notice. Hence, a notice even delivered after 31^st March is a valid notice.

Issuance of notice to file a return under section 148

Before initiating proceedings, Assessing Officer shall serve on the assessee a notice requiring him to file return of income within specified time. Generally AO give time period of 30 days to file the return. We should always file a fresh return u/s 148 of the Income Tax Act, 1961 whether there is any change in the return of income or not.

Request AO to provide reasons for reopening under section 148

After filing the return within the time specified in the notice, we should always require from the Assessing Officer a verbatim (in exactly the same words) copy of reasons recorded for re-opening the case.

Filing of objection against reopening of the case

After receiving the reasons for reopening from the assessing officer, we should file our objection against reopening of the case if there is some valid ground for objection.

AO shall accept of reject the objection before proceeding further

 The assessee has the right to request the Assessing Officer to accept or dismiss the assessee’s objections in writing. The Assessing Officer shall dismiss the objections in writing before proceeding further with the proceedings.

Option of filing writ petition if not satisfied

If the assessee is of the opinion that the notice u/s 148 is not lawful or reasons recorded by the assessing officer is not sufficient for re-opening the case, he can file a writ petition with the relevant High Court challenging lawfulness of notice u/s 148 even prior to completion of assessment or reassessment.

Time limit for completion of assessment/ reassessment under section 147

Section 153A provides for time limit for completion of assessment/ reassessment. As per Section 153A, order u/s 147 shall be passed within nine months from the end of the financial year in which the notice under section 148 was served. For Example, Mr. A receives notice u/s 148 for Assessment Year 2012-13 on 31.03.2019. In this case, the AO shall pass order u/s 147 on or before 31.12.2019.

However, if the notice is issued on or after 01.04.2019, instead of nine months, AO will have time period of twelve months from the end of the financial year in which notice was issued.  For Example, Mr. A receives notice u/s 148 for Assessment Year 2013-14 on 31.03.2020. In this case, the AO shall pass order u/s 147 on or before 31.03.2021.

Time limit for completion of reassessment u/s 147