Reasonableness of Notices issued under section 148 w.r.t Assessment or Reassessment of Income Escaping Assessment under section 147
Finance Act, 2021 has revamped the whole provisions of Reassessment by amending the provisions of Section 147 to 151 of the Income Tax Act w.e.f. 01st April 2021.
Under the old provisions of Section 149 i.e., the Time limit for Issue of Notice under section 148, Notice of Reassessment or Income Escaping assessment could have been given within 4 years from the end of the relevant assessment year only if Income chargeable to tax which had escaped assessment is less than Rs. 1 lakh. However, the notice can be issued within 6 years from the end of the relevant assessment year if Income is chargeable to tax which had escaped assessment amounting to Rs. 1 lakh or more.
Under the amended provisions applicable w.e.f. 01st April 2021, the Time limit for Issue of Notice u/s 148, Notice of Reassessment, or Income Escaping assessment could be issued within 3 years from the end of the relevant assessment year. However, the notice can be issued within 10 years from the end of the relevant assessment year if, Income is chargeable to tax which has escaped assessment amounting to Rs. 50 lakh or more.
First Proviso to Section 149(1) which puts a restriction that the notice u/s 148 cannot be issued in a case for the AY 2021-22 (or an earlier assessment year) if such notice could not be issued at that time on account of time-barred limitation prescribed under the old provisions of Section 149. It means that the old time limit will be applied simultaneously for the AY 2021-22 or an earlier AY.
Now let us understand the above provisions with help of an Example.
Illustration 1: Let us say, for the AY 2015-16, the Assessing Officer (A.O.) finds on 30-03-2022 that the Income of Rs. 55,43,000 has escaped assessment. The Assessing Officer issued a notice u/s 148 on 30.03.2022 and the assessee is asked to file the reply to it by 29-04-2022.
In the above case, let us revisit the old and new provisions of Section 149 to check whether the above notice is time-barred or not.
Analysis:
- As per the old provisions, the Assessing Officer can issue the Notice is till 31st March 2022 which is within 6 years from the end of relevant AY as the Income which has escaped assessment amounts to Rs. 1 lakh or more.
- As per the New provisions, the Assessing Officer can issue the Notice till 31st March 2026 which is within 10 years from the relevant AY as the Income which has escaped assessment amounts to Rs. 50 lakh or more.
- To conclude, we can say that the Assessing Officer is correct in law to issue the issue under 148 i.e., on 30-03-2022 and the Notice issued is not time-barred. Moreover, the Assessing Officer has to take prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General to issue such notice.
- However, if the above notice has been issued by the Assessing Officer on 06-04-2022 which is beyond the time limit to issue a notice under section 148 as per section 149 is 31st March 2022. Therefore, the Assessing Officer cannot issue the notice to the assessee after 31-03-2022.
Illustration 2: XYZ Ltd. wants to know whether a reassessment notice can be issued by the Assessing Officer under section 148 for the AY 2010-11 to 2020-21 on 30.12.2021
Case I: Income escaped for Rs. 30 lakhs
Case II: Income escaped for Rs. 55 lakhs
Analysis:
Case I:
| Assessment
Year |
Last date to
issue notice-Old Law |
Last date to
issue notice-New Law |
Whether Notice can be issued- Old Law | Whether Notice can be issued- New Law | Validity of Notice |
| AY 2010-11 | 31-03-17 | 31-03-14 | No | No | Time-Barred |
| AY 2011-12 | 31-03-18 | 31-03-15 | No | No | Time-Barred |
| AY 2012-13 | 31-03-19 | 31-03-16 | No | No | Time-Barred |
| AY 2013-14 | 31-03-20* | 31-03-17 | No | No | Time-Barred |
| AY 2014-15 | 31-03-21* | 31-03-18 | No | No | Time-Barred |
| AY 2015-16 | 31-03-22 | 31-03-19 | Yes | No | Time-Barred |
| AY 2016-17 | 31-03-23 | 31-03-20 | Yes | No | Time-Barred |
| AY 2017-18 | 31-03-24 | 31-03-21 | Yes | No | Time-Barred |
| AY 2018-19 | 31-03-25 | 31-03-22 | Yes | Yes | Valid |
| AY 2019-20 | 31-03-26 | 31-03-23 | Yes | Yes | Valid |
| AY 2020-21 | 31-03-27 | 31-03-24 | Yes | Yes | Valid |
*Due to the COVID-19 pandemic in 2020 and 2021, the Government had extended the due dates of various compliances on multiple occasions which is 30th June 2021.
Case II:
| Assessment
Year |
Last date to
issue notice-Old Law |
Last date to
issue notice-New Law |
Whether Notice can be issued- Old Law | Whether Notice can be issued- New Law | Validity of Notice |
| AY 2010-11 | 31-03-17 | 31-03-21 | No | No | Time-Barred |
| AY 2011-12 | 31-03-18 | 31-03-22 | No | Yes | Time-Barred |
| AY 2012-13 | 31-03-19 | 31-03-23 | No | Yes | Time-Barred |
| AY 2013-14 | 31-03-20* | 31-03-24 | No | Yes | Time-Barred |
| AY 2014-15 | 31-03-21* | 31-03-25 | No | Yes | Time-Barred |
| AY 2015-16 | 31-03-22 | 31-03-26 | Yes | Yes | Valid |
| AY 2016-17 | 31-03-23 | 31-03-27 | Yes | Yes | Valid |
| AY 2017-18 | 31-03-24 | 31-03-28 | Yes | Yes | Valid |
| AY 2018-19 | 31-03-25 | 31-03-29 | Yes | Yes | Valid |
| AY 2019-20 | 31-03-26 | 31-03-30 | Yes | Yes | Valid |
| AY 2020-21 | 31-03-27 | 31-03-31 | Yes | Yes | Valid |
*Due to the COVID-19 pandemic in 2020 and 2021, the Government had extended the due dates of various compliances on multiple occasions which is 30th June 2021.
I have not considered the scenario of re-assessment pursuant to search proceedings in this article.
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Disclaimer: “Neither this article nor the information contained herein shall in any way be construed as forming a contract or shall constitute professional advice required before acting upon any matter. CA Vaibhav Gupta has taken all due care in the preparation of this article for accuracy in its contents at the time of publication. However, no liability shall be accepted by him in the event of any direct, indirect, or consequential damages arising out of or in any way connected with the use of this article or its contents.”
Author Bio
Sir, Notice u/s 148 under old law after 1/4/21 is invalid as it will be deemed to be issued u/s 148A under new regime. Therefore in your table “Whether Notice can be issued- Old Law”, you have shown as “Yes” is not as per law. It should be “No”
Correct me if my understanding is not as per law.