Assessment/Re-assessment is a procedure adopted to determine the correctness of the income disclosed by the assessee and tax payable thereon. Than what is reassessment and why there is need of reassessment? Section 147 and 148 of Income Tax Act is a well designed weapon for the Income Tax Department empowering it to assess, re-assess or re-compute income, turnover etc, which has escaped assessment.
Section 147 and Section 148 of the Act contain the per-requisite conditions to be fulfilled for invoking the jurisdiction to reopen the assessment. This article is concentrated on procedure to be followed in case of re-assessment.
Powers of the Assessing Officer to re-open a completed assessment are not un-abundant or luxuriant. I will discuss the marked phrase in my next article analyzing the nuts and bolts of section 147 of Income Tax Act, since there are many cases with the help of which we will be able to understand it in detail. The procedure is laid down below:-
- The AO must have reasons to believe. The existence of reasons is mandatory. On the basis of such reasons, the AO must form a belief that there is a situation of actual or deemed escapement of Income and therefore action is required u/s 147. AO must record such reasons in writing. No reassessment notice can be served just to make an enquiry or verification.
- AO must obtain sanctions from higher authority u/s 151, wherever necessary. Section 151 put condition on AO to take the prior approval from appropriate authority. If the AO obtain the approval from any other authority, even from higher authority, then also proceeding u/s 148 is invalid.
- AO must issue notice u/s 148 within prescribed time limit. A formal notice must be served upon the assessee.
1) Normally time limit for issue of Notice period is 4 or 6 years.
4 years if the escaped Income less than Rs. 1,00,000/-
6 years if the escaped income is Rs. 1,00,000/-
2) This time limit shall be 16 years if it is related to Asset located outside India
Further first proviso to section 147 provides that if the assessment has been completed u/s 143(3) or u/s 147 no action can be taken u/s 147 after the expiry of 4 years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
Second proviso to section 147 states that nothing mentioned in first proviso shall apply in a case where the income which has escaped assessment is related to assets ( including financial interest in entity) is located outside India.Time Limits for Issuance of Notices, Orders under Different Sections of Income Tax Act, 1961
3) But, if there is any specific direction contained in an order passed by the authority in any proceeding under act by way of appeal/ revision or by a court, in that situation there shall not be any time limit and the time limit shall be indefinite period. But, if at the time when the order which was subject matter of appeal or revision was passed, the time-limit for issuance of Notice u/s 148 had already expired, the time limit of indefinite period will not apply.
- Assessee shall submit return within time period prescribed in the Notice. Assessee may demand reasons of proceeding u/s 147 from AO. If the assessee does not demand reasons, the AO can proceed to complete assessment. If the assessee demands reasons, the AO must provide reasons to the assessee. Assessing officer is duty bound to provide the copy of reason recorded within reasonable time as per guidelines of Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd. v/s D.C.I.T. (2003) 259 ITR 19 (SC). Reopening u/s 148 can be challenged based on facts.
- After this the AO shall issue Notice u/s 143(2). Such notice u/s 143(2) is mandatory.
- Assessee instead of filing fresh return, can request for considering the return filed u/s 139(1) or 139(1)/(4)/(5) in response to Notice u/s 148. The specimen of the letter to AO is depicted below:
| Specimen of letter to AO Date:-To,………………….,
………………….. SUB: – REPLY TO NOTICE US 148 OF INCOME TAX ACT 1961 FOR A.Y. …….. DATED ……… PAN:-…………………. Respected Madam / Sir, We are in receipt of the above quoted notice dated ……… received on ……….. In connection with the aforesaid subject matter we would like to state that— We has filed the return of income for the Assessment Year ………. on ………. Vide acknowledgement number ……………. The Original return filed on …………. should be considered as return Us 148. We request your good self to kindly provide us the reasons recorded for re-opening the assessment which would enable us to file proper objection/ details in this respect. Thanking You …………………….. …………………….. |
- Assessee can submit the objections. During the reassessment proceedings the assessee advance all the argument and provide all the details for proving that Income had not escape the assessment.
- AO must pass the speaking order on objection raised by assessee. The hon’ble Supreme Court Decided the Ratio of Re-assessment In case of GKN DRIVESHAFT (INDIA) LTD. V/S ITO. AO has under obligation to first dispose of the objections raise by assessee and thereafter frame the reassessment order.
- Assessee can file Writ Petition before High Court if aggrieved by the order of objection and re-assessment proceeding. File details and advance all the arguments.
- Assessment/re-assessment shall be completed by passing order within prescribed time limit. Assessment order should be passed within the prescribed Time limit of 9 months from the end of the Financial Year in which notice u/s 148 is served upon the assessee. However if the notice is issued on or after 01.04.2019 the time limit will be 12 months
- After re-assessment order, if the Assessee is aggrieved by the order of the AO, he can file appeal before CIT(A).
- It is the general policy of Income Tax Officers to initiate penalty for every addition made during assessment. Against the initiation of penalty first assessee can request AO to keep penalty proceeding in abeyance u/s 275till the order of the appellate authorities, if any appeal is filed.
- Where the assessee makes a bonafide claim and no malafide intensions can be attributed, then penalty cannot be levied./ Certain amounts claimed by assessee and disallowed does not mean that the assessee is guilty of fraud or willful neglect. Further, the assessee may also challenge the levy of penalty based on strong grounds. It is well settled law that findings in the assessment proceedings are relevant but not conclusive in penalty proceedings because the considerations that arise in penalty proceedings are different from those that arise in the assessment proceedings.
(Author can be reached at 07738770841 /[email protected])
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If 147 notice is based on “escaped income” which is proved to be actually not taxable in India, then proceedings have to stop..am I right? Though the notice was replied to saying that the “income” cited in 147 notice is not taxable due to DTAA between India and USA and no AO in the enire line of officers,CITs bothered to check if the “income” was actually taxable in India. They simple sent it.
now with proper documents I replied proving it is tax exempt in India. But the AO is issuing 142 notice asking for more details on the return! what to do?
HOW CAN REPLY THE NOTICE U/S 154
sir
non-filer noticed issued u/s 148 returned filed and assessment completed u/s 147 r.w.s. 144. In this case whether 234A leviable from due date of filing of return to date of filing of return. is it correct
respected sir,
may i recieved latter for income tax under section 147 income tax act1961,, reason is my boss transaction my saving a/c in 2011-12—- me i not payabel income for income tax craite aria,, my currant salry is 8000/-per month,, please suggest in this notice under section 147 income tax1961,, which parson sowled my problem,, my old boss and famaly not prasent in this place…..please suggest me,
please let me know the interest received on following items are taxable or not;
1.income from saving account on behalf of interest more than Rs.10,000/= i.e.12,338/=
2.Rs.1800/- annual interest on Infrastructure bond
3.Rs.10,780/= received on account of interest from infrastructure bond after five years.
Regards
can provisions of section 147 be invoked after completion of assessment under section 143(2)
can provisions of section 147 be invoked by the A.O after completion of assessment u/s 143(2)
148 and interes u/ s 234 B related matter.
If any assesee has paid the taxes as tax on regular assessment after 143(3).
Then case is ‘re opened under 148.
Now the taxable income increases.
Now the question is ,while calculating the interest u/s 234 B, will the credit of tax paid on regular assessment be given to assessee? Take two scenes: 1) assessed files revised return before ‘re assessment and claims earlier paid taxes as S A tax.
2) assessee has not filed revise return.
Dear Mr. Maloo,
I have got a letter addressing section 147 & 148 of the tax office for the income tax assessment year 2011-2012
I am a retired teacher and was 75 year old in 2011.
I have minimal interest on my FD’s and bank.
My wife and I share a joint account and in 2011 she had broken an FD into our joint account in the tune of 6&1/2 lakhs. The amount was then transferred to her account and later transferred to our son living abroad to pay his loan.
Could you please advice what I should do next.
Kind regards,
Julian
What if I have not filed any return u/s 139(1) and in response of notice u/s 148? can the A.O. initiate prosecution against me?
Dear Sanjay
1) Please check the reason for disallowing your claim under section 80IC/IE.
2) Check your eligibility for claiming deduction under section 80IC/IE
3) if your claim is sustainable than file appeal before CIT(A)
4) include your arguments on leavy of penalty under 271(1)(c), prima-facie i feel it has been imposed due to wrong claim under 80IC/IE. And it is well settled law that penal action under 271(1) (C) can not be imposed if there is sufficient disclosures and no material information is hidden. Mere wrong claim can not be a reason for imposing penalty.
5) Could not understand why you filed application to CBDT. Plz give details. condonation of delay is to be filed in proper time. Not after completion of assessment.
6) if your grounds are accepted than income and tax will be recomputed and penal interest will automatically be recalculated, if required.
Thanks and regards
In most of the cases A.O. doesn’t treat the ITR filed u/s 139 as return u/s 148 and ask to file fresh ITR.
DEAR SIR,
1) ASSESSEE IS PVT LTD COMPANY FILED RETURN FOR ASSESSMENT YEAR 2012-13 ON 08/01/2013.
2)THE RETURN WAS PROCESSED u/s 143(1)
3) CASE SELECTED FOR SCRUTINY u/s 143(2) ISSUED ON 08/08/2013 (ASSESS FILED BASIC DETAILS.ATTENDED ON 21/08/2013
4)FRESH NOTICE U/S 142(1) ISSUED ON 27/01/2014.RESPONSE TO NOTICE ATENDED ON 7/2/2014,17/09/2014,30/11/2014
5) REFUND RECEIVED ON 21/02/2014.
6) NOTICE 142(1) DT 24/12/2014 CONSEQUENT TO THE CHANGE IN TERRITORIAL JURISDICTION w.e.f (15/11/2015) which is wrong date mentioned in letter) correct date is 15/11/2014.CASE IS ASSESSED IN THE CHARCH CIT – WITH ACIT.DATE FOR COMPLIANCE 06/01/2015.
7)ACIT DISALLOWED DEDUCTION CLAIMED US/80IC/IE , charged interst U/S 234B,234C & 234D & ALSO PROCEEDING u/s 271 (1) (C) & ORDER DEMAND NOTICE ISSUED ON 27/03/2015 & ASSESSMENT MADE u/s 143(3)
8) REASON FOR THE ABOVE ASSESS NOT FURNISHED ANY REASONABLE CASUSE THAT PREVENTED THE ASSESS TO FILE THE RETURN u/s 139(1) IN TIME.ASSESS HAS FILED THE APPLICATION WITH CBDT ON 17/03/2015 ONLY AFTER RECEIVING THE SHOW CAUSE ABOUT REJECTION OF CLAIM u/s 80ic of the act & is not suo moto.
SIR,YOUR VIEW.