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 ………
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.
- 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 /Pawan.firstname.lastname@example.org)
(Republished With Amendments)