Section 147 to 153 Income Escaping Assessment (Reopening of Cases)

Section 147 to 153 Income Escaping Assessment (Reopening of Cases) Under Income Tax Act, 1961:

♦ INTRODUCTION:

• Meaning of Re-Assessment:

As per the Income Tax Act, 1961 when the Assessing Officer has a reason to believe that any income which is chargeable to tax has escaped assessment for any assessment year, he has the power to reassess such income and any other income which comes to his notice subsequently in course of the proceeding. And for carrying out such reassessment a notice must be served to the assessee which is known as Reassessment Notice as per section 147-153 of the IT Act, 1961.

• When it is treated that income chargeable to tax has escaped assessment:

For the purpose of this section there are certain cases when income chargeable to tax is deemed to be escaped assessment and reassessment notices can be issued under such circumstance –

1. When no return is filed U/s 139 by the assessee even though his total income exceeds the maximum amount which is not chargeable to income tax.

2. When return is furnished but no assessment is made and AO notices that assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in return.

3. When the assessee fails to submit a report in respect of international transaction as required under section 92E

4. When income chargeable to tax has been under assessed, assessed at loo low rate or excessive loss or depreciation allowance has been computed.

5. Where a person is found to have assets outside India. 

♦ Section 147: Income Escaping Assessment:

• If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in all sections referred to as the relevant assessment year).
• For the purposes of assessment or reassessment or re-computation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148Ahave not been complied with.]
• Analysis:
• Section 147 provides that if any income chargeable to tax has escaped assessment for any Assessment year (A.Y.) then AO may assess or reassess income of such A.Y. subject to provisions of section 148 to 153.
• For making assessment u/s 147, AO bound to serve the notice u/s 148, Notice u/s 148 can be serve only after following procedure given u/s 148A, Notice u/s 148 will be served with order u/s148A (exception in some cases).
• During the assessment u/s 147, if AO finds some other income escaped for same A.Y. then AO can assess or reassess such income also without issuing fresh notice u/s 148 & without passing order u/s 148A

Example: AO having information related to escaped income under the head PGBP of Mr. Prem for A.Y. 2023-24. AO followed procedure u/s 148A and validly served notice u/s 148.

During the assessment AO finds that Mr. Prem is also having Capital Gain for same year which was not assessed earlier. In this case AO may assess income from capital gain also without following procedure of sec. 148 & 148A.

Suppose in above example if AO finds that Capital Gain is related to A.Y. 2020-21 then he has to follow procedure of sec. 148 & 148A.

♦ Section 148: Issue of Notice where income has escaped assessment:

• Before making the assessment, reassessment or re-computation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.
• Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.
• Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section.
• Provided also that any return of income, required to be furnished by an assessee under this section and furnished beyond the period allowed shall not be deemed to be a return under section 139.

Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means, —

a. any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; or

b. any audit objection raised by Comptroller and Auditor General of India (CAG) to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or

c. any information received under an agreement referred to in section 90 or section 90A of the Act; or

d. any information made available to the Assessing Officer under the scheme notified under section 135A; or

e. any information which requires action in consequence of the order of a Tribunal or a Court.

Explanation 2. —For the purposes of this section, where, —

a. a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or

b. a survey is conducted under section 133A, other than under sub-section (2A) of that section, (i.e. TDS – TCS Survey) on or after the 1st day of April, 2021, in the case of the assessee; or

c. the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

d. the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee,

the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee, where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.]

Analysis:

1) In response to notice u/s 148 assessese is required to file his return of income for that year. It shall be deemed that assessee was required to file his (Return of Income) ROI u/s 139. The assessee is required to file return u/s 148 even if he has already filed his return earlier as per normal provisions. Return filed u/s 148 cannot be revised, as return can be revised only if return made u/s 139(1) or 139(4).

2) Notice u/s 148 can be issued only if following conditions are satisfied:

i. AO having information which suggest that income has been escaped assessment.

Information means:

a. information flagged in accordance with the Risk management strategy formulated by the CBDT (like info from SFT u/s 285BA, info from investigation wing u/s 133C)

b. any final objection raised by the CAG to the effect that the assessment has not been made in accordance with the provisions of this Act.

c. any information received under an DTAA agreement from any foreign source which suggest that assessment should be carried out; or

d. any information made available to the Assessing Officer under the scheme notified under section 135A i.e. Faceless collection of information; or

e. any information received from the order of court or tribunal which requires an action.

ii.  AO has obtained prior approval of higher authority u/s 151.

iii. AO has complied with the procedure given u/s 148A [In cases other than search)

3) In the following cases it shall be deemed that AO having information In the case of assessee where the search is initiated or BOA (Books of Accounts), documents or any assets are requisitioned or survey is conducted in the case of the assessee or any assets or BOA or documents are seized or requisitioned in case of any other person:

i. a search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A,

ii. a survey conducted u/s 133A (other than TDS/TCS survey & Function, ceremony, event survey).

iii. the AO is satisϐied, with the prior approval of the PCIT/CIT, that any assets or BOA documents, seized or requisitioned u/s 132 for pertains to or 132A in case of any other person, belongs to information relates to the assessee.

Example: Search conducted u/s 132 on 14/02/22 in the premises of Mrs. Komal. During the search AO found some documents relates to Mr. Prem. In this case AO of Mr. Prem will forward such document to the AO having jurisdiction over Mr. Prem. In this case it is deemed that
respective AO having information and notice u/s 148 can be issued for making the assessment of Mr. Prem.

♦ Section 151: Specified Authority:

• Principal Commissioner (PCIT) or Principal Director (PDIT) or Commissioner (CIT) or Director (DIT), if three years or less than three years have elapsed from the end of the Relevant Assessment Year (RAY) and income escaped is less than 50 lakhs.
• Principal Chief Commissioner (PCCIT) or Principal Director General (PDGIT) or there is no PCCIT or PDGIT, then Chief Commissioner (CCIT) or Director General (DGIT) If three years has been lapsed and income escaped is more than 50 lakhs. 

♦ Section 148A: Conducting Enquiry & providing opportunity before issuing Notice under section 148:

• The Assessing Officer shall, before issuing any notice under section 148, —

a. Conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

b. Provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

c. Consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

d. Decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

• Exceptions: Provided that the provisions of this section shall not apply in a case where, —

a. a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

b. the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

c. the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee; or

d. the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.

Explanation. — For the purposes of this section, specified authority means the specified authority referred to in section 151.

Analysis:

1) Before issuing notice u/s 148 AO shall:

a. Conduct any enquiry, if required, related to information with the prior approval of higher authority.

b. Provide opportunity of being heard to the assessee, with the prior approval of higher authority by serving SCN (Show Cause Notice) to show cause as to why notice u/s 148 should not be issued to him on the basis of information.

c. In this case assessee has to reply within time period given in SCN. Time period shall not be less than 7 days but not more than 30 days from the date of issue of SCN. The A.O. can extend this period if application mode by assessee.

d. AO shall decide on the basis of material available on record including reply of assessee & passed an order u/s 148A that whether case is fit to issue notice u/s 148 or not.

e. Order u/s 148A shall be passed within 1 month from the end of the month-

i. In which reply of SCN is received by AO; or

ii. In which time or extended time to file reply expired (if assessee not replied).

Example: A.O. is having information related to escape assessment of Mr. Prem for A.Y. 2019-20. A.O. issued SCN u/s 148A to Mr. Prem on 17/07/2021 and allowed him to reply till 06/08/2021. Mr. Prem replied SCN on 30/07/2021 then A.O. shall pass order u/s 148A up to 31/08/2021. Suppose Mr. Prem not replied, in this case A.O. shall pass order u/s 148A up to 30/09/2021.

2) Appeal to CIT(A)/ ITAT is not possible against order u/s 148A. Assessee can file WRIT to HC (High Court) if principle of natural justice not complied by A.O.

3) Section 148A not applicable in following cases:

i.  a search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A.

ii. the AO is satisfied with the prior approval of the PCIT/CIT, that any assets like money, bullion, jewellery or other valuable article or thing, or BOA documents, seized or requisitioned u/s 132 or 132A in case of any other person on or after 1^st April, 2021, belongs to or pertains to or information belongs to or relates to the assessce.

iii. The Assessing Officer has received any information under the scheme notified under section 135A (i.e. Faceless Collection of Information) pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.

4) In above 3 cases AO can issue notice u/s 148 without following section 148A 

♦ Section 148B: Prior Approval for Assessment/ Reassessment/ Re-computation:

• No order of assessment or reassessment or re-computation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.

Analysis:

In case of Search initiated u/s. 132 or servey is conducted u/s. 133A in the case of assessee, then any assessment or re-assessment u/s. 147 can only be conducted by the Joint Commissioner or Joint Director or Additional Commissioner or Additional Director. However, it can also be carried out by lower-level authority if prior approval is given for the same.

♦ Section 149: Time limit for Notice u/s. 148:

(1) No notice under section 148 shall be issued for the relevant assessment year, —

(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of—

i. an asset;

ii. expenditure in respect of a transaction or in relation to an event or occasion; or

iii. an entry or entries in the books of account,

which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more.

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021:

Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:

Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where —

(a) a search is initiated under section 132; or

(b) a search under section 132 for which the last of authorizations is executed; or

(c) requisition is made under section 132A,

after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year:

Provided also that where the information as referred to in Explanation-1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of, —

(a) a search under section 132 which is initiated; or

(b) a search under section 132 for which the last of authorizations is executed; or

(c) a requisition made under section 132A,

after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A does not exceed seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.

Explanation. — For the purposes of clause (b) of this sub-section, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.

(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or re-computation, as the case may be.

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.

Analysis:

1. Notice u/s 148 can be issued –

i) Up to 3 years from the end of Relevant A.Y, or

ii) Up to 10 years from the end of Relevant A.Y, if income has escaped assessment amounts to or is likely to amount to 50 lakh rupees or more for that year.

2. Notice u/s 148 cannot be issued for A.Y. 2021-22 or earlier A.Y.’s if such notice could not have been issued as per old provision of section 149. As per old provision of section 149 notice could be issued up to 6 years from end of R.A.Y. if income escaping amounts to 1 (one) lakh or more.

Example: 1. A.O. having information that income 60 lakhs for each year of Mr. Prem escaped from A.Y. 2010-11 to A.Y. 2021-22, A.O. wish to issue notice u/s 148 on 17/08/2021 for all the A.Y.’s, can he do so?

A.Y.	As per Old Provision	As per New Provision	Conclusion
A.Y. 2010-11	No, as notice can be issued only till 31/03/2017	No, as notice can be issued only till 31/03/2021	Notice Cannot be issued u/s. 148.
A.Y. 2011-12 to A.Y. 2014-15	No, as notice can be issued only till 31/03/2018, 19, 20, and 21 respectively.	Yes, notice can be issued as income escaping is 50 lakhs & more and its falls within 10 years time limit.	Notice cannot be issued u/s 148. As per first proviso to sec 149, notice u/s 148 could not be issued as per old provision then AO cannot issue notice as per the new provision.
A.Y. 2015-16 to A.Y. 2021-22	Yes, Notice can be issued as its falls within 6 years time limit.	Yes, Notice can be issued as income escaping is 50 lakhs or more and its falls within 10 years time limit.	Yes, Notice u/s 148 can be issued on 17/08/2021.

Example: 2. Suppose in example 1 income escaping is Rs. 20 Lakhs instead of Rs. 60 lakhs.

A.Y.	As per Old Provision	As per New Provision	Conclusion
A.Y. 2010-11	No, as notice can be issued only till 31/03/2017.	No, notice can be issued up to 3 years only.	Notice cannot be issued u/s. 148.
A.Y. 2011-12 to A.Y. 2014-15	No, as notice can be issued till 31/03/2018, 19, 20, and 21 respectively.	No, notice can be issued up to 3 years only.	Notice Cannot be issued u/s. 148.
A.Y. 2015-16 to A.Y. 2017-18	Yes, Notice can be issued as its falls within 6 years time limit.	No, as notice can be issued up to 3 years only.	Notice cannot be issued u/s. 148.
A.Y. 2018-19 to A.Y. 2021-22	Yes, Notice can be issued as its falls within 6 years time limit.	Yes, notice can be issued as its falls within 3 years time limit.	Yes, notice u/s. 148 an be issued on 17/08/2021.

3. Provided that provisions discussed in above paint 2 shall not apply in case of search or requisition u/s 132/132A, as time limit of Old section 149 was not applicable for search/requisition cases. Before 01/04/2021 search/requisition cases assessment and time limit were covered by section 153A. It means 1st proviso to section 149(1) not apply in case of search/requisition cases.

4. As per 2nd Proviso to section 149(1), if search/requisition made before 01/04/2021 then assessment shall be governed by section 153A and not by 147.

5. Provided that time limit to issue of notice u/s 148 shall be extended by following time:

i) Time or extended time allowed to assessee to file response of SCN u/s 148A: and

ii) Time during which proceedings u/s 148A stayed by order of any court.

6. If AO is having less than 7 days to pass order u/s 148A then AO will get time of 7 days to pass order u/s 148A and time period to issue notice u/s 148 shall also be increased accordingly.

7. Notice u/s 148 can be issued beyond 3 years only if income escaping for Relevant A.Y. is 50 lakhs or more and it represented in the form of Assets. As per explanation “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. Since assets definition is inclusive so we can say that even income escaping in any other form of assets can also be assess reassess in this section.

♦ Section 150: Unlimited time limit to issue notice u/s. 148:

• If Re-assessment is to be carried out to give effect of any finding or directions in order passed by CIT(A), ITAT, HC, SC or revision u/s 263/264 or any court under any other law for this year or another year, no time limit to issue notice u/s 148.

This provision is applicable when the order contains a direction: –

a. to exclude income from an A.Y. and include in another A.Y. ; or

b. to exclude income from one assessee and include in another assessee.

• Exception: However, no reassessment can be made where the time limit for re-opening assessment was already been time barred when the order of A.O. which was appealed was passed by A.O.

Example: The assessment of Mr. Prem for A.Y. 2013-14 was made on 28.3.2015 making an addition of ₹3,25,000/- for a certain income. Mr. Prem contested the addition before ITAT. ITAT passed an order on 26.2.2021 holding that the said income was not taxable in in hands of Mr. Prem but the same was the income of Mrs. Komal & taxable for A.Y. 2008-09. The AO Issued notice u/s 148 for A.Y. 2008-09 in Feb. 2021 to Mrs. Komal. Is the notice valid? Would your answer change if in the said case, the assessment order for A.Y. 2013-14 was made on 04.04.2015 instead of 28.03.2015 ?

Solution: Order of A.O. which was subject matter of appeal was passed on 28.03.2015 As per old time limit of 149, notice u/s 148 can be issued within 6 years from the end of Relevant A.Y. In this case AO could issue notice to Mrs. Komal on 28.03.2015 for A.Y. 2008-09 so he can issue notice in the month of Feb. 2021 also.

Had the assessment order for A.Y. 2013-14 been made on 04.04.2015 (instead of 28.03.2015), then. the same would have been outside the six-year time limit from A.Y. 2008-09. Hence, since notice could not have been issued at that point of time, it cannot be now issued.

♦ Section 152(1): Tax rate for Escaped Income:

• Respective year tax rate shall apply.

♦ Section 152(2): Dropping of Assessment Proceeding:

• Proceedings once initiated under section 147, may be dropped by A.O., if assessee satisfies him that:

a. There will be no impact or no effect on his tax liability, even after taking into account the income escaping assessment; and

b. He has not gone in an Appeal Revision for Reference, against any part of original assessment order.

♦ Section 153(2): Time limit to Complete the Assessment:

• 12 months from the end of the Financial year in which notice u/s 148 was served. (9 months if notice served before 01/04/2019.) 

♦ Some common notes for Section 147 to 153(2):

1. The A. O not invoke section 147 on the basis of rumours, gossips, suspicion or change of opinion. It can be possible only if A.O. having information as per section 148.

2. The assessee is required to file the ROI u/s 148 even if he already filed in the normal course. Return filed u/s 148 cannot be revised. If assessee not filed return u/s 148 then AO will complete assessment u/s 147 as per manner u/s 144.

3. As held in Sun Engineering Co. Ltd.’s case (SC), reopening is for revenue purposes. Assessee cannot make any fresh claim during reopening proceedings, which was not made earlier. Further, assessee cannot reargue matter which were already concluded in assessment.

4. Expenses not claimed in the original assessment cannot be claimed in the reassessment proceedings u/s 147. However, the expenses pertaining to the income which has escaped assessment can be claimed.

5. Assessment u/s 143(3) read with 147: If A.O. serve notice u/s 148 to assessee and assessee filed return in response to notice u/s 148 then A.O. should serve notice u/s 143(2) within 3 months from end of the F.Y. in which return was filed. If notice u/s 143(2) is served after 3 months then proceeding u/s 147 shall be invalid. 

♦ SOME CASE LAWS:

1. Sky Light Hospitality LLP (2018) (Del):

Notice for reassessment issued u/s 148 is valid even if such notice has been issued erroneously in the name of erstwhile company, which has now been converted into LLP. This was only human error. It was clearly evident from the documents and proceedings that the proceedings were intended to be made only on successor LLP. The error was only a technical issue on the part of the A.O. and cannot be invalidate assessment proceedings as per sec 292B. 

2. Union of India v. Ashish Agarwal Civil Appeal No. 3005 of 2022:

Background: In 2020 by the power vested under section 3 of the Relaxation Act, 2020 the Central government issued a notification extending the timelines prescribed under section 149 for issuing reassessment notice till 30.06.2022. Meanwhile the Parliament through Finance Act, 2021 introduced reformative changes to sections 147-151 of the Income Tax Act, 1961 governing reassessment proceeding. The substituted section 147-149 and section 151 were applicable form 01.04.2021. But even after the amendment of Finance Act, 2021 the revenue department issued approximately 90,000 reassessment notices under the erstwhile provisions. These reassessment notices became subject matter of multiple writ petitions before various high courts. The respective high court held that reassessment orders issued after 01.04.2021 which are not in compliance to newly substituted section are bad in law and set aside.

Being aggrieved by such orders the department approached the Supreme Court in the case of Union of India v. Ashish Agarwal Civil Appeal No. 3005 of 2022.

Held That: Wherein the Supreme Court held that-

1. The notices issued under unamended section 148 of IT Act which were the subject matter of the writ petitions before various High Courts will be deemed to be issued under section 148A of IT Act as amended by Finance Act, 2021 and will be treated as show cause notice in terms of section 148A (b) and provide concerned assessee to file their reply to show cause notices.

2. Holding inquiry with prior approval of specified authority is not mandatory but it is for the concerned Assessing Officer to hold inquiry if required.

3. All the defences which may be available to the assessee shall continue to be available which includes – a. Defences under section 149 of the IT Act i.e. notices are time barred b. Defences under Finance Act, 2021

♦  SOME FAQ’s:

1. Can Notice Under Section 148 be issued for more than one time for same A.Y.?

Ans: Yes. AO has power to issue or reopen the Assessment under section 147 by issuing notice under section 148, and same is mentioned in section 148 Reassessment or Re-computation.

2. What Happens if the A.O. Conducts a best judgement Assessment?

Ans: If the Assessing Officer conducts a best judgement assessment, they will estimate your income and expenses using the available information. In case you disagree with the assessment, you have the option to file an appeal with the Commissioner of Income Tax (Appeals) / the Income Tax Appellate Tribunal. It is always advisable to respond to a notice under Section 148 and provide all the important details of your income and expenses to avoid unnecessary complications.

3. What is Penalty under section 148?

Ans: Section 148 does not specify a specific penalty, as it relates to the issuance of a notice for reassessment. However, if you fail to respond to a notice issued under Section 148, the Assessing Officer may impose penalties under Section 271(1)(b) for concealing income or Section 271(1)(c) for furnishing inaccurate particulars of income. Therefore, it is crucial to respond to a notice under Section 148 and provide precise information regarding your income and expenses to prevent penalties or legal complications.

4. Can A.O. Commence reassessment Proceedings due to change of opinion?

Ans: For reopening of assessment AO needs to records valid reasons and all material facts necessary for the purpose of assessment or reassessment. But for Re-opening of the assessment without any basis/ gossips and merely change of opinion is not permissible while exercising powers under Section 147 read with Section 148 of the Act and If the assessing officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment.

5. Can AO Issue Notice Under section 148 subsequently for same assessment year directly without compliance with section 148A?

Ans: Yes. As per the explanation to section 147, For the purposes of assessment or reassessment or re-computation under this section, the AO may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.

6. Is the notice under section 148 issued in new provisions if it is not issued within time limit and such notice is time barred as per the old provisions?

Ans: No notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148  could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021.

But this provisions will not apply in case, where a notice required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021.

♦ Conclusion:

Section 148 of the Income Tax Act 1961 plays a significant role in ensuring proper assessment of taxpayers whose income has not been appropriately evaluated. It is vital to take any notice received under this section seriously and respond promptly by providing accurate and complete information about your income and expenses. Failing to respond within the specified timeframe may lead to an assessment based on the Assessing Officer’s discretion, which may not be favourable to you. Therefore, it is important to comply with the requirements and cooperate with the authorities to ensure a fair and lawful assessment of your tax liabilities.