PRACTICAL ASPECTS ON REOPENING OF CASES UNDER SECTION 147 OF INCOME TAX ACT, 1961
Section 148 of the Income-tax Act, 1961 is a powerful weapon used by Income-tax department to reopen the case of past years. The basis for reopening of case u/s 147 is that Assessing Officer has reasons to believe that income of assessee has escaped assessment.
♦ BASIS FOR REOPENING OF CASE
The basis on which cases are reopened are many. Some of them include-
1. Cash deposited in savings bank account and return of income not filed. This cash deposited is known to department by banks which file statement of financial transactions.
2. Fixed deposits made, investments made, bonds and debentures acquired and return not filed. It can be checked in AIR information specified in Form No. 26AS.
3. High value transactions executed during the year but return of income does not show any such records.
4. Share capital introduced in company- AO has to check whether it is undisclosed income of shareholders and tax it under section 68 of the Act.
5. Section 148 allows deptt. to reopen the case for last 6 assessment years. The basis for reopening the case for assessment is “Reason to believe”. AO must have reasons to believe that income is escaped from taxes.
♦ PRACTICAL POINTS TO KEEP IN MIND DURING ASSESSMENT PROCEEDINGS
Few points to be kept in mind during the course of re-assessment proceedings which can help you to get out of it is as follows-
1. The notice u/s 148 should be dispatched within due time limit. For eg: If notice u/s 148 for AY 2012-13 can be issued till 6 AY i.e. till AY 18-19 i.e. 31/03/2019. Now AO shall dispatch notice u/s 148 on or before 31/03/2019 to be properly served. If notice is dispatched after 31/03/2019 then notice is said to be not properly served and the notice shall be invalid.
2. If income escaped assessment is 1 lakh or less notice can be issued for last 4 years and if income escaped assessment is 4 lakhs or more then last 6 AY notice can be issued. Accordingly dates for dispatch of notice should be checked.
3. The notice shall be issued by jurisdictional officer having jurisdiction over assessee’s address. Notice issued by non-jurisdictional officer forms the basis for objection.
4. AO should have reasons to believe and apply his mind and be satisfied for reopening of case. Rumors, gossips and borrowed satisfaction does not form basis for reopening of case.
5. Since case is reopened for past years assessee faces hardship to produce documents. The same should be tried to obtain from various other alternate sources.
6. We should also ask for necessary satisfaction recorded by AO with prior approval of Pr./ JT CIT. If approval is not taken, the notice shall be invalid.
7. If the same matter is pending in appeal, then case cannot be reopened u/s 148.
♦ During assessment proceeding the procedure laid down by Hon’ble Supreme in case of GKN Driveshafts (India) Ltd. v/s DCIT (2003) 259 ITR 19 (SC) shall be taken into consideration.