Budget 2021 came up with the insertion of section 148A of the Income Tax Act. It is a welcome section from the point of view of taxpayers.
In simple terms, section 148A acts as an opportunity granted to taxpayer to explain their case before issuance of notice for reopening of assessment by the tax authorities under section 148 of the Income Tax Act.
Importantly, any notice issued under section 148 of the Income Tax Act without following the procedure prescribed under section 148A would be invalid and will thus be liable to be quashed.
The present article covers the provisions of section 148 of the Income Tax Act; provisions of section 148A of the Income Tax Act; difference between section 148 and 148A of the Income Tax Act; time limit prescribed under section 148A and some of the relevant Frequently Asked Questions.
Page Contents
Provisions of section 148 of the Income Tax Act –
Section 148 of the Income Tax Act empower the tax authority to assess/ re-assess the taxable income provided the tax authority has a reason to believe that income has escaped assessment.
Notice can be issued under section 148 by the Assessing Officer only if –
- Assessee has failed to furnish income tax return under section 139 of the Income Tax Act;
- Assessee has failed to furnish income tax return after issuance of notice under section 142 of section 148(1) of the Income Tax Act;
- Assessee has failed to furnish true and complete information that is required for completion of assessment.
Provisions of section 148A of the Income Tax Act –
Before issuance of reassessment notice under section 148 of the Income Tax Act, the Assessing Officer is required to follow the procedure prescribed under section 148A. The procedure to be followed by the Assessing Officer under section 148A is highlighted hereunder –
- Firstly, an Assessing Officer is required to conduct an inquiry based on the information suggesting income escaped assessment. Notably, prior approval of specified authority is required for conducting such inquiry;
- Then, as per section 148A of the Income Tax Act, Assessing Officer is required to offer a chance to assessee to explain the reason for escaped assessment. Notably, Assessing Officer should grant minimum 7 days’ time to the assessee to furnish their explanation;
- Post considering the explanation, if Assessing Officer still suspects the escapement of income then notice for reopening of assessment is to be issued under section 148 of the Income Tax Act.
Thus, chance provided to the assessee to explain their case under section 148A enables the assessee to either accept the escapement and pay required tax, interest and penalty amount or get an opportunity to explain the entire case before receipt of notice.
Difference between section 148 and 148A of the Income Tax Act –
Provisions of section 148 of the Income Tax Act empowers Assessing Officer to issue a notice for reopening assessment provided he has a reason to believe that income has escaped assessment. Post issuance of notice u/s. 148, income of the assessee will be reassessed u/s. 147 of the Income Tax Act.
Whereas, provisions of 148A of the Income Tax Act mandates Assessing Officer to provide an opportunity to the assessee to explain their case of escapement before notice is issued u/s. 148. In nut-shell, section 148A is to be followed first and only then notice u/s. 148 can be issued.
Time limit prescribed under section 148A of Income Tax Act –
Time limit, as amended vide Budget 2024, prescribed under section 148A of the Income Tax Act is highlighted hereunder –
| Particulars | Time limit |
| Income escaping assessment of less than INR 50 Lakhs | 3 years from the end of the relevant assessment year |
| Income escaping assessment of INR 50 Lakhs or more | 5 years from the end of the relevant assessment year [notably, prior to budget 2024, the time limit was 10 years] |
Frequently Asked Questions (FAQs) on Section 148A of Income Tax Act
Some of the relevant Frequently Asked Questions with reference to section 148A of the Income Tax Act are highlighted hereunder –
1. What is section 148A of the income tax?
As per provisions of section 148A, if the Assessing Officer has reason to believe that income has escaped assessment, then, he is required to grant an opportunity to the assessee to explain its case before issuing notice u/s. 148.
2. What is difference between section 148 and 148A?
Section 148 empowers Assessing Officer to issue notice for reopening assessment when he has reason to believe that the income has escaped assessment.
Whereas, section 148A mandates Assessing Officer to grant an opportunity to the assessee to explain its case prior to issuance of notice u/s. 148.
3. What is time limit for notice u/s. 148A?
Notice u/s. 148A should be issued within 3 years from the end of assessment year provided income escaping assessment is less than INR 50 Lakhs. However, the time limit will be 5 years from the end of assessment year when escaping income is INR 50 Lakhs or more.
4. How do you respond to the 148A of the Income Tax Act?
Response to section 148A of the Income Tax Act can be any of the following –
- In case the assessee accepts the income escapement, then, he is required to make the necessary payment; or
- In case the assessee doesn’t accept the same, then he is required to furnish a details reply explaining its case.
Author Bio
knowledge sharing experience