• Notification Date: 28-09-2024
• Notification No: N/A

Notice under Section 148 of the Income Tax Act: Notice of assessment or reassessment under Section 148

Under Section 147 of the Income Tax Act, the income tax authorities are empowered to reassess previously filed income tax returns. Tax officers may reassess income tax returns as per certain predefined criteria. For this purpose, tax officers serve notices under Section 148 on income that has escaped tax. This guide explains the various reasons for receiving a Section 148 notice and how to respond to it.  

Before making any assessment, reassessment, or recalculation, the tax officer must serve a notice on the taxpayer requiring him to file a return of his income or the income of any other person liable to pay tax within the period specified in the notice. A taxpayer is obliged to file details of his income tax return within the time limit specified in the notice from the tax officer. A statement of his income or that of any other person liable to tax under this Act. If the taxpayer is required to file the income tax return of any other person liable to tax, he shall file it in the form expressly specified as provided for in the Act, along with any other information to be provided along with the details. Before serving the notice, the tax officer does not provide the reason for the notice to the taxpayer concerned.  

What is Section 148?   

The income tax authorities may serve a notice of assessment to the taxpayer under Section 148 if they are of the opinion that the income of the taxpayer has not been properly assessed. In other words, if the tax officer has reason to believe that income has evaded assessment, he can serve a notice on the taxpayer under Section 148. 

Why do you receive a notice under Section 148 of the Income Tax Act?   

There are many reasons why a tax officer may serve a notice of assessment on a taxpayer under Section 148, some of which are given below:
• Make an assessment and provide convincing evidence of it; without evidence, the officer cannot issue a notice of assessment of suspicion.
• A solid background must be provided linking the material presented to the tax officer with the reason to believe that the taxpayer has attempted to evade tax for the year.
• Information provided to the tax officer must be of maximum relevance to the individual case and not based on superficial considerations or findings.
• Before serving a notice, the tax officer must explain in writing why he believes that the taxpayer in question is attempting to evade the assessment of income.
• Simply observation or suspicion that a taxpayer is hoarding large amounts of money without providing evidence, reasons, or information in support of the claim shall not be considered a legal source for issuing a notice under Section 148.
• Where a tax officer gives a difference of opinion or reason, unless new information is provided, he cannot issue a notice to a taxpayer on the basis of the difference of opinion alone. Where a taxpayer has provided information on taxable income and disclosed practical and factual information that led to the completion of tax assessment and reassessment, the tax officer has no reason to suspect the taxpayer.   

What is the time limit for issuing a notice under Section 148 to a relevant taxpayer?   

Subject to the provisions of Section 149, a notice issued under Section 148 shall take effect for the following period:
• No notice shall be issued under Section 148 for the relevant assessment year. (a) Ordinary period: for a period of three years after the end of the relevant year of assessment.
(b) Fixed period: for a period of more than three years but not exceeding ten years after the end of the relevant year of assessment, unless the tax officer has in his possession books of accounts or other documents or evidence showing taxable income.
• Shown in the form of an asset.
• Expenses relating to a transaction or in relation to an event or opportunity.
• One or more items in the books of accounts that have escaped assessment and which amount to or are likely to amount to Rs 5 lakh or more.   

How to respond to a notice received under Section 148?   

• Step 1: First, check the notice to see whether the tax officer has verified the causes for issuing the notice under Section 148. If the notice does not state the reasons, ask the tax officer for a copy.
• Step 2: You must reply to the notice of assessment within 30 days. You can do this by filing a tax return or submitting a written answer with all the required information and evidence.
• Step 3: If you agree with the reasons given by the tax auditor, file your tax return as soon as possible. If you have already filed your tax return, send a copy to the tax inspector.
• Step 4: If you are filing a tax return in response to a Section 148 notification, make sure you report all your income and expenses exactly to avoid consequences.
• Step 5: If you believe that the notice is invalid or that the grounds for reopening the tax assessment under Section 147 are invalid, you may appeal to the tax inspector or a higher authority.
• Step 6: If you win the lawsuit, the court will stop the assessment process. If you lose, the tax office will proceed with a re-examination.