Section 148 of the Income Tax Act, 1961: Notice and Reply

In certain cases, the taxpayers’ income might have escaped assessment owing to non-disclosure or simply missing out. To deal with such cases, the income tax law has special provisions to deal with incomes escaping assessment. Section 148 of Income Tax Act, 1961 (ITA) empowers the Assessing Officer (AO) to issue a notice to a taxpayer whose income has escaped assessment, also known as income escaping assessment. Let’s understand in detail what does Section 148 state and how to reply to section 148 notice.

Section 148 of Income Tax Act, 1961

The time period for notice under Section 148 of income tax act is as follows:

• 3 years from the end of the relevant assessment year.
• 10 years from the end of the relevant assessment year if the assessing officer has evidence that the income escaping assessment, represented in the form of, an asset, expenditure in relation to a transaction/event/occasion is Rs. 50,00,000 or more.

The notice u/s 148 must be accompanied with Order u/s 148A(d) of the Act requiring the assessee to furnish a return of income within a period of 3 months from the end of the month in which the notice is being served to the assessee. This return shall contain all the necessary information as prescribed and it shall be treated as a return filed under section 139.

However, the notice under section 148 of income tax act can be issued only when the assessing officer has sufficient information that suggests that the certain income chargeable to tax has escaped assessment and such AO has obtained prior approval from the specified authorities to issue such notice.

What does this information mean?

Following is the information that should be in possession of the AO to issue notice under section 148/148A:

• any information 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
• any audit objection 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
• any information received under an agreement referred to in section 90 or section 90A of the Act; or
• any information made available to the Assessing Officer under the scheme notified under section 135A; or
• any information which requires action in consequence of the order of a Tribunal or a Court.]

In case of search, survey or prior approval of the competent authority that money, bullion, jewellery or other valuable article or books of account, documents seized are belongs to the assessee, then, it will be deemed to have information which suggest income has escaped assessment.

How to Respond to a Notice Under Section 148 of income tax act?

If you receive a notice under Section 148 of income tax act, it is important to respond to it promptly. The taxpayer must reply to notice under section 148 within the specified time period which is usually 30 days of the date of its receipt. If the taxpayer does not respond to the notice, the AO can proceed to make an assessment of the escaped income. The taxpayer will then have the right to appeal against the assessment order. The following are some tips to respond to a notice under Section 148 of income tax act:

• Read the notice carefully: The first step is to read the notice carefully and understand the reasons to believe that income has escaped assessment. In case the notice does not include reasons to believe, then you can request for a copy of reasons to believe from the assessing officer.
• Gather your evidence: Once you understand the reasons to believe, you need to gather your evidence to support your case. This evidence could include documents, bank statements, or other records.
• File a fresh return: Once you gather all the details to file a fresh return, you can file the same. Ensure that the return is complete and accurate. You should also attach all relevant documents to the return. This return will form the basis for future assessment.
• Challenge the Notice: If you feel that the reasons for issue of notice under section 148 of income tax act is invalid or unsustainable, then you can challenge the validity of Section 148 notice before assessing officer or higher authorities.

What to Do if You Disagree With Section 148 of income tax act Notice or Order?

If you disagree with the notice, you can furnish all the necessary evidence to prove that the income has not escaped assessment. If an adverse assessment order has been passed, then you can appeal to the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal (ITAT).

In a Nutshell

Section 148 of income tax act is an important provision of the ITA that gives the AO the power to assess escaped income. If you receive a notice under Section 148, it is important to respond to it promptly and to gather your evidence to support your case. If you disagree with the notice, you have the right to appeal against the assessment order. However, it is important that you hire professionals to liaison with the income tax department and concerned tax officers to avoid any mistake. In case you need any assistance in relation to Section 148 notice and reply, feel free to contact the ASC Group.

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