written by | March 9, 2022

Assessment or Reassessment Notice of Income Tax Act

Assessment/reassessment is a procedure for determining the accuracy of the income revealed by the assessee and the tax due on that income. The Income Tax Act's Sections 147 and 148 are well-designed weapons for the IRS, allowing them to assess, reassess, or re-compute income, turnover, and other items that have avoided assessment.

Sections 147 and 148 of the Act detail the conditions that must be met to claim the authority to reopen the assessment.

The assessing officer asks from the assessee the following information

  • Income tax returns - The assessee must submit a copy of his/her ITR within 30 days of the assessing officer's deadline stated in the notification. If the assessee is required to file ITR for any other assessable person, they must do so in the prescribed format of the act.  

Did you know? The time restriction for reopening income tax assessment cases has been shortened from six to three years. In addition, in cases of substantial tax evasion, the assessment might be reopened for up to ten years, but only if the income concealment is greater than ₹50 lakh. This change has been brought by Union Budget 2021.

Also read: All You Need To Know About Section 143(1) of Income Tax Act

Powers of Income Tax Department to Reassess the person’s income under Section 147

Under Section 148 of the Income Tax Act, the A.O. can assess any taxable income that has not been assessed according to the principles of the Act.

The Income Tax Department has the authority to review an individual's previously submitted income tax returns under Section 147 of the Income Tax Act of 1961.

If you send a notice under Section 148 for income Escaping Assessment, the Assessing Officer may take your income tax return for reassessment based on specified pre-defined factors.

Reopening the evaluation proceedings, according to this legislation, necessitates two factors.

  • The AO must have reasonable grounds to assume the income was not assessed
  • The money may have come to his/her attention after the assessment processes had been completed

If the assessee has submitted all necessary documents and information during the original assessment, the Assessing Officer cannot issue a notice to analyze the same papers.

Making new information or records public is critical that shows money has been illegally taxed.

The AO may prosecute the assessee under sections 147 and 148 of the Income Tax Act if fresh evidence or documents suggest the individual has hidden income. 

There will be no supply of notification to associate assessee displayed four years from the end of the assessment year in question.

If the Chief Commissioner or Commissioner is convinced that the Assessing Officer's grounds for sending a notice to the assessee are sufficient, this can be avoided. 

Procedure to be followed for issuing Notice under Section 148

The AO must have good reason to believe. It is necessary to have reasons, and these reasons must be documented in writing. A strong relationship must be made between the evidence submitted to the assessing officer and a basis for the assessee to avoid assessment for the year in question. No reassessment notice can be issued solely to conduct an investigation or verification; instead, sanctions from a higher authority must be obtained if necessary (section 151). The competent authority has to give AO prior consent under Section 151. The AO's action under section 148 is null and void if clearance is obtained from any other authority, including a higher authority. 

Section 148 authorizes no A.O. below the rank of AC or DC to issue a notice. Within the time limit, the AO must issue a notice under section 148. The assessee must get a proper notification. After four years from the end of the A.Y. in question, no supply of notification to associate assessee will be displayed. The A.O. will only send a notice if any taxable income has been demonstrated to have escaped assessment for the relevant year under the following circumstances: 

• The assessee did not submit their Section 139 returns on time.

• The assessee failed to file their returns after receiving a notice under Section 142, sub-section (1) of Section 148.

• The assessee failed to fully disclose any information, facts, or specifics needed to complete the assessment for the relevant year. 

Also read: Penalty for Late Filing of Income Tax Return

Time Limit to issue Notice under Section 148

  • Notices issued under Section 148 will materialize across the following time frames, according to the provisions of Section 149:
  • Suppose the economic benefit that has managed to escape assessment is less than ₹ 1,00,000. In that case, the A.O. will give notice before the end of four years following the end of the assessment year. If the income so escaping exceeds ₹ 1,00,000, a notice under the section mentioned earlier could be given within six years following the end of the relevant AY, subject to the requirements of the relevant sections.
  • A notice under section 148 could be issued within sixteen years of the end of the relevant AY if the income that has eluded assessment relates to assets located outside India. 
  • If an association assessment or reassessment has been completed and ended under Section 143, the Assessing Officer is no longer entitled to give any notice to an assessee under Section 147 after the four-year timeframe has expired from the end of the assessment or reassessment year. 

Replying to Notice under Section 148

When an assessee receives a notice under section 148, they must file a return for the assessment year in question. The following are some things to keep in mind:

  • Examine the notice for any indications that the assessing officer issued the notice in violation of section 148.
  • If the reasons aren't mentioned in the notice, do request for reasons from A.O. If the assessing officer's reasons to believe satisfy you, file the return as soon as possible.
  • Send a copy of the case to the assessing officer if it has already been filed.
  • The assessee must request a verbal order rejecting the objections from the assessing officer. In the objections, the reasons for doubting the legitimacy of the notification issued under Section 148 must be indicated. The Honourable Supreme Court devised this technique to allow the assessee to file a writ case with the appropriate High Court before the assessment was finished, challenging the validity of the Section 148 notice. 
  • Suppose you believe the notice was not properly served or that the assessing officer's reasons for starting the assessment under section 147 are incorrect. In that case, you may contest the legitimacy of the notice before the assessing officer or higher authorities.
  • If your complaint is successful, the court will order that the assessment process be paused.
  • If the outcome does not meet your expectations, the evaluating officer can review your application.

Also read: Income tax Calculator - Calculate Your Taxes For FY 2021-22 Use Tax Calculator Online

Conclusion

We hope that this article has explained to you about Section 148 notice, the time limit for issuing such notice, powers of the income tax department, procedural aspects, and how to deal with that notice. 

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FAQs

Q: In the case of assets outside India, how long can a reassessment of taxes under Section 148 take place?

Ans:

Reassessment of taxes under Section 148 can occur within 16 years after the end of the relevant assessment year if there are any irregularities in taxes relating to assets outside India.

Q: What happens if an assessing officer cannot issue a notice?

Ans:

The Assessment Officer cannot issue a notice based on the facts and information gleaned from the documents and information submitted by the assessee during the assessment.

The Assessing Officer can only issue a notice if new material is provided to them, not if they find it independently.

Q: Can a reassessment of income tax notification be challenged under Section 148?

Ans:

If you believe they are incorrect, you can question the legality of the grounds mentioned in an income tax reassessment notice.

Q: What happens if a tax reassessment is found to be incorrect?

Ans:

If you win your lawsuit challenging the validity of a reassessment in income tax under Section 148, the Court will cease all legal procedures against you.

Q: What is a section 148 reassessment notice?

Ans:

An assessment made on an older filed income tax return that fits the criterion of income evading assessment is known as a Section 148 reassessment notice.

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