What to do when you receive Notice u/s 148 / 148A?

Understand what is Sec 148 Notice - Notice for reassessment if the income tax officer disagrees with the previous assessment of the ITR of the taxpayer and believes that the income has escaped the assessment.

Section 148A was introduced by Finance Act, 2022 requiring the Assessing Officer to conduct inquiry, providing opportunity before issue of notice under section 148.

it is obligatory for the AO to Issue Notice U/s 148A(b) to the assessee, containing the information along with adverse material purporting escapement of income, which can be countered by the assessee by way material and evidences available with him

In Budget 2021, the government introduced Section 148A in the Income Tax Act. Suppose the income tax officer has information that the taxpayer has escaped income for any assessment year on which tax is payable. In that case, the new provision requires that the income tax officer provide a chance to the taxpayer to explain their case before issuing notice. Under section 148A, the assessee gets a chance to be heard by the officer.

An assessing officer has to give not less than seven days but not more than 30 days to the assessee for furnishing his explanation.

After assessing the taxpayer’s reply, the income tax officer shall decide whether it is a fit case to issue notice for income escaping assessment. If the income tax officer decides to reopen the case, a copy of the order and a notice (under Section 148) must be issued to the taxpayer.

As per the time limitation clause, a notice cannot be issued in normal scenarios if three years have elapsed since the end of the relevant assessment year. However, notice beyond three years can be taken up only if there is evidence that the taxpayer has evaded an assessment of taxable income of at least Rs 50 lakh. However, notice can be issued beyond three years but after 10 years from the end of the relevant assessment year.

The income tax officer shall obtain the approval of specified authority before conducting any such enquiries, providing an opportunity to the taxpayer, or passing such an order.

The entire material and information relied upon by the Assessing Officer needs to be supplied to the assessee alongwith the notice u/s 148A/ Show Cause Notice.

There must be some material supporting allegation of escapement of income. A bald assertion about escapement of income is not sufficient to validate issuance of notice u/s 148A.

The Assessing Officer is obliged to consider, the reply, if any furnished by the assessee in response to notice referred in Clause (b) of section 148A, i.e., Show Cause Notice.

In case the assessee has made a request for personal hearing or cross examination of third party or statement or third party, then the Assessing Officer is bound to provide the same with the approval of specified authority.

Since Section 148A is effective from 1st April 2021, any notice issued to the taxpayer under Section 148 after the said date, without following the procedure under Section 148A (i.e. without giving an opportunity of being heard) would be invalid and contrary to the provisions of the Income Tax Act.

The Courts have held again and again that the procedure envisaged u/s 148A of the Act is sacrosanct and has to be strictly followed in line with the intentions of legislature for bringing new provisions u/s 148A of the act.

After receiving the aforesaid order and notice u/s 148 the assessee needs to file the return of income for the relevant assessment year within time prescribed in the notice u/s148 and process for reassessment

In new regime the powers of the Assessing Officers have widened and he can make Full Scrutiny of the case under reference while making assessment u/s 148.

Keep ready all documents for filing returns and reply to the notice. Also its always advisable to take professional help to reply correctly and timely

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