Section 148 of the Income Tax Act, 1961

Introduction: 

The Assessing Officer can assess or reassess the income of any person subject to certain conditions prescribed. The assessment or reassessment of any income is subject to the due procedure established by the Income Tax Act, 1961. The Assessing Officer must give notice to the person regarding the assessment of income which has escaped assessment. Section 148 of the Income Tax Act, 1961 provides the provision for the issuance of notice. In this article, we will discuss more about Section 148 of the Income Tax Act. 

Understanding of Section 148 of the Income Tax Act, 1961 

Section 148 of the Income Tax Act, 1961 gives power to the Assessing Officer to issue a notice requiring the assessee to furnish the return of his income or income of any other person to which he is assessable to tax. For that purpose, the Assessing Officer will:  

• Serve a notice and with a copy of the order to furnish within 3 months a return of his income or the income of any other person to which he is assessable  
• It is to be served in the prescribed form, verified in the prescribed manner and containing prescribed particulars 

Note: The provision of Section 148 will apply as if the return was required to be furnished under Section 139. 

Reasons to believe: The Assessing Officer can issue the notice only when he has reasons to believe that if income chargeable to tax has escaped assessment.  

Conditions under Section 148: 

The notice can be issued by the Assessing Officer only if the following conditions are fulfilled:  

1. The Assessing Officer has information which suggests that the income chargeable to tax has escaped assessment and it is not based on his mere suspicion. 
2. The Assessing Officer has obtained prior approval from the specified authority for the issuance of notice. 

Meaning of ‘Information’ for Section 148 

The “information” would suggest that the information chargeable to tax has escaped assessment if: 

1. Any information flagged for the assessee for the assessment year as per the risk management strategy formulated by the CBDT.  
2. Any audit objection has not been made as per the provisions of this Act 
3. Any information received under an agreement under section 90 or section 90A of the Act 
4. Any information is given to the Assessing Officer under the scheme Faceless collection of information under section 135A 
5. Any information requiring action for the order of a Tribunal or a Court. 

Deemed to have ‘information’ under Section 148 

The Assessing Officer shall be deemed to have the information: 

1. In the case of the assessee if – 

• A search is initiated under section 132 
• Books of account, other documents or any assets are requisitioned under section 132A 
• A survey is conducted under section 133A except under Section 133A(2A) 
• This must be done on or after 1st April 2021. 

2. In case of any other person if – 

• • Any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 
  • Any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132A 
  • Any books of account or documents seized or requisitioned under section 132 
  • any books of account or documents seized or requisitioned under section 132A 
  • This must be done on or after 1 April 2021. 
  • The assessing officer must be satisfied 
  • There must be prior approval of the Principal Commissioner or Commissioner. 

Time limit for issuance of Notice: 

The time limit for issuance of Notice under Section 148 is specified under Section 149: 

1. More than 3 years but not more than 10 years from the end of the relevant assessment year–  

• • If the Assessing officer possesses books of account or other documents or evidence. 
  • The documents suggest that income amounting to more than Rs 50 lakhs has escaped assessment.  
  • The income is represented in the form of  
  • an asset 
  • expenditure in relation to a transaction or event or occasion 
  • entries in the books of account 

2. 3 years from the end of the relevant assessment year – In any other case 

Reply to a Notice under Section 148: 

An assessee before replying to a Notice under Section 148 shall do the following: 

1. The assessee shall check the reasons for issuing the notice as recorded in writing by the Assessing Authority. 
2. If no reason is given in the notice, then the assessee can ask for the reasons from the Assessing Officer for issuance of the notice. 
3. If the assessee is satisfied with the reasons recorded, he should file the Income Tax Return. 
4. If already Income Tax Return is filed, then he shall send a copy of the return to the Assessing Officer.  
5. The assessee can also challenge the validity of the Notice before the higher authority.  

Legal consequences for not responding to a Notice: 

If an assessee has been served a notice under Section 148 requiring him to furnish the Income Tax return and he has not furnished the Return within the date prescribed in the Notice. Then the assessing officer can proceed with the best judgement assessment of his income on the basis of the facts and materials available to him. This best judgement assessment may result in an increase of his income resulting in higher tax payable, penalties, and interest.   

Conclusion: 

Section 148 of the Income Tax Act provides a provision for the issuance of notice for assessment of income escaping assessment. The assessee who has been served the Notice for furnishing of return of Income must give a proper reply to the Notice within the time specified. If the assessee has not given a satisfactory reply, then the Assessing Officer may proceed with the best judgement assessment which may increase his tax liability and also penalty and interest.