Understanding Income Tax Notice Section 148: A Guide to Reassessment and Compliance

Notice of Income Tax

A key clause in the Income Tax Act, 1961 is Section 148, which gives the Assessing Officer the authority to review a person's previously submitted income tax returns. When the Assessing Officer believes that a taxpayer has either not reported all of their income or has given an incorrect representation of it, they will issue this notice.

What does Section 148 mean?

The Assessing Officer is authorized by Section 148 of the Income Tax Act, 1961, to notify a taxpayer whose income has not been correctly assessed. This suggests that the Assessing Officer may start procedures under this section if they have reason to believe that a taxpayer has not revealed all of their income or has given a false account of it.

How can you receive a notice under sections 148 and 148A from the tax department?

When the tax agency believes that a taxpayer has not revealed all of their income or has given an incorrect representation of it, they will send a notification under Section 148. If they disagree with the taxpayer's assessment and think that any income has not been appropriately assessed, they will receive a notification to reassess their income tax return (ITR).

What occurs if you are the target of a reassessment process?

The return will not be considered a legitimate ITR provided under Section 139 if the taxpayer does not file it and does not comply with the notice under Section 148 within the allotted period. Following the start of reassessment proceedings, notices are sent out pursuant to Section 142(1) requesting more information. This, in accordance with Section 272A, may result in a penalty of Rs 10,000 for each failing.

How Can Tax Notices Be Avoided?

In order to stay out of tax notices, you must:

• Pay your income taxes on schedule and with accuracy.
• Make sure that all pertinent data is appropriately reported.
• Become familiar with the provisions listed in Income Tax Act Section 148.
• As soon as you receive a notice under Section 148, respond to it.
• Work with the authorities to guarantee that your tax liabilities are assessed fairly and legally.

The time limit under Section 148 for issuing notices

Following the following, no notice under Section 148 will be given for the applicable assessment year:

• Typical deadline: three years from the conclusion of the pertinent assessment year
• Time limit: If three but not ten years have gone since the conclusion of the relevant assessment year and the Assessing Officer has proof of income that hasn't been taxed totaling at least Rs 50 lakhs,

The time for reviewing these outdated ITRs is drawing near.

If the hidden income in the assessment year 2018-19 (financial year 2017–18) is Rs 50 lakh or more, the tax department has until August 31, 2024, to issue an income tax notice.

What is suggested in Budget 2024?

The deadline for issuing a notice under Section 148 or an order under Section 148A for the fiscal year 2018–19, in cases where the income escapement is Rs 50 lakh or more, is August 31, 2024. Assessments for the academic year 2018–19 will become time-barred on September 1, 2024.

Answering the Notice Pursuant to Section 148

It's important to remember not to dismiss the notice. If you receive the notice under Section 148, please adhere to the guidelines listed below:

• Examine the notice for any grounds for belief that the Assessing Officer noted in order to issue the notice in accordance with Section 148.
• Answer the notice within the allotted time, which is often thirty days.
• If you agree with the Assessing Officer's stated "reasons to believe," submit the response as soon as possible.
• Make sure you file it after carrying out the necessary due diligence and that you accurately state all of your income and expenses.

Reopening Cases Concerning Income Tax Assessments

A decision has been made to shorten the period of time for reconsidering income tax assessment cases as part of the Union Budget 2021. It will now only last three years instead of the previous six. Assessments, however, may be reopened for a maximum of ten years in cases of severe tax evasion—but only if the hidden income above Rs. 50 lakh.

Things to Take Into Account When Responding to a Section 148 Notice

Any notice you get under this section must be taken seriously, and you must reply right once by giving accurate and comprehensive information about your income and expenses. If you don't reply within the allotted time, the Assessing Officer will make a decision-based evaluation that might not be in your best interests. For this reason, it's critical that you abide by the rules and work with the authorities to guarantee a just and legitimate assessment of your tax obligations.

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