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income escaping assessment notice

Section 148 – Income Escaping Assessment Notice

Last Update Date : November 30, 2018

Section 147 of the Income Tax Act gives the I-T Department power to reassess your previously filed I-T returns. An Assessing Officer can pick your return for reassessment based on a certain pre-defined criteria by sending you an Income Escaping Assessment notice under section 148 of Income Tax Act. This comprehensive guide by H&R Block India will help you understand when you can get this notice and how to resolve such a situation.

Section 148 & 147 of Income Tax Act

Reasons for getting the Notice u/s 148 of Income Tax Act

You can get notice u/s 148 if the assessing officer has a reason to believe that your income which was chargeable to tax has escaped assessment. If he has materials to support his belief, he will record his reasons in writing and send you a notice u/s 148. The AO cannot simply change his mind and decide to re-investigate your case without any valid reason.

If you have disclosed correct information and documents during the original assessment, the AO cannot send you a notice for the reassessment of the same documents. Some new documents / facts which indicate that income has escaped assessment must come into light. If some new information comes to light which shows that you have concealed some income, then he can take action against you under section 147 and 148.

[ Read: Tax Notices under Income Tax Act 1961 ]

Time Limit for Completion of Assessment u/s 148

The I-T Act has specified time limit for completion of reassessment by AO:

  • If you received a notice u/s 148, the AO is bound to complete reassessment within 9 months (12 months for the notices served on or after 1st April 2019) from the end of the FY in which notice was issued.
  • If you received a notice u/s 148 and a reference was made to TPO, the AO must complete reassessment within 21 months from the end of the FY in which notice was issued.
Maximum time limit for completion of reassessment u/s 147
Condition Time limit
Notice served u/s 148 9/12 months from the end of FY
Notice served u/s 148 and reference made to TPO 21 months from the end of FY

Reply to notice under section 148 of Income Tax Act 1961

The most important thing to keep in mind here is to not take this notice lightly. If the tax department has sent you the notice u/s 148, please take the following actions quickly:

  • Check the notice for reasons to believe as recorded by the AO for issue of income escaping assessment notice u/s 148. In case if notice does not have the reasons mentioned in it, then you can request the AO to send you the copy of recorded reasons.
  • If you are satisfied with the reasons to believe as recorded by AO, file your income tax return as soon as possible. If you had already filed the relevant return, send its copy to the AO.
  • If you are filing the return in response to the notice issued u/s 148, make sure you file it after due diligence declare all your income and expenses carefully. If you miss reporting the income correctly then it can result in huge penalties.
  • In case if you feel that the notice is not validly served or the reasons provided by the AO for opening the assessment u/s 147 are not proper then you can challenge the validity of the notice sent to you before the AO or higher authority as the case may be.
  • If you win this case, the Court will halt the assessment proceedings. However, if the decision goes in the favour of the AO, then he can proceed with the reassessment of your case.

Consequences of Reassessment under Section 147

If the reassessment of your case results in demand for tax, you may face the following consequences depending upon whether you filed your tax return or not before receiving the notice:

  • Had you filed your tax return originally, i.e. before the beginning of reassessment, you will be asked to pay the tax due along with interest under 234B and 234C.
  • Had you not filed your tax return originally, i.e. before the beginning of reassessment, the financial loss will be much higher for you than the previous case. You will be asked to pay the tax due along with interest under sections 234A, 234B and 234C.
  • Failure to comply with any notice issued under 142(1) or section 143(2) or failure to comply with a direction under section 142(2A) will result in penalty of Rs 10,000 for each failure.
  • Along with this you may also have to pay penalty of 100-300% of the tax sought to be evaded u/s 271(1)(c) for concealment of income. However starting AY 2017-18 this penalty will be replaced a new penalty u/s 270A(1) as per which, penalty of 50% for under-reporting and 200% for misreporting of income will be levied.
  • Wilful failure to furnish return of income under section 139(1) or in response to notice under section 142(1)(i) or section 148 or section 153A (non-cognizable offence under section 279A)— can result into prosecution as under:
    1. where tax sought to be evaded exceeds Rs 1 lakh  – 6 months to 7 years (Rs 25 lakh w.e.f. 1-7-2012)
    2. in other cases – 3 months to 3 years (2 years w.e.f. 1-7-2012)

Who can send you Notice under Section 148?

If your case has been chosen for reassessment u/s 147, then an AO who holds the rank of Assistant Commissioner or Deputy Commissioner or higher can only send you a notice unless the reasons recorded by AO are found fit by Joint Commissioner for the issue of notice.

If the notice u/s 148 is to be sent after the expiry of 4 years from the end of the relevant assessment year then it should be sent only after due approvals from Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

Reassessment Powers of I-T Department u/s 147 of Income Tax Act

Income Tax department has the power to scrutinize your tax return within 6 months from the end of the financial year in which it is filed. This is a regular scrutiny assessment and your case may get selected for this type of scrutiny based on certain pre-defined criteria. This notice does not necessarily mean that tax department believes that you have done something wrong.

In case such notice was not issued to you within 6 months or you had not filed your return at all, the tax department can still scrutinise your return by issuing you a notice under section 148. Through this notice, the assessing officer can ask you to furnish your return within a specified period. He can then issue scrutiny assessment notice u/s 143(2) to proceed with the reassessment of your case.

Time Limit for Issue of Notice u/s 148

If your assessment was completed u/s 143(3), the tax department cannot take any action (u/s 147) against you after 4 years from the end of relevant AY unless:

  • You failed to disclose all the necessary material facts for the relevant AY
  • Your income escaped assessment due to non-filing of return u/s 139 or in response to a notice issued u/s 142(1) or u/s 148
  • Your income escaped assessment due to incorrect filing

The time limit also depends on the amount of income which has escaped assessment:

  • If the income which escaped assessment is up to Rs 1 lakh, then notice cannot be issued to you after 4 years from the end of relevant AY.
  • If the income which escaped assessment is more than Rs 1 lakh, then notice cannot be issued after 6 years from the end of relevant AY.

Where the income which has escaped the assessment relates to any asset located outside India then notice cannot up to 16 years from the end of relevant AY.

Maximum time limit for notice u/s 148 to be issued
Condition Time limit
Escaped income < Rs 1 lakh 4 years from the end of relevant AY
Escaped income > Rs 1 lakh 6 years from the end of relevant AY
Escaped income relates to foreign asset 16 years from the end of relevant AY

How can H&R Block help you?

Receiving a scrutiny notice is never a pleasant experience and failure to respond to it correctly can result in further proceedings or penalties. To ensure any notices you receive are handled with care and attention to detail, consult your personal tax experts at H&R Block India to get instant tax notice assistance.

  • Have you received an Income Tax Notice?
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