Section 148 of Income Tax Act of India

Assessing Officer has a power to issue notice under section 148 of income tax act wherein any income has been escaped from being taxed which is subject to the provisions of Sec 147 to Sec 153. Notice u/s 148 gives a power to the A.O. to assess or reassess the Income which comes into notice before and during the assessment.

Notice under section 148 issued by A.O. is like an intimation to the assessee where he has to prove why he shall not be assessed under section 147. The assessee is required to respond to the notice within 30 days or within the duration mentioned in the notice.

Reason to Believe –

The A.O. can issue notice u/s 148 only when he has a reason to believe that the Income chargeable to tax has been escaped from assessment.  Let’s understand what is the reason to believe first. Reason to Believe is not merely an opinion. Assessee must have a valid proof which can directly relate to the formation of the belief that the income chargeable to tax has been escaped from assessment.

The proof or material shall be relevant and obtained from a trusted source. This reason to believe must be recorded in writing by the A.O. before issuing any notice u/s 148.

Further, any change of opinion shall also not form a “Reason to Believe”.

For Example- During the assessment, an assessee has disclosed all the facts truly related to his/her earnings and on the basis of which A.O. has completed the assessment. But later on, on the basis of same documents and facts, A.O. has arrived on the different opinion. Now, It has been clearly stated that merely change in the opinion shall not be considered as a Reason to Believe.

Persons Authorized to Issue Notice u/s 148 –

Section 148 of the Income Tax Act, allows some specific persons who can issue notice u/s 148 for the income escaped . The notice u/s 148 cannot be issued by an A.O. who is ranked below the Assistant Commissioner or Deputy Commissioner until the Joint Commissioner is satisfied on the reasons recorded by A.O. as per the provisions of Section 151(1).

1. Further, notice u/s 148 shall not be issued by the A.O. after the expiry of four years from the end of relevant assessment year unless Commissioner or Chief Commissioner is satisfied with the reasons recorded by A.O. for the issuance of the notice.
2. Any other case, which is not covered by the provisions of Sec 151(1), notice shall not be issued by an A.O. –
   1. Where he/she is below the rank of Joint Commissioner or
   2. The four years have been expired from the end of relevant Assessment Year.

That means, A.O. can issue the notice u/s 148 after the expiry of 4 years only when Joint Commissioner gives an approval for the same.

Time Limit for the issuance of Notice u/s 148 –

Notice under section 148 of the Income Tax Act can be issued within the time limit prescribed below –

1. As per the provisions of Sec 149, the notice u/s 148 can be issued within 4 years from the end of relevant Assessment Year where the income chargeable to tax escaped, the amount of which is not more than one lac rupees.
2. Where the income chargeable to tax escaped and the amount of which is more than one lac rupees then notice u/s 148 can be issued up to 6 years from the end of relevant Assessment Year as per the provisions of Sec 151.
3. The notice under section 148 cannot be issued after the expiry of four years from the end of relevant Assessment Year where the assessment u/s 143(3) has already been taken unless –
   1. The assessee has failed to disclose complete material facts truly necessary for his assessment.
   2. Failed to furnish return u/s 139.
   3. Failed to furnish the return in response to a notice issued u/s 142(1).

Duties of the Assessee after receiving the Notice Under Section 148 –

Notice u/s 148 of the Income Tax Act issued by the Assessing Officer makes the assessee liable to carry out the following tasks –

1. After receiving the notice u/s 148, the assessee is required to file his/her income tax return for such escaped assessment mentioned in the notice.
2. Once the assessee has filed the return of income in response to the notice issued u/s 148, he/she can request for the copy of Reason to Believe on the basis of which he has been issued notice for the income escaped u/s 148.
3. If assessee found the Reason to Believe baseless or irrelevant then he has a right to file an objection for the issuance of notice where he has to prove the reasons on which A.O. has issued notice u/s 148 were baseless and irrelevant.
4. The assessee can also file a writ petition in the High Court challenging the relevance and lawfulness of the notice issued by A.O. under sec 148 even before the completion of assessment or reassessment.
5. Writ Petition can be filled in the High Court where the assessment has been completed but the matter is in the appeal challenging the lawfulness of the notice.
6. The assessee has a right to ask A.O. to pass a speaking order after disposing of the objections.

Conclusion – In the above article we have discussed the provisions of Sec 148 of income tax act, when A.O. issues the notice u/s 148, Reason to Believe on the basis of which notice can be issued, persons authorised to issue notice of Sec 148, time limit of issuance of notice, duties of the assessee after receiving the notice u/s 148.   

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Other Sections:

Section 54 of Income Tax Act