Introduction: 

Section 148 of the Tax Act deals with the provision of information in cases where any unreported income is found requiring reassessment. Understanding the nuances of this section is important for taxpayers to comply with the tax law. This guide provides a comprehensive overview of Section 148, including its scope, implications, notification justifications, statutory provisions, timing of notifications, and guidelines for responding a shall be issued for such notice.

Section 148:

Section 148 of  Income Tax Act, 1961 empowers the Assessing Officer to issue notice to taxpayers whose income has not been properly assessed. This provision allows the taxing officer to initiate proceedings if the taxpayer is in doubt about the disclosure of gross income or the accuracy of the information provided.

A Section 148 Notice is issued by the Income Tax Officer to review and potentially reassess the taxpayer’s Income Tax Return (ITR) in cases where there is a discrepancy or disagreement with the taxpayer’s assessment, indicating potential inaccuracies or undisclosed income.

Reasons to Issue Notice Under Section 148: 

There are various grounds for filing notice under Section 148, as mentioned in the provisions of the Income Tax Act, 1961 .

• If an Assessing Officer suspects that taxable income has evaded assessment, they must substantiate their belief with concrete evidence. Merely relying on suspicion without substantial evidence does not warrant the issuance of a notice to the assessee.
• When the Assessing Officer (AO) receives further information or documents showing that a particular assessee has withheld income, the officer is empowered to issue a notice under Section 148 of the Income Tax Act.
• The Assessing Officer (AO) is prohibited from issuing such notification beyond three years from the end of the assessment year concerned. However, there are exceptions in such cases. For example, if the Principal Commissioner or Chief Commissioner finds the AO’s reasoning valid, the notification may be allowed.
• The AO cannot issue such a notification solely on the basis of the information contained in the documents submitted earlier by the taxpayer during the period under investigation. This provision applies only if a taxpayer provides additional information after the assessment.
• If the materials given by the assessees appear to be based on superficial inferences and logic, there may be sufficient reasons for the AO to believe that the assessee has tried to evade the examination in a particular year.
• If an Assessing Officer holds a rank lower than that of a Joint Commissioner, they are not empowered to issue returns under Section 148 of the Income Tax Act. However, even in such cases, if the Joint Commissioner considers the reasons to be compelling enough to warrant notice to the assessee, the Assessing Officer may proceed accordingly.
• Any official in charge of such cases must provide written reasons for reconsideration, supported by strong evidence.

Issuing Notices under Section 148:

The power to give notice is set out in section 151(1) of the Income Tax Act. This notice targets persons who evade assessment or reassessment of taxable income Only selected individuals have the power to reports are issued in specific circumstances, and they are:

• The Assessing Officer holding the rank of Assistant Commissioner or Deputy Commissioner is empowered to issue reports, subject to the approval of the Joint Commissioner. The Joint Commissioner must be satisfied that the reasons given by the Assessing Officer for submitting the report are correct.
• The Assessing Officer (AO) is limited to submit a report within three years from the end of the assessment year (AY) concerned, subject to the approval of the Chief Chief Commissioner/Commissioner/Chief Commissioner, who must be satisfied with the reasonableness which is written about.
• If the circumstances differ from the above, the AO is entitled to issue a notice, even if their rank is lower than that of the Joint Commissioner or three years have elapsed since the completion of the relevant inquiry .

Time limit:

• No notice shall be issued under section 148 for the relevant assessment year on: Appropriate time limit of 3 years from the end of the relevant assessment year. 
•  The specified time limit, being that 3 years but not more than 10 years have elapsed since the end of the assessment year concerned, and the Assessing Officer holds evidence of income of Rs.50 lakh or more for which the tax has not yet been paid is taxed.
• Note that if such a reassessment under section 143(3) has already been made, the AO is barred from issuing a fresh notice under section 147. However, the AO may issue a notice in the following circumstances.
• The taxpayer failed to file the Income Tax Return (ITR) required under Section 139 .
• The taxpayer failed to provide information or information necessary for assessment in that particular assessment year (AY).
• The taxpayer failed to submit the Income Tax Return (ITR) following the issuance of notices under Section 142 and Section 148(1).

Responding to Notice under Section 148:

The key point to remember is that the importance of information cannot be underestimated. If you receive a notice under section 148, please follow the following instructions.

• First, examine the report for the reasons recorded by the Assessing Officer to justify the report under Section 148. If the report is not within these reasons, you can ask the Assessing Officer to issue it some of the reasons listed do not occur.
• You are required to respond to the notice within the time allotted, usually 30 days. You may respond by sending a letter to the investigating officer or by submitting a written response, with all pertinent information and evidence a it supports the addition.
• If you are satisfied with the ‘reasons for believing’ recorded by the Assessing Officer, file the return at once. Send a copy to the hearing officer in the old appeal.
• If you are filing your income tax return in response to a notice under Section 148, make sure you do due diligence by detailing all your income and expenses. Failure to properly report any income may result in unnecessary penalties.  
• If you believe that the information furnished is incorrect or the reasons given by the Assessing Officer for opening inquiry under Section 147 are incorrect, you may challenge the validity of such information before the Assessing Officer or higher authority
• If you win your case, the court will stop your investigation process. However, if the decision is not in your favour, the assessing officer could proceed with the reassessment.
• If you do not respond to the notice under Section 148, the Assessing Officer is empowered to make an assessment on the basis of available information and calculate your income at their discretion. If you dispute their calculation, you can appeal to the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal.

Rights of Assessee as per Section 148:

• If an assessee receives a notice from the Assessing Officer regarding potential evasion of taxable income, they must take the following actions:
• The assessee has to file an income tax exemption return for the year to which the assessment applies.
• After submitting the form, the assessee may apply for a copy explaining the reasons behind the notice under section 148 of the Assessing Officer.
• If the accused finds that the reasons for the notice are unsatisfactory, a suit may be filed challenging its authenticity.
• The accused must give reasonable grounds for objecting to the issuance of the notice in accordance with Section 148 .
• If the Assessing Officer rejects the claim of the assessee, the assessee may request the Assessing Officer to give detailed reasons for the exemption.
• The accused may file a writ petition in the High Court, challenging the legality of the report issued by the Assessing Officer, even before the completion or reconsideration of the investigation.

Things to Remember : 

• Taxpayers should keep these things in mind when responding to the notice:
• See the reasons cited by Assessing Officer for issuing the notice under Sec.148
• If no reasons are provided, you can request the Assessing Officer to furnish a copy of them.
• Once the taxpayer is satisfied with the reasons given by the Assessing Officer, he has to file the Income Tax Return (ITR). If the taxpayer has already filed a tax return, a copy must be filed with the relevant taxing authority.
• While filing an Income Tax Return (ITR) in response to a notification under section 148 , the taxpayer should ensure that both income and expenditure are reported accurately. Failure to properly or incorrectly report income may result in unnecessary penalties.

Conclusion:

Section 148 of the Income Tax Act is an important provision which empowers the Income Tax Department to review the completed assessment if there are grounds for suspecting neglect of income. Taxpayers should respond promptly to notices issued under Section 148 and furnish all relevant information and documents to avoid penalty or interest. If the taxpayer objects to the reassessment, they retain the option of appealing to the relevant authority.