The taxes paid by individuals play a crucial role in funding public services. However, sometimes, taxpayers might intentionally or unintentionally fail to report a part of their income when they file their taxes. In response to this, the tax authorities conduct a comprehensive examination to ensure proper reporting of all sources of income. In such cases, the Assessing Officer issues a notice under Section 148 for ‘Income Escapement Assessment’. The purpose of this assessment is to uncover any concealed income, whether intentional or due to oversight.
Section 148 of the Income Tax Act
If upon reviewing the filed return, the AO has any doubts regarding the completeness of income disclosure by the taxpayer, they can initiate further assessment proceedings by issuing notice under section 148.
Further, the Finance Act 2022 had inserted section 148A. In compliance with this section, the AO must conduct an inquiry and grant the taxpayer an opportunity to present their explanation before issuing a notice under section 148. In such cases, the authorities must permit the taxpayer to provide their explanation within a timeframe of 7 days, which can be extended for up to 30 days.
Issuance of Notice under Section 148
There are various reasons as well as terms and conditions under section 148 for the issue of Notice as follows:-
- Before issuing a notice under section 148, the assessing officer must have a valid reason to believe that taxable income has escaped assessment, supported by substantial evidence. Mere suspicion without evidence cannot be the basis for such a notice.
- The AO must provide the reasons in writing before issuing notice under section 148. Just a change of opinion cannot constitute a reason to believe.
- The AO cannot issue a notice based on information provided by the taxpayer during the assessment.
- The AO can only issue a notice if they have received the new information and not discovered it themselves by reading.
- The AO can issue a notice if previously disclosed relevant information comes to notice, even at a later time.
- Further, if the following conditions are satisfied, then only AO can issue notice u/s 148:
(a) The taxpayer had failed to file the return in response to the notice u/s 142.
(b) The taxpayer had filed the return under Section 139.
(c) The complete and accurate information is being provided by the taxpayer for completing the
assessment of the relevant AY.
Time limit to issue a notice
The time period for issuing notice for income escaping assessment is provided under section 149 of the Income Tax Act.
According to Section 149, the authorities can issue the notice:
- Within the period of 4 years from the end of the relevant assessment year.
- AO can issue notice up to 10 years from the end of the relevant assessment year if:
He has in his possession books of account, other documents or evidence which reveal that the income chargeable to tax, represented in the form of—
(i) an asset;
(ii) expenditure in respect of a transaction or in relation to an event or occasion; or
(iii) an entry or entries in the books of account,
which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more. - The authorities can issue a notice for income escaping assessment related to assets located outside India within a period of 16 years from the end of the relevant Assessment Year.
Who can issue a notice under Section 148?
As per section 148 of the Income Tax Act, the following persons can issue a notice:-
- An AO above the rank of Assistant Commissioner or Deputy Commissioner can issue a notice under section 148. Further, the notice can only be issued if the Joint Commissioner is convinced, with recorded justifications, that it’s an appropriate case.
- The AO cannot issue a notice after 4 years from the end of the relevant assessment year. However, if the Principal Chief Commissioner or Principal Commissioner or Chief Commissioner or Commissioner finds the AO’s reasons valid, they can issue a notice even after this 4-year period.
Replying to notice under Section 148
In case the assessee receives the notice under section 148, he should follow the below-mentioned procedure for replying to the notice:
-
Upon receiving the notice, the taxpayer should review the recorded reasons for issuing the notice. If these reasons are not provided, the taxpayer must request the AO to furnish a copy of the recorded reasons.
-
If the taxpayer agrees with the reasons given by the AO, they must respond within the stipulated time frame. This response can involve either filing the requested return or providing the documents and information as requested by the AO.
-
The taxpayer can dispute the validity of the notice before the AO or higher authorities if the notice is found to be invalid or if the reasons for initiating the assessment under section 147 are deemed inadequate.
-
If the authority’s decision favors the taxpayer, assessment procedures can be suspended. However, if the authorities rule against the taxpayer, the AO can proceed with the re-assessment.
Consequences of not responding to notice
In cases where a taxpayer fails to respond to the notice, the AO has the authority to conduct the assessment based on available information. Essentially, they can estimate taxpayer’s income and assess it to the best of their judgment u/s 144.
If taxpayers disagree with their assessment, they can choose to file an appeal. In such cases, the appeal can be filed with either the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal.
FAQs
The assessee needs to produce the details of their income tax returns within 30 days duration that has been specified by the assessing officer in the notice given.
An AO currently who ranks above the rank of Assistant Commissioner or Deputy Commissioner can issue a notice under Section 148.
The taxpayer will be liable to pay interest under Section 243(3) for late filing of Income Tax returns or for not filing of Income Tax returns.
No, the maximum time limit to issue a notice of income escapment assessment is 10 years.
Hey @TeamQuicko
What is the time limit in which I need to respond to the notice under section 139(9)?
How can I respond to the notice received online?
How much time it will take to process the refund once response to notice u/s 139(9) is filed?
Hey @HarshitShah
It is very common to receive a notice from the Income Tax Department. The notice sent to you might be a routine inquiry or a request for clarification. There is no need to worry when you get a notice from the Income Tax Department. You will have 15 days time in which you will need to respond to the notice/file revised ITR.
Hope this helps!
Hey @SonalYadav
You can login to your account on the Income Tax e-filing website by entering your credentials i.e. User ID (PAN), password, and captcha code.
Next, you need to click on the ‘e-file’ tab and select ‘Response to outstanding Tax Demand’ option.
Hope this helps!
Hey @ViraajAhuja47
In case of any defects in the Income Tax Return, Assessing Office can issue notice u/s 139(9). If you have filed a return within 15 days of issue of notice, then it will generally take 60 days to process the return once it is sent for processing.
Hope this helps!
Hey @HarishMehta
It is mentioned in the notice that in case one does not respond in the stipulated time, the return will be processed by restricting the credit for the TDS proportionately.
To give an example: There are 2 incomes mentioned in Form 26AS as below:
Salary from A - 100000 & TDS deducted - 10000
Salary from B - 200000 & TDS deducted - 20000
In case you have not reported either of the above income in ITR then you may receive a notice for the mismatch.
Thus, in the above example if you don’t respond in the time, then ITD will add the income of both of the above but will not give the credit of TDS not mentioned in ITR and process the return.
Hence, it is always advisable to respond to the Income Tax Notice in the given time period.
Hope this helps!
Hi @Shweta_Saini ,
Notice u/s 144(1) is issued in the following cases:
-When ITR is not filed within due date by a taxpayer
-When a taxpayer fails to provide a response to an inquiry of AO (Assessing Officer) for filed ITR,
-When a taxpayer fails to provide a response to assessment notice for filing ITR.
Here, AO can assess the total income or loss of a taxpayer based on the information gathered by them. AO usually gives the taxpayer an opportunity to present their case and provide necessary documents. Hence response to 144(1) can be given after looking at the cause of the notice and with supporting documents.
Attention XXXXX4061X, Your PAN has been flagged for not filing of ITR for A.Y-2020-21. Please file your ITR or submit online response under e-Campaign tab on Compliance Portal (CP). Access CP by logging into e-filing portal (My Account) - ITD
Please help i want to avoid any problems
Hey @SreeSSXP
Since you had high value transactions and ITR has not been filed for AY 2020-21, ITD has flagged your PAN. Thus, you have to file ITR before March 31, 2021 and respond to the transactions on IT Portal.
You can reach out to us on help@quicko.com or alternatively get in touch with us at +91-7575831310 so someone from our team can get in touch with you for process, pricing and discounts?