For Assessment under Section 147, the Assessing Officer has to serve notice under Section 148 of the Income Tax Act. The Notice requires the assessee to furnish the return within specified time.
But before understanding what the notice is all about and how to respond to the notice, let's understand what exactly does assessment under Section 147 means.
Section 147 - Assessment or Reassessment of Income Escaping Assessment (Re-opening of Cases)
Where the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any Assessment Year, then the Assessing Officer may assess or reassess such income.
The Assessing officer can also assess any other income that comes to his notice subsequently during the course of proceeding under this section.
Now let us understand what is the actual meaning of 'Reasons to Believe'
- If there is any Retrospective Amendment in Law
- A later Supreme Court Judgement
- If there is any strong evidence or proof which is in possession of the Assessing Officer that the assessee has understated the income.
- If there is any mistake apparent from the records.
It should also be noted that any Rumours or Gossips or Suspicion does not amount to 'reason to believe'. Also, A.O. cannot open or reopen a case on the basis of change of opinion.
It should also be noted that the AO cannot assess or reassess income involving matters which are subject to matter of appeal, revision or reference.
Who can issue a notice under Section 148?
Section 151(1) of the Income Tax Act, 1961 contains the provisions for issue of notice under section 148 of the Income Tax Act:
No notice would be issued by an Assessing Officer under section 148, where AO is below the rank of a Joint Commissioner unless Joint Commissioner is satisfied, on reasons recorded by such AO, that it's a fit case for issuing such notice.
Notice can be issued by the Assessing Officer under Section 148 after the expiry of Four Years from the relevant assessment year only if the Principal Chief Commissioner or Principal Commissioner or Chief Commissioner or Commissioner is satisfied that it's a fit case for issuing such notice.
What is the Time limit to issue a notice under Section 148?
Section 149 of the Income Tax Act provides with the time limit within which the notice under section 148 could be issued.
It says that the notice under section 148 can be issued within a period of 4 years from the end of the relevant Assessment Year in case the income that is escaped does not exceed Rs.1 lac.
In case the income so escaped is more than Rs.1 lac, the notice under the said section could be issued within a period of 6 years from the end of relevant AY subject to provisions contained in section 151.
The notice under section 148 could be issued within a period of 16 years from the end of relevant AY in case the income that has escaped assessment relates to assets located outside India.
Further, if the assessment has been completed under section 143(3) or 147 no further action could be taken under section 147 after the expiry of 4 years from the end of relevant AY unless income chargeable to tax has escaped assessment for such AY due to failure on assessee's part to file the return under section 139 or 142 or 148 or fully and truly disclosing all the material facts required for the assessment, for that AY.
What are the Steps Taken By Assessee to reply to the notice under Section 148?
- In the first place, the assessee has an option to file a new return of income declaring the true income in accordance with the notice. Income can be the same or more than what the assessee declared in the original return.
- Secondly, the assessee also has an option to write to AO that returns already filed under section 139(1) may be treated as a return filed in compliance to notice under section 148.
- If the assessee filed the return then after filing it, the assessee should ask for a supply of reasons for the issue of notice under section 148. If a copy of the reasons is not given to the assessee, the whole assessment proceedings and assessment order passed can be quashed.
- Assessee can also file objections to the issue of notice and AO is also bound to dispose the same by a speaking order.
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