How to reply to notice u/s 148 of the Income Tax Act

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How to reply to notice u/s 148 of the Income Tax Act

Paying your taxes is a good thing, although it does pinch to pay huge amounts in taxes from your hard earned money. Therefore, citizens sometimes resort to unfair means to not disclose all the income and pay lower taxes. The income tax authorities have the powers to assess or reassess your income if they are of the view that any of your income has escaped assessment. Section 148 of the Income Tax Act deals with the issuance of a notice wherein any income has escaped recomputation or assessment. For more details can refer our article on A brief on Section 148 of Income Tax Act, 1961.

In this article we will discuss about how to reply to such notices.

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:

  • You need to check whether notice has been issued with proper approval and jurisdiction as mentioned above and whether it is within the time limit or not.
  • 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 234Band 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.
  • Willful 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)

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.
CONDITION TIME LIMIT
Notice served u/s 148 9/12 months from end of FY
Notice served u/s 148 and reference made to TPO 21 months from end of FY

Hence one should file their income tax returns without tax evasion and with due diligence otherwise one will have to face the dire consequences.

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