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How to response to Notice under Section 148
There are various taxpayers who have received notices u/s 148 asking taxpayers to furnish the return u/s 148. It may be noted that income tax authorities are empowered u/s 148 to reopen the case of assessment for earlier years u/s 148. Further, the period of reopening of assessment has been reduced to 3 years in normal case by the Finance Act- 2021 and so income tax authorities have used their earlier power of 4 years or 6 years till 31.03.2021 (Extended to 30/06/2021) for re-opening of the case.
The question emerges as to how to respond to the notice u/s 148. Here is a step-wise guide to reply in such cases.
By following the steps given below, Assessee could establish a strong trail in case assessee prefer an appeal against the reassessment order.
First and foremost, Assessee has to file ITR online u/s 148 for the respective assessment year for which the notice is received. It may be noted that the entire proceeding for section 148 will be online now and hence so return would be required to be e-filed.
It may be noted that in E- proceedings there is an option to file ITR u/s 148. The notice number and the date is required to be mentioned while e-filing return u/s 148. Without mentioning the details about the notice, return could not be filed u/s 148.
Assessee must ascertain the validity of the notice with regard to the time of its issuance, necessary sanction, service of notice, etc. If it is not in accordance with the provision of law, then the notice deserves to be quashed.
Few instances where validity was challenged and the proceeding was quashed are as under:
- Issue of the notice to the dead person
- Issue of notice beyond statutory time period
- Issue of Notice without signature
- Issue of notice at the wrong address
- Issue of notice to the non-existing companies, etc
The question arises as to whether the assessee can get to know the reason for reopening before filing of the income tax return?
AO is duty bound to communicate the reason for reopening of the case to the assessee. However, the timing of communicating the reason is important. The reason could be communicated after the return is filed u/s 148.
As a second step, Assessee must ask for the reasons recorded by the AO before issue of notice.
Courts have observed that while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. It must contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided. The reasons to believe ought to spell out all the reasons and grounds available with the AO for re-opening of the assessment
Assessee must verify the reasons given by the AO for reopening of the case u/s 148. The reason provided must have the details of the required sanction taken by the AO from the approving authority & copy of any relevant tangible material which has been considered by the AO for reasons to be recorded. It may be noted that the notice can be issued only on the basis of tangible material in the possession of the assessee. Taxpayers may refer to an important judgment of Delhi High Court in the case of Sabh Infrastructure Ltd. Vs ACIT dated 25.09.2017 on the subject.
Assessee must file an objection against the reopening of assessment strongly before the AO if the reopening is found to be not in accordance with the law. The submission by the assessee may request AO to drop the proceedings if assessee finds that the reassessment proceedings are invalid. It may be noted that AO is duty bound to dispose of the objection application before proceeding with the assessment proceeding.
It may be noted that if the court finds that the reason recorded doesn’t display the application of mind then the entire assessment proceeding needs to be quashed.
The courts have observed that the exercise of considering the Assessee’s objections to the reopening of assessment is not a mechanical ritual. It is a quasi- judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed.
Before making any further submission with regard to the reassessment proceeding, Assessee should wait for the speaking order of the AO disposing of the objection filed. If the AO drops the proceeding, then the case is closed.
It may be relevant here to mention the observation by Supreme court in GKN Driveshafts (India) Limited v. ITO (2003) 259 ITR19 wherein it is observed as under:
We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the aboves said five assessment years.
After completion of all above action, AO would be issuing the notice u/s 143(2) and notice u/s 142(1) in reply to which the assessee would be required to file the necessary submission, explanations & documents. During the course of assessment, multiple information and documents could be sought by the AO and after all submission, AO would give the draft assessment order to the assessee.
After considering reply of the assessee to the draft assessment order, the AO would pass an assessment order in favour or against the assessee, as the case may be.
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