Section 148-it-act1961

Issue of Notice where
Income has Escaped Assessment
P.V.Harini
3rd year Intern
M/s SBS and Company LLP
harinip@sbsandco.com
040-40183366 (113)
by
SBS Hyderabad
25th May,2019

harinip@sbsandco.com www.sbsandco.com 040-40183366 (113)2
Issue of Notice where income has escaped assessment - Section 148 of Income Tax Act,1961

 Where income has escaped assessment
Instances of Income escaping assessment
Section 147 of Act - Income escaping assessment
Duty of the Assessee
 Issue of Notice
Requirements of Notice
Time Limit for Notice Section 149 of Act
Authority to Issue Notice Section 151 of Act
 Other Provisions
 Consequences
Note : “Act” refers to Income Tax Act,1961
SYNOPSIS

 No Return of income is furnished though his Total Income exceeded the maximum amount
which is not chargeable to income-tax.
Example: During F.Y 2013-14 Mr. PPT has transferred his House Property worth Rs.7,00,000 for
Rs.10,00,000 and the capital gains of Rs.3,00,000 were invested in purchase of another House Property.
Mr.PPT therefore has not filed the Income Tax Return for FY 2013-14 assuming that there is no taxable
income.
In this case he has been served with notice u/s 148 for escaping of his income and the same has not been
disclosed in the ITR
 Return of income has been furnished but no assessment has been made
&
it is noticed by the AO that the assessee has understated the income or has claimed excessive
loss, deduction, allowance or relief in the return.
Instances of Income escaping assessment

 Assessment has been made, but income chargeable to tax
 has been underassessed or
 assessed at too low rate or
 is subjected to excessive relief or
 excessive loss / depreciation allowance / any other allowance has been computed
 Any asset (including financial interest in any entity) located outside India.
 Whether Return of Income is furnished or not, AO on the basis of information or document
received from the prescribed income-tax authority u/s 133C(2) of the Act notices that the assessee
has understated the income or has claimed excessive loss, deduction, allowance or relief in the
return.
 Assessee has failed to furnish a report in respect of any international transaction which he was
so required u/s 92E.
Instances of Income escaping assessment

→ When Assessing Officer has reason to believe
→ that any income chargeable to tax has escaped assessment for any assessment year,
→ AO may assess or reassess
• such income and
• any other income chargeable to tax which has escaped assessment and which comes to his notice
subsequently in the course of the proceedings or
• recompute the loss / depreciation allowance / other allowance.
→ Assessing Officer shall serve on the assessee notice u/s 148 (u/s 148(1) of the Act)
• Requiring assesse to furnish Return of Income within period as specified in the notice
• The Return of Income shall be filed in the prescribed form and shall be duly verified
• The return so furnished shall be deemed as if such return were a return required to be furnished u/s
139
→ AO shall before issuing notice u/s 148 record his reasons for doing so. (u/s 148(2) of the Act)
Section -147 of Act

→ However,
• where an assessment u/s 143(3) or 147 has been made for the relevant AY, no action shall be taken u/s
147 after the expiry of 4 years from the end of the relevant AY.
• unless any income chargeable to tax has escaped assessment for such assessment year by reason of the
failure on the part of the assessee to
o make a return under section 139 or in response to a notice issued under sub-section (1) of section
142 or section 148
o or to disclose fully and truly all material facts necessary for his assessment, for that assessment year
→ The above said provision shall not apply for income escaped assessment from any asset
(including financial interest in any entity) located outside India.
→ Also Assessing Officer may assess or reassess such income, other than the income involving
matters which are the subject matters of any appeal, reference or revision, which is chargeable
to tax and has escaped assessment
Section -147

 Upon receipt of notice u/s 148 assesse is required
 where no return has been filed, file the original return or
 where original return is filed, file revised return.
 He/she can request for the copy of “Reason to Believe” i.e, the basis of which the notice been
issued.
 Can file objection to the issuance of notice, where the reasons on which A.O. has issued notice
u/s 148 were baseless and irrelevant. (GKN Driveshafts (India) Ltd v/s ITO)
 The assessee can also file a writ petition in the High Court challenging the relevance and
lawfulness of the notice even before the completion of assessment or reassessment
 Writ Petition can be filled in the High Court where the assessment has been completed but the
matter is in the appeal challenging the lawfulness of the notice.
Duties of the Assessee

Basic requirements of notice include
 Name of the assesse
 PAN of the Assessee.
 Assessment Year for which the proceedings have been initiated
 Date of issue of notice
 Notice number (for further correspondences)
 Section under which notice has been issued
 Time within which the response is to be given
 To which Jurisdiction does the response is to be given
Requirements of Notice

Taxable Income escaped
assessment
Time limit for issue of
Notice
Example : For FY 2019-20
For AY 2020-21
Income escaped
assessment
Time limit for issue of
Notice
Is < Rs.1,00,000
4 years from end of the
relevant AY.
Rs.85,000 on or before 31.03.2025
Is >=Rs.1,00,000 or more
6 years from the end of
the relevant AY.
Rs.18,50,000 on or before 31.03.2027
Income in relation to any asset
(including financial interest in
any entity) located outside India.
16 years from the end of
the relevant AY. -
on or before 31.03.2037
Time Limit for Notice (Section 149)
 If the person on whom a notice u/s 148 is to be served is a person treated as the agent of a non-resident
(u/s 163 of the Act) and the assessment etc, is to be made on him as the agent of such non-resident, the notice
shall not be issued after the expiry of a period of 6 years from the end of the relevant AY.

 Notice u/s 148 shall not be issued by an AO who is below the rank of Joint Commissioner.
However, where Joint Commissioner is satisfied with the reasons recorded by AO, he may call for issue of
notice u/s 148.
 Where notice is issued after expiry of 4 years from the end of the relevant A.Y it shall be issued
upon satisfaction of
 Principal Chief Commissioner or
 Chief Commissioner or
 Principal Commissioner or
 Commissioner
on the reasons recorded by the Assessing Officer
 In the above cases Joint Commissioner / Principal Chief Commissioner / Chief Commissioner /
Principal Commissioner / Commissioner need not issue such notice himself.
Authority to Issue Notice (Section 151)

Rate of Tax (Section 152 of the Act)
 Tax shall be chargeable at the rate or rates at which it would have been charged had the
income not escaped assessment.
Time limit for assessment, reassessment and re-computation (Section 153 of the Act)
 Order of assessment, reassessment or re-computation under section 147 shall be
made within nine months from the end of the financial year in which the notice u/s 148
was served.
 For notices issued on or after the 1st day of April, 2019, words "nine months", the words
"twelve months" had been substituted.
Other Provisions

 Willful failure to furnish return of income u/s 148 result in (u/s 276CC of the Act)
 where tax sought to be evaded exceeds Rs 25,00,000 – Imprisonment for a term of 6 months
to 7 years & with Fine
 In any other case – Imprisonment for a term of 3 months to 2 years & with Fine
 Payment of interest u/s 234A, 234B & 234C along with tax on escaped income.
 Failure to comply with any notice u/s 142(1) or 143 (2) will result in penalty of Rs 10,000 for
each failure. (u/s 272A of the Act)
 Penalty u/s 270A of the Act for
 misreporting of income - 200% of amount of tax payable or
 under-reporting of income - 50% of amount of tax payable .
 Wheretax and interest payable as per the assessment order issued u/s 143(3) or 147 is paid within the
period specified in the notice of demand, then AO to grant immunity from imposition of penalty u/s
270A (u/s 270AA of the Act).
Consequences

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P.V.Harini
3rd Year Intern
M/s SBS and Company LLP
harinip@sbsandco.com
040-40183366(113)
SBS Hyderabad
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Section 148-it-act1961

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