Section 148 of the Income Tax Act 1961 allows the Assessing Officer to send notices to taxpayers whose income needs to be correctly assessed. This means that if the officer suspects that a taxpayer has not disclosed complete income or provided an inaccurate representation, they can initiate proceedings under this section. The Finance Act 2022 introduced Section 148A, which requires the assessing officer to conduct an inquiry and provide the taxpayer with an opportunity to explain their case before issuing a notice under Section 148.

The 2021 budget introduced Section 148A in the Income Tax Act. Suppose the officer has information that the taxpayer has undisclosed income for a specific assessment year. In that case, the officer must give the taxpayer a chance to explain before issuing a notice. The taxpayer has the right to explain his case to the officer. The officer must allow the taxpayer at least seven days but no more than 30 days to provide their explanation.

If the officer decides to issue a notice for reassessment, they must provide a copy of the order and a notice under Section 148 to the taxpayer. Notices cannot be issued if three years have passed since the end of the relevant assessment year, but if there is evidence of tax evasion of at least Rs 50 lakh, a notice can be issued beyond three years but within 10 years from the end of the relevant assessment year.

Before conducting inquiries, providing opportunities to the taxpayer, or making any orders, the income tax officer must obtain the approval of the authority who has been specified for this. The assessing officer must provide the taxpayer with all the material and information relied upon, along with the notice under Section 148A or the Show Cause Notice. Any notice issued after that date without following the procedure under Section 148A would be invalid and against the provisions of the Income Tax Act.

Eligibility to issue Section 148 Notice:

• Section 151(1) of the Income Tax Act, 1961 states that no notice can be issued by an Assessing Officer after four years from the end of the relevant assessment year unless the Principal Chief Commissioner or Principal Commissioner is satisfied that it's a fit case for issuing such notice.
• In cases where the Assessing Officer is below the rank of a Joint Commissioner, no notice can be issued unless the Joint Commissioner is satisfied that it's a fit case for issuing such notice.
• The Commissioner, depending on the case, doesn't need to issue the notice himself.

Section 148 Notice Time Limit

• Standard time limit: 3 years from the end of the relevant assessment year.
• The specified time limit is 3 years but not 10 years, and the Assessing Officer has evidence of income exceeding Rs 50 lakhs.

Replying to Notice under Section 148

• Check the notice for reasons to believe recorded by the assessing officer.
• Respond within 30 days by filing a return or providing a written reply to the assessing officer by submitting all the details.
• Then file the return if satisfied with the recorded reasons.
• Ensure proper due diligence when filing the income tax return.
• If the notice or reasons the assessing officer provides are invalid, challenge the validity before the assessing officer or higher authorities.
• If the court halts the assessment proceedings, the assessing officer can proceed with the reassessment.

Consequences of failure to respond to Section 148:

The Assessing Officer may use the available information to complete the assessment if you fail to reply to a notification issued under Section 148. They can also estimate and assess your revenue. However, if you disagree with their assessment, you can appeal with the Income Tax Appellate Tribunal or the Commissioner of Income Tax (Appeals).

Things to consider before replying to Section 148 Notice

• Understand why the Assessing Officer (AO) is sending the notice.
• If not provided, individuals can request a copy.
• If the reasons are justifiable, file tax returns promptly to avoid legal complications.
• Be cautious and thorough in filing your income tax return.
• Familiarize with Section 148 provisions to avoid legal complexities.
• Regularly assess income to remain tax compliant.