Safeguards to Assessee under Section 148 of IT Act

Shubhangi Jain

07 Oct, 2022

The Income Tax Act 1961 was enforced to regulate the tax laws in India and protect the interests of the country’s taxpayers. Every taxpayer is obligated to file a return of his income for assessment in the relevant assessment year, and any delay or avoidance in the same can book the assessee under tax evasion, followed by an issue of notice from the Assessing Officer in this regard under Section 148 of IT Act 1961. After receiving such notice, the assessee faces a lot of confusion in dealing with the further action plan.

The article discusses the safeguards for the Assessee under Section 148 of IT Act to help the assessee avoid the confusion and complexities associated with this section of the Income Tax Act.

Section 148 of the IT Act 1961: An Overview

Section 148 0f IT Act 1961 enumerates the responsibility of an Assessing Officer to serve a notice to the assessee,  not before providing him with an opportunity to furnish a return of his income or of any other person regarding which the assessee is assessable under this Act during the previous year in the relevant assessment year, within the specified time period at mentioned in the notice in the prescribed manner before initiating the assessment, re-assessment or re-computation as per section 147 of the ITA 1961.

Qualifications required by the Assessing officer to Issue Notice u/s 148 of IT Act

Only the Assessing officers having the below-mentioned qualifications are entitled to issue notice to the Assessee under Section 148 of IT Act.

• The Assessing Officer must be an Assistant Commissioner or Deputy Commissioner to be permitted to issue a notice to an assessee under this section. This is in line with the provisions of Section 151(1) with regard to any assessment that has taken place for the assessment year of relevance under sub-section (3) of either Sec 143 or Sec – 147. The Joint Commissioner can only circumvent this if he or she is satisfied that the reasons mentioned by the Assessing Officer are valid enough for issuing any notice to an assessee.
• The notice cannot be issued to the assessee after the expiry of 3 years from the conclusion of the assessment year in question. This can once again only be circumvented by the Chief Commissioner only upon being satisfied that the reasons given by the Assessing Officer, the notice is issued to the assessee.
• For any cases that are not covered under Section 151, sub-section (1), an Assessing Officer will be able to issue a notice to an assessee under section  148 of IT Act  if 
• The rank or position is below that of a Joint Commissioner
• The four-year period after the conclusion of the assessment year of relevance has expired

Reasons for Issuance of Notice To An Assessee

Notice under section 148 of IT Act can be served upon the Assessee by the assessing officer due to the following reasons-

• If the Assessing Officer have concrete evidence that the assessee has evaded the assessment of the income for the assessment year in question. This implies that the issuance of notice can be made based on mere suspicion.
• The data or the information provided to the officer must be relevant to the case and not based on any superficial facts or figures.
• The Assessing officer is obligated to record and provide the reasons for the belief about the Assessee escaping the assessment of the income in the relevant assessment year before issuing the notice under section 148 of IT Act 1961.

• The mere statement about the concealment of a large amount of income or the investigation of the assessee for further details in the absence of information to support the claims shall not be considered as a concrete reason to issue a notice under section 148 of IT Act as such reasons would be termed as vague and ambiguous.
• Until any new and relevant material or information is provided to the assessing officer, he is prohibited from issuing the notice solely because of a difference of opinion or slight suspicion. If the assessee discloses all the required information regarding his taxable income supported by the relevant data evidencing the completion of his assessment or re-assessment in the particular assessment year, the assessing office would not have any reason to believe the evasion of income by the assesses.
• On the contrary, if any information or particulars have either been concealed or not been disclosed by the assessee in question, and the same been noticed by the Assessing Officer at a later time, the Assessing Officer shall have complete authority to issue a notice to the offending assessee under Section 147 or Section 148 of IT Act.

Time Frame for Issuance Of Notice To An Assessee Under Section 148

The time frame for the issue of notice under section 148 of IT Act is provided in Section 149, which is as follows:

• The Assessing Officer can issue the notice before the end or expiration of three yrs from the conclusion of the relevant assessment year of relevance if the taxable income evaded the assessment does not exceed Rs 1 lakh.
• However, if the concealed income is more than Rs.50 lakh, a re-assessment can be conducted up to ten years from the relevant assessment year.
• The provisions prescribed under Section 147 provide that if the assessment or re-assessment has occurred and concluded u/s 143(3), then an Assessing Officer cannot issue any notices to an assessee u/s 147 before the expiration of the three years from the conclusion of the assessment year of relevance. However, such an issue can be made by the assessing officer only if any taxable income has been proven to have evaded assessment for the relevant year only if the assessee has failed in regard of
• Furnishing the returns under Section 139
• Furnishing the returns after the issuance of a notice under Section 142, sub-section (1) of Section 148 of IT Act
• Providing full disclosure in respect of any information, factual data or particulars requisite for completing the assessment for that relevant year.

What are the safeguards for the Assessee under Section 148 of IT Act?

The assessee has the following obligations and safeguards upon the receipt of the notice under Section 148 of IT Act

The assessee must 

• The tax returns for any income deemed as ”Income Escaping” for the assessment year in question
• Upon filing the same, the assessee has the right to request a copy containing the reasons for the issue of notice by the Assessing Officer under Section 148 of IT Act.
• If the assessee finds the reasons contained in the copy unsatisfactory or baseless, the assessee reserves the right to file an objection challenging the issuance of such notice.
• It is a mandate for the assessee to provide valid reasons for filing an objection and for challenging the lawfulness of the issuance of the notice under Section 148 of IT Act.
• The assessee also reserves the right to request the Assessing Officer to provide separate reasons if the officer dismisses the assessee’s claims.
• The assessee has the right to file a writ petition with the relevant High Court, and to question the legal traits and lawfulness of the notice issued under Section 148 of IT Act can be challenged even prior to the final conclusion or completion of the assessment or re-assessment.
• The assessee can still be entitled to file a writ petition with the relevant High Court, where the legal traits and lawfulness of the notice issued under Section 148 of IT Act can be challenged,  even if the assessment has been completed and the matter is under appeal.
• For this, the assessee will be required to provide proof about –
• Requesting a copy of the reasons stated by the Assessing Officer for the issuance of notice under Section 148 of IT Act
• Filling an objection to the reasons mentioned by the Assessing Officer
• Requesting the Assessing Officer to provide the reasons for the dismissal of the objections of the assessee 
• Challenging the lawfulness of the issuance of the notice

Landmark Judgement on Section 148 0f IT Act 1961 

The Supreme Court pronounced a landmark judgement, namely Union of India Vs Ashish Aggarwal, regarding the problem of assessment and re-assessment under Section 148 of IT Act, which is discussed below –

Issue of the Case 

Whether old provisions for re-assessment been substituted by Finance Act, 2021^[1], and such old provisions are not applicable on or after 01.04.2021?

• The Apex Court has held that the respective High Courts had rightly held that the benefit of new provisions should be made available if re-assessment notice under Section 148 of IT Act  was issued on or after 1st April 2021
• The Supreme Court completely agreed with the opinion of the various High Courts in pronouncing the same. 
•  These judgments wouldn’t lead to re-assessment proceedings. Thus, some freedom must be provided in that regard which the High Courts could have done so. The Revenue cannot be remedied, and the object and purpose of re-assessment proceedings cannot be frustrated.
• The Apex Court supported the view of different High Courts that the notice under section 148 of IT Act  as per the old law couldn’t be issued after 1st April 2021, i.e., the date of enforcement of the new law of re-assessment. 
• The notice issued under section 148 of IT Act in accordance with the old law during the period between 1-4-2021 to 30-6-2021 shall be deemed as a notice issued under section 148A(b) of the newly enforced law in this regard.
• The Assessing Officer is obligated to provide the reasons recorded and other material in his possession within 1 month to the assessee on whose basis the officer has issued the notice to the assessee.
• Upon receiving the material/reasons, the assessee must furnish the objections/reply to such reasons within 15 days.
• After the receipt of the objections, the Assessing Officer shall dispose of the same by passing an order as per section 148A(d) after stating if the case is still relevant for issuing a notice under section 148
• If it is not a fit case for issuing a notice under section 148, the assessee shall be informed accordingly. 
• Where it is deemed as a fit case to issue a notice under section 148, such notice shall be issued along with the order under section 148A(d)
• All the rights and defences available to the assessee under section 149(1) shall be available in respect of these proceedings.
• This judgment will be applicable in respect of the cases, irrespective of being pending before the apex court in the event of an issue of notice under section 148 under old law has been issued during the period between 1st April 2021 to 30 June 2021 

Conclusion

The safeguards provided to the Assessee under Section 148 of IT Act 1961 can help in protecting his interests in the event of an issue of notice from the assessing officer as it provides him with certain rights to safeguard himself from any unnecessary legal complexities. The landmark judgement of the Apex Court can act as an added advantage in this regard.

Read our Article: Assessment and Reassessment Notice under Section 148 of Income Tax Act