How to handle Income tax notice u/s 147 reassessment in India

How to handle Income tax notice u/s 147 reassessment in India is a article from our professional experts on TaxLedgerAdvisor. This articles covers a detail guide on all the relevant section of reassessment such as Section 148, 147, 149, 153 & also a newly inserted section 148A. This articles also covers relevant year of applicability for these changes. Do not miss the ending as to how to handle such Income Tax notices!!

Let us understand first reassessment and its relevant sections.

Table of Contents

SECTION 147 – Income Escaping Assessment

Enabling Section for assessment or reassessment or re-computation of income or re-computation of losses or depreciation or allowances or any deduction for “RELEVANT ASSESSMENT YEAR“.

The assessing officer may send notice if income has “ESCAPED ASSESSMENT” for “RELEVANT ASSESSMENT YEAR“, but subject to provision of section 148 to 153. If any other issue comes up during the proceedings then the provision of section 148A need not be followed.

SECTION 148 – Issue of notice where income has escaped assessment

No notice can be issued under this section UNLESS :

ASSESSING OFFICER HAS INFORMATION WHICH SUGGEST INCOME HAS ESCAPED ASSESSMENT 
+
PRIOR APPROVAL FROM SPECIFIED AUTHORITY U/S 151 HAS BEEN OBTAINED

The following STEPS/CONDITIONS for issuing notice :

1. First step for assessing officer is to SERVE NOTICE + COPY OF ORDER, if any passed under section 184A Clause (iv)
2. Requiring him to furnish INCOME TAX RETURN for RELEVANT ASSSESSMENT YEAR within time limit as may be prescribed in above notice.
3. The Income tax returns so filed will be treated as return filed under SECTION 139.

Definition of “ASSESSING OFFICER HAS INFORMATION WHICH SUGGESTS INCOME HAS ESCAPED ASSESSMENT”

ASSESSING OFFICER HAS INFORMATION WHICH SUGGEST INCOME HAS ESCAPED ASSESSMENT means :

Information flagged by RISK MANAGEMENT STRATEGY formulated by board from time to time.
or
Any FINAL OBJECTION raised BY Comptroller and Auditor General of India (CAG) ( Auditors of Government companies)

CASES OF DEEMED ESCAPED ASSESSMENT

The deemed escaped assessment is ASSUMED TO BE FOR 3 ASSESSMENT YEARS in which search/survey was initiated or assets/books/documents were requisitioned.

Search is initiate u/s 132 or documents/assets are requisitioned u/s 132A on or after 01/04/2021
or
survey is conducted u/s 133A ( other than subsection 2a & 5) on or after 01/04/2021
or
AO is satisfied + prior approval of PCIT, that money/bullion/jewellery/other valuable things seized or requisitioned u/s 132 & 132A BELONGS TO ASSESSEE on or after 01/04/2021
or
AO is satisfied + prior approval of PCIT, that books of accounts or documents seized or requisitioned u/s 132 & 132A BELONGS TO ASSESSEE on or after 01/04/2021

SECTION 148A – Conducting inquiry, providing opportunity before issue of notice under section 148

Preconditions for issuing notice U/S 148 are as follows :

Conduct enquiry based on available information + before enquiry approval of authority as per Section 151
+
Provide Opportunity of being heard (OOBH) + before OOBH approval of authority as per Section 151
+
Assessee to be given time limit of replying as to "why no notice should be issued U/S 148" at least 7 days but not greater than 30 days
+
consider his reply 
+
then decide whether a fit case within 1 month from the end of month of date of revert of Assessee

Following cases where precondition need not be followed :

SECTION 149 – Time limit for notice U/S 148

The general TIME LIMIT to issue notice is within 3 years from the end of relevant assessment year.

The notice in below exception cases can be issued after 3 years from the end of relevant assessment year but not beyond 10 years from the end of the relevant assessment year.

AO is possession of books of accounts or documents or other evidence
+
which clearly reveals that income chargeable to tax has escaped assessment
+
Escaped assessment amounts to or likes amounts in excess of INR 50 LAKHS OR MORE
+
 Escaped assessment amounts can either related to an asset or an expenditure in relation to transaction or an event or any entry in the books.

The most important point is if for the prior assessment years before April 1, 2021 if the notice under section 148 or 153A or 153C could not be issued because it had become time barred, then same cannot be issued under amended sections.

Also the above provision would not apply in cases where Search is initiate u/s 132 or documents/assets are requisitioned u/s 132A before 31/03/2021.

SECTION 150 – Provision for cases where assessment is in pursuance of an order on appeal, etc.

Overriding provision over Section 149. The notice u/s 148 may be issued at time ignoring time limit under section 149, to give effect to order/directions of any court or a matter which was related to subject matter of appeal, revision or reference.

However, if once the time was elapsed and a notice was not issued, then the above provision does not apply.

SECTION 151 – Sanction for issue of notice

For cases where notice is issued within 3 years from end of relevant assessment year – Principal Commissioner or Principal Director or Commissioner or Director

For cases where notice is issued after 3 years from end of relevant assessment year – Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General.

SECTION 151A – Faceless assessment of income escaping assessment

CG may notify a scheme for making faceless assessments under section 147.

SECTION 152 – Other provisions

The tax rates will be applicable as relevant for the assessment year in which the income has escaped assessment.

Assessee may ask for dropping of assessment, if he has not impugned order & can show that he had already been assessed under Section 154, 155, 260, 262 & 263.

SECTION 153 – Time limit for completion of assessment, reassessment and re-computation

Order prior to Assessment year commencing on April, 2019 – All the orders of assessment must be passed before expiry of 9 MONTHS from the end of financial year in which such notice was served.
Order after Assessment year commencing on April, 2019 – All the orders of assessment must be passed before expiry of 12 MONTHS from the end of financial year in which such notice was served.

Step 1. Once you receive notice, without any delay you should take a opinion of a professional.

Step 2. The professional will check the reasons of such notice, time limit to revert, whether the notice is as per law, requirement of AO.

Step 3. The professional will gather all relevant documents, books of Assessee, evidences and will file a return under the relevant section.

Step 4. The AO based on return file can ask for additional evidence and case will be either be dropped or pursued further.

Step 5. If any penalty come up, same has to be paid along with applicable taxes.

Step 6. AO order can further be appeal to higher court based on situation & cost involved.

Income Tax Notice received ? How to handle Income tax notice u/s 147 reassessment in India. Reach out to our experts at TaxLedgerAdvisor

For expert assistance on Income Tax Notice in Udaipur and Rajasthan, reach our professionals at Tax Ledger Advisor. Also refer our article How to handle Income tax notice u/s 147 reassessment in India.

Also refer >> https://www.taxledgeradvisor.com/income-tax-notice/

Article Source/References >> https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx

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How to handle Income tax notice u/s 147 reassessment in India – Easy guide