In this article, we will discuss Summary of Income tax notice issued under section 148A & 148 for not reporting income in ITR & its Procedural requirement.
Reason for Income Tax Notices issued by the department
1 Non – Filing or Late Filing of ITR – Every taxpayer having Gross Total Income (GTI) before claiming deduction is > basic exemption limit, then he/she is required to file ITR within due date, failing to which they may receive a notice from the department. Also, if ITR is not filed for a particular year, department can issue a notice even after several years.
2. Differences in Income & TDS Details – If the department find any difference between the income declared in the ITR & income reflected in other documents such as Form 26AS, AIS, TIS or Form 16, then they may issue a notice to the taxpayer. Furthermore, if the TDS claimed by taxpayer doesn’t match the TDS details mentioned in form 26AS, then also they may receive a notice from department.
3. Non-disclosure of Income or Investments – If department suspect that taxpayer has not disclosed all their income or investments detail, then they may issue a notice to the taxpayers for non-disclosure of income or investments to the taxpayer.
4. Tax Dues or Refund Adjustments – If a taxpayer has any outstanding tax dues or any interest, fees or penalty pending, then also department may issue a notice to recover the dues pending. Moreover, If a taxpayer has claimed any refund in his ITR then also department may adjust the refund against any outstanding dues & issue a notice for balance tax to the taxpayer.
5. High Value Transactions – High value transactions include purchase or sale of property, investments in stocks, mutual funds, bonds, FD, TD etc. Taxpayer must report these transactions in their ITR & pay the required taxes applicable on it, otherwise if department find any differences or non-reporting of these transaction income, they may issue a notice.
Asking for Explanation under section 148A & issue of notice under section 148 by the department
- As per Section 148A of the Income Tax Act, if income tax officer has information that the taxpayer has escaped income for any assessment year on which tax is payable in that case, the officer will provide a chance to the taxpayer to explain their case before issuing notice. The assessee gets a chance of opportunity of being heard by the officer.
- AO will give assessee not less than 7 days but not more than 30 days for furnishing his/her explanation.
- After seeing the taxpayer’s reply, the AO shall decide whether it is a fit case to issue notice for income escaping assessment under section 148. If the AO decides to reopen the case, a copy of the order & a notice under Section 148 must be issued to the taxpayer.
- If the AO is dis-satisfied with the submissions filed by the assessee, then he shall pass an order u/s 148A & thereafter issue a notice u/s 148 for the relevant assessment year (RAY), directing assessee to file return of income for the RAY.
- After receiving the order u/s 148A & notice u/s 148 the assessee needs to file the return of income for the RAY within time prescribed in the notice u/s 148 and proceedings for assessment will start.
Time Limit for issuance of notice under Section 148A
- As per Section 148A, a notice can be issued within 3 years from the end of the relevant assessment year. However, notice can be issued beyond 3 years but up to 10 years from the end of the relevant assessment year, only if there is evidence that the taxpayer has escaped taxable income of at least Rs 50 lakhs.
- AO shall obtain the approval of specified authority (Principal Chief Commissioner or Chief Commissioner) before conducting any such enquiries, also providing an opportunity of being heard to the taxpayer before passing order u/s 148A. However, this provision is not applicable in search or requisition cases.
Difference between Section 148A & 148 of the Income Tax Act
- Section 148 provisions from 1 April 2021 have some amendments making it mandatory to follow the procedures specified u/s 148A, before issuing of notice u/s 148.
- From 1st April 2021, the AO under the new provision u/s 148A requires to conduct an inquiry or provide the taxpayer with an opportunity to be heard in relation to the information that indicates that the income chargeable to tax has escaped assessment, which requires the assessee to explain his case & to get the proceedings dropped with the satisfaction of the AO. AO must obtain prior approval of specified authority before issuing such notice u/s 148A.
- It is obligatory for the AO to issue notice u/s 148A(b) to the assessee, containing the information along with material evidence which has escapement of income, which can be countered by the assessee by way material and evidences available with him.
- This is a major change from the old provision of Section 148 in which the information of reason for re-opening of case and satisfaction recorded by the AO was made available to the assessee only after issuance of notice u/s 148 in the old rule and after filing of return of Income by the assessee.
- Section 148 requires that the AO issue a notice to the taxpayer if there is a ‘reason to believe’ by the AO that the taxpayer has escaped reporting any income in the RAY.
- After issuing the notice, the AO may assess or reassess or re-compute the total income for such a year u/s 147 of the Income Tax Act.
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