This guide explains why you might receive a notice under Section 148A, how to respond effectively, and the new time limits for reassessment along with Frequently Asked Questions (FAQs).

This article is a part of our detailed article series on various communications that the income tax department sends you. Ensure you have read the other parts here: Show/Hide

📚 Table of Contents

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• What is Section 148A of the Income Tax Act, and when was it introduced?
• Why is the Income Tax Department targeting individuals who haven’t filed their Income Tax Returns (ITR)?
• How does Section 148A impact taxpayers who may have missed filing their ITR or have potential undisclosed income?
• What is the procedure under Section 148A before a notice under Section 148 is issued?
• What is the difference between a notice under Section 148 and the procedure under Section 148A?
• What are the time limits for reopening past assessment cases under Section 148A?
• How should a taxpayer respond if they receive a notice under Section 148A?
• Are there any situations where the procedure under Section 148A is not applicable before issuing a notice under Section 148?

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What is Section 148A of the Income Tax Act, and when was it introduced?

Section 148A was introduced in the Budget of 2021 through the Finance Act 2022. It requires the Assessing Officer (AO) to conduct an inquiry and give the taxpayer a chance to be heard before issuing a notice under Section 148 for reassessment. This ensures that taxpayers are informed and allowed to explain their case before further action is taken.

Why is the Income Tax Department targeting individuals who haven’t filed their Income Tax Returns (ITR)?

The Income Tax Department targets individuals who have taxable income but have not filed their ITR in previous years to ensure tax compliance and detect undisclosed income. They use data from the Annual Information Statement (AIS), TDS/TCS records, Statement of Financial Transactions (SFT), and import/export data to identify non-filers. A risk management system (RMS) flags high-risk individuals based on their transactions and reported income.

How does Section 148A impact taxpayers who may have missed filing their ITR or have potential undisclosed income?

Section 148A protects taxpayers by giving them a chance to explain discrepancies before a reassessment notice is issued under Section 148. If their explanation is unsatisfactory, the department can proceed with reassessment, leading to additional tax, penalties, and interest. Prompt response, with professional guidance from a practising CA, to a Section 148A notice can help reduce penalties.

What is the procedure under Section 148A before a notice under Section 148 is issued?

Before issuing a Section 148 notice, the Assessing Officer must: 1. Conduct an inquiry (if needed) with prior approval of a specified authority. 2. Issue a show-cause notice to the taxpayer, allowing at least 7 days and up to 30 days (or more if extended) to respond. 3. Consider the taxpayer’s response before making a decision. 4. Decide whether to issue a Section 148 notice, with approval from the specified authority, within one month of receiving the taxpayer’s reply or the deadline for response.

What is the difference between a notice under Section 148 and the procedure under Section 148A?

Section 148 is the notice issued to reassess income that may have escaped assessment in previous years. Section 148A is the mandatory procedure before issuing a Section 148 notice, which includes conducting an inquiry (if required), informing the taxpayer, and considering their response before proceeding with reassessment.

What are the time limits for reopening past assessment cases under Section 148A?

The reassessment time limits are: 1. Up to ₹50 lakhs of escaped income: Within 3 years from the end of the relevant assessment year. 2. More than ₹50 lakhs of escaped income: Within 5 years from the end of the relevant assessment year (reduced from 10 years, effective October 1, 2024). 3. For ITRs filed in FY 2018-19, cases can generally be reopened only until August 31, 2024.

How should a taxpayer respond if they receive a notice under Section 148A?

A taxpayer can either file their tax return for the relevant year or submit a written response to the Assessing Officer. The response should include explanations and supporting documents to address concerns about income escaping assessment. If the taxpayer agrees with the notice, they should file their tax return promptly.

Are there any situations where the procedure under Section 148A is not applicable before issuing a notice under Section 148?

Yes, Section 148A does not apply in the following cases: 1. When a search or requisition under Section 132 or 132A is conducted on or after April 1, 2021. 2. When seized or requisitioned money, bullion, or valuable articles belong to the assessee (with approval from the Principal Commissioner or Commissioner). 3. When seized books of account or documents pertain to the assessee (with approval from the Principal Commissioner or Commissioner). 4. When the Assessing Officer receives information under a scheme notified under Section 135A related to escaped income.