The last date for the tax department to issue an income tax notice is August 31, 2024, if the undisclosed income is ₹50 lakh or more in the assessment year 2018-19 (financial year 2017-18).
The Budget 2024 has shortened this deadline, prompting the income tax department to allocate resources towards reopening old cases related to Assessment Year (AY) 2018-19 by August 31, 2024. Prior to Budget 2024, cases could have been reopened within 10 years from the end of the respective AY.
It has been reported that many income tax assessing officers have had their transfer orders put on hold until August 31, 2024, and are being asked to find proof and present it for reopening AY 2018-19 cases.
What has Budget 2024 Proposed?
For AY 2018-19, where the income escapement is ₹50 lakh or more, the maximum time limit to issue a notice under Section 148 or an order under Section 148A is August 31, 2024. From September 1, 2024, assessments for AY 2018-19 will be time-barred.
For AY 2018-19, as per the existing provisions, the notice under Section 148 for the reopening of assessment could have been issued up to ten years from the end of the relevant assessment year, i.e., March 31, 2029. However, the time limit for the same has been reduced to June 30, 2024, as per the proposed provisions effective from September 1, 2024. Therefore, the time limit for notice to be issued under Sections 148A and 148 would be August 31, 2024.
Who Can and Cannot Get an Assessment and Reassessment Notice Under Section 148?
If the income that escaped the assessment is ₹50 lakh or more and it relates to AY 2018-19 or later, then it is likely that you will get a Section 148 notice by August 31, 2024. If your case does not meet these conditions, then it is unlikely that you will receive a Section 148 notice.
Experts suggest that due to the short deadline, you may not have enough time to reply to the Section 148 notice. Considering the short span of time available until August 31, 2024, given the proposed provisions applicable from September 1, 2024, it is probable that the tax authorities may not grant sufficient time to taxpayers for furnishing their response and may pass the order under Section 148A considering the case fit for reassessment and issue notice under Section 148.
The reassessment notice for AY 2018-19 and prior years, under Section 148 or the order under Section 148A, needs to be passed on or before August 31, 2024. If the notice under Section 148A is issued now, the order under Section 148A needs to be passed before August 31, 2024, i.e., within one month. This may not provide the taxpayer with sufficient time to respond to such notice under Section 148A. However, if the notice under Section 148 for AY 2018-19 is issued before August 31, 2024, the reassessment proceeding will be initiated, which needs to be completed within nine months from the end of the financial year in which the notice is served, i.e., the reassessment proceedings shall be completed by December 31, 2025, as per the provisions of Section 149. Therefore, the taxpayer would have sufficient time to respond to the 148 reassessment notice and complete the proceedings.
How Does the Tax Department Send You a Notice Under Sections 148 and 148A?
Here’s how the process works:
Step 1: As per the current provisions of the reassessment process, before issuing the reassessment notice, the officer may conduct an inquiry, issuing a show cause notice (SCN) to taxpayers along with information that suggests escapement of income.
Step 2: Based on the taxpayer’s reply to the SCN, an order may be passed. This order will mention whether the case is fit for issuing a reassessment notice with the prior approval of the specified authority (Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director).
Step 3: Before making the reassessment, the taxpayer gets an opportunity to file a revised ITR within three months.
Before issuing notice under Section 148, tax authorities are required to conduct an inquiry for which notice is required to be issued under Section 148A. This notice under Section 148A provides the taxpayer with an opportunity to be heard as to why the case should not be reopened based on the information available.
If no response is filed by the taxpayer in response to the 148A notice within the specified time provided, the concerned tax authority shall pass the order under Section 148A considering the case as fit for issuing notice under Section 148. Subsequently, notice under Section 148 is issued, requiring the taxpayer to furnish the ITR in response within the time specified. If the person fails to file the return and comply with the notice under Section 148 within the specified time, the same shall not be deemed to be a valid ITR furnished under Section 139.
What Happens if Reassessment Process is Started Against You?
If you have not replied or your reply is unsatisfactory for the tax department, a reassessment order is issued.
Once reassessment proceedings are initiated, subsequent notices are issued under Section 142(1) asking for further information or details. Failure to comply may result in a penalty of ₹10,000 under Section 272A for each failure.
If you fail to furnish any necessary information, documents, or other details requested, tax authorities may proceed with passing the order, assessing the total income based on their judgment and the details available in their records, and determine the tax liability payable by the taxpayer.
Depending upon the additions or disallowances considered, notice may also be issued initiating penalty proceedings under Section 270A of the Act, levying a penalty ranging from 50% to 200% (as the case may be) of the tax payable on such underreported or misreported income.
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