The Finance Act of 2021 incorporated Section 148A in the Income Tax Act, 1961, effective for the 2021-22 tax year. Its purpose is to require the assessing officer to make any necessary inquiries, with the express permission of clearly defined powers, about data that suggests that tax-payable income has escaped assessment before sending a notice under Section 148.
Section 148A was added to the Income Tax Act as part of Budget 2021. Now, let’s say that the tax collector knows that the taxpayer has hidden money for any year in which tax is due. Under the new rule, before sending a notice, the income tax officer must give the taxpayer a chance to respond. Under section 148A, the assessee has the right to speak to the officer.
see also about: Section 80CCC of Income Tax Act
Section 148A of Income Tax Act: ScopeÂ
The assessing officer must give the person being taxed more than seven days but less than thirty days to give an explanation. The response from the taxpayer will help the income tax officer decide whether or not to send a notice for unreported income. A copy of the ruling and a notification (under Section 148) must be sent to the taxpayer if the income tax officer chooses to reopen the matter. Discrepancies in the assessment of taxable income are disclosed in the notification.
The person doing the assessment will also have to prove his or her point. Show cause notices are only sent out after an assessing officer has looked into evidence that the taxable income hasn’t been taxed, with the approval of the designated authority.
All about: Section 35AD
Section 148A of Income Tax Act: SpecificsÂ
The time limit says that no notice can be given more than three years after the end of the applicable assessment year. There are, however, rare situations in which a longer notice period than the standard three years is allowed. Also, notice can be sent after 3 years, but not after 10 years have passed since the end of the relevant assessment year, if there is proof that taxable income of at least 50 lakhs has been hidden from assessment.
Section 148A gives taxpayers much-needed relief since tax issues used to be looked at without telling the assessee. Experts say that taxpayers should do their homework and look over all of their tax documents before responding to the letter. Also, they can’t do anything to avoid getting the message.
As required by the time restriction provision, a notice can’t usually be sent after three years have passed since the end of the applicable assessment year. Before asking these kinds of questions, giving the taxpayer a chance to answer, or giving this kind of order, the income tax officer must get permission from the right people. There are some exceptions to this rule, such as when there is a search or requisition.
Before notice is sent out under section 148A, the person being taxed has the right to be heard. If the assessing officer has reason to think that the assessee’s tax-chargeable income for the relevant assessment year has not been taxed, the assessing officer must first get permission from the right authority before giving the assessee a notice to show cause.
Within a month of getting the respondent’s answer to the show-cause notice at the end of the month, the AO, with the approval of a certain authority, must decide if it is a good case to issue a notice under section 148 by passing an order based on the information on file.
see also: Section 115JD Income Tax Act: Credits and claiming process
Section 148A of Income Tax Act: Further requirements
When there is probable cause, the 148A method is used to handle the situation. Under the new system, the AO is still obliged to follow the process laid forth in Section 148A before providing notice, but unlike under the old regime, the AO is no longer needed to have a “reason to believe” before issuing notice. As the decision under section 148A(d) to the effect that the matter is appropriate for the issue of notice under section 148 shall be a reasoned and spoken order, the process under section 148A, in a manner, takes care of the reason to believe.
It is also important to remember that approval must be sought at every step of the process, including before the inquiry [148A(a)], the notice to assess [148A(b)], and the passing of the order [148(d)]. The relevant jurisdiction’s PCIT or CIT must provide their approval.
see also: Section 115AD of the Income Tax Act: Features and applicability
FAQs
When did 148A become part of the law?
The Finance Act of 2022 added section 148A to the Income Tax Act of 1961.
Can you explain the distinction between sections 148 and 148A?
A notification about revenue that has evaded re-computation or assessment may be issued under Section 148 if there is a reason to suspect that this is the case. Before a notice may be issued, the taxpayer must be consulted, and the required authority must provide its consent under Section 148A.
