Is re assessment of Income Tax cases beyond 4 year possible?

The provisions of section 147 empower the Assessing Officer, to reopen an assessment if he has “reason to believe” that income has escaped assessment. The important words under section 147 are ‘has reason to believe’ and these words are stronger than the words ‘is satisfied’.

As per Section 147 of the Income Tax Act, 1961, the Income Tax Department has the power to reassess an individual’s previously filed income tax returns. The Assessing Officer could pick your income tax return for reassessment subject to some pre-defined criteria by sending a notice under section 148 for income Escaping Assessment.

What are the various reasons to receive a notice under Section 148?

Assessee could receive a notice under section 148 in case the assessing officer believes that such an individual’s income chargeable to tax might have escaped assessment.

There should be ‘reasons’ and ‘belief’. “Reasons” refer to the cause like document, statement, third party confirmation etc and “belief” refers to the conclusion. The “reason to believe” is different from “reason to suspect” or from “to have an opinion”.

In case the proof supporting his belief is available, the AO would record his reasons in writing and send the individual notice under section 148. The assessing officer can’t just change his mind and go for re-investigation without a valid reason. In case the assessee has disclosed all the documents and correct information during the original assessment, the Assessing Officer cannot send a notice to the assessee for reassessing the same documents. Some facts or new documents which show that the income has escaped assessment should come into the light..

Who can issues notice under Section 148?

Section 151(1) of the Income Tax Act, 1961 contains the provisions for issue of notice:

1. No notice would be issued by an Assessing Officer under section 148, after expiry of four years from the end of relevant AY (assessment year), unless Principal Chief Commissioner or Principal Commissioner or Chief Commissioner or Commissioner is satisfied, on reasons recorded by the AO, that it’s a fit case for issuing such notice.
2. In cases other than the one mentioned above, no notice would be issued by an Assessing Officer under section 148, where AO is below the rank of a Joint Commissioner unless Joint Commissioner is satisfied, on reasons recorded by such AO, that it’s a fit case for issuing such notice.
3. For the purposes of above (1) and (2), Principal Chief Commissioner or the Principal Commissioner or the Chief Commissioner or the Joint Commissioner the Commissioner, depending on the case, being satisfied on reasons recorded by AO about the fitness of the case for issuing notice under section 148 of the Income Tax Act, need not issue the notice by himself.

What is the time limit to issue a notice under Section 148?

Section 149 of the Income Tax Act, provides that the notice under section 148 could be issued within a period of 4 years from the end of relevant AY (assessment year) in case the income so escaped doesn’t exceed INR 1 lakh.

In case the income so escaped is more than Rs. 1 lakh the notice under the said section could be issued within a period of 6 years from the end of relevant AY subject to provisions contained in section 151. The notice under section 148 could be issued within a period of 16 years from the end of relevant AY in case the income that has escaped assessment relates to assets located outside India. Further, if the assessment has been completed under section 143(3) or 147 no further action could be taken under section 147 after expiry of 4 years from end of relevant AY unless income chargeable to tax has escaped assessment for such AY due to failure on assessee’s part to file the return under section 139 or 142 or 148 or fully and truly disclosing all the material facts required for the assessment, for that AY.

Finance act, 2021, has made amendment in section 149 with regards time limit for reopening of income tax assessment. The time limit to re-open income tax assessment cases has been reduced to 3 years from 6 years. Also, in case of serious tax evasion, the assessment can be reopened until 10 years, only when concealment of income is more than 50 lakh.

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