The power of assessement or reassessement of any income chargable to tax that have escaped assessement has been provided under secton 147 r w s 148 of Income Tax Act of 1961.If the assessing officer has the reason to believe that any income chargabale to tax has escaped assessement then the assessing officer may subject to the provisions of section 147 to 153 assesse or reassess such income.
What is reason to believe: Before issuing any notice U/S 148 the assessing officer must have reason to believe that any income chargable to tax has escaped assessement. Reason to believe can not be a reason to suspect merely. There must be a direct nexus between the material coming to the notice of the assessing officer and the formation of the belief that there has been escapement of income of the assessee from assessment in a particular year. The material for formation of belief must be relevent and not vague. The assessing officer must record reasons in writting before issuing notice u/s 148. Mere a reason recorded that "there is a huge concealment of income' or 'For further investigation' without any specific instance of entries or material relevent to the assessee will not constitute a valid reason as it is vague and general in nature.
To constitute a valid reason to believe there must be some new material coming into light with the assessing officer, merely a change of opinion cannot constitute a reason to believe. If the assessee has disclosed basic and all the true facts during the cource of assessement and the assessement is completed. Later on notice u/s 148 can not be issued merely beacause there is another inference possible from the same documents and the facts placed before the assessing officer during the cource of assessement as it will amount to change of opinion. There must be some new material coming into light for action u/s 147/148. But if the assessee has surpressed some relevent facts which leads to concealment of income and later those facts come before the assessing officer the notice u/s 147/48 can be issued validly.
Who can issue notice U/s 148: Section 151(1) provides that in a case where an assessment under sub-section (3) of section 143 or 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] :
What is reason to believe: Before issuing any notice U/S 148 the assessing officer must have reason to believe that any income chargable to tax has escaped assessement. Reason to believe can not be a reason to suspect merely. There must be a direct nexus between the material coming to the notice of the assessing officer and the formation of the belief that there has been escapement of income of the assessee from assessment in a particular year. The material for formation of belief must be relevent and not vague. The assessing officer must record reasons in writting before issuing notice u/s 148. Mere a reason recorded that "there is a huge concealment of income' or 'For further investigation' without any specific instance of entries or material relevent to the assessee will not constitute a valid reason as it is vague and general in nature.
To constitute a valid reason to believe there must be some new material coming into light with the assessing officer, merely a change of opinion cannot constitute a reason to believe. If the assessee has disclosed basic and all the true facts during the cource of assessement and the assessement is completed. Later on notice u/s 148 can not be issued merely beacause there is another inference possible from the same documents and the facts placed before the assessing officer during the cource of assessement as it will amount to change of opinion. There must be some new material coming into light for action u/s 147/148. But if the assessee has surpressed some relevent facts which leads to concealment of income and later those facts come before the assessing officer the notice u/s 147/48 can be issued validly.
Who can issue notice U/s 148: Section 151(1) provides that in a case where an assessment under sub-section (3) of section 143 or 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] :
Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.
In a case other than a case falling under sub-section (1) of section 151, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.
Time Limit for Issuing of notice u/s 148: Section 149 provides that notice u/s 148 can be issued within 4 years from the end of relevent assessement year if the income escaped doesnot exceed one lac Rs. If the income escaped is Rs. one lac or more the notice u/s 148 can be issued within 6 years from the end of relevent assessement year subject to the provisions of section 151.
Further first proviso to section 147 provides that if the assessement has been completed u/s 143(3) no action can be taken u/s 147 after the expiry of 4 years from the end of relevent assessement year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
What to do when notice u/s 148 is received: when a notice u/s 148 is received the assessee is asked to file a return of the relevent assessement year. After filling the return the assessee should ask for the copy of reasons recorded for issue of notice u/s 148 and can file objection to the issuance of notice. The assessee should ask specificaly assessing officer to pass a speaking order by disposing off the objections giving reference of the Judjement of Honurable Supreme Court in GKN Driveshafts(India) Ltd vs ITO (2003) 259 ITR 19 (SC). The objections should be filled giving reasons for challenging the legality of the notice u/s 148. All this procedure has been laid down by the Honurable Supreme court in GKN Driveshafts(India) Ltd case. This procedure has been provided by the Honurable Supreme court to enable the assessee to file writ petition before the respective High court challenging the legality of the notice u/s 148 before the assessement is completed.
Evan if the assessement order has been passed and the matter is in appeal the assessee can still file writ petiotion in the high court challenging the legality of notice u/s 148 and the consequent assessement if the above said proicedure as laid down by the Supreme court in GKN Driveshafts(India) Ltd case is not followed. But for that assessee offcource will have to show that he asked for the copy of reasons for issue of notice u/s 148 and filled objections to that and asked the assessing officer to pass a seperate reasoned order disposing off the objections filled and deciding on the legality of the notice issued u/s148.
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