Conducting inquiry, providing opportunity before issue of notice under section 148
Introduction
Taxation is a complex web that often requires diligent oversight by authorities to ensure everyone pays their fair share. Section 148A of the Income Tax Act, 1961, plays a crucial role in this oversight, outlining the steps the Assessing Officer must take before issuing a notice under section 148.
The Journey of Section 148A: A Step-by-Step Breakdown
- 1. Enquiry with Specified Authority Approval (Subsection (a)): Before initiating any action, the Assessing Officer needs to conduct an inquiry, seeking prior approval from the specified authority. This step is vital in ensuring that the information suggesting an escape of taxable income is thoroughly examined.
- 2. Notice to Show Cause (Subsection (b)): Once the inquiry is completed, the assessee is given an opportunity to be heard. A notice is served, allowing a window of seven to thirty days for the assessee to respond. An extension may be granted upon application.
- 3. Consideration of Assessee’s Reply (Subsection (c)): The reply furnished by the assessee in response to the show-cause notice is carefully considered. This step ensures a fair evaluation of the assessee’s perspective in light of the information gathered during the inquiry.
- 4. Decision Making (Subsection (d)): Taking into account the material available, including the assessee’s reply, the Assessing Officer decides whether issuing a notice under section 148 is warranted. This decision is made within one month from the end of the month in which the reply is received.
Exceptions to Section 148A
- i. Search Initiated or Assets Requisitioned (Proviso (a)): Section 148A does not apply if a search is initiated under section 132 or assets are requisitioned under section 132A post April 1, 2021.
- ii. Seizure or Requisitioned Items Linked to the Assessee (Proviso (b) & (c)): The Assessing Officer can bypass Section 148A if satisfied, with prior approval, that seized items or documents relate to the assessee.
- iii. Information under Section 135A Scheme (Proviso (d)): Receiving information about income escaping assessment under the scheme notified under section 135A also exempts the application of Section 148A.
FAQ on Section 148A of Income Tax Act, 1961
- Q1. Why is prior approval needed for an inquiry under Section 148A?
A1. Prior approval ensures a second layer of scrutiny, adding a checks-and-balances system to prevent arbitrary actions. - Q2. Can the notice period be extended beyond thirty days?
A2. Yes, upon application, the Assessing Officer may extend the notice period beyond thirty days. - Q3. Are there situations where Section 148A doesn’t apply?
A3. Yes, instances like a search initiation or requisition of assets post April 1, 2021, fall under exemptions.
Conclusion:
Section 148A of the Income Tax Act, 1961, provides a structured approach to dealing with potential escaped income. By ensuring a fair and thorough investigation, it strikes a balance between the interests of the authorities and the rights of the assessee. As taxpayers, understanding these provisions helps us navigate the intricate landscape of taxation in the Indian context.
Section 148A, of Income Tax Act, 1961
Section 148A, of Income Tax states that:
The Assessing Officer shall, before issuing any notice under section 148,—
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, 23[***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 24[relate to, the assessee; or
(d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.]
Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.]
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