Section 148A – Reassessment Procedure Before Issuing Notice
- Blog|Income Tax|
- 9 Min Read
- By Taxmann
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- Last Updated on 22 March, 2025
Table of Contents
- Conducting Inquiry, Providing Opportunity Before Issue of Notice Under Section 148
- Procedure Before Issuance of Notice Under Section 148
- Non-Issuance of Show Cause Notice Under Section 148A of the Act
- Undelivered or Refused to Accept Notice
- Notice Under Section 148A of the Act Is Unsigned
- Reassessment Notice Issued on a Deceased Person/Non-Existing Entity and Whether the Existence of PAN Amounts to the Existence of the Entity
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Section 148A of the Act as it stood before September 1, 2024, is reproduced as under:
1. Conducting Inquiry, Providing Opportunity Before Issue of Notice Under Section 148
“148A. 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 charge-able to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority1, 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, 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.”
Section 148A of the Act as of September 01, 2024, is reproduced as under:
2. Procedure Before Issuance of Notice Under Section 148
“148A. (1) Where the Assessing Officer has information which suggests that income chargeable to tax has escaped assessment in the case of an assessee for the relevant assessment year, he shall, before issuing any notice under section 148 provide an opportunity of being heard to such assessee by serving upon him a notice to show cause as to why a notice under section 148 should not be issued in his case and such notice to show cause shall be accompanied by the information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year.
(2) On receipt of the notice under sub-section (1), the assessee may furnish his reply within such period, as may be specified in the notice.
(3) The Assessing Officer shall, on the basis of material available on record and taking into account the reply of the assessee furnished under sub-section (2), if any, pass an order with the prior approval of the specified authority determining whether or not it is a fit case to issue notice under section 148.
(4) The provisions of this section shall not apply to income chargeable to tax escaping assessment for any assessment year in the case of an assessee where the Assessing Officer has received information under the scheme notified under section 135A.
Explanation.—For the purposes of this section and section 148, “specified authority” means the specified authority referred to in section 151.”
A comparative chart between the provisions as they stood immediately before Finance (No. 2) Act, 2024 [2024] 467 ITR 1 (St) and after is as under:
Sr. No. | Prior to Finance (No. 2) Act, 2024 | Amended provisions vide Finance (No. 2) Act, 2024 | Comments |
1. | Section 148A(a) | There is no corresponding provision. | The erstwhile provision allowed the Assessing Officer to conduct an inquiry to form a basis if a show cause notice is required or not. This kept a check on roving and fishing enquiries with the requirement of sanction under section 151 of the Act.
The omission of this section was not necessary. |
2. | Section 148A(b) | Section 148(1) | 1. The time prescribed to responding to the Notice is removed. 2. Requirement for furnishing the information to the Assessee has received statutory backing. The amendment of this section is welcomed. |
3. | 148A(c) | 148A(2) | The section is more or less the same. |
4. | 148A(d) | 148A(3) | The section is more or less the same. The period of limitation to pass an order is removed. Now the Assessee’s won’t know if their proceedings are dropped or not. |
5. | Proviso (a), (b) and (c) to section 148A | There is no corresponding provision. | As search and search related cases are removed from the ambit of reassessment, they will now form part of proceedings under section 158BC and 158BD of the Act. |
6. | Proviso (d) to section 148A | 148A(4) | There is no change in the provision. |
The Union Finance Minister pursuing the agenda of simplifying taxation during the presentation of the Finance (No. 2) Bill, 2024 [2024] 465 ITR 30 (St), (paras 137 and 140), announced the introduction of a comprehensive review of the Income-tax Act, 1961 and simplification of reassessment. It can be seen from the amended section 148A of the Act that provisos are removed and made simpler to understand.
It can be observed that the statute in procedure in principle is quite similar to the law introduced vide Finance Act, 2021. Therefore, some of the jurisprudence developed over the last couple of years will be helpful in interpreting and understanding the amended provisions.
3. Non-Issuance of Show Cause Notice Under Section 148A of the Act
Unless the case of Assessee falls within section 148A(4) [Proviso to section 148A in cases prior to September 1, 2024], the issuance of a show cause notice is mandatory.
The Hon’ble Kerala High Court in the case of Nambiar Balakrishnan Narendran v. ITO WP(C) 18182 of 2022 dated November 25, 2022 (Ker) (HC) wherein it was held that where Notice under section 148A was not issued to the Assessee the Notice under section 148 of the Act was quashed.
A similar view has been taken by the Hon’ble Karnataka High Court in the case of Vasanthi Ramdas Pai v. ITO [2024] 159 taxmann.com 392/267 ITR 150 (Karn) (HC), where it was observed that Section 148A of the Act, which assumes pivotal relevance in the matter has a heading which runs “Conducting inquiry and providing opportunity before issue of notice under section 148.” This provision apparently employs the word ‘shall’, and in its text, nothing being repugnant, one can safely assume it to be mandatory. Thus, the issuance of notice to the Assessee as to why a notice under section 148 of the Act should not be issued to assess his ‘escaped income’ is a sine qua non.
4. Undelivered or Refused to Accept Notice
A Notice that is undelivered is held to be a valid Notice. The Hon’ble Allahabad High Court in the case of Dr. Sheo Murti Singh v. CIT [2015] 64 taxmann.com 276/383 ITR 174 (All)(HC) held that as per Order V Rule 17 of Civil Procedure Code clearly indicates that when the notice cannot be served, the serving officer shall affix the copy of the summons on the outer door or at some other conspicuous part of the house in which the petitioner ordinarily resides or carries on business.
Even refusal to accept a Notice issued under section 148 of the Act is a valid service.
5. Notice Under Section 148A of the Act is Unsigned
Signing of a Notice, whether manually or through digital signature is a ministerial act and should be considered mandatory.
The Hon’ble High Court of Calcutta in the case of CIT v. Aparna Agency (P.) Ltd. [2004] 139 Taxman 132/267 ITR 150 (Cal)(HC) held that the provisions of section 292(B) of the Act do not provide for a cure when the notice under the Act is invalid by virtue of it not having a signature affixed as is required under the relevant provisions. Further, another judgment of the High Court of Calcutta in the case of B.K Gooyee v. CIT [1966] 62 ITR 109 (Cal) (HC) and a judgment of a Division Bench of the Madhya Pradesh High Court in Umashankar Mishra v. CIT [1982] 136 ITR 330/11 Taxman 75 (MP) (HC) held that that absence of a signature on notice is an invalid notice in the eyes of law and such an infirmity amounts to no notice at all.
The Hon’ble Bombay High Court in the case of Prakash Krishnavtar Bharadwaj v. ITO [2023] 451 ITR 27/150 taxmann.com 60 (Bom) (HC) considering the above decisions, held that where a reopening notice under section 148 of the Act was issued upon assessee without the signature of Assessing Officer affixed on it either digitally or manually, said notice was invalid and same would not vest Assessing Officer with any further jurisdiction to proceed to reassess income of the assessee.
However, the Hon’ble Delhi High Court has taken a different view. In the case of Suman Jeet Agarwal v. ITO [2022] 449 ITR 517/[2023] 290 Taxman 493 (Delhi) (HC), inter alia, it was held that where notices were sent through the registered e-mail ID of respective Assessing Officers, though not digitally signed, it will be held to be valid service of notice and date and time of dispatch as recorded in ITBA portal will be taken as date of issuance of notice in this regard.
The Hon’ble Delhi High Court in the case of Sonia Gandhi v. ACIT [2018] 97 taxmann.com 150/407 ITR 594 (Delhi) (HC) held that not digitally signing a mail is an irregularity and not an illegality.
6. Reassessment Notice Issued on a Deceased Person/Non-Existing Entity and Whether the Existence of PAN Amounts to the Existence of the Entity
It is a settled position in law that a Notice cannot be issued to a deceased person or a non-existing entity.
The Hon’ble Supreme Court in the case of PCIT v. Maruti Suzuki India Ltd. [2019] 416 ITR 613/265 Taxman 515 (SC) held that where the assessee company was amalgamated with another company and thereby lost its existence, an assessment order passed subsequently in the name of said non-existing entity, would be without jurisdiction and was to be set aside.
This has been extended to even deceased persons as the Notice has to be issued to the legal heirs of the deceased or the estate of the deceased.
The Hon’ble Bombay High Court in the case of Rupa Shyamsundar Dhumatkar v. ACIT [2020] 420 ITR 256/275 Taxman 453 (Bom) (HC) held that where the petitioner, a widow of the original assessee, produced the death certificate of her deceased husband, which indicated that the notice under section 148 of the Act was issued against a dead person, impugned notice was invalid and was to be set aside.
It is pertinent to note that, the Hon’ble Supreme Court a subsequent decision in the case of PCIT v. Mahagun Realtors (P.) Ltd. [2022] 443 ITR 194/287 Taxman 566 (SC) considering the decision of Maruti Suzuki (Supra), inter alia, held that where post amalgamation, no indication was given to Assessing Officer during a search conducted at the premises of assessee-amalgamating company about amalgamation and return filed pursuant to the notice issued under section 153A of the Act suppressed fact of amalgamation since the conduct of assessee reflected that it consistently held itself as the assessee, assessment order passed in name of the assessee-amalgamating company was valid.
A decision of the Hon’ble Income-tax Appellate Tribunal – Pune Bench in the case of DCIT v. Barclays Global Service Centre Private Ltd. [2023] 103 ITR 100 (Pune) (Trib.) observed that the Assessee relied on the decision of the Hon’ble Supreme Court in the case of PCIT v. Maruti Suzuki India Ltd. (2019) 416 ITR 613/107 taxmann.com 375 (SC). However, the Department relied on a subsequent judgment of the Hon’ble Supreme Court in the case of PCIT v. Mahagun Realtors (P.) Ltd. [2022] 443 ITR 194/137 taxmann.com 91 (SC). It was held that in the case of Mahagun (supra), the assessee had not disclosed the change in the assessee’s existence and that the subsequent case does not distinguish the case of Maruti Suzuki (Supra).
Therefore, the difference in the decisions is that when an entity is non-existent or deceased, it is the duty to inform the Department about the changes. If the Department still chooses to proceed on the wrong footing, then the Notice can be held to be bad in law.
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- Omitted vide Finance Act, 2022.
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What is the purpose of deeming fiction u/s 148 explanation 2 if procedure laid down u/s 148A is to be followed. In case there is any information on the basis of survey the case could also be reopened following the procedure laid down u/s 148A. Please clarify