Receiving a notice from the income tax authorities can naturally cause anxiety, especially during assessments or scrutiny. However, understanding the implications of the notice and knowing how to respond can help reduce some of this stress. A notice under Section 148 allows tax authorities to re-examine your income if they suspect that you have either understated your income or overstated your deductions to lower your tax liability.
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In this blog, we will explain why you might receive this notice, how to handle it, the appropriate steps for responding, and the potential consequences of ignoring it.
Why Did You Receive This Notice?
This notice is served if the Assessing Officer possesses valid grounds to believe that the income of the taxpayer has been under-assessed or has escaped assessment. The grounds for such belief may include, but are not limited to:
- Undisclosed Income: If you fail to disclose all or part of your income in the original assessment.
- Incorrect Tax Returns: If there is an error or omission in the previously filed returns.
- High-Value Transactions: If the transactions are huge and do not match with declared income. For example, purchase of expensive property/ huge bank deposits.
- Tax Evasion Identification: If the information from external sources like audits or third-party reports indicates the possibility of tax evasion.
- Preliminary Re-assessments: If the return of previous years needs re-assessment because of newly found discrepancies.
Time Limit to Serve the Notice
If the income tax authorities have reason to believe that income has escaped assessment then they can send a notice within the timeframe as mentioned below:
| Condition | Timeframe for Issuance of Notice under Section 148 |
| Income less than ₹50 lakhs | Within 3 years and 3 months from the end of the relevant assessment year |
| Income of ₹50 lakhs or more | Within 5 years and 3 months from the end of the relevant assessment year |
Time Limit to respond:
The taxpayer is generally expected to respond within 30 days from the date of notice.
How to Respond
Here is a step-by-step guide on how to respond to an income tax notice under Section 148 in a timely manner, helping you avoid penalties and stay compliant with tax regulations:
Step 1: Log in to the Income Tax E-filing Portal: Visit the official website of the income tax department (www.incometax.gov.in) and log in using your PAN, password, and Captcha code.
Step 2: Access the Notice: Go to the ‘e-file’ tab and select ‘Response to Notice u/s 148’ under ‘Pending actions’. Click on the notice to view the details and reasons for issuing notice.
Step 3: Gather required information: Gather all relevant documents and information corresponding to the points mentioned in the notice such as Income tax returns of previous financial years, Bank statements, Investment proofs, Form 16, 26AS, or any documents supporting deductions, etc.
Step 4: Prepare your response: Prepare a written response addressing the points raised in the notice that justifies your reported income and deductions. Clearly state why you believe the original assessment is correct.
Step 5: Submit your income tax return: Submit the return for the assessment year as requested by the assessing officer through the ‘File Return’ option. Choose the correct ITR form based on your sources of income and the appropriate assessment year. Ensure all details in the return are accurate and match the information required by the Income Tax Department. Validate the data before submission to avoid discrepancies.
Step 6: Upload supporting documents: Attach all the supporting documents relevant to your response to the notice. Make sure that each document is clear, legible, and easily identifiable to avoid any confusion during the review process.
Step 7: Review and submit Your Response: After thoroughly reviewing your response and ensuring all supporting documents are uploaded correctly, submit your response within the specified timeframe to comply with the notice requirements.
Step 7: Acknowledge Receipt: Once submitted, you’ll receive an acknowledgment that your response has been accepted. Save this acknowledgement for your future reference.
Consequences of Not Responding
- It could lead to penalties and interest for late filing and payment of taxes.
- The Assessing officer can reassess your income and may disallow the deductions claimed earlier which could lead to additional tax liabilities.
- You may lose out on the benefit of Income tax deductions, exemptions, and carry-forward of losses. Any unclaimed exemptions on capital gains or losses from previous years could also be forfeited.
- Failing to respond could raise concerns about tax evasion or income concealment, leading to increased scrutiny of your future tax returns. The tax authorities may closely examine your income declarations for subsequent years.
Conclusion
Receiving a notice under Section 148 can be a stressful experience for individuals, but understanding its implications is important for effective tax planning. This notice provides you an opportunity to rectify any discrepancies in your tax return and ensures compliance with tax laws. By promptly understanding the notice, gathering necessary documentation, and responding carefully, you can avoid potential penalties and protect your financial interests.
A qualified financial advisor can assist you in responding to income tax notices quickly and effectively. To get help with your income tax notice, download the 1 Finance app and book a consultation with a qualified financial advisor for a seamless, hassle-free tax experience.
