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New Reassessment Procedure Effective 1st Sept: What You Need to Know?
New Reassessment Procedure Effective 1st Sept: What You Need to Know?
In This Article
1. Information Triggering Reassessment:
2. Notice under Section 148:
Time Limits for Issuing Notice:
Examples:
Prior Approval for Issuing Notice:
Return Filed After Time Limit:
Notice Under Section 148A:
Time Limits for Issuing Notice
Approval of order under section 148A(3)
Exemptions from Notice under Section 148A:
Specified Authority for Sanctioning Notices:
Procedural Safeguards for Taxpayers:
Disclaimer:
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Article Brief
The new Reassessment Procedure effective from 1st Sept: Key updates you should know to stay compliant.

The Finance (No. 2) Act, 2024, which became effective on September 1, 2024, introduced key amendments to the reassessment procedures under Section 147 of the Income-tax Act. These changes aim to streamline the process of identifying income that has escaped assessment while protecting the rights of taxpayers. The amendments significantly affect the time limits for reopening assessments, the quantum of escaped income required for action, and procedural safeguards, especially regarding notices under Sections 148 and 148A.

This article will explain these amended provisions, focusing on the conditions under which income can be reassessed, timelines, authorities involved, and practical examples to clarify these concepts.

1. Information Triggering Reassessment:

The reassessment can only proceed if the AO possesses any of the following information suggesting that income chargeable to tax has escaped assessment:

  • Risk management strategy formulated by the Board.
  • Audit objections.
  • Information received under international agreements (Section 90/90A).
  • Information received under a scheme notified under Section 135A.
  • Orders of tribunals or courts.
  • Information gathered under a survey under Section 133A.

2. Notice under Section 148:

The Assessing Officer (AO) is required to issue a notice to the taxpayer under Section 148, along with the order passed under Section 148A(3), requiring the taxpayer to furnish a return of income within the period specified in the notice (not exceeding three months from the date of issue).

Time Limits for Issuing Notice:

As per the substituted Section 149, the time limits for issuing a notice under Section 148 are as follows:

  • Cases where likely escapement income is less than ₹50 lakhs: No notice under Section 148 can be issued after three years and three months from the end of the relevant assessment year.
  • Cases where likely escapement income is ₹50 lakhs or more: The timeline extends to five years and three months from the end of the relevant assessment year. However, the AO must have information related to an asset, expenditure, transaction, or entry showing the escaped income is ₹50 lakhs or more.

Examples:

Example 1: Income Below ₹50 Lakhs

  • Assessment Year: 2020-21
  • Escaped Income: ₹30 lakhs

The reassessment notice can only be issued until June 30, 2024 (three years and three months from the end of the relevant assessment year). If this period has passed, the AO cannot issue a notice under Section 148 unless the escaped income exceeds ₹50 lakhs.

Example 2: Income ₹50 Lakhs or More

  • Assessment Year: 2020-21
  • Escaped Income: ₹55 lakhs

The notice under Section 148 can be issued up to June 30, 2026 (five years and three months from the end of the relevant assessment year) since the income that escaped assessment is ₹50 lakhs or more.

Prior Approval for Issuing Notice:

Where information is received under the e-Verification Scheme 2021, notified under Section 135A, prior approval from the Joint Commissioner, Joint Director, Additional Commissioner, or Additional Director is required before issuing a reassessment notice under Section 148.

Return Filed After Time Limit:

The amended provisions clarify that any return furnished after the expiry of the notice period specified in the notice under Section 148 will not be treated as a return filed under Section 139.

Notice Under Section 148A:

Before issuing a notice under Section 148, the AO is required to conduct a preliminary inquiry by issuing a notice under Section 148A, except where the information is received under the e-Verification Scheme. After receiving the taxpayer's response, the AO must pass an order under Section 148A(3) to determine whether a notice under Section 148 should be issued. This order must be enclosed with the Section 148 notice if issued.

Time Limits for Issuing Notice

As per the substituted Section 149, the time limits for issuing a notice under Section 148A are as follows:

  • Cases where likely escapement of income is less than ₹50 lakhs: No notice under Section 148 can be issued after three years from the end of the relevant assessment year.
  • Cases where likely escapement of income is ₹50 lakhs or more: The timeline extends to five years from the end of the relevant assessment year. However, the AO must have information related to an asset, expenditure, transaction, or entry showing the escaped income is ₹50 lakhs or more .

Approval of order under section 148A(3)

The order under Section 148A(3) is issued by the AO after obtaining approval from the Joint Commissioner, Joint Director, Additional Commissioner, or Additional Director.

Example 1: Assessment Year (AY): 2020-21

  • Information Received: On September 2, 2024, the Assessing Officer (AO) receives information suggesting that ₹45 lakhs of income has escaped assessment.
  • Notice Under Section 148A: The AO issues a notice under Section 148A on September,15, 2024.
  • Time Limit for Issuing Section 148A Notice: The notice under Section 148A must be issued within three years from the end of the relevant assessment year. For AY 2020-21, the deadline is March 31, 2024 . Since the notice is issued beyond this deadline, it is in-valid.

Example 2: Assessment Year (AY): 2018-19

  • Information Received: On January 15, 2024, the AO receives information from a survey indicating ₹60 lakhs of unreported income.
  • Notice Under Section 148A: The AO issues a notice under Section 148A on September 15, 2024.
  • Time Limit for Issuing Section 148A Notice: The notice was to be issued by March 31,2024, for AY 2018-19. Since the notice is issued after this deadline, it is invalid, and the AO cannot proceed with a notice under Section 148 based on this information.

Exemptions from Notice under Section 148A:

A notice under Section 148A is not required in cases where the AO receives information under the e-Verification Scheme notified under Section 135A. However, in such cases, approval from the specified authority must still be obtained before issuing a notice under Section 148.

Example: Assessment Year (AY): 2022-23

  • Information Received: On March 5, 2025, the AO receives information under the e-Verification Scheme (Section 135A) that the taxpayer has not reported ₹55 lakhs in income.
  • Notice Under Section 148A: In this case, no notice under Section 148A is required because the information was received through the e-Verification Scheme.
  • Time Limit for Issuing Section 148: Even though the AO is not required to issue a notice under Section 148A, the Assessing Officer still has time until June 30, 2028 (five years and three months from the end of AY 2022-23) to issue a notice under Section 148. With the prior approval of specified authority.

Specified Authority for Sanctioning Notices:

The specified authority for sanctioning notices under Sections 148 and 148A is defined under Section 151 as the Additional Commissioner, Additional Director, Joint Commissioner, or Joint Director, depending on the circumstances of the case.

Procedural Safeguards for Taxpayers:

The amendments introduce procedural safeguards for taxpayers to protect them from arbitrary reassessments:

  • Opportunity to Respond: The taxpayer is given the chance to respond to a notice under Section 148A before a formal notice under Section 148 is issued.
  • Documentation Requirement: The AO must provide a reasoned order under Section 148A(3) before proceeding with reassessment.
  • Time Limits: The three-year and five-year reassessment windows limit the potential for reopening old cases, giving taxpayers greater certainty.

Conclusion:

The amendments to re-assessment procedure through the Finance (No. 2) Act, 2024, introduce a taxpayer-friendly approach to reassessment. These provisions ensure that while the tax authorities can reopen cases where income has escaped assessment, the process is governed by clear time limits and procedural safeguards, protecting taxpayers from arbitrary reassessment actions. Taxpayers should stay informed about these changes to avoid unexpected reassessment notices and ensure compliance with documentation requirements.

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Disclaimer:

The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. Readers are advised to consult with a qualified tax advisor or legal professional for specific advice tailored to their individual circumstances, particularly regarding reassessment proceedings and claiming refunds. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the content of this article. 

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OP Yadav

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Tax Evangelist at Prosperr.io, (Ex - IRS, Former Principal Commissioner of Income Tax Department) with 31 years of experience in Income Tax Administration. Authored books Master Guide to Corporate Taxation and "" Transfer Pricing in India : Principles and Practice"".

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