Union Budget: The Finance Bill 2024 introduces amendments to Section 148A of the Income-Tax (I-T) Act, which pertain to the time limits for issuing notices regarding the reopening of assessments. Presently, the Income-Tax Department is empowered to reopen assessments under Section 148A for a period of up to 10 years (equivalent to 11 financial years) if the income surpasses Rs 50 lakh. Conversely, for incomes below Rs 50 lakh, the permissible limit stands at three years (or four financial years).

With the Budget of 2024, a significant modification has been proposed, intending to reduce the 10-year duration to five years (or six financial years) for cases where the income exceeds Rs 50 lakh. However, the time limit remains unaltered for instances with income below the aforementioned threshold. For the Assessment Year 2018–19, in cases where the income escaping assessment amounts to Rs 50 lakh or more, the deadline for issuing a notice under Section 148 or an order under Section 148A has been specified as August 31, 2024.

Section 148A of the Income Tax Act allows the Income Tax officers to initiate reassessment proceedings when they suspect that a taxpayer may have concealed income during any assessment year.

Section 148A states that the income tax officer should provide the taxpayer with a chance to explain their case before issuing the notice. In other words, it provides the taxpayer with an opportunity to be heard.

The assessing officer can grant a minimum of 7 days and a maximum of 30 days to the taxpayer to furnish his/her explanation. If the income tax department still suspects tax evasion, then it can issue a notice under section 148, intimating the taxpayer about the reopening of the case.

In adherence to the provisions outlined in Section 148A of the Income Tax Act, as introduced in the Budget of 2021, it is mandated that in cases where an assessing officer possesses intelligence pertaining to potentially undisclosed income, a prescribed protocol must be followed. Prior to the issuance of a notice under Section 148, it is incumbent upon the said officer to afford the taxpayer an opportunity to present their perspective. This is achieved by the serving of a show cause notice, prompting the assessee to furnish reasons mitigating the necessity of issue of a notice under Section 148.

Upon receipt of such notification, the taxpayer is bestowed with the responsibility of submitting a comprehensive response within the stipulated timeframe. Furthermore, individuals subjected to such inquiries reserve the right to raise initial objections against the proposed reopening of their case for an evaluation relating to income-escaping assessments. It is incumbent upon the tax authorities to thoroughly consider and address these objections methodically through the issuance of a detailed and well-substantiated speaking order.

What has changed in Budget 2024?

The Finance Bill 2024 proposes amendments to Section 148A of the Income-Tax (I-T) Act, establishing new time limits for issuing notices. “For income escaping assessment of Rs 50 lakh or more, the Section 148A notice must be issued within five years from the end of the assessment year. Notices under Section 148, following a Section 148A notice, have a maximum time limit of five years and three months from the assessment year-end. These changes will take effect from September 1, 2024,” says Mumbai-based chartered accountant Suresh Surana.

Things to note

1. 1. Starting from September 1,, assessments for AY 2018–19 will be time barred.
2. 2. In the instance of an income escaping assessment of Rs 50 lakh or more for AY 2018–19, the prescribed deadline for issuance of a notice under Section 148 or an order under Section 148A is August 31, 2024.
3. 3. Upon receiving a notification under Section 148A, it is essential for the recipient to verify if the notice was issued within the prescribed timeframe. 4. The notification must include the pertinent incriminating evidence or information that served as the basis for its issuance. Additionally, it should originate from the National Faceless Appeal Centre (NFAC) rather than the jurisdictional assessing officer.