- One whether an A.O can issue notice for reassessment on the basis of information given by other persons like Audit or Investigation wing or some other source?
- What should be proper course of action for you in case a notice for reassessment is served.
“we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment.”
1.You have to file the return of income in response to notice u/s 148.
2.After that ,If you desire, can seek reasons for issuing notices.
3.The Assessing Officer is bound to furnish reasons within a reasonable time, if asked for by you.
4.You can object the reasons of reopening at this stage
5.The Assessing Officer has to dispose of the objections by passing a speaking order
6.Then only, he can proceed with the assessment.
“147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and”
“The fact that the words “definite information” which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are “reason to believe” and not “reason to suspect”. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed.”
The reason of believe was subject matter of many a court case and different courts have given varied judgments . But, in most of the case, on question of sufficiency of reasons of belief, the department won the case. The reason was that the court , while deciding the issue whether there was “reason to believe “ examines facts on the basis of which the notice was issued. In most of the case , it was found that there was really reason to believe.for the A.O . Such cases were
“When the assessee fails to disclose the note of Chartered Accountant along with the balance-sheet, whether the provisions of s. 147(a) are applicable ? Also whether the report of the Central Bureau of Investigation can form a basis for issue of notice under this section ? The non-disclosure of the Chartered Accountant’s note along with the balance-sheet could be considered as a failure of the assessee to disclose the relevant facts fully and truly. The purport of Central Bureau of Investigation formed basis for the Income-Tax Officer’s belief that income had escaped assessment. This was in accordance with the requirements of the statute. This report need not have being disclosed earlier, since the report which was submitted to the High Court later on showed that there was some basis for the Income-Tax Officer to invoke s. 147. The notices issued as per this section are valid.”
“In Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996, the Supreme Court has held that the report of the internal audit party of the Income-tax Department is no information within the meaning of section 147(b) of the Income-tax Act, 1961. The Supreme Court has further held : “In every case, the Income-tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice, he can reasonably believe that income has escaped assessment”. Thus, in the present case, there was no information as required by law before the authorities nor the condition precedent before issuing notices under section 148 has been satisfied as the officer did not apply his mind and come to his own conclusion before acting on the audit report.”
1. The “reason to believe “ which became basis for issue of notice u/s 148 is challengeable in court of law.
2. There has to be application of mind by the A.O before initiating the reassessment proceeding.
3. The information given by other source can be reason for issuing notice, but there has to be some substance in those information support A.O’s “reason to believe”
About taxworry
Excellent reply on 148 notice. it is like an online lecture on the subject. very good .keep it up
krnarayana
acit.chennai