Section 148 — Income Escaping Assessment

Section 148 of the Income-tax Act, 1961, empowers the Assessing Officer to issue a notice for reassessment if they have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. This section is significant as it allows the tax authorities to reassess income that was not assessed or under-assessed in the original assessment. The statutory test requires the Assessing Officer to have a 'reason to believe' that income has escaped assessment, which must be based on tangible material. The burden of proof initially lies with the Assessing Officer to justify the reopening of the assessment. In practice, this section is crucial for maintaining tax compliance and ensuring that all taxable income is duly assessed. However, it also requires a balance to prevent arbitrary or unjustified reassessment notices.

Common Litigation Flashpoints

1. Validity of the 'reason to believe' for reopening assessment
2. Time limits for issuing notice under Section 148
3. Adequacy of material evidence for reassessment
4. Procedural lapses in issuing the notice

Judgments on Section 148 — Income Escaping Assessment

• M/s Dilsa Distributers Combines vs ITO-11(1)(1) — ITAT, 2013
  The statement of a third party cannot be used against the assessee without providing an opportunity for cross-examination.
• Voltas Limited vs Assistant Commissioner of Income Tax Circle -8(3) (1), Mumbai — HC, 2022
  Reopening of assessment based solely on a change of opinion is impermissible under the Income Tax Act.
• DCIT (Central Circle-1) vs Shree Ganesh Edibles Pvt. Ltd. — ITAT,
  Once the assessee furnishes identity, creditworthiness, and genuineness of the lender, the onus shifts to the AO to prove otherwise.
• Arya Roadways Company Pvt. Ltd. vs I.T.O., Ward-12(1), Kolkata — ITAT,
  The case was remanded to ensure a fair opportunity for the assessee to substantiate its claims regarding the expenditure.
• Union of India & Ors. vs Rajeev Bansal — SC,
  Reassessment notices issued under the old regime are deemed valid under the new regime due to the application of TOLA and judicial directions.
• Manisha Agarwal vs Income Tax Officer, Ward 59(1), Delhi & Ors. — HC,
  A reassessment notice issued beyond the surviving time limit under the Income Tax Act read with TOLA is time-barred.
• Hexaware Technologies Limited vs Assistant Commissioner of Income Tax — HC,
  Reassessment notices issued after 1st April 2021 must comply with the amended provisions of the Income Tax Act, 1961, and cannot rely on the erstwhile provisions.
• Chhugamal Rajpal vs S. P. Chaliha & Ors. — SC,
  A notice under Section 148 cannot be issued without the Income-tax Officer having prima facie grounds and the Commissioner's satisfaction based on recorded reasons.
• Pawan Sachdeva vs Income-Tax Officer, Ward 19(3), Delhi & Anr. — HC,
  Issuance of notice within the limitation period is sufficient for jurisdiction, even if the service occurs later or with errors.
• T.K.S. Builders Pvt. Ltd. vs Income Tax Officer Ward 25(3) New Delhi — HC,
  Notices under Section 148 must be issued through automated allocation and in a faceless manner as per the Faceless Assessment Scheme.
• Nuclear Power Corporation of India Ltd. vs Deputy Commissioner of Income-tax — HC,
  Reopening of assessment based on a change of opinion without new tangible material is not justified.
• Twylight Infrastructure Pvt Ltd vs Income Tax Officer Ward 25 3 Delhi and Ors. — HC,
  Approval from the specified authority is mandatory for issuing reassessment notices under Section 148.
• Union of India & Ors. vs Rajeev Bansal — SC,
  Reassessment notices issued after 1 April 2021 should be treated as issued under the new regime, with TOLA extending the time limits for compliance.
• Principal Commissioner of Income Tax, Central-3 vs Abhisar Buildwell P. Ltd. — SC,
  In the absence of incriminating material, the AO cannot assess or reassess completed/unabated assessments under Section 153A.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Chhugamal Rajpal vs S. P. Chaliha & Ors. — SC,
  The Income-tax Officer must have prima facie grounds and record reasons before issuing a notice under Section 148, and the Commissioner must apply his mind before granting sanction.
• Anand Education Society vs Asstt. Director of Income Tax(E) — ITAT,
  The AO must substantiate claims of excessive payments to relatives with evidence of unreasonableness compared to market standards.
• Ananta Landmark Pvt. Ltd. vs Deputy Commissioner of Income Tax — HC,
  Reopening of assessment after four years requires both conditions of income escaping assessment and failure to disclose material facts to be satisfied.
• Bhagwati Ferro Metal Pvt. Ltd. vs Assistant Commissioner of Income Tax — HC,
  A notice under Section 148 must be issued by the Faceless Assessing Officer, and failure to do so is a fatal defect.
• Mon Mohan Kohli vs Assistant Commissioner of Income Tax & Anr — HC,
  The government cannot extend the applicability of statutory provisions through notifications without explicit legislative authority.
• Manju Somani vs Income Tax Officer Ward-70(1) & Ors. — HC,
  A reassessment notice issued post-01 April 2021 must comply with the time limits prescribed by the pre-amendment provisions of Section 149 if the assessment year is prior to 01 April 2021.
• Price Waterhouse Coopers Pvt. Ltd. vs Commissioner of Income Tax, Kolkata-I — SC, 2012
  A bona fide and inadvertent error does not amount to furnishing inaccurate particulars or concealment of income.
• GKN Driveshafts (India) Ltd. vs Income Tax Officer and Ors. — SC,
  When a notice under Section 148 is issued, the noticee should file a return and may seek reasons, which the assessing officer must provide, allowing the noticee to file objections that must be dispose
• ITO, Ward 13 (1) vs M/s. Navodaya Castles Pvt. Ltd. — ITAT,
  The AO must independently apply his mind to the information received before initiating proceedings under Section 147/148.
• Mon Mohan Kohli vs Assistant Commissioner of Income Tax & Anr — HC,
  The Government cannot extend the applicability of legislative provisions beyond the dates specified by the Legislature through notifications.