ITR reassessment: Filing income tax returns, a crucial financial task, poses complexity and error potential, possibly leading to an unsettling tax notice issuance by the income tax department. Taxpayers need to be careful regarding the filing of income tax returns in the first place to prevent getting such notices.
However, taxpayers should note that the Income Tax department has the power to reassess old ITRs in case some income has escaped assessment. The deadline for reassessment of old Income Tax Returns (ITRs) is approaching.
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August 31 is the deadline to receive notices under Section 148 of the Income Tax Act if taxpayers' income has escaped assessment by the IT department. This is particularly applicable if the escaped income is Rs 50 lakh or more for the assessment year (AY) 2018-19 or later. It is crucial to be mindful of this deadline and respond promptly to any communication regarding reassessment to ensure compliance with the Income Tax regulations.
1. Section 148
Section 148 of the Income Tax Act specifies that the tax department will notify any unreassessed tax calculation and that an IT Assessing Officer will reach out to the respective assessee.
In essence, this particular section of the Income Tax Act deals with the issuance of notices in cases where income has not been reassessed.
According to the stipulations outlined, assessing officers are required to communicate with the relevant assessees by issuing a notice requesting the submission of the following documents:
Income returns of the assessee. Income Tax Returns (ITR) of an individual besides the concerned assessee.
2. Changes after Budget 2024
The Finance Bill 2024 proposed amendments to Section 148A of the Income-Tax (I-T) Act:
Income escaping assessments of approximately Rs 50 lakh or more are subject to specific time constraints under the Income Tax Act. A Section 148A notice must be issued within five years from the end of the assessment year. Subsequent notices under Section 148, which follow a Section 148A notice, must be issued within five years and three months from the end of the assessment year. These revised timelines are expected to come into effect on September 1, 2024.
Under the existing provisions, for the assessment year 2018-19, a notice under Section 148 for reassessment could have been issued within ten years from the end of the relevant assessment year, i.e., by March 31, 2029. However, with the proposed changes slated for September 1, 2024, this time limit has been reduced to June 30, 2024. Consequently, the deadline for issuing notices under both Section 148A and Section 148 will be August 31, 2024.
3. New deadline
For Assessment Year (AY) 2018-19, in cases where the income escapement amounts to Rs 50 lakh or above, the deadline for issuing a notice under section 148 or an order under section 148A is August 31, 2024. After September 1, 2024, assessments for AY 2018-19 will be considered time-barred.
4. Time given to explain case
Section 148A of the Income Tax Act mandates that the income tax officer is required to afford the taxpayer an opportunity to present their case before serving the notice. This provision ensures that the taxpayer has a fair chance to explain their position.
Upon the issuance of the notice, the assessing officer has the discretion to allow a minimum period of 7 days and a maximum period of 30 days for the taxpayer to provide their explanations. If, even after this opportunity, the income tax department continues to suspect tax evasion, they may proceed to issue a notice under section 148 to inform the taxpayer about the reopening of the case.
5. Responding to reassessment notice
The reassessment notice for Assessment Year (AY) 2018-19 and prior years must be issued by August 31, 2024, under either section 148 or the order is to be passed under section 148A.
In the case of a notice issued under section 148A, the order under the same section should be passed within one month, i.e., before August 31, 2024. This limited timeline might constrain the taxpayer's ability to respond adequately.
Conversely, if the notice under section 148 for AY 2018-19 is issued before August 31, 2024, the reassessment proceedings must be concluded within nine months from the end of the financial year in which the notice is served, i.e., by December 31, 2025, in accordance with the provisions of section 149. This extended period allows the taxpayer ample time to address the reassessment notice and successfully navigate the proceedings.