Significant Changes in Reassessment Proceedings under section 148 of the Income Tax Act, 1961

Finance Act 2024 has reduced the time limit for initiating reassessment proceedings to five years from the end of the relevant assessment year, replacing the previous limit of ten years for cases where the escaped income is Rs. 50 Lakhs or more. This amendment will take effect from 1st September 2024.

For example, from 1st September 2024, the time limit to issue notices for FY 2017-18 (AY 2018-19) has reduced to 31st March 2024, from the earlier time limit of 31st March 2029. So, if any notices are issued on or after 1st September 2024 for FY 2017-18, the notice will not be valid.

What does this mean for Taxpayers: With the reduced time limit for issuing notices, there is a possibility that notices for Financial Year 2017-18 (Assessment Year 2018-19) or prior periods may be issued by the department until 31st August 2024. Many taxpayers have already received notices, with several notices issued on 29th July 2024.

What should you do: Taxpayers should check the "Pending Actions" > "e-Proceedings" tab to check if notices have been issued in their case. Notifications regarding these notices are also sent to the mobile number and email ID registered on the income tax portal as well.

As the Income Tax Officers has to take prior approval of the Commissioner before initiating 148 proceedings, taxpayers have very limited time to respond to the notices. Moreover, the notices belong to old period, where data collection also takes time.

So, it is advised to taxpayers to check their income tax portal and take appropriate actions.

Consequences of inaction: If taxpayers fail to respond to these notices within the stipulated time, their case could be transferred to faceless assessment, and the procedure for providing explanations for the case becomes complicated at this stage.

Staying proactive and informed about these changes is crucial to ensure compliance and avoid litigation.