Section 148 of the Income Tax Act empowers the assessing officer to reopen an assessment if he has reason to believe that income chargeable to tax has escaped assessment. This section is an important tool for the Income Tax Department to prevent tax evasion and ensure that all taxpayers are paying their fair share of taxes.
Over the years, several cases have come up related to Section 148 of the Income Tax Act. Let’s take a look at some of the notable ones:
- ACIT vs Rajesh Jhaveri Stock Brokers Pvt Ltd: In this case, the Supreme Court laid down the conditions that need to be satisfied before an assessing officer can invoke Section 148. The court held that there must be a tangible material to come to the conclusion that income has escaped assessment. Further, the material must have a rational connection or a live link to the formation of the belief that income has escaped assessment.
- CIT vs Kelvinator of India Ltd: In this case, the Supreme Court held that the power to reopen an assessment under Section 148 is not unlimited. The court emphasized that the assessing officer must have a reason to believe that income has escaped assessment and this belief must be formed on the basis of tangible material. The court further stated that a mere change of opinion of the assessing officer is not sufficient to reopen an assessment.
- ITO vs Lakhmani Mewal Das: In this case, the Supreme Court held that the assessing officer cannot initiate reassessment proceedings merely on the basis of a suspicion or a hunch. The court emphasized that there must be some tangible material on the basis of which the assessing officer forms a reason to believe that income has escaped assessment.
- CIT vs Kamal Wahal: In this case, the Delhi High Court held that if the original assessment was made after due inquiry and examination of the relevant material, then the reopening of the assessment cannot be done merely on the basis of a change of opinion.
- ACIT vs Dhariya Construction: In this case, the Supreme Court held that if the notice issued under Section 148 does not mention the reasons for reopening the assessment, then the entire proceedings would be invalid.
Section 148 allows the assessing officer to reopen an assessment that has already been completed if he has reason to believe that income chargeable to tax has escaped assessment. The assessing officer can issue a notice to the taxpayer requiring him to file a return of income for the relevant assessment year. The taxpayer is then given an opportunity to respond to the notice and to provide any explanations or evidence to rebut the assessing officer’s belief that income has escaped assessment.
The conditions that need to be satisfied before an assessing officer can invoke Section 148 were laid down by the Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt Ltd. The court held that there must be a tangible material on the basis of which the assessing officer forms a reason to believe that income has escaped assessment. Further, the material must have a rational connection or a live link to the formation of the belief that income has escaped assessment.
The Supreme Court also emphasized in the case of Kelvinator of India Ltd that the power to reopen an assessment under Section 148 is not unlimited. The court stated that the assessing officer must have a reason to believe that income has escaped assessment and this belief must be formed on the basis of tangible material. The court further stated that a mere change of opinion of the assessing officer is not sufficient to reopen an assessment.
In the case of Lakhmani Mewal Das, the Supreme Court held that the assessing officer cannot initiate reassessment proceedings merely on the basis of a suspicion or a hunch. The court emphasized that there must be some tangible material on the basis of which the assessing officer forms a reason to believe that income has escaped assessment.
The Delhi High Court in the case of Kamal Wahal held that if the original assessment was made after due inquiry and examination of the relevant material, then the reopening of the assessment cannot be done merely on the basis of a change of opinion.
Finally, in the case of Dhariya Construction, the Supreme Court held that if the notice issued under Section 148 does not mention the reasons for reopening the assessment, then the entire proceedings would be invalid.
In conclusion
Section 148 is an important provision that enables the Income Tax Department to prevent tax evasion and ensure that all taxpayers are paying their fair share of taxes. However, the power to reopen an assessment under this section is not unlimited and there must be tangible material on the basis of which the assessing officer forms a reason to believe that income has escaped assessment. The cases related to Section 148 provide important guidelines for the invoking of this section and ensure that it is not misused by the tax authorities.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q.1 What is Section 148 of the Income Tax Act?
Section 148 empowers the assessing officer to reopen an assessment if he has reason to believe that income chargeable to tax has escaped assessment.
Q.2 What are the conditions that need to be satisfied before an assessing officer can invoke Section 148?
The conditions were laid down by the Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt Ltd. The court held that there must be a tangible material on the basis of which the assessing officer forms a reason to believe that income has escaped assessment. Further, the material must have a rational connection or a live link to the formation of the belief that income has escaped assessment.
Q.3 Can an assessing officer reopen an assessment merely on the basis of a change of opinion?
No, the Supreme Court in the case of Kelvinator of India Ltd held that the power to reopen an assessment under Section 148 is not unlimited. The assessing officer must have a reason to believe that income has escaped assessment and this belief must be formed on the basis of tangible material.
Q.4 Can an assessing officer initiate reassessment proceedings merely on the basis of a suspicion or a hunch?
No, the Supreme Court in the case of Lakhmani Mewal Das held that there must be some tangible material on the basis of which the assessing officer forms a reason to believe that income has escaped assessment.
Q.5 What happens if the notice issued under Section 148 does not mention the reasons for reopening the assessment?
In the case of Dhariya Construction, the Supreme Court held that if the notice issued under Section 148 does not mention the reasons for reopening the assessment, then the entire proceedings would be invalid.
Q.6 Can the taxpayer challenge the reopening of an assessment under Section 148?
Yes, the taxpayer can challenge the reopening of an assessment under Section 148 by filing an objection with the assessing officer. If the assessing officer rejects the objection, the taxpayer can file an appeal with the Commissioner of Income Tax (Appeals).
Q.7 How long does the assessing officer have to reopen an assessment under Section 148?
The assessing officer has to reopen an assessment within four years from the end of the relevant assessment year. However, if the escaped income is more than Rs. 1 lakh, the assessing officer has up to six years to reopen the assessment. In certain cases, such as those involving serious tax evasion, the assessing officer can go back up to 16 years to reopen an assessment.
