New CBDT Guidelines for Issuing Notices Under Section 148 of Income Tax Act

Overview of New Guidelines for Issuance of Notices Under Section 148 of the Income Tax Act

The Central Board of Direct Taxes (CBDT) has released new guidelines concerning the issuance of notices under Section 148 of the Income Tax Act, 1961. These guidelines replace the previous framework established in 2022 and incorporate changes enacted by the Finance Act of 2023. This document aims to clarify the procedures and prerequisites for issuing notices regarding income that may have escaped assessment, thereby enhancing transparency and compliance with tax regulations.

Key Features of the Guidelines

Procedures Prior to Issuing Notice

1. Notice Requirements:

   • An Assessing Officer (AO) may issue a notice under Section 148 only if they possess adequate information indicating that taxable income has escaped assessment for the pertinent assessment year, as per Explanation 1 of Section 148.

2. Definition of Information (according to Explanation 1):

   • Information can encompass:
     • Guidance from the Board’s risk management procedures.
     • Audit findings highlighting non-compliance with the Act during assessment.
     • Insights derived from agreements under Sections 90 or 90A.
     • Data obtained through schemes specified in Section 135A.
     • Information necessitating action based on Tribunal or Court orders.

3. Deemed Information:

   • Explanation 2 to Section 148 outlines situations in which the AO is regarded as having information, such as:
     • A search initiated under Section 132 or requisition of documents/assets under Section 132A occurring after April 1, 2021.
     • Conducting surveys under Section 133A after this date under similar provisions.

4. Exclusions from Section 148A:

   • Specific scenarios are exempt from Section 148A processes, including searches initiated after April 1, 2021, or instances where the AO, with prior approval from the Principal Commissioner or Commissioner, has identified relevant assets or records belonging to the taxpayer.

Approval for Conducting Inquiries

• The approval process for initiating inquiries and issuing notices under Sections 148/148A is outlined as follows:
  • Under 3 Years: The Principal Chief Commissioner or equivalent authority may grant approval.
  • More than 3 Years but up to 10 Years: Approval from higher-ranking officials such as PCCIT or PDGIT is required.

Notification Procedures

1. Content of Notices:

   • Notices issued under Section 148 must include pertinent documents and specifics as outlined in the rules.

2. Show Cause Notice:

   • If inquiries indicate potential income escaping assessment, the AO must issue a show cause notice under Section 148A(b), granting the assessee between 7 to 30 days to respond.

3. Responses and Orders:

   • After reviewing the response to a show cause notice, the AO is required to consider any submissions before issuing a final order under Section 148A(d).

Timelines and Extensions

• If a search under Section 132 is conducted after March 15 of a financial year, the limitation period extends by 15 days (for instance, notices due by March 31 can now be issued by April 15).
• Delays resulting from responses to show cause notices or judicial intervention will also modify the limitation periods accordingly.

Key 2024 CBDT Guidelines (F.No.299/10/2022-Dir(Inv.III)/1522)

• Mandatory Documentation: Notices must include redacted copies of investigation reports (e.g., inputs from FIU/LEA) and screenshots of digital evidence.

• Auto-Extension for Short Windows: If the remaining timeframe after exclusions (e.g., court stays) is 7 days or less, the deadline automatically extends to 7 days.

• Consolidated Reopening: AOs are required to consolidate all escapement issues for multiple years into one notice whenever feasible.

• Enhanced Scrutiny for High-Value Escapement:

  • For cases involving escapement of ₹50 lakh or more beyond 3 years, AOs need to provide evidence through:
    • Discrepancies in assets,
    • Unexplained expenditures,
    • Suspicious entries in books.

Exclusions from Section 148A

• Search/Survey Cases (post-April 2021): No Section 148A notice is needed; direct approval is sufficient.

• Foreign Assets: Information obtained from DTAA/TIEAs bypasses Section 148A guidelines.

• Revised Penalties:

  • Non-compliance with notice timelines incurs penalties under Section 271AAC, amounting to 200% of the tax evaded, rather than general provisions.

• Additionally, electronic filing of responses through the Income Tax Portal or by utilizing Document Identification Numbers (DIN) is mandatory for all communications.

Conclusion

The updated CBDT guidelines clarify the process for issuing notices under Section 148, emphasizing due process and transparency in tax administration. It is essential for officers to implement these guidelines effectively to ensure proper tax compliance and management.