Time limit for issue of notices under sections 148 and 148A

CA V.K. Subramani

The Finance (No. 2) Bill, 2024 proposes to substitute section 149 w.e.f. 1st day of September, 2024.

Sub-section (1) of section 149 says that a notice under section 148 shall not be issued if 3 years and 3 months have elapsed from the end of the relevant assessment year, unless it is covered by clause (b) of section 149(1).

Clause (b) of section 149(1) says that no notice under section 148 shall be issued if more than 5 years and 3 months have elapsed from the end of the relevant assessment year unless the assessing officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to Rs.50 lakh or more.

Thus, if the amount of income escaping assessment or likely to escape assessment is Rs.50 lakh or more, notice under section 148 shall be issued before 5 years and 3 months from the end of the relevant assessment year. The lawmakers have reduced the maximum time limit from 10 years to 5 years from the end of the relevant assessment year for triggering reassessment provisions.

Sub-section (2) of section 149 provides the time limit for issue of notice under section 148A meant for completing the procedural formality before issuing a notice under section 148. It says that no notice under section 148A shall be issued if 3 years have elapsed from the end of the relevant assessment year unless it falls under clause (b) of section 149(2). Clause (b) of section 149(2) says that a notice under section 148A can be issued within 5 years from the end of the relevant assessment year if the income chargeable to tax escaping assessment was Rs.50 lakhs or more.

In essence, section 149 provides two-tier time system. Accordingly, before issuing a notice under section 148, requirements of section 148A are to be completed.

The law so drafted however does not say whether the monetary limit of Rs.50 lakhs is for one assessment year or in aggregate for the assessment years. It seems that the plain reading of the provision provides for reassessment where the escapement is above Rs.50 lakhs for issue of notice up to 5 years and 3 months from the end of the relevant assessment year and it is 3 years and 3 months in other cases. Thus, the legal provision has been drafted to revert to the earlier position as was there vide Finance Act, 2021 with further reduction in time limit for triggering reassessments.