Didn’t file ITR in past? You may get tax notices from I-T department u/s 148A as it has identified high risk non-ITR filers

Did You Miss Filing Your ITR? Brace Yourself for Potential Tax Notices Under Section 148A

Forgetting or deliberately skipping filing your Income Tax Return (ITR) in the past might come back to haunt you. The Income Tax (I-T) Department is actively identifying “high-risk non-ITR filers” and is likely to issue notices under Section 148A of the Income Tax Act, 1961. This proactive approach signifies the department’s commitment to widening the tax base and ensuring compliance.

Who are “High-Risk Non-ITR Filers”?

The I-T Department employs sophisticated data analytics to pinpoint individuals who, despite having significant financial transactions or income, have failed to file their returns. These “high-risk” categories could include individuals who have:

• Made high-value transactions in property, shares, or other investments.
• Received substantial interest income from bank deposits.
• Have significant turnover in their business or profession.
• Are identified through information received from various sources like banks, financial institutions, and other government agencies.

Understanding Section 148A: A Step Towards Transparency

Section 148A was introduced in the Income Tax Act to bring in more transparency and provide taxpayers with an opportunity to explain their position before the department initiates a formal reassessment proceeding under Section 148. Before issuing a notice under Section 148, the Assessing Officer (AO) is now mandated to:

1. Conduct an inquiry: The AO will conduct a preliminary inquiry based on the information suggesting that income chargeable to tax has escaped assessment.
2. Provide an opportunity to the assessee: The AO must provide the individual with a copy of the information and allow them an opportunity to explain why a notice under Section 148 should not be issued.³
3. Consider the reply: The AO is obligated to consider the reply furnished by the assessee before deciding whether or not to issue a notice under Section 148.
4. Pass an order: If the AO, after considering the reply, believes that income has indeed escaped assessment, they will pass an order with reasons before issuing a notice under Section 148.

What Happens if You Receive a Notice Under Section 148A?

Receiving a notice under Section 148A should be taken seriously. Here’s what you need to do:

• Acknowledge and Respond Promptly: Do not ignore the notice. Respond within the stipulated time frame, usually mentioned in the notice itself.
• Understand the Reason: Carefully read the notice to understand the specific information the I-T Department has that suggests you have not filed your return despite having taxable income.
• Gather Relevant Documents: Collect all necessary financial documents and information that can support your explanation. This might include bank statements, investment details, income proofs, and any other relevant records.
• Prepare a Detailed Reply: Draft a comprehensive and factual reply addressing each point raised in the notice. If you genuinely missed filing your return, acknowledge it and state your intention to file it immediately. If you believe the department’s information is incorrect, provide clear evidence to support your claim.
• Seek Professional Help: If you are unsure about how to proceed or if the matter is complex, it is advisable to consult a tax professional. They can help you understand the implications, prepare a suitable reply, and guide you through the process.
• File Your ITR (if not done already): If you haven’t filed your return for the relevant assessment year, do so immediately. This demonstrates your willingness to comply and can potentially mitigate further action.

Consequences of Ignoring the Notice

Ignoring a notice under Section 148A can lead to more stringent actions by the I-T Department. This could include:

• Issuance of Notice Under Section 148: After considering your reply (or if no reply is received), the AO can proceed to issue a notice under Section 148, initiating the reassessment proceedings.
• Best Judgement Assessment: If you fail to cooperate or provide satisfactory explanations, the AO may proceed with a “best judgement assessment” under Section 144, where they will assess your income based on the available information, which might not be favorable to you.
• Penalties and Interest: You may be liable to pay penalties for non-filing or late filing of returns, as well as interest on any unpaid tax.
• Legal Consequences: In severe cases of tax evasion, the department may initiate legal proceedings.

Prevention is Better Than Cure

The best way to avoid receiving such notices is to ensure timely and accurate filing of your Income Tax Returns every year. Even if your income falls below the taxable limit, filing a nil return can be beneficial in certain situations, especially if you have made high-value transactions.

In Conclusion

The I-T Department’s focus on high-risk non-ITR filers signals a stricter enforcement regime. If you have missed filing your returns in the past and believe you fall under the “high-risk” category, it’s crucial to be proactive. Gathering your financial information and being prepared to respond to any potential notice under Section 148A is essential to avoid further complications and ensure compliance with tax regulations. Don’t delay – take stock of your past filings and be ready to address any communication from the tax authorities.