Notices: Section 148A and Section 148
Notice Section 148A and Section 148

Income Tax Notice Query Rahul: My spouse received 148A for AY 21-22. She had transferred all her savings to India account while permanently moving back to India. On response to the 148A, she received 148 within a week. What should be our course of action from here. I am confused as we do not have enough knowledge on this area.

Sourav Joshi Replied Navigating Notices: A Clear Path Forward After Receiving Section 148 for AY 2021-22

Receiving a notice from the Income Tax Department can be a daunting experience, especially when you are unfamiliar with the intricacies of tax laws. The recent notices your spouse has received under Section 148A and subsequently Section 148 of the Income Tax Act, 1961, for the Assessment Year (AY) 2021-22, indicate that the tax department is looking to reassess her income for that year. This situation, while serious, can be managed effectively with a clear understanding of the process and timely action. Here’s a detailed guide on what these notices mean and the course of action you should now follow.

Understanding the Notices: Section 148A and Section 148

The issuance of these notices follows a new procedure introduced by the Finance Act, 2021, aimed at making the reassessment process more transparent.

  • Section 148A: This is a preliminary stage. The Assessing Officer (AO) sends this notice to inform you that they have information suggesting that some of your income has escaped assessment. This notice gives you an opportunity to present your case and furnish details to counter the AO’s information. Your spouse rightly responded to this notice.
  • Section 148: The fact that a notice under Section 148 was issued within a week of her response implies that the AO was not satisfied with the explanation provided. This notice formally initiates the reassessment proceedings. It is not a final tax demand but a call to cooperate in a fresh examination of the income for the specified assessment year. In your spouse’s case, the large transfer of savings to her Indian bank account upon her return to India has likely triggered these proceedings.

Immediate Course of Action: A Step-by-Step Guide

It is crucial to respond to the Section 148 notice diligently and within the prescribed time limits. Here are the steps you should take:

Step 1: File an Income Tax Return (ITR)

The first and most critical step is to file an Income Tax Return for the Assessment Year 2021-22 in response to the Section 148 notice. This must be done within the timeframe mentioned in the notice (usually 30 days). Even if your spouse had not filed a return for that year earlier, or had filed a return which she believes is correct, a new return must be filed.

Step 2: Request the “Reasons for Reassessment”

After filing the ITR, you have the right to request a certified copy of the “reasons recorded” by the Assessing Officer for initiating the reassessment. This is a crucial document as it will detail the specific grounds on which the AO believes that income has escaped assessment.

Step 3: File Objections to the Reassessment

Once you receive the “reasons recorded,” you should carefully examine them. If you believe that the reasons are factually incorrect or legally invalid, you can file a detailed objection with the AO. The AO is legally bound to consider and dispose of your objections by passing a speaking order before proceeding with the reassessment.

Step 4: Gather and Organize All Relevant Documents

This is the most critical part of building your case. Since the issue revolves around funds transferred from abroad, you need to provide a clear and comprehensive trail of the money. The onus is on your spouse to prove that the transferred funds are her accumulated savings from income earned outside India during her period of non-residency and are not undisclosed income earned in India. The following documents will be vital:

  • Proof of Residential Status: Documents like passport pages with entry/exit stamps, visa copies, and employment records from the foreign country to establish her non-resident status for the years the income was earned.
  • Source of Income:
    • Salary slips or certificates from her foreign employer.
    • Tax returns filed in the foreign country.
    • Bank statements of the foreign bank account showing the regular credit of salary and accumulation of savings over time.
    • Any other evidence of income earned abroad (e.g., from investments, property sale, etc.).
  • Trail of Funds:
  • A Detailed Written Submission: A clear and concise letter explaining the source of the funds, her residential status during the period the money was earned, and a declaration that the funds are her life savings and not income chargeable to tax in India for AY 2021-22.

Step 5: Cooperate with the Assessment Proceedings

The AO will likely issue notices under Section 142(1) of the Income Tax Act, asking for specific information and documents. It is imperative to respond to these notices fully and within the stipulated time. Failure to do so can lead to an adverse “best judgement assessment” by the AO, where the tax liability could be determined on an estimated basis, and penalties can be levied.4

Should You Seek Professional Help?

Given the complexities involved and the fact that you do not have in-depth knowledge in this area, it is highly advisable to consult a qualified Chartered Accountant (CA) or a tax lawyer who has experience in handling reassessment cases, particularly those involving non-resident taxation and international fund transfers. A professional can:

While this process may seem overwhelming, a systematic and well-documented approach can help you resolve the matter favourably. The key is to be transparent and provide a clear, evidence-backed explanation for the funds your spouse has brought into India.