Getting a notice from the Income Tax Department can feel confusing and even stressful, especially when you’re unsure why it arrived in the first place. If you’ve received a letter under Section 142(1), don’t panic. It’s not a penalty notice. It’s simply the department’s way of asking for more details or reminding you to file your return if you haven’t done so yet.
This notice is part of a process called a preliminary inquiry, and it helps the tax officer complete your assessment fairly. Whether you’ve missed the deadline, forgotten to submit a document, or filed your return with gaps, this notice is their way of saying, “We need more information.” In this guide, we’ll walk you through what Section 142(1) means, why you might receive this notice, and how to respond properly.
What Is Section 148 of the Income Tax Act?
Section 148 empowers the Income Tax Department to reopen an already completed assessment when there is reason to believe that income has escaped assessment.
If the Assessing Officer (AO) suspects that you haven’t fully disclosed your income or filed an inaccurate return, they may send you a notice under this section.
It is not a random process; the officer must follow a set procedure and be backed by concrete information or evidence.
Recent Updates On Reassessment Under Section 148
Over the years, Section 148 has undergone significant amendments to enhance transparency and fairness in the reassessment process. Below is a timeline of major updates:
Union Budget 2025
The government proposed that taxpayers who have received a notice under Section 148A cannot file an updated return after 36 months from the end of the relevant assessment year. However, if it is later concluded that reassessment isn’t required, the taxpayer may still file an updated return within 48 months.
Union Budget 2022
This amendment introduced Section 148A, making it mandatory for the Assessing Officer to conduct a prior inquiry and issue a show-cause notice before serving a Section 148 notice. It also requires officers to give the taxpayer a clear opportunity to respond and submit supporting documents before reopening the assessment.
Union Budget 2021
The reassessment window was shortened from 6 years to 3 years. However, for serious cases involving tax evasion above INR 50 lakh, the period to reopen cases was extended to 10 years. This update aimed to reduce prolonged uncertainty for taxpayers and improve the overall efficiency of the tax system.
Valid Reasons for Receiving a Section 148 Notice
Notices under Section 148 cannot be sent on mere suspicion. The Assessing Officer must have valid and well-documented reasons to believe that income has escaped assessment. Below are some of the most common and legally accepted grounds.
New and Tangible Evidence of Undisclosed Income
Suppose the department receives fresh information suggesting that you have unreported income, such as a hidden bank account, undisclosed crypto income or capital gains, or undisclosed property. In that case, this can trigger a Section 148 notice. The evidence must not have been part of the original assessment.
Inaccurate or Misleading Information in Original Return
Providing incorrect income figures or failing to report specific transactions, whether intentionally or unintentionally, can be grounds for reassessment. Even minor discrepancies, if they affect taxable income, can lead to scrutiny.
TDS or AIS Mismatch
When the tax deducted at source (TDS) details claimed in your return do not match the data in Form 26AS or the Annual Information Statement (AIS), the system may flag this discrepancy. The Assessing Officer may issue a notice if the gap indicates unreported income.
Disclosures by Other Tax or Enforcement Agencies
Information shared by other government departments, such as the Enforcement Directorate or GST authorities, can be used to reassess your return. If these data points point to possible tax evasion, it qualifies as valid material for initiating reassessment.
Who Can Issue a Notice Under Section 148?
Not every tax officer has the authority to issue a notice under Section 148. There are specific rules around who can initiate the reassessment process and the level of approval required before doing so. This section explains the hierarchy and conditions involved.
Authority Based on Rank
A notice under Section 148 can only be issued by an Assessing Officer of a certain minimum rank. If the reassessment pertains to an already assessed year under Section 143 or Section 147, the officer must hold the position of Assistant Commissioner or Deputy Commissioner.
However, if the officer is of a lower rank, the Joint Commissioner must first be satisfied that the reasons recorded by the officer are valid before issuing the notice.
Approval Requirements as per Section 151
Section 151 outlines the approval process for issuing notices. If the notice is being issued more than 3 years after the end of the relevant assessment year, it cannot proceed unless the Principal Chief Commissioner, Principal Commissioner, Chief Commissioner, or Commissioner is convinced that it’s a fit case.
For notices issued within the past 3 years, officers below the rank of Joint Commissioner must still obtain approval from the Joint Commissioner, based on the recorded reasons. These checks ensure that reassessment powers are not misused and are exercised only when justified.
Time Limits for Issuing a Section 148 Notice
The Income Tax Act sets strict time limits within which a Section 148 notice can be issued. These limits ensure that taxpayers are not indefinitely exposed to reassessment risks and that the department acts within a reasonable timeframe.
|
Condition |
Time Limit |
|
Normal cases where escaped income is less than INR 50 lakh |
3 years from the end of the relevant assessment year |
|
Cases where escaped income exceeds INR 50 lakh |
Up to 10 years from the end of the relevant assessment year |
|
Note: In normal situations, the Assessing Officer cannot issue a notice under Section 148 after 3 years from the end of the relevant assessment year. However, if there is credible evidence of substantial income escaping assessment, specifically more than INR 50 lakh, the notice period extends up to 10 years. |
How to Respond to a Section 148 Reassessment Notice?
Receiving a Section 148 notice can be stressful, but responding correctly at the right time can make all the difference. Here are the key steps to follow for an efficient and compliant reassessment process within the legal framework.
Request the Reasons in Writing
If the notice does not mention the exact reasons for reopening your case, you have the right to request them in writing from the Assessing Officer. These recorded reasons are critical because your next steps, including filing objections, depend entirely on understanding why the notice was issued.
File the Return Promptly
Once you receive the notice, file your income tax return for the relevant assessment year within the timeframe mentioned. If you have already filed your return, send a copy to the Assessing Officer. Filing late or ignoring the notice can lead to penalties and best judgment assessments.
File Objections if the Grounds Are Invalid
If you believe that the reasons given in the notice do not justify reopening the case, you can file a written objection. This objection should clearly explain why the reassessment is invalid, using facts, figures, and legal interpretations as necessary.
Consider Filing a Writ Petition
If you find that the reassessment continues despite invalid reasons or procedural lapses, you can file a writ petition in the High Court. This legal step can be taken even before the reassessment is finalised, as long as your objections were not adequately considered.
Ensure Accuracy and Completeness in Returns
Whether you’re filing a fresh return or resubmitting an older one, check that every income source is reported correctly. Double-check deductions, disclosures, and capital gains calculations. Any error or omission could lead to more complications during the reassessment.
Duties and Rights of the Assessee
Once a notice under Section 148 is received, taxpayers have both obligations to fulfil and rights they can exercise. Understanding these clearly can help ensure a fair reassessment process while safeguarding your legal position.
- Right to Request Reasons for the Notice: You are entitled to receive a copy of the recorded reasons behind the notice. If these are not provided in the original notice, you can formally request them from the Assessing Officer before taking further action.
- Duty to File Return for Escaped Income: It is your responsibility to file a fresh return for the relevant assessment year once you receive a notice. This applies even if you have already filed one earlier. The return must include any income that may have been overlooked or escaped assessment.
- Right to File Objections to the Notice: If the reasons provided by the AO appear weak or legally unjustified, you can submit a formal objection. This allows you to challenge the validity of the reassessment proceedings at an early stage.
- Right to Challenge Rejection of Objection: If your objections are dismissed, you have the right to ask the officer to provide separate written reasons for the rejection. This helps you decide if you wish to pursue the matter further in court.
- Right to File a Writ Petition: At any stage, before or after the reassessment is completed, you can challenge the legality of the notice by filing a writ petition in the appropriate High Court. This right remains even if the matter is appealed.
- Duty to Provide Supporting Evidence: You must maintain and submit supporting documents, such as Form 16, AIS, bank statements, or investment proofs, to substantiate your claims. This is critical to prevent further questioning or reassessment on the same issue.
Read More: How Are Crypto Referrals Taxed in India?
Consequences of Not Responding to a Section 148 Notice
Ignoring a Section 148 notice can lead to serious consequences. The Income Tax Department has the authority to proceed with the reassessment based on whatever limited information is available, and this may not always work in your favour.
- Best Judgment Assessment: If you don’t respond, the Assessing Officer will estimate your income using available data and complete the reassessment based on their discretion. This process often results in a higher tax demand than if you had responded.
- Interest and Penalties: Non-compliance may result in interest under Section 234 for late filing and penalties under Section 271 for concealment or misreporting of income. These penalties can add a significant financial burden.
- Limited Scope for Appeal: While you still have the right to appeal, your chances of success may be limited if you haven’t participated in the reassessment process or failed to provide accurate information when requested.
- Legal and Compliance Risks: Failure to act on the notice could raise red flags for future scrutiny. It can also hurt your compliance record and trigger audits or investigations in subsequent years.
Reopening of Income Tax Assessment Cases: Key Changes
Section 148 has undergone a major overhaul in terms of the tax department’s ability to reopen past assessments. These updates were introduced to strike a balance between efficient tax administration and protecting taxpayer rights.
Old Rule: 6-Year Window
Before the 2021 amendments, the Income Tax Department had the power to reopen assessment cases for up to 6 years from the end of the relevant assessment year. This long window often created prolonged uncertainty for taxpayers, especially for those who had complied with all filing requirements. Even minor discrepancies could be used to reopen assessments several years later, leading to avoidable stress and litigation.
New Rule: 3-Year Limit for Most Cases
Following 2021, the standard time limit for reopening assessment cases has been reduced to three years. This change was introduced to bring more certainty and closure for taxpayers. Unless there is substantial new evidence, the AO cannot issue a Section 148 notice beyond this 3-year window. It encourages timely scrutiny and reduces the risk of long-drawn reassessment processes.
Exception: 10 Years for Income > ₹50 Lakh
In cases where the escaped income exceeds ₹50 lakh, the reassessment period extends to 10 years from the end of the relevant assessment year. This extended timeframe is reserved only for serious cases involving large-scale tax evasion. The officer must possess credible evidence of such high-value undisclosed income before initiating proceedings beyond the normal 3-year limit.
Things to Keep in Mind While Replying to a Section 148 Notice
Replying to a Section 148 notice requires attention to detail, proper documentation, and timely action. Here are some important points to remember when preparing your response.
Always Request the Recorded Reasons
If the notice does not mention the reason for reopening your case, you must formally request the recorded reasons from the AO. These reasons are essential because they determine the validity of the notice itself. Without them, you may not be able to file an objection or challenge the reassessment in court effectively.
File Your Return or Submit a Copy If Already Filed
After receiving the notice, you must file a return for the relevant assessment year, even if you had filed one earlier. If the return has already been submitted, send a copy to the Assessing Officer. This step is mandatory to stay compliant and avoid penalties. Failing to complete this step can result in a best judgment assessment.
Report All Income and Expenses Carefully
Any return filed in response to a Section 148 notice must be complete and accurate. Even minor errors or omissions can be considered misreporting, resulting in penalties. Carefully cross-check your bank statements, investment records, capital gains, and TDS data before filing. A well-prepared return reduces the chances of further questioning or reassessment.
Know the Legal Provisions Under Section 148
Understanding the key provisions under Sections 148 and 148A will help you navigate the process smoothly. It ensures that your response aligns with your rights and duties under the law. Being aware of deadlines, approval requirements, and your rights to object or appeal can protect you from unnecessary legal complications.
How Can KoinX Help You Respond to a Section 148 Notice?
Filing a response to a reassessment notice becomes even more complicated when your tax records involve crypto transactions. From calculating gains to preparing Schedule VDA, every detail must be accurate and precise. KoinX simplifies this process by offering real-time reporting, seamless integrations, and error-free tax reports, helping you respond to notices with clarity and confidence.
Auto-Imports All Crypto Transactions
KoinX connects with 800+ crypto exchanges, wallets, and blockchains to automatically fetch your entire transaction history. Whether you’ve traded on Indian platforms or used DeFi wallets, the system ensures no transaction is missed. This automation saves hours of manual work and significantly reduces the risk of overlooking taxable events while replying to a reassessment notice.
Detects Missed Income or Gains
The platform smartly scans your transaction history to identify any realised gains, airdrops, or staking rewards that may have been unintentionally left out of your original return. By flagging these discrepancies in advance, KoinX helps you address income that might have triggered the reassessment notice, giving you a chance to file an accurate and compliant return.
Generates Error-Free Tax Reports
KoinX generates audit-ready tax reports that are fully compliant with Indian tax laws, including details for capital gains, income from staking, and other crypto earnings. These reports can be submitted directly to your Chartered Accountant or the Assessing Officer as part of your Section 148 response, reducing the chances of rejection or further questioning.
If you’ve received a reassessment notice involving crypto activity, don’t leave it to chance. KoinX ensures you’re fully prepared with accurate reports, compliant filings, and expert support. Sign up on KoinX now and take control of your crypto tax journey today.
Conclusion
Section 148 gives the Income Tax Department the power to reopen your case, but it also gives you a fair chance to respond. Understanding the rules, timelines, and your rights can help you avoid penalties and close the reassessment with confidence and accuracy.
If your return includes crypto transactions, KoinX can make the reassessment process much easier. With automated tracking, accurate reports, and Schedule VDA support, you’ll always stay one step ahead of tax notices. Join KoinX today and simplify your crypto tax compliance like never before.
Frequently Asked Questions
Can I Challenge the Legality of a Section 148 Notice?
Yes, if you believe the notice is unjustified or lacks proper grounds, you can challenge its legality. Start by filing written objections and, if necessary, request a speaking order. If the response is unsatisfactory, you may file a writ petition in the High Court, even before the reassessment process is completed.
Can I File an Updated Return After Receiving a Section 148A Notice?
According to the Budget 2025 provisions, if a Section 148A notice has been issued, an updated return cannot be filed more than 36 months after the end of the relevant assessment year. However, if it is decided that no notice under Section 148 is required, then an updated return can be filed within 48 months.
Does the Assessing Officer Need Approval Before Issuing a Notice?
Yes, before issuing a Section 148 notice, the AO must obtain approval from a higher authority. For notices beyond 3 years, approval from the Principal Commissioner or Chief Commissioner is mandatory. For other cases, the Joint Commissioner’s approval is required if the officer is of a lower rank.
Is a Speaking Order Mandatory If I File Objections?
Yes, as per the Supreme Court ruling in GKN Driveshafts (India) Ltd vs. ITO (2003), the Assessing Officer must issue a speaking order if objections are filed. This ensures that your concerns are addressed formally and provides you with legal grounds to contest the reassessment if needed.
