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ITR UNDER SECTION 148 AND SUBSEQUENT DROPPING OF PROCEDURE

22 April 2024

Hello,

Can someone please let me know if tax need to be paid right after filing 148 ITR or can it wait till the completion of assesment and getting draft / final assesment order ?

The 148 notice for AY 2017-18 that was received was time barred till 31/3/2021 as the income chargable to tax was less than 50L.

So, if the ITR is filed and tax is paid, is the paid tax refunded when the proceeding is dropped in a writ, as the 148 notice was issued beyond the 3 years time limit ?

If someone please can let me know, that would be really helpful.

Thanks

Rajib

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20 Replies

Nikhil Kaushik (Fellow CA) (85271 Points)
Replied 22 April 2024

see, if there is a tax liability that you are sure exists at the time of filing return in response to 148 notice, then you can pay tax anytime. This helps in reducing the interest liability. In case, in future, the assessment is done at a lower income level, then a refund is claimed. However, merely dropped of proceedings, would not automatically reduce the liability that you yourself accepted at the filing of return in response to 148 notice.

Rajib Majumder (45 Points)
Replied 22 April 2024

Hi,

Thanks for your reply.

In that case, it seems filing it a writ petition directly would be the right option to squash the time barred notice and not file the ITR ?

Nikhil Kaushik (Fellow CA) (85271 Points)
Replied 22 April 2024

one question, 148 notice time limits are based on the amount of income that may have evaded tax and not on taxable income. So, how are you concluding that the notice is time barred?

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (3303 Points)
Replied 22 April 2024

In case you win your case, the Court would halt your assessment proceedings. However, in case the decision doesn’t go in your favour, then the assessing officer could proceed with the reassessment.

Rajib Majumder (45 Points)
Replied 22 April 2024

I'm referring section 149(1)(b) which defines the term: "income chargable to tax"

In my case, the notice refers to some FD investment. The investment is an asset, not income, so the amount is inflated to be shown above 50L when considering the FD investment and hence lead to the notice beyond 3 years time limit. The actual income was way below than the threshold of 50L.

Nikhil Kaushik (Fellow CA) (85271 Points)
Replied 22 April 2024

so the notice is valid Rajib. actual income has no standing here. We have dealt with cases with zero taxable income but income considered to have escaped assessment (same as your case, Fixed deposits) exceeded Rs 50 lakhs. So the notice was considered valid. Whether there is taxability or not, that is a separate issue. If you are sure there is no taxability on the impugned transactions, then file the return in response to the notice without any changes from your original return. There wont be any tax payable at this stage.

During the reassessment proceedings, you can explain the source of FDs. Often there is double/triple counting of the same amount by the ITO, so get that corrected. If there is no demand at the end of the day, then the matter is over!

But I dont think writ petition is going to help you at this stage. It would only increase the cost to the client.

CA Anoop Kumar Sharma (Accounts Manager) (309 Points)
Replied 22 April 2024

Both option available either write petition or respond of 148...because notice is valid

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Rajib Majumder (45 Points)
Replied 23 April 2024

It can be easily proven that the notice is beyond time limit and invalid. They overlooked the evidence attached in 148(a)(b) replies and issued the notice mechanically. So I believe it's a violation of natural justice and can be quashed in a writ with proper and detailed evidence. I've seen many cases like this.

Does anyone know if writ needs to be filed within 30 days or any time limit ?

Nikhil Kaushik (Fellow CA) (85271 Points)
Replied 23 April 2024

even if you are late, delays are condoned. So do not worry about that part. Before filing a writ, work out the case laws that are in your favor. Otherwise, as I said above, you would only end up wasting client's money. writ petitions are not cheap.

Rajib Majumder (45 Points)
Replied 23 April 2024

If file a writ, can we show the evidence in that ? Or is it that court will ask AO to verify it again ?

I've seen a case where a capital gain income was shown as the sale value and it was more than 50L. But, writ challenged it with proper calculation that deducted the index cost of acquisition and then income became below 50L, the petition was allowed and proceeding halted.

Vishal Manakshe (271 Points)
Replied 24 April 2024

Hello Rajib,
The case reopened by the AO is well within his powers.

And I agree with Nikhil Sir that the Writ will be costly and time consuming.

Instead, you could proceed with the assessment and prove the genuine sources of the FD.

Even if AO makes an addition to the returned income less than 50 lacs, then you can challenge such addition that the notice or the proceeding is time barred

Rajib Majumder (45 Points)
Replied 25 April 2024

Thanks everyone for their inputs.

Just to give a better background, it's for the AY 2017-18, I got the 148 notice. I was an NRI and missed to file the ITR, but TDS was deducted. My calculation shows it's big interest 234A & B coming. The validity of the notice (time barred) still remains a question, as it should not have issued beyond 31/3/2021.

What are my options ?

1) If i don't file the ITR, what happens ? Can they issue a 144 best assesment demand ? Or do they issue 142(1) and ask again to file ITR with questionaiire ? Can we reply with proper evidence against 142(1) and challenge the validity of the notice in CIT, ITAT, HC ?

2) If I file the ITR and pay tax, can I appeal in CIT, ITAT to reduce the interest ? In case of proceeding is dropped due to time barred issue, is the paid tax refunded ?

If someone has handled such a case and have past experience or knowledge, please let me know your thoughts.

Rajib Majumder (45 Points)
Replied 25 April 2024

Thanks everyone for their inputs.

What are my options ?

2) If I file the ITR and pay tax, can I appeal in CIT, ITAT to reduce the interest ? In case of proceeding is dropped due to time barred issue, is the paid tax refunded ?

If someone has handled such a case and have past experience or knowledge, please let me know your thoughts.

Nikhil Kaushik (Fellow CA) (85271 Points)
Replied 25 April 2024

Rajib,

If I am not wrong, you received this notice sometime in January. So already three months have gone by. And by query, it seems you have no yet responded to the notice.

My above suggestions have been based on the experience of handling such cases.

So my first suggestion, if you are not equipped to handle such cases, tell your client to go some other CA instead of sitting on these notices for more than 3 months.

2. Either your case is there is no income that has escaped taxation or you don't want to pay the liability for not filing return in time. From your latest comment it seems it is the second option. Again, by not filing return in response to the notice, you are only increasing the interest liability

3. In addition, you are thinking of an appeal route that is much more beautiful expensive and carri a decent chance that the matter will be remanded back to the AO only with increased 234 A and B interest liability.

Give the correct advice to your client. File the correct return. Pay due taxes. Stop beating around the bush.