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148 NOTICE followed by 142(1) notice

kannan (none) (97 Points)

24 January 2022

Client received a 148 notice for ay 2015-16 in dec 2021 reg income that escaped assessment and not offered to tax.. The so called escaped income is not taxable in India. Then 142(1) notice was issued in Dec 2021 asking for more information on the return. Client replied to all notices with documentary proofs as he wanted to cooperate with the Dept.

Question is if the 148 notice itself is not valid (as it says income escaped assessment when the nature of income is not taxable in India) can AO follow up with more queries on the return. several court judgements say that the 148 notice should be assessable in order for other queries to be valid per sec 147 explanation note 3.. If the 148 query itself is for an exempt income and can be challenged, does the 142(1) notice have any meaning or validity?

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8 Replies

rama krishnan (12234 Points)
Replied 25 January 2022

Since the assessee is your client, you knew the nature of the receipt that is exempt income but department will have the information of receipt of amount only.... only after the completion of inquiry, it could be ascertained whether it is taxable income or exempt income.

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kannan (none) (97 Points)
Replied 08 February 2022

Thank you for the reply. My query is if the investigation shows that the 148 notice is for an exempt income, will the follow up queries in 142(1) be valid?

rama krishnan (12234 Points)
Replied 08 February 2022

No inquiries would've done on 148 notice. issue 148 notice is condition precedent to initiate assessment proceedings of an early assessment year. details will be called for examination by issue of 142(1) notice only

kannan (none) (97 Points)
Replied 08 February 2022

I mean after the 148 notice, a 147 notice was sent which explained fully the nature of income.

We find out that the Dept did not do duo diligence and check DTAA and the fact the "income which has escaped assessment is NOT taxable in India" per DTAA.

Pl let me know if the 147/148 notices are proved invalid or on incomes not taxablle in India, will the entire follow up queries under 142(1) be cancelled? Case of Jet airways vs CIT, mumbai where judge threw out the additional queries when the original 148/147 "income" was not assessed.

The amendment to 147 explanaton 3 says that if the "escaped income "mentioned in the original notice is not assessed or when it is found out that it is not taxable, judge threw out follow up queries and saidd a Fresh 148 has too be given to look into other issues ..Just want you valuable opinion .

rama krishnan (12234 Points)
Replied 08 February 2022

There's no 147 notice. only 148 notice will be issued sir. I didn't go through the judgement cited by you. in my opinion, the 142(1) issued is valid. actually as I didn't know the facts of the case, I couldn't give you the valid opinion sir

kannan (none) (97 Points)
Replied 08 February 2022

Sir,

Supply of reason for re-opening u/s 147 is what the letter says about the income after sendiing the 148 Notice and asking for the filed return..

Now coming to the query, after this was issued, another 142(1) query also was issued as follow up to the ongoing 147 letter for the same AY.

Question which needs to be answered is " IF THE 147 LETTER SAYS SOME INCOME HAS ESCAPED ASSESSMENT " and if the assessee shows it is not an income that is taxable in India, will the follow up queries be annulled ? See the judgement of the land mark cases of Jet airways vs CIT mumbai and Ranbaxy vs CIT etc

If the income which AO says "has escaped assessment" is not at all a taxable income in India then court cases say a fresh 148 notice has to be issued if AO wants to look into other issues in the return. The ongoing proceedings have be stopped, which means the 142(1) notice issued also will have to be withdrawn..

I hope Sir now you are clear about the query.

rama krishnan (12234 Points)
Replied 08 February 2022

Yeah I got it sir, the judgements cited by you speaks about the additions made on other issues apart from the one which was the reasonable cause for reassessment of income for a particular assessments year.

now coming to your query, If the assessee proves that the income was exempt income then reassessment proceedings have to be completed by passing assessment order under section 143(3) r. w. s. 147.

nine six double zero eight seven eight seven one six, sir if you wish, you can call me in this number after 11.30.. so that we both can come to a conclusion

kannan (none) (97 Points)
Replied 09 February 2022

proceedings limitation date is appproaching. Will see how they reply and we will then contact you.

Based on the two court cases, it appears AO has to stop theproceedings on other issues if the main 147 notice of income escaping assessment is not assessed or proven tax exempt and issue fresh 148 notices if he wants to continue on any other issue. PL confirm if you agree.

Will discuss after we hear something from the AO.

Thanks Sir for your time.