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Time limit for notice
Section 149 of the Income Tax Act lays down the rules for when the tax department can issue a notice under section 148 of Income Tax Act 1961 for reassessment of income. Here’s a simplified explanation:
- Time Limit: The tax department cannot issue a notice for reassessment if more than three years have passed since the end of the relevant assessment year, unless certain conditions are met. These conditions include cases where the income that escaped assessment is fifty lakh rupees or more, and the evidence for this is found within three to ten years from the end of the relevant assessment year.
Example: If for the assessment year 2018-19, income of fifty lakh rupees or more was not assessed, the tax department can issue a notice for reassessment within three to ten years from the end of that assessment year.
Exception for Certain Cases: No notice can be issued for assessment years before April 1, 2021, if it couldn’t have been issued earlier due to time limits specified in the law before April 1, 2021.
Exclusion of Time: In certain situations, like when a search is initiated under section 132 or documents are impounded under section 131, a period of fifteen days is excluded from the time limit calculation.
Multiple Investments: If income represented by an asset or expenditure has escaped assessment in multiple years within the specified time frame, a notice for reassessment can be issued for each of those years.
Subject to Section 151: These rules are subject to the provisions of section 151, which deals with the authorization for issuing a notice for reassessment.
This section ensures that the tax department can reassess income that was not assessed properly within a specified time frame and under certain conditions.
Section 149 of Income Tax Act 1961
(1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
27[(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of—
(i) an asset;
(ii) expenditure in respect of a transaction or in relation to an event or occasion; or
(iii) an entry or entries in the books of account,
which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:]
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if 28[a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021:
Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:
29[Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,—
(a) a search is initiated under section 132; or
(b) a search under section 132 for which the last of authorisations is executed; or
(c) requisition is made under section 132A,
after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year:
Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,—
(a) a search under section 132 which is initiated; or
(b) a search under section 132 for which the last of authorisations is executed; or
(c) a requisition made under section 132A,
after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:]
Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:
Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A 30[does not exceed seven days], such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.
Explanation.—For the purposes of clause (b) of this sub-section, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.
31[(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.]
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.]