Section 148 of the Income Tax Act

Section 148 of the Income Tax Act allows tax authorities to reopen past assessments if an Assessing Officer (AO) suspects undisclosed income, issuing notices within 3-10 years depending on the case value (up to 10 years for evasion over Rs. 50 lakh). Introduced through Section 148A, taxpayers now get a chance to respond before reassessment begins. This provision combats tax evasion while ensuring procedural fairness - if you receive a notice, promptly file revised returns or raise objections with professional guidance to avoid penalties.
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30 July 2025

Section 148 of the Income Tax Act allows the Income Tax Department to reopen past tax assessments if they believe that some income has not been reported properly. If a taxpayer receives a notice under Section 148A, it means the Assessing Officer (AO) is planning to review their return in detail. This process ensures fair tax collection and can involve penalties if ignored. In this blog, we will explain how the reassessment process works, why it is important, and what taxpayers should do to respond correctly and avoid trouble.

What is Section 148 of the Income Tax Act?

Section 148 gives the tax authorities the right to reassess a person’s income if they believe some part of it has not been reported or has been hidden. However, before they move forward with such a reassessment, they must follow the steps laid out in Section 148A, which protects the taxpayer by ensuring a fair process.

Key points to know

  • When reassessment happens: A reassessment under Section 148 is triggered only when there is strong and reliable evidence that some income has been left out from the return.
  • Importance of section 148a: This section makes it compulsory for the AO to carry out a preliminary inquiry and give the taxpayer a chance to explain their side before sending a formal reassessment notice.
  • Legal responsibility: It is very important for the taxpayer to reply to a Section 148 notice without delay. Failing to respond can lead to legal action, added tax liability, and penalties. If you're unsure how to respond, it is always a good idea to speak with a tax professional.

When is Section 148 invoked?

The invocation of Section 148 is not arbitrary; it follows specific conditions:

  1. Escaped income: If the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.
  2. Notification: The assessing officer must issue a notice under Section 148, informing the taxpayer about the reassessment process.
  3. Time frame: Typically, the notice can be issued within four years from the end of the relevant assessment year. However, in certain cases, this period can extend up to six years or even longer if there are specific reasons, such as fraud.

What are income tax notices issued under Section 148?

A notice under Section 148 of the Income Tax Act is sent when the Assessing Officer (AO) believes that a person has not reported all their taxable income. This usually happens when the AO has reliable details indicating under-reporting. However, before sending this notice, the AO must first carry out a preliminary inquiry as per Section 148A. This step is necessary to decide whether reopening the previous assessment is justified. The goal is to ensure fairness while giving the taxpayer a chance to explain before any further action is taken.

What does the notice under Section 148 say?

A Section 148 notice outlines the year being reassessed and the reason why the return is being reviewed. It will mention the suspected discrepancies, such as unreported income or large transactions that don’t match what’s declared. For example, the notice may point to big cash deposits or high-value purchases that were not included in the tax return. It also lists the documents you need to submit and gives a deadline for your response. This helps the taxpayer understand what action to take and which financial records to provide.

Process of reassessment under Section 148

The reassessment process under Section 148 involves several steps, ensuring that taxpayers are treated fairly and transparently:

  1. Issuance of notice: The assessing officer issues a notice to the taxpayer under Section 148, detailing the reasons for reopening the assessment.
  2. Response from taxpayer: Upon receiving the notice, the taxpayer must respond and provide the necessary information or documents requested by the tax authorities.
  3. Assessment order: After evaluating the provided information, the assessing officer will issue a revised assessment order, determining the taxable income.
  4. Appeal process: If the taxpayer disagrees with the reassessment order, they have the right to appeal before the Commissioner of Income Tax (Appeals) or further to the Income Tax Appellate Tribunal (ITAT).
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Reasons to Issue a Notice Under Section 148

Notices under Section 148 are sent when the tax officer has reason to believe income has not been fully reported. Some of the most common reasons include:

  1. Income not disclosed
    If someone earns money—for example, from freelance work or property rental—and does not report it in their return, the department may reopen the case.
  2. Transactions not properly reported
    If large financial dealings (like cash sales or investments) are missing from the return or under-reported, a reassessment may be initiated.
  3. Unexplained deposits or purchases
    If bank statements show large cash deposits that don’t match the declared income, or if there are high-value purchases without explanation, it can lead to a notice under Section 148.
  4. Information from other departments
    Sometimes, government agencies share financial information with the tax department. If the data shows that income declared by the taxpayer is much lower than the actual income, it may prompt reassessment.

Each notice must be based on credible evidence and follow proper procedures to ensure the taxpayer’s rights are respected.

Time Limit to Issue a Notice Under Section 148

 The time limit of Section 148 of Income Tax Act is outlined in the table below:

Undeclared income bracket

Time limit

Below Rs. 50 lakh

Up to 3 years from the end of the assessment year

Exceeds Rs. 50 lakh

Beyond 3 years but up to 10 years

Beyond this threshold

Notices beyond 10 years cannot be issued

 

When can a notice be issued under Sec 148?

A Section 148 notice can only be issued if the AO has concrete evidence that some income has not been assessed. However, before sending the notice, they must follow the procedures in Section 148A, which includes giving the taxpayer a chance to explain their case. The timeline for issuing such a notice is limited to either three or ten years from the end of the relevant assessment year, depending on how much income is believed to have been hidden or missed.

What happens if you do not respond to Section 148?

If you ignore a Section 148 notice, there can be serious consequences.

Ex-parte assessment

If you don’t respond on time, the AO can finalise your assessment using whatever data they already have. This is called an ex-parte assessment. Since your input is not considered, it may result in a higher tax bill.

Penalties and interest

Not replying to the notice may lead to penalties. Under Section 271(1)(b), the AO may impose a fine for failing to respond. Additionally, interest will be charged on unpaid tax starting from the date it was originally due.

Legal action

If the AO believes you have deliberately hidden income, legal proceedings can begin. In serious cases, you could face prosecution. This might include jail time ranging from six months to seven years, along with fines.

It’s best to handle such notices promptly. If the notice involves large sums or complex transactions, it’s a good idea to consult a financial advisor or tax expert to manage your case properly.

Who can issue a notice under Section 148

Only the assigned Assessing Officer (AO) can issue a notice under Section 148. The Supreme Court has clarified that such notices must follow proper legal steps and be backed by strong evidence.

How to deal with a Section 148 notice

  • Confirm the notice is genuine: Go to the Income Tax e-filing website. Use the "Authenticate Notice/Order Issued by ITD" tool found under "Quick Links".
    You can check the notice by entering:
    • The Document Identification Number (DIN) with your mobile number, or
    • Your PAN, assessment year, document type, issue date, and mobile number.
    • Once submitted, you will receive an OTP. Enter this to verify the notice.
  • Respond on time: It’s crucial to reply before the deadline to avoid penalties or further notices.
  • Submit relevant documents: Gather and send financial documents supporting your income as declared.
  • Seek help if needed: If the notice seems complicated, or involves large amounts, it’s smart to speak with a tax advisor for proper guidance.

Duties and rights of the assessed after the receipt of notice under Section 148

Duties
The taxpayer must reply within the time limit mentioned in the notice and provide all requested documents and clarifications.

Rights
You have the right to ask for a copy of the documents or evidence used to issue the notice. You can also challenge the notice if it appears to be wrongly issued. Professional tax advice is recommended if you're unsure.

Implications of Section 148

Understanding the implications of Section 148 is essential for taxpayers to avoid potential pitfalls:

  1. Financial liability: Reassessment can lead to an increase in tax liability if the reassessment reveals additional taxable income. This can significantly impact an individual’s financial planning.
  2. Interest and penalties: In addition to the increased tax liability, taxpayers may also be subject to interest on the outstanding amount and potential penalties for non-compliance.
  3. Impact on home loans: For individuals availing home loans, a reassessment can affect their creditworthiness and repayment capacity. Financial institutions often consider tax compliance while assessing loan applications. Therefore, taxpayers must ensure timely and accurate filing of returns to avoid complications. If you're planning to purchase property or need funds for home-related expenses, having proper tax documentation is essential for loan approval. Check your eligibility for a home loan from Bajaj Finserv today. You may already be eligible, find out by entering your mobile number and OTP.

Reasons for escaped income

Tax authorities may invoke Section 148 for various reasons, including:

  1. Underreported income: Taxpayers may inadvertently underreport their income due to lack of awareness or misunderstanding of tax laws.
  2. Non-disclosure of assets: Failing to disclose income from assets, such as properties or investments, can lead to reassessment.
  3. Fraudulent activities: Engaging in tax evasion or providing false information can trigger the application of Section 148.
  4. Real estate transactions: Involvement in real estate transactions without proper disclosure can raise red flags for tax authorities, leading to scrutiny under Section 148.

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How to respond to a Notice under Section 148

Receiving a notice under Section 148 can be stressful, but understanding how to respond can alleviate concerns:

  1. Immediate action: Upon receiving the notice, do not delay in responding. Timely action is critical to avoid adverse consequences.
  2. Gather documentation: Collect all relevant documents, such as income statements, tax returns, and any other supporting evidence that substantiates your claims.
  3. Consult a tax professional: Engaging a qualified tax consultant or chartered accountant can provide valuable insights and assistance in preparing your response and navigating the reassessment process.
  4. Clarify discrepancies: If there are discrepancies or misunderstandings, clearly explain them in your response to the assessing officer, providing all necessary evidence.

Best practices to avoid reassessment under Section 148

To minimize the risk of reassessment under Section 148, taxpayers should adopt certain best practices:

  1. Maintain accurate records: Keep thorough records of all income, expenses, and financial transactions. This practice simplifies tax filing and reduces the risk of discrepancies.
  2. File returns timely: Ensure timely filing of income tax returns, adhering to all compliance requirements. Delayed filings can trigger scrutiny from tax authorities.
  3. Full disclosure: Always disclose all sources of income, including rental income from properties, capital gains from investments, and any other income sources.
  4. Consult professionals: Regular consultations with tax advisors or accountants can help ensure compliance with tax laws and prevent issues related to escaped income. When planning major purchases like a home, transparency in financial records also helps secure better loan terms from lenders. Check your eligibility for a home loan from Bajaj Finserv with approval in just 48 hours*. You may already be eligible, find out by entering your mobile number and OTP.

Section 148 of the Income Tax Act is a critical component of the Indian taxation system, aimed at ensuring transparency and accountability. Understanding its implications is vital for taxpayers, especially those involved in financial products, real estate transactions, or home loans. By adopting best practices, maintaining accurate records, and seeking professional guidance, taxpayers can navigate the complexities of Section 148 effectively.

Reopening of income tax assessment cases

The Union Budget 2021 introduced a shorter time limit for reopening tax assessment cases. Instead of six years, the department can now reopen cases only up to three years from the end of the assessment year. However, if the unreported income is more than Rs. 50 lakh, the case may still be reopened up to ten years. In all such cases, the AO must explain in writing why any objections made by the taxpayer have been rejected.

Conclusion

Knowing how Section 148 works helps taxpayers stay prepared and avoid penalties. If you receive a notice, don’t ignore it—respond promptly and provide the correct documents. As the courts have noted, reassessment must follow legal procedures to protect your rights. If you are unsure how to respond or if the notice involves complex transactions, consider speaking with a tax professional. Being proactive and transparent can help reduce your tax burden and keep your records in order.

Maintaining good tax compliance also strengthens your profile when applying for major financial products like home loans, helping you secure your dream property with confidence. Check your loan offers with Bajaj Finserv for loans up to Rs. 15 Crore* at attractive interest rates. You may already be eligible, find out by entering your mobile number and OTP.

Category

Relevant URLs

Income Tax Deductions

Section 80CCD(2), Section 80CCD(1B), Section 80CCD1, Section 80CCE, Section 80DD, Section 80DDB, Section 80E, Section 80EEA, Section 80G, Section 80GG, Section 80GGC, Section 80RRB, Section 80TTA, Section 80U

Salary & Allowance Related Sections

Section 16(ia), Section 16(ii), Section 17, Section 17(1), Section 10(13A), Section 89

Property & Capital Gains Tax

Section 24B, Section 54B, Section 54GB, Section 54F, Section 54

TDS & Withholding Tax

Section 194H, Section 194IA, Form 26QB

Income Tax Compliance & Notices

Section 139(9), Section 143(1), Section 148, Section 179, Section 56(2)(x)

SARFAESI Act (Loan Recovery & Security Enforcement)

Section 13, Section 13(2), Section 13(4), Section 14

Income Tax Rates

Income Tax Slab

 

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Frequently asked questions

How does Section 148 affect income tax assessments?
Section 148 allows the income tax authorities to reassess previously filed returns if they believe income has escaped assessment. This can lead to increased tax liabilities, adjustments in assessed income, and additional scrutiny, affecting taxpayers' financial planning and compliance with tax obligations.
Who can initiate proceedings under Section 148?
Proceedings under Section 148 can be initiated by the Assessing Officer (AO) of the income tax department. The AO must have valid reasons to believe that income has escaped assessment, triggering the reassessment process to ensure proper tax compliance.
What are the consequences of ignoring a notice under Section 148?
Ignoring a notice under Section 148 can lead to adverse consequences, including automatic reassessment based on existing information, potential penalties, and interest on outstanding tax liabilities. This neglect can severely impact the taxpayer's financial standing and compliance history.
Is there a time limit for reopening assessments under Section 148?
Yes, there is a time limit for reopening assessments under Section 148. Typically, a notice can be issued within four years from the end of the relevant assessment year, but this period can extend up to six years or longer in specific cases, such as fraud.
How can I respond to a notice under Section 148?
To respond to a notice under Section 148, taxpayers should act promptly by collecting all relevant documents, submitting required information, and addressing any discrepancies. Consulting a tax professional can provide valuable guidance in preparing a comprehensive response to the assessing officer.
Can Section 148 be challenged in court?
Yes, Section 148 can be challenged in court. Taxpayers have the right to appeal against the reassessment order before the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal (ITAT) if they believe the reassessment is unjustified or incorrect.
Is it possible to issue a notice under Section 148 for an assessment year after ten years?

Only in cases where the escaped income exceeds Rs. 50 lakh can a notice be issued up to ten years from the end of the relevant assessment year.

Can a notice under Section 148 be issued if the taxpayer has already submitted a return?

Yes, even if a return has been filed, the tax department can issue a notice under Section 148 if they find reasons to reassess. 

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What happens if the Assessing Officer conducts a best judgement assessment?

The AO will estimate your income based on available information. You can challenge this by appealing to the Commissioner or the Appellate Tribunal.

What is the penalty under Section 148?

There is no direct penalty under Section 148, but not responding may result in fines under Sections 271(1)(b) or 271(1)(c) for failing to respond or misreporting income.     

What is the time limit to issue a notice under section 148?

A notice must be issued within 3 years for undisclosed income under Rs. 50 lakh. If the amount is more than Rs. 50 lakh, the limit extends to 10 years. 

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