Section 148 of Income Tax Act

Dear Client,
Until March 31, 2021, the reopening was allowed up to 7 years from the end of the financial year where escaped income could be upto Rs. 1 lakh or more, thereafter amendments were made in the Finance Act, 2021 increasing the time limit from 7 years to 11 years and increasing the threshold from Rs. 1 lakh to Rs. 50 lakhs. Furthr amendments were made in the Finance Act, 2024 reducing the time limit from 11 years to 6 years or 6 years and 3 months and keeping the threshold limit at Rs. 50 lakhs. Any notice under Section 148 or 148A of the Income Tax Act partaining to the AY 2010-11, even if issued reopening cases after August 31, 2024, would be time-barred and tax authorities would lack the jurisdiction to reopen such cases. Income Tax is a branch of law or legislation that eventually comes under the arena of Chartered Accountants and Tax Consultants, who have expertise and in-depth knowledge on the subject and may guide you properly to navigate the issue effectively. Hence, it is suggested to consult with the said professionals for more clarification and to understand your rights and remedies in the given situation.

Dear Client,

Yes, the Income Tax Department can reopen the assessment of the company that paid the bribe in 2009 (for Assessment Year 2010-11) even though the Supreme Court conviction of the government officer occurred in 2025. This is primarily governed by Sections 147, 148, 148A, and 149 of the Income Tax Act, 1961, as amended by the Finance Act, 2021. The core principle is that a bribe, being an expenditure for an offence prohibited by law, is explicitly disallowed as a business deduction under Explanation 1 to Section 37(1) of the Act. When the company claimed this Rs. 50 Lakhs as a deduction, it resulted in income escaping assessment. While the general time limit for reopening is 3 years from the end of the relevant assessment year, Section 149 allows for an extended period of up to 10 years if the income that has escaped assessment amounts to or is likely to amount to Rs. 50 Lakhs or more.

The Supreme Court's conviction in 2025 provides definitive "information" and a strong "reason to believe" that income has escaped assessment, thereby enabling the tax authorities to invoke these extended provisions. Before issuing a formal notice under Section 148, the Assessing Officer will follow the procedure outlined in Section 148A, which includes providing the company with the information (the conviction) and an opportunity to explain its position, before passing an order to proceed with the reopening. This is in line with the established legal position that illegal payments are not allowable deductions for income tax purposes, as affirmed in various judicial pronouncements, maintaining the integrity of the tax system.

CIT v. Maddi Venkataratnam & Co. (1956) 29 ITR 366 (SC): Though an older case, it established the principle that expenses incurred for illegal purposes are not deductible.