Assessment/ Reassessment of Income Assessment/ Reassessment of Income
Escaping Assessment Escaping Assessment
Income Escaping Assessent
Income which has escaped from assessment
Either wholly or partly
May be brought to tax net under this
AO may assess or reassess an income which is chargeable to tax and escaped assessment other than incomes
involving matters which are subject
matter of any appeal, reference or
Concept of Income Escaping Assessment
Scheme of taxation taxes an income in the Relevant A/Y in the hands of person who has earned it
If the income is not taxed in that relevant A/Y, it has escaped from assessment
1. If taxed in another A/Y or
2. Charged to Tax in the hands of another person [CIT vs Narsee]
Deemed Cases Of Concealment
Income escaping due to non furnishing of return
Income escaping due to non-assessment Post assessment finding about of income escaping assessment
Under Assessment of income
Income assessed at too low rate
Excessive loss, depreciation etc. allowed
To undertake assessment u/s 147, notice has to be issued u/s 148.
Before issuing notice u/s 148 the AO
shall ‘record his reasons’ for issuing the notice.
The notice has to be issued separately
for each AY for which proceedings are
to be taken up u/s 147.
The assessee has to file ROI u/s 148 – even if he has filed the ROI earlier in normal course.
AO is duty bound to provide the
assessee the reasons recorded by him –
if the assessee requests for it after filing
If on request the reasons are not
supplied – then the AO cannot proceed u/s 147.
No previous assessment u/s 143(3)/
144, proceedings u/s 147 called assessment
The most important thing- AO should have ‘
reasons to believe’ that income chargeable to tax has
AO can also consider any other income under any head of income that comes to his detection
subsequent to issue of notice u/s 148 without issuing a fresh notice
Reasons to believe includes:
1) Retrospective change of law-
disallowing an expense/ taxing a receipt 2) A later SC judgement
3) Evidence in possession of AO that the assessee has understated the
income or claimed excessive loss/
4) Mistake apparent from records
Reasons to believe does not include – rumors, gossips, suspicion or change of personal opinion of AO
Where the AO computed the income of an assessee by applying one of the different
legal permissible method, he cannot reopen assessment to apply another permissible
method which would result in larger income-
Assessment u/s 147 and 143(3) (and also 144) is sort of linked. After all, any
assessment can be done only on scrutiny of records.
Now take an example – the assessee “X” has filed Return for AY 2006-07 based on income for the FY 2005-06 within due date of 31-
July-2006. For doing scrutiny assessment u/s
143(3), Notice u/s 143(2) can be issued upto
Now suppose there is no action by the
department and no assessment proceedings are undertaken by the department. Now
suppose, in the May 2009, the AO concerned while doing assessment of some other case comes to understand that for “X”, for the AY 2006-07, certain amount of income has
escaped assessment. Now in May 2009, the
AO cannot issue “X” notice u/s 143(2) for
doing assessment u/s 143(3).
But now he can do the assessment u/s 147.
He would issue him notice u/s 148 on 30-May- 2009 for opening assessment proceedings u/s 147.
In response to this notice – “X” files return in 5- June-2009. This return is treated as return u/s 139. But this return cannot be revised.
AO can issue him notice u/s 143(2) till 30-Sept- 2010 to call for various documents and records The assessment shall be considered to have
been carried out u/s 147
AO issues notice u/s 143(2) after 30-Sept-2010,
proceeding u/s 147 would be void.
Now suppose – in response to notice u/s 147, the assessee “X” does not file any return.
AO shall proceed u/s 147 to the Best of his Judgment to assess the income and tax.
U/s 148 notice can be issued till the end of 6 years from the end of relevant AY, if the
income which has escaped assessment is or likely to be 1,00,000 or more. Otherwise the limit is 4 yrs.
There are various criteria laid down as to
All these tend to complicate the assessment proceedings. And that is apart from – at times – illegal gratification for ’satisfaction’ of AO
’satisfaction’ of AO more important than the
correctness of accounts!
EXCEPTIONS TO TIME LIMIT GIVEN IN SEC. 149(1) PROVISO TO SEC. 147
SECTION 149(3) SECTION 150(1)
PROVISO TO SECTION 147
Assessment made earlier u/s 143(3)/ 147 No notice u/s 148 shall be issued after the expiry of 4 yrs from the end of Relevant A/Y.
Assessee has filed ROI u/s 139/142(1)/148 AND
2. Assessee has disclosed fully & truly all
material facts necessary for assessement
But the explanation to sec 147 provides Production before AO of the books of
accounts and other evidence from which
material evidence could have been gathered by him using reasonable intelligence will not necessarily amount to true and full discloure.
BOOKS OF ACCOUNTS Vs BALANCE SHEET
Section 149(3)- Notice Issued To Agent Of Non-Resident
Notice cannot be issued after the expiry of 2
years from the end of relevant assessment
Section 150(1)- No Time Limit For Issue Of Notice
Notice under section 148 may be issued at any time to give effect to the finding or
direction contained in an order u/s 250, 254, 260A, 262, 263 or 264 of the IT Act OR THE ORDER OF A COURT UNDER ANY OTHER
Computation of Concealed Income, Escaping Assessement
Whole Assessement gets reopened
Re-assessment Proceedings are for the benefit of revenue [CIT vs Sun Engineering Works (P) Ltd.]
Valuation report cannot be the basis of revision Cash credits and loans
Income assessed in the hands of wrong person Expenditure or exemption relating to concealed income to be allowed
Assessee is entitled to rebut the concealment Re-assessment proceedings be dropped if over
assessment nullifies the effect of concealment and it was not contested in the appeal [Ch CIT vs Dharam
Time Limit For Assessment (Sec. 153(2))
No Order of assessment or reassessment u/s 147 shall be made after the expiry of 9 months from the end of the F/Y in which notice u/s 148 was Served
Example- For A/Y 2003-04, the assessment was completed on 10.12.2004 u/s 143(3) assessing the income at Rs. 5,00,000. On 30.3.2010, the AO
notices that income of Rs. 90,000 has escaped
assessment for A/Y 2003-04 and issues a notice u/s 148 on that date. The said notice is served on the assessee on 4th April, 2010.
Time limit for completion of assessment?