Notices For Assessment And Reassessment Under The Income Tax Act, 1961

There are many notices which have been defined under the income tax act, 1961 and the purpose of each notice is different in each case. There are notices which can be issued when you file the return of income like section 143(2) and notices issued when you did not file return like 144. Although, in the case of reassessment, it is very important for you to determine each aspect of the law. In this article, I will explain the process of whether you file the return or not.

notice-income-tax-act

Section 139(1): As we already know that assessee is required to file the return within the due date under section 139(1) which can be 31st July or 30th September as the case may be and even some case 30th November of the assessment year (When transfer pricing applies).

Section 139(4): However, when you fail to file the return within the due date, then still you have some time to file the return with some interest and late fees under section 234F up to the end of assessment year i.e. 31st March of the assessment year.

Section 142(1)(i): If you did not file the return within the due date of filing of return then the assessing officer may send you the notice under section 142(1)(i), in which it instructs you to file the return within the time as specified in the notice. So, if you did not file the return till 31st March of the assessment year then you may file an application to your assessing officer requesting him to send you this notice so that you can file your return.

Section 142(1)(ii): This notice will be sent with the notice of assessment. It requires the assessee to furnish the details of his accounts or documents or statements of assets and liabilities. This, he can demand a maximum of up to 3 years from the end of the relevant assessment year.

Section 143(1): When you file your return under section 139(1) or 139(4) or 142(1)(i), an intimation shall be sent it to you in which it may propose the adjustments in your return and if you have not replies the intimation within 30 days from the date of such intimation then the AO shall finalize the adjustments in your return and you have to bear the interest and penalties. So, if you have satisfied with the adjustment in the intimation then you have to pay the demand within 30 days or if not satisfied then you have to file the reply to your assessing officer in your defense. In case there is no adjustment that has been made in your return, then the acknowledgment shall be deemed to be the intimation. Although, practically, intimation is sent to the assessee in all cases. Following are the adjustments that can be made in your return:

  • Any arithmetical error, which is apparent in your return. For example, you showed 2+2=5
  • Any incorrect claim mentioned in your return. For example, you have taken the deduction under section 80C  of 2 Lakhs and we all know that the maximum deduction under section 80C is up to 1.5 Lakhs
  • Disallowance of deductions and losses, in case, you have filed the return after the due date except for unabsorbed depreciation and loss under the head house property
  • Disallowance of allowance which has been disallowed in the audit report.

Section 143(2): In the above, I was just building the base, the main article starts from here when you received the first notice of assessment.

Note: This notice is issued only when you have filed the return under section 139 or in response to section 142(1)(i). The assessing officer sent this notice to ensure that you have not:

  • Understated the income
  • Claim excessive loss or deduction
  • Underpaid the taxes.

The notice under section 143(2) can be issued maximum up to 6 months from the end of the financial year in which the return has been filed. So, if the notice has been issued after the aforesaid date then you can challenge this notice in court.

As I have mentioned the notice under section 142(1)(ii) in which it demands the documents and information for making the assessment.

income tax notice

Notice under section 143(2) is just informing you that your case has been selected for scrutiny but the documents for making the assessment are demanded from section 142(1)(ii). So, I hope, you are understanding the importance of this notice.

Section 143(3): Now, when the assessment is being made, the assessing officer shall pass the order under section 143(3). The last date of passing the order is defined under section 153 which is one year from the end of the relevant assessment year in which notice has been issued. It may increase your tax liability or even decrease it.

Section 144: In the above, we have talked about the assessment notice when you filed the return, now we will discuss when you did not file the return. In this case, the notice under section 144 shall be served that the assessing officer shall pass the order as per the best of his judgment. Normally, this notice is known when the assessee has not fielded the return is not true. The notice can be issued when the assessee has not filed the return under section 139 or in response to the notice under section 142(1)(i) or does not comply with the notice issued under section 143(2) or does not comply with the direction issued under section 142(2A) of the income tax act, 1961. The assessing officer shall pass the order under section 144.

Section 148: This notice is very important. Basically, under this section notice issued for making the reassessment. Although, through this notice, assessment or reassessment both are possible. Let me clarify this in some cases:

Case1: Assessee file the return under section 139(1) or under section 142(1)(i) and his assessment under section 143(3) have already being done. Then also, the assessing officer may send the notice under section 148 to the assessee for making the assessment 147. This is called notice for making reassessment.

Case2: Assessee files the return under section 139(1) or under section 142(1)(i) and he received his first notice under section 148 then it means his assessment shall be made under section 147.

Case3: Assessee did not file his return of income and the assessing officer has made his assessment as to the best of his judgment under section 144 and after then also, he can issue a notice under section 148 for making the assessment under section 147.

Case4: The assessment has already made under section 147 then also, the AO may again send the notice under section 148.

So, I hope, you have now cleared about the assessment and reassessment. In simple words, the notice under section 148 can be sent to the assessment whether the assessee has filed his return or not and whether his assessment under any section of income tax act has been made or not and whether the assessment under section 147 has already been made earlier or not.

Now, we will discuss what is a notice under section 148 what is the due date for issuing this notice, what is the time limit for passing the order under section 147 and other ancillary matters in this regard? So, Let’s begin.

Where the assessing officer has a reason to believe that you have earned some income which is chargeable to income tax and you have not shown such income at the time of filing of the return, then the assessing officer may send you the notice under section 148 in which he shall assess such income and other income which is come to his notice during the course of his proceedings. Under section 148, it did not ask you to come and provide him the details. As per section 148, the assessing officer issue the notice in which he informed the assessee that his case has been selected for the assessment or reassessment under section 147 and instruct him to file the return of income within the due date as mentioned under section 148.

So, through this notice, AO told assessee that I have caught your some income which you did not declare at the time of filing the return under section 139 or 142(1)(i) and said you to again file your return within the prescribed time and shown all your income including that income which was not shown at the time of filing first return.

AO shall not disclose him about the escaped income but it is compulsory that AO must have the proof that income has been escaped by the assessee. As per the legal language, AO must have the reason to believe.

Although, after filing the return, the assessee may ask the AO to give him proof about the escaped income but not before.

Once you file the return of income, then assessee again sent the notice under section 143(2) for making the reassessment.

Notice and rectification

The notice under section 148 can be issued within the due date as mentioned below:

Condition Time period Permission required by AO for making the assessment
Where the escaped income is less than 1 Lakhs Up to 4 years from the end of the relevant assessment year The joint commissioner or AC/DC
Where the escaped income is 1 Lakhs or more Up to 6 years from the end of the relevant assessment year Principal Commissioner of income tax or commissioner of income tax
In case, the assessee has any financial interest outside India Up to 16 years from the end of the relevant assessment year Principal Commissioner of income tax or commissioner of income tax

Order for assessment or reassessment under section 147 is required to pass by the assessing officer within 12 months from the end of the financial year in which the notice under section 148 was issued.

Although, here word issue has been used but only for checking the time limits. However, the assessment under section 147 can be made only when the notice under section 148 was received to the assessee.

For example, AO issued the notice under section 148 within the time but it was not received by the assessee due to mistakes by postal authorities. In this case, the assessment under section 147 shall be invalid.

As I have mentioned that the AO shall also be required to issue the notice under section 143(2). The due date for issuing this notice is the 6 months from the end of the relevant financial year in which the return has been filed due to the notice under section 148.

SO, I hope this article will help you, not only in the case of reassessment but also to understand, how the whole system works. Also, if you want to know more about any of the above sections, then you can refer to our previous articles. If you have any doubt or query in respect of income tax notice or computing your tax liability then you can contact us on the number as mentioned on the website.

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