Many people don’t know what to do when they receive notices for an assessment or reassessment under the Income Tax Act. This article is specially drafted for them. Today, we are going to explain crucial provisions related to assessment or reassessment so that you have a better understanding of scrutiny proceedings.
So, without further ado let’s discuss. Happy reading!!
Let’s first understand what’s the difference between regular assessment and reassessment?
Regular Assessment – The Income Tax authorities can conduct a regular assessment to ensure that the assessee has truthfully filed his return of income and neither has understated his income or overstated any expense or loss or claimed an excess deduction which resulted in lower tax liability.
Reassessment – If the assessing officer has sufficient reasons to believe that any income has been escaped from the assessment, then he has the authority as per the Income Tax act to reassess the assessee’s income, although there is a time limit to reopen an assessment.
When can you receive a notice for a regular assessment or reassessment notice?
Notice for a regular assessment – The income tax authority not below the rank of Income Tax Officer can issue the notice of scrutiny as per section 143(2) for making a regular assessment, within a specified time limit. Based on any material or evidence furnished by the assessee in response to a notice, the assessing officer shall determine the tax liability of the assessee by passing an order under section 143(3) of the Income Tax Act.
Notice for reassessment – The income tax authority has the power under section 147 of the Income Tax Act, 1961 to reassess the assessee’s income if he has sufficient reasons to believe that his income has been escaped from assessment. For making reassessment as stated, the assessing officer needs to send a notice under section 148, subject to certain conditions met by the assessing officer like prior approval of higher authority is obtained under section 151, proceedings procedure given under section 148A is followed, and so on.
Is there any time limit to issue a regular assessment or reassessment notice?
Yes, Income Tax Act has specified a time limit to issue a regular assessment or reassessment notice, which is as follows:-
In the case of regular assessment – Scrutiny notice for regular assessment, as per section 143(2), needs to be issued within three months from the end of the financial year in which the return was originally filed.
In the case of reassessment – Notice for reassessment under section 148 can be issued by the assessing officer for income escaped, as per specified time limits stated under section 149 (amended by Finance act 2021) of the Income Tax Act, which is as follows:-
● Up to three years from the end of the relevant assessment year, or
● Up to ten years from the end of the relevant assessment year (if income has escaped assessment amounts to or is likely to amount to Rupees 50 lakh or more for that year).
● Upto 16 years from the end of relevant assessment year in case the income has escaped assessment is related to any assets located outside India.
Further, notice under section 148 cannot be issued for AY 2021-2022 or earlier assessment years if such notice could not have been issued as per older provisions before the amendment. Further, the time limit mentioned above shall be extended by the time allowed to the assessee to file a response of show cause notice under section 148A or the time during which proceedings under section 148A stayed by the order of the court.
Please note – Prior to Finance Act 2021 amendment, notice under section 148 can be issued up to 4 years or 6 years (if income escaped is more than Rupees 1 lakh) from the relevant assessment year.
Hopefully, this article has helped you to understand the provisions related to regular assessment and reassessment. If you or any dear one of you receives notices from the Income Tax department, then please feel free to reach out to us and get professional assistance from experts to avoid any tax liability or additions. We are always available to help you all 🙂
