Income Escaping Assessment
Assessment or Re-assessment is a procedure adopted to determine the correctness of the income disclosed by the assessee and tax thereon. If the Assessing officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of Sec 148 to 153, assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently in the course of proceedings.
An issue of Notice where Income has escaped Assessment (Section 148)
Before making the assessment, re-assessment or re-computation under section 147 The Assessing officer shall issue a notice to the assessee requiring him to furnish a return within such period as may be specified in the notice.
Time Limit for Notice relating to Income escaping Assessment (Section 149)
Notice under Section 148 must be issued within the following time limit,
- Notice u/s 148 has to be issued within 16 years from the end of relevant AY in case income is in relation to any asset located outside has escaped assessment.
- Notice u/s 148 has to be issued within 6 years from the end of relevant AY in case income which has escaped assessment is likely to be 1 lakh or more.
- Notice u/s 148 has to be issued within 4 years from the end of relevant AY in any other case.
Circumstances when income is deemed to have escaped assessment
The following shall be deemed to be the cases where income chargeable to tax has escaped Assessment.
- Where the total income of the assessee during the previous year has exceeded the maximum amount which is chargeable to income tax and no return of income has been furnished by the assessee.
- Where the return of income has been furnished by the assessee and it is noticed by the AO that the assessee has understated the income, claimed the excessive loss, deduction, allowance or relief in the return and no assessment has been made
- The Assesse has failed to furnish a report in respect of any international transaction u/s 92E.
- It is noticed by the AO that the income of the assessee exceeds the basic exemption limit based on the information or document received u/s 133C(2) and the return of income has not filed.
- It is noticed by the AO that the assessee has understated the income or claimed an excessive loss, deduction, allowance in case of return of income has been filed.
- Where the return of income has been furnished by the assessee and assessment has been made and it is noticed by the AO that the assessee has understated the income, claimed the excessive loss, deduction, allowance or relief in the return.
AO’s Reasons to believe:
The Assessing office must have reasons to believe to apply section 147 to any particular case. Section 147 should not be applied not merely on the basis of any reasons to suspect. A mere increase in turnover because of use of digital means of payment or otherwise in particular year cannot be the sole reason to believe that income has escaped assessment in earlier years. Past assessments cannot be reopened on the ground that the current year’s turnover has increased.
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