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Re-assessment Procedure Under Section 147 of Income Tax Act

Re-assessment Procedure Under Section 147 of Income Tax Act

Re-assessment Procedure Under Section 147 of Income Tax Act : Assessment is a procedure adopted to determine the correctness of the income disclosed by the assess and tax payable thereon. Section 147 and 148 of Income Tax Act is a well designed weapon for the Income Tax Department empowering it to assess, re-assess or re-compute income, turnover etc, which has escaped assessment.

Sec. 147 and Section 148 of the Act contain the per-requisite conditions to be fulfilled for invoking the jurisdiction to reopen the assessment. This article is concentrated on procedure to be followed in case of re-assessment.

Re-assessment Procedure Under Section 147 of Income Tax Act

Re-assessment Procedure Under Section 147 of Income Tax Act

Re-assessment Procedure Under Section 147 of Income Tax Act

Re-assessment Procedure Under Section 147 of Income Tax Act

Income escaping assessment
Powers of the Assessing Officer to re-open a completed assessment are not un-abundant or luxuriant

Re-assessment Procedure Under Section 147 of Income Tax Act :

Income escaping assessment:

If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :

Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:

Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:

Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.

Re-assessment Procedure Under Section 147 of Income Tax Act

Powers of the Assessing Officer to re-open a completed assessment are not un-abundant or luxuriant.

i. The AO must have reasons. The existence of reasons is mandatory. On the basis of such reasons, the AO must form a belief that there is a situation of actual or deemed escapement of Income and therefore action is required u/s 147. (If time limit is not passed.) AO must record such reasons in writing. No reassessment notice can be served just to make an enquiry or verification. re-assessment Procedure

ii. AO must obtain sanctions from higher authority u/s 151, wherever necessary. Section 151 put condition on AO to take the prior approval from appropriate authority. If the AO obtain the approval from any other authority, even from higher authority, then also proceeding u/s 148 is invalid. re-assessment Procedure

iii. AO must issue notice u/s 148 within prescribed time limit. A formal notice must be served upon the assessee.

1) Normally time limit for issue of Notice period is 4 or 6 years.

4 years if the escaped Income less than Rs. 1,00,000/-

6 years if the escaped income is Rs. 1,00,000/-

2) This time limit shall be 16 years if it is related to Asset located outside India. re-assessment Procedure

3) But, if there is any specific direction contained in an order passed by the authority in any proceeding under act by way of appeal/ revision or by a court, in that situation there shall not be any time limit and the time limit shall be indefinite period. But, if at the time when the order which was subject matter of appeal or revision was passed, the time-limit for issuance of Notice u/s 148 had already expired, the time limit of indefinite period will not apply.

iv. Assessee shall submit return within time period prescribed in the Notice. Assessee may demand reasons of proceeding u/s 147 from AO. If the assessee does not demand reasons, the AO can proceed to complete assessment. If the assessee demands reasons, the AO must provide reasons to the assessee. Assessing officer is duty bound to provide the copy of reason recorded within reasonable time as per guidelines of Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd. v/s D.C.I.T. (2003) 259 ITR 19 (SC). Reopening u/s 148 can be challenged based on facts. re-assessment Procedure

v. After this the AO shall issue Notice u/s 143(2). Such notice u/s 143(2) is mandatory.

Re-assessment Procedure Under Section 147 of Income Tax Act

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Re-assessment Procedure Under Section 147 of Income Tax Act

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