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INCOME ESCAPING ASSESSMENT

SITUATION

TIME LIMIT U/S 149(1)

SANCTION

Income that has escaped Assessment likely to exceed 1 lakh or more

6 years from the end of RAY

JC (AC/DC/ITO if JC satisfied on reason recorded by AO)

Income in relation to any asset located o/s India (including financial interest in an entity)

16 years from the end of RAY

CCIT/CIT (Any AO if CCIT/CIT satisfied on reason recorded by AO)

Any other Case

4 years from the end of RAY

What is Income Escaping Assessment

NOTE:

  • SEC 150: NO TIME LIMIT TO ISSUE NOTICE WHEN ASSESSMENT OR REASSESSMENT IS MADE OUT OF COURT ORDER OR SEC 250/254/260A/262/263/246.
  • Notice Issued to Agent of NR: 6 Years from the end of RAY
  • If the deduction is retrospectively disallowed by Finance Act, then AO can disallow deduction by Issuing notice under Sec 148 but notice should be within prescribed Time Limits.

SEC 148 NOTICE FOR ASSESSMENT/REASSESSMENT u/s 147

The A.O. before making an Income escaping assessment or re-assessment U/s 147 shall serve on assessee a notice U/s.148.

The A.O. shall record his reasons for doing.

If notice is not served properly assessment is illegal and Void

For a return filed in response to notice u/s 148, the notice u/s 143(2) must be served within 6months from the end of FY in which ROI was filed, otherwise, Assessment/Reassessment u/s 147 shall be void.

Sec 147: Income Escaping Assessment

If the A.O. has reason to believe that any income chargeable to tax has escaped assessment for any AY, he may be subject to provision u /s 148 to 153

  • Assess or reassess such income
  • Also, any other income chargeable to tax that has escaped assessment & Which comes to his notice subsequently in the course of proceedings under this section

Cannot Assess/Reassess issues that have gone in for appeal or revision

Cases where income deemed to have been escaped assessment

  • No ROI filed + Total income exceeds BEL
  • ROI Filed but Income is understated or excessive loss. Deduction, allowance, relief claimed
  • Assessment has been made but Income is under-assessed or excessive loss. Deduction, allowance, relief claimed or income is assessed at a lower rate
  • A person is found to have any asset located outside India
  • Fails to Furnish TP Report
  • Basis of Documents/Information u/s 133C(2)
 

NOTE:

  • AO BEFORE MAKING AN ASSESSMENT UNDER THIS SECTION WILL ISSUE NOTICE TO ASSESSEE A NOTICE REQUIRING HIM TO FURNISH ROI WITHIN PRESCRIBED TIME AND AO BEFORE ISSUING NOTICE RECORD HIS REASONS IN WRITING.
  • AO IS DUTY-BOUND TO SUPPLY TO ASSESSEE REASONS IN WRITING RECORDED BY HIM FOR ISSUE OF NOTICE U/S 148 AFTER ASSESSEE HAS FILED ROI
  • IF THE REASON RECORDED FOR THE ISSUE OF NOTICE ARE INVALID THEN THE ASSESSEE CAN FILE A WRIT PETITION IN THE HC. IF HC IS SATISFIED THEN HC SHALL QUASH THE NOTICE ISSUED U/S 148

REASON TO BELIEVE

NO REASON TO BELIEVE

Later of SC/HC Judgement

RUMORS, GOSSIP AND SUSPICION

Retrospective amendment in Law

OBJECTIONS OF CAG AUDIT PARTY

Change in the opinion of AO

SURVEY had taken place without valid material or evidence

  • The order can be passed within the time limit of u/s 153(1) i.e., before the expiry of 12 months (24 Months in the case referred to TPO) from the end of FY in which notice u/s 148 was served.
  • Assessment + Demand Notice both shall be prepared within time limit otherwise time-barred.
 

EXCEPTION TO SEC 149(1): NO NOTICE AFTER 4 YEARS FROM THE END OF RAY WHERE

  • ASSESSMENT HAS BEEN MADE EARLIER
  • AND ASSESSEE HAS FILED ROI
  • AND ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT

BUT IF CASE OF INCOME IN RELATION TO ASSET O/S INDIA-NOTICE CAN BE ISSUED UP TO 16 YRS

Sun Engineering Private Limited (SC)

  • On reassessment u/s 147 original assessment will not wipe off
  • Matter lost in original Assessment proceedings (against which no appeal/revision/rectification application filed) cannot be claimed in the Reassessment proceeding
  • Expenses not claimed in original Assessment proceedings cannot be claimed in the Reassessment proceeding
  • But Expenses pertaining to escaped income can be claimed
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Category Income Tax, Other Articles by - Varsha Nayyar 



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