ASSESSMENTS

Section 142
Inquiry before assessment

Provisions
For the purpose of making an assessment under this Act, the Assessing Officer may serve a
notice on any person who has made a return u/s 139(1) or who has failed to make a return u/s
139(1) require him to:

a. File Income Tax Returns

where such person has not made a return
 within the time allowed u/s 139(1) or,
 before the end of the relevant assessment year
to furnish a return of his income.

b. Documents and Accounts

to produce, or cause to be produced, such accounts or documents as the Assessing Officer may
require.

c. Information
to furnish in writing, information in such form and on such points or matters ( including a
statement of all assets and liabilities of the assessee, whether included in the accounts or not ) as
the Assessing Officer may require

d. Inquiry
For the purpose of obtaining full information in respect of the income or loss of any person, the
Assessing Officer may make such inquiry as he considers necessary.

Restrictions
a. the previous approval of the Joint Commissioner shall be obtained before requiring the
assessee to furnish a statement of all assets and liabilities not included in the accounts.
b. the Assessing Officer shall not require the production of any accounts relating to a
period more than 3 years prior to the previous year.
c. Notice u/s 142(1) only empowers the AO to call for such accounts or documents. THE
NOTICE DOES NOT EMPOWER AO TO CONDUCT ANY ASSESSMENT.

Natural Justice
The assessee shall, except where the assessment is made under section 144, be given an
opportunity of being heard in respect of any material gathered on the basis of any inquiry and
proposed to be utilised for the purposes of the assessment.

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Section 143(1)
Scrutiny Assessment

Provisions
Where a return has been made under section 139, or in response to a notice under such 142(1)
return shall be processed in the following manner, namely
a. the total income or loss shall be computed after making the following adjustments, namely
i. any arithmetical error in the return
ii. an incorrect claim, if such incorrect claim is apparent from any information in the
return
iii. disallowance of loss claimed, if return of the previous year for which set off of loss
is claimed was furnished beyond the due date specified under Section 139(1)
iv. disallowance of expenditure indicated in the audit report but not taken into
account in computing the total income in the return
v. disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-
IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified
under Section 139(1)

No such adjustments shall be made unless an intimation is given to the assessee of such
adjustments either in writing or in electronic mode. The above adjustments can be made
after an intimation is given to the assessee in writing or in electronic mode seeking his
response within 30 days from the issue of the intimation. If no response is received from the
assessee, the above adjustments will be made by the AO.

b. the tax, interest and fee, if any, shall be computed on the basis of the total income
computed under clause (a).

c. the sum payable by, or the amount of refund due to, the assessee shall be determined after
adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax
deducted at source, any tax collected at source, any advance tax paid, any relief allowable
under an agreement under section 90 or section 90A, or any relief allowable under section
91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and
any amount paid otherwise by way of tax , interest or fee.

d. an intimation shall be prepared or generated and sent to the assessee specifying the sum
determined to be payable by, or the amount of refund due to, the assessee under clause (c)

e. the amount of refund due to the assessee in pursuance of the determination under clause
(c) shall be granted to the assessee.

An intimation shall also be sent to the assessee in a case where the loss declared in the return
by the assessee is adjusted but no tax, interest or fee is payable by, or no refund is due to him.

Time Limit
No intimation under this sub-section shall be sent after the expiry of 9 months (Prior to
10/04/2021- 1 year) from the end of the financial year in which the return is made.

If ITR is filed on 30 th September 2023, the intimation u/s 143(1) should be sent to the assessee
before 31st December 2024 (nine months year from the end of the FY 2023-24).

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Section 144
Best Judgement Assessment

Provisions
If any person:
a. fails to make the return required under 139(1) or 139(4) or 139(5) or
b. fails to comply with all the terms of a notice issued under 142(1) or
c. having made a return, fails to comply with all the terms of a notice issued under 143(2)

the Assessing Officer, after

 taking into account all relevant material which the Assessing Officer has gathered, shall,
 after giving the assessee an opportunity of being heard,
make the assessment of the total income or loss to the best of his judgment and determine
the sum payable by the assessee on the basis of such assessment.

The opportunity shall be given by the Assessing Officer by serving a notice calling upon the
assessee to show cause, on a date and time to be specified in the notice, why the assessment
should not be completed to the best of his judgment.

It shall not be necessary to give such opportunity in a case where a notice under Section
142(1) has been issued prior to the making of an assessment under this section (144).

Key Points
1. This section is applicable when an assessee has
a. not filed his income tax returns or
b. having filed the returns, has not responded to a notice u/s 143(2) or
c. has not complied with the notice issued u/s 142(1)

2. Assessing officer can compute an assessee’s income as well as loss for a financial year.

3. Assessing officer can determine ONLY the tax payable by the assessee.

4. Assessing officer CANNOT compute tax refundable to the assessee.

5. If notice is not issued to the assessee u/s 142(1), a fresh notice has to be issued under this
section. However, if a notice is issued u/s 142(1), no notice is required under this section.

Time Limit
No order u/s 144 shall be made after the expiry of :

Before 1st April 2018 21 months from the end of the assessment
year in which the income was first assessable
Assessment year commencing on the 1 day 18 months from the end of the assessment
st

of April, 2018 year in which the income was first assessable

Assessment year commencing on or after the 12 months from the end of the assessment
1st day of April, 2019 year in which the income was first assessable
Assessment year commencing on or after the 18 months from the end of the assessment
1st day of April, 2020 year in which the income was first assessable

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 Assessment year commencing on or after the 9 months from the end of the assessment
1st day of April, 2021 year in which the income was first assessable
Assessment year commencing on or after the 9 months from the end of the assessment
1st day of April, 2022 year in which the income was first assessable

(Finance Act 2023, w.e.f 01-04-2023)

For FY 2019-20 (AY 2020-21), best judgement assessment u/s 144 has to be completed before 31 st
March 2022 (12 months from the end of the AY 2020-21).

Section 143(3)
Regular Assessment

Notice 143(2)
Where a return has been furnished under section 139, or in response to a notice under section
142(1), the Assessing Officer or the prescribed income-tax authority, as the case may be, if,
considers it necessary or expedient to ensure that the assessee
 has not understated the income or
 has not computed excessive loss or
 has not under-paid the tax in any manner,

shall serve on the assessee a notice requiring him, on a date to be specified therein, either
 to attend the office of the Assessing Officer or
 to produce, or cause to be produced before the Assessing Officer any evidence on which
the assessee may rely in support of the return.

Notice under this sub-section shall not be served on the assessee after the expiry of 6 months
from the end of the financial year in which the return is furnished.

Assessment 143(3)
On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be,
 after hearing such evidence as the assessee may produce and such other evidence as
the Assessing Officer may require on specified points, and
 after taking into account all relevant material which he has gathered,

the Assessing Officer shall, by an order in writing, make an assessment of the total income or
loss of the assessee, and determine the sum payable by him or refund of any amount due to
him on the basis of such assessment.

Time Limit
No order u/s 143(3) shall be made after the expiry of:

Before 1st April 2018 21 months from the end of the assessment
year in which the income was first assessable
Assessment year commencing on the 1 st day 18 months from the end of the assessment
of April, 2018 year in which the income was first assessable
Assessment year commencing on or after the 12 months from the end of the assessment

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 1st day of April, 2019 year in which the income was first assessable
Assessment year commencing on or after the 18 months from the end of the assessment
1st day of April, 2020 year in which the income was first assessable
Assessment year commencing on or after the 9 months from the end of the assessment
1st day of April, 2021 year in which the income was first assessable
Assessment year commencing on or after the 9 months from the end of the assessment
1st day of April, 2022 year in which the income was first assessable

(Finance Act 2023, w.e.f 01-04-2023)

For FY 2019-20 (AY 2020-21), assessment u/s 143(3) has to be completed before 31 st March 2022
(12 months from the end of the AY 2020-21).

Section 147
Income Escaping Assessment

Assessment
If any income chargeable to tax, in the case of an assessee, has escaped assessment for any
assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153,
assess or reassess such income or recompute the loss or the depreciation allowance or any
other allowance or deduction for such assessment year.

Explanation.—For the purposes of assessment or reassessment or recomputation under this

section, the Assessing Officer may assess or reassess the income in respect of any issue, which
has escaped assessment, and such issue comes to his notice subsequently in the course of the
proceedings under this section, irrespective of the fact that the provisions of section 148A have
not been complied with.

Procedure before issuing Notice [Section 148(A)]

The Assessing Officer shall, before issuing any notice under section 148
a. conduct any enquiry, if required, with the prior approval of specified authority, with
respect to the information which suggests that the income chargeable to tax has escaped
assessment;

b. provide an opportunity of being heard to the assessee, by serving upon him a notice
to show cause within such time, as may be specified in the notice, being not less than
seven days and but not exceeding thirty days from the date on which such notice is
issued, or such time, as may be extended by him on the basis of an application in this
behalf, as to why a notice under section 148 should not be issued on the basis of
information which suggests that income chargeable to tax has escaped assessment in his
case for the relevant assessment year and results of enquiry conducted, if any;

c. consider the reply of assessee furnished, if any, in response to the show-cause notice
referred to in clause (b)

d. decide, on the basis of material available on record including reply of the assessee,
whether or not it is a fit case to issue a notice under section 148, by passing an order,

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 with the prior approval of specified authority, within one month from the end of the
month in which the reply referred to in clause (c) is received by him, or where no such
reply is furnished, within one month from the end of the month in which time or
extended time allowed to furnish a reply as per clause (b) expires.

Section 148
Provided that no notice under this section shall be issued unless there is information with the
Assessing Officer which suggests that the income chargeable to tax has escaped assessment in
the case of the assessee for the relevant assessment year and the Assessing Officer has obtained
prior approval of the specified authority to issue such notice.

For the purposes of Section 148 and Section 148A, the information with the Assessing Officer
which suggests that the income chargeable to tax has escaped assessment means:

a. any information in the case of the assessee for the relevant assessment year in
accordance with the risk management strategy formulated by the Board from time to
time, or

b. any audit objection to the effect that the assessment in the case of the assessee for the
relevant assessment year has not been made in accordance with the provisions of this
Act, or

c. any information received under an agreement referred to in section 90 or section 90A of

the Act, or

d. any information which requires action in consequence of the order of a Tribunal or a

Court.

Time Limit

Scenario Time Limit

General Cases Not more than 3 years from the end of the
relevant assessment year,
Where the AO has in his possession books of More than 3 years, but not more than 10
account or other documents or evidence years from the end of the relevant
which reveal that the income chargeable to assessment year
tax, represented in the form of (i) an asset;
(ii) expenditure in respect of a transaction or
in relation to an event or occasion; or (iii) an
entry or entries in the books of account,
which has escaped assessment amounts to or
is likely to amount to fifty lakh rupees or
more

e.

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 RECTIFICATIONS OF ORDERS

Section 154
Rectification of mistake

Provisions [154(1)]
With a view to rectifying any mistake apparent from the record an income- tax authority may:
a. amend any order passed by it under the provisions of this Act
b. amend any intimation or deemed intimation under Section 143(1)
c. amend any intimation under Section 200A(1) (TDS intimation)
d. amend any intimation under Section 206CB(1) (TCS intimation)

Appeal matters [154(1A)]

Where any matter has been considered and decided in any proceeding by way of appeal or
revision relating to an order referred to in sub-section (1), the authority passing such order
may, notwithstanding anything contained in any law for the time being in force, amend the
order under that sub-section in relation to any matter other than the matter which has been so
considered and decided.

Opportunity of being heard [154(3)]

An amendment, which has the effect of:
a. enhancing an assessment or
b. reducing a refund or
c. otherwise increasing the liability of the assessee or the deductor or the collector,

shall not be made under this section unless the authority concerned has given notice to the
assessee or the deductor or the collector of its intention so to do and has allowed the assessee
or the deductor or the collector a reasonable opportunity of being heard.

Order in writing [154(4)]

Where an amendment is made under this section, an order shall be passed in writing by the
income-tax authority concerned.

Differences in tax due to rectification

A. Reduction [154(5)]
Where any such amendment has the effect of:
a. reducing the assessment or
b. otherwise reducing the liability of the assessee or the deductor or the collector,
the Assessing Officer shall make any refund which may be due to such assessee or the
deductor or the collector.

B. Increase [154(6)]
Where any such amendment has the effect of:
a. enhancing the assessment or
b. reducing a refund already made or
c. otherwise increasing the liability of the assessee or the deductor or the collector,
the Assessing Officer shall serve on the assessee or the deductor or the collector, as the case
may be a notice of demand in the prescribed form specifying the sum payable and such notice of
demand shall be deemed to be issued under section 156.
Time limit

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No amendment under this section shall be made after the expiry of 4 years from the end of the
financial year in which the order sought to be amended was passed.

Let us considered an order u/s 143(3) was passed in FY 2019-20. The order passed earlier cannot
be rectified after the end of 4 years from FY 2019-20 i.e after 31-03-2024.

Mistake apparent from the record

A mistake is considered as a ‘mistake apparent from the record’ if:
1. It is a mistake for which there are no arguments
2. It is a mistake for which two views are not possible
3. It should not involve investigation of facts
4. Mistake arising from subsequent interpretation of law by the ‘Supreme Court’ can be
rectified as it is considered as mistake apparent from the record
5. However, rectification is not permissible for a High Court Judgement

An order can be rectified u/s 154 if the above conditions are fulfilled. Further, an order
rectified earlier can also be rectified subsequently.

Hind Wire Industries Ltd (SC)

1. The assessee was assessed u/s 143(3) for FY 2005-06 (AY 2006-07) by an assessment order
dated 30-01-2008 (Order is passed within due date).
2. In that order, there were 2 mistakes apparent from record. Assessee filed for rectification
u/s 154 on 12.07.2012 (within due date) seeking rectification of one mistake and
rectification order was passed on 31-12-2012.
3. Assessee filed another rectification application u/s 154 seeking rectification of the 2 nd
mistake on 04-07-2014. AO rejected the same saying that the due period of 4 years from the
original rectification order is over.
4. Supreme Court held that in the wordings ‘No amendment under this section shall be made
after the expiry of 4 years from the end of the financial year in which the order sought to be
amended was passed,’ the order sought to be amended need not be the original order. It can
also refer to a rectified order.
5. The time limit of 4 years has to be considered from the rectified order passed by the AO on
31-12-2012 and not the original order passed on 30-01-2008.
6. The Supreme Court held that the rectification application is valid.

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 REVISION OF ORDERS

Section 263
Revision of orders prejudicial to revenue

Provisions
The Principal Commissioner or Commissioner may call for and examine the record of any
proceeding under this Act and if he considers that any order passed therein by the Assessing
Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may:
 after giving the assessee an opportunity of being heard and
 after making or causing to be made such inquiry as he deems necessary
pass such order thereon as the circumstances of the case justify, including an order
 enhancing or modifying the assessment or
 cancelling the assessment and directing a fresh assessment.

Time limit [Section 263(2)]

No order shall be made under section 263(1) after the expiry of 2 years from the end of the
financial year in which the order sought to be revised was passed.

Prejudicial to the interests of revenue

An order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is
prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or
Commissioner:
a. the order is passed without making inquiries or verification which should have been
made

b. the order is passed allowing any relief without inquiring into the claim

c. the order has not been made in accordance with any order, direction or instruction
issued by the Board (CBDT)

d. the order has not been passed in accordance with any decision which is prejudicial to
the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of
the assessee or any other person.

Key Points
1. The order covered in this section is an order prejudicial to the interests of the revenue
i.e an order which is prejudicial to the Income Tax Department.

2. Revised order is a new order which can either enhance or modify or cancel an
assessment and open a fresh assessment.

3. Revision is possible on matters which are not a subject matter of an appeal. [ Doctrine of
Partial Merger] For those matters which are a subject matter of an appeal, revision u/s
263 is not valid.

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Page 10 of 12
Section 264
Revision of other orders

Provisions
In the case of any order other than an order to which section 263 applies passed by an authority
subordinate to him, the Principal Commissioner or Commissioner may,
 either of his own motion or
 on an application by the assessee
for revision,
 call for the record of any proceeding under this Act in which any such order has been
passed and
 may make such inquiry or cause such inquiry to be made and
may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit.

Time Limits

Suo-motto revision [Section 264(2)]

The Principal Commissioner or Commissioner shall not, of his own motion, revise any order
under this section if the order has been made more than 1 year previously.

Application by assessee [Section 264(3)]

In the case of an application for revision under this section by the assessee, the application must
be made within 1 year from:
 the date on which the order in question was communicated to him or
 the date on which he otherwise came to know of it,
whichever is earlier.

For passing revised order [Section 264(6)]

An order shall be passed within one year from the end of the financial year in which such
application is made by the assessee for revision.

Restrictions [Section 264(4)]

Any order under this section shall not be revised in the following cases:
a. where an appeal against the order lies to the
i. Deputy Commissioner (Appeals) or
ii. to the Commissioner (Appeals) or
iii. to the Appellate Tribunal
but has not been made and the time within which such appeal may be made has not
expired, or
b. in the case of an appeal
i. to the Commissioner (Appeals) or
ii. to the Appellate Tribunal,
the assessee has not waived his right of appeal.
c. where the order is pending on an appeal before the Deputy Commissioner (Appeals), or
d. where the order has been made the subject of an appeal
i. to the Commissioner (Appeals) or
ii. to the Appellate Tribunal
Key Points

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1. Order u/s 264 cannot be appealed by assessee or the Assessing Officer.

2. A mistake apparent from the face of the record in the revised order passed u/s 264 can
be rectified by the Commissioner of Income Tax (CIT).

3. Where an appeal has been filed on an order, no revision u/s 264 is possible even on
those matters which are not a subject matter of the appeal. [Doctrine of Total merger]

4. Once a revised order is passed u/s 264, the previous order [143(3), 144 or 147, as the
case may be] shall remain cancelled. Such previous order cannot be revised u/s 263.

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