Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Income Tax Assessment Procedure in details

Income Tax Assessment Procedure in details
Income Tax Assessment Procedure in details

Table of Contents

1.   Self-Assessment [Section 140A] before Submitting Return of Income

Every person, before submitting a return of income under:

(i)         Section 139 or

(ii)        Section 142(1) or

(iii)       Section 148 or

(iv)       Section 153A,

is under an obligation to make a self-assessment of his income and after taking in account the amount of tax, if any, already paid, pay the self-assessment tax, if due.

The Assessee shall be liable to pay such tax together with interest and fee payable for any delay in furnishing the return or any default or delay in payment of advance tax.

The procedure for making self-assessment and determination of the tax liability of self-assessment tax of return of income is explained in the following steps:

(i)         Compute the total income;

(ii)        Calculate the tax payable on the total income at the rates in force;

(iii)       Add surcharge, if applicable, on tax computed;

(iv)       Add health and education Cess @ 4%;

(v)        From the tax payable, calculated under step (iv), deduct the following:

(a)        the amount of tax, if any, already paid under any provision of this Act e.g., advance tax,

(b)        any tax deducted or collected at source; and

(c)        any relief of tax under Section 89;

(d)        any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India;

(e)        any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section;

(f)         any tax credit claimed to be set off in accordance with the provisions of section 115JAA (MAT credit) or section 115JD (AMT credit);

(vi)       Add interest and fee payable for the following to the Net-tax calculated at step (v):

(a)        Interest for late filing of return under section 234A computed on the amount of the tax on the total income as declared in the return as reduced by the amount of—

(i)         Advance tax, if any paid

(ii)        Tax deducted/collected at source

(iii)       Any relief of tax allowed under section 89.

(iv)       Any relief/deduction of tax allowed under sections 90, 90A and 91

(v)       Any tax credit allowed to be set off in accordance with the provisions of section 115JAA (MAT credit) or section 115JD (AMT credit)

(vi)       any tax or interest payable according to the provisions of section 191(2).

(b)        Interest for default in payment of advance tax under section 234B computed on amount equal to the assessed tax or the case may be, on the amount by which the advance tax paid falls short of assessed tax.

(c)        Interest for deferment of advance tax (under section 234C);

(d)        Fee for delay in furnishing of return of income as prescribed under section 234F.

(vii)      The above tax, interest and fee payable should be paid as self-assessment tax before filing the return of income.

2.   [Section 142]- Enquiry by the Assessing Officer before Assessment

(1). Service of a Notice [Section 142(1)] of Income Tax Act 1961.:

For the purpose of making an assessment, the Assessing Officer may take any / all of the following steps:

(a)     Serve a Notice under Section 142(1)(i)

to the person requiring him to furnish a return of his income, or the income of any other person in respect of which he is assessable under the Act, in the prescribed form and within the time specified in the notice, if the person has not filed a return of income within the time allowed under section 139(1) or before the end of the relevant assessment year.

(b) Serve a Notice under Section 142(1)(ii)

 to any person who has flied a return of income or not to produce or cause to be produced such accounts or documents as the Assessing Officer may require. However, the Assessing Officer shall not require the Assessee to produce any accounts relating to a period more than three years prior to the previous year. Further, the notice under this clause can be sent only when the return has been submitted under section 139 or when the time allowed under section 139(1), as the case may be, for furnishing the return has expired and the return is not submitted.

Example: For making an assessment of assessment year 2019-20 the Assessing Officer can ask for books of account for previous years 2015-16, 2016-17 and 2017-18 besides, of course, for previous year 2018-19 which is in question.

Only 3 years’ Books of Account can be Summoned:

The officer, however, may not summon accounts relating to a period more than 3 years prior to the accounting year in question. Should a notice calling for account books for a period more than 3 years prior to the accounting year be issued, the same may be regarded as consisting of two parts, one for the period of three years for which the books can be rightly called for, and another for the period beyond three years for which the books cannot be called for. The latter part of the notice may be regarded as unauthorized and illegal, but to the extent to which the former part is legal, the Assessee should produce books for the three years; and if he fails to do so, he would be regarded as being in default and liable to best judgment assessment.

(c) Serve a notice under section 142(1)(iii),

to any person who has filed a return of income or in whose case the time allowed under section 139(1) for furnishing the return has expired, to furnish, in writing and verified in the prescribed manner information in such form and on such points and matters as he may require. The Assessing Officer may also ask for a statement of all assets and liabilities of the Assessee whether included in the accounts or not. However, prior approval of the Joint Commissioner of Income-tax will be required, if the Assessing Officer requires the Assessee to furnish a statement of assets and liabilities not included in the accounts. Statement of assets and liabilities can be asked for any number of previous years.

(2). [Section 142(2)]- Make Inquiry by Assessing Officer:

For the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such inquiry, as he considers necessary. While section 142(1) empowers the Assessing Officer to collect information from the Assessee himself, section 142(2) on the other hand, empowers him to collect information from sources other than the Assessee.

(3). Audit of Accounts [Sections 142(2A) to (2D)]:

The Assessing Officer may, at any stage of the proceedings before him, direct the Assessee to get the accounts audited by a Chartered Accountant nominated by the Chief Commissioner / Commissioner of Income-tax. Such a decision may be taken by the Assessing Officer, if having regard to:

(a)        the nature and complexity of the accounts,

(b)        volume of the accounts,

(c)        doubts about the correctness of the accounts,

(d)        multiplicity of transactions in the accounts, or

(e)        specialized nature of business activity of the Assessee,

AND

the interests of the revenue,

is of the opinion that it is necessary so to do. He may, with the previous approval of the Chief Commissioner or the Commissioner, direct the Assessee to get his accounts audited by an accountant and to furnish a report of such audit.

The Assessing Officer shall not direct the Assessee to get the accounts so audited unless the Assessee has been given a reasonable opportunity of being heard.

Direction of audit can be given even if the accounts are already audited under the Income Tax Act or under any other law. [Section 142(2B)]

Form and Time Limit for Submission of Report [Section 142(2C) and Rule 14A]:

The Chartered Accountant shall submit the audit report in Form No. 6B to the Assessee who will in turn submit it to the Assessing Officer within such period as may be specified by the Assessing Officer. Such period may, however, be extended by the Assessing Officer Suo motu or on the request of the Assessee and for any good and sufficient reasons. The aggregate of the period originally fixed and the extended period(s) shall not, in any case, exceed 180 days from the date on which the directions for audit were received by the Assessee.

See also  Submission of Return of Loss [Section 139(3) read with Section 80]

Audit Expenses [Section 142(2D)]:

The expenses of and incidental to such audit (including the remuneration of the accountant) shall be determined by the Chief Commissioner or Commissioner, in accordance with such guidelines as may be prescribed and the expenses so determined shall be paid by the Central Government

(4). [Section 142(3)]- Opportunity of being Heard by Assessing Officer:

The Assessing Officer shall give an opportunity to the Assessee of being heard in respect of any information gathered by the Assessing Officer on the basis of the aforesaid inquiry under section 142(2) or on the basis of the audit conducted as per section 142(2A) above, where the Assessing Officer proposes to utilize such information for the purpose of any assessment. However, no such opportunity is necessary when the assessment is made under section 144.

(5). Consequences of Non-Compliance of Section 142(1) and Section 142(2A):

Failure to comply with notice under section 142(1) or to get accounts audited as per directions issued under section 142(2A) may result in:

(a)        Best judgment assessment under section 144;

(b)        Penalty under section 271(1)(b) which has been fixed at Rs. 10,000;

(c)        Prosecution under section 276D with rigorous imprisonment which may extend to one year or with fine which will not be less than Rs. 4 or more than Rs. 10 for every day during which the default continues, or with both;

(d)        Issue of a warrant of authorisation under section 132 for conducting search.

If the Assessee proves that the non-compliance with the direction under section 142(2A) was not because of his fault but negligence or refusal of the auditor, then best judgment assessment shall not be made and the proceedings shall be dropped.

It may be noted that opportunity of being heard shall have to be given to Assessee before making best judgment assessment and before levying penalty or launching prosecution If the Assessee proves that there was a reasonable course for the failure, for e.g., death in the family, some major illness or negligence on the part of chartered accountant, etc., the Assessing Officer shall not make the best judgment assessment or levy penalty, etc.

3.   [Section 142A]- Estimation of Asset, Property or Investment by Valuation Officer in certain Cases for the purpose of Assessment

Assessing Officer can refer to the Valuation Officer, the estimation of valuation of any investment [Section 142A (1)]

(A) [Section 142A (1) and (2)]- Reference by Assessing Officer to the Valuation Officer for estimate of the value including fair market value of any Asset, Property, or Investment

(1)        The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to the Valuation Officer to estimate the value, including fair market value, of any asset, property or investment and submit the report to him. [Section 142A (1)]

(2)        The Assessing Officer may make a reference to the Valuation Officer whether or not he is satisfied about the correctness or completeness of the accounts of the Assessee. [Section 142A (2)]

(B) [Section 142A (3), (4) and (5)]- Power of Valuation Officer and procedure to make the estimate of the value of the Asset, Property or Investment

(1)        The Valuation Officer, on a reference being made, shall, for the purpose of estimating the value of the asset, property or investment, have all the powers of section 38A of the Wealth-tax Act, 1957. [Section 142A (3)]

(2)        The Valuation Officer shall estimate the value of the asset, property or investment after taking into account the evidence produced by the Assessee and any other evidence in his possession gathered, after giving an opportunity of being heard to the Assessee. [Section 142A (4)]

(3)        If the Assessee does not co-operate or comply with the directions of the Valuation Officer, he may, estimate the value of the asset, property or investment to the best of his judgment. [Section 142A (5)]

(C) [Section 142A (6)]- Time period of Submitting Valuation Report

The Valuation Officer shall send a copy of the report of the estimate made by him under section 142A (4) and (5) to the Assessing Officer and the Assessee within a period of six months from the end of the month in which the reference is made.

(D) [Section 142A (7)]- Assessing Officer may take such report into account in making Assessment or Re-assessment

The Assessing Officer on receipt of the report from the Valuation Officer may, after giving the Assessee an opportunity of being heard, take into account such report in making the assessment or reassessment.

4.   [Section 143(3)]- Regular / Scrutiny Assessment— On the basis of Return of Income and after Hearing Additional Evidence

(1).  [Section 143(2)]- Compulsory Service of Notice to the Assessee

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—

(i)         the Assessee has not understated the income or

(ii)        has not computed excessive loss or

(iii)       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.

However, no notice under this sub-section shall be served on the Assessee after the expiry of 6 months from the end of the financial year in which the return is furnished.

Prescribed Authority U/s 143(2) [Rule 12E]. —

The prescribed authority under section 143(2) shall be an income-tax authority not below the rank of an Income-tax Officer who has been authorised by the Central Board of Direct Taxes to act as income-tax authority for the purposes section 143(2).

(2).  [Section 282A]- Authentication of Notices and Other Documents

Notices and documents required to be issued by income-tax authority under the Act shall be issued by such authority either in paper form or in electronic form in accordance with such procedure as may be prescribed.

(3).  [Section 292BB]- Notice Deemed to be Valid in certain circumstances:

Where an Assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such Assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was—

(a)        not served upon him: or

(b)        not served upon him in time; or

(c)        served upon him in an improper manner.

However, nothing contained in this section shall apply where the Assessee has raised such objection before the completion of such assessment or reassessment.

(4).  Consequences of Failure to Comply with Notice under Section 143(2):

The consequence of a default in complying with the notice under section 143(2), may entail an ex parte, best judgment assessment under section 144. Such a default may also attract penalty under Section 271(1) (b) which has been fixed at Rs. 10,000.

(5).  [Section 143(3)]- Assessment after Evidence

The Assessing Officer, on the day specified in the notice under section 143(2) or as soon afterwards, as may be, shall, by order in writing, make an assessment of the Total Income or the 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. The assessment shall be made after hearing:

(i)         such evidence as the Assessee may produce on the dates specified, from time to time and such other evidence as the Assessing Officer may require on specified points:

(ii)        all relevant material gathered by him.

Meaning of the word ‘Hearing’ [Section 2(23C)]:

“Hearing” includes communication of data and documents through electronic mode.

(A)    Deduction not to be Allowed if claim is not made in the Return of Income:

As per section 80A (5), where the Assessee fails to make a claim in his return of income for any deduction under Section 10A or Section 10AA or Section 10B or Section 10BA or under any provision of Chapter VIA under the heading ‘C—Deductions in respect of certain incomes Le. sections 80-IA to 80RRB, no deduction shall be allowed to him thereunder.

(B)    [Section 143(3A)/(3B)/(3C)]- New Scheme for Scrutiny Assessment

(i)      [Section 143(3A)]- Central Government to make a scheme for making assessment:

The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the Assessee under section 143(3) so as to impart greater efficiency, transparency and accountability by—

(a)        eliminating the interface between the Assessing Officer and the Assessee in the course of proceedings to the extent technologically feasible:

(b)        optimising utilization of the resources through economies of scale and functional specialisation:

(c)        introducing a team-based assessment with dynamic jurisdiction.

(ii)     [Section 143(3B)]- Provisions of section 143(3A) may not apply or apply with modification in certain cases:

The Central Government may, for the purpose of giving effect to the scheme made under section 143(3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification.
Provided that no direction shall be issued after 31.3.2020 (extended up to 31.3.2022, by the Finance Act, 2020).

5.   [Section 144]- Best Judgment Assessment

The Assessing Officer, after taking into account all relevant material which he has gathered, is under an obligation to make an assessment of the total income or loss to the best of his judgment and determine the tax payable by the Assessee in the following cases:

(i)         where any person fails to make the return under section 139(1) and has not made a return or a revised return under section 139(4) or section 139(5);

(ii)        where any person:

—         fails to comply with all the terms of a notice issued under section 142(1); or

—         fails to comply with the directions issued under section 142(2A) for getting the account audited.

(iii)       where any person, having made a return, fails to comply with all the terms of a notice issued under section 143(2).

(1)   Opportunity must be given to the Assessee:

The best judgment assessment can only be made after giving the Assessee an opportunity of being heard by giving notice to the Assessee to show cause why the assessment should not be completed under section 144. However, it will not be necessary to give such notice where a notice under section 142(1) has already been issued prior to making assessment under this section.

1. The Assessing Officer cannot assess income under section 144 for an assessment below the returned income or cannot assess the loss higher than the returned loss.

2. If an assessment under section 144 is made without giving a show cause notice under section 144 [except where a notice has been issued under section 142(1)(i)] then the assessment is void-ab-initio.

3. No refund can be granted under section 144.

(2)   Assessment on Rejection of Accounts:

Section 145(3) empowers the Assessing Officer to reject the account books which are unreliable, false or incorrect or incomplete. The Assessing Officer can reject the books of account on the following grounds and may make the assessment in the manner provided in section 144:

(a)        He is not satisfied about the correctness or completeness of the accounts of the Assessee,

(b)        Although the accounts of the Assessee are correct and complete to the satisfaction of the Assessing Officer but the method of accounting employed is such that, in the opinion of the Assessing Officer, profits cannot be correctly arrived therefrom.

(c)        Where the method of accounting adopted by the Assessee has not been regularly followed by him, or

(d)        Where income has not been computed in accordance with the standards notified under section 145(2).

(3)   [Section 144A]- Power of Joint Commissioner to issue Directions in certain cases

A Joint Commissioner may:

(a)        on his own motion; or

(b)        on a reference being made to him by the Assessing Officer; or

(c)        on the application of an Assessee

call for and examine the record of any proceeding in which an assessment is pending. Thereafter, if he considers that:

(a)        having regard to the nature of the case; or

(b)        the amount involved; or

(c)        for any other reason,

it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment.

The powers of the Joint Commissioner are wide and he can issue directions to the Assessing Officer for any reasons that he thinks are necessary. The directions to the Assessing Officer are binding in nature and the Assessee has a recourse to agitate in appeal if the Assessing Officer does not follow the directions.

however, no directions which are prejudicial to the Assessee shall be issued before an opportunity is given to the Assessee to be heard.

Direction as to the lines on which an investigation connected with the assessment should be made, shall not be deemed to be a direction prejudicial to the Assessee.

Section 144A is indeed an effective tool for seeking intervention of higher authorities on interpretation and resolution of vexed issues arising during the course of assessment.

Conditions to be satisfied before invoking Section 144A:

The provisions of section 144A can only be evoked if:

(a)        notice under section 143(2) has been issued, and

(b)        the assessment proceedings as a consequence of the notice are pending.

 1.        Assessment includes reassessment and hence direction under section I 44A can be given even when any reassessment is pending.

2.         No appeal can be filed against the directors issued by Joint Commissioner under section 144A The Assessee can file an appeal to CIT (Appeal) against the assessment order passed by Assessing Officer on the direction of Joint Commissioner.

6.   [Section 147]- 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 provisions of sections 148 to 153:

(a)        assess or reassess such income which has escaped assessment;

(b)   recompute the loss or depreciation allowance or any other allowance as the case may be, for the assessment year concerned i.e., the relevant assessment year.

During the course of proceedings under section 147, if any other income chargeable to tax has also escaped assessment for the relevant assessment year and it comes to the notice of the Assessment Officer, he can assess or reassess that income also.

(1)   Reassessment can be done for any income other than income involving matters which are the subject matter of appeal reference or revision [Proviso 3 to Section 147]:

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

In other words, the matters/issues which have gone for appeal or revision cannot be reopened under section 147 but for all other matters/issues the Assessing Officer can reopen the assessment under section 147.

This affirms the concept of partial merger of matters/issues as against the complete merger.

(2)   Deemed Cases of Escapement:

Explanation 2 of section 147 clarifies that the following shall also to be deemed to be cases where income chargeable to tax has escaped assessment namely:

(a)        where no return of income has been furnished by the Assessee and no assessment has been made although:

(i)         his total income; or

(ii)        the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income- tax:

(b)        where a return of income has been furnished by the Assessee but no assessment (scrutiny/best judgment assessment) has been made and it is noticed by the Assessing Officer that the Assessee:

(i)         has understated the income; or

(ii)        has claimed excessive loss, deduction, allowance or relief in the return;

(ba)      where the Assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E.

(c)        where assessment under section 143(3) or 144 has been made whether return of income has or has not been furnished but:

(i)         income chargeable to tax has been under-assessed; or

(ii)        income chargeable to tax has been assessed at too low a rate; or

(iii)       income chargeable to tax has been made the subject of excessive relief under the Income- tax Act; or

(iv)       excessive loss or depreciation allowance or any other allowance under the Income-tax Act has been computed.

(Ca)      where a return of income has not been furnished by the Assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under section 133C (2). it is noticed by the Assessing Officer that the income of the Assessee exceeds the maximum amount not chargeable to tax, or as the case may be. the Assessee has understated the income or has claimed excessive loss. deduction, allowance or relief in the return;

(d)        where a person is found to have any asset (including financial interest in any entity) located outside India.

(3)   [Section 148]- Issue of Notice where Income has Escaped Assessment

Before making the assessment / reassessment or re-computation under section 147, the Assessing Officer shall serve on the Assessee a notice requiring him to furnish a return of his income or income of any person in respect of which he is assessable during the previous year corresponding to the relevant assessment year [even though it has already been furnished earlier under section 139 or 142(1)] within such period as may be specified in the notice.

The return filed in response to notice under section 148(1) shall be treated as if such return was a return required to be furnished under section 139 and therefore the Assessing Officer shall have to serve a notice under section 143(2) within a period of 6 months from the end of the financial year in which the return is furnished by the Assessee to make the assessment under section 147 read with section 143(3).

As per section 148(2), before issuing notice under section 148, the Assessing Officer is required to record his reasons for doing so.

(A)    Reassessment of income can be done even for an issue for which reason not recorded [Explanation 3 to section 147]:

For the purpose of assessment or reassessment 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, notwithstanding that the reasons for such issue have not been included in the reasons recorded under section 148(2).

The above explanation has been inserted because some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening of assessment.

(B)    Separate notice under section 148 has to be given for each assessment year for which income has escaped assessment:

For making assessment or re-assessment under section 147 a separate notice under section 148 is required to be issued by the Assessing Officer for each assessment year for which the income has escaped assessment.

During the course of proceeding under section 147 for a particular assessment year. if any other income chargeable to tax has also escaped assessment for that particular assessment year and it comes to the notice of the Assessing Officer, he can assess or reassess that income also but he cannot do so for any other Assessee year unless a separate notice under section 148 is issued.

7.   [Section 153]- Time Limit for Completion of all Assessments and Re-Assessment

 

In respect of an order of assessment relating to assessment year
commencing on 1.4.2018
In respect of an order of assessment relating to assessment year commencing on or after 1.4.2019
1. Assessment under section 143 / 144
[Section 153(1)]
18 months from the end of relevant assessment year in which the income was first assessable. 12 months from the end of relevant assessment year in which the income was first assessable.

 

2. Assessment! Re-assessment under section 147 [Section 153(2)] Where the notice under section 148 is served on or after 1.4.2019—
12 months from the end of the Financial Year in which the notice under Section 148 was served on the Assessee.
3. Fresh assessment where original assessment of income has been set aside or cancelled by Tribunal under section 254, or by CIT under section 263 or 264 [Section 153(3)] Where the order under section 254 is received by the Principal chief commissioner or chief commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal commissioner or commissioner on or after the 1st day of April, 2019—

12 months from the end of the Financial Year in which such order of set aside or canceling the assessment:

(i)         passed by the tribunal under section 254 was received by the Principal CCIT/CCIT/Principal CIT/ CIT or

(ii)        was passed by the Principal CIT/CIT. under Section 263 or 264

as the case may be.

4. Where a reference under section 92CA (1) is made during the course of the proceeding for the assessment or reassessment [Section 153(4)] Notwithstanding anything contained in section 153(1) or (2) or (3), (mentioned above) the period available for completion of assessment or reassessment, as the case may be. under the said section 153(1) or (2) or (3) shall be extended by 12 months.
5. Where effect to an order under section 250 or section 254 or section 260 or section
262 or section 263 or section 264 is to be given by the Assessing Officer, wholly or partly, otherwise than by making a fresh assessment or reassessment. [Section 153(5)]
Such effect shall be given within a period of 3 months from the end of the month in which—

(i)         order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,

(ii)        the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner:

as the case may be,

Provided that where it is not possible for the Assessing Officer to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer, if satisfied, may allow an additional period of 6 months to give effect to the order.

Provided further that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the Assessee or any other person or where an opportunity of being heard is to be provided to the Assessee, the order giving effect to the said order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 shall be made within the time specified in section 153(3).

6. (i)         where the assessment, reassessment or re-computation is made on the Assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, section 254, section 260, section 262, section 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act. [Section l53(6)(i)] Nothing contained in section 153(1) and (2) shall apply to such assessments, reassessments and re-computation which may, subject to the provisions of section 153(3) and (5), be completed on or before the expiry of 12 months from the end of the month in which such order is received or passed by the Principal Commissioner or Commissioner, as the case may be Explanation 2 to section 153

Explanation 2.—For the purposes of this section, where, by an order referred to in section 153(6)(i), —

(a)        any income is excluded from the total income of the Assessee for an assessment year, then, an assessment of such income for another assessment year shall. for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order: or

(b)        any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, if such other person was given an opportunity of being heard before the said order was passed.

(ii)        where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147 [Section 153(6)(ii)]. Nothing contained in section 153(1) and (2) shall apply to such assessments, reassessments and re-computation which may, subject to the provisions of section 153(3) and (5), be completed on or before the expiry of 12 months from the end of the month in which the assessment order in the case of the firm is passed
7. Where effect to any order, finding or direction referred to in section 153(5) or
section (6) is to be given by the Assessing Officer, within the time specified in the said sections 153(5) or 153(6), and such order has been received or passed, as the case may be, by the income tax authority specified therein before the 1st day of June, 2016. [Section 153(7)]
The Assessing Officer shall give effect to such order, finding or direction, or assess, reassess or recompute the income of the Assessee, on or before the 31st day of March, 2017.
8. Where any proceeding initiated or the order of assessment or reassessment made under section 153A (1) relating to assessment of search cases has been annulled in appeal or other legal proceedings and the assessment or reassessment relating to assessment year which was abated has revived. [Section 153(8)] 1 year from the end of the month of such revival

or

within the time specified in this section i.e., Section 153 or Section 153B (1),

Whichever is Later.

8.   [Section 154]- Rectification of Mistakes during Assessment

(A) [Section 154(1)]- Rectification only when Mistake Apparent from the record and by the Authority who passed the Order:

It may be possible that an Income-tax authority may commit a mistake while passing the order of assessment, appeal, revision, etc. With a view to rectifying any mistake, apparent from the record, the income-tax authority is empowered as under:

(a)        The Assessing Officer is empowered to rectify any order of assessment or of refund or any other order passed by him.

(b)        The Assessing Officer/designated income tax authority is empowered to amend any intimation or deemed intimation under section 143(1).

(c)        The Assessing Officer/designated income tax authority may amend any intimation

(i)         under section 200A (1) relating to processing of statement of tax deducted at source, or

(ii)        under section 206CB (1) relating to processing of TCS statement

(d)        The Commissioner is empowered to rectify any order passed by him in revision under section 263 or264.

(e)        The Commissioner (Appeals) may rectify any order passed by him under section 250.

(f)         Other Income-tax Authorities mentioned under section 116 may also amend any order passed by it.

Rectification can be done only by the Authority who has Passed the Order:

An authority under the Income-tax Act can rectify its own order. But where it gives effect to the order of the appellate authority, it is the appellate order, which is required to be implemented as a mandate from a higher appellate forum. It was pointed out that the assessing authority has no right to modify the order. The authority passing the order alone could rectify its order for the alleged mistake.

(B) [Section 154(2)]- When can Rectification be made:

The Income-tax authorities may make the rectification:

(a)        on its own motion; or

(b)        on application made by the Assessee or the diductor or by the collector bringing the mistake to the notice of the authority concerned.

Where the authority concerned is Commissioner (Appeals), besides the above, such mistake can be brought to his notice by the Assessing Officer also.

The Appellate Tribunal can rectify its order under section 254(2) but not under section 154 as it is not an income-tax authority.

(C) [Section 154(1A)]- Rectification can be done for any matter other than the matter considered and decided in Appeal / Revision:

Where a matter had been considered and decided in any proceeding by way of appeal or revision, rectification of such matter cannot be done by Assessing Officer under section 154. However, the matter which has not been considered and decided in the appeal / revision can be rectified under section 154.

Assessing Officer could not pass order Suo motu under section 154 levying interest under sections 234B and 234C when superior authority had already passed an order against levy of interest.

(D) [Section 154(3)]- Opportunity of being heard is necessary if Rectification Results into Enhancement, etc.:

If such rectification order has the effect of enhancing an assessment, or reducing a refund, or otherwise increasing the liability of the Assessee or the deductor or the collector the authority concerned must give a notice to the Assessee or the deductor or the collector of its intention to do so and an opportunity of being heard must be given to the Assessee of the deductor or the collector.

(E) [Section 154(4)]- Order of Rectification:

 Where any rectification is made under this section, an order of rectification shall be passed in writing by the income-tax authority concerned. Refusal to make rectification shall also require an order under this section.

(F)   [Section 154(5)]- Refund to be given in case Rectification Results into Reduction of Assessment:

Where any such amendment has the effect of reducing the assessment or 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.

(G) [Section 154(6)]- Notice of Demand to be Issued in case Rectification Results in to Enhancing the Assessment, etc.:

Where any such amendment has the effect of enhancing the assessment or reducing a refund already made or 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 and the provisions of the Income-tax Act shall apply accordingly.

(H) [Section 154(7)]- Time Limit for Rectification:

Rectification of an order under this section can be made only within four years from the end of the financial year in which the order sought to be amended was passed. However, this time limitation shall not apply to cases where amendment is made under section 155.

(I) [Section 154(8)]- Time Limit for Passing an Order of Rectification if Application for Amendment made by the Assessee U/s 154:

Without prejudice to the provisions of section 154(7), where an application for amendment under this section is made by the Assessee or the deductor or the collector to an income-tax authority referred to in section 154(1), the authority shall pass an order. within a period of six months from the end of the month in which the application is received by it—

(a)        making the amendment; or

(b)        refusing to allow the claim.

Time limit gets freshly extended in case of rectification of rectified order:

Order sought to be amended does not necessarily mean the original order. It could be any order including the amended or rectified order. Thus, for subsequent rectification, the time limit of four years shall be from the end of the financial year in which the earlier rectification order was passed.

Time limit of 4 years as per section 154(7) would freshly apply to the appellate order:

Once an appeal against order passed by an authority is preferred and is decided by the appellate authority, the order of Assessing Officer/income-tax authority merges with order of the appellate authority. Hence, after merger, the order of the original authority ceases to exist and the order of the appellate authority prevails and therefore period of limitation of 4 years for the purpose of section 154(7) has to be counted from the date of the order of the Appellate Authority.

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