Section 144 Of The Income Tax Act: Best Judgment Assessment, Provisions, Process And Duration Of Assessment

Section 144 of the Income Tax Act deals with best judgement assessment. This Section gives an Assessing Officer (AO) the power to use the best of his/her judgement. An AO can use the best judgement against an individual who fails to provide relevant information.

This article gives you all the important information related to Section 144 of the Income Tax Act. Read on!

What is Section 144 of the Income Tax?

Section 144 of the Income Tax Act mentions that an Assessing Officer (AO) can use their best judgement while assessing an individual based on all relevant materials that an AO has gathered. This procedure occurs in cases where a taxpayer disobeys the requirements of Section 144 of the Income Tax Act.

What are the Provisions under Section 144 of the Income Tax?

According to Section 144 of the Income Tax Act, an Assessing Officer gets the power to make a judgement in the following scenarios:

• When a taxpayer fails to file Income Tax Returns within the due date. Moreover, this due date is prescribed under Section 139 (1), Section 139 (4) for belated return and Section 139 (5) for revised return.
• If a taxpayer does not fulfil all the terms of notice and direction issued under Section 142 (1)
• If a taxpayer does not comply with all the terms of notice under Section 143(2) after filing returns
• If a taxpayer cannot convince the completeness and correctness of information in front of an AO. Additionally, the taxpayer has not employed any method for accounting regularly.

Nevertheless, it is essential to keep in mind that an AO under Section 142(1) can ask a taxpayer to file income returns if a taxpayer has not done that. Besides, Section 142(2A) deals with a special audit. As per this Assessing Officer can ask a taxpayer to get his or her accounts audited from a chartered account. Further, the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner has to nominate the charter accountant for audit. Besides, the CA has to furnish the reports to the assessor. 

What is the Procedure of Assessment under Section 144 of the Income Tax?

Suppose all conditions mentioned earlier are present. In that case, an Assessing Officer can serve a taxpayer a notice to show cause as to why they could not complete the assessment based on an AO’s best judgment. However, a notice is not required in a case where a notice under Section 142(1) has been issued before assessing Section 144 of the Income Tax Act 1961. 

Furthermore, if the Assessment Officer is not pleased with the assessee’s arguments and feels that the case demands the best judgement, he/she has the power to carry on with the assessment. Finally, if all scenarios lead toward best judgement, then AO can consider all relevant materials and information he or she has gathered. Moreover, the taxpayer has already been given a chance to put forward their point of view and arguments. Additionally, AO has to assess total income and loss based on his best judgement. 

What is the Duration to Complete the Assessment under Section 144 of the Income Tax?

According to Section 153, the duration to complete an assessment under Section 144 is within 21, 18, 12 and 9 months from the end of AY from when the income was first assessed.

Also Read: Belated Returns: Meaning, Types & Penalty For Late Filing

Final Word

Section 144 of the Income Tax Act is a significant part of the income tax law. It gives the Assessing Officer the power to use their best judgement while assessing a taxpayer if adequate information is not available. Therefore, the assessees should be extremely careful while filing returns and providing information on their total income.

FAQs on Section 144 of the Income Tax Act