The Income Tax Act empowers tax authorities to decide whether the required information and income furnished by a taxpayer is correct. Section 147 of Income Tax Act empowers the Assessing Officer (AO) to reassess an ITR if he/she suspects that the taxpayer has concealed essential income details leading to an incorrect assessment of income.
To know more about this Section, read on!
This Section aims to prevent any under assessment of assessees’ income. It mentions the conditions under which an Assessing Officer can reassess an Income Tax Return by issuing notice to the taxpayer under Section 148 of Income Tax Act within a set time frame.
Whenever an AO has adequate reasons to consider that any income has escaped assessment, he/she may trigger proceedings under Section 147 for reassessment. However, the AO must take prior approval or permission from a higher authority before issuing any notice. The time limit to issue notice for reassessment proceedings is 4 or 6 years, depending on the escaped income.
The power of an AO to issue certificates is not arbitrary and not abundant. The Supreme Court has laid down clear conditions, which tax authorities must fulfil before carrying out reassessment proceedings. They are as follows:
The judiciary has always been of the firm view that assessees are duty-bound to provide all relevant and crucial details necessary for computing the taxable income. This information will help the AO to carry out assessments in a fair and reasonable manner.
Here are steps for carrying out assessment under Section 147 of Income Tax Act, India:
Note that income under revision or appeal is not eligible for reassessment under this Section by an AO.
The tax authorities are liable to issue a reassessment notice within a certain period. The time limits are as follows:
If all details related to a taxpayer’s case concerning the assessment year according to risk handling strategy is initiated via the board with time, an AO will initiate this report on the basis of a computerised system. AO can refer all final objections to CAG of India in relation to the taxpayer’s case for relevant AY.
Here are the cases in which an AO thinks that income has escaped assessment:
Section 147 of Income Tax Act It gives AOs power to revisit or review ITR files and check whether one has concealed facts or information about their income. Therefore, the assessees must be very careful that they furnish all income-related details in their original ITR to avoid legal proceedings and penalties.
AO can issue notice for reassessing income under Section 148 of the Income Tax Act. The reassessment must be completed within one year from the end of financial year in which such notices were issued by them.
Taxpayers can reply to the scrutiny notice online. One needs to log in to the income tax portal using their credentials and visit ‘My Account’. There, they can select the notice they want to respond to.
In case an individual does not reply to the reassessment notice issued by an Assessing Officer within the specific time frame, he/she is liable to face penal provisions. Not replying to the notice can attract a fine of Rs.10,000. In some cases, taxpayers can be jailed for up to 1 year.
If taxpayers having total income above the basic exemption limit do not file their returns within due dates, the IT Department will issue notices. They will have to respond to the notice and file their delayed returns and pay a penalty.
Before you go…
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.