Section 153 Of The Income Tax Act: Assessments And Reassessments
Every financial year, an assessing officer (AO) has to conduct an assessment of the income revealed by the assessee. So, if you reveal your total annual income as Rs. 20 lakh or any other amount, an AO determines the accuracy of this income and taxes due on it.
Moreover, if an AO believes that an individual’s taxable income has escaped assessment, he/she will conduct a reassessment. These two procedures help the Income Tax Department to ensure that taxpayers do not understate their income or overstate their expenses.
However, for the smooth functioning of this overall process, Section 153 of the Income Tax Act provides a time limit for an AO to complete an assessment/reassessment.
Time Limit for Completing Assessments and Reassessments
As per Section 153 of the Income Tax Act, these are the time limits for completing assessments and reassessments in the assessment year 2022-2023.
- Section 153(1)
No assessments should be made under Section 143 or Section 144 after twelve months from the end of the relevant assessment year.
Section 143 sets the general and detailed terms to —
- Discover basic errors and make adjustments when necessary
- Ensure that the income furnished is not understated or any excessive loss is not claimed
- Verify deductions, claims, etc., made by an assessee
Commonly, one refers to assessments under Section 144 as best judgement assessments. An assessing officer verifies the income of a taxpayer based on all relevant materials that they gather. One carries out this assessment if a taxpayer does not comply with the requirements stated in the Section.
- Section 153(2)
There can be no assessment or reassessment u/s 147 after twelve months from the end of the financial year in which notice under Section 148 was served. The condition is that the serving of notice u/s 148 should take place within this financial year.
If AOs believe that an income escaped assessment, they can reopen proceedings under Section 147 of the Income Tax Act. However, if a taxpayer’s income did not undergo reassessment, he/she will receive a notice u/s 148.
- Section 153(3)
This Section specifies the time limit of any assessment made that falls under sub-section (1) and (2). Furthermore, it covers fresh assessment, i.e., when original assessments are set aside or cancelled u/s 254, Section 263, and Section 264. The time limit is twelve months from the end of the financial year in which cancellation takes place.
- Section 153(4)
To understand the functioning of Section 153(4), one needs to take a look at Section 92CA(1) of the Income Tax Act. It states that when an assessee enters into an international transaction in any previous year, an assessing officer, with previous approval from the Commissioner, can refer the calculation of the arm’s length price with regard to the said international transaction under Section 92C to the Transfer Pricing Officer.
Thus, if an AO makes a reference u/s 92CA(1) during the completion of assessment or reassessment, there is an extension of 12 months on the time limit for cases under sub-sections 1,2, and 3.
- Section 153(5)
It is crucial to mention that Sections 250, 254, 260, 262, 263, and 264 refer to orders passed by a High Court, the Appellate Tribunal, Commissioner, or the Supreme Court. So, upon passing of an order, the AO has to give effect wholly or partially, rather than making a fresh assessment.
Under these circumstances, the time limit for assessment/reassessment is three months. These three months begin from the end of the month in which this order was given.
- Section 153(6)
This Section covers assessments and reassessments made due to a finding or direction contained in an order under Sections 250, 254, 260, 262, 263, or 264. It also covers an order in any court proceeding through an appeal. The time limit under this Section is twelve months from the month’s end in which one receives this order.
Moreover, Section 153(6) also mentions the case of a firm. So, if an AO reopens the assessment proceedings for a partner of the firm, the time limit is twelve months. These twelve months begin from the end of the month in which the order was passed.
- Section 153(7)
This Section mentions the findings and directions covered in sub-section 5 and 6. If one receives these orders or findings by June 1 of a financial year, an AO should give effect to it before March 31 next year.
- Section 153(8)
Section 153(8) covers the order of assessment or reassessment that stands revived under sub-section (2) of Section 153A. An AO should conduct an assessment within one year from the end of the month of such revival or within the period specified in this Section or sub-section (1) of Section 153B, whichever is later.
Also Read: Different Types Of Taxes In India
Final Word
In FY 2019-20, 8,13,22,263 taxpayers paid income tax. For such a large population, income tax assessment becomes a vital part of our tax system. It is the duty of an assessing officer to ensure that the income details submitted by each taxpayer are genuine.
However, as this procedure takes place every financial year, there has to be a time limit. Section 153 of the Income Tax Act sets the last date for an AO to complete assessment, reassessment or recomputation.
Also Read: Calculate Income Tax In Excel
Frequently Asked Questions On Section 153A Of The Income Tax Act
Section 153A of the Income Tax Act establishes a mechanism to complete income assessment upon initiation of a search under Section 132. In this instance, an assessing officer can frame a taxpayer’s assessment for six years immediately after the year of search.
If you are not satisfied with an Assessing officer’s decision, you can file an appeal to a higher authority. First, you can approach a Commissioner. Subsequently, you can take the appeal to the Appellate Tribunal, High Court, and then the Supreme Court.
Section 153C of the Income Tax Act establishes guidelines for the assessment of income of any other person. It mentions an AO has jurisdiction over any money, jewellery, books of account or documents received that belong to someone apart from the one referred to in Section 153A.
Recently, the Income Tax Department launched a digital appeal filing facility. An assessee can file Form 35 against an assessing officer’s order. Your appeal will directly reach the Commissioner of Income Tax (Appeals). However, to file Form 35, one has to pay a fee ranging from Rs. 250 to Rs. 1,000.
The Income Tax Department grants an assessing officer the right to assess or reassess any taxable income that escapes the radar. Furthermore, an AO has the power to reassess an income that did not follow assessment guidelines. For both these purposes, an AO has to follow provisions mentioned under Section 147 through to Section 153.
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