1. Assessment v/s Reassessment
Post filing a tax return, the returns are automatically processed at the Central Processing Centre (CPC) in Bangalore. The software automatically selects certain cases for further scrutiny by the Assessing Officer (‘AO’) based on certain criteria fixed by the Central Board of Direct Taxes (CBDT)
I. Assessment
The entire proceedings from the time a taxpayer receives a notice to the time the assessing officer passes the final assessment order determining the final taxable income of the taxpayer is called an assessment proceeding.
A scruntiy assessment notice can be issued with one year from the end of the financial year in which the return of income has been filed.
Example:
Raghav filed his income tax return on 5th July 2017 for the year ending 31st March 2017. The return has been filed in FY 2017-18. Therefore, Raghav can be issued an assessment notice anytime before 31st March 2019.
II. Reassessment
If an AO has any reason to believe that any income chargeable to tax has escaped assessment, the AO has authority to reopen the case for scrutiny.
Scrutiny proceedings in the case of Mr Rohan for FY 2015-16, have concluded and the tax authorities are in agreement with the income Rohan has disclosed in his return. Subsequently, the assessing officer receives some information with regard to a sale of land that Rohan has carried out during the FY 2015-16, capital gains from which, was not disclosed by Rohan in his return for FY 2015-16. On the basis of such information, the AO can reopen the assessment.
2. Instances Income having Escaped Assessment
i. In technical terms, the income which is not disclosed at the time of filing returns is referred to as the income escaping assessment
ii. Instances which are considered as income escaping assessment
iii. Where the assessee has an income exceeding the taxable limit i.e. Rs 2,50,000 (the limit will be Rs 3,00,000 and Rs 5,00,000 for senior citizens and very senior citizens respectively)
iv. Where the assessee has filed the return but it is found that the income disclosed is understated or has losses/ deductions have been overstated
v. In case of any international transaction, the assessee has not filed the relevant report under section 92E
vi. If it has been found the assessee has any assets outside India
3. Time Period to Issue Notice
As per law, a valid notice must always be served before an assessment or reassessment. In case of reassessment the AO must record the reasons for doing so.
4. Persons Authorised to Issue a Reassessment Notice
i. No Assessing Officer (‘AO’) who is currently ranked below the position of an Assistant Commissioner or Deputy Commissioner will be permitted to issue a notice to an assessee
ii. This can only be circumvented by the Joint Commissioner, provided he or she is content that the reasons given by the Assessing Officer are valid enough for the issuance of any notice to an assessee
Frequently Asked Questions
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What is the time limit for completion of assessment or reassessment?
Time limit for completion of assessment and reassessment is 9 months form the end of the financial year in which the notice was served.
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Can notice for assessment and reassessment be made beyond 4 years ?
Yes, if the income escaping assessment is more than Rs.100000 and for income earned outside India, notice can be served beyond 4 years upto 6 years or 16 years respectively.
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