Income Tax

The Procedure for Reassessment Proceedings under the Income Tax Act

When you are filing for income tax in India, you should be aware of the jargons that are present in the Income Tax Act. There are several complicated sections, subsections, clauses and sub-clauses that may make it difficult for a layman to understand. Here in this article, an important aspect of the act has been discussed – the procedure of reassessment under Section 147 of the Income Tax Act.

Assessment is a procedure that is adopted by Income Tax officials to determine the correctness of the income disclosed by the assessee or the taxpayer


What is an assessment Under Income Tax Act?

Before you go onto reassessment, you should know what assessment is. Assessment is a procedure that is adopted by Income Tax officials to determine the correctness of the income disclosed by the assessee or the taxpayer and hence, part of the taxable income.

What is reassessment- What Is Process for re-assessment and under what circumstances is it warranted?

Now coming to reassessment, Section 147 and Section 148 of the Income Tax Act has been well designed to empower the Income Tax Department in assessing, reassessing, or re-computing the income, the turnover and as such, which may have escaped the assessment. The Section 147 and Section 148 of the Act, contains the pre-requisite conditions that have to be fulfilled for summoning the jurisdiction needed to reopen the assessment.

Procedures followed for re-assessment

For conducting a re-assessment under Section 147, the Assessing Officer must follow an already laid down procedure. It goes as follows:

  1. The Assessing Officer (AO) must have reasons, as the existence of reason is mandatory to conduct a reassessment.
  2. The AO must obtain sanctions from higher authority in the Income Tax Department as stated under Section 151 of the Income Tax Act.
  3. The AO must issue a notice to the assessee as stated under Section 148. The time limit for issue of the notice is normally for a period of 4 to 6 years. This time limit will become 16 years if the asset in question is located outside India. However, this time limit will become indefinite if the order passed by the authority is involved in court proceedings.
  4. The assessee will have to submit the return within the time period as prescribe din the notice. The assessee has the liberty to demand reasons from the Assessing Officer, as stated under the Section 147 of the Act.
  5. Following the previous step, the AO shall issue another notice as per the Section 143(2) of the ACT. This notice is mandatory under Section 143(2).
  6. In response to notice under Section 148, the assessee can request for considering the return filed under Section 139(1) or 139(1)/(4)/(5), instead of filing a fresh return.
  7. During re-assessment under Section 147, the assessee can submit all the objections and provide substantial details.
  8. The AO is obligated to answer the objections raised by the assessee and frame the reassessment order based on that.
  9. The assesee is free to file a Writ Petition before High Court and/or appeal before CIT (A), if he/she is not happy with the reassessment proceedings.
  10. The assessment order should be passed within a year from the end of the financial year, in which the notice under Section 148 was served to the assessee.
  11. The Income Tax Officer can charge a penalty for every addition made during the assessment.
  12. A penalty cannot be charged, if the assessee makes a bonafide claim without any malafide intention.
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