Provision Of Reassessment Under Income Tax Act 1961- PART I
Reassessment of income as the word suggests is assessing the income of an assessee again even when the assessment has taken place earlier. Such reassessment of income is often carried out when the AO notices that some of the income has not been included in the assessment and its source needs to be explored further. Escapement of income is another reason that can make the AO decide for the reassessment of the income. This can be also in the case where no earlier assessment has been carried out. If the same process is carried out in normal manner, it is taken as normal assessment of income. However, when it comes under the escapement of income it has to be handled according to the Income Tax Act 1961 meant for reassessment of income tax.
Power to Reassess
In general cases, the normal assessment is enough. However, when escapement of income is detected or suspected reassessment becomes necessary. That is why under the Income Tax Act 1961 for safeguarding the revenue the power to reassess the assessee has been bestowed to check the revenue sources perfectly that might have been missed during the earlier assessment. Under this Act the provisions in the section 147 to 153 has been taken into consideration. This gives the reassessment officer the power to reassess the income of an assessee merely on the belief that some income source has escaped consideration during the earlier assessment.
Income escaping reassessment-Section 147
The AO can reassess any income that has escaped the earlier assessment and attracts tax. There are many income sources attracting tax and such income is not considered as income escaping. There are certain situations and conditions laid down under the section 147 that comes under the income escaping reassessment.
Case Situation 1
The assessee does not file Income Tax Returns:
In this case, income-escaping reassessment is applicable if the AO feels that the total income of the person or the total income of any other person who contributes to the income of the assessee has reached taxable limits. In such a situation merely based on belief, the AO can take steps to reassess the assessee.
Case Situation 2
The assessee has filed Income Tax Returns:
In this case, the income escaping reassessment is applicable if the AO feels that the assessee has falsely claimed excessive loss, allowance, relief or deduction and tried to escape from the income tax he should be paying on the total earned income.