Subscribe and get "Guide For Startups"
Scope of assessment under section 144
Assessment under section 144
This is an assessment carried out as per the best judgment of the Assessing Officer on the basis of all relevant material he has gathered. This assessment is carried out in cases where the taxpayer fails to comply with the requirements specified in section 144.
Scope of assessment under section 144
As per section 144, the Assessing Officer is under an obligation to make an assessment to the best of his judgment in the following cases:-
If the taxpayer fails to file the return required within the due date prescribed under section 139(1) or a belated return under section 139(4) or a revised return under section 139(5).
If the taxpayer fails to comply with all the terms of a notice issued under section 142(1).
Note: The Assessing Officer can issue notice under section 142(1) asking the taxpayer to file the return of income if he has not filed the return of income or to produce or cause to be produced such accounts or documents as he may require and to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the taxpayer, whether included in the accounts or not) as he may require.
If the taxpayer fails to comply with the directions issued under section 142(2A).
Note : Section 142(2A) deals with special audit. As per section 142(2A), if the conditions justifying special audit as given in section 142(2A) are satisfied, then the Assessing Officer will direct the taxpayer to get his accounts audited from a chartered accountant nominated by the principal chief commissioner or Chief Commissioner or Principal Commissioner or Commissioner and to furnish a report of such audit in the prescribed form.
If after filing the return of income the taxpayer fails to comply with all the terms of a notice issued under section 143(2), i.e., notice of scrutiny assessment.
If the assessing officer is not satisfied about the correctness or the completeness of the accounts of the taxpayer or if no method of accounting has been regularly employed by the taxpayer.
From the above criteria, it can be observed that best judgment assessment is resorted to in cases where the return of income is not filed by the taxpayer or if there is no cooperation by the taxpayer in terms of furnishing information / explanation related to his tax assessment or if books of accounts of taxpayer are not reliable or are incomplete.
The Finance Act, 2018 has inserted Section 143(3A) to implement e-assessment scheme for the regular assessment carried out by the Assessing Officer under Section 143(3).
Now, the Finance Act 2020 has expanded the scope of e-assessment to cover the best judgment assessments under Section 144. The Central Government may issue necessary directions in this regard by 31-03-2022.
Procedure of assessment under section 144
If the conditions given above calling for best judgment are satisfied, then the Assessing Officer will serve a notice on the taxpayer to show cause why the assessment should not be completed to the best of his judgment.
No notice as given above is required in a case where a notice under section 142(1) has been issued prior to the making of an assessment under section 144.
If the Assessing Officer is not satisfied by the arguments of the taxpayer and he has reason to believe that the case demands a best judgment, then he will proceed to carry out the assessment to the best of his knowledge.
If the criteria of the best judgment assessment are satisfied, then after taking into account all relevant materials which the Assessing Officer has gathered, and after giving the taxpayer an opportunity of being heard, the Assessing Officer shall make the assessment of the total income or loss to the best of his knowledge/judgment and determine the sum payable by the taxpayer on the basis of such assessment.
As per Section 153, the time limit for making assessment under section 144 is:-
- Within 21 months from the end of the assessment year in which the income was first assessable. [For assessment year 2017-18 or before]
- 18 months from the end of the assessment year in which the income was first [for assessment year 2018-19]
- 12 months from the end of the assessment year in which the income was first assessable [Assessment year 2019-20 and onwards]
Note:- If reference is made to TPO, the period available for assessment shall be extended by 12 months.
Login to post comment