Understand the provisions related to income assessment under Section 147
Section 147 of the Income Tax Act, 1961, details the conditions for tax assessment and payment. It allows the Assessment Officer (AO) to assess or reassess your Income Tax Return (ITR). This is if they suspect that you have concealed information. But the AO can only reopen the assessment proceeding in certain circumstances.
For instance, your income details may be reassessed if it has escaped assessment. This could be either wholly or partly. This section was amended as per the Finance Act 2021.
Here is its scope under Section 147 of the Income Tax Act:
If your total annual income exceeds the basic exemption limit but you have not filed an ITR
If you have furnished ITR details but the Income Tax Department has not assessed the same
If you claimed excessive losses or deductions when calculating total taxable income
If an AO suspects that you evaded income tax, they can start an assessment procedure. Here is the process followed for assessment under Section 147:
The AO conducts an inquiry with prior approval of the prescribed authorities
You get an opportunity to be heard within 7-30 days from when the notice has been issued
- The AO passes an order u/s 148 (d) with approval of the prescribed authorities within 1 month of your response
Alternatively, if you do not respond within the given time frame, the AO can issue notice within one month. This is from the month's end of expiry of the time given.
The assessment timeframe starts from the end of the financial year. This is from when the notice was issued. Here is the specified timeline to issue a notice under Section 147:
10 years from the end of the relevant assessment year when the tax authority has
Books of accounts or other documents
Income that escaped assessment is more than ₹50 Lakhs or in the form of an asset
3 years from the end of the relevant assessment year in any other case
Frequently Asked Questions
What is Section 147 of the Income Tax Act?
Section 147 of the Income Tax Act, 1961, empowers Assessment Officers to serve a notice. They can issue it if they suspect you concealed details related to your income to evade taxes.
After three years, can an AO reopen an assessment proceeding under Section 147 of the Income Tax Act?
Yes. This is if the income that has escaped assessment exceeds ₹50 Lakhs or is in the form of an asset.
Who is eligible to issue the notice according to Section 147?
Only an AO who holds power equal to the rank of a Deputy or Assistant Commissioner can send the notice under Section 147.
When can the Income Tax Department scrutinise my tax returns?
The I-T department can examine your ITR within six months from the end of the relevant financial year.
Can I appeal against the reassessment order under Section 147?
Yes. The AO must give you up to 30 days to respond to the notice, during which you can appeal.
How to respond to a notice issued under Section 147?
If the notice does not provide reasons, you can request the AO to provide them. In case you are satisfied with the recorded reasons, file your ITR with the penalty charges.
Can I ignore an Income Tax notice under Section 147?
No. You will have to send your response within 30 days or the time specified by the Assessment Officer. If you don’t, it can lead to penalties, interest on the unpaid taxes, or other legal proceedings.
What is the difference between Sections 147 and 148?
Section 147 allows the AO to issue a notice if they suspect taxpayers of evading taxes. It permits them to reopen assessment proceedings. Section 148 establishes a timeline and procedures to be followed after the notice is issued.
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