What is Assessment under Section 147 of Income Tax Act, 1961? What is Escaped
Assessment? How to prepare Return under Section 148? What is the time Limit to
complete Escaped Assessment?
Income Tax Assessment Under Section 147 of Income Tax Act
Assessment U/s 147 is carried out if the Assessing Officer has reason to believe
that any income chargeable to tax has escaped assessment for any assessment
Scope of assessment under section 147
The objective of carrying out assessment under section 147 is to bring under
the tax net any income which has escaped assessment in original assessment.
Original assessment here means an assessment under sections 143(1), 143(3),
144 and 147 (as the case may be). In other words, if any income has escaped (*)
from being taxed in the original assessment made under section 143(1) or section
143(3) or section 144 or section 147, then the same can be brought under tax net
by resorting to assessment under section 147. (*) In the following cases, it
will be considered as income having escaped assessment:
Where no return of income has been furnished by the taxpayer, although his
total income or the total income of any other person in respect of which he is
assessable during the previous year exceeded the maximum amount which is not
chargeable to income-tax.
Where a return of income has been furnished by the taxpayer but no assessment
has been made and it is noticed by the Assessing Officer that the taxpayer has
understated the income or has claimed excessive loss, deduction, allowance or
relief in the return.
Where the taxpayer has failed to furnish a report in respect of any
international transaction which he was required to do under section 92E.
Where an assessment has been made, but:
i. income chargeable to tax has been under assessed; or
ii. income has been assessed at low rate; or
iii. income has been made the subject of excessive relief; or
iv. excessive loss or depreciation allowance or any other allowance has been
Where a person is found to have any asset (including financial interest in
any entity) located outside India.
Procedure of assessment under section 147
For making an assessment under section 147, the Assessing Officer has to
issue notice under section 148 to the taxpayer and has to give him an
opportunity of being heard. The time-limit for issuance of notice under section
148 is discussed in later part.
If the Assessing Officer has reason to believe that any income chargeable to
tax has escaped assessment for any assessment year, then he may assess or
reassess such income and also any other income chargeable to tax which has
escaped assessment and which comes to his notice subsequently in the course of
the proceedings under this section. He is also empowered to re-compute the loss
or the depreciation allowance or any other allowance, as the case may be, for
the assessment year concerned.
Items which are the subject matters of any appeal, reference or revision
cannot be covered by the Assessing Officer under section 147.
Time-limit for Completion of Assessment u/s 147
As per section 153, assessment under section 147 shall be made
within a period of one year from the end of the financial year in
which notice under section 148 is served on the taxpayer.
What is Time-limit for issuance of notice under section 148
Notice under section 148 can be issued within a period of 4 (*) years from
the end of the relevant assessment year. If the escaped income is Rs. 1,00,000
or more and certain other conditions are satisfied, then notice can be issued
upto 6 years from the end of the relevant assessment year.
In case the escaped income relates to any asset (including financial interest in
located outside India, notice can be issued upto 16 years from the end of the
relevant assessment year. Notice under section 148 can be issued by AO only
after getting prior approval from the prescribed authority.