17.

1 RETURN OF INCOME
The Income-tax Act, 1961 contains provisions for filing of return of income. Return of income is the
format in which the assessee furnishes information as to his total income and tax payable. The format
for filing of returns by different assessees is notified by the CBDT. The particulars of income earned
under different heads, gross total income, deductions from gross total income, total income and tax
payable by the assessee are generally required to be furnished in a return of income. In short, a return
of income is the declaration of income by the assessee in the prescribed format.

17.2 COMPULSORY FILING OF RETURN OF INCOME

[SECTION 139(1)]
(1) As per section 139(1), it is compulsory for companies and firms to file a return of income or loss
for every previous year on or before the due date in the prescribed form.
(2) In case of a person other than a company or a firm, filing of return of income on or before the due
date is mandatory, if his total income or the total income of any other person in respect of which
he is assessable under this Act during the previous year exceeds the basic exemption limit.
(3) A return of income or loss for the previous year in the prescribed form and verified in the
prescribed manner on or before the due date, has to be filed by every person, being a resident
other than not ordinarily resident in India within the meaning of section 6(6), who is not required
to furnish a return under section 139(1) if such person, at any time during the previous year –
(a) holds, as a beneficial owner or otherwise, any asset (including any financial interest in
any entity) located outside India or has a signing authority in any account located outside
India; or
(b) is a beneficiary of any asset (including any financial interest in any entity) located outside
India.
However, an individual being a beneficiary of any asset (including any financial interest in any
entity) located outside India would not be required to file return of income, where, income, if
any, arising from such asset is includible in the income of the person referred to in (a) above in
accordance with the provisions of the Income-tax Act, 1961.
 Meaning of “beneficial owner” and “beneficiary” in respect of an asset for the purpose of
section 139:

An individual who has provided, directly or

Beneficial Owner indirectly, consideration for the asset for the
immediate or future benefit, direct or indirect,
of himself or any other person.

An individual who derives benefit from the

Beneficiary
asset during the previous year and the
consideration for such asset has been
provided by any person, other than such
beneficiary.

Requirement of filing of return of income as per the fourth and fifth proviso to section 139(1)

A resident other than not ordinarily resident within the

meaning of section 6(6)

Who is not required to furnish a return of income

u/s 139/(1)
AND
Who at any time during the P.Y.

A B

is a beneficiary of any asset

has a signing authority (including financial interest in
holds, as beneficial any entity) located outside
owner or otherwise, OR in any account located
outside India India
any asset (including
financial interest in any
entity) located outside

However, where any income arising from such asset is includible in the hands of the person specified in
(A) in accordance with the provisions of the Act, an individual, being a beneficiary of such asset, is not
required to file return of income.
(4) All such persons mentioned in (1), (2) & (3) above should, on or before the due date, furnish a
return of his income or the income of such other person during the previous year in the
prescribed form and verified in the prescribed manner and setting forth such other particulars
as may be prescribed.
(5) Further, every person, being an individual or a HUF or an AOP or BOI or an artificial juridical
person -
 whose total income or the total income of any other person in respect of which he is
assessable under this Act during the previous year
 without giving effect to the exemption provisions contained in sections 54/54B/54D/
54EC/54F/54G/54GA/54GB in respect of capital gains or deductions under Chapter VI-
A
 exceeds the basic exemption limit
is required to file a return of his income or income of such other person on or before the due date
in the prescribed form and manner and setting forth the prescribed particulars.
For the A.Y.2020-21, the basic exemption limit is ` 2,50,000 for individuals/HUFs/AOPs/BOIs
and artificial juridical persons, ` 3,00,000 for resident individuals of the age of 60 years or more
but less than 80 years and ` 5,00,000 for resident individuals of the age of 80 years or more at
any time during the previous year. These amounts denote the level of total income, which is arrived
at after claiming exemption under sections 54/54B/54D/54EC/54F/ 54G/54GA/54GB in
respect of capital gains and the admissible deductions under Chapter VI-A. However, the level
of total income to be considered for the purpose of filing return of income is the income before
claiming exemption under sections 54/54B/54D/54EC/54F/ 54G/54GA/54GB in respect of
capital gains and the admissible deductions under Chapter VI-A.
(6) Any person other than a company or a firm, who is not required to furnish a return under
section 139(1), would have to file income-tax return in the prescribed form and manner on
or before the due date if, during the previous year, such person –
(a) has deposited an amount or aggregate of the amounts exceeding
` 1 crore in one or more current accounts maintained with a banking company
or a co-operative bank; or
(b) has incurred expenditure of an amount or aggregate of the amounts exceeding
` 2 lakh for himself or any other person for travel to a foreign country; or
(c) has incurred expenditure of an amount or aggregate of the amounts exceeding
` 1 lakh towards consumption of electricity; or
(d) fulfils such other prescribed conditions
(7) Meaning of due date : ‘Due date’ means -

Assessee Due Date

(i) Where the assessee, other than an assessee referred to 30th September of the
in clause (ii), is - assessment year
(a) a company,
(b) a person (other than a company) whose accounts
are required to be audited under the Income-tax Act,
1961 or any other law in force; or
(c) a working partner of a firm whose accounts are
required to be audited under the Income-tax Act,
1961 or any other law for the time being in force.
(ii) in the case of an assessee who is required to furnish a 30th November of the
report referred to in section 92E. assessment year
(iii) in the case of any other assessee. 31st July of the
assessment year

17.3 INTEREST FOR DEFAULT IN FURNISHING RETURN

OF INCOME [SECTION 234A]
(1) Interest under section 234A is attracted for failure to file a return of income on or before the due
date mentioned above i.e. interest is payable where an assessee furnishes the return of income
after the due date or does not furnish the return of income.
(2) Simple interest @ 1% per month or part of the month is payable for the period commencing
from the date immediately following the due date and ending on the following dates -

Circumstances Ending on the following dates

Where the return is furnished after due the date of furnishing of the return
date
Where no return is furnished the date of completion of assessment

(3) The interest has to be calculated on the amount of tax on total income as determined under
section 143(1) or on regular assessment as reduced by the advance tax paid and any tax
deducted or collected at source, relief of tax allowed under section 89/90/90A/91, and tax credit
allowed to be set-off in accordance with section 115JAA or 115JD.
 17.4 OPTION TO FURNISH RETURN OF INCOME TO
EMPLOYER [SECTION 139(1A)]
(1) This section gives an option to a person, being an individual who is in receipt of income
chargeable under the head “Salaries”, to furnish a return of his income for any previous year to
his employer, in accordance with such scheme as may be notified by the CBDT and subject to
such conditions as may be specified therein.
(2) Such employer shall furnish all returns of income received by him on or before the due date, in
such form (including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other
computer readable media) and manner as may be specified in that scheme.
(3) In such a case, any employee who has filed a return of his income to his employer shall be
deemed to have furnished a return of income under sub-section (1).

17.5 SPECIFIED CLASS OR CLASSES OF PERSONS TO BE

EXEMPTED FROM FILING RETURN OF INCOME
[SECTION 139(1C)]
(1) Under section 139(1), every person has to furnish a return of his income on or before the due
date, if his total income exceeds the basic exemption limit.
(2) For reducing the compliance burden of small taxpayers, the Central Government has been
empowered to notify the class or classes of persons who will be exempted from the requirement
of filing of return of income, subject to satisfying the prescribed conditions.
Accordingly, the Central Government has, vide Notification No. S.O.2672(E) dated
26.7.2019, exempted non-corporate non-residents and foreign companies, having any
income chargeable under the Income-tax Act, 1961 during a previous year from any
investment fund set up in an International Financial Services Centre (IFSC) located in India,
from the requirement of furnishing a return of income under section 139(1) from A.Y.2019-
20 onwards.
The exemption from filing return of income would be available to such class of persons
only if any income-tax due on income of the said class of persons has been deducted at
source and remitted to the Central Government by the investment fund at the tax-rate in
force as per provisions of section 194LBB; and there is no other income during the
previous year for which the said class of persons, is otherwise liable to file the tax-return.
Also, the exemption from the requirement of furnishing a return of income shall not be
available to the said class of persons where a notice under section 142(1) or section 148
or section 153A or section 153C has been issued for filing a return of income for the
assessment year specified therein.
 For this purpose, “investment fund” means any fund established or incorporated in India
in the form of a trust or a company or a limited liability partnership or a body corporate
which has been granted a certificate of registration as a Category I or Category II
Alternative Investment Fund (AIF) and is regulated under the SEBI (AIF) Regulations, 2012
made under the SEBI Act, 1992.
(3) Every notification issued under section 139(1C) shall, as soon as may be after its issue, be laid
before each House of Parliament while it is in session, for a total period of thirty days. If both
Houses agree in making any modification in the notification, the notification will thereafter have
effect only in such modified form. If both Houses agree that the notification should not be issued,
the notification shall thereafter have no effect.

17.6 RETURN OF LOSS [SECTION 139(3)]

(1) This section requires the assessee to file a return of loss in the same manner as in the case
of return of income within the time allowed under section 139(1).
(2) Section 80 requires mandatory filing of return of loss under section 139(3) on or before the
due date specified under section 139(1) for carry forward of the following losses
(a) Business loss under section 72(1)
(b) Speculation business loss under section 73(2)
(c) Loss from specified business under section 73A(2)
(d) Loss under the head “Capital Gains” under section 74(1)
(e) Loss from the activity of owning and maintaining race horses under section 74A(3)
(3) Consequently, section 139(3) requires filing of return of loss mandatorily within the time allowed
under section 139(1) for claiming carry forward of the losses mentioned in (2) above.
(4) However, loss under the head “Income from house property” under section 71B and unabsorbed
depreciation under section 32 can be carried forward for set-off even though return of loss has
not been filed before the due date.
(5) A return of loss has to be filed by the assessee in his own interest and the non-receipt of a notice
from the Assessing Officer requiring him to file the return cannot be a valid excuse under any
circumstances for the non-filing of such return.

17.7 BELATED RETURN [SECTION 139(4)]

(1) Any person who has not furnished a return within the time allowed to him under section 139(1)
may furnish the return for any previous year at any time -
(i) before the end of the relevant assessment year; or
 (ii) before the completion of the assessment,
whichever is earlier.
(2) Thus, belated return can be filed only in case a person has not furnished his return within the
time allowed under section 139(1). Also, the belated return cannot be furnished after the end of
the relevant assessment year.

17.8 RETURN OF INCOME OF CHARITABLE TRUSTS AND

INSTITUTIONS [SECTION 139(4A)]
(1) Every person in receipt of income -
(i) derived from property held under a trust or any other legal obligation wholly or partly
for charitable or religious purpose; or
(ii) by way of voluntary contributions on behalf of such trust or institution
must furnish a return of income if the total income in respect of which he is assessable as a
representative assessee (computed before allowing any exemption under sections 11 and
12) exceeds the basic exemption limit.
(2) Such persons should furnish the return in the prescribed form and verified in the prescribed
manner containing all the particulars prescribed for this purpose.
(3) This return must be filed by the representative-assessee voluntarily within the time limit. Any
failure on the part of the assessee would attract liability to pay interest and penalty.

17.9 RETURN OF INCOME OF POLITICAL PARTIES

[SECTION 139(4B)]
(1) Under this section, a political party is required to file a return of income if, before claiming
exemption under section 13A, the party has taxable income.
(2) The grant of exemption from income-tax to any political party under section 13A is subject to
the condition that the political party submits a return of its total income within the time limit
prescribed under section 139(1).
(3) The Chief Executive Officer of the political party is statutorily required to furnish a return of income
of the party for the relevant assessment year, if the amount of total income of the previous year
exceeds the basic exemption limit before claiming exemption under section 13A.
(4) The return must be filed in the prescribed form and verified in the prescribed manner setting
forth such other particulars as may be prescribed by the CBDT.
(5) The provisions of the Act would apply as if it were a return required to be furnished under section
139(1).
 17.10 MANDATORY FILING OF RETURNS BY SCIENTIFIC
RESEARCH ASSOCIATIONS, NEWS AGENCY, TRADE
UNIONS, ETC. [SECTION 139(4C)]
(1) It will be mandatory for the following institutions/associations/persons etc. to file the return of
income if their total income without giving effect to exemption under section 10, exceeds the
basic exemption limit –
Institution/Association etc. Applicable section
(a) Research association 10(21)
(b) News agency 10(22B)
(c) Association or institution 10(23A)
(d) Fund for the welfare of employees or their dependents 10(23AAA)
(e) Institution 10(23B)
(f) Fund or institution 10(23C)(iv)
(g) Trust or institution 10(23C)(v)
(h) University or other educational institution 10(23C)(vi)/(iiiad)
(i) Hospital or other medical institution 10(23C)(via)/(iiiae)
(j) Mutual Fund 10(23D)
(k) Securitisation Trust 10(23DA)
(l) Investor Protection Fund 10(23EC)/(ED)
(m) Core Settlement Guarantee Fund 10(23EE)
(n) Venture Capital Company/Venture Capital Fund 10(23FB)
(o) Trade Union 10(24)(b)
(p) Board or Authority as referred 10(29A)
(q) Body or Authority or Board or Trust 10(46)
(r) Infrastructure Debt Fund 10(47)

(2) Such return of income should be in the prescribed form and verified in the prescribed manner
and setting forth such other particulars as may be prescribed.
(3) Then, the provisions of the Act would apply as if it were a return required to be furnished under
section 139(1).
 17.11 MANDATORY FILING OF RETURNS BY
UNIVERSITIES, COLLEGES ETC. [SECTION 139(4D)]
(1) It will be mandatory for every university, college or other institution referred to in clause (ii) and
clause (iii) of section 35(1), which is not required to furnish its return of income or loss under
any other provision of section 139, to furnish its return in respect of its income or loss in every
previous year.
(2) All the provisions of the Income-tax Act, 1961 shall apply to such return as if it were a return
under section 139(1).

17.12 FILING OF RETURN OF INCOME BY A BUSINESS

TRUST [SECTION 139(4E)]
(1) Every business trust, which is not required to furnish return of income or loss under any other
provision of this section, has to furnish the return of its income in respect of its income or loss
in every previous year.
(2) All the provisions of the Income-tax Act, 1961 shall apply as if it were a return required to be
filed under section 139(1).

17.13 FILING OF RETURN OF INCOME BY INVESTMENT

FUND [SECTION 139(4F)]
(1) Every investment fund referred to in section 115UB, which is not required to furnish return of
income or loss under any other provision of this section, shall furnish the return of income in
respect of income or loss in every previous year.
(2) All the provisions of the Income-tax Act, 1961 shall apply as if it were a return required to be
filed under section 139(1).

17.14 REVISED RETURN [SECTION 139(5)]

(1) If any person having furnished a return under section 139(1) or section 139(4), discovers any
omission or any wrong statement therein, he may furnish a revised return at any time before
the end of the relevant assessment year or before completion of assessment, whichever
is earlier.
(2) The return can be revised for any number of times within the given time limit. In this case the
latest revised return filed replaces all other returns filed earlier.
 17.15 PARTICULARS TO BE FURNISHED WITH THE
RETURN [SECTION 139(6)]
The prescribed form of the return shall, in certain specified cases, require the assessee to furnish
the particulars of -
(1) income exempt from tax
(2) assets of the prescribed nature and value, held by him as a beneficial owner or otherwise or in
which he is a beneficiary.
(3) his bank account and credit card held by him
(4) expenditure exceeding the prescribed limits incurred by him under prescribed heads
(5) such other outgoings as may be prescribed.

17.16 PARTICULARS TO BE FURNISHED WITH RETURN OF

INCOME IN THE CASE OF AN ASSESSEE ENGAGED
IN BUSINESS OR PROFESSION [SECTION 139(6A)]
The prescribed form of the return shall, in the case of an assessee engaged in any business or
profession also require him to furnish -
(1) the report of any audit referred to in section 44AB.
(2) the particulars of the location and style of the principal place where he carries on the business
or profession and all the branches thereof.
(3) the names and addresses of his partners, if any, in such business or profession.
(4) if he is a member of an association or body of individuals,
(a) the names of the other members of the association or the body of individuals; and
(b) the extent of the share of the assessee and the shares of all such partners or members,
as the case may be, in the profits of the business or profession.

17.18 PERMANENT ACCOUNT NUMBER (PAN)

[SECTION 139A]
(1) Section 139A(1) requires the following persons mentioned in column (2), who have not been
allotted a permanent account number (PAN), to apply to the Assessing Officer within the time
specified in column (3) for the allotment of a PAN –
(1) (2) (3)
Persons required to apply for PAN Time limit for making such
application
 (i) Every person, if his total income or the total On or before 31st May of the
income of any other person in respect of which he assessment year for which such
is assessable under the Act during any previous income is assessable
year exceeds the maximum amount which is not
chargeable to income-tax
(ii) Every person carrying on any business or Before the end of that financial year
profession whose total sales, turnover or gross (previous year).
receipts are or is likely to exceed ` 5 lakhs in any
previous year
(iii) Every person who is required to furnish a return Before the end of the financial year
of income under section 139(4A)
(iv) Every person being a resident, other than an On or before 31st May of the
individual, which enters into a financial immediately following financial year
transaction of an amount aggregating to
` 2,50,000 or more in a financial year
(v) Every person who is a managing director, On or before 31st May of the
director, partner, trustee, author, founder, karta, immediately following financial year
chief executive officer, principal officer or office in which the person referred in (iv)
bearer of any person referred in (iv) above or any enters into financial transaction
person competent to act on behalf of such person specified therein.
referred in (iv) above
Further, for widening the tax base, every person who has not been allotted a PAN and
intends to enter into such transaction as prescribed by the CBDT is also required to apply
to the Assessing Officer for allotment of PAN (inserted w.e.f. 1.9.2019)
(2) The Central Government is empowered to specify, by notification in the Official Gazette, any
class or classes of persons by whom tax is payable under the Act or any tax or duty is payable
under any other law for the time being is force. Such persons are required to apply within such
time as may be mentioned in that notification to the Assessing Officer for the allotment of a
PAN [Sub-section (1A)].
(3) For the purpose of collecting any information which may be useful for or relevant to the purposes
of the Act, the Central Government may notify any class or classes of persons, and such
persons shall within the prescribed time, apply to the Assessing Officer for allotment of a PAN
[Sub-section (1B)].
(4) The Assessing Officer, having regard to the nature of transactions as may be prescribed, may
also allot a PAN to any other person (whether any tax is payable by him or not) in the manner
and in accordance with the procedure as may be prescribed [Sub-section (2)].
(5) Any person, other than the persons mentioned in (1) to (4) above, may apply to the Assessing
Officer for the allotment of a PAN and the Assessing Officer shall allot a PAN to such person
immediately.
(6) Such PAN comprises of 10 alphanumeric characters.
(7) Quoting of PAN is mandatory in all documents pertaining to the following prescribed transactions:
(a) in all returns to, or correspondence with, any income-tax authority;
(b) in all challans for the payment of any sum due under the Act;
(c) in all documents pertaining to such transactions entered into by him, as may be
prescribed by the CBDT in the interests of revenue. In this connection, CBDT has notified
the following transactions, namely:
S. Nature of transaction Value of transaction
No.
1. Sale or purchase of a motor vehicle or vehicle, as defined All such transactions
in the Motor Vehicles Act, 1988 which requires registration
by a registering authority under that Act, other than two
wheeled vehicles.
2. Opening an account [other than a time-deposit referred All such transactions
to at Sl. No.12 and a Basic Savings Bank Deposit
Account] with a banking company or a co-operative bank
to which the Banking Regulation Act, 1949 applies
(including any bank or banking institution referred to in
section 51 of that Act).
3. Making an application to any banking company or a co- All such transactions
operative bank to which the Banking Regulation Act, 1949,
applies (including any bank or banking institution referred
to in section 51 of that Act) or to any other company or
institution, for issue of a credit or debit card.
4. Opening of a demat account with a depository, participant, All such transactions
custodian of securities or any other person registered
under section 12(1A) of the SEBI Act, 1992.
5. Payment to a hotel or restaurant against a bill or bills at Payment in cash of an
any one time. amount exceeding
` 50,000.
6. Payment in connection with travel to any foreign country or Payment in cash of an
payment for purchase of any foreign currency at any one amount exceeding
time. ` 50,000.
7. Payment to a Mutual Fund for purchase of its units Amount exceeding
` 50,000.
8. Payment to a company or an institution for acquiring Amount exceeding
debentures or bonds issued by it. ` 50,000.
9. Payment to the Reserve Bank of India for acquiring bonds Amount exceeding
issued by it. ` 50,000.
10. Deposit with Cash deposits exceeding
- a banking company or a co-operative bank to which ` 50,000 during any one
the Banking Regulation Act, 1949, applies (including day.
any bank or banking institution referred to in section
51 of that Act); or
- post office
11. Purchase of bank drafts or pay orders or banker’s Payment in cash of an
cheques from a banking company or a co-operative bank amount exceeding
to which the Banking Regulation Act, 1949 applies ` 50,000 during any one
(including any bank or banking institution referred to in day.
section 51 of that Act).
12. A time deposit with, - Amount exceeding
(i) a banking company or a co-operative bank to ` 50,000 or aggregating to
which the Banking Regulation Act, 1949 applies more than ` 5 lakh during
(including any bank or banking institution referred a financial year.
to in section 51 of that Act);
(ii) a Post Office;
(iii) a Nidhi referred to in section 406 of the Companies
Act, 2013; or
(iv) a non-banking financial company which holds a
certificate of registration under section 45-IA of
the Reserve Bank of India Act, 1934, to hold or
accept deposit from public.
13. Payment for one or more pre-paid payment instruments, Payment in cash or by way
as defined in the policy guidelines for issuance and of a bank draft or pay order
operation of pre-paid payment instruments issued by or banker’s cheque of an
Reserve Bank of India under the Payment and Settlement amount aggregating to
Systems Act, 2007, to a banking company or a co- more than ` 50,000 in a
operative bank to which the Banking Regulation Act, 1949, financial year.
 applies (including any bank or banking institution referred
to in section 51 of that Act) or to any other company or
institution.
14. Payment as life insurance premium to an insurer as Amount aggregating to
defined in the Insurance Act, 1938. more than ` 50,000 in a
financial year.
15. A contract for sale or purchase of securities (other than Amount exceeding ` 1
shares) as defined in section 2(h) of the Securities lakh per transaction
Contracts (Regulation) Act, 1956.
16. Sale or purchase, by any person, of shares of a company Amount exceeding ` 1
not listed in a recognised stock exchange. lakh per transaction.
17. Sale or purchase of any immovable property. Amount exceeding
` 10 lakh or valued by
stamp valuation authority
referred to in section 50C
at an amount exceeding
` 10 lakh
18. Sale or purchase, by any person, of goods or services of Amount exceeding ` 2
any nature other than those specified at Sl. No. 1 to 17 of lakh per transaction:
this Table, if any.
Minor to quote PAN of parent or guardian
Where a person, entering into any transaction referred to in this rule, is a minor and who does not
have any income chargeable to income-tax, he shall quote the PAN of his father or mother or
guardian, as the case may be, in the document pertaining to the said transaction.
Declaration by a person not having PAN
Further, any person who does not have a PAN and who enters into any transaction specified in
this rule, shall make a declaration in Form No.60 giving therein the particulars of such
transaction either in paper form or electronically under the electronic verification code in
accordance with the procedures, data structures, and standards specified by the Principal
Director General of Income-tax (Systems) or Director General of Income-tax (Systems).
Non-applicability of Rule 114B
Also, the provisions of this rule shall not apply to the following class or classes of persons, namely:-
(i) the Central Government, the State Governments and the Consular Offices;
(ii) the non-residents referred to in section 2(30) in respect of the transactions other than a
transaction referred to at Sl. No. 1 or 2 or 4 or 7 or 8 or 10 or 12 or 14 or 15 or 16 or 17 of
the Table.
 Meaning of certain phrases:
Phrase Inclusion
(i) Payment in Payment towards fare, or to a travel agent or a tour operator, or to an
connection authorized person as defined in section 2(c) of the Foreign Exchange
with travel Management Act, 1999
(ii) Travel agent A person who makes arrangements for air, surface or maritime travel
or tour or provides services relating to accommodation, tours, entertainment,
operator passport, visa, foreign exchange, travel related insurance or other
travel related services either severally or in package

(iii) Time deposit Any deposit which is repayable on the expiry of a fixed period.

(8) Every person who receives any document relating to any transaction cited above shall ensure
that the PAN is duly quoted in the document.
(9) If there is a change in the address or in the name and nature of the business of a person, on the
basis of which PAN was allotted to him, he should intimate such change to the Assessing
Officer.
(10) (10)Intimation of PAN to person deducting tax at source

Every person who receives any amount from which tax has been deducted at source shall intimate
his PAN to the person responsible for deducting such tax [Sub-section (5A)]. Such person has to
be make an application of PAN before the end of such financial year.
(11) (11)Quoting of PAN in certain documents

Where any amount has been paid after deducting tax at source, the person deducting tax
shall quote the PAN of the person to whom the amount was paid in the following documents:
(i) in the statement furnished under section 192(2C) giving particulars of perquisites or
profits in lieu of salary provided to any employee;
(ii) in all certificates for tax deducted issued to the person to whom payment is made;
(iii) in all returns made to the prescribed income-tax authority under section 206;
(iv) in all statements prepared and delivered or caused to be delivered in accordance with
the provisions of section 200(3)[Sub-section (5B)].
(12) (12)Requirement to intimate PAN and quote PAN not to apply to certain persons

The above sub-sections (5A) and (5B) shall not apply to a person who –
(i) does not have taxable income or
(ii) who is not required to obtain PAN
 if such person furnishes a declaration under section 197A in the prescribed form and manner
that the tax on his estimated total income for that previous year will be nil.
(13) (13)Intimation of PAN to person collecting tax at source

Likewise, every buyer or licensee or lessee referred to in section 206C shall intimate his PAN to
the person responsible for collecting tax.
(14) (14)Quoting of PAN in certain documents

Every person collecting tax in accordance with section 206C shall quote PAN of every buyer
or licensee or lessee referred to therein –
(i) in all certificates furnished in accordance with the provisions of section 206C(5);
(ii) in all returns prepared and delivered or caused to be delivered in accordance with the
provisions of section 206C(5A) or section 206C(5B) to an income-tax authority;
(iii) in all statements prepared and delivered or caused to be delivered in accordance with
the provisions of section 206C(3).
(15) Inter-changeability of PAN with the Aadhaar number
Every person who is required to furnish or intimate or quote his PAN may furnish or intimate
or quote his Aadhaar Number in lieu of the PAN w.e.f. 1.9.2019 if he
- has not been allotted a PAN but possesses the Aadhaar number
- has been allotted a PAN and has intimated his Aadhaar number to prescribed authority
in accordance with the requirement contained in section 139AA(2) [Sub-section (5E)]
PAN would be allotted in prescribed manner to a person who has not been allotted a PAN but
possesses Aadhaar number.
Note – Rule 114(4) requires submission of application for allotment of PAN by the applicant in
the prescribed form accompanied by the prescribed documents as proof of identity, address
and date of birth of such applicant. Sub-rule (1A) has been inserted in Rule 114 w.e.f. 1.9.2019
to provide that any person, who has not been allotted a PAN but possesses the Aadhaar number
and has furnished or intimated or quoted his Aadhaar number in lieu of the PAN in accordance
with section 139A(5E), shall be deemed to have applied for allotment of PAN and he shall not
be required to apply or submit any documents under Rule 114.
Further, sub-rule (1B) has been inserted in Rule 114 w.e.f. 1.9.2019 to provide that any person,
who has not been allotted a PAN but possesses the Aadhaar number may apply for allotment
of the PAN under section 139A(1)/(1A)/(3) by intimating his Aadhaar number and he shall not
be required to apply or submit any documents under Rule 114.
(16) Quoting and authentication of PAN or Aadhaar number
(a) Every person entering into such prescribed transactions is required to quote his PAN
 or Aadhaar number, as the case may be, in the documents pertaining to such transactions.
Such persons are also required to authenticate such PAN or Aadhaar number in the
prescribed manner [Sub-section (6A), inserted w.e.f. 1.9.2019].
(b) Every person receiving such document relating to transactions referred to in (a) has to
ensure that PAN or Aadhaar number has been duly quoted in such document. They also
have to ensure that such PAN or Aadhaar number is so authenticated [Sub- section (6B),
inserted w.e.f. 1.9.2019].
(17) Meaning of certain terms for the purpose of section 139A
Term Definition
(i) Aadhaar An identification number issued to an individual under section 3(3) of
Number Aadhar (Targeted Delivery of Financial and Other Subsidies, Benefits
and Services) Act, 2016 by the Unique Identification Authority of India,
after verification of the demographic information and biometric
information submitted by the individual.
(ii) Assessing Includes an income-tax authority who is assigned the duty of
Officer allotting PANs.
(iii) Authentication The process by which –
(i) the PAN or Aadhaar number along with demographic
information or biometric information of an individual is submitted
to the income-tax authority or such other prescribed authority or
agency for its verification; and
(ii) Such authority or agency verifies the correctness or the lack
thereof, on the basis of the information available with it.
(iv) Permanent A number which the Assessing Officer may allot to any person for the
Account purpose of identification and includes a PAN allotted under the new
Number (PAN) series i.e., PAN having 10 alphanumeric characters.
(18) Penalty for failure to comply with the provisions of section 139A [Section 272B]
Section Default Penalty
272B(1) Failure to comply with the provisions of section 139A ` 10,000
272B(2) Failure to quote PAN/Aadhaar number in any document ` 10,000 for
referred to in section 139A(5)(c) each such
Failure to intimate PAN/Aadhaar number as required by default
section 139A(5A)/(5C)
Knowingly quoting or intimating a number which is false
272B(2A) Failure to quote PAN/Aadhaar Number in documents ` 10,000 for
inserted w.e.f. referred to in section 139A(6A) or authenticate such number each such
1.9.2019 in accordance with the provisions contained therein default
 272B(2B) (i) Failure to ensure that PAN/Aadhaar Number is duly
inserted w.e.f. quoted in the documents relating to transactions ` 10,000 for
1.9.2019 referred to in section 139A(5)(c) or section 139A(6A) each such
(ii) Failure to ensure that PAN/Aadhaar Number has been default
duly authenticated in respect of transactions referred
to under section 139A(6A)
Note – It is necessary to give an opportunity to be heard to the person on whom the penalty
under section 272B is proposed to be imposed.

17.22 PERSONS AUTHORISED TO VERIFY RETURN OF INCOME

[SECTION 140]
This section specifies the persons who are authorized to verify the return of income under section
139 of the Act.
Assessee Circumstance Authorised Persons
1. Individual (i) In circumstances not covered under - the individual himself
(ii), (iii) & (iv) below
(ii) where he is absent from India - the individual himself; or
- any person duly authorised by him in
this behalf holding a valid power of
attorney from the individual (Such
power of attorney should be
attached to the return of income)
(iii) Where he is mentally incapacitated - his guardian; or
from attending to his affairs - any other person competent to act
on his behalf
(iv) where, for any other reason, it is not - any person duly authorised by him in
possible for the individual to verify this behalf holding a valid power of
the return attorney from the individual (Such
power of attorney should be
attached to the return of income)
2. Hindu (i) in circumstances not covered - the karta
Undivided under (ii) and (iii) below
Family
(ii) where the karta is absent from - any other adult member of the HUF
India
(iii) where the karta is mentally - any other adult member of the HUF
incapacitated from attending to his
affairs
3. Company (i) in circumstances not covered - the managing director of the
under (ii) to (vi) below company
(ii) (a) where for any unavoidable reason - any director of the company
such managing director is not
able to verify the return; or

(b) where there is no managing - any director of the company

director
(iii) Where the company is not - a person who holds a valid power of
resident in India attorney from such company to do
so (such power of attorney should
be attached to the return).
(iv) (a) Where the company is being - Liquidator
wound up (whether under
the orders of a court or
otherwise); or
(b) where any person has been - Liquidator
appointed as the receiver of
any assets of the company
(v) Where the management of the - the principal officer of the company
company has been taken over by
the Central Government or any
State Government under any law

(vi) Where an application for corporate - insolvency professional

insolvency resolution process has appointed by such Adjudicating
been admitted by the Adjudicating Authority
Authority under the Insolvency
and Bankruptcy Code, 2016.

4. Firm (i) in circumstances not covered - the managing partner of the firm
under (ii) below
(ii) (a) where for any unavoidable - any partner of the firm, not being a
reason such managing minor
partner is not able to verify
the return; or
(b) where there is no managing - any partner of the firm, not being a
partner. minor
5. LLP (i) in circumstances not covered - Designated partner
under (ii) below
(ii) (a) where for any unavoidable - any partner of the LLP
 reason such designated
partner is not able to verify
the return; or
(b) where there is no - any partner of the LLP
designated partner.
6. Local - - the principal officer
authority
7. Political - - the chief executive officer of such party
party (whether he is known as secretary
[referred to or by any other designation)
in section
139(4B)]
8. Any other - - any member of the association or the
association principal officer of such association

9. Any other - - that person or some other person

person competent to act on his behalf.

17.23 SELF ASSESSMENT [SECTION 140A]

(1) Payment of tax, interest and fee before furnishing return of income
Where any tax is payable on the basis of any return required to be furnished under, inter alia,
section 139, after taking into account -
(i) the amount of tax, already paid, under any provision of the Income-tax Act, 1961
(ii) any tax deducted or collected at source;
(iii) any relief of tax claimed under section 89;
(iv) relief of tax claimed under section 90 or 90A;
(v) deduction of tax claimed under section 91;
(vi) any tax credit claimed to be set-off in accordance with the provisions of section 115JAA
or section 115JD.
the assessee shall be liable to pay such tax together with interest and fee payable under any
provision of this Act for any delay in furnishing the return or any default or delay in payment of
advance tax before furnishing the return. The return shall be accompanied by the proof of
payment of such tax, interest and fee.
(2) Order of adjustment of amount paid by the assessee

Where the amount paid by the assessee under section 140A(1) falls short of the aggregate
of the tax, interest and fee as aforesaid, the amount so paid shall first be adjusted towards
 the fee payable and thereafter towards interest and the balance, if any, shall be adjusted
towards the tax payable.

(3) Interest under section 234A

For the above purpose, interest payable under section 234A shall be computed on the amount
of tax on the total income as declared in the return, as reduced by the amount of-
(i) advance tax paid, if any;
(ii) any tax deducted or collected at source;
(iii) any relief of tax claimed under section 89;
(iv) relief of tax claimed under section 90 or 90A;
(v) deduction of tax claimed under section 91;
(vi) any tax credit claimed to be set-off in accordance with the provisions of section 115JAA
or section 115JD.
(1) (4) Interest under section 234B
Interest payable under section 234B shall be computed on the assessed tax or on the amount
by which the advance tax paid falls short of the assessed tax.
For this purpose, “assessed tax” means the tax on total income declared in the return as
reduced by –
(i) the amount of tax deducted or collected at source;
(ii) any relief of tax claimed under section 89;
(iii) relief of tax claimed under section 90 or 90A
(iv) deduction of tax claimed under section 91
(v) any tax credit claimed to be set-off in accordance with the provisions of section 115JAA
or section 115JD [Sub-section (1B)].
(2) (5) Self-assessment tax deemed to have been paid towards regular assessment or
assessment under section 153A

After regular assessment under section 143 or section 144 or an assessment under section 153A
has been made, any amount paid under section 140A shall be deemed to have been paid towards
such regular assessment or assessment.

(3) (6) Consequence of failure to pay tax, interest or fee

If any assessee fails to pay the whole or any part of such of tax or interest or fees, he shall be
deemed to be an assessee in default in respect of such tax or interest or fees remaining unpaid
and all the provisions of this Act shall apply accordingly.
17.27 ASSESSMENT [SECTION 143]
Where a return has been made under section 139 or in response to a notice under section 142(1), if
any tax or interest is found due an intimation should be sent to the assessee which will deemed to be
a demand notice. If any refund is due to the assessee it shall be granted.
(1) Summary assessment [Section 143(1)/(1A)/(1B)/(1C)]
(i) Section 143(1) provides for computation of the total income of an assessee after
making the following adjustments to the returned income:-
 (a) any arithmetical error in the return; or
(b) an incorrect claim, if such incorrect claim is apparent from any information in the
return.
(c) Disallowance of loss claimed, if return is filed beyond due date u/s 139(1)
(d) Disallowance of expenditure indicated in the audit report but not taken into
account in computing the total income in the return
(e) Disallowance of deduction u/s 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or 80- IE,
if return is filed beyond due date u/s 139(1)
However, before making any such adjustments, in the interest of natural justice, intimation
has to be given to the assessee requiring him to respond to such adjustments. Such
intimation may be in writing or through electronic mode. The response received, if any, has
to be duly considered before effecting any adjustment. However, if no response is received
within 30 days of issue of such intimation, the processing shall be carried out incorporating
the adjustments.
(ii) The term “an incorrect claim apparent from any information in the return” shall mean
such claim on the basis of an entry, in the return, –
(a) of an item, which is inconsistent with another entry of the same or some other
item in such return;
(b) in respect of which, information required to be furnished to substantiate such
entry, has not been furnished under this Act; or
(c) in respect of a deduction, where such deduction exceeds specified statutory limit
which may have been expressed as monetary amount or percentage or ratio or
fraction.
(iii) Tax, interest and fee should be computed on the basis of the total income computed
after making the adjustments in (i) above.
(iv) The sum payable by, or the amount of refund due to, the assessee shall be determined
after adjustment of such tax, interest and fee, if any, so computed by any tax deducted
at source, any tax collected at source, any advance tax paid, any relief allowable
under section 89, any relief allowable under an agreement under section 90 or section
90A, or any relief allowable under section 91 any tax paid on self-assessment and any
amount paid otherwise by way of tax, interest or fee.
(v) Based on the above adjustments, an intimation shall be prepared or generated and sent
to the assessee within a period of one year from the end of the financial year in which
the return was made. The intimation shall specify the sum determined to be payable by,
or the amount of refund due to, the assessee.
 (vi) If any amount of refund is due to the assessee, the same shall be granted to the
assessee.
(vii) An intimation shall also be sent to the assessee in a case where the loss declared in the
return by the assessee is adjusted but no tax, interest or fee is payable by, or no refund
is due to, him.
(viii) On the other hand, where there is neither any adjustment nor any tax due from or refund
payable to the assessee, the acknowledgement of the return shall be deemed to be the
intimation under section 143(1).
(ix) The scheme contemplates avoiding human interface and therefore, provides for
computerised processing of returns for making the above adjustments i.e., the software
will be designed to detect arithmetical inaccuracies and internal inconsistencies and
make appropriate adjustments in the computation of the total income/fringe benefits.
(2) Mandatory processing of return of income before issuance of assessment order
[Section 143(1D)]
(i) Section 143(1) requires processing of return of income filed under section 139(1) or in
response to a notice issued under section 142(1).
(ii) An intimation has to be prepared or generated and sent to the assessee specifying the
sum payable or the refund due, to the assessee.
(iii) No intimation can be sent after the expiry of one year from the end of the financial year
in which the return is made. This is provided in the second proviso to section 143(1).
(iv) In respect of returns furnished for A.Y.2017-18 or thereafter, processing of a return under
section 143(1) is necessary even where a notice has been issued to the assessee under
section 143(2).
(v) However, to address the concern of recovery of revenue in doubtful cases, section 241A
provides that, for the returns furnished for A.Y.2017-18 or thereafter, where refund of
any amount becomes due to the assessee under section 143(1) and the Assessing
Officer is of the opinion that grant of refund may adversely affect the recovery of revenue,
he may, for the reasons recorded in writing and with the previous approval of the
Principal Commissioner or Commissioner, withhold the refund upto the date on which
the assessment is made.
(3) Regular assessment/Scrutiny assessment [Section 143(2)/(3)] - If the Assessing Officer or
the prescribed income-tax authority [i.e., an income-tax authority not below the rank of an
Income-tax Officer who has been authorised by the CBDT to act as income-tax authority for the
purpose of section 143(2)] considers it necessary or expedient to ensure that the assessee has
not understated his income or has not computed excessive loss or has not
underpaid his tax in any manner he can issue a notice for making the assessment in the normal
manner as at present. This will be a scrutiny assessment. It may be noted that notice for detailed
scrutiny under section 143(2) cannot be issued after the expiry of 6 months from the end of the
financial year in which the return of income is furnished.
On the day specified in the notice issued under section 143(2), or as soon afterwards as may be,
after hearing such evidence as the assessee may produce and such other evidence as the
Assessing Officer or the prescribed income-tax authority may require on specified points, and after
taking into account all relevant material which he has gathered, the Assessing Officer shall, by an
order in writing, make an assessment of total income or loss of the assessee, and determine the
sum payable by him or refund of any amount due to him on the basis of such assessment.

Where assessment u/s 143(3) or

u/s 144 is made

Tax or interest paid u/s 143(1) If no refund is due or amount refunded > amount
refundable on regular assessment

Deemed to have been paid Whole or excess amount so refunded shall be

towards regular assessment deemed to be tax payable by the assessee

It is also obligatory for research associations and other institutions exempt under clauses
(21),(22B),(23A),(23B), sub-clauses (iv),(v),(vi) and (via) of clause (23C) of section 10 to file their
returns of income. In these cases, the Assessing Officer cannot make an assessment denying
exemption under section 10 without intimating the Central Government or the prescribed authority
of the contravention of the provisions of the relevant sections and till the approval granted to these
funds, trusts, institutions, universities, educational institutions or hospitals or medical institutions
has been withdrawn or notification rescinded.
The time period for completing the assessment in such cases will exclude the period between the
date on which the Assessing Officer gives the intimation of the default and date on which copy of
the order withdrawing the approval is received by the Assessing Officer.
Section 2(15) provides that in case of a trust or institution, whose main object is the
“advancement of object of general public utility”, the purpose does not remain charitable in a
previous year, if its commercial receipts exceed 20% of total receipts. However, this temporary
excess in one year may not be treated as altering the very nature of the trust or institution so
as to lead to cancellation of registration or withdrawal of approval or rescinding
 of notification issued in respect of trust or institution. Accordingly, such trust and institution does
not get benefit of tax exemption under section 10(23C) or 11 or 12 in the year in which its
receipts from commercial activities exceed 20% of total receipts, whether or not the registration
or approval granted or notification issued is cancelled, withdrawn or rescinded in respect of such
trust or institution. Consequently, in such a circumstance, no effect shall be given by the
Assessing Officer to the exemption provisions under section 10(23C) while making an
assessment of the total income or loss of the trust or institution for the previous year under
section 143(3).
Assessing Officer empowered to send a proposal to the Central Government
recommending withdrawal of approval of research association, university, college or other
institution approved under section 35(1)(ii) and (iii)
(i) The guidelines, the manner and the conditions in accordance with which an application
made by a research association, university, college or other institution shall be approved
under section 35(1)(ii)/(iii) have been provided by the Taxation Laws (Amendment) Act,
2006. Also, the amendment provides for grant of one time approval, which means the
approval is to remain in force unless it is withdrawn.
(ii) Therefore, the Assessing Officer is now required to satisfy himself as to the activities of
the university, college or other institution referred to in clause (ii) or clause (iii) of section
35(1).
(iii) If the activities are not being carried out in accordance with all or any of the conditions
subject to which any of the said entities had been approved, the Assessing Officer may,
after giving a reasonable opportunity of showing cause to the concerned entity, send a
proposal to the Central Government recommending withdrawal of approval.
(iv) The Central Government may, by order, withdraw the approval and forward a copy of
the order to the concerned university, college or other institution and to the Assessing
Officer.
(4) Scheme to be notified by the Central Government for greater efficiency, transparency
and accountability [Section 143(3A)/(3B)/(3C)]
(i) The Central Government is empowered to notify a Scheme for assessing total income
or loss of the assessee under section 143(3). Accordingly, the Central Government
has, vide Notification No.61/2019 dated 12.9.2019, notified the E-assessment
Scheme, wherein the assessment would be made in respect of such territorial
area, or persons or class of persons, or incomes or class of incomes, or cases or
class of cases, as may be specified by the CBDT [Refer to Annexure at the end of
this Chapter wherein the E-assessment Scheme as contained in the said
notification has been detailed]
(ii) The Scheme would ensure greater efficiency, transparency & accountability by –
(a) eliminating the interface between the Assessing Officer and the assessee in the
course of proceedings to the extent technologically feasible;
 (b) optimising utilisation of the resources through economies of scale and functional
specialisation;
(c) introducing a team-based assessment with dynamic jurisdiction.
The Scheme so notified has to be laid before each House of Parliament.
(iii) In order to give effect to this scheme, the Central Government, may direct on or before
31.03.2020 by way of notification, that the other provisions of this Act relating to
assessment of total income or loss would not apply or would apply with certain
exceptions, modifications and adaptations specified in the notification. Accordingly, the
Central Government has, vide Notification No. 62 dated 12.9.2019, for the purposes
of giving effect to the E-assessment Scheme, 2019 made under section 143(3A),
directed that the provisions of section 2(7A), section 92CA, section 120, section
124, section 127, section 129, section 131, section 133, section 133A, section 133C,
section 134, section 142, section 142A, section 143,section 144A, section 144BA
section 144C and Chapter XXI of the Income-tax Act, 1961 would apply to the
assessment made in accordance with the said Scheme subject to certain
exceptions, modifications and adaptations listed in said notification given as
Annexure at the end of this Chapter.
(5) (5) Best judgment assessment [Section 144]

Fails to file return u/s

139(1) and has not
filed belated return u/s
139(4) or revised
Fails to comply with return u/s 139(5) Having filed a
all the terms of a return, fails to
notice issued u/s comply with all the
142(1) or a direction terms of a notice
issued u/s 142(2A) issued u/s 143(2)

A.O. shall
make a best
judgement
assessment

After taking into account all

After giving the assessee an
relevant material which he has
opportunity of being heard
gathered
(i) Best judgement assessment mandatory in all the three cases stated above - It is
mandatory for the Assessing Officer to make a best judgment assessment and he has no
discretion to make or not to make such assessment. These three cases are alternative and not
cumulative for the purpose of making an ex parte assessment.
(ii) Opportunity of being heard - Before making best judgement assessment, the Assessing
Officer has to take into account all relevant material which he has gathered. The assessee must
be given an opportunity of being heard. Such opportunity shall be given by an Assessing Officer
by serving a notice calling upon the assessee to show cause on a date and time to be specified
in the notice, why the assessment should not be completed to the best of his judg- ment.
Thereafter, the Assessing Officer shall make the assessment of total income or loss to the best
of his judgment and determine the sum payable on the basis of such assessment. It may noted
that no refund can be granted under section 144.
However, where a notice under section 142(1) has been issued prior to the making of an
assessment under this section, it is not necessary to give such opportunity.

17.31 INCOME ESCAPING ASSESSMENT [SECTIONS 147 TO 149]

(1) Applicability - If the Assessing Officer has reason to believe that any income chargeable
to tax has escaped assessment for any assessment year, he may, subject to the provisions
of sections 148 to 153, 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, or re-compute the loss or the depreciation allowance or
any other allowance, as the case may be, for the relevant assessment year.
The Assessing Officer may assess or reassess the income in respect of any issue (which has
escaped assessment) which comes to his notice subsequently in the course of proceedings under
this section, even though the reason for such issue does not form part of the reasons recorded
under section 148(2).
(2) Time limit - Where an assessment under section 143(3) or 147 has already been made by the
Assessing Officer for the relevant assessment year, then, no action shall be taken under this
section after the expiry of four years from the end of the relevant assessment year.
The exception would be in cases where any income chargeable to tax has escaped assessment
for such assessment year by reason of the failure on the part of the assessee to
 make a return under section 139, or in response to a notice issued under section 142(1) or section
148 or to disclose, fully and truly, all material facts necessary for his assessment for that
assessment year.
It has been clarified that production before the Assessing Officer of account books or other
evidence from which material evidence could with due diligence have been discovered by the
Assessing Officer will not necessarily amount to disclosure.
The above time limit shall also not apply in a case where income chargeable to tax, in relation to
an asset (including financial interest in an entity) located outside India, has escaped assessment
for any assessment year. In effect, in such cases, the Assessing Officer can initiate assessment
proceedings under section 147 even after the expiry of 4 years inspite of the assessee having –
(i) duly furnished his return of income and
(ii) fully and truly disclosing all material facts necessary for his assessment
for that assessment year.
(3) Reason to believe - The Assessing Officer must have ‘reason to believe’ that income
chargeable to tax had escaped assessment. The belief which prompts an Income-tax Officer to
apply section 147 to any particular case must be that of an honest and reasonable person based
upon reasonable grounds, and that the Assessing Officer may act under this section on direct
or circumstantial evidence but not on a mere suspicion, gossip or rumor. The powers of the
Assessing Officer are wide, but not plenary in nature. Care must be taken to note that the words
used in the section are “reason to believe” and not ‘reason to suspect’. The expression ‘reason
to believe’ does not, however, mean a purely subjective satisfaction on the part of the Assessing
Officer. The belief must be held in good faith. It cannot be a mere pretence. It is open to the
Court to examine whether the reasons for the belief have a rational connection or a relevant
bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the
section. There is no requirement in any of the provisions of the Act or under any section laying
down as a condition for the initiation of the proceeding that the reasons which induced the
Assessing Officer, to issue the notice must also be communicated to the assessee. Therefore,
the Assessing Officer need not communicate to the assessee the reasons, which led him to
initiate the proceedings under section 147.
(4) Reassessment of matters other than subject matter of appeal or revision - The
Assessing Officer may assess or reassess an income which is chargeable to tax and has escaped
assessment other than the income involving matters which are the subject matter of any appeal,
reference or revision.
(5) Circumstances when income is deemed to have escaped assessment - For the purpose of
this section, the following shall also be deemed to be cases where income chargeable to tax has
escaped assessment:
 Case When income is deemed to have
escaped assessment
(i) Where the assessee’s total income or No return of income has been furnished
the total income of any other person in by the assessee
respect of which he is assessable under
this Act during the previous year
exceeded the maximum amount which is
not chargeable to income-tax.
(ii) Where a return of income has been It is noticed by the Assessing Officer that
furnished by the assessee but no the assessee has understated the
assessment has been made income or has claimed excessive loss,
deduction, allowance or relief in the
return.
(iii) Where the assessee is required to furnish The assessee has failed to furnish such
a report in respect of any international report
transaction under section 92E.
(iv) Where an assessment has been made (a) income chargeable to tax has
been under-assessed
(b) such income has been assessed
at too low a rate
(c) such income has been made the
subject of excessive relief under
this Act
(d) excessive loss or depreciation or
any other allowance under this
Act has been computed.
(v) where a return of income has not been On the basis of information or document
furnished by the assesse received from the prescribed income-tax
authority, under section 133C(2), it is
noticed by the Assessing Officer that the
income of the assessee exceeds the
basic exemption limit
(vi) where a return of income has been On the basis of information or document
furnished by the assessee received from the prescribed income-tax
authority, under section 133C(2), it is
noticed by the Assessing Officer that the
assessee has understated the income or
has claimed excessive loss, deduction,
allowance or relief in the return

In addition, income chargeable to tax has escaped assessment, where a person is found to have
any asset (including financial transaction in any entity) located outside India.
 Note - The CBDT has, vide Circular No.40/2016 dated 9.12.2016, clarified that reopening of
cases under section 147 is feasible only when the Assessing Officer "has reason to believe that
any income chargeable to tax has escaped assessment for any assessment year" and not
merely on the basis of any reason to suspect. Mere increase in turnover, because of use of
digital means of payment or otherwise, in a particular year cannot be a sole reason to believe
that income has escaped assessment in earlier years. Hence, past assessments cannot be
reopened merely on the ground that the current year's turnover has increased.
(6) Issue of notice where income has escaped assessment [Section 148] Before making the
assessment, reassessment or recomputation under section 147, the Assessing Officer shall
serve on the assessee, a notice requiring him to furnish a return within such period as may be
specified in the notice, a return of his income or the income of any other person for whom he is
assessable under the Act, during the previous year corresponding to the relevant assessment
year in the prescribed form and verified in the prescribed manner and setting forth such other
particulars may be prescribed. The provisions of this Act shall apply accordingly as if such
return were a return required to be furnished under section 139.
The Assessing Officer shall, before issuing any notice under this section, record his reasons for
doing so.
(7) Time limit for notice [Section 149]: Notice under section 148 must be issued within the
following time limit:

Time limit for issue of notice u/s 148 [Section

149(1)]

In case income is in Where the income which In any other case

relation to any asset has escaped
(including financial assessment amounts to
interest in any entity) or is likely to amount to
located outside India has ` 1 lakh or more
escaped assessment

Notice u/s 148 has to be Notice u/s 148 has to be Notice u/s 148 has
issued within 16 years issued within 6 years to be issued within
from the end of the from the end of the 4 years from the
relevant A.Y. relevant A.Y. end of the relevant
A.Y.

As per section 149(3), if the person on whom a notice under section 148 is to be served is a
person treated as an agent of a non-resident under section 163 and the assessment,
 reassessment or re-computation in pursuance of the notice is to be made on him as the agent of
such non-resident, there is a time limit of 6 years from the end of the relevant assessment year,
beyond which such notice cannot be issued.
(8) (8) Provision for cases where assessment is in pursuance of an order on appeal, etc.
[Section 150]
(i) Section 149(1) provides the time limit for issue of notice u/s 148 for assessment,
reassessment or recomputation where income has escaped assessment.
(ii) The restriction of time limit under section 149(1) is not applicable where notice u/s 148
is issued for making an assessment, reassessment or re-computation to give effect to
any finding or direction contained in an order passed by any authority in any proceeding
by way of appeal, reference or revision or by a Court in any proceeding under any other
law. This relaxation is contained in section 150(1).
(iii) However, such relaxation will not apply where any such assessment or reassessment
relates to an assessment year in respect of which an assessment or reassessment could
not have been made at the time the order which was the subject matter of appeal,
reference or revision, as the case may be, was made on account of the expiry of the time
limit at that point of time itself. This restriction is contained in section 150(2)
(iv) Section 150(1) operates to relax the time restriction stipulated under section 149. Such
relaxation can be made use of by the Assessing Officer only if the restriction placed
under section 150(2) does not affect the operation of section 150(1). It may be noted that
the restriction placed under section 150(2) is applicable only in respect of appeal,
reference or revision referred to in section 150(1) but it does not apply with reference to
an order passed by a Court in any proceeding under any law.
ILLUSTRATION
The assessment of Mr. Hari for A.Y.2012-13 was made on 28.3.2014 making an addition of ` 3,25,000
for a certain income received during the P.Y.2011-12. The assessee contested the addition before
Commissioner (Appeals) but lost the case. The Appellate Tribunal passed an order on 26.2.2019 holding
that the said income was not taxable in the P.Y.2011-12 but the same was taxable in the year of accrual,
being P.Y.2006-07 relevant to A.Y.2007-08. The Assessing Officer issued notice under section 148 for
A.Y.2007-08 in March 2019 bringing to tax the sum of ` 3,25,000. Is the notice valid?
Would your answer change if in the said case, the assessment order for A.Y.2012-13 was made on
4.4.2014 instead of 28.3.2014?
SOLUTION
Section 149 requires issue of notice under section 148 within a period of 6 years from the end of the
relevant assessment year, where income escaping assessment exceeds ` 1 lakh. Accordingly, in respect
of A.Y.2012-13, notice can be issued upto 31.3.2019. Section 150(1) enables issue of notice
at any time to give effect to a finding contained in an appellate order. However, this is subject to the
provisions of section 150(2), which places a restriction that, if on the date of passing of the order which
was the subject-matter of appeal, no notice could have been issued, then, such notice cannot be issued
by virtue of the enabling provision contained in section 150(1).
In this case, the income was taxable in the A.Y.2007-08 as per the order of the Appellate Tribunal. The
six year time limit, in this case, expires on 31.3.2014. Since the original assessment in respect of such
income was made on 28.3.2014, the notice issued under section 148 consequent to the Appellate
Tribunal order is valid.
Had the assessment order for A.Y.2012-13 been made on 4.4.2014 (instead of 28.3.2014), then, the
same would have been outside the six year time limit from A.Y.2007-08. Hence, since notice could not
have been issued at that point of time, it cannot be now issued invoking the provisions of section 150(1).

17.32 SANCTION FOR ISSUE OF NOTICE [SECTION 151]

(i) Section 151 requires the Assessing Officer to obtain sanction from certain authorities before
issue of notice for reassessment of income under section 148, under certain specified
circumstances.
(ii) The simplified approval regime with effect from 1.6.2015 for issue of notice for reassessment is
given hereunder -
Time limit (from Issue of Notice under Competent authority who has to
the end of the section 148 by be satisfied on the reasons
relevant A.Y.) recorded by the A.O., that it is a fit
case for the issue of such notice
(1) Upto 4 years Assessing Officer below Joint Commissioner
the rank of Joint
Commissioner
(2) After 4 years Assessing Officer Principal Chief Commissioner/ Chief
Commissioner/Principal
Commissioner/ Commissioner

Issue of notice u/s 148

Upto four years Beyond four years

By an AO below the rank of By an AO, if the Principal Chief Commissioner /

the JC, if the JC is satisfied Chief Commissioner/ Principal Commissioner/
that it is a fit case for issue Commissioner is satisfied that it is a fit case for
of notice issue of notice.
It is further clarified that in the above cases, the Principal Chief Commissioner or Chief Commissioner or
the Principal Commissioner or Commissioner or the Joint Commissioner, as the case may be, has to be
satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice
under section 148. However, these authorities are not required to issue the notice themselves.

ASSESSMENT PROCEDURE IN CASE OF SEARCH OR

REQUISITION [SECTION 153A/153B/153C]
The block assessment procedure introduced in 1995 and in operation since then for 8 years with various
amendments from time to time has been abolished in respect of search carried out after 31st May, 2003.
In the place of the block assessment, a scheme of reassessment was introduced by inserting three
sections 153A, 153B and 153C with effect from 1st June, 2003 for assessment in case of search or making
requisition.
(1) Procedure for assessment where search is initiated under section 132 or books of
account etc. are requisitioned under section 132A [Section 153A]
(i) Overriding provisions of section 153A: The provisions of section 153A prescribing a
procedure for assessment in the case of search or requisition will apply notwithstanding
anything contained in sections 139/147/148/149/151 and 153.
This section provides for the procedure for completion of assessment where a search is
initiated under section 132 or books of account, other documents or any assets are
requisitioned under section 132A after 31st May, 2003.
(ii) Issue of Notice: In such cases, the Assessing Officer shall issue notice to such person.
Such a person has to furnish a return of income within such period as may be specified
in the notice setting forth such other particulars as may be prescribed.
(iii) Filing of return in response to notice: Such a return should be filed in respect of six
assessment years and for the relevant assessment year or years immediately preceding
the assessment year relevant to the previous year in which the search was conducted
under section 132 or requisition was made under section 132A.
The expression "relevant assessment year" shall mean an assessment year preceding
the assessment year relevant to the previous year in which search is conducted or
requisition is made which falls beyond six assessment years but not later
 than ten assessment years from the end of the assessment year relevant to the previous
year in which search is conducted or requisition is made.
(iv) Year upto which income can be assessed: The Assessing Officer shall assess or
reassess the total income of each of these six assessment years and for the relevant
assessment year or years .
(v) Pending assessments to abate: The assessment or reassessment, if any, relating to
any assessment year falling within the above period of six assessment years and for
the relevant assessment year or years, pending on the date of the initiation of the search
under section 132 or requisition under section 132A, as the case may be, shall abate. In
other words, they will cease to be applicable.
(vi) Notice to be issued only for the assessment year relevant to the previous year of
search in case of notified class of cases: The Central Government is empowered to
notify class or classes of cases [except the cases where any assessment or
reassessment has abated] in which the Assessing Officer shall not be required to issue
notice for initiation of assessment or reassessment of total income for six assessment
years immediately preceding the assessment year relevant to the previous year in which
the search was conducted or requisition was made and for the relevant
assessment year or years. The assessment proceedings in the class or classes of cases
so notified shall be carried out only for the assessment year relevant to the previous year
in which search was conducted or requisition was made, except in cases where any
assessment or reassessment in respect of any of the earlier six years and
for the relevant assessment year or years has abated.
Accordingly, in exercise of this power, the Central Government has, through Notification
No.42/2012 dated 4.10.2012, inserted Rule 112F which came into force from 1st July, 2012.
The said Rule provides that the Assessing Officer is not required to issue notice for
assessing or reassessing the total income for six assessment years immediately preceding
the assessment year relevant to the previous year in which search is conducted or
requisition is made, in the following cases:
(a) where as a result of a search under section 132(1) or a requisition made under
section 132A, a person is found to be in possession of any money, bullion, jewellery
or other valuable articles or things, whether or not he is the actual owner of the
same, and
(b) where such search is conducted or such requisition is made in the territorial area
of an assembly or parliamentary constituency in respect of which a notification
has been issued under section 30 read with section 56 of the Representation of
the People Act, 1951, or where the assets so seized or requisitioned are
connected in any manner to the ongoing election in an assembly or parliamentary
constituency.
 However, this Rule is not applicable to cases where such search under section 132 or such
requisition under section 132A has taken place after the hours of poll so notified.
Circular No.10/2012 dated 31.12.2012 clarifies that the aforesaid provision would reduce
infructuous and unnecessary proceedings under the Income-tax Act, 1961 in cases
where a search is conducted under section 132 or requisition is made under section
132A and cash or other assets are seized during the election period, generally on a
single warrant, and no evidence is available, or investigation required, for any
assessment year other than the assessment year relevant to the previous year in which
search is conducted or requisition is made.
In such cases, the officer investigating the case, with the approval of the Director General
of Income-tax, is required to certify that -
(a) the search is conducted under section 132 or the requisition is made under
section 132A in the territorial area of an assembly or parliamentary constituency
in respect of which a notification has been issued under section 30, read with
section 56 of the Representation of the People Act, 1951; or
(b) the assets seized or requisitioned are connected in any manner to the ongoing
election process in an assembly or parliamentary constituency; and
(c) no evidence is available or investigation is required for any assessment year other
than the assessment year relevant to the previous year in which search is
conducted or requisition is made.
The certificate of the investigating officer shall be communicated to the Commissioner
of Income-tax and the Assessing Officer having jurisdiction over the case of such person.
(vii) Conditions to be satisfied for issue of notice beyond six years prior to the year of
search: No notice for assessment or reassessment shall be issued by the Assessing
Officer for the relevant assessment year or years unless:
(a) the Assessing Officer has in his possession books of account or other documents
or evidence which reveal that the income, represented in the form of assets,
which has escaped assessment amounts to or is likely to amount to
` 50 lakhs or more in the relevant assessment year or in aggregate in the
relevant assessment years.
(b) the income so referred above has escaped assessment for such year or years
(c) the search under section 132 is initiated or requisition under section 132A is made
on or after 1.4.2017
For this purpose, "asset" includes immovable property being land or building or both,
shares and securities, loans and advances, deposits in bank account.
 (viii) Revival of abated proceeding: If any proceeding initiated under section 153A or any order of
assessment or reassessment made under section 153A(1) has been annulled in any appeal or
other legal proceeding, the abated assessment or reassessment relating to any assessment
year shall stand revived with effect from the date of receipt of the order of such annulment by
the Principal Commissioner or Commissioner. If the order of annulment is set aside, such
revival shall cease to have effect.
(ix) Applicability of other provisions of the Act: Unless section 153A, section 153B and section
153C provide otherwise, all other provisions of the Income-tax Act, 1961, shall apply to the
assessment or reassessment made in respect of assessment year under this section.
Applicable rate of tax: The tax shall be chargeable at the rate or rates as applicable to such assessment year.