Meaning of Income Escaping Assessment under Income Tax Act

Section 147 of the Income Tax Act, 1961 states the provision for the Income Escaping Assessment. It can be defined as an assessment carried out by Assessing Officer in cases where he believes that a taxpayer has escaped taxes chargeable on the income for a particular assessment year. The provisions give the AO a power to conduct re-assessment and re-computation of income or turnover of the taxpayer which has been escaped in one of the different types of Income tax assessment before.

Income Escaping Assessment

Objective of conducting Income Escaping Assessment:

The Income Escaping Assessment under Section 147 is carried out with an objective to bring all the income and levied taxes on them under the tax assessment net that have escaped assessment in the past. It aims at gathering assesses income that have escaped and the proceedings are undertaken for benefiting the revenue of the country and not the taxpayer or assesses.

Notice for Income Escaping Assessment:

Notice under Section 148 of the Income Tax Act, 1961 is issued for Income Escaping Assessment to the taxpayer by the Assessing Officer where, he has a reason to believe that assesses has escaped the income assessment for a particular assessment year. The notice is issued for one of the following cases-

  • If the income escaped is less than Rs.1 Lakh within 4 years from the end of the assessment conducted.
  • If the income escaped is Rs.1 Lakh and above, the notice to be issued must for up to 6 years from the end of the assessment year relevant in the case.
  • When income escaped is associated with any assets that are located outside Indian Territory then, notice can be issued for up to 16 years from the date of end of relevant year of assessment.

Cases where chargeable Income tax deemed to have escaped assessment:

In the following cases the Assessing Officer deems an income to escape the assessment and issue notice for the Income Escaping Assessment-

  • When the assesses total income for the previous year has exceeded the maximum amount not chargeable to income tax and the taxpayer has not filed Income Tax Return for the same.
  • Where assessment was made but the following have not been undertaken properly-
  • Chargeable Income Tax is under assessed category.
  • Taxpayer has been found to have assets located outside of the Indian Territory including the financial interest of assesses in some entity.
  • Computation of allowances related to depreciation and excessive loss under the act.
  • The assessed income has been assesses at a very low rate.
  • The income being assesses has been made subject relief that is way too excessive under the Act.
  • When it is noticed by the AO that assesses has understated their income in the return and has claimed deductions, losses, allowances and relief excessively and where no tax assessment was made by the department.
  • Where the return is to be furnished by assesses under Section 92E for all the international transactions carried out by them and for which they have failed to furnish the same.

 

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.