Section 144 of the Income Tax Act, 1961 empowers the Assessing Officer (AO) to make a best judgement assessment when the taxpayer fails to comply with various requirements under the Act. This section is important as it allows the department to assess the income of the taxpayer even when they have not filed their returns or provided necessary documents. In this blog, we will discuss section 144 of the Income Tax Act, 1961 in detail.
-
Introduction to Section 144 of the Income Tax Act, 1961
Section 144 of the Income Tax Act, 1961 empowers the Assessing Officer (AO) to make a best judgement assessment when the taxpayer fails to comply with various requirements under the Act. This section is invoked when the taxpayer fails to file their tax returns, fails to provide necessary documents or information, or fails to cooperate with the department during the assessment process.
-
Circumstances under which Section 144 is invoked
The following are the circumstances under which section 144 is invoked:
a. Non-filing of tax returns: If the taxpayer fails to file their tax returns, the assessing officer can invoke section 144 to make a best judgement assessment.
b. Non-disclosure of income: If the taxpayer fails to disclose their income or provides inaccurate information, the assessing officer can invoke section 144 to make a best judgement assessment.
c. Non-compliance with notices: If the taxpayer fails to comply with notices issued by the department, such as a notice for assessment, the assessing officer can invoke section 144 to make a best judgement assessment.
d. Non-cooperation: If the taxpayer does not cooperate with the department during the assessment process, the assessing officer can invoke section 144 to make a best judgement assessment.
-
Procedure for invoking Section 144
The following is the procedure for invoking section 144:
a. Notice to the taxpayer: The assessing officer must issue a notice to the taxpayer before invoking section 144. The notice must state the reasons for invoking section 144 and give the taxpayer an opportunity to explain their position.
b. Opportunity of being heard: The taxpayer is given an opportunity of being heard and to present their case to the assessing officer.
c. Best judgement assessment: If the taxpayer fails to comply with the notice or fails to provide satisfactory explanation, the assessing officer can make a best judgement assessment.
d. Assessment order: The assessing officer must issue an assessment order under section 144 of the Income Tax Act, 1961.
-
Consequences of invoking Section 144
The following are the consequences of invoking section 144:
a. Tax liability: The taxpayer may end up with a higher tax liability as the assessing officer may not take into account deductions and exemptions available to the taxpayer.
b. Interest and penalty: The taxpayer may also be liable to pay interest and penalty for non-compliance.
c. Appeal: The taxpayer can file an appeal against the assessment order issued under section 144 of the Income Tax Act, 1961.
5. Importance of Section 144
Section 144 of the Income Tax Act, 1961 is important for the government as it ensures that taxpayers comply with the tax laws. It provides the assessing officer with the power to make a best judgement assessment in cases where the taxpayer has failed to comply with various requirements under the Act. This helps the government in increasing tax compliance and ensuring that taxpayers pay their fair share of taxes.
6. Precautions to be taken by taxpayers
Taxpayers must take the following precautions to avoid the consequences of invoking section 144:
a. File tax returns on time: Taxpayers must ensure that they file their tax returns on time to avoid the assessing officer invoking section 144.
b. Provide accurate information: Taxpayers must provide accurate information and disclose all their income to avoid the assessing officer invoking section 144.
c. Comply with notices: Taxpayers must comply with all notices issued by the department, such as a notice for assessment, to avoid the assessing officer invoking section 144.
d. Cooperate with the department: Taxpayers must cooperate with the department during the assessment process to avoid the assessing officer invoking section 144.
Conclusion
In conclusion, section 144 of the Income Tax Act, 1961 is a powerful tool for the assessing officer to make a best judgement assessment in cases where the taxpayer has failed to comply with various requirements under the Act. Taxpayers must ensure that they comply with all the requirements under the Act to avoid the consequences of invoking section 144. This will help them avoid the higher tax liability, interest, and penalty that may arise due to non-compliance.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions (FAQs)
What is Section 144 of the Income Tax Act, 1961?
Section 144 of the Income Tax Act, 1961 empowers the Assessing Officer (AO) to make a best judgement assessment when the taxpayer fails to comply with various requirements under the Act.
When is Section 144 invoked?
Section 144 is invoked when the taxpayer fails to file their tax returns, fails to provide necessary documents or information, or fails to cooperate with the department during the assessment process.
What is the procedure for invoking Section 144?
The procedure for invoking section 144 involves issuing a notice to the taxpayer, giving them an opportunity of being heard, making a best judgement assessment, and issuing an assessment order.
What are the consequences of invoking Section 144?
The consequences of invoking section 144 include a higher tax liability, interest, and penalty for non-compliance.
Can the taxpayer file an appeal against the assessment order issued under Section 144?
Yes, the taxpayer can file an appeal against the assessment order issued under section 144 of the Income Tax Act, 1961.
How can taxpayers avoid the consequences of invoking Section 144?
Taxpayers can avoid the consequences of invoking section 144 by filing their tax returns on time, providing accurate information, complying with notices, and cooperating with the department during the assessment process.
Is Section 144 applicable to all taxpayers?
Yes, section 144 is applicable to all taxpayers who fail to comply with various requirements under the Income Tax Act, 1961.
What is a best judgement assessment?
A best judgement assessment is an assessment made by the assessing officer based on the information available to them when the taxpayer fails to comply with various requirements under the Income Tax Act, 1961.
Can the assessing officer make a best judgement assessment without issuing a notice to the taxpayer?
No, the assessing officer cannot make a best judgement assessment without issuing a notice to the taxpayer.
Can the assessing officer invoke Section 144 if the taxpayer has already filed their tax returns?
No, the assessing officer cannot invoke section 144 if the taxpayer has already filed their tax returns and complied with all the requirements under the Income Tax Act, 1961.
