Section 147 of the Income Tax Act is an important provision that allows the income tax department to reopen an assessment or reassessment in certain cases. This provision is aimed at preventing tax evasion and ensuring that taxpayers pay their fair share of taxes. In this blog, we will discuss section 147 of the Income Tax Act in detail, covering its meaning, scope, and implications.
Introduction
Section 147 of the Income Tax Act provides for the procedure to be followed by the income tax department for reopening an assessment or reassessment. This provision is applicable to cases where income has escaped assessment, or where excessive loss or depreciation has been claimed.
Meaning of income escaping assessment
Income escaping assessment means income that has not been assessed or has been under-assessed in the original assessment. This can happen due to various reasons, such as the non-disclosure of income, incorrect computation of income, or the failure to furnish necessary documents or information.
Scope of section 147
Section 147 applies to cases where the Assessing Officer has reason to believe that income has escaped assessment. Such reasons can be based on the information received from any source, such as the audit report of the Comptroller and Auditor General of India, the report of the tax authorities of other countries, or any other information available with the department.
Time limit for reopening assessment
Section 147 provides for a time limit for reopening an assessment. The assessment can be reopened within four years from the end of the relevant assessment year, unless the income escaped assessment exceeds Rs. 1 lakh, in which case the assessment can be reopened within six years.
Procedure for reopening assessment
The procedure for reopening an assessment is laid down in section 148 of the Income Tax Act. The Assessing Officer must first issue a notice to the taxpayer, stating the reasons for reopening the assessment. The taxpayer has the right to file a return in response to this notice, and the Assessing Officer must provide an opportunity to the taxpayer to be heard.
Implications of section 147
Section 147 has significant implications for taxpayers, as it allows the income tax department to scrutinize their past returns and demand additional taxes if any income has escaped assessment. Therefore, it is important for taxpayers to maintain accurate records and disclose all their income in their tax returns to avoid any future disputes with the department.
Exceptions to section 147
There are certain exceptions to section 147 of the Income Tax Act. For instance, if an assessment has already been reopened once, it cannot be reopened again unless there is new and valid information available. Similarly, if an assessment has been completed after scrutiny under section 143(3), it cannot be reopened unless there is clear evidence of the taxpayer’s failure to disclose all material facts.
Remedies available to taxpayers
If a taxpayer is aggrieved by the reopening of an assessment under section 147, they can challenge it before the Commissioner of Income Tax (Appeals). If the taxpayer is still dissatisfied, they can appeal to the Income Tax Appellate Tribunal and eventually to the High Court and Supreme Court.
Conclusion
In conclusion, section 147 of the Income Tax Act provides the income tax department with the power to reopen an assessment or reassessment in cases where income has escaped assessment. This provision is aimed at preventing tax evasion and ensuring that taxpayers pay their fair share of taxes. It is important for taxpayers to be aware of the scope and implications of section 147 to avoid any future disputes with the department.
Read more useful content:
- section 145 of income tax act
- section 10e of income tax act
- section 9 of the income tax act
- section 94b of income tax act
- section 206aa of income tax act
Frequently Asked Questions (FAQs)
What is section 147 of the Income Tax Act?
Section 147 of the Income Tax Act provides for the procedure to be followed by the income tax department for reopening an assessment or reassessment.
When can an assessment be reopened under section 147?
An assessment can be reopened under section 147 if the Assessing Officer has reason to believe that income has escaped assessment.
What is the time limit for reopening an assessment under section 147?
The time limit for reopening an assessment under section 147 is four years from the end of the relevant assessment year, unless the income escaped assessment exceeds Rs. 1 lakh, in which case the assessment can be reopened within six years.
What is the procedure for reopening an assessment under section 147?
The procedure for reopening an assessment under section 147 involves issuing a notice to the taxpayer, stating the reasons for reopening the assessment, and providing an opportunity to the taxpayer to be heard.
What are the exceptions to section 147?
There are exceptions to section 147, such as if an assessment has already been reopened once, it cannot be reopened again unless there is new and valid information available.
Can a taxpayer challenge the reopening of an assessment under section 147?
Yes, a taxpayer can challenge the reopening of an assessment under section 147 before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, and eventually the High Court and Supreme Court.
What is income escaping assessment?
Income escaping assessment means income that has not been assessed or has been under-assessed in the original assessment.
What are the reasons for income escaping assessment?
Income escaping assessment can happen due to various reasons, such as the non-disclosure of income, incorrect computation of income, or the failure to furnish necessary documents or information.
What are the implications of section 147 for taxpayers?
Section 147 has significant implications for taxpayers, as it allows the income tax department to scrutinize their past returns and demand additional taxes if any income has escaped assessment.
How can taxpayers avoid disputes with the income tax department under section 147?
Taxpayers can avoid disputes with the income tax department under section 147 by maintaining accurate records and disclosing all their income in their tax returns.
