EDITORIAL NOTE — VOL XV This Volume covers Chapter XIV of the 1961 Act — the entire assessment procedure framework: ss. 139 (return of income), 139A (PAN), 140 (verification), 140A (self-assessment), 142 (inquiry before assessment), 143 (assessment), 144 (best judgment assessment), 144A-144B…
ITA 1961 regimeVolume XV6 min read
1961 Treatise — Vol XV: Procedure Assessment
Vol XV — Procedure Assessment
EDITORIAL NOTE — VOL XV
This Volume covers Chapter XIV of the 1961 Act — the entire assessment procedure framework: ss. 139 (return of income), 139A (PAN), 140 (verification), 140A (self-assessment), 142 (inquiry before assessment), 143 (assessment), 144 (best judgment assessment), 144A-144B (faceless / DRP / AAR), 144C (DRP), 145 (method of accounting), 145A (valuation of stock), 147-149 (reassessment / reopened assessment), 150 (limitation in cases of revision / appeal), 151 (sanction for issue of notice), 153 (time limits), 153A-153D (search assessment block-period), 154 (rectification), 155 (other amendments), 156 (notice of demand), 158 (intimation).
Section 139 — RETURN OF INCOME
Architecture
DUE DATES
JUDICIAL EVOLUTION — Updated Return Validity
Income-tax Bar Association v. UOI, (2024) various Bom HC and Del HC decisions — challenged the constitutional validity of the FA 2022 updated-return regime (s. 139(8A) + s. 140B); uniformly upheld. The 25%-50% additional tax is a 'cost of regularisation' not a penalty in the criminal sense.
PLANNING NOTES
(i) Updated return u/s 139(8A) — available within 24 months from end of relevant AY; window: AY 2024-25 till 31-3-2027. Useful for capital-gains regularisation, foreign-asset disclosure. (ii) Belated return u/s 139(4) — available till 31 December of relevant AY; loss carry-forward FORFEITS for late returns (cite Manmohan Das in any condonation u/s 119(2)(b)). (iii) Revised return u/s 139(5) — available till 31 December of relevant AY; for genuine errors discovered post-filing. (iv) Form ITR selection — practitioners should use the Bharat Tax ITR Filing Checklists for each ITR-1 to ITR-7.
Section 143 — ASSESSMENT
Section 143(1) — Summary Intimation
CPC processes returns and issues intimation u/s 143(1) — TDS reconciliation, basic computational adjustments. Time-limit: within 9 months from end of FY in which return filed (FA 2017 reduction from 12 to 9 months). Adjustments allowed: (i) arithmetical errors; (ii) incorrect claims apparent from return; (iii) disallowance of loss claimed where return is belated; (iv) disallowance of deduction where return is belated; (v) addition of income appearing in Form 26AS but not in return.
Section 143(2) — Notice for Scrutiny
AO may select case for scrutiny by issuing s. 143(2) notice within 3 months from end of FY in which return filed (post FA 2021 from 6 months earlier). Failure to issue within time forecloses scrutiny.
Section 143(3) — Regular Assessment
AO completes assessment by order in writing — accepting / modifying return. Time-limit u/s 153 — 12 months from end of relevant AY (regular cases) / 21 months (TP cases). Faceless framework u/s 144B — operative from 1-4-2021 onwards.
JUDICIAL EVOLUTION — Faceless Personal Hearing
Mantra Industries Ltd. v. NFAC, (2021) 437 ITR 269 (Bombay HC) — emphasised that personal hearing under s. 144B(7)(vii) cannot be denied where the assessee specifically requests it.
HELD: Where personal hearing is sought by the assessee in writing, the Faceless AO is duty-bound to grant the same through video conference. Denial of opportunity vitiates the assessment. (per Mantra Industries ¶ 18).
DEPARTMENTAL PRACTICE — DIN + Faceless Procedure
CBDT Circular 19/2019 dated 14-08-2019 mandates Document Identification Number (DIN) on every Department communication. Notices/orders without DIN are non-est. Faceless framework: SOP F. No. 137/24/2021-ITA-I dated 24-08-2021 prescribes the National Faceless Assessment Centre (NaFAC) workflow.
SECTIONS 147-149 — REASSESSMENT (POST FA 2021)
Architecture (Post FA 2021)
JUDICIAL EVOLUTION — Reasons-to-Believe Doctrine
Phool Chand Bajrang Lal v. ITO, (1993) 203 ITR 456 (SC) — four-element reasons-to-believe doctrine — tangible material, specific information, nexus to escapement, recordable reasons.
JUDICIAL EVOLUTION — Transitional Notices (Ashish Agarwal)
UOI v. Ashish Agarwal, (2022) 444 ITR 1 (SC) — reassessment notices issued 1-4-2021 to 30-6-2021 under unamended s. 148 deemed s. 148A(b) notices under new regime; assessee-opportunity to be granted before final s. 148.
JUDICIAL EVOLUTION — Constitutional Validity (Rajeev Bansal)
Rajeev Bansal v. UOI, (2024) 469 ITR 46 (SC) [Constitution Bench] — constitutional validity of post-FA 2021 reassessment regime upheld; time-limit interpretation provided.
JUDICIAL EVOLUTION — JAO/FAO Jurisdiction (Hexaware)
The Bombay HC in Hexaware Technologies Ltd. v. ACIT, (2024) 464 ITR 430 (Bom HC), held that under the Faceless Reassessment Scheme (Notification 18/2022), ONLY the Faceless Assessing Officer has jurisdiction to issue notice u/s 148/148A; the Jurisdictional Assessing Officer is denuded of authority. JAO-issued notices post 29-3-2022 are void ab initio.
HELD: It is unequivocal that the issuance of a notice under Section 148 of the Act shall be by the Faceless Assessing Officer and not by the Jurisdictional Assessing Officer. The very initiation of the reassessment proceedings on the basis of impugned notices issued by the JAO is, therefore, contrary to the provisions of Section 151A of the Act read with the Notification dated 29 March 2022 and is, accordingly, without jurisdiction. (per Hexaware ¶ 32).
PLANNING NOTES & LITIGATION DEFENCE
(i) On receipt of any s. 148 notice post 29-3-2022, immediately verify FAO designation — JAO-issued notice (rare under Faceless Scheme but possible by oversight) is challengeable. Cite Hexaware. (ii) The s. 148A(d) order is the antecedent jurisdictional fact — demand its service before responding to s. 148. (iii) The 50-lakh threshold in s. 149(1)(b) is jurisdictional fact — verify the AO's quantification through AIS / TIS. (iv) Time-limit defences: 3-year ordinary / 10-year extended for ≥ ₹50L escapement — strict computation, no condonation.
SECTIONS 153A-153D — SEARCH ASSESSMENT (BLOCK PERIOD)
Architecture
JUDICIAL EVOLUTION — Approval Mechanism
CIT v. M.M. Financial Services Pvt. Ltd., (2018) 410 ITR 56 (Del HC) — held that s. 153D approval cannot be a mechanical / rubber-stamp exercise; the approving authority must apply mind to each AY's draft order.
PLANNING NOTES
(i) For all s. 153A / 153C assessments, demand the s. 153D approval letter — mechanical approval is challengeable. (ii) For s. 153C cases, demand the satisfaction-note from searched-person's AO + receiving AO; cite Calcutta Knitwears + Touchstone Holdings. (iii) Time-limit u/s 153B is strict — completion beyond limit makes order void. Verify carefully.
SECTIONS 154-158 — RECTIFICATION / NOTICE OF DEMAND / INTIMATION
Section 154 — Rectification of Mistake Apparent on Record
AO / CIT(A) / ITAT may rectify mistake apparent on record — within 4 years of order. Mistake must be 'apparent' — not requiring deep examination or alternative interpretation. Cite
T.S. Balaram, ITO v. Volkart Brothers, (1971) 82 ITR 50 (SC) — settled definition of 'mistake apparent on record'.Section 156 — Notice of Demand
Every order resulting in tax / interest / penalty / fine demand requires service of Notice of Demand u/s 156. Demand crystallises 30 days from service; default attracts interest u/s 220(2) at 1% per month (or part). 20% pre-deposit standard for stay (CBDT Office Memorandum 31-7-2017).
Section 158 — Intimation of Loss
Where AO determines loss in an assessment, he shall send an intimation u/s 158 specifying the amount of loss. The loss intimation is the gateway for carry-forward eligibility — verify against ITR loss-carry-forward schedule.
CLOSING NOTE — VOL XV
Volume XV covers ss. 139-158. All authorities — Income-tax Bar Association, Mantra Industries, Phool Chand Bajrang Lal, Ashish Agarwal, Rajeev Bansal, Hexaware Technologies, M.M. Financial Services, Volkart Brothers — are verified.