1. Introduction: Meaning and Role of “Assessment”
In the context of the Indian Income-tax Act, 1961, assessment is the process by which the tax authorities examine a taxpayer’s return of income, verify the correctness of income, deductions and tax paid, and determine the final tax liability or refund. It is more than a mechanical computation; it is a legal and quasi-judicial process, governed by defined procedures, statutory time limits, and safeguards for both the Revenue and the taxpayer.
The Central Board of Direct Taxes (CBDT) recognises several classes of assessments: summary processing under section 143(1), regular or scrutiny assessment under section 143(3), best judgment assessment under section 144, reassessment for income escaping assessment under section 147, and special search-related assessments. Over the last decade, the field has been transformed by the introduction of faceless assessment under section 144B, which has made most scrutiny and many reassessment proceedings electronic and jurisdiction-less.
This page presents the subject in a “FAQ” format; however, each answer is structured as a multi-paragraph explanation, so that students, practitioners and taxpayers can build a complete conceptual understanding of assessments under the Act.
2. FAQ 1 – What are the different types of assessments?
2.1 Self-assessment (Section 140A)
The starting point of the assessment ecosystem is self-assessment. The law places the primary responsibility for computing income, claiming deductions and paying tax on the assessee. Under section 140A, the taxpayer must calculate tax on the returned income, adjust for advance tax and TDS/TCS, and pay any balance as self-assessment tax before filing the return.
Self-assessment is not an order passed by the Department, but it is recognised in the Act as a distinct step. The Department then takes this self-computed return as a base, subjecting it to automated checks under section 143(1) and, where required, to deeper verification or scrutiny under other provisions.
2.2 Summary / Intimation under Section 143(1)
A summary assessment under section 143(1) is carried out in an automated manner at the Centralised Processing Centre (CPC). The system performs checks for arithmetic errors, internal inconsistencies, mismatch with TDS/TCS and advance-tax data, and disallowance of claims that are prima facie inadmissible on the face of the return.
The result is communicated as an “intimation” under section 143(1). This may confirm the returned income or make minor adjustments, resulting in additional demand or refund. No personal hearing is involved and the process is entirely electronic. In many cases, where no further proceedings are initiated, this 143(1) intimation operates as a de facto finalisation of the return for that year.
2.3 Scrutiny / Regular Assessment under Section 143(3)
A scrutiny assessment under section 143(3) is a detailed enquiry into the correctness of the return. It begins with the issue of a notice under section 143(2), ordinarily within a prescribed time from the end of the financial year in which the return is filed. This notice informs the assessee that the case has been selected for scrutiny—either on the basis of risk parameters (CASS) or through specific information.
The Assessing Officer, now usually acting through the faceless assessment framework, then issues questionnaires and notice under section 142(1), calling for books of account, explanations, and supporting documents. After considering submissions and evidence, the officer passes an order under section 143(3), determining total income, tax, interest and, where appropriate, initiating penalty proceedings. Scrutiny is therefore the primary vehicle for issue-based or comprehensive verification of returns.
2.4 Best Judgment Assessment (Section 144)
A best judgment assessment under section 144 is made when the assessee fails to comply with fundamental obligations—such as not filing a return, ignoring notices under sections 142(1) or 143(2), or failing to produce accounts and documents. In such situations, the Assessing Officer is empowered to make an estimate of the assessee’s income on the basis of available material, including third-party information, past assessments, and external data.
Even in a best judgment scenario, principles of natural justice require that the assessee be given an opportunity of being heard, typically via show-cause notices and, under faceless assessment, through electronic communication or video hearings. The resulting order often represents a higher or protective estimate of income and may be accompanied by penalty proceedings, making such situations particularly serious from the taxpayer’s perspective.
2.5 Reassessment / Income Escaping Assessment (Sections 147–151)
Where the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment for a particular year, they may initiate reassessment proceedings under section 147. The procedural mechanics—now involving sections 148, 148A, 149 and 151—have been significantly overhauled in recent years.
Under the current framework, before issuing a notice under section 148, the officer must follow a pre-notice process under section 148A: conducting enquiries where necessary, issuing a show-cause notice to the assessee, considering their reply, and then passing an order under section 148A(d) that decides whether it is a fit case for issuing a reassessment notice. Time limits generally run up to three years in normal cases and can extend to longer periods in cases of substantial, well-documented income escaping assessment, subject to safeguards.
2.6 Search / Block Assessments and Special Situations
In cases involving search and seizure operations or requisition of assets, special assessment provisions—such as sections 153A and 153C—can apply, allowing the Department to assess or reassess multiple years in a “block” linked to the search. Similarly, assessments of partners, related parties, or persons in whose hands seized material is relatable may be centralized or linked procedurally.
These special regimes are designed to deal with situations where substantial undisclosed income is suspected across several years and entities, and they often interact with both scrutiny and reassessment provisions.
3. FAQ 2 – What is Faceless Assessment and how does it change the process?
3.1 Concept and Legal Basis (Section 144B)
Faceless assessment is a structural reform that moves many assessments away from individual, jurisdiction-based officers to a centralized, electronic, team-based system. The legal basis is provided in section 144B and related notifications. Under this system, the traditional face-to-face interaction between assessee and Assessing Officer is replaced by communication through a centralized portal, with work distributed among multiple specialized units.
The stated objectives include eliminating personal interface, reducing discretion and perceived harassment, promoting functional specialization, and creating a transparent digital trail of all actions taken during assessment. In practice, most scrutiny assessments and many reassessment proceedings are now routed through the faceless architecture, unless specifically carved out.
3.2 Architecture: NFAC and Units
The faceless system is anchored by the National Faceless Assessment Centre (NFAC), which coordinates and routes cases to various units:
- Assessment Units – draft orders, frame issues and propose additions.
- Verification Units – conduct enquiries, cross-verifications, third-party checks.
- Technical Units – provide opinions on complex issues (e.g., transfer pricing, valuation).
- Review Units – review draft orders for factual and legal consistency.
Allocation and reallocation of cases are done through an automated system, maintaining anonymity between the assessee and individual officers. Notices, questionnaires and orders are served electronically, and responses are filed through the portal. Personal hearings, where allowed, are typically held via video conferencing rather than physical appearance.
3.3 Exceptions and Transfer Out of Faceless
Not every case is permanently locked into the faceless system. CBDT instructions allow certain categories – such as complex search cases, matters involving specific anti-avoidance provisions, or partially set-aside assessments – to be handled by jurisdictional Assessing Officers. Cases can be transferred out of the faceless framework in such circumstances through prescribed procedures.
This hybrid approach aims to retain the advantages of faceless assessment for the majority of cases while preserving flexibility for particularly complex or sensitive matters that may benefit from closer, jurisdiction-based handling.
4. FAQ 3 – How and when can the department select my case for scrutiny?
4.1 Mechanism of Selection
Cases for scrutiny assessment under section 143(3) are typically selected using two broad channels:
- CASS (Computer Assisted Scrutiny Selection), where returns are screened on the basis of risk parameters such as large refunds, TDS mismatch, abnormal loss claims, high-value transactions, or specific third-party information; and
- Manual selection, confined to limited categories under CBDT instructions, including search and survey cases or matters flagged by other enforcement agencies.
Selection for scrutiny is not, by itself, an allegation of wrongdoing. It simply indicates that the return carries risk markers or information patterns that warrant closer examination.
4.2 Time Limits for Scrutiny Notices and Completion
The law prescribes strict timelines around scrutiny:
- The notice under section 143(2) must be issued within a specified period (commonly described as within 3 months from the end of the financial year in which the return is furnished).
- The assessment order under section 143(3) must be passed within a defined period (typically 12 months from the end of the relevant assessment year, subject to special extensions in specified cases).
If a valid 143(2) notice is not issued within time, a full-fledged scrutiny assessment under section 143(3) cannot normally be made, although the return may still be processed under section 143(1) and can be subject to reassessment if fresh information emerges.
4.3 Rights of the Assessee During Scrutiny
Even within the faceless framework, the assessee retains essential rights:
- To receive clear and specific notices and questionnaires,
- To seek reasonable adjournments when genuinely required,
- To file detailed submissions and supporting documents electronically,
- To request personal hearing (usually through video conference) in appropriate cases, and
- To receive a speaking order that addresses major arguments and evidence.
Adverse orders can be challenged through rectification, appeal and revision mechanisms, making scrutiny a structured legal process rather than an arbitrary exercise.
5. FAQ 4 – What happens in a reassessment or “income escaping” assessment?
5.1 Trigger and Pre-notice Procedure
Reassessment is invoked when the Department has some information or material suggesting that income chargeable to tax has escaped assessment. Sources may include data analytics, information from other tax laws (like GST), foreign-exchange or bank reports, search and survey results, and audit or investigation findings.
Under the revamped law, before issuing a formal notice under section 148, the AO must typically follow a pre-notice procedure under section 148A: conducting enquiry, if required, issuing a show-cause notice to the assessee, allowing an opportunity to respond, and then passing an order under section 148A(d) explaining why reassessment is or is not warranted. This adds a layer of transparency and due process.
5.2 Limitation Periods in Reassessment
The limitation framework balances revenue needs with taxpayer certainty. In broad terms (subject to specific statutory language and yearly amendments):
- Normal cases – reassessment notices must generally be issued within a relatively shorter period (often framed as up to 3 years from the end of the relevant assessment year).
- Serious cases – where there is evidence of large income escaping assessment (above prescribed thresholds), the period can extend further, often up to 10 years, subject to stricter conditions and approvals.
These timelines have been refined through successive Finance Acts and CBDT instructions. For any specific year, one must cross-check with the exact text of sections 149 and 151 and the latest circulars.
5.3 Reassessment and Faceless Framework
Many reassessment cases are now conducted through the same faceless assessment architecture as scrutiny cases. Notices and questionnaires issue via the national portal; assessee replies online; and draft orders may be subject to review. Some complex search-based or exceptional matters may still be assigned to jurisdictional officers, but the core spirit of data-driven, transparent, and trackable processing extends into the reassessment space as well.
6. FAQ 5 – What are the common time limits and notices I should know?
6.1 Key Notices in the Assessment Cycle
Several key notices typically appear in the assessment life-cycle:
- Section 139(9) – notice for defective return, asking for correction of specified defects.
- Section 143(1) intimation – summary processing of the return.
- Section 143(2) – notice of selection for scrutiny.
- Section 142(1) – general notice calling for return (where not filed) or for information and documents.
- Section 148A / 148 – notices relating to proposed and actual reassessment.
Each of these notices has both a time window within which it must be issued and a time limit within which the assessee must respond. Failure to respond can lead to ex parte or best judgment orders, making timely compliance crucial.
6.2 Snapshot of Important Time Limits
While one must always check the precise law for the relevant assessment year, a broad snapshot under the recent framework can be described as:
- 143(1) intimation – commonly required to be issued within 9 months from the end of the financial year in which the return is furnished.
- 143(2) scrutiny notice – to be issued within a short window (often described as within 3 months from the end of the FY in which the return is filed).
- 143(3) assessment order – to be passed within 12 months from the end of the relevant assessment year, subject to special extensions.
- Reassessment notices (148/148A) – generally up to 3 years (normal) or up to 10 years (serious cases) from the end of the relevant assessment year, with detailed statutory conditions.
These time bars serve a dual purpose: they encourage timely action by the Department and give taxpayers a measure of certainty that their assessments cannot be kept open indefinitely.
7. FAQ 6 – What remedies are available if I disagree with an assessment?
7.1 Rectification of Mistakes (Section 154)
When an assessment or intimation contains a “mistake apparent from the record”, the assessee may seek rectification under section 154. Typical examples include arithmetical errors, failure to grant credit for TDS appearing in Form 26AS, or omission to give effect to a clear and unambiguous statutory provision.
Rectification proceedings can be initiated by the Department suo motu or on application by the assessee. They are, however, limited to obvious mistakes and cannot be used to reopen debatable legal issues or re-argue complex factual points. Many rectification requests are now filed and disposed of electronically.
7.2 Appeals and Faceless Appeals
For substantive disputes on facts or law, the principal remedy is an appeal. The first appellate authority is the Commissioner (Appeals) or the faceless Commissioner (Appeals) under the Faceless Appeal Scheme. Further appeals lie to the Income Tax Appellate Tribunal (ITAT), and on substantial questions of law, to the High Court and Supreme Court.
Appeals are subject to filing deadlines and may require payment of admitted tax and application for stay of disputed demand. The faceless appeals framework, where applicable, mirrors the assessment model with digital filings, automated allocation, and video hearings where necessary.
7.3 Revision and Extraordinary Remedies
In suitable cases, taxpayers can also explore:
- Revision under section 264, where the Principal Commissioner/Commissioner may revise any order on application by the assessee to provide relief.
- Revision under section 263, which is initiated by the Department (and can be challenged in appeal) when an order is considered erroneous and prejudicial to the interests of the revenue.
- Writ petitions in High Courts, in cases involving jurisdictional errors, violation of natural justice or fundamental rights.
From time to time, the Government may also introduce special settlement or dispute resolution schemes, but these are year- and scheme-specific and must be studied when available.
8. FAQ 7 – How should taxpayers practically handle assessment proceedings?
8.1 Documentation and Internal Controls
Practically, the cornerstone of smooth assessment is robust documentation. Taxpayers should maintain proper books, vouchers, contracts, board minutes, and reconciliations with GST, TDS, bank records and AIS/TIS. Where positions are taken on contentious issues, explanatory notes and internal memos should be kept ready to support the view adopted.
Internal controls—such as timely closing of books, periodic reconciliations, and review of high-value or unusual transactions—help reduce surprises during scrutiny or reassessment, and facilitate quicker and more credible responses to notices.
8.2 Using the E-filing Portal and Faceless Utilities
Since most notices and orders now arrive through the e-filing portal, taxpayers and their advisors must be vigilant about:
- Regularly logging in to check the “Pending Actions” and “e-Proceedings” tabs,
- Ensuring contact details and email/SMS alerts are up to date,
- Responding within the stipulated timelines or seeking extensions where permitted, and
- Keeping a structured record of all submissions and acknowledgments (ARNs) for future reference.
Missing a digital notice or deadline can quickly turn a manageable scrutiny into a best judgment or reassessment proceeding, so process discipline is essential.
8.3 Professional Advice and Risk Assessment
With the law evolving rapidly—especially around limitation periods, faceless procedures, and reassessment triggers—seeking professional advice in complex or high-stakes matters is often prudent. Experienced CAs or tax lawyers can help in:
- Framing accurate and complete responses to notices,
- Assessing whether issues are best addressed via rectification, appeal, or revision, and
- Designing long-term strategies to minimise recurring disputes (for example, through advance rulings or better documentation).
A proactive approach, rather than reactive firefighting, usually results in smoother assessments and reduced litigation.
9. Conclusion
Assessments under the Income-tax Law are the central mechanism through which the State verifies returns and enforces tax compliance. From self-assessment and summary processing, through scrutiny, best judgment and reassessment, each stage is governed by clearly defined statutory provisions, time limits and remedies.
Recent reforms—most notably the faceless assessment framework and the revamped reassessment regime—aim to make this process more data-driven, technology-based and transparent. For taxpayers, the most important practical takeaway is simple: stay compliant, stay documented, and respond promptly. When records are strong and communications are clear, assessment proceedings become a structured dialogue rather than a source of fear, and taxpayers can assert their rights confidently within the framework of the Income-tax Act, 1961.