Section 143

        ‘143. Assessment. — (1) (a) Where a return has been made under section 139, the Assessing Officer may, without requiring the presence of the assessee or the production by him of any evidence in support of the return, make an assessment of the total income or loss of the assessee after making such adjustments to the income or loss declared in the return as are required to be made under clause ( b), with reference to the return and the accounts and documents, if any, accompanying it, and for the purposes of the adjustments referred to in sub-clause (iv) of clause (b), also with reference to the record of the assessments, if any, of past years, and determine the sum payable by the assessee or refundable to him on the basis of such assessment.

        (b) In making an assessment of the total income or loss of the assessee under clause (a ), the Assessing Officer shall make the following adjustments to the income or loss declared in the return, that is to say, he shall,—

    (i)   rectify any arithmetical errors in the return, accounts and documents, referred to in clause (a ) ;

   (ii)   [* * *]

  (iii)   [* * *]

  (iv)   give due effect to the allowance referred to in sub-section (2) of section 32, the deduction referred to in clause (ii) of sub-section (3) of section 32A or clause (ii) of sub-section (2) of section 33 or clause (ii) of sub-section (2) of section 33A or clause (i) of sub-section (2) of section 35 or sub-section (1) of section 35A or sub-section (1) of section 35D or sub-section (1) of section 35E or the first proviso to clause (ix) of sub-section (1) of section 36, any loss carried forward under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A and the deficiency referred to in sub-section (3) of section 80J, as computed, in each case, in the regular assessment, if any, for the earlier assessment year or years.

        (2) Where a return has been made under section 139, and—

   (a)   an assessment having been made under sub-section (1), the assessee makes within one month from the date of service of the notice of demand issued in consequence of such assessment, an application to the Assessing Officer objecting to the assessment, or

   (b)   whether or not an assessment has been made under sub-section (1), the Assessing Officer considers it necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assessee or the production of evidence in this behalf,

        the Assessing Officer shall serve on the assessee a notice requiring him, on a date to be therein specified, either to attend at the Assessing Officer’s office or to produce, or to cause to be there produced, any evidence on which the assessee may rely in support of the return :

        Provided that, in a case, where an assessment has been made under sub-section (1), the notice under this sub-section except where such notice is in pursuance of an application by the assessee under clause (a) shall not be issued by the Assessing Officer unless the previous approval of the Deputy Commissioner has been obtained to the issue of such notice :

        Provided further that in a case where the assessment made under sub-section (1) is objected to by the assessee by an application under clause (a), the assessee shall not be deemed to be in default in respect of the whole or any part of the amount of the tax demanded in pursuance of the assessment under that sub-section, which is disputed by the assessee, in so far as such amount does not relate to any adjustment referred to in sub-clause (i) of clause (b) of sub-section (1), and further no interest shall be chargeable under sub-section (2) of section 220 in respect of such disputed amount.

        (3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered,—

   (a)   in a case where no assessment has been made under sub-section (1), the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment ;

   (b)   in a case where an assessment has been made under sub-section (1), if either such assessment has been objected to by the assessee by an application under clause (a) of sub-section (2) or the Assessing Officer is of opinion that such assessment is incorrect, inadequate or incomplete in any material respect, the Assessing Officer shall, by an order in writing, make a fresh assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment.

        Explanation.—For the purposes of this section,—

   (1)   an assessment under sub-section (1) shall be deemed to be incorrect, inadequate or incomplete in a material respect, if—

   (a)   the amount of the total income as determined under sub-section (1) is greater or smaller than the amount of the total income on which the assessee is properly chargeable under this Act to tax ; or

   (b)   the amount of the tax payable as determined under sub-section (1) is greater or smaller than the amount of the tax properly payable under this Act by the assessee ; or

   (c)   the amount of any loss as determined under sub-section (1) is greater or smaller than the amount of the loss, if any, determinable under this Act on a proper computation ; or

   (d)   the amount of any depreciation allowance, development rebate or any other allowance or deduction as determined under sub-section (1) is greater or smaller than the amount of the depreciation allowance, development rebate or, as the case may be, other allowance or deduction properly allowable under this Act ; or

   (e)   the amount of the refund as determined under sub-section (1) is greater or smaller than the amount of the refund, if any, due under this Act on a proper computation ; or

    (f)   the status in which the assessee has been assessed under sub-section (1) is different from the status in which the assessee is properly assessable under this Act ;

13.   The provisions of section 143 as they stood before the commencement of the Direct Tax Laws (Amendment) Act, 1987, shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1988 and any earlier assessment year—vide Income-tax (Removal of Difficulties) Order, 1989.

14.   See also Circular No. 201, dated 5-7-1976, Instruction No. 1395, dated 15-5-1981 [Source : 114th Report [1982-83] of the Public Accounts Committee, pp. 16-17], Circular No. 230, dated 27-10-1977. Relevant extracts from minutes of 12th meeting of CDTAC held on 17-8-1967, Circular No. 1 [C. No. 9(17)-IT/50], dated 24-4-1950, Circular No. 18 (XL-37), dated 28-4-1955, Circular No. 125, dated 26-11-1973, Circular No. 36(XL-52), dated 19-11-1958, Circular No. 50(XL-43), dated 28-12-1956, Letter [F.No. 91/41/67/ITJ(25)], dated 3-7-1967, Letter [F.No. 81/27/65-IT(B)], dated 18-5-1965, Circular No. 14 (XL-35), dated 11-4-1955, Circular No. 3 of 1942, dated 16-1-1942, Circular No. 601, dated 4-6-1991, Circular No. 689, dated 24-8-1994, Instruction No. 1617, dated 18-5-1985, Instruction No. 574, dated 27-7-1993 and Press Release dated 12-3-1996. For details, see Taxmann’s Master Guide to Income-tax Act.

15.   Substituted by the Finance Act, 1999, w.e.f. 1-6-1999. Prior to its substitution, sub-section (1), as amended by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989, Finance Act, 1992, w.e.f. 1-4-1993 and Finance Act, 1997, w.e.f. 1-4-1998, read as under :

           "(1)( a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,—

    (i)   if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly ; and

   (ii)   if any refund is due on the basis of such return, it shall be granted to the assessee :

           Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :—

    (i)   any arithmetical errors in the return, accounts or documents accompanying it shall be rectified ;

   (ii)   any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed ;

  (iii)   any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed :

           Provided further that an intimation shall be sent to the assessee whether or not any adjustment has been made under the first proviso and notwithstanding that no tax or interest is due from him :

           Provided also that an intimation under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable.

           ( b) Where as a result of an order made under sub-section (3) of this section or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, or any order of settlement made under sub-section (4) of section 245D relating to any earlier assessment year  and passed subsequent to the filing of the return referred to in clause (a), there is any variation in the carry forward loss, deduction, allowance or relief claimed in the return, and as a result of which,—

    (i)   if any tax or interest is found due, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly, and

   (ii)   if any refund is due, it shall be granted to the assessee :

           Provided that an intimation for any tax or interest due under this clause shall not be sent after the expiry of four years from the end of the financial year in which any such order was passed.

           ( c) Where the assessee is a member of an association of persons or body of individuals and as a result of the adjustments made under the first proviso to clause (a) of sub-section (1) in the income or loss declared in the return made by the association or body, as the case may be, or as a result of an order made under sub-section (3) of this section or section 144 or section 147 or section 154 or section 155 or sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5) of section 185 or sub-section (1) or sub-section (2) of section 186 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, or any order of settlement made under sub-section (4) of section 245D, passed subsequent to the filing of the return referred to in clause (a), there is any variation in his share in the income or loss of the association or body, as the case may be, or in the manner of inclusion of his share in the returned income, then,—

                 ( i)   if any tax or interest is found due, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly, and

                ( ii)   if any refund is due, it shall be granted to the assessee :

Provided that an intimation for any tax or interest due under this clause shall not be sent after the expiry of four years from the end of the financial year in which any such adjustments were made or any such order was passed."

16.   For the meaning of the expression "without prejudice to the provisions of sub-section (2)", see Taxmann’s Direct Taxes Manual, Vol. 3.

16a. Substituted for "two years from the end of the assessment year in which the income was first assessable" by the Finance Act, 2001, w.e.f. 1-6-2001.

16b.Third proviso inserted by the Finance Act, 2001, w.e.f. 1-6-2001.

17.   Prior to its omission, sub-section (1A), as inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, and later on amended by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989, Finance Act, 1992, w.r.e.f. 1-4-1989 and Finance Act, 1993, w.r.e.f. 1-4-1989, read as under :

        "(1A) (a ) Where as a result of the adjustments made under the first proviso to clause (a) of sub-section (1),—

    (i)   the income declared by any person in the return is increased ; or

   (ii)   the loss declared by such person in the return is reduced or is converted into income,

        the Assessing Officer shall,—

   (A)   in a case where the increase in income under sub-clause (i) of this clause has increased the total income of such person, further increase the amount of tax payable under sub-section (1) by an additional income-tax calculated at the rate of twenty per cent on the difference between the tax on the total income so increased and the tax that would have been chargeable had such total income been reduced by the amount of adjustments and specify the additional income-tax in the intimation to be sent under sub-clause (i) of clause (a) of sub-section (1) ;

             ( B)   in a case where the loss so declared is reduced under sub-clause (ii) of this clause or the aforesaid adjustments have the effect of converting that loss into income, calculate a sum (hereinafter referred to as additional income-tax) equal to twenty per cent of the tax that would have been chargeable on the amount of the adjustments as if it had been the total income of such person and specify the additional income-tax so calculated in the intimation to be sent under sub-clause (i) of clause (a) of sub-section (1) ;

             ( C)   where any refund is due under sub-section (1), reduce the amount of such refund by an amount equivalent to the additional income-tax calculated under sub-clause (A) or sub-clause (B), as the case may be.

(b) Where as a result of an order under sub-section (3) of this section or section 154 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, the amount on which additional income-tax is payable under clause (a) has been increased or reduced, as the case may be, the additional income-tax shall be increased or reduced accordingly, and,—

               ( i)   in a case where the additional income-tax is increased, the Assessing Officer shall serve on the assessee a notice of demand under section 156 ;

              ( ii)   in a case where the additional income-tax is reduced, the excess amount paid, if any, shall be refunded."

"(1B) Where an assessee furnishes a revised return under sub-section (5) of section 139 after the issue of an intimation, or the grant of refund, if any, under sub-section (1) of this section, the provisions of sub-sections (1) and (1A) of this section shall apply in relation to such revised return and—

               ( i)   the intimation already sent for any income-tax, additional income-tax or interest shall be amended on the basis of the said revised return and where any amount payable by way of income-tax, additional income-tax or interest specified in the said intimation has already been paid by the assessee then, if any such amendment has the effect of—

                        ( a)   enhancing the amount already paid, the intimation amended under this clause shall be sent to the assessee specifying the excess amount payable by him and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly;

                        ( b)   reducing the amount already paid, the excess amount paid shall be refunded to the assessee ;

              ( ii)   the amount of the refund already granted shall be enhanced or reduced on the basis of the said revised return and where the amount of refund already granted is—

                        ( a)   enhanced, only the excess amount of refund due to the assessee shall be paid to him ;

                        ( b)   reduced, the excess amount so refunded shall be deemed to be the tax payable by the assessee and an intimation shall be sent to the assessee specifying the amount so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly :

           Provided that an assessee, who has furnished a revised return under sub-section (5) of section 139 after the service upon him of the intimation under sub-section (1) of this section, shall be liable to pay additional income-tax in relation to the adjustments made under the first proviso to clause (a ) of sub-section (1) and specified in the said intimation, whether or not he has made the said adjustments in the revised return."

19.   Substituted for "In a case referred to in sub-section (1), if the Assessing Officer" by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.

20.   For the meaning of the expression "necessary or expedient", see Taxmann’s Direct Taxes Manual, Vol. 3.

21.   Words "he shall" omitted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.

        "Provided that no notice under this sub-section shall be served on the assessee after the expiry of the financial year in which the return is furnished or the expiry of six months from the end of the month in which the return is furnished, whichever is later."

23.   Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.

24.   Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.

25.   Prior to its omission, sub-section (5), as inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :

           "(5) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year."

26.   Omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Prior to its omission, Explanation, as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and later on amended by the Finance Act, 1994, w.e.f. 1-6-1994, read as under :

           " Explanation.—An intimation sent to the assessee under sub-section (1) or sub-section (1B) shall be deemed to be an order for the purposes of sections 246 and 264."