Assessment Procedure including Dispute Resolution Process: formula sheet

Key formulas

Due dates (section 263(1)(c))

30 Nov: section 172 applies | 31 Oct: company; audited assessee; partner of audited firm | 31 Aug: business/profession, not audited; partner of such firm | 31 Jul: any other assessee

Dates are in the financial year after the tax year. Audit applies under the Act or any other law. The 31 Oct and 31 Aug rows apply where section 172 does not apply.

Belated return (s. 263(4))

Within 9 months from end of tax year OR before completion of assessment, whichever is earlier

Available only if no return was filed within the time under sub-section (1).

Revised return (s. 263(5))

Within 12 months from end of tax year OR before completion of assessment, whichever is earlier

Needs an earlier return under (1) or (4) and an omission or wrong statement. It is subject to section 428(b).

Updated return (s. 263(6))

Within 48 months from end of the financial year succeeding the tax year

Barred if it is a loss return, reduces tax, creates or raises a refund, or an earlier updated return exists. Other bars: pending or completed assessment, search, survey and others.

Defective return (s. 263(7))

Rectify within 15 days of intimation (extendable on application); else invalid

Late rectification before assessment may be condoned by the Assessing Officer.

Return regardless of income

Company, firm, university/college (s. 45(3)(a)), business trust, investment fund (s. 224), resident with foreign assets

Under s. 263(1)(b), file even with nil income or a loss.

Best judgment assessment triggers (section 271(1))

No return under section 263 OR failure to comply with all the terms of a notice under section 268(1) / a direction under section 268(5) OR, after filing a return, failure to comply with all the terms of a notice under section 270(8)

Any one trigger is enough. The Assessing Officer must take relevant material into account and hear the assessee.

Show-cause notice before best judgment (section 271(2) and (3))

Show-cause notice under section 271(2) required, EXCEPT where a notice under section 268(1) was already issued before the assessment (section 271(3))

The notice states a date and time to show cause why assessment should not be made to best judgment. Section 271(3) removes only this show-cause step. The opportunity of being heard under section 271(1) still applies.

Faceless assessment scope (section 273(1) and (2))

Assessment, reassessment or recomputation under section 270(10) / 271 / 279 made faceless in cases specified by the Board

Only assessments under these sections are covered. Scope can be by territorial area, persons, incomes or cases, as the Board specifies.

Faceless communication (section 273(7))

All communication through NaFAC; NaFAC with assessee and with units exclusively electronic

Exception in sub-section (8): enquiry or verification by the verification unit in circumstances the Board specifies.

Faceless centre and units (section 273(3)) and the assessment unit's order (section 273(4)(b))

NaFAC + assessment units + verification units + technical units + review units; the assessment unit makes the assessment order after hearing the assessee

Section 273(3) sets up the centre and units. Section 273(4)(b)(i) gives the assessment unit the task of making the order. Review units act where NaFAC considers review necessary.

Transfer out of faceless mode (section 273(12))

NaFAC head may transfer the case to the jurisdictional Assessing Officer with prior approval of the Board

Can be done at any stage if considered necessary.

General assessment time limit (section 286(1), Sl. No. 1)

Limit = one year from the end of the financial year succeeding the relevant tax year

Applies to assessment orders under section 270(10) or 271.

Reassessment or recomputation under section 279 (Sl. No. 4)

Limit = one year from the end of the financial year in which notice under section 280 was served

Starting point is the service of the notice, not the tax year.

Orders giving effect to appellate or revisionary orders (Sl. No. 10)

Six months from the end of the month of receipt/passing; extendable to nine months with approval

Applies where no fresh assessment is made. Sl. No. 9 (verification or hearing needed) gives one year.

Transfer pricing extension (section 286(2))

Additional 12 months where a reference is made to the TPO under section 166(1)

Covers Sl. Nos. 1 to 5 of the Table only.

Minimum remaining period (section 286(4))

If remaining period after exclusions < 60 days, it is extended to 60 days

Applies after excluding periods listed in section 286(3).

Rectification time limit (section 287(8))

No amendment after four years from the end of the financial year in which the order or intimation was passed

Subject to section 288.

Order on rectification application (section 287(9))

Pass order within six months from the end of the month in which the application is received

Must still respect the four-year limit.

High Court appeal: filing time

Appeal to High Court within 120 days from the date the Tribunal's order is received

Section 365(2)(a). Applies to the assessee and to the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner. The High Court may admit a late appeal if there was sufficient cause (section 365(3)).

High Court appeal: condition

Appeal lies only if the case involves a substantial question of law

Section 365(1) and (2)(b). The memorandum of appeal must precisely state the question. The High Court formulates it (section 365(4)) and hears the appeal on that question (section 365(5)).

Revision: own motion limit

No revision on own motion if the order was made more than 1 year earlier

Section 378(2).

Revision: application by assessee

Apply within 1 year from the date the order was communicated to him or he otherwise came to know of it, whichever is earlier; fee ₹500

Section 378(3) and (6). Late application can be admitted for sufficient cause (section 378(4)).

Revision: bars

No revision if appeal lies but is not yet made and time has not expired; or the assessee has not waived the right of appeal; or the order is already the subject of an appeal

Section 378(5). The revision order cannot be prejudicial to the assessee. Declining to interfere is not prejudicial (section 378(11)(b)).

Revision: time to pass order on assessee's application

Order within 1 year from the end of the financial year in which the application is made

Section 378(7). If the time left after excluding periods under section 378(8) is under 60 days, it is extended to 60 days (section 378(9)).

Identical question: assessee's declaration

Declaration to the Assessing Officer or appellate authority that, if the final decision in the other case is applied, he will not raise the question in the relevant case before any appellate authority or in a subsequent appeal before a higher forum

Section 375(1). The question must be identical with one in the assessee's other tax year that is pending before the High Court (reference or appeal), the Supreme Court (reference or appeal), or in a Special Leave Petition under Article 136. The order admitting or rejecting the claim is final (section 375(4)).

Identical question: department's application

Application to Tribunal or High Court within 120 days of receiving the order; later appeal within 60 days (Tribunal) or 120 days (High Court) of the final decision being communicated

Section 376(3) and (6). The collegium has two or more Chief Commissioners, Principal Commissioners or Commissioners (section 376(7)).

Variation limit

Aggregate variations proposed or made ≤ ₹10,00,000

First test of a specified order. The limit is on the aggregate of variations, not on income.

Return income limit

Total income as per return ≤ ₹50,00,000

Applies where the assessee has filed a return for the tax year of the order. Equal to the limit passes; above it fails.

Excluded cases

No search (section 247), requisition (section 248), survey (section 253) or section 159(1)/(2) agreement information

An order based on any of these is not a specified order. This covers the assessee or any other person for search and requisition.

DRC powers

Modify variations + reduce or waive penalty (imposed or imposable) + grant immunity from prosecution

Subject to prescribed conditions, for a person whose dispute is resolved under the Chapter.

AO time limit

Give effect within 1 month from the end of the month in which the DRC order is received

Draft order case: pass assessment, reassessment or recomputation order. Other cases: modify the existing order.

Procedure on an advance ruling application

Application → copy to PCIT/CIT and records called → order allowing or rejecting → ruling in writing within 6 months of receipt

Section 384(1), (2) and (6). The six months run from receipt of the application.

Mandatory rejection grounds

Reject if the question (a) is already pending before an income-tax authority, Appellate Tribunal or court, (b) involves determination of fair market value of any property, or (c) relates to a transaction designed prima facie for avoidance of income-tax

Section 384(3). Exceptions: pending and avoidance grounds do not apply to a resident applicant under section 380(b)(iii); the avoidance ground also does not apply to an applicant under section 380(b)(iv).

Hearing before rejection

No rejection unless the applicant is heard and reasons are recorded in the order

Section 384(4). On request, a hearing is also given before the ruling is pronounced (384(7)), in person or through an authorised representative.

Specified order conditions for the Dispute Resolution Committee

(i) aggregate variations ≤ ₹10,00,000; (ii) not based on search (section 247), requisition (section 248), survey (section 253) or information under an agreement under section 159(1) or (2); (iii) if a return was filed, total income per return ≤ ₹50,00,000

Section 379(4). All conditions apply together, and the order must also be one the Board has specified.

Powers of the Dispute Resolution Committee

Modify variations; reduce or waive penalty imposed or imposable; grant immunity from prosecution

Section 379(2). Subject to prescribed conditions, for a person whose dispute is resolved.

Time for the Assessing Officer to act on the Committee order

Within one month from the end of the month in which the order is received

Section 379(3). For a draft order, pass the assessment, reassessment or recomputation; otherwise modify the existing order, in conformity with the Committee's directions.

Quick revision

• The DRP is a collegium of three Principal Commissioners or Commissioners of Income-tax constituted by the Board.
• An eligible assessee for the DRP includes a person whose variation arises from the Transfer Pricing Officer's order under section 166(6), and any non-resident (not being a company) or foreign company.
• The Assessing Officer must first forward a draft order if the proposed variation is prejudicial to the eligible assessee.
• The assessee has 30 days from receiving the draft order to accept, or to file objections with the DRP and the Assessing Officer.
• If the assessee accepts or does not object in time, the Assessing Officer completes the assessment on the draft order.
• DRP directions must be issued within nine months from the end of the month in which the draft order is forwarded.
• The DRP may confirm, reduce or enhance variations, but may not set aside a variation or direct further enquiry.
• DRP directions bind the Assessing Officer, who must complete the assessment without a further hearing to the assessee within one month from the end of the month of receipt.
• DRP directions need a hearing for the assessee, and for the Assessing Officer on directions prejudicial to the revenue.
• Section 379 DRC: aggregate variation not above ten lakh rupees, and return income not above fifty lakh rupees where a return is filed.
• The DRC may modify variations, reduce or waive penalty imposed or imposable, and grant immunity from prosecution.
• Orders based on search, requisition, survey or treaty information are outside the DRC route.

Common mistakes

• Using 31 July for every taxpayer. Fix: Read the Table by row: companies and audit cases 31 October, unaudited business 31 August, section 172 cases 30 November.
• Applying the old nine-month revised return limit. Fix: For the Act as amended from 1-4-2026, revised return is within twelve months from the end of the tax year, or before assessment is completed, whichever is earlier.
• Treating best judgment assessment as arbitrary, with no hearing. Fix: Remember section 271(1): relevant material must be considered and the assessee must be heard.
• Saying a show-cause notice is always needed before best judgment, or that no hearing is needed once section 271(3) applies. Fix: Section 271(3) removes only the show-cause notice under section 271(2), and only if a section 268(1) notice was issued before the assessment. The opportunity of being heard under section 271(1) remains.
• Counting the time limit from the end of the tax year instead of the end of the financial year succeeding it. Fix: For Sl. No. 1, the start is the end of the financial year succeeding the relevant tax year. Read column C every time.
• Applying the twelve-month TPO extension to every row of the Table. Fix: Section 286(2) extends only Sl. Nos. 1 to 5. Rows for orders giving effect to appellate orders are not extended this way.
• Saying the High Court hears any appeal against a Tribunal order. Fix: State that the case must involve a substantial question of law, and that the memorandum must state it precisely.
• Using 60 days for a High Court appeal. Fix: The normal High Court appeal period is 120 days from receipt of the Tribunal's order. Use 60 days only for a Tribunal appeal under section 376(6).
• Comparing assessed income with the ₹50 lakh limit. Fix: The test is total income as per the return filed. The ₹10 lakh test is the one that covers the officer's variations.
• Treating the ₹10 lakh limit as a limit on tax or on one addition. Fix: Add all variations proposed or made in the order. Compare the sum with ₹10,00,000.

Exam tips

• Memorise the Table rows by person type; examiners usually test the audit and section 172 conditions.
• Always compute dates from 31 March of the tax year, and write the final date in your answer.
• For updated return questions, list the bars: loss, lower tax, refund, earlier updated return, pending or completed assessment, search or survey.
• Quote the 2025 Act section number 263 and avoid Income-tax Act, 1961 terms such as previous year and assessment year.
• In a defective return answer, mention the fifteen days, the invalid consequence, and the condonation power before assessment.
• In MCQs, match the trigger to the type: no return or ignored notice points to best judgment under section 271.
• Quote the three limbs of section 271(1) and the sub-section (3) exception to the show-cause notice. These are easy marks.
• In a faceless answer, name NaFAC and the four units, and state that communication is electronic.