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Direct Tax Laws and International Taxation · Assessment Procedure including Dispute Resolution Process

Types of Assessment and Assessment Procedure under Income-tax Act 2025

Updated 11 October 2026 · Fact-checked

Assessment is the process of determining the assessee's total income and tax payable. Main types are self-assessment, summary assessment, scrutiny assessment and best judgment assessment. To solve a question, identify the trigger (return filed, notice ignored, return not filed), check the notice and hearing requirement, then state the outcome and whether the proceeding is faceless.

Understand Types of Assessment and Assessment Procedure

Assessment means determining the total income or loss of an assessee and the tax payable or refundable. The Income-tax Act, 2025 uses the tax year (2026-27 for income from 1 April 2026) and new section numbers. Do not quote Income-tax Act, 1961 sections.

Start with the easiest type. In self-assessment, you compute your own income, pay any tax still due after advance tax and TDS/TCS, and file the return. No officer is involved at this stage. It is the base on which every other assessment sits.

In summary assessment, the return is processed, mostly by computer, to check arithmetical errors, incorrect claims apparent from the return, and tax credits. The assessee is not called for a hearing at this stage. This page describes summary processing in general terms, without a section number. In scrutiny assessment, the Assessing Officer examines the return in detail. Where needed, a notice under section 268(1) calls for accounts or documents. The assessee is heard before the order is made.

Best judgment assessment under section 271 is the assessment the Assessing Officer makes to the best of his judgment when the assessee defaults. It is not a penalty. Penalty proceedings are a separate matter. The section applies if you (a) fail to furnish the required return, (b) fail to comply with all the terms of a notice under section 268(1) or a direction under section 268(5), or (c) having filed a return, fail to comply with all terms of a notice under section 270(8). The Assessing Officer then uses all relevant material gathered, gives an opportunity of being heard, and assesses income to the best of his judgment.

Faceless assessment under section 273 removes personal interface. Assessment, reassessment or recomputation under section 270(10), 271 or 279 in cases specified by the Board is made faceless as per the prescribed procedure. The National Faceless Assessment Centre (NaFAC) coordinates, and assessment, verification, technical and review units do the work. Communication is exclusively electronic.

Key rules to remember

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.

How to solve Types of Assessment and Assessment Procedure questions

Use this sequence for any question on types of assessment or procedure.

  1. 1Identify the trigger: was a return filed, and did the assessee comply with all the terms of the notices?
  2. 2Name the type of assessment: self, summary, scrutiny or best judgment.
  3. 3State the notice involved: section 268(1) for documents or evidence, and the section 271(2) show-cause notice for best judgment. Failure to comply with all terms of a section 268(1) notice or a section 268(5) direction falls under section 271(1)(b). A section 270(8) notice is one that a person who has filed a return may fail to comply with, and that falls under section 271(1)(c). It does not apply where no return was filed.
  4. 4Check the hearing and notice requirements. Section 271(1) requires an opportunity of being heard in every best judgment assessment. Section 271(3) removes only the show-cause notice under section 271(2), and only if a section 268(1) notice was already issued.
  5. 5Decide whether the case is faceless: if the Board has specified it, apply section 273 (covering assessment, reassessment or recomputation under section 270(10), 271 or 279) and electronic communication through NaFAC.
  6. 6Apply the correct unit roles: the assessment unit makes the order after hearing the assessee (section 273(4)(b)(i)), the verification unit enquires, the technical unit advises, and the review unit reviews variations.
  7. 7Conclude: state the type, the procedure followed and the outcome in one clear sentence.

Quickest way: Trigger-notice-hearing check

When to use it: MCQs and short case questions where you must pick the type of assessment or the correct procedural step.

  1. Return not filed means best judgment under section 271(1)(a). Failure to comply with all the terms of a section 268(1) notice or a section 268(5) direction means best judgment under section 271(1)(b). Failure to comply with all the terms of a section 270(8) notice, by a person who has filed a return, means best judgment under section 271(1)(c).
  2. Filed return with detailed examination by the Assessing Officer and a hearing before the order means scrutiny.
  3. Mechanical check of return without hearing means summary processing.
  4. A section 268(1) notice already issued (a section 270(8) notice does not count) means no separate show-cause notice under section 271(2) before best judgment. The hearing under section 271(1) still applies.
  5. Case specified by Board means faceless, with all communication through NaFAC electronically.

Common mistakes in Types of Assessment and Assessment Procedure

  • Treating best judgment assessment as arbitrary, with no hearing.

    The words suggest the officer can assess as he likes.

    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.

    Students remember sub-section (2) but forget sub-section (3), or mix the show-cause notice with the hearing.

    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.

  • Treating a late response as full compliance.

    Students think any reply avoids best judgment.

    Fix: Section 271 applies when the assessee fails to comply with all the terms of the notice. Partial compliance can still trigger it.

  • Quoting Income-tax Act, 1961 sections such as 143 or 144.

    Older notes and habits.

    Fix: Use the Income-tax Act, 2025 numbering: sections 268, 270, 271 and 273 for this topic.

  • Saying faceless assessment covers all assessments automatically.

    Students assume it is universal.

    Fix: Section 273(2) says it applies to areas, persons, incomes or cases specified by the Board.

  • Assuming the jurisdictional officer can never take over a faceless case.

    The word faceless suggests permanence.

    Fix: Section 273(12) allows transfer with the Board's prior approval at any stage if considered necessary.

Worked examples

Example 1

Meera Textiles Pvt. Ltd. filed its return but did not respond to a notice under section 270(8) asking for its books and bills. Can the Assessing Officer make a best judgment assessment? Is a show-cause notice needed?

Show the solution
  1. Meera filed a return, so trigger (c) of section 271(1) is relevant: having made a return, it failed to comply with all terms of a section 270(8) notice.
  2. The Assessing Officer may therefore assess total income to the best of his judgment after taking relevant material into account.
  3. Under section 271(1), the assessee must be given an opportunity of being heard.
  4. Section 271(2) requires a show-cause notice before the assessment, unless section 271(3) applies.
  5. Section 271(3) dispenses with the show-cause notice only if a section 268(1) notice was issued before the assessment. The facts mention only a section 270(8) notice, so the show-cause notice under section 271(2) is required.

Answer: Yes, best judgment assessment under section 271(1)(c) is possible. The Assessing Officer must first serve the show-cause notice under section 271(2), since no section 268(1) notice is stated, and must also give Meera an opportunity of being heard under section 271(1).

Example 2

Ravi Kumar's case is selected for faceless assessment. Explain who does what and how communication happens.

Show the solution
  1. Under section 273(3)(a), the National Faceless Assessment Centre assigns the case to a specific assessment unit, intimates Ravi that the assessment will be faceless, serves notices under section 268(1) or 270(8), and forwards his responses to the assessment unit.
  2. Under section 273(3)(b), the assessment unit analyses the material furnished, identifies the points or issues material to the liability, and seeks information or clarification on them. Under section 273(4)(b)(i), it makes the assessment of total income or loss by an order in writing after taking into account all relevant material and giving Ravi an opportunity of being heard.
  3. The verification unit does enquiry, cross verification and examination of books, witnesses and statements. The technical unit gives technical advice. The review unit reviews proposed variations where NaFAC considers it necessary.
  4. Under section 273(7), communication among units and with Ravi goes through NaFAC, and between NaFAC and Ravi it is exclusively electronic, through his registered account on the designated portal.
  5. The Board can specify circumstances where enquiry or verification by the verification unit is outside this rule.

Answer: NaFAC assigns the case, serves notices and forwards replies (section 273(3)(a)). The assessment unit analyses, seeks clarifications (section 273(3)(b)) and makes the order after hearing Ravi (section 273(4)(b)(i)). Other units support, and all communication with Ravi is electronic through NaFAC under section 273(7).

Exam tips

  • 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.
  • Use Income-tax Act, 2025 section numbers and the term tax year. Avoid 1961 numbers.
  • Close case answers with a one-line conclusion naming the type of assessment and the procedural step.

Practice questions from Assessment Procedure including Dispute Resolution Process

Types of Assessment and Assessment Procedure in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Types of Assessment and Assessment Procedure: frequently asked questions

What is the difference between summary and scrutiny assessment?

Summary assessment is a quick processing of the return to correct apparent errors, usually without a hearing. Scrutiny assessment is a detailed examination of the return by the Assessing Officer, with documents called for where needed and the assessee heard before the order.

When can an Assessing Officer make a best judgment assessment?

Under section 271(1), when the assessee fails to file the required return, fails to comply with all terms of a section 268(1) notice or section 268(5) direction, or, after filing, fails to comply with a section 270(8) notice. The officer must consider relevant material and hear the assessee.

Is a show-cause notice always required before best judgment assessment?

No. Section 271(2) requires one, but under section 271(3) it is not necessary if a notice under section 268(1) was issued before the assessment is made.

Does faceless assessment apply to every assessee?

No. Under section 273(2) it applies to the areas, persons, incomes or cases the Board specifies. Even then, the head of NaFAC can transfer a case to the jurisdictional officer with the Board's prior approval under section 273(12).