Tax Laws and Practice · Procedural Compliance under Income Tax

Types of Assessment under the Income-tax Act, 2025

Updated 11 October 2026 · Fact-checked

Assessment is the process of determining a taxpayer's total income and tax payable. You self-assess when you file the return, the department may process it by intimation, scrutinise it, make a best judgment assessment if you default, reassess escaped income, and rectify mistakes apparent from the record.

Understand Assessment Procedures

Assessment means working out the total income or loss of a person and the tax payable on it. Under the Income-tax Act, 2025, you first assess yourself. You compute income, pay tax due, and file the return. This is self-assessment.

The department then checks the return. In a routine case, the return is processed and an intimation is issued, which is a summary check of arithmetical and apparent errors. In selected cases, the Assessing Officer (AO) calls for evidence and examines the return in detail. This is scrutiny assessment, and it follows a notice and an opportunity of being heard.

If you do not cooperate, the law does not let the case stall. Section 271 gives the AO power to make a best judgment assessment. It applies when you fail to file a required return, fail to comply with a notice under section 268(1) or a direction under section 268(5), or, having filed a return, fail to comply with a notice under section 270(8). The AO uses all relevant material gathered and estimates the income to the best of his judgment, after giving you an opportunity of being heard.

Reassessment reopens an earlier assessment when income is believed to have escaped. Its detailed conditions are not in the sections supplied for this page, so learn them from the study material. Mistakes in orders can be fixed by rectification under section 287, which covers only a mistake apparent from the record.

Section 269 also lets the AO refer the value of an asset, property or investment to a Valuation Officer during assessment. The AO may take the report into account only after giving you an opportunity of being heard.

Key rules to remember

Best judgment assessment: triggers: Section 271(1): failure to file return under 263(1), (4), (5) or (6) OR non-compliance with notice under 268(1) or direction under 268(5) OR non-compliance with notice under 270(8) after filing a return; The AO must consider all relevant material and give you an opportunity of being heard.
Show-cause notice before best judgment: Section 271(2): show-cause notice on a stated date and time; Section 271(3): not needed if a notice under 268(1) was already issued; A common trap: the exception applies only where a 268(1) notice has been issued before the assessment.
Rectification: scope: Section 287(1): mistake apparent from the record; orders, intimations under 270(1) and intimations under 399; Section 287(2): matters considered and decided in appeal or revision cannot be amended.
Rectification: who can start it: Section 287(3): the authority may act on its own motion and must act on a mistake brought to notice by the assessee, deductor or collector; Where the authority is the JCIT(A) or CIT(A), the AO can also bring the mistake to notice.
Rectification: adverse amendment: Section 287(4): notice of intention plus reasonable opportunity of being heard; Section 287(5): order in writing; Applies to amendments that enhance assessment, reduce refund or increase liability.
Rectification: time limits: Section 287(8): no amendment after 4 years from the end of the financial year in which the order or intimation was passed; Section 287(9): order within 6 months from the end of the month of receiving the application; Section 287(8) is subject to section 288, so mention that exception.
Consequences of rectification: Section 287(6): refund if liability reduced; Section 287(7): notice of demand (deemed under section 289) if liability increased; Refund is due to the assessee, deductor or collector.
Valuation Officer reference: Section 269: report within 6 months from the end of the month of reference; AO uses it after hearing the assessee; The reference may be made whether or not the AO doubts the accounts.
Tribunal rectification: Section 363(2): within 6 months from the end of the month of the order; fee ₹50 under section 363(4); Adverse amendments need a reasonable opportunity of being heard.

How to solve Assessment Procedures questions

Use this method for any question on assessment types, a defaulting assessee, or a mistake in an order.

1Identify the stage: return filing, processing, detailed examination, default by the assessee, escaped income or an error in an order.
2Name the type of assessment that fits the facts: self, summary (intimation), scrutiny, best judgment, reassessment or rectification.
3State the provision in plain words, with the section number only where you are sure of it.
4Check the conditions and trigger: which notice was ignored, which return was not filed, and whether a hearing was given.
5Check procedure and time limits: show-cause notice, opportunity of being heard, written order, four-year and six-month limits.
6Apply the rule to the facts given and compute any consequence, such as refund or demand.
7End with a clear conclusion that answers exactly what was asked.

Quickest way: Trigger-and-limit check

When to use it: Use it for short-answer or case-based questions when time is tight.

Ask: did the assessee default (no return, ignored notice)? If yes, think best judgment under section 271.
Ask: is there only an error in an existing order or intimation? If yes, think rectification under section 287.
Ask: was the order already decided in appeal on that point? If yes, rectification is barred for that matter.
Note the numbers: four years for rectification, six months for disposal of an application.
Write the conclusion in one line, then add the procedural safeguard, which is a hearing.

Common mistakes in Assessment Procedures

Treating best judgment assessment as an arbitrary guess.
The phrase sounds like the AO may estimate freely.
Fix: Say the AO must take all relevant material into account and give the assessee an opportunity of being heard.
Saying a show-cause notice is always required before best judgment assessment.
Students remember sub-section (2) and forget sub-section (3).
Fix: Add that it is not needed if a notice under section 268(1) was issued before the assessment.
Using rectification to reopen a point decided in appeal.
Students think any wrong order can be rectified.
Fix: State that the mistake must be apparent from the record, and matters decided in appeal or revision are excluded.
Increasing tax in rectification without notice.
The rectification is seen as a small clerical step.
Fix: Any amendment that raises liability needs prior notice of intention and a reasonable opportunity of being heard.
Mixing the rectification time limits.
There are two different periods.
Fix: Four years from the end of the financial year of the order bars the amendment; six months from the end of the month of application is the deadline to dispose of the application.
Using repealed Income-tax Act, 1961 section numbers.
Older notes and books still circulate.
Fix: Quote the Income-tax Act, 2025 sections, such as 271 and 287, for June 2027.

Worked examples

Example 1

Meera Textiles Ltd. did not file its return and also ignored a notice issued under section 268(1). The Assessing Officer proposes to complete the assessment without any further notice. Can he do so? Advise.

Show the solution

Provision: under section 271(1), if a person fails to furnish the required return or fails to comply with a notice under section 268(1), the AO makes a best judgment assessment.
Facts: Meera Textiles did not file its return and ignored a section 268(1) notice, so section 271(1) is attracted.
Procedure: section 271(2) requires a show-cause notice before the assessment.
Exception: section 271(3) says the show-cause opportunity is not necessary where a notice under section 268(1) was issued before the assessment, as here.
The AO must still take all relevant material into account and give an opportunity of being heard, as section 271(1) requires.

Answer: Yes. The AO may make a best judgment assessment under section 271 without a separate show-cause notice, because a section 268(1) notice was already issued, but he must consider all relevant material and give the company an opportunity of being heard.

Example 2

An order was passed in March 2024 (financial year 2023-24) containing a mistake apparent from the record. Ravi, the assessee, applies for rectification on 10 August 2026. By when must the authority pass its order, and is the application within time?

Show the solution

Provision: section 287(8) bars an amendment after four years from the end of the financial year in which the order was passed.
Order passed in financial year 2023-24, which ends on 31 March 2024. Four years from then run to 31 March 2028.
The application of 10 August 2026 is before 31 March 2028, so it is within time.
Section 287(9): the order must be passed within six months from the end of the month in which the application is received.
The application is received in August 2026. The month ends on 31 August 2026, and six months from that date is 28 February 2027.

Answer: The application is within time. The authority must pass an order amending the order or refusing the claim by 28 February 2027. If the amendment increases Ravi's liability, prior notice and a hearing are needed under section 287(4).

Exam tips

Write the section number with the rule only when you are sure of it, and always name the Income-tax Act, 2025.
For best judgment questions, structure the answer as trigger, hearing, show-cause exception, conclusion.
For rectification questions, check the four-year bar, the six-month disposal period and the appeal exclusion.
Mention the opportunity of being heard whenever an adverse step is taken. Examiners look for it.
Do not mix the 1961 Act provisions into answers for June 2027.

Practice questions from Procedural Compliance under Income Tax

Assessment Procedures in other exams

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

Assessment Procedures: frequently asked questions

What is the difference between scrutiny and best judgment assessment?

Scrutiny assessment is a detailed examination of a filed return, based on notice and evidence. Best judgment assessment under section 271 applies when the assessee defaults, for example by not filing a return or ignoring a notice. The AO then estimates income on the material gathered, after hearing the assessee.

What can be rectified under section 287?

A mistake apparent from the record in an order, an intimation under section 270(1) or an intimation under section 399 can be amended. Matters considered and decided in appeal or revision cannot be rectified.

Is there a time limit for rectification?

Yes. No amendment can be made after four years from the end of the financial year in which the order or intimation was passed, subject to section 288. The authority must dispose of an application within six months from the end of the month of receipt.

Can the Appellate Tribunal rectify its own order?

Yes. Under section 363(2), it may amend its order for a mistake apparent from the record within six months from the end of the month of the order. The assessee's application carries a fee of ₹50.