Income Escaping Assessment under Section 147 of the Income Tax Act, 1961 refers to a situation where the Income Tax Department believes that a taxpayer has not disclosed their full income in a particular financial year, resulting in lower tax payments. In such cases, the department has the authority to re-open and reassess the taxpayer’s income for that year.
This provision is especially relevant for small business owners, startups, freelancers, and first-time entrepreneurs who may unknowingly miss out on reporting certain income or make errors in their filings. If the Assessing Officer has reasons to believe that income has escaped assessment—either due to non-filing of returns, under-reporting, or incorrect claims—the case can be re-evaluated even after the return has been processed or the assessment has been completed.
It’s important to note that reassessment can only be done within specified time limits and after following due process. As per recent amendments, notices for reassessment cannot be issued beyond three years from the end of the relevant assessment year, except in cases where the amount of escaped income is Rs. 50 lakh or more—then the limit extends to ten years.
From a compliance perspective, businesses and individuals should ensure accurate reporting of income, maintain proper documentation, and regularly review tax filings to avoid reassessment under Section 147. Keeping up with these responsibilities not only prevents legal issues but also builds a clean financial track record.
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