Income Tax 2025

Appearance

Time limit for notices under sections 280 and 281 ​

282(1) ​

No notice under section 280 shall be issued for the relevant tax year,—

  • (a) if four years and three months have elapsed from the end of the relevant tax year, unless the case falls under clause (b);
  • (b) if four years and three months, but not more than six years and three months, have elapsed from the end of the relevant tax year, unless the Assessing Officer has books of account or other documents or evidence related to any asset or expenditure or transaction or entry which shows that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more.

282(2) ​

No notice to show cause under section 281 shall be issued for the relevant tax year,—

  • (a) if four years have elapsed from the end of the relevant tax year, unless the case falls under clause (b);
  • (b) if four years, but not more than six years, have elapsed from the end of the relevant tax year, unless the income chargeable to tax which has escaped assessment, as per the information with the Assessing Officer, amounts to or is likely to amount to fifty lakh rupees or more.

282(3) ​

No notice under section 280 or 281 shall be issued within one year from the end of any tax year.

Explanation

Section Summary: ​

Section 282 of the new income tax law sets time limits for issuing notices under Sections 280 and 281. These sections deal with cases where income has escaped assessment (i.e., income that should have been taxed but was not). The purpose of this section is to provide clarity on the timeframes within which tax authorities can issue notices to taxpayers for reassessment or to show cause for escaped income.

Key Changes: ​

  1. Time Limits for Notices:

    • For Section 280, notices cannot be issued after 4 years and 3 months from the end of the relevant tax year, unless specific conditions are met (e.g., escaped income is ₹50 lakh or more).
    • For Section 281, notices cannot be issued after 4 years from the end of the relevant tax year, unless escaped income is ₹50 lakh or more.
    • Both sections allow for an extended period of up to 6 years and 3 months (for Section 280) and 6 years (for Section 281) if the escaped income is ₹50 lakh or more.
    • No notice can be issued within 1 year from the end of the tax year.

  2. Threshold for Extended Period: The extended time limit applies only if the escaped income is ₹50 lakh or more, based on evidence or information available with the Assessing Officer.

Practical Implications: ​

  • Taxpayers: Taxpayers can now rely on a clearer timeline for when they might face reassessment notices. If their income has been correctly reported, they are unlikely to face notices after the specified time limits unless there is significant evidence of escaped income (₹50 lakh or more).
  • Businesses: Businesses with complex transactions or high-value assets should ensure proper documentation to avoid reassessment notices, especially if the extended period applies.
  • Tax Authorities: The Assessing Officer must have concrete evidence (books of account, documents, or other evidence) to issue notices beyond the standard time limits.

Critical Concepts: ​

  • Escaped Income: Income that was not reported or was underreported in the original tax return, leading to lower tax liability.
  • Relevant Tax Year: The financial year for which the income is being assessed.
  • Assessing Officer: The tax authority responsible for assessing and reassessing tax liabilities.

Compliance Steps: ​

  1. Maintain Proper Records: Ensure all books of account, documents, and evidence related to income, assets, and transactions are properly maintained for at least 6 years and 3 months (for Section 280) or 6 years (for Section 281).
  2. Review Past Returns: Regularly review past tax returns to ensure no income has been missed or underreported.
  3. Respond Promptly: If a notice is received, respond within the stipulated time to avoid penalties or further scrutiny.

Examples: ​

  1. Standard Time Limit:

    • For the tax year 2020-21, a notice under Section 280 cannot be issued after March 31, 2026 (4 years and 3 months from March 31, 2021), unless the escaped income is ₹50 lakh or more.

  2. Extended Time Limit:

    • If the Assessing Officer finds evidence in 2025 that a taxpayer underreported income by ₹60 lakh for the tax year 2018-19, a notice can be issued up to March 31, 2025 (6 years and 3 months from March 31, 2019).

  3. No Notice Within 1 Year:

    • For the tax year 2023-24, no notice can be issued before March 31, 2025 (1 year from March 31, 2024).

This section provides a structured framework for reassessment timelines, balancing taxpayer rights with the need for tax authorities to address significant cases of escaped income.