Income Tax 2025

Appearance

Time limit for completion of assessment, reassessment and recomputation. ​

286(1) ​

No order in respect of proceedings mentioned in column B of the Table below shall be made after expiry of the period specified in column D of the said Table and calculated from the date as mentioned in column C thereof. --Table--

286(2) ​

Time limit for completion of any assessment or reassessment as provided in sub-section (1), in a case where reference is made to the Transfer Pricing Officer for determining the arm’s length price under section 166(1), shall be extended by an additional period of twelve months.

286(3) ​

For the purposes of this section, in computing the time limit for completion, the following period shall be excluded,––

  • (a) the time taken in reopening the whole or any part of the proceeding on request of the assessee or in giving an opportunity to the assessee to be re-heard under section 244;
  • (b) the period commencing on the date on which stay on assessment proceeding was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by jurisdictional Principal Commissioner or Commissioner;
  • (c) the period commencing from the date on which the Assessing Officer intimates the Central Government or the prescribed authority, the contravention of the provisions of Schedule III (Table: Sl. No. 23, 24, 25) or section 270(11)(i), and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those provisions is received by the Assessing Officer;
  • (d) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited or inventory valued under section 268(5) and–– (i) ending with the last date on which the assessee is required to furnish a report of such audit or inventory valuation under that section; or (ii) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner;
  • (e) the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under section 269(1) and ending with the date on which the report of the Valuation Officer is received by him;
  • (f) the period (not exceeding sixty days) commencing from the date on which the Assessing Officer received the declaration under section 375(1) and ending with the date on which the order under section 375(3) is made by him;
  • (g) the period commencing from the date on which an application is made before the Board for Advance Rulings under section 383(1) and ending with the date on which the order either rejecting the application or the advance ruling pronounced by it, is received by the jurisdictional Principal Commissioner or Commissioner under section 384(5) or (8), as the case may be;
  • (h) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 159 and ending with the date on which the information requested is last received by the jurisdictional Principal Commissioner or Commissioner, or one year, whichever is less;
  • (i) the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the jurisdictional Principal Commissioner or Commissioner under section 274(1) and ending on the date on which a direction under sub-section (3) or (6) or an order under sub-section (5) of the said section is received by the Assessing Officer;
  • (j) the period (not exceeding one hundred eighty days) commencing from the date on which a search is initiated under section 247 or a requisition is made under section 248 and ending on the date on which the seized items or the requisitioned items, are handed over to the Assessing Officer having jurisdiction over the assessee,— (i) in whose case such search is initiated under section 247 or such requisition is made under section 248; or (ii) to whom any money, bullion, jewellery, virtual digital asset or other valuable article or thing seized or requisitioned belongs to; or (iii) to whom any books of account or documents seized or requisitioned pertains or pertain to, or any information contained therein, relates to;
  • (k) the period commencing from the date on which the Assessing Officer makes a reference to the jurisdictional Principal Commissioner or Commissioner under the section 270(13) and ending with the date on which copy of the order under of section 351(2)(ii)(A) or (B), is received by the Assessing Officer.

286(4) ​

Where immediately after exclusion of the period as mentioned in sub-section (3), the remaining period for completion available to the Assessing Officer, as specified in sub-section (1), for making an order of assessment, reassessment or recomputation, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid time limits for completion shall be deemed to have been extended accordingly.

286(5) ​

Where the period available to the Transfer Pricing Officer is extended to sixty days as per section 166(8) and the remaining period for completion available to the Assessing Officer under this section, for making an order of assessment, reassessment or re-computation, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid time limit for completion shall be deemed to have been extended accordingly.

286(6) ​

Where a proceeding before the Interim Board for Settlement abates under section 245HA of the Income-tax Act, 1961 and the remaining period of limitation available to the Assessing Officer under this section for making an order of assessment, reassessment or re-computation, after the exclusion of the period under section 245HA(4) of the Income-tax Act, 1961, is less than one year, such remaining period shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under sections 282, 287, 288 and 296 and for the purposes of payment of interest under section 437, this sub-section shall also apply accordingly.

286(7) ​

In a case where the remaining time period for making an order of regular or reassessment, after excluding the time period specified in sub-section (3)(k), ends before the end of the month, the remaining period shall be extended to the end of such month, and the specified time limit for completion shall be deemed to have been extended accordingly.

286(8) ​

For the purposes of this section and section 283, where by an order referred to in entry in sub-section (1) (Table: Sl. No. 8.A)–– (i) any income is excluded from the total income of the assessee for a tax year, then, an assessment of such income for another tax year shall be deemed as one made in consequence of or to give effect to any finding or direction contained in the said order; or (ii) any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall be deemed as one made in consequence of or to give effect to any finding or direction contained in the said order, if such other person was given an opportunity of being heard before the said order was passed.

Explanation

Section Summary: ​

Section 286 of the new income tax law sets the time limits for completing assessments, reassessments, and recomputations. It specifies the deadlines for tax authorities to finalize these proceedings and outlines circumstances where these deadlines can be extended. The section also provides clarity on how certain periods (e.g., delays due to court stays, audits, or other procedural requirements) are excluded when calculating the time limit.

Key Changes: ​

  1. Clear Time Limits: The section introduces a structured table (Column B and D) specifying the time limits for different types of assessments, reassessments, and recomputations.
  2. Extended Deadlines for Transfer Pricing Cases: If a Transfer Pricing Officer is involved, the time limit is extended by an additional 12 months.
  3. Exclusions for Specific Periods: The section lists several scenarios (e.g., court stays, audits, valuation reports) where the time taken for these processes is excluded from the overall time limit calculation.
  4. Minimum Extension Rule: If the remaining time after exclusions is less than 60 days, it is automatically extended to 60 days.
  5. Special Provisions for Settlement Cases: If a case before the Interim Board for Settlement abates, the remaining time for assessment is extended to one year.
  6. End-of-Month Rule: If the remaining time ends before the end of a month, it is extended to the end of that month.

Practical Implications: ​

  • For Taxpayers: Taxpayers can expect more predictability in the timeline for assessments and reassessments. However, they must be aware that certain actions (e.g., requesting audits, challenging directions in court) can extend the time limit.
  • For Businesses: Businesses involved in transfer pricing must account for the additional 12-month extension when planning for tax assessments.
  • For Tax Authorities: The section provides a structured framework for managing deadlines, ensuring that delays due to procedural requirements are accounted for without violating the law.

Critical Concepts: ​

  • Arm’s Length Price: The price at which a transaction would occur between independent parties. Transfer Pricing Officers determine this to ensure transactions between related entities are fair.
  • Abatement of Proceedings: When a case before the Interim Board for Settlement is discontinued, and the assessment process resumes.
  • Valuation Officer: An officer appointed to determine the value of assets, often used in cases involving property or inventory.

Compliance Steps: ​

  1. Monitor Deadlines: Taxpayers should be aware of the time limits for assessments and reassessments as per the table provided in the law.
  2. Document Delays: If any exclusions apply (e.g., court stays, audits), ensure proper documentation is maintained to justify the extended timeline.
  3. Plan for Transfer Pricing Cases: Businesses involved in transfer pricing should factor in the additional 12-month extension when preparing for assessments.
  4. Respond Promptly: If the Assessing Officer requests additional information (e.g., audit reports, valuation), respond within the stipulated time to avoid unnecessary delays.

Examples: ​

  1. Transfer Pricing Case: A multinational company undergoes a transfer pricing audit. The standard time limit for assessment is 24 months. However, since a Transfer Pricing Officer is involved, the deadline is extended by 12 months, making the total time limit 36 months.
  2. Court Stay: A taxpayer challenges a tax assessment in court, and a stay is granted for 6 months. This 6-month period is excluded from the time limit calculation. If the original deadline was 24 months, the new deadline becomes 30 months.
  3. End-of-Month Rule: If the remaining time for an assessment is 5 days and it ends on the 25th of the month, the deadline is extended to the last day of that month (e.g., 31st).

This section ensures a balance between timely completion of assessments and accommodating procedural delays, providing clarity for both taxpayers and tax authorities.