Income escaping assessment refers to situations where a taxpayer’s income has not been fully or correctly assessed by the Income Tax Department. This can happen due to non-disclosure, underreporting, incorrect claims, or misrepresentation of income while filing returns. To safeguard government revenue and ensure fairness, the tax department is empowered under Section 147 of the Income Tax Act to reassess such cases.
When the assessing officer believes that taxable income has escaped assessment, a notice under Section 148 may be issued, seeking clarification or additional information from the taxpayer. Understanding how assessment and reassessment differ—and the timelines involved—helps taxpayers remain compliant and avoid penalties.
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Assessment vs reassessment
Assessment is the initial process where the income tax department evaluates the income declared in your return, along with deductions and exemptions claimed. It verifies records and determines the correct tax payable based on available information.
Reassessment, however, is triggered later if new information suggests that some income was not disclosed or was incorrectly reported during the original assessment. This could arise from data received from banks, registrars, or other authorities. While assessment is routine, reassessment acts as a corrective mechanism to ensure no taxable income remains untaxed.
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Also Read: Self-Assessment Tax
Example
Suppose a taxpayer earns rental income from two properties but reports income from only one while filing the return. The assessment is completed based on the disclosed income. Later, if the tax department identifies the second property through registration or banking data, it may initiate reassessment proceedings.
The taxpayer must then explain the omission. If the explanation is unsatisfactory, additional tax, interest, and penalties may be levied—ensuring accurate taxation of all income.
