Assessment & Returns — Sections 263–286
Assessment & Returns
Complete guide to filing income tax returns and the assessment process under the Income Tax Act 2025 — who must file, due dates, belated/revised/updated returns, self-assessment, intimation, scrutiny, best judgment, faceless assessment, and reassessment time limits.
🔄 Replaces: Sections 139, 140, 140A, 143, 144, 147, 148, 148A, 149 of the Income Tax Act 1961
Section 263 — Who Must File a Return
Replaces Section 139 of the 1961 Act. The following persons must file a return of income for a tax year:
- Company — every company regardless of income level
- Firm — every firm regardless of income level
- Any person (other than company/firm) whose total income exceeds the basic exemption limit (computed before deductions and exemptions)
- Specified entities (trusts, educational institutions etc.) if total income before Sec 11 exemptions exceeds basic exemption
- Universities, colleges and research institutions (Sec 45)
- Business trusts and investment funds
- Person with business / capital gains loss who wants to carry it forward
- Resident (other than RNOR) holding assets or signing authority outside India
A person with losses must file to preserve carry-forward rights (Section 121). A resident with foreign assets must file even if income is nil. Key rule: income is computed before applying Chapter VIII deductions — so if gross income exceeds exemption limit, return is mandatory even if net income after deductions is zero.
Due Dates for Filing Return [Section 263(1)]
| Category of Assessee | Due Date | Notes |
|---|---|---|
| Company | 31st October | Transfer pricing report required by 30 Nov (different date) |
| Firm, LLP, AOP, BOI, AJP, Local Authority | 31st October | If accounts require audit (Section 63) |
| Individual / HUF whose accounts require audit (e.g., business with turnover > ₹1 crore) | 31st October | |
| Individual / HUF — working partner of a firm requiring audit | 31st October | Partner must wait for firm's audit |
| Any other assessee (non-audit individuals, salaried) | 31st July | Most salaried employees and non-audit businesses |
Types of Returns — Original, Belated, Revised & Updated
| Type | Sec | When & How | Key Consequences |
|---|---|---|---|
| Original Return | 263(1) | Filed by due date (31st July or 31st October) | Full carry-forward rights; all deductions available; no late fee |
| Belated Return | 263(4) | Filed after due date but within 9 months from end of tax year (i.e., by 31st December), or before assessment completion, whichever is earlier | Late fee (Section 421): ₹5,000 (₹1,000 if income ≤ ₹5L). Cannot carry forward most losses (except house property loss). Interest under Sections 423/424 applies. |
| Revised Return | 263(5) | To correct any omission or wrong statement in original/belated return. Filed within 9 months from end of tax year, or before assessment completion, whichever is earlier | Replaces the earlier return. Can be revised multiple times. Can rectify mistakes without penalty if no concealment intent. |
| Updated Return (ITR-U) | 263(6) | Filed within 48 months from end of the financial year succeeding the relevant tax year. Available to any person (whether or not they filed original ITR). | Must pay additional income-tax under Section 267 (25% or 50% depending on timing). Cannot reduce income/increase refund/increase loss. Cannot be filed if search/survey initiated or assessment in progress. |
Section 267 — Additional Tax on Updated Return (ITR-U)
When filing an updated return under Section 263(6), an additional income-tax is payable over and above the regular tax and interest. This is designed to incentivise voluntary disclosure before assessment.
| When Updated Return is Filed | Additional Tax Rate | On What Base |
|---|---|---|
| Within 12 months from end of relevant tax year (i.e., within 24 months from end of the assessment year) | 25% | Of additional tax (tax + interest on incremental income) |
| Between 12 and 24 months from end of relevant tax year | 50% | Of additional tax |
| Between 24 and 36 months | 60% | Of additional tax |
| Between 36 and 48 months | 70% | Of additional tax |
- It results in a refund or increase of existing refund
- It results in a reduction of tax liability or increase of loss
- A search/survey/requisition has been conducted for the relevant year
- Assessment or reassessment proceedings are pending or completed
- Prosecution proceedings have been initiated under the Act
Section 266 — Self-Assessment
Replaces Section 140A of the 1961 Act. Before filing the return, the assessee must compute and pay any remaining tax liability (after deducting TDS/TCS/advance tax already paid).
- Advance tax paid during the year
- TDS / TCS credited
- Relief of tax under Section 157 (salary arrears)
- Double taxation relief (Sections 159/160)
- MAT credit set-off
Payment sequence [Sec 266(3)]: If payment is short, it is first adjusted against fee (late filing fee), then against interest, and lastly against tax. Interest on self-assessment tax is computed under Section 423.
Section 270 — Processing of Return & Intimation
Replaces Section 143(1) of the 1961 Act. After filing, the return is processed by the CPC (Centralised Processing Centre). This is a computer-based processing, not a full assessment.
Adjustments Made During Processing [Section 270(1)(a)]
- Arithmetical errors in the return
- Incorrect claims apparent from the return — e.g., deduction claimed exceeds statutory limit
- Inconsistencies with information in the return of any preceding year (as prescribed)
- Loss carry-forward disallowance — if the loss return was filed after the due date
- Audit report discrepancies — expenditure disallowed per audit report but not reflected in return
- Section 144 / Chapter VIII-C deduction disallowance — if return filed after due date
Intimation under Section 270: After processing, an intimation is sent to the assessee — showing computed income, tax, interest and refund/demand. If no further scrutiny notice is issued within 3 months of end of financial year in which return was filed, the intimation is treated as the assessment order.
Section 270(8)–(10) — Scrutiny Assessment
Replaces Section 143(2)/(3) of the 1961 Act. After receiving the intimation, the AO may issue a notice requiring the assessee to attend or produce evidence — this is the beginning of scrutiny assessment.
- Notice under Section 270(8) must be issued before the expiry of 3 months from end of financial year in which return was filed — for example, if return filed in AY 2026-27 (FY 2026-27), notice must be issued before 30 June 2027
- If no notice is issued within this window, processing intimation becomes final
- Assessee must be given opportunity of hearing before any variation adverse to them
- Final assessment order under Section 270(10) must be passed within prescribed time limits
Section 271 — Best Judgment Assessment
Where an assessee: (a) fails to file the return, (b) fails to comply with notices under Section 268 or 270(8), or (c) fails to comply with terms of Section 268 notice — the AO may make a best judgment assessment after giving the assessee an opportunity to show cause. The AO uses all available evidence to determine income and tax.
Section 273 — Faceless Assessment
Replaces the Faceless Assessment Scheme under the 1961 Act. All assessments, reassessments, and recomputations for specified cases are conducted in a faceless manner — digitally, without the assessee knowing which officer is handling the case.
- National Faceless Assessment Centre (NFAC) assigned at centre
- Case allocated to random assessment unit (different from AO's jurisdiction)
- All notices, responses, and orders through the e-proceedings portal
- Review by separate review unit before order is passed
- Technical unit may assist with complex issues
- No direct interaction between assessee and AO — reduces corruption
- All proceedings on record — complete audit trail
- Personal appearance only in exceptional cases (e.g., fraud)
- PCIT/Board may transfer to jurisdictional AO if necessary
Sections 279–282 — Income Escaping Assessment (Reassessment)
Replaces Sections 147–149 of the 1961 Act. Where income has escaped assessment, the AO may reassess — but strict procedural and time limit conditions apply.
Section 281 — Mandatory Show-Cause Before Notice
- Serve a show-cause notice on the assessee with the information suggesting income has escaped assessment
- Consider the assessee's reply (if any)
- Pass an order with prior approval of the specified authority (Additional/Joint Commissioner) — determining whether it is a fit case to issue Section 280 notice
Section 281 does not apply where the AO has received information under the prescribed scheme (Section 260) or directions from the Approving Panel.
Section 282 — Time Limits for Reassessment Notices
| Time Elapsed Since End of Tax Year | Condition | Notice Under |
|---|---|---|
| Up to 4 years | Any escaped income | Section 280 — standard cases |
| Between 4 and 6 years | Escaped income is ₹50 lakh or more AND AO has books/documents showing the escape | Section 280 — only if ₹50L+ threshold met |
Assessment time limits (Section 286): Scrutiny assessment orders under Section 270(10) must be passed within 12 months from end of the financial year in which return was filed (general rule).
Practical Q&A
| Question | Answer |
|---|---|
| I missed the 31st July due date. Can I still file my ITR? | Yes — you can file a belated return under Section 263(4) by 31st December of the same year (9 months from end of tax year). You'll pay a late fee of ₹5,000 (₹1,000 if income ≤ ₹5L) and lose the ability to carry forward most losses. |
| I filed my return in July but realised I forgot to claim my HRA exemption. What do I do? | File a revised return under Section 263(5) — before 31st December or before assessment completion, whichever is earlier. Revised returns can be filed multiple times to correct mistakes. |
| I didn't declare ₹3L income in FY 2024-25 (AY 2025-26). It's now FY 2026-27 (AY 2027-28). Can I file an updated return? | Yes — ITR-U under Section 263(6) is available for 48 months from end of FY 2025-26 (the financial year succeeding AY 2025-26), i.e., until 31st March 2030. Since filing in AY 2027-28, it's within 24 months — 50% additional tax applies on the incremental tax + interest. |
| AO wants to reassess my income for FY 2020-21. Can they? | FY 2020-21 = 4 years ago. Reassessment is possible within 4 years, but note Section 282(3): no notice within 1 year of tax year end. If escaped income is less than ₹50L, the window is 4 years. For FY 2020-21, that window closes at end of FY 2024-25 (4 years from end of FY 2020-21). Depending on exact date, it may be time-barred. |
| I received an intimation under Section 270 with an additional demand. Is this the final assessment? | The Section 270 intimation (processing under 143(1) equivalent) is final only if no scrutiny notice is issued within 3 months of the end of the financial year in which the return was filed. If a scrutiny notice is issued within this period, the case goes to full scrutiny assessment. |
| I received a notice asking why my case should not be reopened. Is this mandatory? | Yes — this is the new mandatory show-cause under Section 281 before any reassessment notice. The AO must serve this notice, consider your reply, and then pass an order (with JC/Additional Commissioner approval) before issuing the formal reassessment notice under Section 280. You should respond with all supporting documents to contest the case at this stage itself. |