Income Tax Authorities, Return Filing & Assessment Procedures in India

Think of the income tax system as a well-organised post office. Letters (your returns) go into a sorting centre. Clerks process them. A supervisor scrutinises suspicious ones. A senior officer can reopen old letters. There are inspectors who knock on your door. And a Director General at the top decides how the entire post office runs. Each person has a fixed job, a fixed area, and a fixed time to act. Miss any of those limits, and your case can close in your favour.

The Hierarchy: Twelve Classes of Authority

Section 236 of the Income Tax Act 2025 Sec 236 / Old: 116 lists twelve classes of income-tax authorities. These are not just job titles. Each class carries specific powers, and a lower authority cannot override a higher one. Together, they form a chain from national policy down to field-level tax collection.

Click on any level below to understand what that authority actually does.

Who Appoints These Authorities?

Section 237 Sec 237 / Old: 117 provides the appointment framework. The Central Government appoints all income-tax authorities. For officers below the rank of Deputy Commissioner, it can delegate this power to the CBDT or to senior officers such as Principal Chief Commissioners and Principal Directors General. Ministerial and executive staff assisting the authorities can be appointed by an income-tax authority authorised by the CBDT.

The Taxpayer’s Charter: A Statutory Obligation on CBDT

Section 240 Sec 240 / Old: 119A requires CBDT to adopt and declare a Taxpayer’s Charter. This Charter defines what a taxpayer can expect from the department and what the department expects from taxpayers. It is not a voluntary gesture. It is a legal obligation. The Charter forms the framework within which all other authorities must conduct themselves.

How Is Your Assessing Officer Assigned?

Section 241 Sec 241 / Old: 120 gives CBDT the power to direct which income-tax authority exercises which powers for which area or class of persons. CBDT can base jurisdiction on four criteria: (a) territorial area, (b) persons or class of persons, (c) incomes or class of income, and (d) cases or class of cases. This means your AO is not necessarily chosen because of your address alone. A large corporation may be assessed by a centralised circle even though it is headquartered elsewhere.

Section 242 Sec 242 / Old: 124 elaborates on territorial jurisdiction. An Assessing Officer with area jurisdiction covers businesses at their principal place of business and individuals residing within the area. If you dispute the jurisdiction, you must raise it promptly. After the due date specified in the section passes, no challenge to jurisdiction is entertained.

Transfer of Cases

Cases can be transferred from one Assessing Officer to another under Section 243 Sec 243 / Old: 127. The transferring authority must be a specified income-tax authority (Commissioner or higher). The assessee must generally be given an opportunity to be heard. However, no hearing is needed if both the original and receiving officers are in the same city or locality. A transfer does not invalidate previous notices. The receiving officer continues from the stage at which the case stood.

Faceless Jurisdiction: The Digital Transformation

Section 245 Sec 245 / Old: 130 authorises the Central Government to create a scheme for faceless exercise of all jurisdiction-related functions. The objective, as stated in the section itself, is to eliminate officer-taxpayer interface, optimise resource utilisation, and introduce team-based assessments with dynamic jurisdiction. This faceless framework is not just about assessment. It covers vesting of jurisdiction, case transfers, and even changes in office incumbent.

Permanent Account Number: The Foundation

Section 262 Sec 262 / Old: 139A makes PAN mandatory for every person whose income exceeds the basic exemption limit, every firm and company regardless of income, every person carrying on business with turnover likely to exceed Rs 5 lakh, and any resident (other than an individual) entering into financial transactions of Rs 2.5 lakh or more in a year. PAN must be quoted in all returns, challans, and correspondence with income-tax authorities.

An important change in the current law: if you have an Aadhaar number and have not linked it to your PAN, your PAN becomes inoperative. Section 262(6)(b) provides for this consequence. An inoperative PAN is treated as if no PAN was furnished, which attracts higher TDS and can block refunds.

Who Must File a Return?

Section 263(1) Sec 263 / Old: 139 lists the categories of persons required to file an ITR. These include every company and every firm (regardless of income or loss), every person whose income exceeds the basic exemption, every political party, every trust or institution required to file, every business trust, every investment fund, every person with foreign assets or signing authority in a foreign account, and any person who has incurred a loss that he wishes to carry forward.

Which ITR Form Applies to You?

Due Dates for Filing

Section 263(1)(c) as substituted by Finance Act 2026 provides a revised due date table. The dates depend on whether the assessee is subject to tax audit under Section 172 (transfer pricing).

Types of Returns You Can File

By Whom Must the Return Be Verified?

Section 265 Sec 265 / Old: 140 specifies who must verify the return for each type of entity. An individual verifies the return personally. Where the individual is incapacitated or absent from India, a guardian or duly authorised attorney can do so. The karta verifies a HUF return. The managing director verifies a company return (if no managing director, any director may verify). The managing partner verifies a firm return. The designated partner verifies an LLP return. These verification requirements ensure accountability.

The Income Tax Act 2025 provides for several distinct types of assessment, each triggered by a different situation. Understanding which type applies to you determines both your rights and the department’s powers.

Summary Assessment / Intimation: Section 270

This is the most common type. After you file your return, the system processes it automatically. It checks for arithmetic errors, incorrect claims apparent from the return, inconsistencies with prior year returns, disallowance of losses set off from a belated return, and audit report discrepancies. If the system finds anything, it sends you a communication. You have 30 days to respond. If your response is accepted, the intimation goes through. If not, the adjustment is made and an intimation is issued under Section 270(1)(d).

The intimation itself is treated as an assessment order for refund purposes. If no adjustment is made and no tax is due, the acknowledgement itself serves as the intimation. No human officer scrutinises your return in this process. The system handles it. However, if the AO suspects understated income, excessive losses, or underpayment, he may issue a notice under Section 270(8) to require your attendance or production of evidence.

Scrutiny Assessment: Section 270(8) to 270(10)

When the Assessing Officer believes the assessee has understated income, computed excessive losses, or underpaid tax in any manner, he can serve a notice under Section 270(8). This notice calls you to attend the office or to produce evidence in support of your return. After hearing your evidence and gathering other material, the AO makes an assessment order in writing, determining the total income or loss and the tax payable.

Importantly, no scrutiny notice can be issued after 3 months from the end of the financial year in which the return was filed (Section 270(9)).

Best Judgment Assessment: Section 271

If you fail to file a return despite a notice under Section 268(1), or fail to comply with a notice under Section 270(8), the Assessing Officer proceeds to assess your income to the best of his judgment. This is also called an ex parte assessment. The AO uses all available material, such as industry averages, comparable cases, and information from third parties, to estimate your income. A show-cause notice must normally be given before making such an assessment. The burden of proving the AO’s estimate wrong falls entirely on the assessee.

Faceless Assessment: Section 273

Section 273 Sec 273 / Old: 144B provides the framework for faceless assessment. Certain cases are selected by the Board for faceless treatment. These are assigned to the National Faceless Assessment Centre (NFAC). The NFAC then routes the case to an assessment unit. The assessment unit analyses the material, identifies issues, and makes the assessment. Separately, a verification unit handles enquiries. A technical unit provides specialised inputs. A review unit checks the draft order before it is finalised.

All communication between the NFAC and the taxpayer happens exclusively through the e-filing portal, by electronic mode. The assessee sees no officer. The officer sees no assessee. This is the design.

Income Escaping Assessment (Reassessment): Section 279

This is the most significant power after the initial assessment closes. If income chargeable to tax has “escaped” assessment, the Assessing Officer can reopen the case under Section 279 Sec 279 / Old: 147. The word “escaped” includes income not assessed, income assessed at too low a figure, excessive losses or deductions allowed, and excessive relief or refunds.

Before reopening, the AO must have information suggesting escape. The law lists specific types of qualifying information: risk management strategy output, audit objections, international agreement information, survey-derived information, AIS data, and Approving Panel directions, among others (Section 280(6)).

Further, before the AO can issue the reopening notice under Section 280, he must first issue a show-cause notice under Section 281, give the assessee a chance to respond, and then pass an order (with specified authority approval) deciding whether it is a fit case to issue a Section 280 notice. This procedural safeguard, added to curb arbitrary reopening, is important protection for taxpayers.

Dispute Resolution Panel: Section 275

For certain eligible assessees (non-residents, foreign companies, and persons in transfer pricing cases), the Assessing Officer must forward a draft assessment order if any variation is proposed that is prejudicial to the assessee. The eligible assessee can either accept the variation or object to the Dispute Resolution Panel (DRP). The DRP has three members (all Principal Commissioners or Commissioners). The DRP’s directions are binding on the AO, who then completes the assessment in conformity. No direction can be issued by the DRP after 9 months from the end of the month in which the draft order was forwarded.

Reassessment: The Window the Department Can Use

Section 282 Sec 282 / Old: 149 sets strict time limits for issuing reassessment notices. Understanding these limits is critical, because once the window closes, the department cannot reopen your assessment no matter what.

Time Limits for Completing Assessment

Section 286 Sec 286 / Old: 153 mandates that assessment orders must be passed within one year from the end of the financial year in which the return was filed (for regular assessments under Sections 270 or 271). For reassessments under Section 279, the one-year period runs from the end of the financial year in which the Section 280 notice was served. This prevents the department from indefinitely sitting on a case after opening it.

Self-Assessment: Pay Before You File

Section 266 Sec 266 / Old: 140A mandates self-assessment. Before filing the return, you must compute the tax payable on your declared total income (after reducing TDS, TCS, advance tax, and any tax credits). You must then pay this balance tax before you file. The return must include proof of payment. If you pay less than required, you are treated as an assessee in default for the shortfall.

Consequences of Late Filing or Non-Filing

Annual Information Statement (AIS): The Department’s Eyes

Rule 245 of the Income Tax Rules 2026 provides for the Annual Information Statement (AIS) in Form 168. The Director General of Income-tax (Systems) uploads the AIS in every taxpayer’s registered portal account within 90 days of the end of the month in which information is received. The AIS contains TDS and TCS data, information from Statements of Financial Transactions (SFT), payment of taxes, refunds, pending and completed proceedings, and any other information authorised by CBDT. This is why the department often knows about income you have not declared. The AIS is the system’s primary tool for identifying mismatches between your return and your financial activity.

Powers of Income-Tax Authorities (General)

Section 246 Sec 246 / Old: 131 gives income-tax authorities the same powers as a civil court. This means they can discover documents, enforce attendance, examine on oath, compel production of books, and issue commissions. These powers apply not only during pending proceedings but also where no proceedings are currently pending, if authorised by the Board for treaty information exchange or concealment investigation.

Search and Seizure: Section 247

Search and seizure Sec 247 / Old: 132 is the department’s most intrusive power. The “competent authority” (a Commissioner or higher) must first have information giving reasonable belief that a person has concealed income or assets. On this basis, an authorised officer (typically a Joint Commissioner or Joint Director) can enter premises, search, inspect books and electronic records, break open locks, place identification marks on documents, make copies, and seize books, documents, computer systems, or assets (other than stock-in-trade). Statements on oath can be recorded. Seized material can be retained for up to one month from the end of the quarter in which the assessment is made, subject to prior approval for retention beyond that period. The reason for search cannot be disclosed to any person or tribunal (Section 249).

Survey: Section 253

Survey Sec 253 / Old: 133A is less intrusive than search. An income-tax authority can enter any place of business during working hours. The authority can inspect books, record statements on oath, check cash and stock, and impound documents (up to 15 days). Crucially, the authority cannot remove any assets or stock from the premises during a survey. Survey requires prior approval of the Principal Director General or higher authority. The scope of survey information now feeds directly into the AIS and the risk management system, which makes it a powerful early-stage investigative tool.

Power to Call for Information: Section 252

Section 252 Sec 252 / Old: 133 allows the AO, Joint Commissioner, or Commissioner (Appeals) to require any person (including banks) to furnish information, produce account statements, or disclose names of partners and beneficiaries. Banks are specifically included. This power is used frequently to verify undisclosed deposits or suspicious credits. Without pending proceedings, this power requires prior approval from a Principal Director or Commissioner.