Section 144 of Income Tax Act - Best Judgment Assessment

Section 144 of the Income-tax Act, 1961 provides for a best judgment assessment when a taxpayer fails to file the required return or does not comply with specified assessment notices or directions. The Assessing Officer must consider relevant material and ordinarily provide an opportunity of being heard.

What is a best judgment assessment?

A best judgment assessment is an assessment of a person's total income or loss by the Assessing Officer using available evidence and a reasonable evaluation of relevant facts where the statutory conditions for such assessment are met. It is not a licence to make arbitrary or unsupported estimates. The resulting order determines the tax payable on the assessed income.

Section 144(1): When can it be made?

Under Section 144(1) of the 1961 Act, the Assessing Officer must proceed to a best judgment assessment, subject to the statutory procedure, where a person:

1. Section 144(1)(a) - Failure to file a return: does not furnish the return required under Section 139(1), and has not furnished the relevant belated, revised or updated return under Section 139(4), (5) or (8A), as applicable.
2. Section 144(1)(b) - Non-compliance with inquiry: fails to comply with all the terms of a notice under Section 142(1), or with a direction for special audit under Section 142(2A).
3. Section 144(1)(c) - Non-compliance with scrutiny: having furnished a return, fails to comply with all the terms of a notice under Section 143(2).

The assessment must take account of all relevant material gathered by the Assessing Officer. The legal consequences depend on the specific default and the provisions applicable to the year concerned.

Show-cause notice and assessment procedure

1. Identify the default: the authority identifies the return-filing or notice-compliance failure falling within Section 144.
2. Opportunity to respond: ordinarily, a notice specifies the date and time for showing cause why a best judgment assessment should not be completed.
3. Statutory exception: the second proviso to Section 144(1) states that a separate opportunity under this provision is not necessary if a notice under Section 142(1) was already issued before assessment. Other applicable procedural safeguards must still be considered.
4. Evaluate material: the officer considers available accounts, returns, information, explanations and other relevant evidence.
5. Pass assessment order: the officer determines total income or loss and the amount payable in accordance with law.

Where faceless assessment applies, the procedure must also be read with Section 144B of the 1961 Act and the relevant scheme, notifications and judicial decisions. Applicable time limits generally arise under Section 153, subject to the year and any statutory extensions or exclusions.

Taxpayer rights and practical steps

• Check the assessment year, statutory section, date of service, compliance deadline and authenticity of each notice.
• File a complete, timely response with supporting documents, reconciliation statements and explanations for any default.
• Request a reasonable extension or hearing where legally available, and retain acknowledgement of electronic submissions.
• If an assessment order is passed, examine the computation, evidence relied on, limitation period and available appeal or rectification remedies.
• Review whether a statutory show-cause opportunity was required, and whether the authority complied with the applicable faceless-assessment procedure.

Remedies may include rectification under Section 154 and appeal under the applicable provisions, including Section 246A of the 1961 Act. The proper remedy and deadline depend on the order and governing statute.

Section 144(2): Historical assessments

Section 144(2) preserves the pre-amendment provisions of Section 144 for assessments relating to assessment year 1988-89 or earlier, with references to other provisions interpreted as applicable to those years. This is a historical transitional provision, not the general rule for current assessments.

Income-tax Act, 2025: Section 271

Section 271 of the Income-tax Act, 2025 addresses best judgment assessment under the new statutory framework. It covers failures concerning return filing under Section 263, inquiry notices or directions under Section 268, and scrutiny notices under Section 270(8).

Section 271(2) provides for a show-cause notice before assessment, subject to Section 271(3), which provides an exception where a notice under Section 268(1) has already been issued. The 2025 Act reorganises provisions, so corresponding section numbers should not be treated as interchangeable without reading the applicable statute.

Frequently asked questions

Can the Assessing Officer assess income without a return?

Yes, if the conditions of Section 144 or the corresponding applicable provision are met, using relevant material and the prescribed procedure.

Is a separate show-cause notice always compulsory?

No. Section 144 contains an express exception where a Section 142(1) notice was issued before the assessment. The procedural requirements of any other applicable provision must also be observed.

Can a best judgment assessment be challenged?

Yes. Depending on the order and statute, appeal, rectification or other legal remedies may be available within prescribed deadlines.

Official legal references

This article is general legal information. Statutory amendments, notifications, applicable tax years and case-specific facts may affect the outcome.