Sub-section (1) lets the Assessing Officer make a best judgment assessment in three situations: failure to furnish the return required under section 263(1), (4), (5) or (6); failure to comply with all the terms of a notice under section 268(1) or with a direction under section 268(5); and, having made a return, failure to comply with all the terms of a notice under section 270(8). He must take into account all relevant materials he has gathered, give the assessee an opportunity of being heard, assess the total income or loss to the best of his judgment and determine the sum payable on that basis.
Sub-section (2) requires him, before making such an assessment and subject to sub-section (3), to serve a notice to show cause, on a date and time specified in it, why the assessment should not be completed to the best of his judgment. Sub-section (3) removes that requirement where a notice under section 268(1) was issued before the assessment under this section is made.
Why it is there
Where a taxpayer will not file or will not comply, the Department must still arrive at a figure, and this section authorises it to do so on the material it has. The constraints are what make it an assessment rather than a guess: relevant material gathered by the officer, a hearing, and a show cause notice, except where a section 268(1) notice has already put the assessee on notice.
Who it applies to
A person who fails to furnish a return required under section 263(1), (4), (5) or (6)
A person who fails to comply with all the terms of a notice under section 268(1), or a direction under section 268(5)
A person who, having filed a return, fails to comply with all the terms of a notice under section 270(8)
The Assessing Officer making the assessment
What this means in practice
The trigger is failure to comply with all the terms of the notice, so partial compliance does not take the case out of the section. Two safeguards are in play and only one can be dispensed with: the opportunity of being heard in sub-section (1) is part of the power itself, while the separate show cause notice in sub-section (2) is not required where a section 268(1) notice was issued before the assessment is made. The officer must also build the assessment on all relevant materials he has gathered.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
An individual does not file a return and does not respond to the notices issued to him. The Assessing Officer gathers material about his receipts, issues a show cause notice fixing a date and time, hears him, and assesses the total income to the best of his judgment. Had a notice under section 268(1) already been issued, sub-section (3) would have dispensed with the show cause notice, but not with the hearing.
Where you meet this section
You meet it as a show cause notice asking why the assessment should not be completed to the best of judgment, and then as an assessment order under section 271 with a demand based on the officer's own estimate.
The words themselves
shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment
Section 271(1), Income-tax Act, 2025.
It shall not be necessary to give the opportunity referred to in sub-section (2) in a case where a notice under section 268(1) has been issued prior to the making of an assessment under this section
Section 271(3), Income-tax Act, 2025.
What people get wrong
Assuming partial compliance defeats the section. Sub-section (1)(b) and (c) are triggered by failure to comply with all the terms of the notice.
Reading sub-section (3) as removing the hearing altogether. It dispenses only with the show cause notice under sub-section (2).
Treating best judgment assessment as available only for non-filing. It also follows non-compliance with a notice under section 268(1), a direction under section 268(5), or a notice under section 270(8).
Overlooking that the officer must use material. Sub-section (1) requires him to take into account all relevant materials he has gathered.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
Rules of the Income-tax Rules, 2026 that work section 271. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.
Rule 176 — Procedure for faceless assessment, reassessment or recomputation under section 273(1) — on reading the rule
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular 5/2014, dated 11-2-2014 — Section 14A of the Income-tax Act, 1961, read with rule 8d of the Income-tax Rules, 1962 - Expenditure incurred in relation to inc 2014-02-11
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 271. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
CIT v Chhabil Dass AgarwalSupreme CourtHelps departmenttagged s.144 Can I go straight to the High Court against an income-tax order instead of filing the statutory appeal?
Dhakeswari Cotton Mills v CITSupreme Courttagged s.144 Can the Assessing Officer estimate income on departmental material the assessee has never been shown?
Kachwala Gems v JCITSupreme Courttagged s.144 Once the books are rightly rejected, how much guesswork is the Assessing Officer allowed in a best judgment assessment?
Kalyan Kumar Ray v CITSupreme CourtHelps departmenttagged s.144 My assessment order does not compute the tax — the figures are only on the itns-150. Does that make the assessment bad?
Sasi Enterprises v ACITSupreme CourtHelps departmenttagged s.144 The firm never filed its returns and the assessments were made under s.144. Can we get the s.276CC complaint discharged because the assessment was…
State of Kerala v C. VelukuttySupreme Courttagged s.144 What are the outer limits on a 'best of judgment' estimate, and can suppression found in one place be projected onto another?
ACIT v Serajuddin & CoHigh Courttagged s.144 What must an approval under s.153D actually show on its face, and does last-minute bulk approval survive?
BVR Projects v Assessment UnitHigh CourtHelps taxpayertagged s.144 The faceless show-cause notice gave me four days to reply. Is that enough time?
Mantra Industries Ltd v NFACHigh CourtHelps taxpayertagged s.144 The faceless order says I filed no reply when I did, and my hearing request was ignored. Is it valid?
PCIT v Kanak Impex (India) LtdHigh CourtHelps departmenttagged s.144 The officer says my purchases are accommodation entries. Can he add the whole purchase, or only a percentage?
Net Agri Co P Ltd v ITOITATHelps taxpayertagged s.144 The CIT(A) accepted my explanation for the property investment but taxed the cash deposits behind the loan repayments instead. Can he do that without…
Santosh Kumar v ITOITATHelps taxpayertagged s.144 The AO has taxed my entire cash deposit as undisclosed income. Can he be made to tax only the presumptive percentage of it instead?
Vatsalabai Karbhari Deore v ACITITATHelps taxpayertagged s.144 You missed the notices and got a best judgment assessment. Is the officer's estimate final?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.