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Case law › AO — Assessment Stage

AO — Assessment Stage

No precedent is created here. What governs this stage is the Act, the Rules, CBDT instructions — and the decisions of the courts above, which the officer is bound to follow.

Nothing on this page was decided at this stage. Every authority below was decided by a court above — and each one is law that the officer, or the first appellate authority, is bound to apply to you. That is the useful thing about them: you can put them in a reply or a ground of appeal and they have to be answered.

AO — Assessment Stage — 153 entries

And 93 entries, by name. The first 60 are spelled out above because that is as far as most people scroll; each of these has a page of its own carrying the full text and the sources.

The procedure, explained

What the statute requires at this stage, and where people go wrong.

Best judgment assessment (section 144)

The officer estimated my income without any basis — can he just pick a number?

How faceless assessment actually works

My assessment is faceless. Who is deciding, and what happens if they skip the hearing?

Limitation on notices and assessments

Is this notice too late, and does it matter that the officer had reasons?

Natural justice in tax proceedings

They used a statement against me without letting me question the person — is that allowed?

Non-issue is not non-service: what s.292BB can and cannot cure

The assessee attended the hearings without objecting, so does s.292BB cure the missing notice?

Rectification of a mistake apparent from the record

There is an obvious arithmetic or credit error in my order. Can it be fixed without an appeal?

Rejecting the books, then estimating: what the officer must show

Before an Assessing Officer estimates income, what must he establish about the books, and what must the estimate rest on?

s.142(1) notices, and what ignoring them actually costs

What can the Assessing Officer call for under s.142(1), and what follows if the assessee does not comply?

s.153D approval: the second signature that has to mean something

When does approval under s.153D stop being a safeguard and start being a rubber stamp that destroys the assessment?

Special audit: when the officer sends your books to an outside auditor

The Assessing Officer wants my accounts audited by a nominated chartered accountant. Can he do that, and what does it cost me in time?

The draft order and the DRP: the s.144C route

Who is an eligible assessee under s.144C, and what happens if the officer skips the draft order?

The s.143(2) notice: the door the officer must open

What exactly does a notice under s.143(2) do, and what happens if it is never issued or issued late?

Which clock runs: s.153 limitation against the s.144C timeline

When an assessment goes through the DRP, does the nine-month Panel period run inside the s.153 limitation or on top of it?

Which orders you can actually appeal to the CIT(A)

Is the order I have received an appealable order under section 246A, and what if I have already accepted it?

Worked examples

Notice situations that pass through the ao — assessment stage stage, worked through in order.
A 30% disallowance for TDS you did not deduct The AO has disallowed freight, commission and testing charges under s.40(a)(ia) — which of those disallowances can actually be removed? 7 steps · 18 authorities · s.40(a)(ia), s.201, s.194C, s.194H A cancellation notice on the registration and an exemption denial in the same season Our trust charges course fees and paid rent to a trustee — can they cancel the registration and tax the whole of our income? 7 steps · 18 authorities · s.12AB, s.11, s.13, s.2(15) A large demand, a fresh appeal, and the officer wants 20 per cent now The appeal is filed and the officer says pay 20 per cent or face recovery - what actually has to be paid? 6 steps · 17 authorities · s.220(6), s.156, s.254(2A) A presumptive return, an AIS mismatch, and an audit penalty I declared 8 per cent under the presumptive scheme - can the AO add my cash deposits and penalise me for not getting audited? 7 steps · 17 authorities · s.44AD, s.69A, s.115BBE, s.271B A prosecution show-cause for TDS that was paid, only late We deposited the TDS with interest before any notice - can the company and its directors still be prosecuted? 6 steps · 12 authorities · s.276B, s.278B, s.279 A prosecution show-cause for two years where no return was filed The department wants to prosecute me for two years I never filed. I filed as soon as they asked, and all the tax was already paid by deduction and advance tax. How much trouble am I actually in? 8 steps · 15 authorities · s.276CC, s.278E, s.279, s.139(1) A revision notice for an issue the original assessment already examined The Commissioner wants to revise an item the officer did look at - and is he even in time? 6 steps · 10 authorities · s.263, s.147 A s.148 notice for AY 2019-20 arrived in my father's name three years after he died Is a reassessment notice on a dead person curable, and should the legal heir reply to it at all? 7 steps · 11 authorities · s.148, s.148A, s.159, s.292B A s.148 notice for AY 2020-21 arrived in May 2025 alleging Rs 62 lakh escaped Is this notice inside the s.149 window at all, and does the Rs 50 lakh limb actually apply to this year? 7 steps · 11 authorities · s.148, s.149, s.148A, s.151 A s.148A show-cause for AY 2022-23 built on an Insight flag the return already answers How do I answer a s.148A show-cause whose only information is a portal flag that the return already discloses? 7 steps · 14 authorities · s.148A, s.148, s.149, s.68 A s.153C notice for seven years landed after a search on the builder we sold land to What must the Department have done before it can assess me on the back of somebody else's search? 7 steps · 18 authorities · s.153C, s.153A, s.132, s.153D A surrender signed at midnight in a survey, retracted five weeks later Our partner surrendered Rs 1.2 crore during a survey and we have since retracted with a stock reconciliation - can the assessment still rest on that statement? 7 steps · 16 authorities · s.133A, s.132(4), s.145, s.69 A TDS survey says your consultants are employees The TDS officer has treated the hospital as an assessee in default for deducting under s.194J instead of s.192 — how much of that demand can be taken off? 6 steps · 15 authorities · s.201, s.192, s.194J An intimation that disallowed two claims before anyone had answered, a rectification nobody has decided, and next year's refund gone The processing centre disallowed my deductions and raised a demand without ever hearing me, my rectification has been sitting for seven months and my next refund has been taken against the demand - what do I do first? 8 steps · 25 authorities · s.143(1), s.143(1)(a), s.154, s.154(8) Cash and loose sheets found in a search, taxed at the special rate The AO has taxed everything found at my premises as unexplained money at the special rate - can I get out of the section, or at least off the rate? 6 steps · 18 authorities · s.69A, s.115BBE, s.292C, s.132(4) Cash freight and cash purchases disallowed, books rejected, and a penalty on the land sale Every one of my cash payments was under the limit and the officer has still disallowed the lot, thrown out my books and now wants a penalty equal to the cash I took on my plot. Where do I start? 8 steps · 17 authorities · s.40A(3), s.40A(3A), s.145(3), s.144 Circle rate substituted, and the reinvestment exemption refused The AO taxed me on the stamp duty value and denied my exemption because the new flat is in my wife's name - is either move safe? 7 steps · 16 authorities · s.50C, s.54F, s.45, s.48 Demonetisation deposits out of sales already in the books Our November 2016 deposits came out of recorded cash sales that were taxed as turnover - can the AO add them again as unexplained? 6 steps · 11 authorities · s.68, s.145, s.144, s.115BBE Four transfers in one family in one year, and the client wants to know which of them he has to pay tax on My family moved money and a flat around this year and there was a wedding. Which of those receipts is taxable, in whose hands, and for how much? 8 steps · 18 authorities · s.56(2)(x), s.56(2)(vii), s.49(4), s.50C HRA on rent paid to your wife, and interest on the flat you let out The AO says I cannot claim HRA on rent paid to my spouse while also deducting housing loan interest — can he refuse both? 7 steps · 15 authorities · s.10(13A), s.24, s.17(2) I have counted my days three ways and got three answers - which one do I file on? I left India in June for a job abroad and came back for two months in the winter. My day count comes to somewhere between 119 and 122. Am I resident for the year, and what does that pull into the Indian return? 8 steps · 25 authorities · s.6, s.6(1), s.6(1A), s.6(6) I left for a job in Dubai in October 2023 and the officer has taxed the Dubai salary too I moved abroad for employment in the middle of FY 2023-24. Am I resident for AY 2024-25, and can the department tax the salary I earned after I left India? 8 steps · 16 authorities · s.6(1), s.6(6), s.6(1A), s.5 I made money on some coins and lost it on others, and I want to know what the year actually costs before I file I traded on an Indian exchange and on a wallet abroad, took a token as a fee from a client, moved coins between my own wallets, and the exchange has already deducted on every sale. What is my real liability for FY 2025-26, and what can I set against it? 8 steps · 19 authorities · s.115BBH, s.2(47A), s.194S, s.2(47) I sold my flat below the ready reckoner value - what is the taxable gain, and in which year The registrar valued my flat well above what I sold it for, I spent money on it over the years and I paid off my brother and my tenant. What is my capital gain, and does it fall in the year of the agreement or the year of the deed? 8 steps · 29 authorities · s.45, s.48, s.2(47), s.50C I've put the plot money into a flat and into bonds - how much of the gain does that actually save? I sold a plot, paid part of the money to a builder for a flat and part into capital gain bonds, and I filed my return late. How much of the gain is actually exempt, and what have I already lost? 8 steps · 27 authorities · s.54F, s.54EC, s.54, s.54F(4) Loans from identified lenders, but the AO wants the lender's source Our lenders confirmed the loans and gave PAN and bank statements - can the AO still add them because he doubts where the lenders got the money? 6 steps · 21 authorities · s.68, s.115BBE, s.269SS, s.271D My employer treated the whole of my house rent allowance as taxable, and the processing centre has now done the same I paid rent to my mother for half the year and moved cities in October. Payroll allowed me nothing. How much of my house rent allowance is actually exempt, and will the claim survive being looked at? 7 steps · 18 authorities · s.10(13A), Rule 2A, s.192, Rule 26C Notional rent on nineteen unsold flats, and a shop the officer says was never really vacant The officer has taxed rent I never received on flats I am trying to sell, refused vacancy allowance on a shop that stood empty for seven months, cut my interest and says my other rent is understated - how much of this survives? 7 steps · 15 authorities · s.22, s.23, s.23(1)(a), s.23(1)(b) One flat, two additions: the buyer taxed on the gap and the seller taxed on the same gap We bought a flat below the ready reckoner rate and the department has added the difference to my income and substituted the same figure in my uncle's sale price. Can both of those stand? 7 steps · 12 authorities · s.56(2)(x), s.50C, s.50C(2), s.194-IA One refund taken to pay an old demand, another simply not released The department adjusted my refund against a stayed demand and is sitting on a second one - what can be undone? 5 steps · 14 authorities · s.245, s.244A, s.220(6) Rs 3.84 crore goes out on Monday and nobody here can tell me what to deduct on it A composite payment to a foreign vendor and a running bill to the Indian erector both go out this month. Which section applies to each line, on what amount, and what does it cost me if I have it wrong? 8 steps · 29 authorities · s.195, s.195(2), s.9(1)(vi), s.9(1)(vii) Share premium added under s.68 in a private company The AO wants to tax our entire share issue as an unexplained credit because he doubts the investors - what do we actually have to prove? 6 steps · 20 authorities · s.68, s.56(2)(viib), s.115BBE Shares sold to the incoming investor at book value, and both sides assessed on the round price I sold my shares to the new investor at book value and the officer has taxed me on the price the company issued fresh shares at, and taxed the investor on the same amount. How do we answer that? 7 steps · 12 authorities · s.50CA, s.56(2)(x), s.48, s.49(4) Tax deducted on stock that cannot be sold, for money that never arrived My employer has deducted tax on my stock options at exercise, on a value I never received in cash, the shares cannot be sold, and part of what I got has since been bought back. What do I do now? 8 steps · 15 authorities · s.17(2)(vi), s.192, s.192(1C), s.197 Tax was deducted from your money and the portal says it was not The buyer deducted TDS on my property sale but it does not appear in my 26AS and CPC has raised a demand — how do I get the credit? 6 steps · 18 authorities · s.143(1), s.154, s.194-IA, s.201 The department has my exchange data for FY 2023-24 and says my crypto income is a tenth of what it should be Exchange data shows Rs 6.73 crore of receipts against the Rs 11.6 lakh I put in Schedule VDA, and there is now a s.148A show-cause. How do I answer it, and what do I have to concede? 8 steps · 24 authorities · s.148A, s.149, s.115BBH, s.194S The faceless order for AY 2022-23 came without the video hearing we asked for twice Does a faceless assessment order survive when a requested personal hearing was never given and the reply window was four days? 7 steps · 16 authorities · s.144B, s.143(3), s.68, s.115BBE The penalty notice says 'under-reporting / misreporting' and nothing else The s.270A notice never says which limb is charged - can the penalty be resisted on that alone? 6 steps · 11 authorities · s.270A, s.270AA, s.274 The purchases are called accommodation entries, the whole invoice value is proposed, and a penalty of the same amount alongside The notice wants to add my entire Rs 3.42 crore of purchases, not the profit in them, and there is a separate penalty show-cause for the same figure. The supplier's statement has not been given to me and the goods are in my stock register. Where do I start? 7 steps · 19 authorities · s.69C, s.37(1), s.115BBE, s.271AAD The s.148 notice for AY 2021-22 came from our ward officer, not through automated allocation Is a reassessment notice issued by the jurisdictional Assessing Officer rather than the faceless unit still worth challenging? 7 steps · 15 authorities · s.148, s.148A, s.151A, s.144B The State audit finished in January, the return went in late, and the whole 80P deduction has gone on the date alone Our society filed after the due date because the statutory audit was not finished. Is the deduction really lost on that alone, and what happens to the penalties on our cash counter and the tax on our withdrawals? 8 steps · 25 authorities · s.80P, s.80P(2)(c), s.80P(4), s.80AC Three years of Schedule FA left blank, and a notice proposing Rs 10 lakh for each of them I never filled Schedule FA for my foreign brokerage account or my employer's stock plan, and the notice proposes Rs 30 lakh of penalty. Is it automatic, and does the higher threshold that came in recently help me? 8 steps · 12 authorities · BMA 2015 s.43, s.139(1), s.6(6), s.5 Two bank accounts frozen and a flat sale treated as void The recovery officer has garnished my accounts and says a sale I made in 2023 is void - what can be reversed? 7 steps · 16 authorities · s.226(3), s.281, s.281B What the housing loan actually takes off the rent, on a flat that was empty for five months I am working out my house property income for the year. The flat was let for seven months and lay empty for five, I am still running the interest from before I got possession, and there is a second flat in joint names - how much of the loan actually comes off, and what is the officer going to attack? 8 steps · 22 authorities · s.22, s.23, s.23(1)(a), s.23(1)(b) Your society's deposit interest, and whether 80P still reaches it The AO has taxed our fixed deposit interest as other sources and denied 80P because it is not derived from the credit business — is the claim gone? 6 steps · 16 authorities · s.80P, s.80AC, s.56