Section 286 Time limit for completion of assessment, reassessment and recomputation

Income-tax Act, 2025

At a Glance

Clause 286 of the Income Tax Bill, 2025 - (Old Version) sets out time limits for making assessment, reassessment and recomputation orders, specifies the dates from which those limitations run, and lists exceptions/tolling periods. It affects taxpayers, Assessing Officers, Transfer Pricing Officers, and other tax authorities; it governs procedural limitation periods. Effective date or enactment date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 286 of the Income Tax Bill, 2025; cross-references include sections 270(10), 271, 263(6), 239(3)(b), 279, 280, 166, 359, 363, 365(10), 368, 377, 378, 292, 279, 270(13), 244, 375, 269, 383, 384, 159, 274 and legacy sections 153A(2), 245HA of the Income-tax Act, 1961 (43 of 1961). Context: procedural limitation for tax proceedings. Coverage includes a table of eleven specified proceedings indicating the date from which time-limit is to be calculated and the duration allowed; additional subsections extend or suspend time-limits in designated circumstances and define exclusions for computing time.

Statutory Provision Mode

Text & Scope

Clause 286 prescribes that no order in respect of specified proceedings (listed in a Table with Sl. Nos. 1-11) shall be made after expiry of the period specified in column D, computed from the date in column C. The Table identifies types of assessment or order (e.g., assessment u/ss 270(10)/271; orders consequent to updated returns; reassessment u/s 279; orders to give effect to court or specified statutory directions; modification to give effect to orders u/s 166 read with 377). Time limits range predominantly at one year (for many entries), with certain entries at six months (extendable to nine) and two months for modification u/s 166 read with 377. Revival cases are governed by one-year limits measured from the month of revival (explicitly referencing section 153A(2) or section 292). Sub-section (2) provides a 12-month extension where Transfer Pricing Officer reference u/s 166(1) is made. Sub-section (3) enumerates exclusion/tolling periods for computing time (including re-hearing at assessee request, court-ordered stays, Central Government intimation regarding contravention of Schedule III or section 270(11)(i), audit/inventory valuation directions u/s 268(5), references to Valuation Officer u/s 269(1), declarations u/s 375, Board for Advance Rulings applications, exchange of information references under agreements in section 159, references for impermissible avoidance arrangements u/s 274(1), and specifically a search/requisition-related exclusion not exceeding 180 days). Sub-sections (4)-(7) provide further extensions and remedial adjustments where excluded periods leave less than minimum operational time (e.g., extend remaining period to 60 days; extend to one year following abatement of Interim Board for Settlement proceedings u/s 245HA of the 1961 Act; extend to month-end where remaining time ends before month-end after excluding a specified period). Sub-section (8) deems certain assessments to be "made in consequence of or to give effect to" orders referred to in entry Sl. No. 8 (i.e., orders under specified sections or court orders), including cross-assessee reallocation of income, subject to opportunity to be heard where applicable.

Interpretation

The text reflects a legislative intent to impose relatively short, definite limitation periods (commonly one year) for making various assessment and consequential orders, while providing specific, enumerated circumstances when time will be excluded or extended to accommodate due process (e.g., audits, valuations, references, stay of proceedings, transfer-pricing processes, searches). The inclusion of minimum residual periods (60 days) indicates an intent to ensure Assessing Officers have a baseline time to conclude proceedings after interruptions. The 12-month extension for transfer pricing references signals recognition of the complexity of TP determinations.

Exceptions/Provisos

The clause provides multiple carve-outs in sub-section (3) (a-k) that exclude particular periods from computation of limitation; minimum extension rules appear in subsections (4)-(7). Explicit provisos include: the 180-day maximum exclusion for search/requisition (sub-section (3)(j)); the 60-day maximum for certain declaration-linked exclusions (sub-section (3)(f)); the possibility to extend a six-month period to nine months with approval (Table entry 10). For abated Interim Board for Settlement proceedings, the remaining period is deemed extended to one year (sub-section (6)).

Illustrations

• Example 1: An assessment u/s 270(10) for tax year T has a time limit computed to the end of the financial year succeeding T; the assessing officer must complete the order within one year from that date, subject to exclusions. (Derived from Table Sl. No. 1.)
• Example 2: Where the Assessing Officer makes a reference to the Transfer Pricing Officer u/s 166(1), the time limit prescribed for assessment/reassessment is extended by an additional twelve months. (Derived from sub-section (2).)
• Example 3: If a search u/s 247 is conducted and seized items are returned after 140 days, that 140-day period is excluded from computation of the limitation (sub-section (3)(j)), and if the remaining time post-exclusion is under 60 days, the remaining period is extended to 60 days (sub-section (4)).

Interplay

The provision cross-refers to numerous other provisions and to the Income-tax Act, 1961 (e.g., sections 153A(2), 245HA). It interacts with transfer-pricing processes (section 166), valuation and audit directions (sections 268, 269), Board for Advance Rulings procedures (sections 383-384), exchange-of-information mechanisms (section 159), and impermissible avoidance arrangement declarations (section 274). The clause anticipates coordination with search/requisition rules (sections 247-248) and tribunal/court stays. No rules or notifications beyond those statutory cross-references are referenced in the clause itself.

Differences between the two provisions and practical impact

Summary of primary differences between Section 286 of the Income-tax Act, 2025 (Document 1) and Clause 286 of the Income Tax Bill, 2025 - Old Version (Document 2):

• Statutory references to revival: Document 1 (Section 286) lists revival u/s 292 (without the separate reference to section 153A(2) of the Income-tax Act, 1961). Document 2 (Bill) expressly references revival "as per section 153A(2) of the Income-tax Act, 1961 (43 of 1961), or section 292."
  • Practical impact: Document 2 expressly preserves the link to revival under the legacy section 153A(2) of the 1961 Act (suggesting continuity for assessments revivied under search/seizure provisions), whereas Document 1 omits that explicit cross-reference. This may affect interpretive clarity for cases revived under 153A(2).
• Exclusion periods linked to searches/requisitions: Document 2 includes a specific exclusion period (sub-section (3)(j)) described as "the period (not exceeding one hundred eighty days) commencing from the date on which a search is initiated u/s 247 or a requisition is made u/s 248 and ending on the date on which the seized items or the requisitioned items, are handed over..." with detailed sub-clauses (i)-(iii). Document 1 does not contain this (j) entry; instead Document 1 contains other exclusion grounds (for instance multiple items including references to section 375 declaration period) but not the explicit search/requisition clause in the same form.
  • Practical impact: Document 2 gives an express and time-limited exclusion for periods relating to searches/requisitions (up to 180 days), clarifying tolling in search scenarios. Its absence in Document 1 may result in less explicit protection of time excluded for search/requisition handling, potentially shortening effective assessment limitation where searches occur unless other provisions apply.
• Wording and drafting differences in table phrasing: Several minor drafting differences occur in column C entries (dates from which time limits are calculated). For example, Document 1 uses "End of the financial year succeeding the relevant tax year for which assessment is made" for Sl. No. 1, whereas Document 2 states "End of the financial year succeeding the relevant tax year."
  • Practical impact: These are drafting style variations with negligible substantive effect, but the slightly narrower phrasing in Document 1 may be read as clarifying the reference to the particular assessment year.
• Sub-section lettering and numerical cross-references: Document 1's sub-section (3)(f) refers to "the period (not exceeding sixty days) commencing from the date on which the Assessing Officer received the declaration u/s 375(1) and ending with the date on which the order u/s 375(3) is made by him;" Document 2 has the same but places search-related tolling at (3)(j) and moves the other jurisdictional reference to (3)(k).
  • Practical impact: Reordering may affect cross-referencing in later amendments; Document 2's structure makes search/requisition exclusion explicit and earlier than the jurisdictional reference at k - practical effect limited except for drafting clarity.
• Other textual differences: Document 1 contains specific additional sub-sections not present or differently worded in Document 2 - for instance Document 1 contains sub-section (6) cross-applying extension for purposes of sections 282, 287, 288 and 296 and interest u/s 437; Document 2 contains an analogous provision.
  • Practical impact: Largely parity, with differences focussed on the explicit search/requisition exclusion and the 153A(2) cross-reference.

Practical Implications

• Compliance and risk areas: The short one-year and six-month limitation windows require prompt administrative action by tax authorities; taxpayers should monitor notices/orders and potential reopening/revival triggers. The specified exclusions mean timelines may be tolled in many procedural situations-tax practitioners must track those tolling events carefully (e.g., TP references, valuations, searches, advance rulings applications).
• Record-keeping/evidence points: The clause implies the need to retain records documenting dates of searches/requisitions, dates of receipts of Valuation Officer reports, dates of Board for Advance Ruling responses, and dates of declarations/orders under relevant sections, because these dates control exclusion computation. Not stated in the document: procedural forms or filings to notify these dates to Assessing Officers (explicit mechanisms are Not stated in the document.).

Key Takeaways

• Clause 286 prescribes short, specific limitation periods (mostly one year) for assessment, reassessment and recomputation.
• Multiple, enumerated exclusion/tolling events preserve time during procedural or evidentiary delays (e.g., audits, valuations, TP references, searches, advance rulings, exchange-of-information).
• A 12-month extension applies where Transfer Pricing Officer reference is made u/s 166(1).
• Specific minimum residual time rules (extend to 60 days) and special extensions (e.g., one year after abatement of Interim Board for Settlement) ensure Assessing Officers retain baseline time to conclude matters.
• The Bill explicitly references revival u/s 153A(2) of the 1961 Act for revived assessments, preserving continuity with legacy search-based revival mechanisms.
• Practitioners must carefully track triggering and ending dates for exclusion events to compute limitation accurately.
• Where the clause is silent on implementation details (e.g., procedural filings to record exclusion events), such rules are Not stated in the document.

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Full Text:

Section 286 Time limit for completion of assessment, reassessment and recomputation

Time limits for tax assessments impose short limitation windows, with tolling for procedural delays and transfer pricing processes. Section 286 prescribes specific limitation periods for assessments, reassessments and recomputations linked to dates in a statutory table, generally imposing one year windows with limited shorter periods; it provides a 12 month extension where a Transfer Pricing Officer reference is made, enumerates discrete exclusion/tolling events (including hearings, stays, audit and valuation references, advance ruling applications, exchange of information references, declarations under anti avoidance provisions and search/requisition periods), and supplies minimum residual time and remedial extension rules to ensure Assessing Officers retain a baseline time to conclude proceedings.