The Income Tax Department in India operates within fixed time limit for Income Tax Notices after scrutinising income tax returns. If the department fails to act within the prescribed time frame, no further action can be taken for those years.
Regular Assessment
In the normal course of assessment, income tax officers can issue a notice within three months from the end of the financial year in which the Income Tax Return (ITR) is filed.
Example: For returns filed in FY 2024-25, the department can issue notices only up to June 30, 2025.
Income Escaping Assessment
In cases where tax authorities receive information about income escaping assessment after the time limit for regular assessment has lapsed, they can still issue notices under specific timelines:
- If escaped income is less than ₹50 lakh
- Time limit: 3 years and 3 months from the end of the relevant Assessment Year (A.Y.)
- Example: For FY 2020-21, notices cannot be issued after June 30, 2025.
- If escaped income is ₹50 lakh or more (or likely to be ₹50 lakh or more)
- Time limit: 5 years and 3 months from the end of the relevant A.Y.
- Example: For FY 2018-19, notices cannot be issued after June 30, 2025.
Relief for Taxpayers
This means that all tax matters up to March 31, 2019, which are not already under scrutiny, are now out of the purview of tax officers. In other words, the department cannot reopen or initiate new action for those years.
