Income Tax Act

Official PDF pages 371–375

SOURCE PDF PAGE 371
Method of accounting in certain cases.
277.   (1) For the purposes of determining the income chargeable under the head
“Profits and gains of business or profession”,—
( i )   the valuation of inventory shall be made at lower of actual cost or net
realisable value computed as per the income computation and disclosure
standards notified under section 276(2);
( ii )   the valuation of purchase and sale of goods or services and valuation
of inventory shall be adjusted to include any tax, duty, cess or fee (by
whatever name called) actually paid or incurred by the assessee to bring
the goods or services to the place of its location and condition as on the
date of valuation;
( iii )   the inventory being securities not listed on a recognised stock exchange,
or listed but not quoted on a recognised stock exchange with regularity
from time to time, shall be valued at actual cost initially recognised as
per the income computation and disclosure standards notified under
section 276(2);
( iv )   the inventory being securities other than those referred to in clause ( iii ),
shall be valued at lower of actual cost or net realisable value as per the
income computation and disclosure standards notified under section
276(2).
(2) For the purposes of sub-section (1), the inventory being securities held by   a
scheduled bank or public financial institution shall be valued as per the income
computation and disclosure standards notified under section 276(2) after taking into
account the extant guidelines issued by the Reserve Bank of India in this regard.
(3) For the purposes of sub-sections (1) and (2), the comparison of actual cost and
net realisable value of securities shall be made category-wise.
(4) For the purposes of this section, any tax, duty, cess or fee (by whatever name
called) under any law in force, shall include all such payment irrespective of any
right arising as a consequence to such payment.
(5) For the purposes of this section, “public financial institution” shall have the same
meaning as assigned to it in section 2( 72 ) of the Companies Act, 2013 (18 of 2013).
Taxability of certain income.
278.   (1) Any interest received by an assessee on any compensation or on enhanced
compensation, shall be deemed to be the income of the tax year in which it is
received, irrespective of anything to the contrary contained in section 276.
(2) Any claim for escalation of price in a contract or export incentives shall be
deemed to be the income of the tax year in which reasonable certainty of its real -
isation is achieved.
(3) The income referred to in section 2( 49 )( w ) shall be treated as the income of the
tax year in which it is received, if not charged to income-tax in any earlier tax year.
Income escaping assessment.
279.   (1) If, in the case of an assessee, any income chargeable to tax has escaped
assessment for any tax year (herein and in sections 280 to 286 referred
to as the relevant tax year), the Assessing Officer may, subject to the provisions of

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sections 280 to 286, assess or rea ssess such income or recompute the loss or the
depreciation allowance or any other allowance or deduction for the relevant tax
year.
(2) For the purposes of assessment or reassessment or recomputation under sub-sec -
tion (1), the Assessing Officer may assess or reassess the income in respect of any
issue, which has escaped assessment, and such issue comes to his notice subsequently
in the course of the proceedings under this section, irrespective of the fact that the
provisions of section 281 have not been complied with.
58
[ (3) The “Assessing Officer” for the purposes of sections 280 and 281 shall mean to
be an Assessing Officer other than the National Faceless Assessment Centre or any
assessment unit referred to in section 273(3). ]
Issue of notice where income has escaped assessment.
280.   (1)( a ) Before making the assessment, reassessment or recomputation under
section 279, the Assessing Officer shall, subject to the provisions of section 281,
issue a notice to the assessee, along with a copy of the order passed under section
281(3);
( b ) the notice referred to in clause ( a ) shall require the assessee to furnish, within
such period as may be specified therein, a return of his income or income of any
other person in respect of whom he is assessable under this Act during the relevant
tax year; and
59
[ ( c ) the period specified in the notice referred to in clause ( a ) shall not be less than
thirty days from the date of such notice but shall not exceed three months from the
end of the month in which such notice is issued. ]
(2) The return of income required under sub-section (1) shall be furnished in such
form, verified in such manner and setting forth such other particulars, as may be
prescribed, and the provisions of this Act shall apply accordingly, as if such return
were a return required to be furnished under section 263.
(3) Any return of income required to be furnished under sub-section (1), furnished
after the expiry of the period specified in the notice under the said sub-section, shall
not be deemed to be a return under section 263.
(4) No notice under this section shall be issued unless there is information with
the Assessing Officer which suggests that the income chargeable to tax has escaped
assessment in the case of the assessee for the relevant tax year.
(5) No notice under this section shall be issued without prior approval of the specified
authority, where the Assessing Officer has received—
( a )   information under the scheme notified under section 260; or
( b )   directions from the Approving Panel under section 274(6); or
58   Inserted by the Finance Act, 2026, w.e.f.   1-4-2026 .
59.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its substitution, clause ( c ) read
as under :
“( c )   the period specified in the notice referred to in clause ( a ) shall not exceed three
months from the end of the month in which such notice is issued.”

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( c )   any finding or direction contained in an order passed by any authority,
Tribunal or court in any proceeding under this Act by way of appeal,
reference or revision or by a Court in any proceeding under any other
law.
(6) For the purposes of this section and section 281, the information with the
Assessing Officer which suggests that the income chargeable to tax has escaped
assessment means—
( a )   any information in the case of the assessee for the relevant tax year as
per the risk management strategy formulated by the Board from time
to time;
( b )   any audit objection to the effect that the assessment in the case of the
assessee for the relevant tax year has not been made as per this Act;
( c )   any information received under an agreement referred to in section 159
of this Act;
( d )   any information made available to the Assessing Officer under the scheme
notified under section 260;
( e )   any information which requires action in consequence of the order of a
Tribunal or a Court;
( f )   any information in the case of the assessee emanating from the survey
conducted under section 253, other than under sub-section (4) of the
said section;
( g )   any directions in the case of the assessee given by the Approving Panel
under section 274(6);
( h )   any finding or direction contained in an order passed by any authority,
Tribunal or court in any proceeding under this Act by way of appeal,
reference or revision, or by a Court in any proceeding under any other
law.
Procedure before issuance of notice under section 280.
281.   (1) Where the Assessing Officer has information which suggests that income
chargeable to tax has escaped assessment in the case of an assessee for the
relevant tax year, he shall, before issuing any notice under section 280   provide an
opportunity of being heard to such assessee by serving upon him a notice to show
cause as to why notice under section 280 should not be issued.
(2) The notice to show cause referred to in sub-section (1) shall be accompanied by
the information which suggests that income chargeable to tax has escaped assess -
ment in his case for the relevant tax year, and on receipt of such notice, the assessee
may furnish his reply within such period, as specified therein.
(3) The Assessing Officer shall, on the basis of material available on record and taking
into account the reply of the assessee furnished under sub-section (2), if any, pass
an order with the prior approval of the specified authority determining whether or
not it is a fit case to issue notice under section 280.
(4) The provisions of this section shall not apply to income chargeable to tax es -
caping assessment for any tax year in the case of an assessee, where the Assessing
Officer has received—

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( a )   information under the scheme notified under section 260; or
( b )   directions issued by the Approving Panel under section 274(6); or
( c )   any finding or direction contained in an order passed by any authority,
Tribunal or court in any proceeding under this Act by way of appeal,
reference or revision, or by a Court in any proceeding under any other
law.
Time limit for notices under sections 280 and 281.
282.   (1) No notice under section 280 shall be issued for the relevant tax year,—
( a )   if four years and three months have elapsed from the end of the relevant
tax year, unless the case falls under clause ( b );
( b )   if four years and three months, but not more than six years and three
months, have elapsed from the end of the relevant tax year, unless the
Assessing Officer has in his possession books of account or other docu -
ments or evidence related to any asset or expenditure or transaction or
entry which shows that the income chargeable to tax, which has escaped
assessment, amounts to or is likely to amount to fifty lakh rupees or more.
(2) No notice to show cause under section 281 shall be issued for the relevant tax
year,—
( a )   if four years have elapsed from the end of the relevant tax year, unless
the case falls under clause ( b );
( b )   if four years, but not more than six years, have elapsed from the end
of the relevant tax year, unless the income chargeable to tax which has
escaped assessment, as per the information with the Assessing Officer,
amounts to or is likely to amount to fifty lakh rupees or more.
(3) No notice under section 280 or 281 shall be issued within one year from the
end of any tax year.
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[Provision for cases where assessment is in pursuance of an order on appeal,
etc.
283.   (1) Irrespective of anything contained in section 282, the notice under section
280 may be issued at any time for the purpose of making an assessment or
reassessment or recomputation in consequence of, or to give effect to,—
( a )   any finding or direction contained in an order passed by any authority.
Tribunal or Court in any proceeding under this Act or any other law; or
60.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its substitution, section 283
read as under :
“283.   Provision for cases where assessment is in pursuance of an order on appeal, etc. —(1)
Irrespective of anything contained in section 282, the notice under section 280 may be issued
at any time for the purpose of making an assessment or reassessment or recomputation in
consequence of or to give effect to—
( a )   any finding or direction contained in an order passed by any authority, Tribunal or
court in any proceeding under this Act by way of appeal, reference or revision or by
a Court in any proceeding under any other law; or
( b )   the directions issued by the Approving Panel under section 274(6).
( Contd. on page 403 )

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( b )   the directions issued by the Approving Panel under section 274(6).
(2) The provisions of sub-section (1) shall not apply in any case, where the assessment
or reassessment or recomputation as is referred to in that sub-section relates to a tax
year in respect of which an assessment or reassessment or recomputation could not
have been made under this Act due to it being time-barred, at the time when,—
( a )   the order, which was the subject-matter before any authority, Tribunal or
Court, was made; or
( b )   the proceedings relating to assessment or reassessment or recomputation
under this Act (other than those proceedings which have culminated in an
order), which was the subject-matter before the Court, was initiated; or
( c )   the reference from the jurisdictional Principal Commissioner or Commis -
sioner is made to the Approving Panel under section 274(4).
(3) For the purposes of sub-section (1), notice under section 280 shall be issued within
three months from the end of the quarter in which the certified copy of the order of the
authority or the Court, as the case may be, is received by the jurisdictional Principal
Commissioner or Commissioner. ]
Sanction for issue of notice.
284.   The specified authority for the purposes of sections 280 and 281
46  
shall
be the Additional Commissioner or the Additional Director or the Joint Com -
missioner or the Joint Director.
Other provisions.
285.   (1) In an assessment, reassessment or recomputation made under section
279, the tax shall be chargeable at the rate or rates at which it would have
been charged had the income not escaped assessment.
(2) The proceedings initiated under section 279 shall be dropped on a claim made
by the assessee and on his showing to the effect that—
( a )   the assessee had been assessed on an amount not lower than what he
would be rightly liable for, even if the income alleged to have escaped
assessment had been taken into account, or the assessment or compu -
tation had been properly made; and
( b )   he has not impugned any part of the original assessment order for the
relevant tax year under section 356 or 357 or 378.
( Contd. from page 402 )
(2) The provisions of sub-section (1) shall not apply in any case where any such assessment,
reassessment or recomputation as is referred to in that sub-section relates to a tax year in
respect of which an assessment, reassessment or recomputation could not have been made,
by reason of any other provisions limiting the time within which any action for assessment,
reassessment or recomputation may be taken, at the time when,—
( a )   the order which was the subject-matter of the appeal, reference or revision, as the
case may be, was made; or
( b )   the reference from the jurisdictional Principal Commissioner or Commissioner is
made to the Approving Panel under section 274(4).”