Best Judgment Assessment AY 2026-27

Best Judgment Assessment

Introduction
Best Judgment Assessment is conducted when an assessee fails to file a return, does not cooperate in assessment proceedings, or maintains incomplete or inaccurate accounts. The Assessing Officer (AO) estimates taxable income based on available information and must pass a reasoned order.

Types of Best Judgment Assessments

• Compulsory Best Judgment Assessment– Mandatory in cases where:

o The assessee fails to file a return within the due date.

o An updated return (Section 139(8A)) is not filed.

o The assessee does not respond to a notice under Section 142.

o The assessee fails to comply with a special audit or inventory valuation order (Section 142(2A)).

o A defective return is not rectified within the allowed time.

• Discretionary Best Judgment Assessment– Conducted when:

o The AO is not satisfied with the correctness or completeness of accounts.

o If no regular accounting method or Accounting Standards are followed,

Manner of Conducting Assessment

• Faceless Assessment (Section 144B): Conducted through automated allocation and digital communication.
• Other assessment:

o The AO issues a show-cause notice, allowing the assessee to justify their position.

o The assessee is given an opportunity to be heard, except when a prior notice under Section 142(1) has already been issued.

Time Limit for Completion

• If Transfer Pricing reference is made, the time limit extends by 12 months.
• Updated returns (Section 139(8A)) can be assessed within 12 months from the financial year in which the return was filed.