Assessment of Persons Likely to Transfer Property to Avoid Tax
Introduction
If the Assessing Officer believes that a person may sell, transfer, or dispose of assets to evade tax liabilities, the total income of that person can be taxed before the transfer occurs. This ensures tax recovery before assets are beyond reach.
Income Taxable in the Previous Year Itself
Normally, the income of a previous year is chargeable in the next following assessment year. However, this general principle is subject to some exceptions in which income is charged to tax in the previous year itself.
One exception arises when it appears to the Assessing Officer that any person is likely to charge, sell, transfer, dispose of or otherwise part with any of his assets with a view to avoid payment of any liability under this Act. In this situation, the total income of such person for the relevant financial year (from 1st day of previous year and up to the date the Assessing Officer commences proceedings) shall be charged to tax in that year itself.
Separate Assessments and Tax Rates
- Tax is levied at the rates in force for the relevant assessment year.
- Separate assessments are made for each completed financial year or part thereof.
Issue of Notice
- The Assessing Officer issues a notice underSection 142(1)(i), requiring the individual to furnish returns for:
o Each completed previous year.
o Estimated income from the start of the financial year to the date of assessment.
Filing of Return and Consequences of Non-Compliance
- The return must be filed within the period specified in the notice, which cannot be less than seven days.
- If no return is filed:
o Best judgment assessment under Section 144 applies.
o Penalty under Section 271 may be levied.
o Prosecution under Section 276CC may be initiated.