Best Judgment Assessment under Section 144— FAQs

FAQs On Best Judgment Assessment under Section 144 of the Income Tax Act

A communication referring to Section 144 of the Income Tax Act often creates serious concern among taxpayers, as it is commonly associated with non-compliance or lack of response during assessment proceedings. Unlike routine processing or scrutiny notices, section 144 empowers the Income Tax Department to determine taxable income on the basis of its own judgment, where a taxpayer fails to comply with statutory requirements.

Section 144 acts as a consequence provision in the assessment framework. It comes into operation when a taxpayer does not cooperate with assessment proceedings initiated under other provisions such as sections 142(1) or 143(2). This FAQ page explains the legal meaning, conditions, procedure, safeguards, and remedies relating to Best Judgment Assessment under section 144, based on the Income-tax Act and official departmental practice.

Best Judgment Assessment under Section 144 of Income Tax Act explaining non-compliance consequences
Understanding Best Judgment Assessment under Section 144 for non-compliance during income tax assessment

Frequently Asked Questions-Best Judgment Assessment

Best Judgment Assessment under section 144 refers to an assessment made by the Assessing Officer based on the best of his judgment when a taxpayer fails to comply with certain statutory obligations. In such cases, the Assessing Officer determines taxable income on the basis of available material, past records, and reasonable estimates, after following the procedure prescribed under the Act.

Section 144 can be invoked where the taxpayer fails to file a return of income, does not comply with notices issued under section 142(1), fails to comply with directions issued under section 142(2A), or does not respond to a notice issued under section 143(2). Non-cooperation during assessment proceedings is the primary trigger for invoking section 144.

No. Best Judgment Assessment is not automatic. Before passing an order under section 144, the Assessing Officer is required to issue a show-cause notice giving the taxpayer an opportunity to explain why the assessment should not be completed to the best of judgment.

Yes. Granting an opportunity of being heard is a mandatory procedural safeguard under section 144. Failure to provide such opportunity may render the assessment order invalid in law, except in cases expressly excluded by statute.

The Assessing Officer may rely on past assessment records, information available on the Income Tax portal, third-party information, bank data, AIS/TIS, and any other material available on record. The assessment must be based on reasonableness and fairness, and not on arbitrary assumptions.

No. Invocation of section 144 does not automatically imply concealment or tax evasion. It indicates procedural non-compliance or lack of cooperation during assessment proceedings. Penalty proceedings, if any, are initiated separately under relevant provisions.

Yes. Best Judgment Assessment under section 144 is also carried out under the Faceless Assessment Scheme, where all communications are electronic and routed through the Income Tax e-filing portal without physical interaction.

An assessment under section 143(3) is made after considering explanations and documents submitted by the taxpayer, whereas an assessment under section 144 is made when the taxpayer fails to cooperate. Section 143(3) is participative in nature, while section 144 is consequence-based.

Yes. A tax demand can be raised based on the income determined under section 144. Such demand is legally enforceable, subject to the taxpayer’s right to appeal or seek relief under applicable provisions.

Yes. An assessment order passed under section 144 is appealable before the Commissioner of Income Tax (Appeals) under section 246A. The taxpayer may challenge the additions, estimates, or procedural lapses in appeal.

An order under section 144 may be rectified under section 154 if there is an error apparent on record. In appropriate cases, revision under section 264 may also be sought, subject to statutory conditions.

Where non-compliance occurs due to genuine hardship or reasonable cause, the taxpayer may raise such grounds during appellate proceedings. Courts have consistently held that Best Judgment Assessment should be fair, reasonable, and not punitive.

Once an assessment under section 144 is completed, subsequent compliance does not automatically nullify the order. However, the taxpayer may seek relief through appeal, rectification, or revision, as applicable.

Best Judgment Assessment can be avoided by timely filing of returns, responding to notices issued under sections 142(1) and 143(2), submitting information through the e-Proceedings facility, and maintaining proper communication during assessment proceedings.

FAQs on Best Judgment Assessment under Section 144 issued by Income Tax Department
FAQs explaining Best Judgment Assessment under Section 144 of the Income Tax Act and also explore Income Tax FAQs Hub.

Key Takeaway

Best Judgment Assessment under Section 144 represents the most consequential form of assessment under the Income-tax Act, as it permits the Assessing Officer to determine taxable income in the absence of cooperation from the taxpayer. The provision acts as a safeguard for the tax administration to ensure that assessment proceedings do not fail due to non-compliance, while simultaneously imposing a responsibility on the Assessing Officer to act fairly and reasonably.

Section 144 is procedural in nature, not punitive. Its invocation does not automatically imply concealment of income or tax evasion; rather, it reflects a breakdown in the assessment process caused by failure to respond to statutory notices or directions. For this reason, the law mandates critical safeguards, including issuance of a show-cause notice and grant of an opportunity of being heard before a best judgment assessment is finalised.

In practice, assessments under section 144 often result in higher additions and tax demands, as they are based on estimates and available material rather than taxpayer explanations. Timely compliance with notices issued under sections 142(1) and 143(2) is therefore essential to avoid exposure to such assessments. Where a best judgment order is passed, the Act provides remedies through appeal, rectification, and revision, ensuring that genuine hardship or procedural lapses can be addressed.

A clear understanding of Section 144 enables taxpayers to appreciate the serious consequences of non-compliance, while also recognising that the provision is governed by principles of fairness, reasonableness, and natural justice.

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Disclaimer

This FAQ is for informational purposes only and does not constitute legal or professional advice. Tax positions should be evaluated based on individual facts and applicable law.