Best judgment assessment
[Section-271 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 271(1) of Income Tax Act 2025
271(1) If any person—
- (a) fails to make the return required under sub-section 263(1) and has not made a return or a revised return under section 263(4) or (5) or an updated return under section 263(6);
- (b) fails to comply with all the terms of a notice issued under section 268(1) or fails to comply with a direction issued under section 268(5);
- (c) having made a return, fails to comply with all the terms of a notice issued under sub-section 270(8),
the Assessing Officer, after taking into account all relevant materials which he has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment.
Section 271(2) of Income Tax Act 2025
271(2) The Assessing Officer before making an assessment under sub-section (1) shall, subject to the provisions of sub-section (3), serve a notice on the assessee to show cause, on a date and time to be specified in the notice, as to why assessment should not be completed to the best of his judgment.
Section 271(3) of Income Tax Act 2025
271(3) It shall not be necessary to give the opportunity referred to in sub-section (2) in a case where a notice under section 268(1) has been issued prior to the making of an assessment under this section.
FAQs on Section 271 of Income Tax Act 2025
What is best judgment assessment under Section 271 of the Income Tax Act, 2025?
Best judgment assessment refers to the process where the Assessing Officer (AO) assesses the total income or loss of an assessee to the best of his judgment when the assessee fails to comply with specific provisions of the Act.
When can best judgment assessment be made under Section 271(1)?
It can be made when the assessee:
(a) fails to furnish a return as required under section 263(1) and hasn’t filed a revised or updated return under sections 263(4), 263(5), or 263(6);
(b) fails to comply with a notice issued under section 268(1) or a direction under section 268(5);
(c) having filed a return, fails to comply with a notice under section 270(8).
What is the procedure before making a best judgment assessment under Section 271(2)?
Before making such an assessment, the Assessing Officer must issue a show cause notice to the assessee, specifying the date and time to explain why best judgment assessment should not be completed.
Is it always necessary to issue a show cause notice under Section 271(2)?
No, as per Section 271(3), if a notice under section 268(1) has already been issued before making the best judgment assessment, the AO is not required to issue a separate opportunity under Section 271(2).
Does the assessee get an opportunity of being heard before the assessment is made?
Yes, under Section 271(1), the AO must give the assessee an opportunity of being heard before making the best judgment assessment.
What materials can the Assessing Officer use for best judgment assessment?
The AO can consider all relevant materials that he has gathered to estimate the total income or loss of the assessee.
Is best judgment assessment applicable even if the assessee filed a return?
Yes, if the assessee has filed a return but fails to comply with a notice under section 270(8), best judgment assessment under Section 271 can still apply.
What happens after a best judgment assessment is made?
The AO determines the total income or loss and the amount payable by the assessee based on the best judgment assessment.
What is the significance of Section 271 in the tax compliance process?
Section 271 ensures that non-compliance by the assessee does not hinder the tax administration by empowering the AO to assess income based on available information.
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