Text of ITO Section 121

Best Judgement Assessment

(1) Where a person fails to:
(a) furnish a return of income in response to a notice under sub-section (3) or sub-section (4) of section 114;
(b) furnish a return as required under section 143 or section 144;
(c) furnish the statement as required under section 116; or
(d) produce before the Commissioner, or a special audit panel appointed under sub-section (11) of section 177 or any person employed by a firm of chartered accountants or a firm of cost and management accountants under section 177, accounts, documents, and records required to be maintained under section 174, or any other relevant document or evidence that may be required by him for the purpose of making assessment of income and determination of tax due thereon,

the Commissioner, based on the available information and to the best of his judgement, may make an assessment of the taxable income of the person and the tax due thereon [and the assessment, if any, treated to have been made on the basis of return or revised return filed by the taxpayer shall be of no legal effect.

[(1A) For the purposes of making a best judgment assessment under subsection (1), the Commissioner may determine taxable income on the basis of sectoral benchmark ratios prescribed by the Board.

Explanation.- The expression “sectoral benchmark ratios” means standard business sector ratios notified by the Board on the basis of comparative cases and includes financial ratios, 102 production ratios, gross profit ratio, net profit ratio, recovery ratio, wastage ratio and such other ratios in respect of such sectors as may be prescribed.]

(2) As soon as possible after making an assessment under this section, the Commissioner shall issue, in writing, an assessment order to the taxpayer stating:
(a) the taxable income of the taxpayer for the year;
(b) the amount of tax due;
(c) the amount of tax paid, if any; and
(d) the time, place, and manner of appealing the assessment order.

(3) An assessment order shall only be issued within five years after the end of the tax year, or the income year, to which it relates.

 [Provided that where notice for furnishing a return of income under sub-section (4) of section 114 is issued in respect of one or more of the last ten completed tax years in pursuance of proviso to sub-section (5) of section 114 an assessment order under this section shall only be issued within two years from the end of tax year in which such notice is issued.]