Chapter-19 Income Return and Assessment of Tax

96. Income return

(1) Each person shall, within three months of the expiration of an income year, and subject to Sections 97, 98 and 100, submit the income return of that year in the place specified by the Department.

Analyzing the above provisions of the Act, except for persons exempted from filing income returns as specified in Section 97 of the Act, every person must file an income return for that income year within three months of the end of the income year. Any person engaged in any economic activity that generates taxable income within Nepal, and any resident person engaged in any economic activity that generates taxable income anywhere in the world, must file an income return.

Among persons engaged in any economic activity that generates taxable income, a person who has no taxable income in any income year, i.e., has incurred a loss from such activity or has income only up to the amount where no tax is payable, although such a person need not pay tax, does not fall within the definition of persons not required to pay tax. Therefore, such persons must still file an income return even if they have no taxable income in any year.

A person with a tax filing obligation must generally file an income return for any income year within 3 months of the end of that fiscal year. If that day falls on a public holiday, the first working day the office opens shall be treated as the extended deadline. Under Section 98 of the Act, any person required to file an income return who submits a written application to the Department with an appropriate reason within the deadline for filing such return may have the deadline for filing extended once or repeatedly up to a maximum of three months.

(2) The income return referred to in sub-section (1) shall be as follows:-

(a) It shall be prepared in the manner and format specified by the Department, setting out the following matters:-

(1) Assessable income earned by that person from each employment, business or investment in that year and the source of such income,

(2) Taxable income of that person in that year and the tax imposable on the person referred to in clause (a) of Section 3 in respect of that income,

(3) Income sent abroad in that income year by a non-resident person's foreign permanent establishment situated in Nepal and the tax imposable on that income,

(4) ......,

(5) ......,

(6) Such other information and details as specified by the Department.

(b) The income return shall be signed by that person or manager, declaring that it is true and complete, and

Except for persons paying presumptive tax, professional natural persons, and persons with annual turnover of less than Rs. 1 crore from business and employment, the income returns filed by other persons must be certified by an auditor authorised to conduct audits by the Institute of Chartered Accountants of Nepal.

Example 25.2.1: Suppose Bhairav Singh Kaptan's sole proprietorship firm has annual turnover of Rs. 29 lakhs and annual profit of Rs. 2,78,000/-. He has filed the income return as a presumptive taxpayer. His income return need not be certified by an auditor.

Example 25.2.2: Suppose Dr. Bhairavlal Joshi is a physician at Nirmalaya Hospital. He received Rs. 6 lakhs from that employment this year. He also has a private clinic. The turnover of that clinic this year was Rs. 54 lakhs. Therefore, his total turnover from employment and business became Rs. 60 lakhs. Even though the total annual employment and business income of a professional natural person is Rs. 60 lakhs, his income return need not be certified by an auditor. If the total turnover had exceeded Rs. 1 crore, the income return for such turnover and the attached documents would have needed to be certified by an auditor.

Example 25.2.3: Suppose Man Bahadur Limbu is engaged in the purchase and sale of land. In income year 2080/81, his turnover was Rs. 93,50,000/-. Since the turnover did not exceed Rs. 1 crore, his income return need not be certified by an auditor. If the total turnover had exceeded Rs. 1 crore, the income return for such turnover and the attached documents would have needed to be certified by an auditor. However, if registered as a company, the financial statement must be audited under the Companies Act, 2063.

Auditor certification of return (Sec 96(2)): NOT required for - presumptive taxpayers, professional natural persons (doctors, lawyers, engineers, auditors) with income up to Rs. 30 lakh, and persons with annual business + employment turnover under Rs. 1 crore. All OTHER persons/entities must have the return and financial statements certified by an ICAN-licensed auditor. A company's accounts must still be audited under the Companies Act, 2063 regardless. A return not signed & sealed by the taxpayer (or authorised manager) is invalid.

(c) The following matters shall be accompanied with the income return:-

(1) ......,

(2) Any details made available to that person pursuant to sub-section (4),

(3) ......,

(3a) If a choice has been made pursuant to sub-section (4b) of Section 4, information thereof, and

(4) Such other information and details as specified by the Department.

(3) If any person, except in the capacity of an employee, prepares or assists in preparing the income return of any other person or the documents or details to be accompanied with the income return, in lieu of any payment, such person shall certify the following matters:-

(a) Having examined the documents maintained by the other person pursuant to Section 81, and

(b) Having the circumstances in question actually reflected in the details or information.

(4) If the person required to certify the return pursuant to sub-section (3) refuses to certify, information setting out the reasons for such refusal shall be given in writing to the person whose income return was to be certified.

A person who receives any consideration or service fee, other than as an employee, and prepares or assists in preparing the income return of a person required to file an income return, or any statements and documents to be attached with such income return, and who certifies the information stated in such income return, is called a tax auditor. In this context, an accounting professional who has obtained permission to audit from the Institute of Chartered Accountants of Nepal is treated as a tax auditor for the purposes of the Act. However, persons paying presumptive tax, professionals such as doctors, lawyers, engineers, and accountants with employment and business income (profit and gain) up to Rs. 30 lakhs, and persons with annual turnover (total income) from business and employment up to Rs. 1 crore need not have their income returns certified by a tax auditor. A tax auditor assisting someone in preparing and certifying the income return must fulfill the following obligations:

1. The income return must be prepared in the prescribed format and the statements and documents required to be attached must be attached. The statement must ascertain the assets, liabilities, income, expenses, and taxable income of the taxpayer.

2. The books of account and documents kept by the taxpayer under the Act must be examined.

3. The tax audit report must certify that the taxpayer's documents have been examined and that the income return reflects the taxpayer's income, expenses, and profit and loss.

4. The income return prepared or assisted in preparing must be signed, sealed, and certified.

5. If any tax auditor is unable to certify as per points 3 and 4 above, such auditor must state in writing the reasons why they cannot certify and inform the relevant taxpayer in writing.

(5) In the following circumstances, the Department may require any person to submit the income return of an income year or any part of an income year within the time-limit mentioned in the written notice given to such person, subject to Section 100, prior to the due time-limit for submission of the income return of the income year pursuant to sub-section (1):-

(a) If that person becomes bankrupt, insolvent or is dissolved,

(b) If that person is to leave Nepal for an uncertain period of time,

(c) If that person is leaving the act being carried out in Nepal for any reason, or

(d) If the Department otherwise thinks it proper.

Although every person must generally file an income return within three months of the end of the income year, if any person becomes insolvent, goes into receivership, becomes indebted, is dissolved, is about to leave Nepal permanently or for an indefinite period, or is about to stop any business or economic activity being conducted in Nepal, the Department may give a written order and notice to such person to file an income return for any income year or any part or period of the income year before the end of that income year. A person who receives such a notice must file the income return for the income year or period mentioned in the notice within the time stated in that notice. If a person who has received such an order does not file the income return within the time stated in the notice, the Department may conduct a deemed assessment under Section 100 of the Act for the purpose of determining the tax payable for the period mentioned in the notice.

(6) If any person wishes to amend the income return submitted to the Department within the time-limit, that person may amend the income return within thirty days of the date of its submission in accordance with the process specified by the Department.

Under the above provisions of the Act, an income return filed within the deadline means the period under Section 96(1) and, where extension has been granted, the period under Sections 98(1) and (2) of the Income Tax Act, 2058. Accordingly, only the income return filed within such deadline and the related schedules can be amended. Once a financial statement certified by an auditor and the taxpayer themselves has been submitted, the financial statement cannot be amended under this provision. For presumptive and turnover-based taxpayers for whom it is not mandatory to submit financial statements, if the turnover differs from what was shown in the income return, such taxpayers may amend the income return filed within the prescribed deadline if they wish under this provision.

Example 25.4.1: Suppose Kalpabriksha Pvt. Ltd. took a three-month extension under Section 96 in Ashwin 2081 to file the income return for income year 2080/81. That company filed the income return on Poush 20, 2081. If any error is found in the filed income return by Magh 20, 2081, since that date falls within thirty days of filing, the income return can be amended up to that date.

Example 25.4.2: Suppose ABC and Company Pvt. Ltd. filed the income return for income year 2080/81 on 2081/06/25. When filing the income return, the interest expenses paid for this year as per the profit and loss account were Rs. 10 lakhs, but in Schedule 5 the amount was omitted from the expense side, and the total sales in the profit and loss account and financial statement were Rs. 1,00,00,000/- (Rs. 1 crore) but in Schedule 5 it was incorrectly recorded as Rs. 10,00,00,000/- (Rs. 10 crore). Since there was an error in Schedule 5, the company submitted an application with reasons to amend the income return within 30 days from the date of filing, and the office, after review, has provision to amend such income return.

Where the ownership of any entity changes under Section 57 of the Act, the part before and the part after the change of ownership in the income year of the change must be treated as separate income years. Where parts need to be treated as separate income years, the date on which ownership changes is the date of change, and the period before and after that date must self-assess tax separately and file separate income returns. Within three months of the date of ownership change, the income return must be filed.

For example, if the ownership of any entity changes on date 2081/1/5, for the purpose of Section 57, the part of that entity before the change of ownership, i.e., from date 2080/4/1 to date 2081/1/5, is one income year and the income return for that income year must be filed by date 2081/4/4 without extension. Similarly, the part after the change of ownership, i.e., from date 2081/1/6 to date 2081/3/32, is another income year, and the deadline for the income return for that subsequent income year without extension is by the end of Ashwin 2081.

Income return (Sec 96): every person must file an income return within 3 MONTHS of the income-year end (by end of Ashwin), at the place specified by the Department. Even a person with a loss or income below the taxable threshold must file (no taxable income ≠ exempt from filing); lacking a PAN does not excuse filing or liability.

The return states assessable income per source, taxable income & tax, any PE remittance, WHT/instalment credits and tax payable.

97. Submission of income return not required

(1) Notwithstanding anything contained in Section 96, the following persons shall not be required to submit an income statement (tax return):

(a) A person who is not liable to pay tax and falls within the category of persons referred to in Section 3(a) during that income year.

(b) A person referred to in Section 3(c) during that income year.

(c) A resident natural person to whom Section 4(3) applies during that income year.

(d) In the case of a natural person other than a sole proprietorship owner of a vehicle who pays tax pursuant to Schedule 1, Section 1, Sub-section (13), such natural person.

(e) A person specified by the Department.

Provided that, the Department may, by written order or public notice, require such person to submit an income statement.

A natural person who earns income by transacting non-business taxable assets, i.e., land and house-land and interest (shares) in any entity, and has only such income and does not want to file an income return need not submit a return. However, under the proviso to Section 97(2), if a natural person has income exceeding Rs. 40 lakhs in any income year, an income return must be filed under Section 96 of the Act.

(2) Notwithstanding anything contained in sub-section (1), an natural person having income of more than forty lakh rupees in any income year shall submit the income return pursuant to Section 96 of this Act.

Notwithstanding the above exemptions, where a natural person has income exceeding Rs. 40 lakhs in any income year, an income return must be filed. Persons with only employment income from Nepal source, persons receiving only payments subject to final withholding tax, and natural persons who are owners of rented passenger vehicles, if they earn income exceeding Rs. 40 lakhs in any income year, must file an income return prescribed by the Department under Section 96 of the Act.

(3) The natural person required to submit the return pursuant to sub-section (2) shall include in the return, in addition to the income required to be included, the income gained from the business concession benefit referred to in clause (d) of Section 5, sub-section (3) of Section 7, clause (a) of sub-section (3) of Section 8, clause (a) of sub-section (3) of Section 9 and Section 11.

Provided that it shall not be mandatory to include retirement payment, meeting allowance and interest income.

(4) From the income computed pursuant to sub-section (3), the income referred to in clause (c) of Section 3 and the income exempted from tax under Section 11 of this Act shall be deducted.

Provided that it need not be deducted where retirement payment, meeting allowance and interest income have not been included.

(5) The format of the income returns to be submitted pursuant to sub-section (2) shall be as specified by the Department.

No income return required (Sec 97): the following need NOT file (unless the Department orders) - (a) a person with NO taxable income (but a person with a LOSS or income below the threshold MUST still file);

(b) a person whose income is ONLY final-WHT payments;

(c) a resident natural person meeting all Sec 4(3) conditions (Nepal employment income only, one resident employer at a time, no extra retirement/donation claims);

(c1) a resident with only Sec 95A(6b)/(6c)/(6d) forex income;

(d) a natural-person owner (not a firm) of a rented passenger vehicle paying tax under Sch 1, Sec 1(13);

(e) a natural person with only NBTA-disposal income who chooses not to file.

EXCEPTION (97(2)): ANY natural person with income over Rs. 40 lakh in the year MUST file

98. Extension of time-limit for submission of income return

(1) If any person who has to submit an income return pursuant to Section 96 makes an application in writing to the Department within the time-limit for the submission of such return for an extension of the time-limit, the Department may extend the time-limit for submission of the income return if there is a reasonable cause. Information of the decision made by the Department on the application for the extension of time-limit shall be given in writing to the applicant.

(2) For the purpose of submitting the income return pursuant to sub-section (1), the Department may extend the time-limit, at one time or on several occasions, for a period not exceeding three months in total.

Extension (Sec 98): on a written application with reason filed within the deadline, the Department may extend, once or repeatedly, by up to a maximum of 3 months total. If the due date falls on a public holiday, the next working day applies

99. Assessment of tax

(1) If any person has submitted the income return of any income year, setting out the following amounts, on the date of submission of the return, the tax of the income return shall be deemed to have been assessed:-

(a) The amount of tax mentioned in the income return payable by the person mentioned in clauses (a) and (b) of Section 3 in that income year, and

(b) The amount of tax mentioned in the income return remaining due and payable in that year.

Example 26.2.1: Suppose Ram Prasad operates 'Ram Galla Bhandar' as a sole proprietorship doing wholesale rice business. His turnover in income year 2080/81 was Rs. 2 crores. Of the turnover amount for this year, he sold rice worth Rs. 50 lakhs to the Nepal Food Corporation, and that corporation withheld Rs. 75 thousand as advance tax in Magh 2080. He paid Rs. 10 thousand at Bir Hospital for approved medical treatment expenses in that year. According to his calculations, his taxable income after all allowable deductions was Rs. 20 lakhs for that year. He paid Rs. 60 thousand as installment tax in Poush 2080. He filed his income return in Bhadra 2081. In this year, he and his wife chose the couple option. The total tax he must pay and the balance tax remaining are as follows:

(2) If any person does not submit the income return of any income year, tax shall be deemed to have been assessed as follows on the due date for submission of the income return until the return is submitted:-

(a) The tax payable by that person in that year shall be deemed to equal the sum of any tax withheld from amounts received pursuant to Chapter-17 and any amount paid by that person in installments for that year pursuant to Chapter-18, and

(b) No tax shall be deemed due and payable pursuant to tax assessment.

If a person required to file an income tax return fails to do so within the prescribed deadline, the person is deemed to have made a self-assessment on the return filing due date. The deemed tax liability is equal to the installment tax paid under Section 94 together with any non-final withholding taxes deducted from payments included in the person's income. Where advance tax or installment tax has been paid, such amount is deemed to be the assessed tax liability and no balance tax remains payable. Even where no advance tax or installment tax has been paid, a deemed assessment still arises with a nil tax liability. Since a deemed assessment is considered to have been made under Section 99(2), the tax authority cannot issue an amended assessment merely because the taxpayer failed to file a return. If the taxpayer subsequently files the return after the due date, the deemed assessment is automatically nullified. However, where the tax authority has already issued an amended assessment before the late return is filed, that amended assessment remains effective. The late-filed return may then be treated as a notice for further amendment of the assessment if required; otherwise, the existing amended assessment becomes final.

Example 26.2.2: Hari Mishra does wholesale chowmein business as an agent. His turnover in income year 2080/81 was Rs. 2 crores. For significantly conducting that year's transactions, the manufacturer gave him a sales bonus of Rs. 2 lakhs and withheld Rs. 30 thousand advance tax from that amount and filed it. He paid Rs. 1 lakh as installment tax in Poush 2080. He had not filed an income return for that year by Ashwin 2081 and had not obtained an extension of the income return filing deadline. In this situation, his tax assessment for income year 2080/81 is deemed done at end of Ashwin 2081, and the total tax he must pay and balance tax remaining are as follows:

Since Hari Mishra did not file an income return, it is deemed that at the deadline for filing the income return (end of Ashwin 2080/81), tax of Rs. 1,30,000/- filed by him or on his behalf by others is the tax assessment, and pursuant to that tax assessment he has no remaining tax for 2080/81.

Example 26.2.3: Suppose Hari Mishra's turnover and income are the same as mentioned in Example 26.2.2. He obtained a deadline extension until end of Mangsir 2081 to file the income return for income year 2080/81. However, he did not file the income return by end of Mangsir 2081 either. Even in this situation, Hari Mishra's tax assessment for income year 2080/81 is deemed done at the deadline for filing his income return, i.e., end of Ashwin 2081, with tax of Rs. 1,30,000/- filed by him or on his behalf by others, and pursuant to that tax assessment, he has no remaining tax for income year 2080/81. Similarly, even though Hari Mishra obtained a deadline extension, until the return is filed or until the Department makes an amended tax assessment, the tax assessment as above at end of Ashwin 2081 is deemed done.

Example 26.2.4: Suppose Hari Mishra's turnover in income year 2080/81 is the same as mentioned in Example 26.2.3, but there was no sales bonus income and advance tax withheld amount. Similarly, he did not file any amount as installment tax for that year. He did not file an income return for income year 2080/81 by end of Ashwin 2081 and did not obtain an extension either. Even in such a situation, Hari Mishra's tax assessment for income year 2080/81 is deemed done at the deadline for filing the income return, i.e., end of Ashwin 2081. Since no tax was filed by him or by anyone else on his behalf for this income year, it is deemed that the tax assessment is done showing no tax required for this income year, i.e., a zero-amount tax assessment is done. Similarly, pursuant to that tax assessment, he also has no remaining balance tax for income year 2080/81.

For any person covered by Section 96(5) of the Act, i.e., a person who is insolvent, in bankruptcy proceedings, drowning in debt, dissolved, planning to leave Nepal permanently or for an indefinite period, or planning to cease any business or economic transactions operating in Nepal, if the office gives a written order or notice to file an income return for any income year or any portion or period of that income year before the filing deadline, and such person does not file the income return for the income year or period mentioned in that notice within the time mentioned in that notice, the above provision does not apply. If a person who received such an order does not file the income return for the income year or period mentioned in the office's order within the time mentioned in that notice, that person is not deemed to have done the tax assessment for the period mentioned in that notice. In such a situation, the office must make a jeopardy tax assessment pursuant to Section 100 of the Act to determine the tax that person must pay for the period mentioned in that notice.

Self-assessment (Sec 99): filing an income return within the deadline (or extended deadline) = the tax is DEEMED assessed on the filing date, as stated in the return - no separate departmental order is needed. 'Tax payable' = taxable income × Schedule-1 rates + any interest/penalty; 'balance tax remaining' = that total minus instalment tax, WHT credits, self-paid advance tax, foreign tax credit and medical credit.

Deemed assessment (Sec 99(2)): if a person does NOT file by the deadline, tax is DEEMED assessed at the deadline = the sum of instalment tax + creditable WHT already paid (so no balance remains; zero if nothing was paid). Filing later nullifies this deemed assessment (unless the Department already made an amended assessment).

JEOPARDY assessment (Sec 100): where a person is insolvent, dissolving, leaving Nepal or ceasing business and has not self-assessed/filed after the Department's Sec 96(5) notice, the Department assesses the tax itself on available information, giving at least 7 days to show cause. A jeopardy assessment can be made only before the self-assessment period lapses; after that, only an amended assessment is possible

100. Jeopardy assessment of tax

(1) Section 99 shall be applicable if the income return of any income year or any part of an income year has to be submitted pursuant to sub-section (5) of Section 96.

(2) Notwithstanding anything contained in sub-section (1), in the circumstance mentioned in sub-section (5) of Section 96, the Department may, based on the amounts mentioned in sub-clauses (1), (2) and (3) of clause (a) of sub-section (2) of Section 96, assess the tax of that person for any income year or for the part of such year in a justifiable manner.

(3) The following provisions shall apply if tax is assessed pursuant to sub-section (1) or (2):-

(a) A person whose tax is assessed for the whole income year shall not be required to submit the income return referred to in sub-section (1) of Section 96 for that income year, or

(b) A person whose tax is assessed for a portion of any income year shall be required to submit the income return referred to in sub-section (1) of Section 96 for that income year.

(4) The amount of tax paid as per the assessment of tax for a portion of any income year may be adjusted against the tax chargeable as per the assessment of tax for the whole year.

(5) In assessing the tax pursuant to this Section, the Department shall give a time-limit of seven days for the submission of proof and evidence in defence.

Jeopardy assessment refers to the tax assessment done by the Department to determine the tax that a person must pay, where there is a risk that such a person may not pay the required tax due to being insolvent, drowning in debt, dissolved, planning to leave Nepal permanently or for an indefinite period, or planning to cease any business or economic transactions operating in Nepal, or where the Department considers it otherwise appropriate, and that person has not self-assessed the tax and has not filed the income return even as per the Department's notice.

Any person covered by Section 96(5) of the Act who has not determined and paid their tax liability may have their jeopardy tax assessment made by the Department before the deadline for filing the income return for any income year, covering that income year or any portion or period of that year. For this, the Department may give a written order or notice pursuant to Section 83 of the Act to such person asking them to file the returns and information needed for tax assessment. If the Department gives such a notice to any person, that person must file the returns for the income year or period and information as requested in the notice within the time specified in that notice. The Department may make a jeopardy tax assessment for that income year or portion of the income year based on that notice and other information available to it. However, after the period for self-assessment for the relevant income year has passed, jeopardy assessment cannot be made, but an amended tax assessment can be made.

Example 26.3.1: Information reached the Department on date 2081.3.1 that Kamleshi had made documents showing a sale of land worth Rs. 3 crores for Rs. 1 crore on date 2081.2.1. She had not paid advance tax (capital gains tax) during registration at the land revenue office for that Rs. 1 crore either. The Department also received information that she was leaving Nepal to go abroad. In such a situation, the Department may have tax assessed through the following methods:

(a) Pursuant to Section 100(1), require her to file an income return and make a tax assessment pursuant to Section 99, and make an amended tax assessment pursuant to Section 101 for that income return.

(b) Make a jeopardy tax assessment under Section 100(2); in such a case, a period of at least seven days must be given for the concerned person to submit cause and evidence.

(c) Pursuant to Section 95(7), estimate the advance payment for persons who did not file an estimated return and request the installment amount.

101. Amended tax assessment

(1) The Department may make an amended tax assessment in order to adjust, on reasonable grounds, the tax liability of a person whose tax has been assessed pursuant to Section 99 or 100, in accordance with the purposes of this Act.

The Department may issue an amended tax assessment under Section 101 for taxpayers whose self-assessment or deemed assessment was made under Section 99 or whose jeopardy assessment was made under Section 100, where the original assessment is found to be unsatisfactory or results in an under-assessment of tax. An amended assessment must be based on reasonable grounds and evidence, with the objective of correctly determining the taxpayer's actual tax liability rather than imposing additional tax arbitrarily. The tax officer must establish sufficient evidence before amending an assessment. Grounds for amendment include omission of taxable income, deduction of non-allowable or excess expenses, incorrect computation of tax, penalty or interest, or wrongful claim of tax credits. Where such errors are identified through a tax audit, examination, or other reliable information, the Department may amend the tax liability. These provisions apply equally to taxpayers who filed returns, those subject to deemed assessments for non-filing, and those assessed through jeopardy assessments.

(2) If the Department considers it proper to re-amend the amended tax assessment made pursuant to sub-section (1), it may amend it for any number of times on reasonable grounds.

If any error occurred in an amended tax assessment due to lack or insufficiency of notice or evidence at the time of making that amended tax assessment, the amended tax assessment may be re-amended only for the purpose of adjusting the tax liability on a reasonable basis, i.e., correctly determining that person's tax liability. Without evidence or basis proving that any person's amended tax assessment is erroneous or shows less tax assessment, the Department cannot amend any person's amended tax assessment.

(3) The Department shall complete the assessment of tax pursuant to sub-section (1) or (2) within three years from the following date:-

(a) If tax is assessed pursuant to Section 99, the due date for the submission of income return,

When the Department must amend the tax assessment of any person who filed or did not file an income return for any income year pursuant to Section 96 of the Act, where the tax assessment was done pursuant to Section 99(1) by filing an income return by the filing deadline, or is deemed done pursuant to Section 99(2) even without filing an income return, such amendment must be completed within three years from the deadline for filing the income return for any income year (i.e., the end of Ashwin of the income year following the income year for which the income return is filed). For this purpose, even for persons who obtained a deadline extension, the three-year period is calculated without counting the extended period.

Example 26.6.1: Suppose the following persons filed their income return for income year 2080/81 as follows:

• Hari Prasad filed the income return for income year 2080/81 by end of Ashwin 2081.

• Dinesh Kumari obtained a deadline extension until Mangsir 30, 2081 to file the income return for income year 2080/81 and filed the income return on that date.

• Gobind Prasad filed the income return for income year 2080/81 on Poush 20, 2081 but had not obtained a deadline extension for filing the return.

• Hemant Kumari filed the income return for income year 2080/81 on Chaitra 2, 2081. She had obtained a deadline extension until end of Poush 2081 for filing that return.

• Manoj Kumari did not file an income return for income year 2080/81.

Whether the above persons filed their income return for income year 2080/81 on time, filed it within the extended deadline, did not file on time, did not file within the extended deadline, or did not file at all - for all these persons, the deadline for filing or required to file the income return for income year 2080/81 is end of Ashwin 2081.

The Department must complete the amended tax assessment or re-amended tax assessment by end of Ashwin 2084.

Example 26.6.2: Suppose 50 percent ownership of Neptune International Pvt. Ltd. changed on date 2080.11.10. That entity had not filed an ownership change return pursuant to Section 57 of the Act, and filed a consolidated income return for income year 2080/81 on Bhadra 5, 2081. Since the ownership of that entity changed on date 2080.11.10, for the purposes of Section 57 of the Act, the portion before the ownership change, i.e., the period from 2080.4.1 to 2080.11.10, is one income year, and the income return for that income year must be filed by 2081.2.10 if no deadline extension is obtained. And the portion after the ownership change, i.e., from 2080.11.11 to end of Ashadh 2081, is another income year, and the income return for that later income year must be filed by end of Ashwin 2081. In this situation, the Department must complete the amended tax assessment or re-amended tax assessment for the pre-ownership change income year by 2084.2.10 and for the post-ownership change income year by end of Ashwin 2084.

(b) If tax is assessed pursuant to sub-section (2) of Section 100, the date on which the tax assessment notice is given to the person whose tax is assessed pursuant to Section 102,

The Department may also amend or re-amend the jeopardy tax assessment of any person made pursuant to Section 100(2) of the Act. When amending or re-amending the jeopardy tax assessment of a person for whom jeopardy assessment was made, it must be completed within three years from the date the notice of jeopardy tax assessment was given to that person pursuant to Section 102.

Example 26.6.3: Suppose Meg Jackson is a British citizen who has been operating a business in Nepal for the past ten years. Due to family reasons, he had to return to Britain, so he closed his business in Nepal in Poush 2076. From some source, the Department received information about this person and issued him a notice on Magh 2, 2080 to file an income return for the period from Shrawan 2080 to Poush 2080 by end of Magh 2080. However, he disregarded that notice and did not file the income return. On the basis of evidence and information immediately available to the office, a jeopardy tax assessment was made on Falgun 15, 2080 establishing a tax liability of Rs. 10 lakhs for his income year 2080/81 for the period from Shrawan to Poush, and the notice of jeopardy tax assessment was served to him on Falgun 20, 2080 pursuant to Section 102. In this situation, the amendment or re-amendment of the jeopardy tax assessment made by the office for that period must be completed within three years of the date Falgun 20, 2080, i.e., by Falgun 20, 2083.

(c) If tax is assessed pursuant to sub-section (1) or (2), the date mentioned in clause (a) or (b) related with the previous tax assessment that has been amended pursuant to sub-section (1).

Explanation (Section 101(3c)): When the Department has already amended a tax assessment once under Section 101, and later wants to amend it again, the 4-year limitation period does not restart from the date of the first amendment. Instead, it is counted from the original assessment date referred to in clauses (a) or (b).

(4) Notwithstanding anything contained in sub-section (3), if the tax of any person has been assessed in a wrong manner due to fraud, the Department may amend such tax assessment at any time. Such amendment shall be completed within one year of receipt of information that details have been given or tax assessed fraudulently.

Where a taxpayer has made a fraudulent tax assessment, the normal three-year limitation period for issuing an amended assessment does not apply. Instead, the Department may amend or further amend the assessment at any time, provided it completes the amendment within one year from the date it receives information or evidence of the fraud. Fraud includes intentionally or maliciously making false statements, omitting material facts in returns, records or documents, submitting forged documents, or using any other fraudulent means to reduce tax liability. Upon obtaining evidence that a taxpayer has understated tax through such fraudulent conduct, the Department must amend or re-amend the tax assessment for the relevant income year within one year of receiving the information, irrespective of when the original assessment was made.

(5) Notwithstanding anything contained in sub-section (3), if the tax assessment is amended or the assessed tax is reduced by the Revenue Tribunal or other competent courts, the Department shall not be able to amend such tax assessment to that extent.

Provided that if an order has been issued to re-examine the matter, it shall not be deemed to bar the making of an amendment.

Where the Revenue Tribunal, an authorized officer, or a court orders the Department to re-amend an amended tax assessment, the Department must comply with the order. If the order specifies the amendments to be made, they must be implemented accordingly. If the order merely directs a re-hearing, the Department must reassess the tax after conducting the re-hearing based on the facts established. A taxpayer dissatisfied with a jeopardy assessment, amended assessment, or re-amended assessment may seek an administrative review by the Director General. If dissatisfied with the review decision, or if no decision is made within 60 days, the taxpayer may appeal to the Revenue Tribunal, and thereafter, with leave, to the Supreme Court. Where a final decision of the Revenue Tribunal or court requires amendment or re-amendment of a tax assessment, the Department may make such amendment at any time, notwithstanding the normal limitation period, but it must complete the amendment within one year of receiving the final decision.

(6) In making an amendment to the tax assessment pursuant to this Section, the Department shall give that person a written notice clearly setting out the grounds for such amendment and a time-limit of fifteen days for the submission of proof and evidence in defence on such tax assessment.

Before amending a jeopardy assessment, tax assessment, or amended tax assessment under Section 101(1), the Department must issue a written notice to the taxpayer stating the basis and reasons for the proposed amendment. The same requirement applies where a re-amendment is made pursuant to an order of the Director General, the Revenue Tribunal, or any court. The notice must clearly specify the reasons for the amendment, the revised taxable income, the total tax, penalty and interest payable, and the resulting balance tax liability. The taxpayer must be given an opportunity to present explanations, evidence, or objections within 7 days in the case of a jeopardy assessment and 15 days in the case of an amended assessment, with the response period calculated from the date the notice is received.

Amended assessment (Sec 101): the Department may amend a Sec 99 or 100 assessment on reasonable grounds where under-assessment is proven (income omitted, excess/disallowed expenses, wrong tax/interest, wrongful credit), and may re-amend any number of times (101(2)).

TIME BAR (101(3)): complete within 4 YEARS of the return deadline (Sec 99) or the Sec 102 notice date (jeopardy) - any deadline extension is NOT counted in the 4 years.

EXCEPTIONS: fraud/false statement → amend ANY TIME, within 1 year of discovering it (101(4)); where a court/Revenue Tribunal has reduced the assessment, the Department cannot re-amend to that extent (101(5)) unless a re-hearing is ordered (then within 1 year of the decision). The Department must give 15 days' notice (7 days for jeopardy) stating the grounds before amending

101A. Tax assessment on property of undisclosed source

(1) If a reference is received by the Department on the assessment of tax in relation to any person's property of undisclosed source pursuant to Section 28 of the Asset (Money Laundering) Prevention Act, 2064 (2008), the Department shall, subject to that Section, examine whether or not a tax-related offence has been committed.

(2) If no tax-related offence is found upon examination pursuant to sub-section (1), income tax shall be recovered from that person at the maximum tax rate applicable to the income of that year.

Undisclosed-property assessment (Sec 101A): on a money-laundering reference under the Asset (Money Laundering) Prevention Act, 2064, the Department checks for a tax offence; if NONE is found, it recovers income tax at the MAXIMUM rate applicable that year on the undisclosed-source property.

102. Tax assessment notice

The Department shall give the person whose tax has been assessed a written notice of the tax assessment made pursuant to sub-section (2) of Section 100 or Section 101, setting out the following matters:-

(a) The assessed tax payable and due and payable by the person mentioned in clauses (a) and (b) of Section 3 for the income year or period related to the tax assessment,

(b) The method of computation of tax in the tax assessment mentioned in clause (a),

(c) The reason why the Department has to assess the tax,

(d) The time for payment of the assessed tax due and payable, and

(e) The time, place and mode for making a petition if not satisfied with the tax assessment.

Until the person whose tax assessment was made receives the notice of tax assessment, such tax assessment does not have legal validity and the person whose tax assessment was made is not obliged to pay the tax liability created by that tax assessment.

Assessment notice (Sec 102): a jeopardy/amended/re-amended assessment is NOT legally valid and creates NO payment obligation until the written notice is served - stating the assessed & payable tax, the computation method, the reason for assessing, the payment deadline, and the time/place/manner of appeal