Sections 268 and 272 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 268 gives the Assessing Officer the power to serve a notice, call for accounts and information, make inquiries and, in complex cases, direct a special audit or inventory valuation. Section 272 lets a Joint Commissioner give binding directions in a pending assessment. This article explains both as per the Income-tax Act, 2025 as amended by the Finance Act, 2026. Sections 269 to 271 sit between them and are covered separately.
Before assessment the Assessing Officer may serve a notice requiring a return, accounts, documents and information, with the Joint Commissioner's prior approval for a statement of assets and liabilities not in the accounts. In complex cases he may direct a special audit or inventory valuation, with approval of the Commissioner-level authority and a hearing, within a cap of six months, and the Central Government pays the expenses. A Joint Commissioner's directions in a pending assessment are binding on the Assessing Officer, but none prejudicial to the assessee may be given without a hearing.
By section 1(3), the Act is in force from 1 April 2026, save as otherwise provided. No Finance Act, 2026 amendment is named for these sections. Later amendments, rules and notifications should be checked. For notices and assessments, see our legal dispute resolution service.
Section 268(1): the notice
For the purpose of making an assessment, the Assessing Officer may serve a notice on any person who has made a return under section 263, or in whose case the time allowed under section 263(1) has expired, requiring him, on a date specified in the notice, to:
| Clause | Requirement |
|---|---|
| (a) | Where the person has not made a return within the time allowed under section 263(1) or before the end of the financial year succeeding the relevant tax year, furnish a return of his income, or the income of any other person for which he is assessable, in the form, verified in the manner and with the particulars as may be prescribed |
| (b) | Produce, or cause to be produced, such accounts or documents as the Assessing Officer may require |
| (c) | Furnish in writing, verified in the manner prescribed, information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require |
The form, verification and particulars are left to the Income-tax Rules, 2026; see our rule-wise guides. The returns that this notice relates to are in section 263; see our articles on section 263(1) and on section 267, the updated return.
Section 268(2) and (3): safeguards and who serves the notice
- (2)(a) The previous approval of the Joint Commissioner must be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts.
- (2)(b) The Assessing Officer shall not require production of accounts relating to a period more than three years prior to the relevant tax year.
- (3) A notice under sub-section (1)(a) may also be served by the prescribed income-tax authority.
Section 268(4): inquiry
For obtaining full information about the income or loss of any person, the Assessing Officer may make such inquiry as he considers necessary.
Section 268(5) to (11): special audit and inventory valuation
When it can be directed: sub-section (5)
If at any stage of the proceedings the Assessing Officer, having regard to (a) the nature and complexity of the accounts, (b) their volume, (c) doubts about their correctness, (d) multiplicity of transactions, or (e) the specialised nature of the business activity, and the interests of the revenue, is of the opinion that it is necessary, he may, after giving the assessee a reasonable opportunity of being heard and with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, direct the assessee to get either or both of:
- (i) the accounts audited by an accountant, and a report furnished in the prescribed form, duly signed and verified by the accountant, with prescribed particulars and any other particulars the Assessing Officer requires; and
- (ii) the inventory valued by a cost accountant, with a report in the prescribed form, duly signed and verified, with prescribed and other particulars.
Nomination, effect and time: sub-sections (6) to (10)
| Sub-section | Rule |
|---|---|
| (6) | The accountant or cost accountant is nominated by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner |
| (7) | Sub-section (5) has effect irrespective of whether the accounts have been audited under any other law or otherwise |
| (8) | Every report shall be furnished to the Assessing Officer within the period specified by him |
| (9) | He may, on his own motion or on the assessee's application and for any good and sufficient reason, extend that period by such further period or periods as he thinks fit, subject to sub-section (10) |
| (10) | The original period plus extensions shall not in any case exceed six months from the end of the month in which the direction is received by the assessee |
Expenses: sub-section (11)
The expenses of the audit or inventory valuation (including incidental expenses and the remuneration of the accountant or cost accountant) shall be (a) determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as per guidelines issued in this behalf, and (b) paid by the Central Government.
Section 268(12) and (13): hearing and definition
The assessee shall, except where the assessment is made under section 271, be given an opportunity of being heard on any material gathered through an inquiry under sub-section (4), or any audit or inventory valuation under sub-section (5), and proposed to be used for the assessment. The Act uses a different term for an assessment under section 271; its notice to show cause is in section 271(2), and the sections on assessment are covered in our post on section 270. "Cost accountant" means a cost accountant as defined in section 2(1)(b) of the Cost and Works Accountants Act, 1959 who holds a valid certificate of practice under section 6(1) of that Act; that Act is another law, which the reader should check.
Section 272: power of the Joint Commissioner to issue directions
The power: sub-section (1)
A Joint Commissioner may, on his own motion, on a reference by the Assessing Officer or on the application of an assessee, call for and examine the record of any proceeding in which an assessment is pending and, if he considers it necessary or expedient, having regard to the nature of the case or the amount involved or for any other reason, he may (a) issue such directions as he thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment; and (b) such directions are binding on the Assessing Officer.
Safeguards: sub-sections (2) and (3)
- (2) No direction prejudicial to the assessee shall be issued without giving the assessee an opportunity of being heard.
- (3) No direction as to the lines on which an investigation connected with the assessment should be made shall be deemed prejudicial to the assessee.
The section has no time limit and says nothing about the form of the directions; the text is silent.
A worked example
Names and dates are assumed.
Ashwood Engineering Ltd. has made a return. The Assessing Officer, finding the accounts complex and voluminous, proposes a special audit.
- Notice (sub-section (1)): the Assessing Officer serves a notice requiring accounts and information. He asks for accounts going back four years before the relevant tax year; under sub-section (2)(b) he cannot require accounts for a period more than three years prior to the relevant tax year.
- Direction (sub-section (5)): after a reasonable opportunity of being heard and with the previous approval of the Principal Commissioner, he directs an audit by an accountant nominated by that authority.
- Time (sub-section (10)): the direction is received on 12 March. Six months from the end of the month of receipt (31 March) is 30 September, which is the outer limit even with extensions.
- Cost (sub-section (11)): the expenses are determined by the senior authority and paid by the Central Government.
- Joint Commissioner (section 272): Ashwood Engineering Ltd. applies to the Joint Commissioner while the assessment is pending. Any directions he gives bind the Assessing Officer; one prejudicial to the company needs a hearing first.
Need help with an inquiry before assessment?
Notices under section 268 and special audit directions come with short dates and a hearing step you may want to use. Our team can help you prepare the reply and the representation through our legal dispute resolution service.
Key takeaways
- The Assessing Officer can call for a return, accounts and information by notice under section 268(1), but not accounts older than three years before the relevant tax year.
- A statement of assets and liabilities not in the accounts needs the Joint Commissioner's previous approval.
- A special audit or inventory valuation needs a hearing, the senior authority's previous approval and one of five grounds.
- The report period, with extensions, cannot exceed six months from the end of the month of receipt; the Central Government pays the expenses.
- A Joint Commissioner's directions bind the Assessing Officer; prejudicial ones need a hearing.
Read next
- Section 269: estimation of value of assets by the Valuation Officer
- Section 273: faceless assessment
- Section 270: processing, intimation and assessment
- Chapter XVI: procedure for assessment
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.