Income Tax Assessment

Every taxation system requires assessment. The assessment generally means a determination of tax or in other words, it is the process of examination of the returns by the Income Tax Department.

As every person whose income is chargeable to tax has to furnish income tax return. Once a return is furnished by the assessee, the next step is the processing of return by the Income Tax Department.

According to the Income Tax Act, 1961 assessments of following of type –

  • Self Assessment –[Section 140A]
  • Summary Assessment –[Section 143(1)]
  • Scrutiny Assessment –[Section 143(3)]
  • Best Judgment Self Assessment[Section 144]
  • Income Escaping Assessment or Reassessment –[Section 147]
  1. Self Assessment [Section 140A]

         Process of self calculation and payment of tax is called a self-assessment, the amount payable under self-assessment will be calculated by taking the following amounts:-

  • Advance Tax
  • TDS/TCS
  • DTAA relief
  • MAT credit according to section 115JAA
  • AMT credit according to section 115JD 

Any tax paid by the assessee under self-assessment is deemed to have been paid towards regular assessment, if an assessee fails to pay he shall be deemed to be in default for such unpaid amount.

  1. Summary Assessment [Section 143(1)]

This assessment was carried out without any human intervention. In this assessment reasonableness and correctness cross-checked by department and return filed by an assessee under section 139 or in response to a notice under section 142(1), such return shall be processed in the following manner: 

  • Tax and interest shall be recalculated after considering TDS, TCS, Advance tax.
  • Total income or loss shall be computed after making such adjustment

   * Arithmetical error

   * Incorrect claim

  • Disallowance of loss claimed if the return is filed after the due date of section 139(1)
  • Disallowance of expenditure that is shown in a tax audit but not taken into account while computing tax.

  Time Limit:- No intimation under this section shall be sent after the expiry of one year from the end of the financial year in which return is made.  

3. Regular/ Scrutiny Assessment – [Section 143(3)]

 Where a return has been furnished under section 139 or in response to a notice under section 142(1) the Assessing officer or income tax authority who is authorized by the income tax department conducts this assessment. The purpose is only to ensure that –

  1. The  assessee has not understated the income or
  2. Has not computed excessive loss or any expense or 
  3. Has not underpaid tax in any manner,

There are certain parameters of CBDT on which taxpayer’s case bought for scrutiny Assessment. Department will send a notice to the taxpayer.

Time limit –  No notice under this section shall be served on the assessee after the expiry of 6 months from the end of the financial year in which the return is furnished.

Department will ask the assessee to produce the books of accounts and other evidence that validate the income stated in his return. After verifying all the details, the assessing officer passes an order to confirm his return that has been filled or make further additions. This raises an income tax demand that assessees must respond accordingly.

4.Best Judgment Assessment [Section -144]

This section comes into action if the assessee fails to respond to the notice issued by the department to provide certain information or books of accounts. There are two types of best judgment assessments. 

  1. Compulsory Best Judgment Assessment Assessing Officer shall make the assessment to the best of his judgment in the following cases-
  1. If  any person fails to furnish the return under of income under section 139(1)
  2.  If it has not made a return or a revised return under section 139(4)  or section 139(5).
  3. If a person fails to comply with all the terms of a notice issued under section 142(1).
  4. If a person fails to comply with the direction issued under section 142(2A) for getting the account audited.

The assessing officer provides an opportunity to hear the assessee’s arguments, the assessing officer passes an order based on relevant materials and evidence available to him.

  1.  Discretionary Best Judgment Assessment – According to section 145(3) if assessing officer is not satisfied with the correctness or the completeness of the account of the assessee or where no method of accounting has been regularly and consistently employed by the assessee, he may make an assessment in the manner provided in section 144. 

5. Income escaping assessment or reassessment – [Section – 147]:

If the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year and such income comes to notice in the course of a proceeding or any other allowance, as the case may be.

Before making an assessment under this section, the Assessing Officer shall serve on assessment notice under section 148. Such notice shall be issued within the following period-

SituationTime Limit for Issuance of Notice
If the escaped income is any amount4 year from the end of the relevant assessment year
If the escaped income of Rs.   1,00,000 or MoreEven beyond 4 years but up to 6 years from the end of the relevant assessment year
If escaped income in relation of asset(including financial interest on entity located outside India)Even beyond 4 years but up to 16 years from the end of the relevant assessment year

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