Procedure of assessment
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The document discusses various types of income tax assessments including self-assessment, regular assessment, best judgment assessment, and re-assessment as outlined in the Indian Income Tax Act. It explains the processes for each type, the responsibilities of the assessee in filing returns and responding to notices, and the potential consequences of failing to comply with requirements. Additionally, it outlines the time limits for issuing notices under re-assessment provisions and exceptions to those time limits.
Procedure of assessment
- 1. Dr. V. K. Jain Head, Department of Commerce GMN (PG) College, Ambala Cantt
- 2. ASSESSMENT Assessment means the determination of total income and tax payable. Assessment can be of following types: • Self-assessment • Regular Assessment • Best Judgment Assessment • Re-assessment
- 3. SELF-ASSESSMENT U/S 140A Every assessee before filing income tax return under various sections viz. 139, 142(1), 148 or 153A is supposed to find whether he is liable for any tax, interest or penalty. For this purpose section 140A has been introduced in Income tax act. This type of Income Tax Assessment is the one in which the assessee calculate the tax by himself, usually to accompany his calculation with payment of the amount he regards as due.
- 4. SELF-ASSESSMENT U/S 140A (Cont.….) Where any tax is payable on the basis of any return required to be furnished under section 139 or section 142 or section 148 or section 153A, after deducting: i. TDS and TCS. ii. Advance payment of tax, if any iii. Double taxation relief u/s 90, 90A, 91 iv. Tax credit u/s 115JAA or 115JD This assessment is termed as self assessment because the assessee himself determines the income tax payable.
- 5. FEE for late filing of return u/s 234F (Applicable w.e.f. AY 2018-19) CASE AMOUNT 1. Total income < 5 Lac Rs. 1,000 2. Other Cases i. Return furnished on or before 31st Dec. of AY ii. Return furnished after 31st Dec. of AY Rs. 5,000 Rs. 10,000
- 6. SUMMARY ASSESSMENT or Assessment On The Basis Of Return or Provisional Assessment u/s 143 (1) Where a return under section 139 or in response to notice under section 142 (1) is filed then u/s 143(1) this return is checked form the point of arithmetical accuracy and will not be scrutinized in detail, in following way: 1) The total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; or (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
- 7. SUMMARY ASSESSMENT (Cont.…) (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return. However no such adjustments shall be made unless intimation is given to the assessee of such adjustments either in writing or in electronic mode. The response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made.
- 8. SUMMARY ASSESSMENT (Cont.…) 2) The tax and interest, if any, shall be computed on the basis of the total income computed under clause (a); 3) The sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest and fee; 4) An intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and
- 9. SUMMARY ASSESSMENT (Cont.…) 5) The amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee. 6) An intimation u/s 143(1) shall also be sent if loss declared is adjusted but no any tax/interest/fee/ is payable by or no refund is due to him. 7) No intimation u/s 143(1) shall be sent after the expiry of one year from the end of the financial year in which return is filed. In case of revised return (section 139(5)) the one year period shall be counted from end of financial year in which return was revised.
- 10. REGULAR ASSESSMENT or SCRUTINY ASSESSMENT u/s 143(1) Scrutiny assessment u/s 143(3) is also known as regular assessment. To initiate assessment u/s 143(3), assessing officer has to issue notice u/s 143(2), which can only be issued in case where return u/s 139 or in response to section 142(1) has been filed by the assessee. It means notice u/s 143(2) and assessment u/s 143(3) cannot be issued / done if no return is filed. Assessing officer, u/s 143(2), if consider it necessary or expedient to ensure that – i) the assessee has not understated the income or ii) has not computed excessive loss or iii) has not under paid the tax in any manner shall require assessee to attend his office to produce documents / evidences in support of return.
- 11. REGULAR ASSESSMENT (Cont.…) Assessment after Evidence: On the day specified in the notice issued under sub- section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.
- 12. BEST JUDGMENT ASSESSMENT u/s 144 The best judgment assessment means evaluation or estimation in the context income tax law of income of the assessee by the assessing officer. In the case of best judgment assessment, the assessing officer will make the assessment based on best reasoning i.e. they will not act dishonestly. The assessee will neither be dishonest in assessment nor have a bitter attitude towards the officer. This is a type of income tax assessment which involves the input of both the assessee and the officer equally.
- 13. BEST JUDGMENT ASSESSMENT (Cont.…) Types Compulsory Assessment: Assessing officer (AO) finds that there is non-cooperation by the assessee or found to be a defaulter in supplying information to the department. Discretionary/optional assessment: When AO is dissatisfied with the authenticity/validity of the accounts given by the assessee or where no regular method of accounting has been followed by the assessee.
- 14. BEST JUDGMENT ASSESSMENT (Cont.…) Cases of Compulsory Best Judgment Assessment: 1. If a person fails to make return u/s 139(1) and has not made a return or a revised return under sub-section (4) or (5) of that section; or 2. If any person fails to comply with all the terms of notice under section 142(1) or fails to follow directions mentioned to get account audited u/s section 142(2A); or 3. If a person after filing a return fails to comply with all the terms of notice received under section 143(2) requiring presence or production of evidence and documents; or 4. If the Assessing Officer is not satisfied with the correctness or completeness of the accounts or documents.
- 15. BEST JUDGEMENT ASSESSMENT (Cont.…) Consequences: The assessee becomes liable for penalties (Sec 272A). The assessee becomes liable for prosecutions (Sec 276CC and 276D). The assessee is prevented from bringing on record any new evidences. A refund may not be granted under this section. Remedies: Filing an Appeal to Commissioner (Appeals) against assessment. Appellate Tribunal against order of Commissioner (Appeals). High Court if question of law is involved. Commissioner for revision.
- 16. BEST JUDGEMENT ASSESSMENT (Cont.…) Discretionary Best Judgment Assessment a) If the Assessing officer is not satisfied about the correctness or the completeness of the accounts of assessee or b) If no method of accounting has been regularly employed by the assessee or c) Income has not be calculated as per standard notified by Govt. The assessing officer can make best judgment assessment as per his discretion.
- 17. RE-ASSESSMENT or INCOME ESCAPING ASSESSMENT u/s 147 When the assessing officer has sufficient reasons to believe that any taxable income has escaped assessment, he has the authority to assess or reassess the assessee’s income. Deemed cases of escapement: Where no return has been filed and no assessment is done but his total income or total income of any other person in respect of which he is assessable, exceeds the maximum amount which is not chargeable to tax Where a return of income filed but no assessment is done and assessing officer noticed understatement of income or excessive claim of loss, deduction, allowance or relief etc. Where assessee fails to report international transactions u/s 92E Where assessment u/s 143(3) / 144 has been made but income chargeable to tax: (i) has been under assessed; or (ii) has been assessed at low rate; or (iii)has been assessed with excessive relief; or (iv) excessive loss or depreciation or other allowance has been computed
- 18. RE-ASSESSMENT (Cont.…) Notice u/s 148 (1) Before making any assessment u/s 147, the assessing officer shall serve on the assesse a notice requiring him to furnish a return of his income or income of any other person in respect of which he is assessable during the previous year corresponding to the relevant assessment year with in such period as may be specified in the notice. As per section 148(2), assessing officer is required to record the reasons for issuing notice u/s 148(1). Separate notice u/s 148(1) is required for each assessment year for which income has escaped.
- 19. RE-ASSESSMENT (Cont.…) Time Limit for issue of Notice u/s 148 CASES TIME LIMIT Escaped Income < Rs. 1 Lac 4 years from end of relevant AY Escaped Income ≥ Rs. 1 Lac More than 4 years but up to 6 years from the end of relevant AY Escaped Income in relation to any asset (including financial interest in any entity) located outside India More than 4 years but up to 16 years from the end of relevant AY
- 20. RE-ASSESSMENT (Cont.…) Exceptions to Time Limit to issue Notice u/s 148 If the notice u/s 148(1) is required to be issued to give effect to any finding or direction contained in a passed by: By any authority in any proceeding under this Act by way appeal or revision By a Court / Supreme Court / High Court CIT Appeal u/s 250, ITAT u/s 254, Commission u/s 263 or 264 of Income Tax Act