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Income Tax assessment

Introduction

The process of examination of ITR by the Income Tax Department is called “Assessment”. The assessment also includes re-assessment and best judgment assessment under sections 147 and 144 respectively and the different types of income tax assessment.

Types of Income Tax Assessment:

  1. Self Assessment –u/s 140A

  2. Summary assessment –u/s 143(1)

  3. Scrutiny assessment –u/s 143(3)

  4. Best Judgment Assessment –u/s 144

  5. Protective assessment

  6. Re-assessment or Income escaping assessment –u/s 147

  7. Assessment in case of search –u/s 153A

PUT THE BELOW IN SLIDE FORM:

1) Self Assessment u/s 140A

This type of Income Tax Assessment is the one in which the assessee calculates the tax by himself, usually to accompany his calculation with payment of the amount he regards as due.

Tax payable is required to be furnished under section 139 or section 142 or section 148 or section 153A, after taking TDS and deducting Advance tax paid.

Time limit:

There are no specific dates to pay Self Assessment Tax. Payment of Self Assessment Tax and non-filing of the returns should be paid within 31st July of every year.

2) Summary assessment u/s 143(1)

Assessment under section 143(1) is like initial checking of the return of income. Under this section, Income tax department sent intimation u/s 143(1) to the taxpayer. A Comparative Income Tax computation is sent by the Department. In income tax assessment, total income or loss incurred is computed.

Time Limit:

Assessment u/s 143(1) can be made within a period of one year from the end of the financial year in which the return is filed.

3) Scrutiny Assessment u/s 143(3)

Scrutiny assessment is the assessment of the return filed by the assessee by giving an opportunity to the assessee to substantiate the declared income and expenses and the claims of deductions, losses, exemptions, etc. in the return with the help of evidence. It is managed by the Committee through a single work plan. Specific work is undertaken through the committee and by establishing informal panels (for in-depth activities) or working groups.

The assessing officer gets the opportunity to conduct an inquiry and aims at ascertaining whether the income in the return is correctly shown by the assessee or not. The claims for deductions, exemptions, etc. are legal and factually.

If there is any omission, discrepancies, inaccuracies, etc. Then the assessing officer makes their own assessment for the assessee by taking all facts in mind.

Type of cases-

  • Manual scrutiny cases.

  • Compulsory Scrutiny cases.

4)Best Judgment Assessmentu/s 144

The best judgment assessment means evaluation or estimation in the context of 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 that involves the input of both the assessee and the officer equally.

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.

5)Protective assessment

This is a type of assessment that focuses on those assessments which are made to ‘protect’ the interest of the revenue.

Though, there is no provision in the income tax act authorizing the levy of income tax on a person other than whom the income tax is payable. It is open to the authorities to make a protective or an alternative assessment if it is not ascertainable who is really liable to pay the tax among a few possible persons.

6) Re-Assessment (or) Income escaping assessment u/s 147

Income Escaping Assessment under section 147 is the assessment which is done by the Assessing Officer if there is a reason for him to believe that income chargeable to tax has escaped assessment for any assessment year. It gives power to him to re-assess or re-compute income, turnover, etc. which has escaped assessment.

Notice u/s 148 can be issued by AO only after getting prior approval from the prescribed authority mentioned in section 151.

7) Assessment in case of search u/s 153A

Section 153 A of the Income-tax Act, 1961 provides for the scheme of assessment of income in the case of a searched person. In terms of the said section, the Assessing Officer can frame the assessment of a searched person for six assessment years immediately preceding the year of search. One of such facet is whether while framing assessment under the said section, the addition/disallowance, if any, with respect to the assessment year for which the proceedings does not abate (means there has either been assessment done earlier or the time period for making such an assessment has elapsed), should be restricted only qua the ‘incriminating’ materials found during the course of search proceedings. Till today, the majority of the judicial precedents, discussed infra, indicates that the Assessing Officer, while framing assessment under section 153A of the Act cannot make the addition/disallowance which dehors any ‘incriminating material.

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