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All assessees have to file their returns of income with the Income tax department to furnish the complete details of income pertaining to the relevant financial year. Once such a return is filed by the assessee, the next step involves the examination of the return of income by the Income tax department to analyze its correctness. Such a process of appraising and evaluating the return of income by the assessing officer is known as assessment. The term assessment also includes re-assessment and best judgment assessment under Section 144. The scrutiny patterns followed by the Income tax department have undergone a radical change over the years. As per the Income tax laws, there are five major types of assessments which are as follows:
Various forms for filing an income tax return in India are made accessible by the Income tax department; which are used by the assessee to consolidate his income from different sources. The assessee himself adjusts his income for losses/deductions/exemptions, if any, allowable to him during the financial year. From the total income arrived at, he reduces the TDS and advance tax to determine the net income tax payable. Such an assessment of tax is known as self assessment.
Summary assessment is one
of the major types of assessment which strives to cross-check the information
submitted by the assessee in his return against the details that the Income tax
department has access to. This is a preliminary appraisal of the return of income
wherein detailed scrutiny is not executed. Under this assessment, the
taxpayer’s total income is computed after adjusting for any arithmetical error
in the return, an incorrect claim which is apparently clear from the information
provided in return, any disallowance of expenditure brought into light in the
audit report which is not taken into consideration in return, etc. However, no such adjustment will be made
to an assessee’s total income unless an intimation of the same is given to him either
in writing or in electronic mode. The summary
assessment can be made within a period of 1 year from the close of the financial
year in which the tax return is filed.
Scrutiny assessment is a thorough
assessment wherein an in-depth scrutiny of the income tax return is carried out
to assert the accuracy and genuineness of all claims, deductions, etc., availed
by the assessee in his return. The rationale behind this assessment is to
ensure that the assessee has not understated the income or claimed excessive
losses or underpaid tax to the revenue department in any manner.
If the AO considers it
essential to assure that neither any income has been understated nor any
expenditure has been overstated, he shall, for the purposes of conducting a
scrutiny assessment, serve a notice on the assessee demanding him to attend his
office or to render any evidence in support of the income tax return. Such notice
has to be served within 6 months from the close of the financial year in which
the return is filed. As per
Section 153, the time-limit for completing a scrutiny assessment under Section 143(3)
is 12 months from the end of the AY in which the income was first assessable.
This refers to an
assessment done in accordance with the best judgment of the AO on the basis of
all requisite information procured. Section 144 obligates the AO to carry out a
best judgment assessment in the following circumstances:
For undertaking a best judgment assessment, the AO shall serve a show cause notice on the assessee. However, such notice is not required if a notice under section 142(1) has already been issued to him. As per Section 153, the time-limit for completing an assessment under Section 144 is 12 months from the close of the AY in which the income was first assessable.
Income escaping assessment is one of
those types of assessment in income tax, which is undertaken by the AO if he has
sufficient grounds to believe that any income liable to tax under the Act has
escaped assessment for a particular assessment year. The utter objective
of assessment under Section
147 is to put under the tax purview, any income which has earlier escaped the original
assessment. Original assessment, in this context, means an assessment under Sections
143(1), 143(3), 144 and 147.
Some of the cases of assessment which
fall under Section 147 include the following:
For the purpose of carrying out an
assessment under Section 147, the AO is required to issue a notice under Section
148 to the assessee to offer him an opportunity of being heard. Such notice
under Section 148 can be issued within a period of 4 years from the close of
the relevant assessment year.
As per Section 153, the time-limit for
completing an order of assessment, reassessment or re-computation under Section
147 is 9 months from the end of the financial year in which the notice under Section
148 was served. Furthermore, where the notice under Section 148 is served on or
after 1st April 2019, the time limit for making this assessment is 12
months from the close of the financial year in which the notice under Section
148 is served.
The process of examination of the return
of income by the Income tax department is called “assessment”. Different types
of assessment are undertaken by the AO to ensure that the taxpayers haven’t
hidden any information or underpaid any tax. There are occasions where,
depending upon set parameters by the CBDT, the return of an assessee gets
picked up for an assessment.
Note: AO here refers to Assessing Officer of
the Income tax department.
A CA together with MBA (Fin) and M Com, she relishes taking interest in insightful writing in the domain of taxation and finance. She has gained experience as a full-time author and has also served an accounting role in industry.
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