Income Tax

Know the Various Types of Income Tax Assessments

An assessee earning beyond the basic exemption limit in a Financial Year is required to file a statement that contains his income details, deductions and other related information. It is called Income Tax Return. Once the return is submitted, the Income Tax Department verifies the accounts and assesses the liability, which is known as Income Tax Assessment. At times, based on certain parameters by the CBDT, the return of an assessee is picked for an assessment. In this article, we shall discuss different types of Income Tax Assessments under the Income Tax Act 1961.

Different types of Income Tax Assessments

Some of the Income Tax Assessments are as follows:

• Self Assessment

Self assessment under section 140A is when the assessee determines the income tax payable on his own. The Income Tax department has provided for different forms to file the ITR. The assessee consolidates his income from different sources and settles it with the losses/deductions/exemptions available to him. The assessee subtracts the TDS and advance tax from the amount to know the tax to be paid on such income. If the tax is still payable by him, it’s called self-assessment and should be paid before filing the return of income.

• Summary Assessment

Summary Assessment under section 143(1) is a kind of assessment done without any human intervention. In this, the details by the assessee in his return is cross-checked with the information that the income tax department has. The department shall verify the correctness of the return. The return is processed online, and in case of any incorrect claims and disallowances, adjustments are automatically done.

Once the adjustments are made, if the assessee is required to pay the tax, he would be sent intimation under Section 143(1). The assessee should respond to the intimation.

• Scrutiny Assessment

Scrutiny Assessment under section 143(3) is the assessment of return filed by the assessee by giving a chance to the assessee to support the income declared and expenses and claims of deductions, exemptions, losses etc., in the return using proof. The committee manages it with single work plan. The committee undertakes specific work and forms informal panel or working groups.

The assessing officer conducts the investigation to know if the assessee has reported his income correctly in the return. The claims for deductions, exemptions, and other benefits should be correct. If there is any omissions, contradictions or errors, the assessing officer will prepare his own assessment for the assessee, taking into account all circumstances related to it.

• Best Judgment Assessment

Best Judgment Assessment under section 144 gets invoked in case where the assessee fails to respond to a notice issued by the income tax department, or if such person fails to comply with the special audit ordered by the income tax authorities or if the assessee fails to file return within the due date or extended time limit or if the assessee fails to comply with the terms as specified in the notice issued under Summary Assessment, the assessing officer shall pass an order based on all relevant materials and evidence. This is best judgment assessment. 

• Income Escaping Assessment

In case where the assessing officer has reasons to believe that any taxable income has escaped assessment, then he can assess or reassess the income of such assessee. The deadline to issue a notice to reopen an assessment is 4 years from the end of relevant assessment year.

Some cases where re-assessments can be triggered:

1. The assessee with taxable income but didn’t file return yet;
2. The assessee, after filing ITR, has either understated his income or claimed excess allowances or deductions;
3. When it was required of the assessee, the assessee fails to provide reports on international transactions.

• Protective Assessment

This is a kind of assessment focusing on those that are made to protect revenue’s interests. However, the income tax law doesn’t have any provision for imposing income tax on anyone apart from the person to whom it is due. It is open to the authorities to undertake protective/alternative assessment in case it is not clear as to who among few persons is liable for tax payment. The authorities make assessment and keep it on the paper until the situation is resolved when they make a protective assessment.

• Assessment in case of search under section 153 A

The assessing officer would do the following in this case:

Giving notice to such person requires providing it within the time period provided in the notice. Clause (b) referred to return of income for each of the 6 assessment years. Furnishing such other details as may be prescribed, and the provisions of the Act will apply as if the return were as return to be furnished under Section 139^[1] to the extent possible;

The assessor re-assesses the income of the 6 assessment years preceding the assessment year relevant to the previous year when such search or requisition is made.

Conclusion

Income tax assessments can be gruelling sometimes therefore, you are required to prepare the income tax return accurately. Not many find it easy to answer the income tax officers hence in such scenario, you should take the help of professionals. All the assessments mentioned above should be taken seriously.

Read our article:Assessment and Reassessment Notice under Section 148 of Income Tax Act