What is assessment under the income tax act, 1961, and How many types of it are there?
Every taxpayer has to furnish the details of his income to the Income-tax Department. These details are to be furnished by filing up his return of income. Once the return of income is filed by the taxpayer, the next step is processing the income return by the Income Tax Department. The Income Tax Department examines the return of income for its correctness. The process of examining the return of income by the Income Tax department is called “Assessment”.
Under the Income-tax Law, there are five types of assessments given below:
|No||Assessment u/s||Type of assessment|
|2||143 (1)||Intimation/Summary Assessment/Refund Order or Demand Order|
|3||143 (3)||Limited Scrutiny Assessment/Regular Assessment|
|4||147||Re-assessment/Income escaping assessment/Recomputation|
Assessment under section 140A | Self-Assessment
The assessee himself determines the income tax payable while filing the return of income. Before filing the return of income assessee is supposed to find whether he is liable to pay any tax, for this purpose this section has been introduced in the income tax act. This process is generally known as self-assessment.
Assessment under section 143(1) | Intimation/Summary Assessment/Refund Order or Demand Order
This is a preliminary assessment and is referred to as a summary assessment without calling the assessee. Assessment under section 143(1) is like preliminary checking of the return of income. At this stage, no detailed scrutiny of the return of income is carried out. At this stage, the total income or loss is computed after making the following adjustments (if any), namely: –
|1||Any arithmetical error in the return|
|2||An incorrect claim|
|3||Disallowance of loss claimed if the return of the previous year was furnished beyond the due date specified under section 139(1)|
|4||Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return|
|5||Disallowance of deduction claimed u/s 10AA (Special provisions in respect of newly established Units in Special Economic Zones), 80IA (Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.) to 80-IE (Special provisions in respect of certain undertakings in the North-Eastern States) if the return is furnished beyond the due date specified under section 139(1)|
|6||Addition of income appearing in Form 26AS or Form 16A (form for other than salaried person) or Form 16 (form for salaried person) or Form 16B (Tax deducted on purchase of property) or Form 16C (Payment of rent u/s 194 IB) which has not been included in computing the total income in the return.|
Assessment under section 143(3) | Limited Scrutiny Assessment/Regular Assessment
This is a detailed assessment and is referred to as a scrutiny assessment. At this stage, detailed scrutiny of the return of income will be carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income. The objective of scrutiny assessment is to confirm that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. To confirm the above, the Assessing Officer carries out detailed scrutiny of the return of income and will satisfy himself regarding various claims, deductions, etc., made by the taxpayer in the return of income. To carry out an assessment under section 143(3), the Assessing Officer shall serve such notice in accordance with provisions of section 143(2).
In a case where the return of income is not filed by the taxpayer, then notice under section 142 (1) is issued by the assessing officer for filing the return of income after the time allowed under sub-section (1) of section 139 for filing the return has expired, but the return of income is already filed by the taxpayer then the assessing officer directly issued a notice under section 143 (2) to carry out an assessment under section 143(3).
Assessment under section 144 | Best Judgement Assessment
This is an assessment carried out as per the best judgment of the Assessing Officer on the basis of all relevant material he has gathered. This assessment is carried out in cases where the taxpayer fails to comply with the requirements specified in section 144.
As per section 144, the Assessing Officer is under an obligation to make an assessment to the best of his judgment in the following cases.
If the taxpayer fails to file the return required within the due date prescribed under section 139(1) or a belated return under section 139(4) or a revised return under section 139(5), or an updated return under section 139(8A). If the taxpayer fails to comply with all the terms of a notice issued under section 142(1).
The Assessing Officer can issue the notice under section 142(1) asking the taxpayer to file the return of income if he has not filed the return of income or to produce or cause to be produced such accounts or documents as he may require and to furnish in writing and verified in the prescribed manner information in such form.
If the taxpayer fails to comply with the directions issued under section 142(2A). Section 142(2A) deals with special audits. As per section 142(2A), if the conditions justifying a special audit as given in section 142(2A) are satisfied, then the Assessing Officer will direct the taxpayer to get his accounts audited by a chartered accountant nominated by the principal chief commissioner or Chief Commissioner or Principal Commissioner or Commissioner and to furnish a report of such audit in the prescribed form.
If the conditions given above calling for best judgment are satisfied, then the Assessing Officer will serve a notice on the taxpayer to show cause why the assessment should not be completed to the best of his judgment. No notice as given above is required in a case where a notice under section 142(1) has been issued prior to the making of an assessment under section 144. If the Assessing Officer is not satisfied by the arguments of the taxpayer and he has reason to believe that the case demands the best judgment, then he will proceed to carry out the assessment to the best of his knowledge.
Section 144 assessment has to be completed within 9 months from the end of the assessment year in which income was first assessable. If reference is made to TPO, the period available for assessment shall be extended by 12 months. If the return has been furnished under section 139(8A), the order of assessment shall be passed within 9 months from the end of the financial year in which such return was furnished.
Assessment under section 147 | Re-assessment/Income escaping assessment/Recomputation
If any income of an assessee has escaped assessment for any assessment year, the Assessing Officer may, subject to the new provisions of sections 148 to 153, assess or reassess such income and also any other income which has escaped assessment and which comes to his notice subsequently in the course of the proceedings, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the such assessment year.
The Assessing Officer shall serve on the assessee a notice under Section 148 along with a copy of the order passed under clause (d) of section 148A, requiring him to furnish within return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year.
Notice is required to be issued only when information with the Assessing officer suggests that the income chargeable to tax has escaped assessment. Prior approval of specified authority is also required before issuing such notice by the Assessing Officer. However, no such prior approval is required if the Assessing Officer has passed an order under Section 148A(d) with prior approval of the specified authority stating that the income is escaping assessment.
Search and Seizure under section 132 and Powers to requisition books of account, etc. under section 132A is also covered under Assessment under section 147 | Re-assessment/Income escaping assessment/Recomputation, which is discussed below:
Search and Seizure are conducted by the Income Tax Department, also called raids, when they suspect any person is in possession of illegal money in any form. Let’s understand in detail about Income Tax Raids.
As per section 132 (1), the authorised officer has reason to believe that,
|Then the authorised officer to|
|1.Taxpayer has failed to produce such books of account or other documents as required by the summons or notices
2. Taxpayer is in possession of any money, bullion, jewellery or other valuable article or thing and all are not disclosed in the return of income
|1. Enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept.
2. Break open the lock of any door, box, locker, safe, almirah or other receptacles where the keys thereof are not available.
3. Carry out a personal search of a person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing.
4. Require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record, to afford the authorised officer the necessary facility to inspect such books of account or other documents.
5. Seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search.
6. Place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom.
7. Make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing.
The department cannot be seized the following type of assets:
1. Stock-in-trade of a business
2. Assets declared in the books of accounts and the return of income
3. Cash which is duly explained
4. Jewellery provided in wealth tax return
5. Jewellery (Gold and Silver and articles thereof) up to 500 gm for each married female and 250 gm for each unmarried female and 100 gm per male member as per Instruction No. 1916 dated 11.05.1994 by the CBDT. (Here, jewellery means, jewellery which is not disclosed in the return of income)
Provided that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of a such authorised officer.
The authorised officer may requisition the services of any police officer or of any officer of the Central Government.
The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during the such examination may thereafter be used in evidence.
Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed that
1. Such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person
2. The contents of such books of account and other documents are true
The books of account or other documents seized, shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment or reassessment or recomputation under sub-section (3) of section 143 or section 144 or section 147 or section 153A or clause (c) of section 158BC unless he records the reasons for retaining the same in writing and the approval authorised officer.
The person from whose custody any books of account or other documents are seized under sub-section (1) or sub-section (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.
Powers to requisition books of account, etc. under section 132A
The authorised officer has the power to requisition books of account, etc. If authorised officer, in consequence of information in his possession, has reason to believe that
1. The taxpayer has failed to produce such books of account or other documents as required by the summons or notices
2. The taxpayer is in possession of any money, bullion, jewellery or other valuable article or thing and all are not disclosed in the return of income
Then books of account or other documents have been taken into custody by any officer or authority under any other law for the time being in force.
Faceless Assessment under section 144B
Faceless assessment means the assessment proceedings are conducted electronically in the “e-proceeding” facility through the assessee’s registered account in the designated portal. Designated portal means the web portal designated as such by the Principal Chief Commissioner or Principal Director General, in charge of the National Faceless Assessment Centre. The CBDT had issued the instructions, guidelines, and notice formats for conducting scrutiny assessments electronically.
The provision provides that the assessment, re-assessment or re-computation under Section 143(3), Section 144, or Section 147 shall be made in a faceless manner in respect of the specified territorial areas, persons, income or class of cases.
For the purpose of faceless assessment, the CBDT is empowered to set up the following centres and units by specifying their respective jurisdiction:
|Centres and Units||Work compliances|
|National Faceless Assessment Centre (NFAC)||The purpose of this centre is to facilitate the conduct of faceless assessment proceedings in a centralized manner.|
|Assessment Units (AU)||It shall perform the function of making the assessment, which includes identification of points or issuing material for the determination of any liability (including refund) under the Act, seeking information or clarification on points or issues so identified, analysis of the material furnished by the assessee or any other person, and such other functions as may be required for making the faceless assessment.|
|Verification Units (VU)||It shall perform the function of verification, which includes inquiry, cross verification, examination of books of accounts, examination of witnesses and recording of statements, and such other functions as may be required for the purposes of verification.|
|Technical Units (TU)||It shall perform the function of providing technical assistance, which includes any assistance or advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management, any other technical matter or an agreement entered into under Section 90 or Section 90A which may be required in a particular case or a class of cases, under this section.|
|Review Units (RU)||It shall perform the function of the review of the Income Determination Proposal, which includes checking the following:
1. Whether the relevant and material evidence has been brought on record;
2. Whether the relevant points of fact and law have been duly incorporated in the proposal;
3. Whether the issues requiring addition or disallowance have been incorporated in the proposal;
4. Arithmetical correctness of modifications proposed if any;
5. Any other functions required for the purposes of review.
The time limit for issuance of notice and completion of the assessment
|Assessment under section||Notice issued or served under section||Notice issued or served||The time limit for a notice issued or served||The time limit for completion of assessment (Time limit for passing assessment order)|
|143 (1) – Intimation||143 (1)||Issued (Generally served, in a case where income tax needs to be payable)||Issued/Served within a period of 9 months from the end of the financial year in which the return is filed.||Within 9 months from the end of the assessment year in which income was first assessable.
If the return has been furnished under section 139(8A)[updated return], the order of assessment shall be passed within 9 months from the end of the financial year in which such return was furnished.
|143 (3) – Scrutiny Assessment||143 (2)||Served||Served within a period of 3 months from the end of the financial year in which the return is filed.|
|144 – Best judgement assessment||144||Not applicable||No time limit is specifically provided because where notice is issued under section 142 (1) for filing a return of income and under section 143 (3) for scrutiny assessment and no reply given by assessee to the assessing officer then notice under section 144 is issued.|
|147 – Income escaping assessment||148||Served||If the escaped assessment amounts to
1. Less than Rs. 50,00,000, then Within 3 years from the end of the relevant assessment year
2. 50,00,000.00 or more, then Within 10 years from the end of the relevant assessment year
No time limit when an order passed.
1. by the authority in any proceeding under Income-tax Act in appeal/reference/revision
2. by a court in any proceeding under any other law
|Within 12 months from the end of the financial year in which the notice under section 148 was served.|
|144B – Faceless assessment||Assessment under sections 143(3), 144, or 147 shall be made in a faceless manner and all the provisions applied to physical assessment will also remain the same in a faceless assessment. So, it is observed that faceless assessment means assessment under sections 143(3), 144 or 147 in a non-physical mode.|
In a case where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be shall be extended by twelve months, that means If reference is made to TPO, the period available for assessment shall be extended by 12 months.