CA Abhijit Sawarkar

CA Abhijit SawarkarIncome tax assessment is estimation for an amount assessed while paying Income Tax by assessee himself or by income tax officer. Following types of assessment are carried out under Income tax act. We will discuss each type of assessment in detailed in this article.

  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.  Income escaping assessment u/s 147.
  7. Assessment in case of search u/s 153A

For making assessment under these various provisions of the act, some compliance is mandatory to assessing officer:

Particulars Mandatory Requirements
Self assessment u/s 140A.
Scrutiny assessment u/s 143(3). Section 143(2) Notice
Best judgment assessment u/s 144. Show cause notice u/s 144
Protective Assessment
Income escaping assessment u/s 147. Section 148 Notice
Assessment in case of search u/s 153A Section 153A

 Self Assessment u/s 140A

Before submitting returns assessee is supposed to find whether he is liable for any tax or interest. For this purpose this section has been introduced in Income tax act.

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:

  1. Advance tax Paid, if any
  2. TDS/TCS
  3. Relief under section 90, 91 & 90A
  4. MAT credit under 115JAA or 115JD

Then assessee shall pay tax & interest before furnishing return and proof of such payment will be accompanied with return of income.

Self assessment calculation Summary:

  Particulars Amount
Income tax + Edu. Cess +Surcharge if any Xxx
Add Interest u/s 234A, 234B, 234C Xxx
Less TDS/TCS Xxx
Less Advance tax Paid, if any Xxx
Less Relief under section 90, 91 & 90A Xxx
Less MAT credit under 115JAA or 115JD Xxx
  Amount Payable by way of Self Assessment u/s 140A xxx

 If any amount is payable under section 140A then amount so paid shall be adjusted against interest payable first and then balance amount to be adjusted toward tax payable.

Summary Assessment u/s 143(1)

“Summary Assessment”, it is not an actual assessment. Under this section, the Return of Income filed by assessee will not be scrutinized, however whatever, is claimed by assessee in his ROI will be accepted by assessing officer after only confirming arithmetical accuracy.

1. the total income or loss shall be computed after making the following adjustments, namely:—

(i)         any arithmetical error in the return; or

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(ii)       an incorrect claim, if such incorrect claim is apparent from any information in the return;

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, 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;

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

5. the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee:

Scrutiny assessment u/s 143(3).

 Scrutiny assessments are popularly known as regular assessment.

On the day specified in the notice of sub-section (2), or as soon afterwards as may be, after hearing such evidence and after taking into account such particulars as the assessee may produce, the Assessing Officer shall, by an order in writing, allow or reject the claim or claims specified in such notice and make an assessment determining the total income or loss accordingly, and determine the sum payable by the assessee on the basis of such assessment.

What if Analysis of Section 143(2) and 143(3)?

What if – Answer
What if assessee has not filed Return of Income? Notice under section 143(2) can not issue therefore assessment under 143(3) not possible.
What if notice under section 143(2) not issued? Assessment is Void
Assessment carried out after 6 month of servicing notice Assessment is Void
What if, Assessing officer reduce income below returned income? Yes AO can reduced below returned income, as per CBDT clarification
What if assessee claims certain deduction through letter to Assessing officer during assessment? No request will be entertain unless return has been revised

 Best judgment assessment u/s 144.

If any person—

(a)               fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or

(b)               fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section], or

(c)                having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143,

Then Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment.

Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment :

it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section 144.

What if Analysis of Section 144 –

What if – Answer
What if Assessing Officer has not provided opportunity of being heard by servicing notice? Assessment is Void
What if Assessing Officer has not provided opportunity of being heard by servicing notice but notice under 142(1) (i) is already issued? Assessment is Valid
What if, Assessing officer (AO) reduces income below returned income? AO can not reduce income.
What if, assessment is done in an arbitrary manner? Assessment is Void. Assessment should be based on material which AO collects.
What if, assessment carried out after 2 years of completion of assessment year Assessment is Void

 Protective Assessment.

There appears to be no provision in the Act providing for the manner in which a protective assessment has to be done. But traditionally wherever the department has been in doubt on ac­count of a pending litigation as to how exactly an assessment had been framed against the assessee, the Assessing Officer has been making an assessment in a manner in which he thought the assess­ment should be done and apprehending that such assessment may be set aside in the pending litigation, he would make another as­sessment as per the stand of the assessee for the purpose of protecting the interest of the revenue. There is no provision anywhere in the Act stipulating that such protective assessment has also to be made along with the original assessment – Bhatia Motor Stores  v. CIT [2006] 152 Taxman 89 (MP). Certain case laws based on protective assessments are Supreme Court in Lalji Haridas v. ITO, (43 ITR 387) also G. Topi Saheb vs Commissioner of Income-Tax (170 ITR 181 AP).

We will discuss Income escaping assessment u/s 147 & Assessment in case of search u/s 153A in details in second part of this article. You can send any queries on this article in comment column or mail me at abhijit.sawarkar@gmail.com.

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One response to “Income tax Assessment Procedure in Nutshell – PART I”

  1. sumit gupta says:

    Please send me the second article on mail sumitaarushi@gmail.com and this article is precise and a good one. Thanks & regards.

  2. krupalisoni says:

    Can u send me the second article on mail krupalisoni1411@gmail.com

  3. saroop singh says:

    Can u send me the second article on mail @ saroop27cool@gmail.com

  4. Golam Massum says:

    Very good article. thanks

  5. Sandeep Marne says:

    self assessment can be refundable ?

  6. nishu says:

    Thank u so much sir…..plz tell me me abut custom duty

  7. Pawan Gupta says:

    Thanks for writing the procedure for income tax assessment part 1 pls send us part two also. Basically I am I tax line only but in indirect tax now person from direct tax left the organisation and my selfie is looking after both so it helps me lot.
    Thanks

  8. nandlal says:

    please send me the procedure & format of calculating tax for the year 2014-15

  9. nandlal says:

    please send me the procedure & format of calculating income tax deduction for the year 2014-15

  10. naveen says:

    learned a lot

  11. Tekumalla Venkatappaiah says:

    Assessments in the case of “Block Assessments” may please be given.

  12. nandlal kumawat says:

    Dear sir plz send me CBDT CLARIFICATION FULL ABOUT REDUESSING RETURN INCOME BY A.O. u/s 143(3)
    Thanks

  13. nandlal kumawat says:

    This is very good articls sir. Plz send me circular no where assessing officer can reduess return income u/s 143(3).
    As mention above what if anlysis.

    Thanks in advance

  14. m.srinivasa rao says:

    i learned a lot from this article, thanking you sir.

  15. Hari C says:

    It is a good article covering different aspects of assessments in a simple language. Welldone.

  16. Archana kumavat says:

    Sir. I am appareing In CA Final Exam And Result of same is not coming. I want to become a tax consultant after becoming CA But unfortunatly in article ship i dont get such knowledge as necessary So I want to know How I will Do Work So that I wii get good expertise in income tax field .
    SEnd Me Your Reply.

  17. C A K C AGARWAL says:

    C A ABHIJEET HAS DONE A WORK, WHICH IS SUPER. I CONGRATULAT HIM, such type of articles always help the common person and proffessional also

    C A K C AGARWAL, ALLD

  18. Mk Sahu says:

    Thanks Abhijit

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