This article is covering in depth knowledge of various types of Jurisdictions, Various types of Assessments under Income Tax Act, 1961 and details of new system i.e. Jurisdiction-Free Assessment which was introduced from 2016.

Jurisdiction is prescribed under Section 124 of the Income-tax Act, 1961 and assessment includes Summary assessment under section 143(1), Scrutiny assessment under section 143(3), Best judgment assessment under section 144, Income escaping assessment under section 147 and Assessment in case of search or requisition under section 153A.

A. Jurisdiction

Jurisdiction means power or legal authority. The word jurisdiction is derived from Latin terms Juris and dicto which means I speak by the law. Jurisdiction generally describes any authority over a certain area or certain persons.

It is an authority granted to a formally constituted legal body to deal with and make pronouncements on legal matters.

1. Jurisdiction under Income Tax Act, 1961

Section 124 of the Income-tax Act, 1961, reads “where the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he would have jurisdiction in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situated within the area. “

The Assessing Officer is the authority, who initiates the assessment, receives returns from assessees within his jurisdiction and makes an assessment under Chapter 14.

At any given point of time, only one Assessing Officer can have regular jurisdiction over an assessee and on transfer, only the officer to whom the files are transferred can make assessments.

2. Jurisdiction – Not a matter of Choice

Jurisdiction is not a matter of choice of either the Assessing Officer or the assessee. Assessee cannot be given the discretion to choose his officer. (B R Industries Ltd. V. CIT – 255 ITR 593) 

3. Concurrent Jurisdiction – Permissible

There can be a concurrent jurisdiction with reference to different functions with more than one officer for the same assessee. For Instance, Assistant Commissioner (TDS) has the power to call for records and authorize survey. (Reckitt Colman of India Ltd. V. ACIT (TDS) 252 ITR 550) 

4. Objection to Jurisdiction

Issues relating jurisdiction are fundamental to the validity of an assessment order, it can be raised by the assessee before the Assessing Officer and before the expiry of the prescribed time. However, the Objection cannot be raised for the first time in appeal against the assessment after the assessment has been made.

5. Assignment of Jurisdiction

Jurisdiction may be assigned by Commissioners of Income Tax to Assessing Officers with reference to specified areas, persons or class of persons or income or classes of incomes. [(Section 124(1)] 

B. Assessment

Every taxpayer has to furnish the details of his income by filing his return of Income to the Income-tax Department. The Department examines the return of income for its correctness. The process of examining the return of income is called as “Assessment”. The assessment also includes re-assessment and best judgment assessment under section 144.

Even though assessment is an important step, the term has not been defined in the Income Tax Act, 1961.

Under the Income-tax law, there are five major types of assessments as mentioned below:

1. Summary assessment under section 143(1)

This is a preliminary assessment, without calling the assessee (i.e., taxpayer).

2. Scrutiny assessment under section 143(3)

This is a detailed assessment. At this stage, a detailed scrutiny of the return of income will be carried out. At this stage, a scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc.

3. Best judgment assessment under section 144

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.

4. Income escaping assessment under section 147

This assessment is carried out if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.

5. Assessment in case of search or requisition under section 153A

This assessment is carried out only in the case of a person where a search is initiated under Section 132 or books of account or any other documents are requisitioned under Section 132A. 

C. Jurisdiction – Free Assessment: The New Approach

Come October 1st, the Income Tax Department, all set to launch a new assessment system “Jurisdiction-Free Assessment” where system envisages allocation of a particular taxpayer’s profile to any officer across the country via special software.

New Approach – In Brief

The new system would do away with the Assessing Officers’ discretionary powers to call for additional documents, records, and most importantly, ask the taxpayer to appear in person.

  1. To minimize interaction between the taxpayer and the tax officer;
  1. To curb corrupt practice in the Department;
  1. To ensure a transparent and no-harassment culture;
  1. To deal with all kinds of tax-related matters such as filing of returns scrutiny etc.
  1. The identities of the taxpayer and his assessing officer will be kept as confidential.

The e-assessment system was introduced in 2016 on a pilot basis in New Delhi and Mumbai. In 2017, it was extended to 102 cities with the objective of reducing the interface between the department and the assessees. It is expected that the same will dissolve the 18 assessment zones which account for all direct tax collection in coming days.

To implement the new system, an amendment is required to Section 143 of the Income Tax Act, 1961, hence, the said Amendment. By implementing e-assessment proceedings, no doubt, India is moving towards borderless compliance within the country.

Reference:

1. Kanga & Palkhivala’s The Tax and Practice of Income Tax, Tenth Edition

2. Sampath Iyengar’s Law of Income Tax, Twelfth Edition

3. Media Reports

The Author is a budding Tax Law Professional & can be reached at shreetaxchambers@bsnl.in

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