Different Types of Assessments Under Income Tax Act, 1961

CA AJIT SHAH 16 Sep 2025 1,380 Views 0 comment Print Income Tax | Articles

Summary: Income Tax Act, 1961 provides for different types of assessments to ensure proper computation and collection of tax. Under self-assessment (Sec. 140A), taxpayers compute tax liability after considering advance tax, TDS/TCS, foreign tax reliefs (Secs. 89, 90, 90A, 91), and MAT credits (Secs. 115JAA/115JD). Interest is levied under Secs. 234A and 234B for late filing and shortfall in advance tax, while Sec. 234F prescribes fees for delayed return filing (₹5,000 generally, ₹10,000 for serious delay, capped at ₹1,000 if income ≤ ₹5 lakh). Under regular assessment (Sec. 143), returns may be processed without scrutiny (143(1)), corrected for errors, or examined in detail through scrutiny assessment (143(2)/(3)) where the AO doubts correctness or complexity. In cases of default, non-compliance, or failure to file returns, the AO can proceed with best judgment assessment (Sec. 144), determining income on available material after giving the assessee an opportunity of being heard. Details of these assessments are given here.

Self-assessment: Section 140A & 234F

When an assesses is submit his return of income under section 139 or section 142 or section 148 or section 153A, as the case may be, after taking in to account the following details:

The amount of tax already paid under any provision of the Income tax Act.;
Any tax deducted or collected at source;
Any relief of tax claimed u/s 89;
Any relief of tax or deduction of tax claimed u/s 90 or 91 on account of tax paid in a country outside India;
Any relief of tax claimed u/s 90A on account of tax paid in any specified territory outside referred to in that section;
Any tax credit claimed to be setoff in accordance with the provisions of section 115JA OR SECTION115jd; and
e.f. 1^st April, 2020, any tax or interest payable according to the provisions of section 191(2).

For the purpose of computing the interest payable u/s 140 A(1).-

(1) interest u/s 234A is to be computed on the amount of the tax on the total income as declared in the return as reduced by the amount of.-

(a) advance tax, if any, paid;

(b) any tax deducted or collected at source;

(d) any relief of tax or deduction of tax claimed u/s 90 & 91

On account of tax paid in a country outside India;

(e) any relief of tax claimed u/s 90A on account of tax paid in any specified territory outside India; and

(f) any tax credit claimed to be setoff in accordance with the provisions of section 115JAA or section 115JD.

(2) interest u/s 234B is to be computed on an amount equal to the ‘assessed tax’ or, as the case may be, on the amount by which advance tax paid falls short of the ‘assessed tax’. ‘Assessed tax for this purpose, means the tax on total income as deducted in the return as reduced by the amount of,-

(a) tax deducted or collected at source, in accordance with provisions of Chapter XVII, on any income which is subject to deduction or collection and which is taken in account in computing such total income;

(b) any relief of tax claimed u/s 89;

(d) any relief of tax claimed u/s90A on account of tax paid in any specified territory outside India referred to in that section; or

(e) any tax credit claimed to be setoff in accordance with the provisions of section 115JAA or section 115JD.

Section 234F: Fee for default in furnishing return of income.

This section was inserted by the Finance Act, 2017, with effect from 1^st April, 2018 and substituted by the Finance Act, 2021, provides that where a person required to furnish a return of income u/s 139, fails to do so within time prescribed u/s 139(1), he shall pay by way of fee, a sum of:

(1) Rs. 5,000 in relation to assessment year 2021-22 and subsequent years;

(2) (a) Rs. 5,000 if the return is furnished on or before the 31^st December of the assessment year; and

(b) Rs.10,000 in any other case in relation to assessment years 2018-19 to 2020-21.

However, if the total income of the person does not exceed Rs.5,00,000 the fee payable will not exceed Rs.1,000.

Regular Assessment: Section 143.

Acceptance of Return without calling the Assesse. Sec. 143(1):

This section provides that where a return has been filed u/s. 139 or in response to a notice u/s 142(1), such return shall be processed in the manner discussed hereunder:

The income shown in the return has been accepted without any addition or deduction.
If an officer has find any arithmetical error in the return, he can correct it.
Any incorrect claim, apparent from any information in the return.
Disallowance of loss claimed, if return of the previous year for which setoff of loss is claimed was furnished beyond the due date specified u/s 139(1).
Disallowance of expenditure or increase in income, indicated in the audit report, but not taken in to account in computing the total income in return.
Addition of income appearing in Form 26AS or Form 16A which has not been included in computing the total income in the return.

Assessment after hearing the assesse: 143(2)/(3):

If the Assessing Officer, having regard to the nature and complexity of accounts, volume of the accounts, doubts about correctness of the accounts, multicity of transactions in the accounts or specialized nature of business activity of the assesse and the interest of the revenue, the A.O. may direct the assesse, after obtaining previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

Best Judgment Assessment: Section 144:

Best Judgment assessment or an ex parte assessment, is made under the following circumstances:

Failure to file return of income u/s 139(1) or 139(4) or 139(5) or 139(8A); or
Failure to comply with all the terms of a notice issued u/s 142(1); or failure to comply with directions issued under section 142(2A); or
Having filed the return of income, the assesse fails to comply with the terms of a notice issued u/s 143(2).
The Assessing Officer, after taking into account all relevant material and after giving an opportunity to assesse of being heard, and if assesse do not response, will make the assessment to the best of his judgment and determine the income.