BEST JUDGEMENT
ASSESSMENT
BY: SRINIVAS K
What Best Judgement Assessment(BJA)
• A best judgement assessment is an income tax assessment which is performed by the assessing
officer with limited knowledge about the. financial circumstances of the assessee.
• Assessees may fail to give the assessing officer adequate co-operation regarding the assessment
procedure. In such circumstances, the assessing officer proceeds with the assessment based on the
information available.
• Best judgement assessment takes place when the Income Tax officer is forced to perform the
assessment with the available knowledge and resources. The present article provides an overview of
the concept of best judgement assessment.
Best judgment assessment is carried out where:
o Return of income is not filed within due date
o No cooperation by the taxpayer in furnishing information/explanation related to his tax assessment
o Books of accounts of taxpayer are not reliable or are incomplete
Types of Best Judgement Assessment
1. Compulsory Best Judgement Assessment:
Best judgement assessment is performed when the assessee is
not co-operating with the assessing officer or withholds
necessary information.
2. Discretionary Best Judgement Assessment:
This is performed if the assessing officer feels any inconsistency
in the method of accounting or feels the account was not
conclusive or doubts its authenticity.
Scope of BJA – Sec 144
As per Sec 144, the AO 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 Sec 139(1) and
• File a return under 139(4) or
• File a return under 139(5), or
• If the taxpayer fails to comply with all the terms of a notice issued under Sec 142(1)-notice to file
return
• If the taxpayer fails to comply with the directions issued under Sec 142(2A) - Special Audit.
• If after filing the return of income the taxpayer fails to comply with all the terms of a notice issued
under Sec 143(2)-notice of scrutiny assessment.
Objective and Procedure of BJA
• The object of the Best Judgment is to arrive at a proper estimate of the
turnover of an assesee. The best judgment does not refer to
enhancement in turnover. The assessee is provided with sufficient
opportunity to explain his case which is sought to make an assessment
order. In cases where the AO receives information about individual who
is being assessed, he must disclose the source of such information to
the assessee. The assessee is entitled to summon such a witness for
cross examining him for revealing falsehood.
• When the returns and the books of account are rejected, the AO
makes an estimate which is related to some evidence. However such
estimate is not based on mere suspicion. The AO must make what he
honestly believes to be a fair estimate taking into consideration all
materials appearing before him, including the assessee’s circumstances
which will assist him in arriving at a fair estimate.
Basis of Sections for BJA
• Sec 139(1): Filing of Return of Income within specified due date.
• Sec 139(4): Belated Return-to be filed before end of AY or completion of
assessment whichever is earlier.
• Sec 139(5): Revised Return - Above mentioned returns can be revised before end of
AY or completion of assessment whichever is earlier
• Sec 142(1): Notice can be issued to assessee to file return of income or produce
documents or furnish specified details, after acquiring approval of Joint
Commissioner
• Sec 142(2a): AO, after giving an opportunity of being heard, will direct the taxpayer,
having regard to complexity, doubt, volume, to get its accounts audited from a CA
nominated by the PCCIT or CCIT or PCIT or CIT and to furnish a report of such audit
in the prescribed form
• Sec 143(2): Notice for carrying out scrutiny assessment - it must be served to the
assessee within 6 months from the end of the FY in which the return was made
CONCLUSION
A general understanding of the procedure shows that the best judgment
assessment procedure has given wide discretionary powers to the assessing
authority to assess in the instances where there has been willful suppression
and concealment of income and turnover by the assessee. The power so
provided is wide to the extent that the AO has the authority to assume from the
documents so present as to provide an assessment with an increased or a
decreased turnover based on the documents so provided. Even though the
assumption may be guesswork it has a valid justification that all the turnover so
recorded in order to correctly assume the turnover and thereby the returns in
case of an attempt to intentionally conceal the tax payable by not displaying in
the books of accounts and the other official documents.
Tax assessment being a difficult area of work it is but imperative that the
assessing authority should be provided with adequate powers for encountering
tax evaders. The assessing officers in this respect have been given wide powers
in that regard. It also aids in honest tax disclosures so as to avoid the rising
concerns of tax evasion which had panicked the economy of the country
thereby giving rise to a parallel unaccounted economy.
THANK
YOU
