UNIT-5

ASSESSMENT PROCEDURE AND INCOME TAX AUTHORITIES

Due date of Filing Returns

Different Situation Due Date

st
Individual, BOI, HUF, AOP 31 July 2024
Business (Requiring Audit) 31st October 2024
Domestic Companies
Business (Requiring Transfer Pricing Report) 30th November 2024
Revised Return, belated returns 31st December, 2024

Filing of Returns by Different Assessee

Forms Applicability Due Dates Remarks

ITR-1 Individuals 31st July of the For those who are required to get their accounts
(Sahaj), and HUFs Assessment Year audited or those who are required to furnish a
ITR-2, report under Section 92E, the due date is generally
October 31st or November 30th of the assessment
ITR-3, and Firms, 31st July of the year
ITR-4 Individuals Assessment Year
(Sugam) and HUFs
ITR – 5 LLP or Firm October 31st of the
assessment year
/ 30 November
ITR – 6 Companies October 31st of the
assessment year/
30 November
ITR-7 Trusts,
Companies

E-Filing of Returns

E-filing, or electronic filing, of income tax returns in India is a convenient and efficient way
for taxpayers to submit their tax returns online. The process is managed by the Income Tax
Department through its dedicated e-filing portal.

Steps for E-filing Income Tax Returns:

1. Registration:
• First-time users need to register on the Income Tax e-Filing portal
(https://www.incometax.gov.in/).
• Registration requires PAN (Permanent Account Number), which acts as the user
ID.
•
2. Login:
• Log in to the e-Filing portal using your PAN as the User ID and the password you
created during registration.
 3. Download the Appropriate ITR Utility:
• Download the relevant ITR preparation software (Excel or Java utility) based on
the type of return you need to file (like ITR-1, ITR-2, etc.). This is available under
the ‘Downloads’ section of the portal.
• Alternatively, you can choose to fill the return online using the ‘Quick e-file ITR’
link.
4. Prepare and Fill the Return:
• Fill in the required details in the downloaded utility or the online form. This will
include personal information, income details, deductions, taxes paid, etc.
• Validate the information entered and calculate the final tax or refund.
5. Generate and Save the XML:
• If using the utility, after filling out the form, generate an XML file of the return.
6. Upload the Return:
• Go to the ‘e-File’ menu and click ‘Upload Return’ on the e-Filing portal.
• Select the appropriate ITR, Assessment Year, and XML file you saved earlier.
Then, upload it.
7. Verification of the Return:
• After successfully uploading the return, you need to verify it. There are multiple
options for verification:
• Digital Signature Certificate (DSC): If you have a digital signature, you can
sign the return digitally.
• Aadhaar OTP: If your Aadhaar is linked to your PAN, you can use an OTP
sent to your Aadhaar-registered mobile number.
• EVC (Electronic Verification Code): This can be generated through your
bank account, Demat account, or via Net Banking.
• Physically Sending ITR-V: If none of the above options are feasible, you can
send a signed copy of ITR-V (Acknowledgement) to the Income Tax
Department’s CPC office in Bangalore within 120 days of e-filing.

Assessment

Every Person, who is earning, which is chargeable to tax, has to furnish his return of
income to the Income Tax Department. After filling of return of income, the next step is the
processing of income tax return by the Income Tax Department. The income tax department
examines the return of income and specifies any correction, if any.

Meaning of Assessment

The process of examination of the return of the Income Tax Department is called
"Assessment".

Types of Assessment
Under Income Tax Act, 1961, there are four types of assessment as mentioned below:
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 Re-assessment or Income escaping assessment –u/s 147
6. Assessment in case of search –u/s153A

1. Self assessment

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:
i. Advance tax Paid, if any
ii. TDS/TCS
iii. Relief
iv. MAT credit
Then assessee shall pay tax & interest before furnishing return and proof of such payment will
be accompanied with return of income.

2. Summary assessment

Assessment under section 143(1) is like preliminary checking of the return of income. Under
this section, Income tax department sent intimation u/s 143(1) in which comparative Income
Tax computation [i.e. as provided by Tax payer in Return of Income and as computed u/s
143(1)] is sent by Income Tax Department. 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 adjustment (if any), namely-
i. Any arithmetical error in the return,
ii. An incorrect claim, if such incorrect claim is apparent from any information in the return;
iii. Disallowance of loss claimed, if return of the previous year for which set off of
loss is claimed was furnished beyond the due date specified under section 139(1);
iv. Disallowance of expenditure indicated in the audit report but not taken into
account in computing the total income in the return;
v. Disallowance of deduction claimed under section 10AA, 80-IA, 80-IAB, 80-IB, 80-IC,
80-ID, or section 80-IE, if the return is furnished beyond the due date specified under
section 139(1);
vi. Addition of income appearing in form 26AS or form 16A or Form 16 which has
not been included in computing the total income in the return;

Time Limit
Assessment u/s 143(1) can be made within a period of one year from the end of financial year
in which the return of income is filled.
3. Scrutiny Assessment

Scrutiny assessment refer to the examination of a return of income by giving opportunity

to the assessee to substantiate the income declared and the expenses, deduction, losses,
exemptions, etc. claimed in the return with the help of evidence.
During the course of scrutiny, the assessing officer gets opportunity to conduct enquiry as
he deemed fit from the assessee and from third parties. The exercised is aimed at
ascertaining whether the income in the return is correctly shown by the assessee and
whether the claims for deductions, exemptions etc. are factually and legally correct. If any
omission, discrepancies, inaccuracies, etc. comes light to as a result of examination, the
assessing officer makes his own assessment of the assessee’s taxable income after taking
into consideration all the relevant facts. These assessments are made under section 143(3)
of the income tax act.
The case selected for Scrutiny Assessment can be of by two types - i.e. (1) Manual scrutiny
cases and (2) Compulsory Scrutiny cases.

4. Best Judgment Assessment

Section 144 of Income tax act, 1961 speaks about Best Judgment Assessment. In the best
judgment assessment, an assessing officer makes an assessment based on his best
reasoning. Assessee should neither be dishonest in his assessment nor have a vindictive
attitude.

There are two types of Best Judgment Assessment

a. Compulsory best judgment assessment: It is done when assessing officer finds that
there is an act amounting to non co-operation by the assessee or where assessee is found to
be a defaulter in supplying information to the department.
b. Discretionary best judgment assessment: It is done in cases where assessing officer
is dissatisfied with the authenticity of the accounts given by the assessee or where no
regular method of accounting has been followed by the assessee.
The process of Best Judgment Assessment is applied in conformity with the Principle of
Natural justice. As per the provision of Section 144 of the Income Tax Act, 1961, the
Assessing officer is supposed to make an assessment of the income of an assessee to the
best of his Judgment in the following cases:
* If the person fails to make return u/s as required 139(1) and has not made a return or a
revised return under sub-section (4) or (5) of that section; or
* If any person fails to comply with all the terms of a notice under section 142(1) or fails
to comply with the direction requiring him to get his account audited in terms of section
142(2A); or
* If any person after having filed a return fails to comply with all the terms of a notice
under section 143(2) requiring his presence or production of evidence and documents; or
* If the Assessing officer is not satisfied about the correctness or the completeness of
the accounts of assessee or if no method of accounting has been regularly employed by the
assessee. In the case of best judgment assessment, an assessee has a right to file an appeal
u/s 246 or to make an application for revision u/s 264 to the commissioner.

5. Protective assessment

Though there is no provision in the income tax act authorizing the levy of income tax on a
person other than whom the income tax is payable, yet it is open to the authorities to make a
protective or alternative assessment if it is not ascertainable who is really liable to pay the tax
among a few possible persons.

6. Re-Assessment (or) Income escaping assessment

Re-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.
Scope of assessment u/s 147
The objective of carrying out assessment u/s 147 is to bring under the tax net, any income
which has escaped assessment in original assessment. Here, Original assessment means an
assessment u/s 143(1) or 143(3) or 144 and 147 (as the case may be).

7. Assessment in case of search or requisition

Notwithstanding anything contained in section 139, section 147, section 148, section 149,
section 151 and section 153, in the case of a person where a search is initiated under section
132 or books of account, other documents or any assets are requisitioned under section
132A after the 31st day of May, 2003.

PERMANENT ACCOUNT NUMBER (PAN)

Permanent Account Number, commonly known as PAN, is a unique, ten-
character alphanumeric identifier, issued in the form of a laminated card, by the
Indian Income Tax Department under the supervision of the Central Board for
Direct Taxes (CBDT).

Pan Card Contents

PAN card contains various information, which are as follows:,

• Name of the cardholder – Name of the individual, partnership firm, LLP or company.

• Name of the father of the cardholder – Applicable for only individual cardholders.
The father’s or mother’s name (in case of single parent) will be printed.

• Date of birth – The cardholder’s date of birth in the case of an individual or the date of
registration in the case of a company or firm.

• PAN Number – It is a 10-digit alpha-numeric number. Each character represents

information about the cardholder.
• Signature – Applicable for only individual cardholders. PAN card also acts as proof of
the individual’s signature required for financial transactions.

• Photograph of the individual – PAN acts as a photo identity proof of the individual. In
the case of companies and firms, no photograph is present on the card

Historical Background and Purpose

Introduced in 1972 under the Indian Income Tax Act of 1961, PAN was initially a
voluntary system of identification for high-net-worth individuals to help the government track
their financial transactions. However, as the Indian economy evolved and the need for better
tax administration grew, PAN became a mandatory requirement for a broader segment of the
population.

The primary purpose of PAN is to use a universal identification key to track financial
transactions that might have a taxable component to prevent tax evasion. It serves as an
important identity proof and is now a necessity for various financial transactions and for the
filing of Income Tax Returns.

Structure of PAN
The PAN is a ten-character string, where each character has a specific meaning. It is structured
as follows:

1. First Five Characters:

• The first three characters are a sequence of alphabetic series running from AAA to
ZZZ.

• The fourth character represents the status of the PAN holder.

• For instance, ‘P’ stands for Individual, ‘F’ for Firm, ‘C’ for Company, ‘H’ for HUF
(Hindu Undivided Family), ‘A’ for AOP (Association of Persons), ‘T’ for Trust, etc.

• The fifth character is the first character of the PAN holder’s last name/surname.

2. Next Four Characters: These are sequential numbers running from 0001 to 9999.

3. Last Character: This is an alphabetic check digit.

Importance of PAN:
• Taxation
• Identity Proof
• Financial Transactions
• Compliance
• Prevention of Financial Fraud

Procedure for obtaining PAN

1. Choose Application Type:

Form 49A: For Indian citizens.
Form 49AA: For foreign nationals.
2. Online Application:
Visit the official portals of NSDL (https://www.tin-nsdl.com/) or UTIITSL
(https://www.utiitsl.com/), or https://www.incometaxindia.gov.in/ which are authorized by the
Income Tax Department. Select the ‘Application for PAN’ option and choose the relevant form
(49A or 49AA). Fill in the form with details like name, date of birth, address, contact details,
etc.
3. Document Submission:
Submit the required documents, which typically include proof of identity, address, and date of
birth. These can be Aadhaar card, passport, voter ID card, driving license, etc. For online
applications, these documents can be uploaded digitally.
4. Payment of Fees:
Pay the application fee, which varies depending on whether the communication address is
within India or outside India.Payment can be made via credit/debit card, net banking, or
demand draft
5. Acknowledgment:
On successful payment, an acknowledgment slip is generated. Keep this slip for future
reference.
Physical Documents (if required):
In some cases, you might need to send physical documents to the NSDL/UTIITSL office. If
so, the acknowledgment, along with the documents, should be sent within 15 days of the online
application.
6. Processing and PAN Card Dispatch:
Once the application and documents are verified, the PAN is processed and dispatched to the
address provided.
Transactions where Quoting of PAN is Compulsory

The Government of India has made it mandatory to quote the PAN for certain transactions to
prevent tax evasion and track high-value transactions. Some of these transactions include:

• Opening of Bank Accounts: PAN is required for opening a new bank account, whether
it’s a savings account, current account, or fixed deposit account.
• Sale or Purchase of Motor Vehicles: Required for transactions involving the sale or
purchase of a vehicle other than two-wheelers.
• Property Transactions: Mandatory for sale or purchase of immovable property valued at
₹10 lakh or more.
• Deposits with Banks and Post Offices: Required for deposits totaling ₹50,000 or more in
a day with a bank or post office.
• Foreign Travel: Mandatory for payment of ₹50,000 or more for foreign travel, including
fare and payment to forex dealers.
• Securities Transactions: Required for opening a Demat account, purchasing bonds,
debentures, or shares of a company amounting to ₹1 lakh or more per transaction.
• Credit or Debit Cards: PAN is needed for applying for a credit or debit card.
• Mutual Fund Investments: Required for investing ₹50,000 or more in mutual funds.
• Insurance Payments: Mandatory for payments of ₹50,000 or more in a year towards life
insurance premiums.
• Fixed Deposits: Required for making fixed deposits exceeding ₹50,000 with a financial
institution.
• Cash Payments: Required for cash payments exceeding ₹2 lakh for goods and services.

PAN

2.0
INCOME TAX AUTHORITIES AND DUTIES

Income tax or the tax taken by the government on an individual on his earnings is income
tax. The government has set up various authorities for lawful execution of the income Tax
Act and to oversee the righteous functioning of the income tax department.

The various income tax authorities for the purposeful existence of the Act are :

1. CBDT or the Central Board of Direct Taxes which has been constituted under the
Central Board of Revenue Act 1963
2. Director general of income tax
3. Chief commissioner of income tax
4. Directors and commissioner of income tax
5. Additional directors and additional commissioners of income tax
6. Joint directors and joint commissioners of income tax
7. Deputy directors and deputy commissioners of income tax
8. Assistant directors and assistant commissioners of income tax
9. Income tax officers
10. Income tax inspectors

It is a joint role of all these authorities that tax payer abide by the rule mentioned in
the beginning of every financial year and pay their taxes accordingly.

The supreme body with reference to the direct tax setup in India is the Central Board
of Direct Taxes (CBDT) it is created under Central Boards of Revenue Act, 1963 it works
under the Ministry of Finance. This board comprises a leading Chairperson and a body of
6 members.

POWERS AND DUTIES OF INCOME TAX AUTHORITIES

1. Powers of CBDT
• To make rules for carrying out the objectives of IT Act.
• To issue orders ad instructions to subordinate authorities for proper administration of
IT Act.
• To authorize and IT authority to accept application of claims for any exemption,
deductions, refund or any other relief after the expiry of the prescribed period
• To declare any institution, association or body to be a company
• To exercise control over IT authorities
• To decide jurisdiction of IT authorities
• To declare a company having no share capital, to be a widely held company
• To empower authorities with the power of search

2. Commissioner of Income Tax (CIT)

He is vested with the following powers:
• To review the order of the assessing officer
• To set-off refund against arrears of tax
• To appoint an IT authority below the rank of an assistant commissioner or deputy
commissioner
• To authorize joint commissioner to exercise the powers of an assessing officer
 • To transfer cases from one subordinate assessing officer to another
• To authorize any joint commissioner, assistant commissioner or deputy director or IT
officer to make search and seizure
• To make any enquiry under this act
• To sanction the re-opening of an assessment after the expiry of 4 years

3. Income Tax Officer (ITO)

ITO is the person with whom an assessee comes into direct contact. The important
powers and functions of ITO are narrated below:
• To grant refunds
• To impose penalty for non-payment of tax
• To re-assess the escaped income
• To allot permanent account number
• To exercise power of search and seizure, if authorize by the designated authority
• To inspect register of companies
• To issue a certificate prescribing lower rate of deduction of tax at source
• To determine appropriate proportion of expenses for deduction in respect of premises
partly used for business or profession.

Meaning of Tax Recover Officer

‘Tax Recovery Officer’ means Income-tax officer who is authorized by the Chief
Commissioner or Commissioner, by general or special order in writing, to exercise the power
of a tax recovery officer.