ASSESMENT PROCEDURE

By: Smriti Khanna

 Assessment

can be defined as the process of assessing the income returned and determination of tax payable . The method for assessment of tax can be divided into three steps: (a) Computation of tax payable income or taxable income (b) Computation of tax payable on such tax payable income (c ) serving of notice of demand in prescribed form

FILING OF RETURNS [Section 139(1)]

(i)

(ii)

Every person being a company or firm; whether it has any income or loss during the previous year or not; or Every person other than a company or a firm whose total income of any other person in respect of which he is assessable under the Act, exceeds the exempted limit: or

(iii) If Gross total income of an individual or HUF without giving effect to exemption u/s 10A of tax free zones or u/s 10B under 100% EOU or u/s 10BA for export of certain special goods, exceeds the exempted limit, he shall be required to file his return of income before due date prescribed u/s 139(1) Shall file return of income before due date.

PERMANENT ACCOUNT NUMBER(PAN)

It

is a code number issued by the income tax department to every assesse. An assesse covered under Income tax Act 1961, is identified by the code. This is an alpha-numeric code having 10 characters and is issued in the form of a laminated card.

PROCEDURE FOR ASSESSMENT

Assessment can be of following types:
o o o o o

Self Assessment Enquiry before assessment Assessment on the basis of return Best judgment assessment Income escaping assessment or reassessment

SELF ASSESSMENT[Section 140A]

Every assesse liable to pay income tax is required to submit his return u/s 139,142,148 or u/s 153A. The assesse should prepare his return after taking into account following points: (i) the amount of tax, if any, already paid under any provision of this Act. (ii) Any tax deducted or collected at source (iii) Any relief of tax or deduction of tax claimed u/s 90 or 91 on account of tax paid in a country outside India. (iv) Any relief of tax claimed u/s 90A in account of tax paid in any specified territory outside India referred to it that section. (v) Any tax credit claimed to be set off in accordance with the provision of section 115AA.

ENQUIRY BEFORE ASSESSMENT[Section 142(1)]

Before finalizing the assessment of an assesse, the Assessing officer may be interested to go through certain books, accounts, documents, statements of the assesse and certain other inquiries, which the Assessing Officer may think desirable before finalizing the Assessment. Section 142 empowers the Assessing Officer in this regard. He can issue a notice to the assesse u/s 141(1), requiring him (assesse) on a date to be specified therein: (i) where such person has, within the time allowed u/s 139(1) or before the end of the relevant assessment year failed , to furnish a return of his income or income of any other person in respect of which he is assessable under this act, in prescribed form and verified in prescribed manner and setting forth such other particulars as may be prescribed, or

(ii) To produce or cause to be produced , such books, accounts or documents as the assessing officer may require, or
(iii) To furnish in writing and verified in the prescribed manner information in such form and on such points or matters as Assessing Officer may require. (iv) The Assessing Officer shall not require production of any books of accounts relating to a period more than three years prior to previous year. But in the case of documents, there is no such time limit. U/s 142(2) for the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such inquiry as he considers necessary.

ASSESSMENT ON THE BASIS OF RETURN FILED

With effect from assessment year 1989-90 new procedure of regular assessment has been prescribed which is as follows: (1) if any tax or interest is found due on the basis of such return after adjustment of any advance tax paid, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of subsection(2), an intimation shall be sent to the assesse specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and

 (ii)

if any refund is due on the basis of such return, it shall be granted to the assesse and an intimation to this effect shall be set to the assesse; The acknowledgement of the return shall be deemed to be intimation under this sub-section where either no sum is payable by the assesse or no refund is due to him; No intimation under this sub-section shall be sent after the expiry of one year from the end of the Assessment year in which the income was first assessable. But for returns filed for the income in relation to the assessment year commencing on 1-4-1999 the intimation can be sent up to 31-3-2002

Assessment on the basis of enquiry i.e. scrutiny[section 143(2) and 143(3)

(a)

if Assessment Officer has reason to believe that the assesse has claimed loss, exemption, deduction, allowance and rebate which is not admissible under the Act, a notice requiring him to produce proof of such claims on a specified date, shall be issued. No notice under this section shall be issued with effect from 16-2003.

 (b)

such notice can also be served to an assesse who has either understated his income or has computed excessive loss or has under paid tax, asking him to produce evidence to support his case. (c) it is provided that no notice under this clause shall be served on the assesse after the expiry of six months from the end of the financial year in which the return is furnished.

(d) on the specified day the Assessing Officer after hearing the evidence or after inspecting the documents may accept or reject the claim and pass the necessary orders in writing. After such orders the amount of tax may be determined and demand notice/refund order may be issued. (e) in case the return of income is filed by following persons, no order shall be issued without giving effect to the exemption allowed u/s 10 unless he has intimated the Central Govt. or the prescribed authority about the contravention of any provision of the prescribed conditions for claim of exemption and such approval has been rescinded:

 (i)

Research Association referred to Section 10(2). (ii) News Agency (iii) Association or institution referred to u/s 10(23A) (iv) Association or institution referred to u/s 10(23B) such as Khadi and Village Industries Board. (v) Following institutions as covered u/s 10(23c)

Best Judgement Assessment

This type of assessment is made when the assesse does not cooperate with the Assessing Officer , and he, in the absence of sufficient information, proceeds with the finalization of income or loss of the assesse according to the best of his ability, knowledge, judgment, guess-work. In the process of making assessment of an assesse, the Assessing Officer calls for certain informations through notices from such assesse. To know the correct income or loss of an assesse, such information may be necessary. In case assessee fails to comply such notice , the Act has armed the Assessing Officer with wide powers to deal with such cases. To make best judgement assessment of assessees income is the most important tool in the hands of the Assessing Officer. This Assessment is also known as Ex- Parte Assessment.

Compulsory best judgement Assessment

An assessment made under section 144 is known as compulsory best judgement assessment shall be made, if any person: (i) fails to file the return u/s 139(1) and has not made a return or a revised return u/s 139(4) and 139(5); or (ii) fails to comply with all the terms of notice issued u/s 142(1); or (iii) fails to comply with the directions issued under section 142 (2A); (iv) having made a return, fails to comply with all the terms of a notice issued u/s 143(2) This section provides that the Assessing Officer shall make the assessment of assesses total income or loss to the best of his judgment after taking into account all relevant material which he had gathered , and after giving the assesse an opportunity of being heard.

Discretionary Best Judgment Assessment

Method

of accounting[Section 145]: 1. for computing the income under the head profits and gains of business or profession the assesse may adopt either cash or mercantile system of accounting. 2. The Central Government may notify the accounting standards to be followed by any class of assesse or in respect of any class of incomes.

Income Escaping Assessment or Reassessment[Section 147]

Assessment or reassessment of Income in respect of an issue the reasons for which not recorded under section 148(2): For the purpose of assessment or re-assesment under this section , Assessing Officer , may assess or re-assess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reason under section 148(2)

Deemed cases of escaped income assessment

The

following shall be deemed to be the cases where income chargeable to tax has escaped assessment (i) Assesses own taxable income or the total income of any person in respect of which he is assessable exceeds the maximum exempted amount but the assesse has not filed or furnished return of his income.

 (ii)

The assesse has furnished the return of his income but no assessment has been made and the Assessing Officer has noticed that(a) The assesse has understated his income. Or (b) Has claimed excessive loss, deductiion, allowance, relief, etc. in his return.

 (iii)

the assessing officer has made an assessment, but he has found that(a) Income chargeable to tax has been under-assessed, or (b) Such income has been assessed at too low rate; or (c) Such income has been made the subject of excessive relief under this Act; (d) Excessive loss or depreciation allowance under this Act has been computed,

Time limit for issuing notice

No notice under section 148 shall be issued for the relevant assessment year (a) if four years have elapsed from the end of the relevant assesment year (b) if four years , but not more than six years , have elapsed from the end of relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees 1,00,000 or more for that year

Time limit for completion of assessment or reassessment[Section 153]

Regular

and best judgment assessment: A regular assessment u/s 143 or best judgment assessment u/s 144 is required to be completed within 21 months from the end of the relevant assessment year. Escaped assessment and reassessment u/s 147: It is require to be completed within 9 months from the end of the financial year in which the notice u/s 148 was served.

Thank you