assesment procedure

7/29/2019 Assesment Procedure

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ASSESMENT

PROCEDURE

By: Smriti Khanna


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Assessment can be defined as the

process of assessing the income returnedand determination of tax payable .

The method for assessment of tax can bedivided into three steps:

(a) Computation of tax payable incomeor taxable income

(b) Computation of tax payable on suchtax payable income

(c ) serving of notice of demand inprescribed form


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FILING OF RETURNS [Section 139(1)]

(i) Every person being a company or

firm; whether it has any income or loss

during the previous year or not; or(ii) 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 theexempted limit: or


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(iii) If Gross total income of an individual or

HUF without giving effect to exemption u/s10A of tax free zones or u/s 10B under 100%EOU or u/s 10BA for export of certain specialgoods, exceeds the exempted limit, he shall

be required to file his return of incomebefore due date prescribed u/s 139(1)

Shall file return of income before due date.


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PERMANENT ACCOUNT

NUMBER(PAN)

It is a code number issued by the incometax department to every assesse. An

assesse covered under Income tax Act1961, is identified by the code. This is analpha-numeric code having 10characters and is issued in the form of a

laminated card.


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PROCEDURE FOR ASSESSMENT

Assessment can be of following types:

o Self Assessment

o Enquiry before assessment

o Assessment on the basis of return

o Best judgment assessmento Income escaping assessment or

reassessment


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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. Theassesse should prepare his return after taking intoaccount following points:

(i) the amount of tax, if any, already paid under anyprovision 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 outsideIndia.

(iv) Any relief of tax claimed u/s 90A in account of taxpaid in any specified territory outside India referred toit that section.

(v) Any tax credit claimed to be set off in accordancewith the provision of section 115AA.


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ENQUIRY BEFORE

ASSESSMENT[Section 142(1)] Before finalizing the assessment of an assesse, the

Assessing officer may be interested to go throughcertain books, accounts, documents, statements of theassesse and certain other inquiries, which the Assessing

Officer may think desirable before finalizing theAssessment. Section 142 empowers the Assessing Officerin this regard. He can issue a notice to the assesse u/s141(1), requiring him (assesse) on a date to be specifiedtherein:

(i) where such person has, within the time allowed u/s

139(1) or before the end of the relevant assessment yearfailed , to furnish a return of his income or income of anyother person in respect of which he is assessable underthis act, in prescribed form and verified in prescribedmanner and setting forth such other particulars as may beprescribed, or


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(ii) To produce or cause to be produced , such books,accounts or documents as the assessing officer mayrequire, or

(iii) To furnish in writing and verified in the prescribedmanner information in such form and on such points ormatters as Assessing Officer may require.

(iv) The Assessing Officer shall not require production ofany books of accounts relating to a period more thanthree years prior to previous year. But in the case ofdocuments, there is no such time limit.

U/s 142(2) for the purpose of obtaining full information inrespect of the income or loss of any person, theAssessing Officer may make such inquiry as he considersnecessary.


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ASSESSMENT ON THE BASIS OF

RETURN FILED With effect from assessment year 1989-90 new

procedure of regular assessment has beenprescribed which is as follows:

(1) if any tax or interest is found due on the basis ofsuch return after adjustment of any advance taxpaid, any tax paid on self assessment and anyamount paid otherwise by way of tax or interest,then, without prejudice to the provisions of sub-section(2), an intimation shall be sent to the

assesse specifying the sum so payable, and suchintimation shall be deemed to be a notice ofdemand issued under section 156 and all theprovisions of this Act shall apply accordingly; and


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(ii) if any refund is due on the basis of such return,

it shall be granted to the assesse and anintimation to this effect shall be set to the assesse;

The acknowledgement of the return shall bedeemed to be intimation under this sub-sectionwhere 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 theAssessment year in which the income was first

assessable.But for returns filed for the income in relation to theassessment year commencing on 1-4-1999 theintimation can be sent up to 31-3-2002


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Assessment on the basis of

enquiry i.e. scrutiny[section143(2) and 143(3)

(a) if Assessment Officer has reason to

believe that the assesse has claimed loss,exemption, deduction, allowance andrebate which is not admissible under theAct, a notice requiring him to produce

proof of such claims on a specified date,shall be issued. No notice under thissection shall be issued with effect from 1-6-2003.


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(b) such notice can also be served to anassesse who has either understated hisincome or has computed excessive loss orhas under paid tax, asking him to produceevidence to support his case.

(c) it is provided that no notice under thisclause shall be served on the assesse afterthe expiry of six months from the end ofthe financial year in which the return is

furnished.


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(d) on the specified day the Assessing Officerafter hearing the evidence or after inspecting

the documents may accept or reject theclaim and pass the necessary orders in writing.After such orders the amount of tax may bedetermined and demand notice/refund ordermay be issued.

(e) in case the return of income is filed byfollowing persons, no order shall be issuedwithout giving effect to the exemptionallowed u/s 10 unless he has intimated theCentral Govt. or the prescribed authorityabout the contravention of any provision ofthe prescribed conditions for claim ofexemption and such approval has beenrescinded:


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(i) Research Association referred to

Section 10(2).

(ii) News Agency

(iii) Association or institution referred to u/s10(23A)

(iv) Association or institution referred to u/s10(23B) such as Khadi and VillageIndustries Board.

(v) Following institutions as covered u/s

10(23c)


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Best Judgement Assessment

This type of assessment is made when the assesse does notcooperate with the Assessing Officer , and he, in theabsence of sufficient information, proceeds with thefinalization 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 throughnotices from such assesse. To know the correct income orloss of an assesse, such information may be necessary. Incase assessee fails to comply such notice , the Act has

armed the Assessing Officer with wide powers to deal withsuch cases. To make best judgement assessment ofassessees income is the most important tool in the handsof the Assessing Officer. This Assessment is also known asEx- Parte Assessment.


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Compulsory best judgement

Assessment An assessment made under section 144 is known as

compulsory best judgement assessment shall bemade, 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 lossto the best of his judgment after taking into accountall relevant material which he had gathered , andafter giving the assesse an opportunity of being heard.


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Discretionary Best Judgment

Assessment

Method of accounting[Section 145]:

1. for computing the income under the

head profits and gains of business orprofession the assesse may adopt eithercash or mercantile system of accounting.

2. The Central Government may notify theaccounting standards to be followed byany class of assesse or in respect of anyclass of incomes.


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Income Escaping Assessment

or Reassessment[Section 147]

Assessment or reassessment of Income inrespect of an issue the reasons for which notrecorded under section 148(2):

For the purpose of assessment or re-assesmentunder this section , Assessing Officer , mayassess or re-assess the income in respect ofany issue, which has escaped assessment,and such issue comes to his noticesubsequently in the course of the proceedingsunder this section, notwithstanding that thereasons for such issue have not been includedin the reason under section 148(2)


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Deemed cases of escaped

income assessment

The following shall be deemed to be thecases where income chargeable to tax

has escaped assessment- (i) Assesses own taxable income or the

total income of any person in respect ofwhich he is assessable exceeds the

maximum exempted amount but theassesse has not filed or furnished return ofhis income.


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(ii) The assesse has furnished the return ofhis income but no assessment has beenmade and the Assessing Officer hasnoticed that-

(a) The assesse has understated his income.Or

(b) Has claimed excessive loss, deductiion,allowance, relief, etc. in his return.


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(iii) the assessing officer has made anassessment, but he has found that-

(a) Income chargeable to tax has beenunder-assessed, or

(b) Such income has been assessed at toolow rate; or

(c) Such income has been made thesubject of excessive relief under this Act;

(d) Excessive loss or depreciation allowanceunder this Act has been computed,


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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 ofthe relevant assesment year

(b) if four years , but not more than six years ,have elapsed from the end of relevantassessment year unless the income

chargeable to tax which has escapedassessment amounts to or is likely to amountto rupees 1,00,000 or more for that year


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Time limit for completion ofassessment or reassessment[Section

153] Regular and best judgment assessment: A

regular assessment u/s 143 or best

judgment assessment u/s 144 is requiredto be completed within 21 months fromthe end of the relevant assessment year.

Escaped assessment and reassessmentu/s 147: It is require to be completed

within 9 months from the end of thefinancial year in which the notice u/s 148was served.


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