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What are Income Tax Assessments?

Income tax assessment is the process of scrutinizing and reviewing the income declared by assessee in their income tax returns.

At the end of each financial year, all individuals and entities are required to file an income tax return by self-computing the amount of income earned during the financial year and pay the tax due.

After the filing of an income tax return by the taxpayer, Income tax authorities select suspicious income tax returns and send notice to conduct manual income tax assessment. Income tax authorities scrutinize whether the income declared is correct or not.

Types of Income Tax Assessment

Under the Income-tax Law, Income tax officials can conduct given below four principal assessments:

  • Assessment under section 143 (1) : ITR system based processing
  • Assessment under section 143 (3) : Scrutiny assessment
  • Assessment under section 144 :  Best judgment assessment
  • Assessment under section 147: Income escaping assessment 

Income Tax Assessments

Assessment Under Section 143(1) - An auto-processing of ITR

Meaning - This is a preliminary assessment and is referred to as a summary assessment without calling the assessee (i.e., the taxpayer).

Scope - Assessment under section 143(1) is an Auto Process of the return of income.

At this stage, the complete income or loss is computed after making the following adjustments (if any), namely:-

  • Any arithmetical error or incorrect claim is apparent from any information in the return
  • Disallowance of loss claimed under section 139(1)
  • Disallowance of expenditure shown in the audit report but not taken into account
  • Disallowance of deduction claimed u/s 10AA, 80IA to 80-IE under section 139(1)
  • Addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been covered in computing the total income in the return.

Time-limit to complete assessment - Processing under section 143(1) can be filed within one year from the end of the financial year in which the return of income is filed.

 

 

 

 

Assessment under section 143(3) - Manual Assessment of ITR

Meaning - This is a comprehensive assessment and is referred to as scrutiny assessment.

At this stage complete scrutiny of the return of income will be taken out is to confirm the correctness and genuineness of income, various claims, deductions, etc., made by the taxpayer in the return of income.

Scope - The purpose of scrutiny assessment is to authenticate that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner.

To validate the above return of income, the Assessing Officer carries out detailed scrutiny of the return of income and will serve himself regarding various claims, deductions, etc., made by the taxpayer in the return of income.

Time-limit to complete assessment - As per Section 153, the time limit for assessing section 143(3) is: –

  • Within 21 months from the completion of the assessment year in which the income was first assessable. [For the assessment year 2017-18 or before]
  • 18 months from the completion of the assessment year in which the income was first [for the assessment year 2018-19]
  • 12 months from the completion of the assessment year in which the income was first assessable [For the assessment year 2019-20 and onwards]

Assessment under section 144 - Best judgment assessment

Meaning - This is an assessment carried out as per the most approving judgment of the Assessing Officer based on all relevant material he has gathered.

This assessment is taken in cases where the taxpayer fails to respond to income tax notices or fails to comply with the requirements specified in section 144.

Scope - As per section 144, the Assessing Officer is under an obligation to assess the best of his decision in the following cases:-

  • If the taxpayer fails to file the return demanded within the due date prescribed under section 139(1) or a belated return under section 139(4) or a revised return under section 139(5).
  • If the taxpayer fails to comply with all the terms of a notice proceeded under section 142(1).

Time Limit to complete assessment - As per Section 153, the time limit for assessing section 144 is:-

  • Within 21 months from the completion of the assessment year in which the income was first assessable. [For the assessment year 2017-18 or before]
  • 18 months from the completion of the assessment year in which the income was first [for the assessment year 2018-19]
  • 12 months from the completion of the assessment year in which the income was first assessable [For the assessment year 2019-20 and onwards]

 

 

 

 

 

 

 

 

 

Assessment under section 147 - Income escaping assessment

Meaning - Assessment under section 147 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 - Assessment under section 147 is carried out if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.

  • Within 9 months from the completion of the financial year in which the notice under section 148 was served (if notice is served before 01-04-2019).
  • 12 months from the completion of the financial year in which notice under section 148 is served (if notice is served on or after 01-04-2019).

Time Limit to complete assessment - As per Section 153, the time limit for assessing section 147 is: –

  • Within 9 months from the completion of the financial year in which the notice under section 148 was served (if notice is served before 01-04-2019).
  • 12 months from the completion of the financial year in which notice under section 148 is served (if notice is served on or after 01-04-2019).

Time-limit for issuance of notice under section 148- Assessment under section 147 is carried out if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.

  • Notice under section 148 can be declared within 4 years from the completion of the relevant assessment year. If the left income is Rs. 1,00,000 or more and certain other conditions are satisfied, then notice can be issued up to 6 years from the end of the relevant assessment year.
  • In case the left income relates to any asset (including financial interest in any entity) located outside India, notice can be issued up to 16 years from the end of the applicable assessment year.

How to respond to Income Tax Assessment Notice?

Getting a notice from the income tax department can leave you in panic mode.

Assure the below before taking any further steps:-

  • Is it really your name on the income tax assessment Notice?
  • Is your Pan Number mentioned correctly?
  • Which assessment year such tax notice relates to?
  • Is there a correct document identification number [DIN]?

If all particulars are correct in the Income Tax Assessment Notice then you must reply to the Income-tax department within time as specified in the income tax notice. Our professional can help you understand the nature of Income Tax Assessment notice received and assist you in representing before the income tax authorities as per income tax rules.

What if not replied to the Income Tax Assessment?

If you don’t answer the income tax Assessment notice within the specified time, there can be various implications.

Ignorance of Income tax notice and non-cooperation during income tax assessment not only attracts heavy penalties but may lead to the best judgment assessment by the tax officer against you. Some non-compliances of the income tax act contain prosecution punishment also.

Hence we suggest you file a timely reply to the income tax assessment notices and cooperate in income tax assessments.

How can we help you in Income Tax Assessment?

We have income tax experts in our team who can assist you in the income tax assessment till the disposal of the income tax case.

Our professionals not only help you advise what steps to be taken in response to income tax assessment notices but can also represent income tax authorities on behalf of you.

 INCOME TAX ASSESSMENT PROCESS

Provide the required details and information as per income tax notice.

Choose a package and pay online with different payment modes available.

On placing an order, your application will be assigned to one of our dedicated professionals.

Our professional shall carefully examine the documents and furnish with the income tax authority.

Our professional shall make regular follow up with the Income tax department and comply with issued notices.

On obtaining furnishing all required details Income tax officials pass appropriate order of assessment.

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