VARIOUS TYPES OF INCOME TAX ASSESSMENT IN INDIA
What is income tax assessment?
Every year, every person who is liable to pay tax to the
government and other prescribed assessee, files Income Tax Return with the tax
department. After filing of Income Tax Return, the tax department makes
processing of such tax returns filed and verifies the returns for its accuracy.
This process of verification and examination of tax return
filed is called as Income
Tax Assessment in India.
Further, under the tax laws, Income tax assessment also
includes reassessment and best judgment assessment.
Various types of Income Tax Assessment in India are as under:
1)
Summary Assessment or assessment u/s 143(1).
This is done without calling the assessee on
the basis of income tax return filed and Tax Audit report filed by the assessee.
Here, there is no detailed scrutiny of Income
Tax Return filed. Here,
adjustments are made on account of following:
a)
any arithmetical error in the return or
incorrect claim apparent from any information in the return,
b)
disallowance of any loss claimed in case tax
return was filed late,
c)
disallowance of any expenditure mentioned in tax
audit report but not claimed in the tax return and
d)
in case any income is appearing in form 26AS or
Form 16A or Form 16 and such income is not shown in the Income Tax Return.
However, finance act 2021 has removed this clause and therefore, not applicable
from AY 2018-19.
Before making assessment u/s 143(1)
proper notice and opportunity of being heard shall be given to the assessee.
2)
Scrutiny Assessment i.e assessment u/s 143(3)
Here, the scrutiny of tax return is done in
detail to determine whether various deductions, claims etc. made by the assessee in his return are accurate and genuine. The idea is to determine whether
genuine tax has been paid after correct computation of income by the assessee.
This assessment is done after serving notice u/s 143(2) within a period of 6
months from end of the financial year in which tax return was filed. Here,
assessing officer passes order for payment of additional taxes or refund any
amount due to the assessee after thorough scrutiny of the tax return and
additional documents asked from the assessee.
The time limit for making scrutiny
assessment u/s 143(3) is before 9 months from end of the assessment year in
which income was first assessable. In case of TP cases, time limit is 21 months
from the end of the assessment year.
3)
Best Judgment Assessment u/s 144
In this type of assessment, the AO
conducts the assessment and passes order without calling the assesse i.e. in the absence of the assessee on the basis of
all the relevant materials available with him.
Best Judgment assessment is done
in following cases:
a)
When assessee has defaulted in filing tax return
within due date prescribed u/s 139(1) or u/s 139(4) i.e. belated return or u/s 139(5) i.e. revised return.
b)
When assessee fails to comply with notice u/s
142(1)
c) When assessee fails to comply with the directions issued u/s 142(2A)
4)
Reassessment or Income escaping Assessment
u/s 147
Finance Act 2021 has introduced a new
section 148A which has replaced the existing sections 147, 148 and 151. Also,
there has been complete change in manner of conducting reassessment and search
related cases.
Following process will be involved:
a)
AO will serve notice u/s 148 to the assessee along with copy of the order u/s 148A(d) asking the assessee to file his return
of income or return of income of any other person in respect of which he is
assessable under this act during the relevant previous year in prescribed form.
Also, provisions of the Income tax act will apply as if such return were a
return required to be filed u/s 139.
5)
AO can send such notice only with the prior
approval of specified authority and only when AO has information that the
income chargeable to tax has escaped assessment.
6)
Such notices are issued when AO has flagged any
information in the case of assessee as per the risk management strategy
formulated by the CBDT from time to time or when CAG has made any objection
that assessment in case of assessee has not been made as per the provisions of
the Act.
7)
AO shall follow the following procedures:
a)
The AO shall conduct an enquiry with prior
approval of the specified authority regarding some information in his
possession which suggests that income has escaped assessment.
b)
Before issuing such notice, AO shall provide an
opportunity of being heard to the assessee asking him to reply within 7 days to
30 days as to why notice u/s 148 shall not be issued.
c)
After receiving assesses reply and other
material record in his possession, the AO shall decide whether to issue notice
u/s 148 with prior approval of specified authority within 1 month of end of
month in which reply of assessee is received or within one month of the end of
the month in which time allowed to furnish reply is expired.
8)
Faceless Income Tax Assessment u/s 144B
Government has introduced a new scheme of income tax
assessment by inserting section 144B which is called as faceless assessment
scheme. Meaning of faceless Income tax assessment is that the assessment proceedings will be conducted
electronically in e proceeding facility of Income tax portal.
For the purpose of conducting Income tax faceless assessment, the
following centers or units have been set up by the board specifying their
respective jurisdiction namely:
a)
National Faceless Assessment Centre (NFAC)
b)
Regional Faceless Assessment Centre (RFAC)
c)
Assessment units(AU)
d)
Verification units(VU)
e)
Technical units(TU)
f)
Review units(RU)
The purpose of NFAC is to facilitate the conduct of the
faceless Income Tax Proceedings in a centralized manner. Accordingly, NFAC will
be the single point of contact between the assessee and other units.
The time limit for making Income Tax Assessment u/s 144 is within 9 months from the end of the
assessment year when income was first assessable applicable for AY 2021-22 and
onwards. In those cases, where TP is applicable, time limit for making faceless Income Tax
Assessment is 21 months from end of
the assessment year when income was first assessable.
Thus, above are the various types of Income Tax Assessment in India and also with the introduction of faceless Income Tax
Assessment, the entire process
has become online with no physical interface between the assessee and the AO
which brings more transparency to the entire process.
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