ASSESSMENT PROCEDURE

By:CA Ankit Lakhotia CA Nidhi Mundra

TYPES OF ASSESSMENT

Self Assessment (u/s 140A) Intimation (u/s 143(1)) Scrutiny Assessment (u/s 143(3)) Best Judgment Assessment (u/s 144) Income Escaping Assessment (u/s 147) Assessment in case of Search (u/s 153A)

Self Assessment – Section 140A

Where any tax is payable on the basis of any return required to be furnished under section 139 / 142 / 148 / 153A, after taking into account,—

(i) the amount of tax, if any, already paid(ii) any tax deducted or collected at source; (iii) any relief of tax or deduction of tax claimed u/s 90 or 91(iv) any relief of tax claimed under section 90A and (v) any tax credit claimed to be set off in accordance with the provisions of section 115JAA, liable to pay such tax together with interest for any delays

Intimation (u/s 143(1))

Intimation u/s 143(1) is wherein the total income or loss shall be computed after making the following adjustments:

(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 u/s 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 sections 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 u/s 139(1); or(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:

Provided… 

that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:

that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made.

Time limitIntimation under section 143(1) can be made within a period of one year from the end of the financial year in which the return of income is filed.

Please Note

The acknowledgement of the return of income shall be deemed to be the intimation in a case where no sum is payable by or refundable to the assessee or where no adjustment is made to the returned income.

The processing of a return under section 143(1) shall not be necessary, where a notice has been issued to the assessee under section 143(2), i.e., a notice for scrutiny assessment has been issued to the taxpayer.

Service of Notice (u/s143(2))

AO may serve a notice for scrutiny assessment if: the assessee has filed a ROI u/s 139 or in response to a notice issued u/s 142(1)as the case maybeAnd if AO considers it necessary to do so, in order to ensure that the assessee has not under-stated the income, or computed excessive loss, or underpaid tax in any manner.

Time limitNotice has to be served before the expiry of 6 months from the end of the financial year in which the return is furnished

Notice has to be ‘served’ and mere ‘issue’ is not sufficient

Inquiry Before Assessment u/s 142

For the purpose of making an assessment, the AO can :

Serve a notice u/s 142(1)(i) for furnishing the ROI Serve a notice u/s 142(1)(ii) to produce such documents or accounts – return must be filed earlier. Serve a notice u/s 142(1)(iii) to call for information he may require including

statement of assets & liabilities - return must be filed earlier.

Scrutiny Assessment(u/s 143(3))

This is a detailed assessment. At this stage a detailed scrutiny of the return of income will be carried out confirm the

correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income.

Time LimitAs per section 153 of the Act, assessment under section 143(3) shall be made within a period of 21 months from the end of assessment year.

Limited Scrutiny

The Central Board of Direct Taxes ('CBDT'), vide Instruction No. 7/2014 dated 26-9-2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. The said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014. The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameter(s) of AIR/CIB/26AS data. If a case has been selected under CASS for any other reason(s)/parameter(s) besides the AIR/CIB/ 26AS data, then the said instruction would not apply. The Questionnaire under section 142(1) of the Act in 'Limited Scrutiny' cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny' issues.

Limited Scrutiny to Complete Scrutiny

During the course of assessment proceedings in 'limited Scrutiny' cases, if:

It comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs.5 lac/ 10 lac (for metro charges) requiring substantial verification on any other issue(s), then, the case may be taken up for 'Complete Scrutiny' with the approval of the Pr. CIT/CIT concerned. The AO has to take approval of Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case.

'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad.

Best Judgment Assessment (u/s 144)

As per section 144, the AO is under an obligation to make an assessment to the best of his judgment in the following cases:-

If the taxpayer fails to file the return required within the due date prescribed u/s 139(1) or a belated return u/s 139(4) or a revised return u/s 139(5). If the taxpayer fails to comply with all the terms of a notice issued u/s 142(1). If the taxpayer fails to comply with the directions issued u/s 142(2A). If after filing the return of income the taxpayer fails to comply with all the terms of a notice issued under section 143(2), i.e., notice of scrutiny assessment If the assessing officer is not satisfied about the correctness or the completeness of

the accounts of the taxpayer or if no method of accounting has been regularly employed by the taxpayer.

Time limitAs per section 153, assessment under section 144 shall be made within a period of 21 months from the end of the relevant assessment year.

Assessment u/s 147

This 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.

ObjectiveThe objective of carrying out assessment under section 147 is to bring under the tax net any income which has escaped assessment in original assessment.

Original assessment here means an assessment u/s 143(1), 143(3), 144 & 147.

Cases Where Income Has Escaped Assessment

Where no return has been furnished, although the total income exceed the maximum amount chargeable to tax.

Where return has been furnished but no assessment have been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss/deduction/allowance/ relief in the return.

Where the taxpayer has failed to furnish the report as required u/s 92 E.

Where assessment have been made buti) income chargeable to tax has been under assessed; or ii) income has been assessed at low rate; oriii) income has been made the subject of excessive relief; oriv) excessive loss or depreciation allowance or any other allowance has been computed;

On the basis of information received u/s 133C, if it is noticed by the AO that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return.

Where a person is found to have any asset (including financial interest in any entity) located outside India.

Time limit for no-tice u/s 148

Income escap-ing assess-ment is less

than 1lac

4 years

Income escap-ing assessment is 1 lac or more

6 years

Assessment u/s 143(3)/148 was

made.

4 years except where income chargeable to tax has escaped assess-ment due to failure on the part of as-

sesse to:-Furnish return u/s 139 or 142 or 148

-To disclose fully and truly material facts

Asset located outside India

16 years

Time limit for completion of assessmentAs per section 153, assessment under section 147 shall be made within a period of9 months from the end of the financial year in which notice under section 148 isserved on the tax payer.

Assessment in case of Search u/s 153A

Notwithstanding anything contained in section 139/147/148/149/151/153, 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 , the Assessing Officer shall—

(a) issue notice to such person requiring him to furnish the return of income in

respect of each assessment year falling within six assessment years , as if such return were a return required to be furnished under section 139;(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:

Provided that assessment or reassessment, pending on the date of initiation of search u/s 132 or 132A of the six assessment years referred, shall stand abated.

If any proceeding initiated or any order of assessment or reassessment made in case of search or requisition has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained u/s 153(1), the assessment or reassessment relating to any assessment year which was abated under the second proviso section 153(1), shall stand revived with effect from the date of receipt of the order of such annulment.

Central Government may by rules  specify the class or classes in which the AO shall not issue notice for assessing or reassessing the total income of the six AY.

Assessment of income u/s 153C

Notwithstanding anything contained in section 139/147/148/149/151/153, where the Assessing Officer satisfied that,

any money, bullion ,jewellery or other valuable article or thing , seized or requisitioned, belongs to; or

any books of account or documents, seized or requisitioned ,pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then , the books of account or documents or assets, seized or requisitioned shall be handed over to the AO having jurisdiction over such other person.

In respect of each AY falling within 6 AYs immediately preceding the AY relevant to the previous year in which search was conducted or requisition was made.

In respect of AY relevant to the previous year in which search was conducted or requisition is made,

Within a period of 21 months from the end of financial year in which the last of the authorisation for search u/s 132 or requisition u/s 132A was executed.

Time limit for completion of assessment u/s 153A/C