Income Tax Assessment | Types of Assessment under Income Tax Act, 1961

Different types of Income Tax Assessment- Every Taxpayer should know

Meaning of Income Tax Assessment:

The Income Tax Department requires evry taxpayer to furnish income details in prescribed formats. The details of income are to be filed and furnished in the Income Tax Return form by the taxpayer. The income tax authority processes the income returns of the taxpayers and verifies its fairness and correctness. This procedure of assessing and examining the returns is known as Income Tax Assessment.

Income Tax Assessment | Types of Assessment under Income Tax Act

Types of Income Tax Assessment:

As per the Income Tax laws and provisions, there are four major type of Income Tax Assessment. These are as follows-

  1. Assessment under section 143(1): Summary Assessment without calling the assessee

It is a type of preliminary assessment which is referred to as summary assessment without actually calling the assessee for a physical presence.

Procedure of Income Tax Assessment under section 143(1)-

Summary assessment are basically performed where a proper computation of the tax and interest fee has been done by the officer based on the adjusted income. Any intimation are to be sent to the taxpayer regarding the refund amount or the determined sum that has to be paid. The taxpayer has to reply to the notice for completing the summary assessment process.

  1. Assessment under section 143(3): Scrutiny Assessment

A scrutiny assessment is a type of detailed Income Tax Assessment. It is carried to confirm and verify the fairness and correctness of all the claims and deductions that the taxpayer has made in the income tax return.

Procedure of Income Tax Assessment under section 143(3)-

Under this assessment the assessing officer serves a notice to the taxpayer asking them to be present at the office. Such notices are served in case the tax officer considers that the taxpayer has not understated the income; they have not computed the excessive loss or has paid the taxes less than the chargeable taxes. A notice as per section 143(2) is issued by the assessing officer to the taxpayer. The assessee or their representative has to appear before the assessing officer and provide the required arguments and evidences to support their claim.

Once the hearing and verification is done, the officer takes into account all the data and information provided by the taxpayer and makes an order in writing to complete the assessement. He provides a true insight of the gathered information and its verification in the report.

Recently, the Government of India along with taxation department has introduced a new scrutiny assessment process in form of E-Assessments. This scheme has been introduced for-

  • For making the process paperless and on electronic mode.
  • Optimizing the use of resources in relation with scale economy and specialization in the functionality.
  • Jurisdiction-less income tax assessment that is team based.
  • To eliminate the interface interaction between the assessee and the assessing officer.
  1. Assessment under section 144: Best Judgment Assessment

This type of Income Tax Assessment is carried out as per the best judgment made by the Assessing Officer on the basis of all relevant evidences and material collected and gathered by him.

Procedure of Income Tax Assessment under section 144-

The assessing officer for the purpose of assessment serves a show cause notice to the assessee to ask for valid reasons and proof as to why the taxes have been paid wrongly or not been paid at all. In case where the assessing officer is not satified with the arguments of the assessee, he has the power to decide the assessment result on the basis best of his knowledge about the evidences and proof. He can provide his best judgement on the assessment case and complete the process.

  1. Assessment under section 147: Income Tax Escaping Assessment

Under Section 147, the assessment is carried out by the Assessing Officer in case he has a reason to believe that the taxpayer has escaped the levied or chargeable taxes on the income in a particular financial year.

Procedure of Income Tax Assessment under section 147:

The Assessing Officer issue a notice under Section 148 to the taxpayer for making an Income Tax Assessment under Section 147. The taxpayer is given an opportunity to be heard through the notice. An assessment or re-assessment of income is likely to take place in cases where during the course of proceedings, the assessing officer believes and notices that the taxpayer has escaped the chargeable taxes on the income for the particular assessment year. The act also empowers the officer to do re-computation of the depreciation, losses and other allowances for that particular assessment year.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.