Tax Assessment under Income Tax Act | Types of Income Tax Assessments

Income Tax Assessment- An overview

Income Tax Assessment in India:

Income tax return filing is a process that every taxpayer has to complete on annual basis. Once the returns are filed, they are sent for a detailed processing with the income tax department. The authorities thoroughly evaluate and analyze the returns for further actions or investigation. This called as Tax Assessment under the Income Tax Act. In other words, a tax assessment means examining the income tax returns. The act has prescribed and provided with different provisions that state many different types of Income Tax Assessment, which we will discuss in this article.

Tax Assessment

  • Self-Assessment under Section 140 A: The tax assessment in which the process of calculation and computation of the income and the liable taxes to be paid on it are done by the taxpayer himself is called Self-Assessment. The income and the levied taxes have to be calculated on yearly basis.
  • Scrutiny Assessment under Section 143(3): There can be incidences where after the taxpayer files the returns, the taxation department assigns a Tax Officer for conducting the tax assessment. Such a case arises where the taxpayer has not met with certain criteria as demanded by the department. Such an assessment in which the tax officer carries out a detailed assessment and scrutiny of the returns and documents furnished by the taxpayer is called as scrutiny assessment. For the purpose of conducting this tax assessment the officer informs about the same to the taxpayer through a notice under Section 143(2).
  • Best Judgment Assessment under Section 144: In situations where the taxpayer or individuals fail to comply with the department or co-operate with them are issued with a tax assessment called as best judgment assessment. It means that if even after being intimated about an assessment through multiple notices, the taxpayer does not responds to the same then the tax officer or assessing officer can scrutinize the information and documents available to them and pass on an assessment order to the best of their knowledge and judgment.
  • Income Escaping Assessment under Section 147: There can be scenarios that the taxpayer could have escaped assessment or escaped from paying taxes on income for certain assessment year. At such instances the tax department can conduct a tax assessment known as income tax escaping assessment under Income Tax. This type of assessment can be conducted for cases as old as six years. For the purpose of assessing the taxpayer under this assessment the officer must believe that taking in account all the information that the taxpayer has escaped income tax and assessment for a particular year.
  • Summary Assessment under Section 143 (1): After the taxpayer has filed his due income tax returns, all the furnished information in the same is cross-checked and verified by the department. This tax assessment is conducted through online mode where the arithmetical mistakes in the return are corrected and all the disallowances or wrong claims are automatically adjusted. If there are any gaps in the paid taxes the taxpayer is required to pay the due amount.
  • Assessment in case of search Under Section 153A: As per this section of the act, the assessing officer is empowered to assess the filed income tax returns of an individual for the last six years. On the basis of his assessment, he can draft a tax assessment report. Any additions or disallowances on which preceding are not abated must be restricted in the assessment process.
  • Regular Assessment: This type of tax assessment must be conducted by an officer of rank of Income Tax Officer or above. The assessing officer checks for the fairness and correctness of the income stated, whether taxes are unpaid or the expenses are overstated.

Protective Assessment: Tax Assessment that is conducted for protecting the revenue or interest on revenue under the Income Tax Act is called as protective assessment.

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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.