Assessment is a process of evaluation and examination of the financial statements and Income Tax Returns of the taxpayer, conducted by the Income Tax Department. The Income Tax Act, 1961 has prescribed different types of Income Tax Assessment through various provisions. These types of assessment are as follows-
- Self-Assessment under Section 140A
- Summary assessment under Section 143(1)
- Scrutiny assessment under Section 143(3)
- Best Judgment Assessment under Section 144
- Protective assessment
- Re-assessment or Income escaping assessment under Section 147
- Assessment in case of search under Section 153A
In this article we are discussing in detail about one of the most prominent assessment under Income Tax that is the Scrutiny Assessment prescribed under Section 143(3) of the Income Tax Act, 1961.
What is Scrutiny Assessment?
As per the Section 143(3) of the Income Tax Act, 1961, a scrutiny assessment is type of income tax assessment in which the taxpayer’s filed Income Tax Returns for a particular financial year are assessed by the Income Tax Authorities. The taxpayer or the assesses are given an opportunity by the department to check and verify their substantiated income and expenses declared and exemptions, losses or deductions claimed by them. This can be done with the help of proper and accurate evidences and proofs.
The department assigns an assessment committee that manages the whole plan for the assessment and works it out accordingly. By establishing or constituting informal groups or panels, it undertakes certain specific and targeted work activities. Then it appoints an assessing officer who conducts a detailed review or investigation of the tax matter of the taxpayer or assesses. The main objective of the officer is to ascertain the fairness and correctness of the tax declared in the Income Tax Return filing. In case the officer finds any discrepancy in the tax returns, he/she makes an assessment on their own by taking into account all the facts and documents furnished by the taxpayer. There are two types of assessment cases that falls under the Scrutiny Assessment. These cases are as follows-
- Manual Scrutiny Assessment Cases
- Compulsory Scrutiny Assessment Cases
In the upcoming section we will discuss the above-mentioned cases below in detail.
Manual Scrutiny Cases:
This type of case under scrutiny assessment contains and deals with the following-
- Non-filing of the Income Tax Return by the taxpayer.
- Any mismatching of the Tax Deducted at Source (TDS) Credits between the Accounting Standard 26 and the claims made by the taxpayer.
- Large refunds claimed in the returns.
- Where the taxpayer has stated more taxes and lesser income as compared to the previous financial year.
- Where assesses have taken a double benefit because of changing their job or work.
- Where the taxpayer has not declared the income exempted by the act.
Compulsory Scrutiny Cases:
The second type there are four kinds of cases under the scrutiny assessment as mentioned below-
- Case 1: Those cases that are considered as an addition to previous assessment year for Rs.10 Lakhs or Rs. 10 Crore excess on the recurring and substantial questions of facts and laws, that have been confirmed or are pending in front of the appellate body.
- Case 2: All the cases of the Computer Added Scrutiny Selection (CASS) can be selected for the scrutiny assessment.
- Case 3: Where the Authority or Department under the Government has been furnished with information that is specific and verified related to tax evasion by the taxpayer.
- Case 4: Where the taxpayer has claimed a tax exemption but the authority has already passed a withdrawal approval or rejected the approval under Section 10(23C) of the Income Tax Act.