Income Tax Authorities

Income tax authority [Explanation (a) to section 133A]:

"Income-tax authority" means a Commissioner, a Joint Commissioner, a Director, a Joint
Director, an Assistant Director or a Deputy Director or an Assessing Officer, or a Tax
Recovery Officer, and for the purposes of clause (i) of subsection (1), clause (i) of sub-
section (3) and sub-section (5), includes an Inspector of Income-tax.
1.1. Various Authorities
Section of the Income Tax Act, 1961 provides for the administrative and judicial
authorities for administration of this Act.
The Direct Tax Laws Act, 1987 has brought far-reaching changes in the organizational
structure.
The implementation of the Act lies in the hands of these authorities.
The change in designation of certain authorities and creation of certain new posts in the
structure are the main features of amendments made by The Direct Tax Laws Act, 1987.

These authorities have been grouped into two main wings :

(i) Administrative [ Income Tax Authorities ][ Sec. 116 ]
1. the Central Board of Direct Taxes constituted under the Central Boards of Revenue
Act, 1963 (54 of 1963),
2. Directors-General of Income-tax or Chief Commissioners of Income-tax,
3. Directors of Income-tax or Commissioners of Income-tax or Commissioners of
Income-tax (Appeals),
3.1. (cc) Additional Directors of Income-tax or Additional Commissioners of Income-tax
or Additional Commissioners of Income-tax (Appeals),
3.2. (cca) Joint Directors of Income-tax or Joint Commissioners of Income-tax.
4. Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy
Commissioners of Income-tax (Appeals),
5. Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
6. Income-tax Officers,
7. Tax Recovery Officers,
8. Inspectors of Income-tax.

(ii) Assessing Officer [ Sec. 2(7A)]

"Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or
Assistant Director or Deputy Director or the Income-tax Officer who is vested with the
relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-
section (2) of section 120 or any other provision of this Act, and the Joint Commissioner
or Joint Director who is directed under clause (b) of sub-section (4) of that section to
exercise or perform all or any of the powers and functions conferred on, or assigned to, an
Assessing Officer under this Act;

Importance of Assessing Officer :

In the organizational setup of the income tax department Assessing Officer plays a very
vital role.
He is the primary authority who initiates he proceedings and is directly connected with
the public.
From the time of filing of return till the assessement is completed he plays a pivotal role .
He can start proceedings for non filing of return, imposition of penalties etc.
Orders passed by him can be challenged only on approval.
The department can revise his orders only if it is proved that there are prejudicial to the
revenue and that too only by the Commissioner of Income Tax.
(iii)  Appointment of Income-Tax Authorities [ Sec. 117 ]
 Power of Central Government :
The Central Government may appoint such persons as it thinks fit to be income-tax
authorities. It kept with itself the powers to appoint authorities upto and above rank of an
Assistant Commissioner of Income-Tax [ Sec. 117 (1) ]
Power of the Board and Other Higher Authorities :  
Subject to the rules and orders of the Central Government regulating the conditions of
service of persons in public services and posts, the Central Government may authorize the
Board, or a Director-General, a Chief Commissioner or a Director or a Commissioner to
appoint income-tax authorities below the rank of an Assistant Commissioner or Deputy
Commissioner.  [ Sec. 117 (2) ]
Power to appoint Executive and Ministerial Staff :  
Subject to the rules and orders of the Central Government regulating the conditions of
service of persons in public services and posts, an income-tax authority authorized in this
behalf by the Board may appoint such executive or ministerial staff as may be necessary
to assist it in the execution of its functions.

(iv) Control of Income-Tax Authorities [ Sec. 118 ]

The Board may, by notification in the Official Gazette, direct that any income-tax
authority or authorities specified in the notification shall be subordinate to such other
income-tax authority or authorities as may be specified in such notification.
Return of income
Return of income is a special type of form to be used by the assessee for furnishing the
necessary particulars like name, address, PAN/GIR No., Bank Account, income under
each head, total income, tax liability, etc. before the Income Tax authority. Different
types of forms are prescribed in Rule 12 of theIncome tax Rules, 1962 to be used by
different categories of assessee earning different types of income. Each assessee liable to
submit the return of income is required to use a specific form as prescribed in Rule 12 and
to submit the same before the Income tax authority after being duly filled in. Persons
liable for submitting return of income- The following persons are liable to furnish the
return of income (or loss in case of a company and a firm) in a prescribed form on or
before the due date as specified by the Act for this purpose:
Consequences: If the assessee is required to furnish return of income under section 139(1)
but fails to furnish such return the assessee will be liable to interest under section 234A,
penalty under section 2741F and prosecution under section 276CC. Thus, one can very
well know the need to furnish such return accurately and timely; else will have to face the
unpleasant situations of penalty, prosecution and interest.

It is mandatory for every taxpayer to communicate the details of his income to the Income
tax Department. These details are to be furnished in the prescribed form known as return
of income. In this part, you can gain knowledge about the various provisions relating to
return of income.

Person required to file the return of income

The provisions relating to filing of return of income depend upon the status of the
taxpayer. The position in this regard is given below:
In the case of companies:
Every person, being a company, has to file its return of income compulsorily, irrespective
of its income being profit or loss. In other words, it is mandatory for every company to
file the return of income irrespective of its income or loss.
In the case of partnership firms:
Every person, being a partnership firm (including Limited Liability Partnership), has to
file its return of income compulsorily, irrespective of its income being profit or loss. In
other words, it is mandatory for every partnership firm to file the return of income
irrespective of its income or loss.
In the case of an Individual/HUF/AOP/BOI/Artificial Juridical Person:
Every individual/HUF/AOP/BOI/artificial juridical person has to file the return of income
if his total income (including income of any other person in respect of which he is
assessable) without giving effect to the provisions of section 10(38), 10A, 10B, 10BA 54,
54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB or Chapter VIA (i.e., deduction under
section 80C to 80U), exceeds the maximum amount which is not chargeable to tax i.e.
exceeds the exemption limit.
In the case of charitable or religious trusts:
Every person in receipt of income derived from property held under charitable or
religious trusts/legal obligations or in receipt of income being voluntary contributions
referred to in section 2(24)(iia), has to file the return of income if its total income without
giving effect to the provisions of sections 11 and 12 exceeds the maximum amount not
chargeable to income-tax.
In the case of political parties:
The Chief Executive Officer of every political party has to file the return of income of the
party if the total income of the party without giving effect to the provisions of section
13A exceeds the maximum amount not chargeable to income-tax.
In the case of certain associations :
Following entities are liable to file the return of income if their total income without
giving effect to the provisions of section 10 exceeds the maximum amount not chargeable
to tax:
 Research association referred to in section 10(21)
 News agency referred to in section 10(22B)
 Association or institution referred to in section 10(23A) [As amended by Finance
Act, 2022]
 Person referred to in clause (23AAA) of section 10.
 Institution referred to in section 10(23B)
 Fund/institution/trust/university/other educational institution/any hospital/medical
 institution referred to in sub-clause (iiiac), (iiiab), (iiiad), (iiiae), (iv), (v), (vi) or (via)
 of section 10(23C)
 Mutual Fund referred to in clause (23D) of section 10
 Securitisation trust referred to in clause (23DA) of section 10
 Investor Protection Fund referred to in clause (23EC) or clause (23ED) of section 10.
 Core Settlement Guarantee Fund referred to in clause (23EE) of section 10
 Venture capital company or venture capital fund referred to in clause (23FB) of
section 10;
 Trade union/association referred to in sub-clause (a) or (b) of section 10(24)
 Board or Authority referred to in clause (29A) of section 10.
 Body/authority/Board/Trust/Commission referred to in section 10(46)
 Infrastructure debt fund referred to in section 10(47)
In the case of certain university, college or other institution:
Every university, college or other institution referred to in clause (ii) and clause (iii) of
section 35(1), which is not required to furnish return of income or loss under any other
provision of the Act, shall furnish the return of income every year, irrespective of income
(or) loss.
In the case of Business Trust
Every business trust, which is not required to furnish return of income or loss under any
other provision of the Act, shall furnish the return of income every year, irrespective of
income (or) loss.
In case of investment fund referred to in section 115UB
Every investment fund referred to in section 115UB, which is not required to furnish
return of income or loss under any other provisions, shall furnish the return of income in
respect of its income or loss every year irrespective of income (or) loss
In the case of persons holding assets located outside India:
A person, being a resident in India (other than not ordinarily resident), who is not
required to furnish a return under any of the above `and who at any time during the
previous year :
a) holds, as a beneficial owner (*) or otherwise, any asset (including any financial
interest in any entity) located outside India or has signing authority in any account
located outside India; or
b) is a beneficiary (*) of any asset (including any financial interest in any entity)
located outside India,
shall furnish, on or before the due date, a return in respect of his income or loss for the
previous year in such form and verified in such manner and setting forth such other
particulars [As amended by Finance Act, 2022] as may be prescribed. However, above
discussed provision will not apply to an individual, being a beneficiary of any asset
(including any financial interest in any entity) located outside India where, income, if any,
arising from such asset is includible in the income of the person referred to in (a) above.
(*) "Beneficial owner" in respect of an asset means an individual who has provided,
directly or indirectly, consideration for the asset for the immediate or future benefit, direct
or indirect, of himself or any other person.
(*) "Beneficiary" in respect of an asset means an individual who derives benefit from the
asset during the previous year and the consideration for such asset has been provided by
any person other than such beneficiary.
Belated return
If the person fails to file the return of income within the time-limit prescribed in this
regard, then as per section 139(4) he can file a belated return. A belated return can be
filed at any time 3 months before the end of the relevant assessment year or before
completion of assessment, whichever is earlier.

Consequences of delay in filing the return of income

Delay in filing the return of income may attract certain adverse consequences. Following
are the consequences of delay in filing the return of income:
Loss (other than loss under the head “Income from house property”) cannot be
carried
forward.
Levy of interest under section 234A.Levy of fee under section 234F*
Exemptions under sections 10A, 10B, are not available.
Deduction under Part-C of Chapter VI-A shall not be available.
* Fee for default in furnishing return of income shall be Rs. 5,000. However, where the
total
income of the person does not exceed Rs. 5,00,000, the fee payable shall not exceed Rs.
1,000

Revision of return
Sometimes the taxpayer may omit to include certain information in the return or may
commit any mistake at the time of filing the return of income. In such case any
unintentional mistake or error or omission in the return of income filed by the taxpayer
can be corrected by filing a revised return.
 A return can be revised at any time 3 months before the end of the relevant
assessment year or before the completion of the assessment, whichever is earlier. It
should be noted that only a return filed under section 139(1) or belated return filed
under section 139(4) can be revised.
 A return of income filed pursuant to notice under section 142(1) of Act cannot be
revised under section 139(5).
Defective return
Section 139(9) provides the list of situations in which the return of income filed by the
taxpayer can be treated as defective return. If the Assessing Officer finds the return of
income to be defective under section 139(9), then he may intimate such defect to the
taxpayer and may give an opportunity to him to rectify such defect.
The taxpayer shall rectify such defect in the return of income within a period of 15 days
of such intimation or within such further period as the Assessing Officer may allow.
If the defect is not rectified within the period of 15 days or the further period so allowed
(as the case may be), then, notwithstanding anything contained in any other provision of
the Act, the return shall be treated as an invalid return and the provisions of the Act shall
apply as if the taxpayer had failed to furnish the return.

A return of income shall be regarded as defective, unless all the following conditions are
fulfilled:
 The annexures, statements and columns in the return of income relating to
computation of income chargeable under each head of income, computation of gross
total income and total income have been duly filled in.
 The return is accompanied by a statement showing the computation of the tax payable
on the basis of the return. [As amended by Finance Act, 2022]
The return is accompanied by the report of the audit referred to in section 44AB, or,
where the report has been furnished prior to the furnishing of the return, by a copy of
such report together with proof of furnishing the report.
The return is accompanied by proof of the tax, if any, claimed to have been deducted
or collected at source and the advance tax and tax on self-assessment, if any, claimed
to have been paid. Where the return is not accompanied by proof of the tax, if any,
claimed to have been deducted or collected at source, the return of income shall not be
regarded as defective if :
1. A certificate for tax deducted or collected was not furnished under section 203 or
section 206C to the person furnishing his return of income.
2. Such certificate is produced within a period of two years specified under subsection
(14) of section 155.
Where regular books of account are maintained by the taxpayer, the return is
accompanied by copies of :
1. Manufacturing account, trading account, profit and loss account or, as the case may
be, income and expenditure account or any other similar account and balancesheet.
2. In the case of a proprietary business or profession, the personal account of the
proprietor; in the case of a firm, association of persons or body of individuals,
personal accounts of the partners or members and in the case of a partner or member
of a firm, association of persons or body of individuals, also his personal account in
the firm, association of persons or body of individuals.
Where the accounts of the taxpayer have been audited, the return is accompanied by
copies of the audited profit and loss account and balance sheet and the auditor's report
and, where an audit of cost accounts of the taxpayer has been conducted under section
233B of the Companies Act, 1956 [now Section 148 of Companies Act, 2013], also the
report under that section.
Where regular books of account are not maintained by the taxpayer, the return is
accompanied by a statement indicating the amounts of turnover or, as the case may be,
gross receipts, gross profit, expenses and net profit of the business or profession and the
basis on which such amounts have been computed, and also disclosing the amounts of
total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of
the previous year.
Different Types of Return Forms
Return of income is a form used for detailing the income and taxes paid on the income
and reporting the same to the government. For the purpose of income tax, there are
mainly three types of returns which can be filed:
1. Original
2. Revised
3. Belated

Who is Liable to File a Return?

An individual below 60 years of age, who has a total income of Rs 2.5 lakhs or more in a
financial year is liable to file an income tax return. For a senior citizen (aged 60 years or
more) and for a very senior citizen (aged 80 years or more) this income limit gets
increased to Rs 3,00,000 and Rs 5,00,000 respectively for filing a return of income.
Companies and partnership firms are mandatorily supposed to file their returns even in
case they have a loss. 

What are the Due Dates for Various Returns?

Status Due Date

Due date for filing Income tax return for all assessees
except :
31st July of the following
1. Companies
year i.e. 31 July of the
2. Non-Companies whose books are required to be audited
Assessment Year (AY).
3.Working partner of a firm whose accounts are required to
be audited
Due date for filing Income tax return for the following
31st October of the following
assessees:
year i.e. 31st October of the
1. Companies not requiring transfer pricing report
AY
2. Non-Companies Whose books are required to be audited
Due date for filing Income tax return for the following 30th November of the
assessees: following Year i.e. 30
Companies requiring transfer pricing report November of the AY

What is a Revised Return?

When an assessee successfully files his return but subsequently realises he has either
missed some information or has not disclosed the information completely or any other
reason for which he wishes to file his return again, is known as a revised return. The due
date for filing the revised return is before the end of the relevant assessment year.
Example: Roshan has successfully filed his return of income on 10th July 2018.

Scenario 1:

On 15th July 2018, he realised he has not disclosed his bank account details correctly. He
files his return on 18th July 2018 after rectification. His revised return will override his
original return. For all purposes, his revised return acknowledgement will be considered.
What is a Belated Return?
An assessee does not file his return within the timelines prescribed in the income tax act
but files it after the due date is referred to as a belated return. The due date for filing a
belated return is on or before the end of the relevant assessment year.
Example: Ram has a taxable income of Rs. 7,00,000 from salary in AY 2019-20. He files
his return on 5th September 2019. His due date to file the return is 31st August 2019.
Since he has filed it on 5th September 2019 it is a belated return. Ram can file his belated
return anytime until 31st March 2020.

What are the Consequences if There is A Delay in Filing Your Return?

Delay in filing your return, has its own set of disadvantages:

1. Loss under head capital gain and business and profession will not be allowed to be
carried forward;

2. The assessee will be liable to pay interest under section 234A depending upon the
amount of tax due to @1% per month;

3. The income tax officer may levy a penalty under section 271F for late filing of return
up to Rs.10,000. However, if taxable income is below 5,00,000 penalty will not exceed
1,000.

4. In case the assessee is eligible for a refund, the tax department pays an interest under
Section 244A, a portion of which will be lost due to the late filing of return.

If you have missed the due date to file your return, you can still file it before 31 Dec 2019
by paying a fee of Rs 5,000. If you are filing after 31 December 2019, you will have to
pay a fee of Rs 10,000. Also to note that the time limit for filing a return late for FY
2018-19 expires on 31 March 2020.
Income Tax Assessment Procedure
Ascertaining total income is one major task of the procedure involved in levying tax on
an assessee. The task of assessing the income returned and determination of tax liability
is called ‘assessment’. The term ’assessment’ has been used in the Income-tax Act
meaning differently contexts. In certain situations, it refers to computation of income,
sometimes to the determination of tax payable and in some cases to the whole procedure
laid down in the Act of imposing tax liability on assessee.

Assessment of income relating to one Financial Year (FY) starts in the succeeding
financial year, which is called Assesment Year (AY). Income tax assessment procedure
begins when an assessee files his return of income to the income tax department.

Filing of return [Sec 139 (1)]

A person has to file return of income in the prescribed form within the specified time
limit if his total income exceeds the maximum non-taxable limit. A person other than a
company though income is less than the nontaxable limit, who satisfies any one of six
economic criteria and residing in a specified area.

1. Ownership of a motor vehicle other than a two wheeler

2. Occupation of any category of immovable property as may be notified by the CBDT
3. Incurred expenditure on foreign travel by himself or in respect of any other person.
Travel to Bangladesh, Pakistan, Bhutan, Nepal, Maldives, Sri Lanka and Saudi
Arabia for hajj or china on pilgrimage to Manasarover are excluded.
4. Holder of a credit card other than an add on card
5. Member of a club where entrance fees charged is Rs.25000 or more
6. Expenditure of Rs.50000 or more during the PY towards consumption of electricity.

Time of filing of return

1. In the case of a company, due date of submission is October 31

2. In the case of person other than a company
3. Where audit is compulsory, due date of filing return is October 31
4. In any other case, the due date of filing of return is July 31

Return of loss [Sec 139 (3)]:

Return can also be filed in the prescribed form in respect of loss suffered by the assessee.
It is not compulsory to file a return of loss, but certain losses can be carried forward only
on filing return of loss

Belated return [Sec 139(4)]:

If the return is not furnished within the time, the person may furnish the return of any PY
at any time before the end of one year form the end of the relevant AY or before making
assessment whichever is earlier. An assessee who files belated return are liable for penal
interest

Revised return [Sec 139(5)]:

If after filing a return of income or in pursuance of a notice the assessee discovers any
omission or wrong statement in return originally filed, he can file a revised return. It
should be filed within one year from the AY or before the completion of assessment
whichever is earlier.
Defective return [Sec 139(9)]:
Where the AO finds that the return filed by an assessee is defective he should intimate the
assessee about the defect and give him an opportunity to rectify the defects within 15
days from the date of intimation or within such further extended time as the AO may
allow. If the defect is not rectified within the time allowed, the return will be treated as
invalid and it will be deemed that no return has been filed by the assessee attracting penal
interest

Types of Income Tax  Assessment

 Self assessment [Sec 140A]: 

When a return is furnished the assessee will have to pay tax, if any payable on the basis of
return. He has also to pay interest up to the date of filing the return along with self-
assessment of tax. The return of income is to be accompanied by proof of payment of
both tax and interest. Assessing officer may make an enquiry for getting full information
in respect of assesse’s income. The assessee shall be given an opportunity of being heard
in respect of any material gathered on the basis of any enquiry so made. The assessing
authority may also direct the assessee to get his accounts audited by an accountant
nominated by chief commissioner, even if the accounts of the assessee have been audited
under nay other provision.
As the name suggests this is the type of income tax assessment where the assessee
personally calculates the tax themselves, usually accompanied by payment of the amount
they believe is due. After taking TDS and subtracting advance tax paid, tax payable is
required to be given under Section 139, Section 142, Section 148, or Section 153A.

 Summery assessment [Sec 143(1)]:

If on the basis of return filed, any tax or interest is due the A.O shall send intimation to
the assessee specifying the sum so payable. If any refund is due on the basis of such
return it shall be granted to the assessee. Such intimation shall be deemed to be a notice of
demand. Such an intimation should be send before the expiry of 2 years from the end of
the AY in which income was first assessable
The assessment under Section 143(1) is similar to the initial review of Income tax returns
online. The taxpayer receives an intimation u/s 143(1) from the IRS. The department will
send you a comparative income tax calculator. The overall income or loss incurred is
computed in the income tax assessment.

 Assessment in response to an order [Sec 143(2)]:

Assessment of income after receiving a notice from income tax authorities is called
assessment in response to an order. A.O  can send notice if he considers it necessary to
ensure that the assessee has not understated the income or has not underpaid tax. After
hearing such evidence as the assessee may produce in response to the notice and after
taking into account all relevant materials, which the A.O has gathered, he shall pass an
assessment order in writing determining the total income of the assessee and the sum
payable or refund due to the assessee on the basis of such assessment order

 Scrutiny Assessment u/s 143(3)

Scrutiny assessment is the assessment of a return filed by an assesse by providing an
opportunity for the assessee to support the declared income and expenses, as well as
claims of deductions, losses, exemptions, and so on, in the return using proof. The
committee manages it using a single work plan. The committee undertakes specific work,
as well as forming informal panels (for in-depth activities) or working groups.
The assessing officer is given the chance to conduct an investigation in order to determine
if the assessee correctly reported their income in the return. The claims for deductions,
exemptions, and other benefits are legal and factually correct. In case of any omissions,
contradictions, inaccuracies, or other errors, the assessing officer prepares their own
assessment for the assessee, taking into account all relevant circumstances.

 Best Judgment Assessment [Sec 144]:

In the following situation the A.O can make a best judgment assessment after considering
all relevant materials, which he has gathered. (1) if the assessee has not filed a return or a
belated return or a revised return, (2) if he fails to comply with the terms of the notice or
fails to comply with the direction to get his account audited, (3) if he fails to comply with
the terms of the notice   requiring the presence or production of evidence and documents
and (4) if the A.O is not satisfied with the correctness or completeness of the accounts of
the assessee. The best judgment assessment can be made only after giving the assessee a
reasonable opportunity of being heard. Assessee has a right to file an appeal or to make
an application for revision to the commissioner.
The term ‘best judgment assessment’ refers to the assessing officer’s opinion or
calculation of the assessee’s income in the context of income tax law. In the situation of
best judgment assessment, the evaluating officer will make the decision based on the best
reasoning. The assessee will not be dishonest in their assessment, nor will they be hostile
to the officer.

 Income escaping assessment or reassessment [Sec 147]:

If the AO has reason to believe that any income chargeable to tax has escaped assessment
for any AY he may assess or re assess such income. If an assessee has not furnished a
return of income although total income is above the taxable limit or where a return of
income has been made but assessee is found to have understated his income where an
assessment is made but income chargeable to tax has been under assessed, reassessment
can be made.
If the assessing officer has reason to think that income liable to tax has escaped
assessment for any assessment year, they will conduct an income escaping assessment
under Section 147. Moreover, it gives them the authority to reassess or re-compute
income, turnover, and other figures that have escaped their notice. The goal of conducting
an assessment under Section 147 is to bring any income that escaped assessment in the
original assessment into the tax net.

 Protective Assessment
This is a type of assessment that focuses on those that are made to ‘protect’ the revenue’s
interests. The income tax legislation, however, has no provision for the imposition of
income tax on anyone other than the person to whom it is due. It is open to the authorities
to undertake a protective or alternative assessment if it is unclear who among a few
probable persons is actually liable to pay the tax.
The authorities just make an assessment and keep it on paper until the situation is
resolved when they make a protective assessment. A protective order of assessment, but
not one of penalty, can be issued.

 Assessment in Case of Search u/s 153A

The assessing officer will do the following in this type of income tax assessment:
1. Giving such a person notice requires furnishing it within the time frame mentioned in
the notice. Clause (b) referred to the income return for each of the six assessment
years, which is confirmed in the prescribed format. Setting forth such other
particulars as may be prescribed, and the provisions of this Act shall apply as if such
 return were a return required to be furnished under Section 139, to the extent
possible; 
2. The assessor re-assesses the total income of the six assessment years immediately
preceding the assessment year relevant to the previous year in which such search or
requisition is made.

ncome tax assessments of any kind should be treated seriously. Furthermore, to avoid any
form of income tax assessment in front of the assessing officer, one must prepare the
income tax return accurately.
APPEALS AND REVISIONS UNDER INCOME TAX ACT, 1961

The Constitution of India gurantees the citizens of the country certain fundamental rights.
Therefore , under any system of rule of law, the right to appeal for redressal of one’s
grievances is generally in built.
Under the Income Tax Act, 1961 following two alternatives are available to the assessee
if he is not satisfied with the order passed by the Assessing Officer;

1) APPEAL : First appeal against the order of the Assessing Officer shall, except in
certain cases( Refusing to grant registration u/s 12AA and approval u/s 80G ), lie with the
commissioner (Appeals) u/s 246A.

2) REVISION : Alternativly, if the appeal is not preferred, or if could not be filed within
the time limit allowed, the assesse can apply u/s 264 to the Commissioner of Income Tax
for revision of the order of the Assessing Officer. This is known as revision in favour of
the assessee. The Commissioner of Income Tax can also take up suo moto the case foe
revsion u/s 264. In some cases, the Commissioner of Income Tax can also take up the
case for revision u/s 263. This is known as revision of the order of the Assessing Officer
which is erroneous and prejudicial to the interest of revenue.

The assessee is given a right of appeal by the Income tax Act where he feels aggrieved by
the order of the assessing authority. However, the assessee has no inherent right of appeal
unless the statute specifically provides that a particular order is appealable. There are four
stages of appeal under the Income-tax Act, 1961 as shown hereunder –
REVISIONS u/s 263 and 264

Section 263: The Principal Commissioner or Commissioner may call for and examine the
record of any proceeding under this Act, and if he considers that any order passed therein
by the Assessing officer is erroneous in so far as it is prejudicial to the interests of the
revenue, he may after giving an opportunity of being heard pass such order thereon as the
circumstances of the case justify, including an order enhancing or modifying the
assessment, or cancelling the assessment and directing a fresh assessment .
However, Assessee has an option to file an appeal in INCOME TAX APPELLATE
TRIBUNAL against the revision order passed by CIT u/s 263.

Section 264: The Principal Commissioner or Commissioner may, either of his own
motion or on an application by the assessee for revision, call for the record of any
proceeding under this act in which any such order has been passed and may make such
inquiry or cause such inquiry to be made and subject to the provisions of this act, may
pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit.

However, In this case income tax act does not provide any remedy for filling appeal to
higher income tax authority. But , assessee has an option , he can take the benefit of
Constitution of India. Article 226 provides every citizen of india remedy to file WRITE
petition in High Court against the order passed by income tax department.

APPEALS
As already discussed in above mentioned intro, the first appeal against the order of
Assessing Officer shall lie to the Commissioner (Appeals) and it can only be filed by
assesse only. An assesse or any deductor or any collector who has been aggrieved by the
orders (like order passed under section 147, 144, 143(3) etc) passed by the certain income
tax authorities can file its first appeal to commissioner appeals u/s 246A of the income
tax, act 1961.

Form of Appeal and limitation ( section 249 and Rules 45 & 46 )

1. Form : An appeal to the commissioner ( appeals) shall be made in Form 35.
2. Manner of furnishing the appeal:
A.By furnishing the form electronically under digital signature, if the return of income is
furnished under digital signature.
B.By furnishing the form electronically through electronic verification code in a case not
covered under sub clause (a)
C.In case where the assessee has the option to furnish the return of income in paper form,
he can exercise both options of filing form in paper form or electronically.

Time limit for filing the form [section 249(2)]

The appeal should be filed within a period of 30 days of date of service of notice of
demand or order passed by the authority. Further Commissioner may admit an appeal
after the expiration of the prescribed period of 30 days, if he is satisfied that the appellant
had sufficient cause for not presenting it within the prescribed period.
Tax Deducted at Source (TDS)
TDS stands for tax deducted at source. As per the Income Tax Act, any company or
person making a payment is required to deduct tax at the source if the payment exceeds
certain threshold limits.

TDS has to be deducted at the rates prescribed by the tax department. The company or
person that makes the payment after deducting TDS is called a deductor, and the
company or person receiving the payment is called the deductee.

The deductor is responsible for deducting TDS before making the payment and depositing
the same with the government. TDS is deducted irrespective of the mode of payment–
cash, cheque or credit–and is linked to the PAN of the deductor and deductee.

The concept of TDS was introduced with an aim to collect tax from the very source of
income. As per this concept, a person (deductor) who is liable to make payment of
specified nature to any other person (deductee) shall deduct tax at source and remit the
same into the account of the Central Government. The deductee from whose income tax
has been deducted at source would be entitled to get credit of the amount so deducted on
the basis of Form 26AS or TDS certificate issued by the deductor.

New Section 194S- A person is liable for Tax Deduction at Source (TDS) at 1% at the
time of payment of the transfer of virtual digital assets.
Sale of immovable property under Section 194-IA- It is proposed to amend the amount
on which TDS should be deducted. The person buying the property should deduct tax at
1% on the sum paid/credited or the stamp duty value of such property, whichever is
higher.
New Section 194R- TDS at 10% should be deducted by any person who provides perks
or benefits, whether convertible into money or not, to any resident for carrying out any
business or profession by such resident.

TDS is deducted on the following types of payments:

 Salaries
 Interest payments by banks
 Commission payments
 Rent payments
 Consultation fees
 Professional fees
However, individuals are not required to deduct TDS when they make rent payments or
pay fees to professionals like lawyers and doctors.

TDS is one kind of advance tax. It is a tax that is to be deposited with the government
periodically and the onus of doing the same on time lies with the deductor.

For the deductee, the deducted TDS can be claimed as a tax refund after they file
their ITR.

How to pay Tax Deducted/Collected at source?

Tax deducted or collected at source shall be deposited to the credit of the Central
Government by following modes:
1) Electronic mode: E-Payment is mandatory for
a) All corporate assesses; and
b) All assesses (other than company) to whom provisions of section 44AB of the Income
Tax Act, 1961 are applicable.
2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch

Tax Deducted at Source is a type of advance tax that the Government of India levies on
a periodic basis. The overall deducted TDS is claimed as a tax refund after a taxpayer
files the Income Tax Return.

When is TDS Deducted?

TDS deduction rules necessitate tax payment when a taxpayer gets payment due or
receives actual payment (whichever is earlier). Let’s take a look at a few examples where
TDS will be applicable. 
Example 1
Assume Mr Paul is a self-employed professional who got paid Rs.40,000 as advance and
received another Rs.20,000 after completion of work. In this scenario, the payee will
deduct TDS from the advance (Rs.4,000, 10% of Rs.40,000) and the rest (Rs.2,000, 10%
of Rs.20,000). The total payable taxable amount will be Rs.6,000. 
Example 2
Mr. Paul receives the complete payment after the completion of his work. In this case, he
will be taxed Rs.6,000 from the total sum by his payee, and Rs.54,000 will be paid to him
for his work.

Who is Liable to Deduct TDS?

The person making the payment is liable for the TDS deduction. That individual or
organisation is liable to deduct the sum at a specified rate and deposit it to the
Government within every financial year. 

TDS Return and the Associated Forms 

TDS return is a statement issued after successful payment of the taxes, containing all the
transactions mentioned towards TDS deduction made during a quarter. It is issued by the
payer, submitted to the Income Tax Department of India.

Tax returns contain all TDS deduction details collected by the payer, as well as other
essential information like the Permanent Account Number of the payer and payee and
other particulars regarding the payment made to the Government of India. It also collects
TDS challan information.
This certificate contains details like the particulars of payment, payee and payer details,
date of tax deduction and date of credit submission. TDS certificate is necessary to claim
tax credit or refund (if any) while filing Income Tax Return.
Considerations to File TDS
In order to file TDS return, the following considerations need to be followed:
 You need to have a valid Tax Deduction and Collection Account Number, and also
ensure that it is registered for e-filing.
 Prepare the TDS statements utilizing Return Preparation Utility before validating the
same.
 You need to have a valid digital signature certificate that is registered to e-file.
 Provide your Demat or bank account details of your principal contact and make sure
the PAN is linked with his or her Aadhaar.

Penalty Provision
Any taxpayer not complying with the TDS deduction rules will be liable to pay penalties,
usually in the form of fees and interest levied on the principal taxable amount. There are
multiple types of penalties levied; for example –

Regulation regarding tax deduction – Levied tax will be deducted when the actual
payment is being paid. Any delay in tax deduction will be subjected to a penalty of 1%
interest/month until the sum is deducted.
In case the person responsible for TDS deduction fails to do so, they are likely to be
restricted from ascertaining the taxable profit from the total expenditure. 
Regulations regarding TDS payment – Taxpayers are required to pay the taxable sum
to the Government of India by the 7th day of the month which succeeds the tax filing.
Incidents of none or late payment will attract a penalty of 1.5% per month (on the total
payable sum) till the sum is deposited.
Regulations regarding TDS return filing – TDS returns should be filed on the 31st day
of January, May, July, and October of every financial year. Non-filing or late filing of
return will attract a penalty of Rs.200 every day (according to Section 234E of the Income
Tax Act of India) till the return is filed. However, the penalty should not exceed the total
sum of tax levied.

How to Know Deducted TDS Amount?

The process to find whether TDS has been deducted or not and whether it has been
credited to a particular taxpayer’s account can be completed online. The steps are as
follows – 
 Step 1 – Navigate to the official website of the Income Tax Department of India and
select the option to register as a new user. 
 Step 2 – Enter details of the Permanent Account Number and generate a password.
 Step 3 – After logging in with the registered ID and password, select the option to
view the tax credit statement or Form 26AS.
26AS is a tax credit statement that carries a detailed report of TDS deducted during a
financial year. 
 Step 4 – The website will redirect to the page for the TDS Reconciliation Analysis
and Correction Enabling System, which will show all the details of a taxpayer’s tax
liabilities, including details of Tax Deducted at Source, advance tax paid, and other
information.

Tds Refund and Non-reduction of the Applicable Tax

If a taxpayer pays more tax than what he or she is legally obligated to pay,  will be able to
file a claim regarding a tax refund. Taxpayers can file the same with their annual income
tax return, and the refund amount will be disbursed along with the Income Tax Return. 

For example, suppose Mr. Paul presented an invoice of Rs.40,000, against which he
received a total of Rs.39,200 after deducting 2% (Rs.800) TDS. However, under Section
194C, he is liable for taxation at 1% (or Rs.400). The balance amount will arise as a
refund when Mr. Paul files his Income Tax Return.

If an individual’s annual income does not fall under the taxable threshold, they can
request zero deduction on their income as well. It can be completed via 2 different
methods – 

 Declaring income below the basic exemption limit in Form 15G or 15H will exempt
an individual from TDS. These Forms have to be submitted every year, otherwise,
the applicant may be subjected to tax deduction. 

 Applying for a certificate for deduction of tax at a lower or NIL rate via Form 13 will
also register as zero TDS under this clause.

Tax Deducted at Source is an essential clause under Income Tax Act, 1961. Every
taxpayer should be thoroughly aware of the taxation limit, forms, etc. in detail to adhere
to the regulations of the Income Tax Department of India. 
Tax Collected at Source (TCS) 
Indian Income Tax Act has provisions for tax collection at source or TCS. In these
provisions, certain persons are required to collect a specified percentage of tax from their
buyers on exceptional transactions. Most of these transactions are trading or business in
nature. It does not affect the common man.

Meaning of Tax collected at source (TCS)

Tax collected at source (TCS) is the tax collected by the seller from the buyer on sale so
that it can be deposited with the tax authorities. Section 206C of the Income-tax act
governs the goods on which the seller has to collect tax from the buyers. Such persons
must have the Tax Collection Account Number to be able to collect TCS.

Goods covered under TCS provisions and rates applicable to them

When the below-mentioned goods are utilised for the purpose of manufacturing,
processing, or producing things, the taxes are not payable. If the same goods are utilised
for trading purposes, then tax is payable. The tax payable is collected by the seller at the
point of sale. The rate of TCS is different for goods specified under different categories :

Type of Goods or transactions Rate

Liquor of alcoholic nature, made for consumption by humans 1%

Timber wood under a forest leased 2.5%

Tendu leaves 5%

Timber wood by any other mode than forest leased 2.5%

Forest produce other than Tendu leaves and timber 2.5%

Scrap 1%

Minerals like lignite, coal and iron ore 1%

Purchase of Motor vehicle exceeding Rs.10 Lakhs 1%

Parking lot, Toll Plaza and Mining and Quarrying

2%

Where total turnover is more than Rs.10 crores in the previous financial 0.1%
year and receives sale consideration of any products of more than Rs. 50
lakhs, such seller must collect TCS upon receiving consideration from
the buyer on such amount over and above Rs.50 lakhs, , as per Section
206C(IH).
(Without PAN, then 1% is TCS)

Classification of Sellers and Buyers for TCS

1. There are some specific people or organisations who have been classified
as sellers for tax collected at the source. No other seller of goods can collect tax at
source from the buyers apart from the following list :
 Central Government
 State Government
 Local Authority
 Statutory Corporation or Authority
 Company registered under the Companies Act
 Partnership firms
 Co-operative Society
 Any person or HUF who is subjected to an audit of accounts under the Income-tax
Act for a particular financial year.

2. A buyer is a person who obtains goods of specified nature in any sale or right to
receive any such goods, by way of auction, tender or any other mode. However, the
below buyers are exempted from the collection of tax at the source.In other words,
TCS need not be collected from the following persons.
 Public sector companies
 Central Government
 State Government
 Embassy of High commission
 Consulate and other Trade Representation of a Foreign Nation
 Clubs such as sports clubs and social clubs
 Where resident buyer utilises such purchase for the purposes of manufacturing,
processing or producing articles or things or for the purposes of generation of power
(not for trading) and gives this declaration in writing in duplicate.

When should TCS be collected?

The seller must collect TCS at the earlier of the following two dates:
When debiting the money payable by the buyer to their account in the books of accounts.
Upon receipt of such money from the buyer in any mode such as cash issue of a cheque or
draft.
In the case of the motor vehicle sale, the TCS is collected upon receipt of money or
consideration for the motor vehicle from the buyer.
Example of TCS calculation
If a buyer purchases a car from a showroom that is valued at Rs. 11 lakhs then an amount
of Rs. 11,000 is the TCS deposited by the showroom. So, the total amount to be collected
from the buyer is Rs.11,11,000.
An invoice was issued to the customer for Rs. 12,000 on which 1% TCS was charged and
collected at Rs. 120. So, the total payable by the customer is Rs. 12,120.
Penalty Under Income Tax Act
An assessee who commits an offence under the provisions of The Income Tax Act, 1961
shall be subject to penalty. The penalty is an additional amount levied and is different
from the tax payable. Penalty is levied based on the law at the time of the offence being
committed and not as it stands in the financial year for which the assessment is being
made. 
Under the Income-tax Act, penalties are levied for various defaults committed by the
taxpayer. Some of the penalties are mandatory and a few are at the discretion of the tax
authorities. In this part, you can gain knowledge about the provisions relating to various
penalties leviable under the Income-tax Act.

 Penalty for default in making payment of Self Assessment Tax As per section
140A(1)
any tax due (after allowing credit for TDS, advance tax, etc.) along with interest and fee*
should be paid before filing the return of income. Tax paid as per section 140A(1) is
called ‘self-assessment tax’.
As per section 140A(3), if a person fails to pay either wholly or partly self-assessment tax
or, interest, or fee* then he will be treated as assessee in default in respect of unpaid
amount. As per section 221(1), if a taxpayer is treated as an assessee in default, then he
shall be held liable to pay penalty of such amount as the Assessing Officer may impose
and in the case of a continuing default, such further amount or amounts as the assessing
officer may, from time to time, direct. However, the total amount of penalty cannot
exceed the amount of tax in arrears.

 Penalty for default in making payment of Tax As per section 220(1),

when a demand notice under section 156 has been issued to the taxpayer for payment of
tax (other than notice for payment of advance tax), then such [As amended by Finance
Act, 2022] amount shall be paid within a period of 30 days of the service of the notice at
the place and to the person mentioned in the notice.
If the taxpayer makes default in payment of any tax due from him, then apart from other
penal provisions, he is treated as an assessee in default. As per section 221(1), if a
taxpayer is treated as an assessee in default, then he shall be liable to pay penalty of such
an amount as the Assessing Officer may impose. However, penalty cannot exceed the
amount of tax in arrears. Thus, penalty under section 221(1) is a general penalty and can
be levied in all the cases in which the taxpayer is treated as an assessee in default

 Late filing fees for delay in filing the TDS/TCS statement

As per section 200(3) every person liable to deduct tax at source is liable to file the
statement in respect of tax deducted by him i.e. TDS return. Further, as per proviso to
section 206C(3) every person liable to collect tax at source has to furnish statement in
respect of tax collected by him i.e. TCS return. Section 234E provides for levy of late
filing fees for the delay in filing TDS/TCS return. As per section 234E, where a person
fails to file the TDS/TCS return on or before the due date prescribed in this regard, then
he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the
failure continues. The amount of late fees however shall not exceed the amount of
TDS/TCS. TDS/TCS return cannot be filed (after prescribed due date) without payment
of late filing fees.

 Fee for default in furnishing return of income

If assessee who is required to furnish return of income under section 139 failed to furnish
return of income within due date as prescribed under section 139(1) then as per section
234F, he will be required to pay fee of Rs. 5,000 if return has been furnished after the due
date prescribed under section 139(1). However, it shall be Rs. 1,000 if the total income of
an assessee does not exceed Rs. 5 lakh.

 Penalty for failure to comply with notice issued under section 142(1) or 143(2)
or direction for audit under section 142(2A)
Penalty under section 272A is levied if a taxpayer fails to comply with notice issued to
him under section 142(1) or section 143(2) or fails to comply with a direction issued
under section 142(2A).
Under section 142(1),
the Assessing Officer can issue notice asking the taxpayer to file the return of income if
he has not filed the return of income or to produce or cause to be produced such accounts
or documents as he may require or to furnish in writing and verified in the prescribed
manner, information in such form and on such points or matters (including a statement of
all assets and liabilities of the taxpayer, whether included in the accounts or not) as he
may require.
Section 142(2A) deals with special audit.
Section 143(2) deals with the provisions relating to the issuance of notice before
conducting a scrutiny assessment under section 143(3).
If the taxpayer fails to comply with notice issued to him under section 142(1) or section
143(2) or fails to comply with a direction issued under section 142(2A), then as per
section 272A he shall be liable for a penalty of Rs. 10,000 for each failure.

 Under-reporting of income
If the income assessed/ re-assessed exceeds the income declared by the assessee, or in
cases where return has not been filed and income exceeds the basic exemption limit,
penalty at 50% of tax payable on such under reported income shall be levied.
200% of the tax is payable if under-reporting results from misreporting of income

 Failure to maintain books of accounts and other documents

Normally, the amount of penalty leviable is ₹25,000
In case, the assessee is a person who has entered into international transaction, the penalty
will be 2% of the value of such international transactions or specified domestic
transactions

 Penalty for false entry such as fake invoices

In case the income tax officer finds that the books of accounts provided by the asseessee
in the proceeding contains the following:
1. forged or falsified documents such as a fake invoice or a false piece of documentary
evidence
2. an invoice in respect of supply or receipts of goods or services issued by any person
without actual supply or receipt of goods or services
3. an invoice of supply or receipt of goods or services received from a person who does
not exist
4. an omission of any entry which is relevant for computation of total income.
Then, the assessee might have to pay a penalty of the amount equal to sum of such false
or omitted entries.

 Undisclosed income
1. Where the income determined includes undisclosed income, a penalty @10% is
payable. However, no such penalty will be leviable, if such income was included in
the return and tax was paid before the end of the relevant previous year.
2. Where Search has been initiated on/ after 1/7/2012 but before 15/12/2016,
3. If undisclosed income is admitted during the course of search and assessee pays tax
and interest and files return, a penalty @ 10% of such undisclosed income is payable.
4. If undisclosed income is not admitted but the same is furnished in the return filed
after such search, 20% of such undisclosed income is payable.
5. In all other cases, penalty is leviable @ 60%
6. Where Search has been initiated on/ after 15/12/2016,
7. If undisclosed income is admitted during the course of Search and assessee pays tax
and interest and files return, a penalty @ 30% of such undisclosed income is payable.
8. In all other cases, penalty is leviable @ 60%

 Audit and Audit Report

1. If the assessee fails to get his accounts audited, obtain audit report, or furnish
report of such auditor, a penalty will be leviable at the ₹1,50,000 or ½% of the total
sale/ Turnover/ gross receipts whichever is lesser.
2. Failure of assessee to furnish Audit report related to foreign transaction, a penalty
@ ₹1,00,000 will be payable

 TDS/TCS
i. Where a person fails to deduct tax at source, he will be liable to pay a penalty equal
to the amount of tax which he has failed to deduct/ pay.
ii. Where a person fails to collect tax at source, he will be liable to pay a penalty equal
to the amount of tax which he has failed to collect.
iii. Failure to furnish TDS/TCS statement or furnishing incorrect statements, shall attract
a penalty ranging from ₹10,000 to ₹1,00,000
iv. Failure to furnish information/ furnishing inaccurate information related to TDS
deduction related regarding Non residents shall attract a penalty of ₹100,000

 Penalty for using modes other than Account payee cheque/ draft/ ECS
If a person takes/ accepts loan/ deposit except by way of Account payee cheque/ account
payee draft/ ECS, and if the aggregate amount exceeds ₹20,000, he shall be liable to pay
a penalty of an amount equal to such loan/ deposit.
If, an amount of ₹2,00,000 or more is received in aggregate from a person in a day/ single
transaction/ relating to one event, a penalty equal to such amount will be payable.
If a person repays loan/ deposit and such amount so repaid exceeds ₹20,000 and such
amount has been repaid except by way of Account payee cheque/ account payee draft/
ECS, an amount equal to such loan/ deposit shall be payable.

 Failure to furnish statements/ information

1. Failure to furnish a statement of financial transaction or reportable account shall
attract a penalty of ₹500 for each day of failure. And if the failure is in response to a
notice to report on specified financial transaction, the penalty shall be ₹1,000 for
each day of failure
2. A penalty of ₹50,000 shall be attracted for furnishing inaccurate statement of a
financial transaction/ reportable account
3. Failure of an eligible investment fund to furnish any statement / information/
documents within the prescribed time shall attract a penalty of ₹5,00,000
4. Failure to furnish any information/ document in relation to international transaction
shall attract a penalty of 2% of the value of such transaction
5. Failure to furnish any information/ document by an Indian Concern related with
international transaction, shall attract a penalty of 2% of the value of transaction
or ₹50,000 in some cases.
6. If a report/ certificate is required to be furnished by an Accountant/ Merchant
Banker/ Registered Valuer and such information is found to be incorrect, a penalty
of ₹10,000 for each incorrect report/ information is payable
7. Failure to furnish information by any person who is attending/ helping carrying the
business/ profession of any person, in whose building/ place the income tax authority
has entered for collecting information shall attract a penalty of upto ₹1,000

Others
i. Failure to apply/quote/ intimate PAN/ quoting false PAN shall attract a penalty
of ₹10,000
ii. Failure to apply/quote TAN/ quoting false TAN shall attract a penalty of ₹10,000
iii. In case of the following defaults, ₹10,000 will be the penalty leviable,
iv. Refusal to answer questions put by the department
v. Refusal to sign statements made in income tax proceedings
vi. Non compliance with summons to give evidence/ produce books of accounts
vii. Failure to comply with a notice

Interest
Introduction
Interest is the charge a person is required to pay on the money borrowed. Interest is
payable on debentures and bonds and other debt securities or monies borrowed.
Interest may be paid as simple interest or as compound interest. Simple interest is paid at
a fixed rate per annum. Compounding allows for the calculation of interest on the
principal and the accumulated interest.

Income Tax Department strives to make it as easy and convenient for citizens to comply
with advance tax payments. So, one has the option of paying it in 4 instalments over the
financial year.

However, if you still default, there are some consequences in the form of an interest
penalty. Basically, Section 234C deals with interest to be levied on defaulters of Advance
Tax Instalment Payments. This is the last part in a 3-part series about Interest imposed by
the IT Department.

Due dates for paying Advance Tax

The Income Tax department expects you to pay your taxes on time, otherwise, you will
be charged interest for late payment, at the time of filing your returns. Advance tax is paid
on the following dates of a financial year:

Interest on late payment of advance tax

Taxpayers opting for
In case of all taxpayers other than taxpayer opting
On or Before presumptive income u/s
for presumptive income u/s 44AD
44AD
15th June Up to 15% of advance tax payable NIL
15th
Up to 45% of advance tax payable NIL
September
15th
Up to 75% of advance tax payable NIL
December
Up to 100% of advance
15th March Up to 100% of advance tax payable
tax payable
Refund of Tax by Income Tax Department
REFUNDS OF TAX

If, any assessment year an assessee pays the tax which is more than the amount for which
he is actually chargeable and if the assessee proves excess payment before the Assessing
Officer, section 237 empowers the assessee to claim a refund of the excess. Once the
Assessing Officer is satisfied about the excess payment made by the assessee, he can
allow the claim or refund.

Under the following cases a claim to refund may arise –

 When tax is deducted at source from salary, interest on securities od debentures,

dividend at a rate higher than the rate applicable to the total income of an assessee.
 When tax paid in advance exceeds the amount of tax actually payable as determined
at the time of refular assessment.
 When tax calculated was higher due to some mistake and later on tax liability is
reduced on account of rectification of a mistake.
 When tax was calculated at the higher rate on the payment given to non-residents
whereas they were actually chargeable at a lower rate of income tax.
 When due to double taxation , the assessee is entitled to a double taxation relief.

A- Who is allow to Claim Refund of Tax ? [ Sec. 238(1) ]

Where the income of one person is included in the total income of any other person, the
latter alone shall be entitled to a refund in case of excess payment of tax in this case.
In the case of death, incapacity, insolvency, liquidation or other cause, a person is unable
to claim or receive any refund due to him, his legal representative or the trustee or
guardian or receiver, as the case may be, shall be entitled to claim or receive such refund
for the benefit of such person or his estate.
A Claim for Refund must be filed in the prescribed form and verified in the prescribed
manner. Where any part of the total income of a person claiming refund consists of
dividends or any other income from which tax is deducted at source, the claim for refund
shall be accompanied by a certificate which is issued by the tax-deducting authority. The
claim for refund may be presented by the claimant or through an agent or may be send by
post.

B- Time Limit for Claiming Refund of Tax [ Sec. 239(2) ]

No such claim shall be allowed, unless it is made within the period specified hereunder,
namely :—
(a) where the claim is in respect of income which is assessable for any assessment year
commencing on or before the 1st day of April, 1967, 4 years from the last day of such
assessment year;
(b) where the claim is in respect of income which is assessable for the assessment year
commencing on the first day of April, 1968, 3 years from the last day of the assessment
year;
(c) where the claim is in respect of income which is assessable for any other assessment
year, [one] year from the last day of such assessment year;
(d) where the claim is in respect of fringe benefits which are assessable for any
assessment year commencing on or after the first day of April, 2006, 1 (one) year from
the last day of such assessment year.
C- Refund of Tax on Appeal etc. [ Sec. 240 ]
Where, as a result of any order passed in appeal or other proceeding under this Act,
refund of any amount becomes due to the assessee, the Assessing Officer shall refund the
amount to the assessee without his having to make any claim in that behalf:

It is further provided that—

(a)  an assessment is set aside or cancelled and an order of fresh assessment is directed to
be made, the refund, if any, shall become due only on the making of such fresh
assessment;
(b)  the assessment is annulled, the refund shall become due only of the amount, if any, of
the tax paid in excess of the tax chargeable on the total income returned by the assessee.]

D- Interest On Delayed Refunds of Tax [ Sec. 243 ]

Central Government shall pay the assessee simple interest at 15% p.a.  [fifteen per cent
per annum ] on the amount directed to be refunded from the date immediately following
the expiry of the period of 3 months aforesaid to the date of the order granting the refund.
Where any question arises as to the period to be excluded for the purposes of calculation
of interest under the provisions of this section, such question shall be determined by the
Chief Commissioner or Commissioner whose decision shall be final.
The provisions of this section shall not apply in respect of any assessment for the
assessment year commencing on the 1st day of April, 1989 or any subsequent assessment
years.

E- Interest On Refund of Tax Where No Claim Is Needed [ Sec. 244 ]

Where a refund is due to the assessee in pursuance of an order and the Assessing Officer
does not grant the refund within a period of 3 month [three months]  from the end of the
month in which such order is passed, the Central Government shall pay to the assessee
simple interest at 15% p.a. [fifteen per cent per annum ] on the amount of refund due
from the date immediately following the expiry of the period of 3 months [three] months
aforesaid to the date on which the refund is granted.

F- Interest on refunds of Tax [ Sec. 244A ]

Where refund of any amount becomes due to the assessee, he shall be entitled to receive,
in addition to the said amount, simple interest thereon calculated in the following manner,
namely :—
(a)  where the refund is out of any tax paid or collected at source or paid by way of
advance tax or treated as paid, during the financial year immediately preceding the
assessment year, such interest shall be calculated at the rate of 1½ % [one-half per cent]
for every month or part of a month comprised in the period from the 1st day of April of
the assessment year to the date on which the refund is granted:

Provided that no interest shall be payable if the amount of refund is less than 10% [ten per
cent] of the tax on regular assessment;
(b)  in any other case, such interest shall be calculated at the rate of 1½% [one-half per
cent] for every month or part of a month comprised in the period or periods from the date
or, as the case may be, dates of payment of the tax or penalty to the date on which the
refund is granted.