TABLE OF CONTENTS

Definitions.................................................................................................................................. 2

1. Introductory.......................................................................................................................... 5

2. Residential status ................................................................................................................. 7

3. Set off & carry forward ........................................................................................................ 9

4. Taxable income .................................................................................................................. 12

5. Appeal, revision ................................................................................................................. 16

6. Income Tax Authorities ..................................................................................................... 19

7. Assessment ......................................................................................................................... 21

8. Penalties ............................................................................................................................. 25

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 DEFINITIONS

SECTION - 2, INCOME-TAX ACT, 1961-2019 (NO. 2)

2(1) "ADVANCE TAX" means the advance tax payable in accordance with the provisions of
Chapter XVII-C;
2 (1A) "AGRICULTURAL INCOME" means—
(a) any rent or revenue derived from land which is situated in India and is used for
agricultural purposes;
(b) any income derived from such land by—
(i) agriculture; or
(ii) the performance by a cultivator or receiver of rent-in-kind of any process
ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or
received by him fit to be taken to market; or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or
received by him, in respect of which no process has been performed other than a process of
the nature described in paragraph (ii) of this sub-clause;
(c) any income derived from any building owned and occupied by the receiver of the rent or
revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any
land with respect to which, or the produce of which, any process mentioned in paragraphs (ii)
and (iii) of sub-clause (b) is carried on :
Provided that—
(i) the building is on or in the immediate vicinity of the land, and is a building which the
receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of
his connection with the land, requires as a dwelling house, or as a store-house, or other out-
building, and
(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and
collected by officers of the Government as such or where the land is not so assessed to land
revenue or subject to a local rate, it is not situated—
(A) in any area which is comprised within the jurisdiction of a municipality (whether known
as a municipality, municipal corporation, notified area committee, town area committee, town
committee or by any other name) or a cantonment board and which has a population of not
less than ten thousand; or
(B) in any area within the distance, measured aerially,—

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(I) not being more than two kilometres, from the local limits of any municipality or
cantonment board referred to in item (A) and which has a population of more than ten
thousand but not exceeding one lakh; or
(II) not being more than six kilometres, from the local limits of any municipality or
cantonment board referred to in item (A) and which has a population of more than one lakh
but not exceeding ten lakh; or
(III) not being more than eight kilometres, from the local limits of any municipality or
cantonment board referred to in item (A) and which has a population of more than ten lakh.
Explanation 1.—For the removal of doubts, it is hereby declared that revenue derived from
land shall not include and shall be deemed never to have included any income arising from
the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of
this section.
Explanation 2.—For the removal of doubts, it is hereby declared that income derived from
any building or land referred to in sub-clause (c) arising from the use of such building or land
for any purpose (including letting for residential purpose or for the purpose of any business or
profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be
agricultural income.
Explanation 3.—For the purposes of this clause, any income derived from saplings or
seedlings grown in a nursery shall be deemed to be agricultural income.
Explanation 4.—For the purposes of clause (ii) of the proviso to sub-clause (c), "population"
means the population according to the last preceding census of which the relevant figures
have been published before the first day of the previous year;
(1C) "ADDITIONAL COMMISSIONER" means a person appointed to be an Additional
Commissioner of Income-tax under sub-section (1) of section 117;
(1D) "ADDITIONAL DIRECTOR" means a person appointed to be an Additional Director of
Income-tax under sub-section (1) of section 117;
2(4) "APPELLATE TRIBUNAL" means the Appellate Tribunal constituted under section 252 ;
2(7) "ASSESSEE" means a person by whom any tax or any other sum of money is payable
under this Act, and includes—
(a) every person in respect of whom any proceeding under this Act has been taken for the
assessment of his income or assessment of fringe benefits or of the income of any other
person in respect of which he is assessable, or of the loss sustained by him or by such other
person, or of the amount of refund due to him or to such other person ;
(b) every person who is deemed to be an assessee under any provision of this Act ;
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(c) every person who is deemed to be an assessee in default under any provision of this Act ;
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 Additional
Commissioner or Additional Director or 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 ;
2(9) "ASSESSMENT YEAR" means the period of twelve months commencing on the 1st day of
April every year ;
2(9A) "ASSISTANT COMMISSIONER" means a person appointed to be an Assistant
Commissioner of Income-tax or a Deputy Commissioner of Income-tax under sub-section (1)
of section 117 ;
2(9B) "ASSISTANT DIRECTOR" means a person appointed to be an Assistant Director of
Income-tax under sub-section (1) of section 117 ;
2(12) "BOARD" means the Central Board of Direct Taxes constituted under the Central
Boards of Revenue Act, 1963 (54 of 1963) ;
2(15A) "CHIEF COMMISSIONER" means a person appointed to be a Chief Commissioner of
Income-tax or a Principal Chief Commissioner of Income-tax under section 117 (1);
2(16) "COMMISSIONER" means a person appointed to be a Commissioner of Income-tax or a
Director of Income-tax or a Principal Commissioner of Income-tax or a Principal Director of
Income-tax under sub-section (1) of section 117;
2(16A) "COMMISSIONER (APPEALS)" means a person appointed to be a Commissioner of
Income-tax (Appeals) under sub-section (1) of section 117;
2(19A) "DEPUTY COMMISSIONER" means a person appointed to be a Deputy Commissioner
of Income-tax under sub-section (1) of section 117;
2(25) "INCOME-TAX OFFICER" means a person appointed to be an Income-tax Officer
under section 117(1);

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 INTRODUCTORY
1. INTRODUCTION
- Article 265 – tax cannot be levied or collected without the authority established and
entitled by law.
- Article 19(1)(g) – right to do business
2. DEFINITIONS
2.1. Income [sec. 2(24)]
- Income includes all the receipts in the form of cash /any kind.
1) Profits & Gains,
2) Dividends,
3) Voluntary contributions received by a trust,
4) Perquisites in the hand of employee
5) Any special allowance or benefit
6) City compensatory allowance/dearness allowance
7) Any benefits or perquisites to a Director
8) Capital Gains
9) Any benefits or perquisite to a representative assessee
10) Any sum chargeable u/s 28,41 & 59
11) Insurance profit
12) Winnings from lottery
13) Employees contribution towards provident fund
2.2. Tax
3. TYPES OF INCOME
3.1. Earned
3.2. Profit
3.3. Interest
3.4. Dividend
3.5. Rental
3.6. Capital gains
3.7. Royalty etc.
4. TYPES OF TAXES
4.1. Direct
- Income tax
- Wealth tax
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 - Capital gains tax
- Security transaction tax
- Perquisite tax
- Corporate tax
4.2. Indirect
- GST
- Custom duty
- Excise duty
5. IMPORTANCE OF TAXATION
6. HISTORY OF TAXATION IN INDIA
6.1. Ancient India- mentions in Manusmriti, Arthshastra etc.
6.2. Mughal era
- Tax based on religion, non-Muslims were charged more tax on everything
6.3. British era
- The British Government specially sent “Mr. James Wilson” an experienced British
Treasury official to restore order in Indian finances.
- Mr. Wilson introduced a tax on income of all kinds, a system of licenses of arts trades
and professions and a tobacco tax.
- Income Tax Act was closely modelled after British Income Tax Law.
6.4. Post independence
- In the light of recommendations of Mahabir Tyagi committee in 1961, Income Tax
Act 1961 was presented and passed in September 1961.
- It came into force from 1st April 1962.
7. CONCLUSION

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 RESIDENTIAL STATUS
1. INTRODUCTION
2. MEANING
2.1. Person [sec. 2(31)]
1. An individual,
2. A Hindu undivided family,
3. A company,
4. A firm,
5. An association of persons or a body of individuals, whether incorporated or
not,
6. A local authority, and
7. Every artificial juridical person, not falling within any of the preceding sub-
clauses.
2.2. Residential status
3. CATEGORIES
3.1. For individuals & HUFs
3.1.1. Residents/ ordinary residents
3.1.2. Non-ordinary residents
3.1.3. Non-residents
3.2. For others
3.2.1. Residents/ ordinary residents
3.2.2. Non-residents
4. RULE OF RESIDENTIAL STATUS
4.1. For residents
- 182 days in previous year.
- 365 days in 4 years
4.2. For non-ordinary residents & non-residents
- Not more than181 days in previous year.
- Not more than 364 days in 4 years
5. NEED TO DETERMINE RESIDENTIAL STATUS
- The total income differs
- Burden is different upon different categories of residents
6. IMPORTANT ASPECTS
6.1. Residential address is updated every year of the previous year.
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 6.2. Duty of assessee to show evidences of his residence in India.
6.3. Dual residential status is possible
7. HOW IT AFFECTS?
Particulars Ordinary Non-ordinary Non-residents
residents residents
1. Income received in India Taxable Taxable Taxable
2. Income accrued outside but received Taxable Taxable Taxable
in India
3. Income accrued & received outside
a. Foreign business where business Taxable Taxable Non- taxable
is controlled from here
b. Foreign professional income Taxable Taxable Non- taxable
where profession is here
c. Any other foreign income Taxable Non- taxable Non- taxable

8. CONCLUSION

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 SET OFF & CARRY FORWARD
1. INTRODUCTION
2. MEANING
2.1. Loss
2.2. Set-off
- Adjustment of losses against profits from another sour/heads of income in the same
assessment year.
2.3. Carry forward
- After making the appropriate and permissible intra-head and inter-head adjustments,
there could still be unadjusted losses. These unadjusted losses can be carried forward
to future years for adjustments against income of these years
3. SET-OFF OF LOSSES
3.1. Intra head adjustment in assessment [sec. 70]
- The losses from one source of income can be set off against income from another
source under the same head of income.
- For eg: Loss from Business A can be set off against profit from Business B, where
Business A is one source and Business B is another source and the common head of
income is “Business”.
- EXCEPTIONS:-
1. [Sec. 73A] Losses from a Speculative business will only be set off against the profit
of the speculative business. One cannot adjust the losses of speculative business with
the income from any other business or profession.
2. Loss from an activity of owning and maintaining race-horses will be set off only
against the profit from an activity of owning and maintaining race-horses.
3. [Sec. 74] Long-term capital loss will only be adjusted towards long-term capital
gains. However, a short-term capital loss can be set off against both long-term capital
gains and short-term capital gain.
4. [Sec. 73] Losses from a specified business will be set off only against profit of
specified businesses. But the losses from any other businesses or profession can be set
off against profits from the specified businesses.
3.2. Inter head adjustment in assessment [sec. 71]
- After the intra-head adjustments, the taxpayers can set off remaining losses against
income from other heads.
- Eg. Loss from house property can be set off against salary income.
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 - EXCEPTIONS:- Following losses can’t be set off against any other head of income:
a. Speculative Business loss
b. Specified business loss
c. Capital Losses
d. Losses from an activity of owning and maintaining race-horses
4. CARRY FORWARD OF LOSSES
4.1. Losses from House Property :
- Can be carry forward up to next 8 assessment years
- Can be adjusted only against Income from house property
- Can be carried forward even if the return of income for the loss year is belatedly filed.
4.2. Losses from Non-speculative Business (regular business) loss :
- Can be carry forward up to next 8 assessment years
- Can be adjusted only against Income from business or profession
- Not necessary to continue the business at the time of set off in future years
- Cannot be carried forward if the return is not filed within the original due date.
4.3. Speculative Business Loss :
- Can be carry forward up to next 4 assessment years
- Can be adjusted only against Income from speculative business
- Cannot be carried forward if the return is not filed within the original due date.
- Not necessary to continue the business at the time of set off in future years
4.4. Specified Business Loss under 35AD :
- No time limit to carry forward the losses from the specified business under 35AD
- Not necessary to continue the business at the time of set off in future years
- Cannot be carried forward if the return is not filed within the original due date
- Can be adjusted only against Income from specified business under 35AD
4.5. Capital Losses :
- Can be carry forward up to next 8 assessment years
- Long-term capital losses can be adjusted only against long-term capital gains.
- Short-term capital losses can be set off against long-term capital gains as well as
short-term capital gains
- Cannot be carried forward if the return is not filed within the original due date
4.6. Losses from owning and maintaining race-horses :
- Can be carry forward up to next 4 assessment years from the assessment year in
which the loss was incurred
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 - Cannot be carried forward if the return is not filed within the original due date
- Can only be set off against income from owning and maintaining race-horses only
5. CONCLUSION

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 TAXABLE INCOME
1. INTRODUCTION -
2. MEANING
2.1. Assessment year
- Sec. 2(9) “assessment year” means the period of twelve months commencing on the
1st day of April every year ;
2.2. Previous year
- Sec. 3 “previous year” means the financial year immediately preceding the assessment
year
2.3. Taxable income
- Final amount of income on which tax is to be paid.

Taxable Income Formula = Gross Total Income (Chapter IV)

– Total Exemptions – Total Deductions (Chapter VI A)

3. SOURCES OF INCOME
Income from Salary Salary, Allowances, Leave encashment basically all the money we
receive while rendering job as a result of our employment.
Income from House Income from house or building, this may be owned and self-
Property occupied or may be rented
Income from Capital Income from gain or loss when you sell a capital asset
Gain
Income from Business Income/loss that arises as a result of carrying on a business or
or Profession profession
Income from Other This is the residual head - includes your income from savings
Sources bank accounts, fixed deposits, family pension or gifts received

4. INCOME FROM HOUSE PROPERTY[SEC. 23]

THREE ESSENTIAL CONDITIONS:
1. The assessee is the owner of that property.
2. The property must consist of house, buildings and/or land.
3. The property may be used for any purpose except used by the owner for the purpose of
running his business or profession.

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 PARTICULAR AMOUNT
1. Income from Self-occupied Property
Interest Paid/Payable on Housing Loan for Current Financial Year
Total interest for Pre-Construction Period

2. Income from Let-out Property

Annual letable value or rent received or receivable
Less: Municipal Taxes Paid During the Year
Less: Unrealized Rent
Net Annual Value (1-(2+3))

Less: Deductions from Net Annual Value

i. Standard Deduction @ 30% of Net Annual Value
ii. Interest on Housing Loan

Total Income from House Property

5. INCOME FROM SALARY [SEC. 15]
PARTICULARS AMOUNT
1. Gross Salary
1) Basic Salary
2) Fees, Commission and Bonus
3) Allowances
4) Perquisites
5) Retirement Benefits

Less: Deductions from Salary (Sec. 16)

1) Entertainment Allowance
2) Professional Tax

Net Salary

6. INCOME FROM PROFITS & GAINS OF BUSINESS & PROFESSION [SEC. 29]
- Only profit is to be taken into consideration

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7. INCOME FROM CAPITAL GAIN [SEC. 45]
PARTICULAR AMOUNT
1. Short Term Capital Gains (Covered under section 111A)
2. Short Term Capital Gains (Other than covered under
section 111A)
3. Long Term Capital Gains (Charged to tax @ 10%)
4. Long Term Capital Gains (Charged to tax @ 20%)

Total Income from capital gains

8. INCOME FROM OTHER SOURCES [SEC. 56]

PARTICULAR AMOUNT
1. Interest
2. Commission
3. Winnings from lottery, crossword puzzles etc.
4. Miscellaneous

Total Income from other sources

9. INCOME TAX SLAB 2019-20

9.1. For person aging below 60
INCOME TAX SLAB
Up to Rs.2.5 lakh
From Rs.2,50,001 to Rs.5,00,000
From Rs.5,00,001 to Rs.10,00,000
Income of above Rs.10 lakh
9.2. For person aging between 60-80
Income Tax slabs
Up to Rs.3 lakh
From Rs.3,00,001 to Rs.5,00,000
TAX RATE
Nil
5% of the total income that is more than Rs.2.5 lakh +
4% cess
20% of the total income that is more than Rs.5 lakh +
Rs.12,500 + 4% cess
30% of the total income that is more than Rs.10 lakh +
Rs.1,12,500 + 4% cess
Tax Rate
Nil
5% of the total income that is more than Rs.3 lakh +

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From Rs.5,00,001 to Rs.10,00,000
Income of above Rs.10 lakh
9.3. For person aging above 80
Income Tax slabs
Up to Rs.5 lakh
From Rs.5,00,001 to Rs.10,00,000
Above Rs.10 lakh
10. CONCLUSION
4% cess
20% of the total income that is more than Rs.5 lakh +
Rs.10,500 + 4% cess
30% of the total income that is more than Rs.10 lakh +
Rs.1,10,000 + 4% cess
Tax Rate
Nil
20% of the total income that is more than Rs.5 lakh +
4% cess
30% of the total income that is more than Rs.10 lakh +
Rs.1,00,000 + 4% cess
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 APPEAL, REVISION
1. INTRODUCTION – Ch. 20, sec. 246 – 268A.
2. MEANING
2.1. Appeal
- Application to a higher authority for a reversal of the decision of a lower court.
2.2. Revision
- Revision is the act of examining again in order to remove any defect or grant relief
against the order by a lower authority or the same authority.
3. APPEAL (SEC. 246)
3.1. First appeal (SEC. 246A.)
- First appeal from order of any Assessing Officer shall lie before the Commissioner.
- Filled through form 35.
- Within 30 days or after that with the permission of the Commissioner [sec. 249(2)]
- FEES – i. ₹250 if assessed income is less than 1 lakh, ii. ₹500 for 1-2 lakhs, iii. ₹1000
for more than 2 lakhs
- No appeal in following cases
o Order levying interest u/s 234A, 234B, and 234C
o Revision order u/s 264
o Order of authority for advance ruling
o Order of Settlement Commission
- Time limit to decide appeal is one year from the end of the financial year in which
such appeal is filed.
3.2. Second appeal (SEC. 253)
- Second appeal from order of Commissioner shall lie before IT Appellate Tribunal.
- Filled through form 36.
- Within 60 days of order of Commissioner or after that with the permission of the
Income Tax Appellate Tribunal.
- FEES – i. ₹500 if assessed income is less than 1 lakh, ii. ₹1,500 for 1-2 lakhs,
iii. 1% of assessed income (upto ₹10,000/-) for more than 2 lakhs assessed income.
- No appeal in against the order passed by Commissioner u/s 264.
- Time limit to decide appeal is four years from the end of the financial year in which
such appeal is filed.
3.3. Third appeal (SEC. 260A.)
- Third appeal from order of Appellate Tribunal to High Court.
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 - Substantial question of law.
- Two judges bench.
- Within 120 days of order of ITAT (Income Tax Appellate Tribunal).
- Fees for filing appeal as may be specified in the relevant law relating to court fees
filing appeals to high court
- High court cannot determine issue not raised before ITAT (CIT vs. Air India Ld.)
3.4. Final appeal (SEC. 261)
- Final appeal from order of High Court to Supreme Court.
- Only with the certificate of High Court.
- Or with special leave to appeal under article 136.
- SC decisions are binding for non-appellants as well. Law declared by SC is binding
on all Courts and Tribunals in view of article 141 of constitution.
4. REVISION (SEC. 263, 264)
- SEC. 263 – The Principal Commissioner or Commissioner may call for and examine
the record of any proceeding, and if he considers that any order passed therein by the
Assessing officer is erroneous & prejudicial to the interests of the revenue.
- Can modify, cancel or direct fresh assessment
- Opportunity of being heard to assessee is must
- Time limit: cannot revise AO order after the expiry of 2 years from the end of
financial year in which the order sought to be revised was passed.
- SEC. 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.
- Revision of orders not covered under section 263
- Shall not revise any order under this section in the following cases:
a. Suo motu, where the order has been made more than one year previously
b. On application of assessee, where application has been made after one year from
the date of order communicated or came to his knowledge, whichever is earlier
c. Where appeal has been filed to CIT (appeals)
d. Where appeal is not filed but the time to file appeal has not expired
- Time limit: shall pass an order within one year from the end of the financial year in
which the application is filed by the assesse.
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 - But no time limit in cases where order is to be passed to give effect to any finding /
direction contained in any order of the Appellate tribunal, National Tax Tribunal,
High Court or the Supreme Court.
- No appeal can be filed against such orders under Income Tax Act.
- However writ under Article 226/227 is possible.
5. CONCLUSION

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 INCOME TAX AUTHORITIES
1. INTRODUCTION – Ch. XIII 116 - 138
2. AUTHORITIES (SEC. 116)
2.1. Central Board of Direct Tax
2.1.1. Composition
- Chairman
- Six members (income tax, investigation, audit & judicial, legislation, personnel,
revenue & audit)
2.1.2. Powers
SEC. 118 –
1. Power to define hierarchy
SEC. 119 –
2. To condone delay in filing IT Return u/s 39.
3. Instructions, orders and directions to subordinate authorities for proper
administration of this Act
4. To issue general or special orders for any class of incomes or fringe benefits
or class of cases, setting forth directions or instructions for the authorities
5. To authorise any IT authority, not being a Commissioner (Appeals) to admit
an application or claim for any exemption, deduction, refund or any other
relief
6. To relax any requirement contained in any of the provisions of Chapter IV or
Chapter VI-A, where the assessee has failed to comply with any requirement
2.2. Principal Director General or Principal Chief Commissioner
2.3. Director General or Chief Commissioner
2.4. Principal Director or Principal Commissioner
Assessing Officers
2.5. Director or Commissioner (appeal)
2.6. Additional Director or Additional Commissioner
2.7. Joint Director or Joint Commissioner
2.8. Deputy Director or Deputy Commissioner
2.9. Assistant Director or Assistant Commissioner
2.10. Income Tax Officer
2.11. Tax Recovery Officer
2.12. Inspector
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3. APPOINTMENT (SEC. 117)
- Central Govt. may appoint any person it deem fit.
- Central Govt. may authorise the Board, or a Principal Director General or Director-
General, a Principal Chief Commissioner or Chief Commissioner or a Principal Director
or Director or a Principal Commissioner or Commissioner to appoint income-tax
authorities below the rank of an Assistant Commissioner or Deputy Commissioner.
- An income- tax authority authorised 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.
4. POWER OF OTHER AUTHORITIES
1. Sec. 127 – to transfer cases
2. Sec. 129 – to allow rehearing of assessee
3. Sec. 131 – discovery, production of evidences
- Discovery & inspection
- Enforcing attendance
- Compelling production of books of accounts
- Issuing commissions
1. Sec. 132 – search & seizure
2. Sec. 132A. – to call for books of accounts
3. Sec. 132B. – to accept of retained assets
4. Sec. 133 – power to call for information
5. Sec. 133A. – power of survey
6. Sec. 133B – power to collect certain information
7. Sec. 134 – to inspect register of companies
8. Sec. 135 – power to enquiry
9. Sec. 136 – proceeding equivalent to judicial proceeding
5. CONCLUSION

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 ASSESSMENT
1. INTRODUCTION – Ch. 14, sec. 139 - 158
2. MEANING
a. Assessment
- Assessment in income tax is estimation of total income and tax thereon either by
assessee himself or by income tax officer.
b. Reassessment
- A reassessment refers to a periodic revaluation of a property's value for tax purposes.
3. PROCESS OF ASSESSMEN
ASSESSMENT

4. FORMS OF ASSESSMENT UNDER INC

INCOME
OME TAX ACT, 1961
a. Self assessment u/s 140A.
b. Summary assessment u/s 143(1)
c. Scrutiny assessment u/s 143(3)
d. Best judgment assessment u/s 144
e. Income escaping assessment u/s 147
f. Assessment in case of search u/s 153A
g. Protective assessment

5. SELF ASSESSMENT U/S 140A

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- Every assessee before filing income tax return under various sections viz. 139,
142(1), 148 or 153A is supposed to find whether he is liable for any tax, interest or
penalty. For this purpose section 140A has been introduced in Income tax act.
- Procedure of self-assessment is as follows:
Compute total income XX
Calculate tax payable on total income XX
Add Edu. Cess +Surcharge if any XX
Less Relief under section 89, 90, 91 & 90A XX
Less Minimum Alternate Tax credit under 115JAA or 115JD XX
Less TDS/TCS XX
Less Advance tax Paid, if any XX
Add Interest u/s 234A, 234B, 234C XX
Amount Payable as Self-Assessment u/s 140A XX
- If any amount is payable under section 140A then amount so paid shall be adjusted
against interest payable first and then balance amount to be adjusted toward tax payable
6. SUMMARY ASSESSMENT U/S 143(1)
- Where a return under section 139 or in response to notice under section 142 (1) is filed
then u/s 143(1) this return is checked form the point of arithmetical accuracy.
- Total income or loss computed after making the following adjustments, namely:—
o (i) any arithmetical error in the return;
o (ii) an incorrect claim;
o (iii) disallowance of loss claimed;
o (iv) disallowance of expenditure indicated;
o (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-
IB, 80-IC, 80-ID or section 80-IE; or
o (vi) addition of income appearing in Form 26AS or Form 16A or Form 16
- However no such adjustments shall be made unless intimation is given to the assessee of
such adjustments either in writing or in electronic mode.
- The response received from the assessee within 30 Days shall be considered before
making any adjustment.
7. SCRUTINY/REGULAR ASSESSMENT U/S 143(3)
- IT Department authorises Officer not below the rank of IT Officer.
- To initiate assessment u/s 143(3), assessing officer has to issue notice u/s 143(2):

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 o If return filed u/s 139 or
o Response to section 142(1) has been filed by the assessee.
- Assessing officer, u/s 143(3) ensures that –
i) the assessee has not understated the income or
ii) has not computed excessive loss or
iii) has not under paid the tax in any manner
- Assessee may be required to produce documents /evidences in support of return.
- Notice u/s 143(2) shall not be served after the expiry of 6 months from the end of
financial year in which return is furnished.
- Non-compliance of notice u/s 143(2) may result in ex parte, best judgement assessment
u/s 144 and may also attract penalty u/s 271(1)(b) which has been fixed at Rs. 10000/-.
- After taking into account all relevant material, the Assessing Officer shall, by an order in
writing, make an assessment of the total income or loss of the assessee, and determine
the sum payable by him or refund of any amount due to him.
8. BEST JUDGMENT ASSESSMENT U/S 144
- Where any person —
a. Fails to make return required u/s 139 (1) / 139(4) or 139(5) depending upon
circumstances, or
b. Fails to comply with all the terms of
a. Notice issued u/s 142(1) or
b. Directions issued under 142(2A), or
c. Fails to comply with all the terms of a notice under 143(2),
- The Assessing Officer,
o after taking into account all relevant material and
o after giving the assessee an opportunity of being heard
shall make the assessment of the total income or loss to the best of his judgment and
determine the sum payable by the assessee on the basis of such assessment.
- Show cause notice to assessee as to why the assessment should not be completed to the
best of the officer’s judgment.
- No order of assessment/ reassessment u/s 144 shall be made after the expiry of 21
months from the end of relevant Assessment Year.
9. INCOME ESCAPING ASSESSMENT/REASSESSMENT U/S 147
- Subject to provisions of section 148 to 153, if any assessing officer believes that any
income, chargeable to tax, has escaped assessment for any assessment year, he may:
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 a) assess or reassess such income which has escaped assessment;
b) recompute the loss or depreciation allowance or any other allowance
- Before making any assessment u/s 147, the assessing officer shall serve notice u/s 148(1)
requiring to furnish a return of income.
- TIME LIMIT – As per section 149(1) notice u/s 148(1) can be issued only –
a. within 4 years from the end of the relevant assessment year or
b. within 6 years from the end of the relevant assessment in cases where the amount of
income escaping assessment is likely to be Rs. 1,00,000/- or more for that year, or
c. within 16 years from the end of the relevant assessment year if the income in relation
to any asset located outside India, chargeable to tax, has escaped assessment.
- NO TIME LIMIT – for issue of notice u/s 148 (1) if the notice is required to be issued to
give effect to any finding or direction contained in a passed by:
i. By any authority in any proceeding under this Act by way appeal or revision
ii. By a Court / Supreme Court / High Court
iii. CIT Appeal u/s 250, ITAT u/s 254, Commission u/s 263 or 264
- DEEMED CASES OF ESCAPEMENT:
a. where no return filed and no assessment is done but person’s total income exceeds
the limit of taxing.
b. where return is filed but no assessment is done & assessing officer noticed
understatement of income or excessive claim of loss, deduction, allowance, relief etc.
c. where assessee fails to report international transactions u/s 92E
d. where assessment u/s 143(3) / 144 has been made but income chargeable to tax:
(i) has been under assessed; or
(ii) has been assessed at low rate; or
(iii) has been assessed with excessive relief, loss or depreciation
10. SEARCH ASSESSMENT U/S 153A
- Where a search is initiated under section 132 or books of account, other documents or
any assets are requisitioned under section 132A after 31.5.2003, the officer issues notice
for filing return u/s 153A(1)(a)
- The officer assess or reassess the total income of six assessment years immediately
preceding the relevant assessment year u/s 153A(1)(b)
- As per proviso 1 to section 153A, separate assessment of six assessment years and for the
relevant assessment year
11. CONCLUSION
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 PENALTIES
1. INTRODUCTION – Chapters XVII, XXI & XXII
2. PUNISHMENTS FOR OFFENCES UNDER IT ACT, 1961
2.1. Interest – in section 234 A, B, C, 201(1A), 220(2)
2.2. Penalties – in section [270A – 275]
2.3. Prosecution – in section 275A – 280D]
3. FEW IMPORTANT OFFENCES
1. Concealment of income 1. Sec. 271, penalty from 100% to 300%
2. Not filing IT return 2. Penalty of ₹5k or more
3. Failure to pay tax as self-assessment 3. Fine not exceeding tax arrear
4. Failure to comply with demand notice 4. Reply within 30 days, otherwise defaulter
5. Failure to comply with tax notice 5. Defaulter
6. Failure to get accounts audited 6. Penalty 1 lakhs or more
7. Failure to deduct TDS 7. Sec. 276 W, RI 3 months to 7 years,
penalty equal to amount failed to deduct
4. OFFENCES BY COMPANIES [SEC. 275B] – People in management
5. OFFENCES BY HUF [SEC. 275C] – Karta liable
6. COMPOUNDING OF OFFENCES [SEC. 279]
6.1. If no mens rea or to avoid genuine hardship, the officer may compound the offences
with or without any condition
6.2. Principal Chief Commissioner or Chief Commissioner or a Principal Director
General or Director General.
7. CAUSES OF TAX EVASION
7.1. Illegal activities – anti-social
7.2. Legal activities in illegal ways
8. METHODS FOR TAX EVASION
8.1. Out of book record
8.2. Manipulation of sales/receipts
8.3. Manipulation of expenses
8.4. Manipulation of capital
8.5. Manipulation of closing stock
8.6. Manipulation of capital expenses
8.7. International transactions through associate enterprise
9. MEASURES TO CURB TAX EVASION
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 9.1. Lowering tax rates
9.2. Advance tax payment
9.3. Tax deduction at source
9.4. Surveys
9.5. Summons and search & seizure
9.6. Penalties & prosecution
10. TAX AVOIDANCE – legitimate ways to avoid tax by claiming all the available
deductions
11. PRESUMPTION
11.1. Sec. 278 D – presumption as to assets, book of accounts etc.
11.2. Sec. 278 E – presumption as to culpable mental state
- Integral to criminal jurisprudence.
- Burden of proving the absence of Mens rea upon the accused.
- Constitutional validity of the said provision was upheld: − Selvi J. Jayalalitha v. UOI
and Ors. (2007) 288 ITR 225 (Mad) (HC)
12. PROCEDURE FOR PUNISHMENTS
12.1. Before department
12.1.1. Recognition of faults in assessment
12.1.2. Proposal to commissioner
12.1.3. Sending show cause notice
12.1.4. Reasonable opportunity to assessee to present himself
12.1.5. Taking actions based on the gravity of the offence
12.2. Before court
12.2.1. Complaint by officer
12.2.2. Summons
12.2.3. Framing of charges
12.2.4. Trial
13. CONCLUSION

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