ASSESSMENT PROCEDURE

Section 140A - Self Assessment Tax

Every person filing a return under any provisions of the Act is required to pay the tax
together with the interest and fees on his own before furnishing the return.

However such tax liability payable at the time of self assessment shall be determined after
deducting these amounts - Amount of tax already paid under the provisions of the act

Ex: - Advance tax TDS/TCS, relief u/s 90/91/96A, any credits allowed to company under section
115 JAA or for any other person u/s 115 JD.

Where assessee fails to pay any part of self assessment tax or interest or fees or all of them
he shall be deemed to be an assessee in default

Penal provisions shall apply if he is in default, where amount paid by the assessee in this
section falls short of aggregate amount of tax, fee or interest then the amount paid Shall be
first adjusted towards fees then towards interest and balance on tax.

Section 142 - Inquiry before Assessment

Section 142(1): For the purpose of making assessment the assessing officer may serve any
person who has made a return under section 139 or in case where time allowed under section
139 (1) for furnishing the return has expired a note under section 142 shall be given.

Following are the purposes:-

1. To furnish a return of income of assessee or any other person in respect of which he is

assessable under the act, in case where such person has not filed return of income
within time specified under section 139 (1)
2. To produce such account or documents as assessing officer may specify
3. To furnish in writing information on such income relating to a period within three years
prior to previous year can only be stated further approval of joint commissioner shall be
obtained for requiring the assessee to furnish statement of all asset and liability
included in the account

Section 142(2): For the purpose of obtaining full information in respect of the income (or loss)
of any person, the Assessing Officer may make such inquiry, as he considers necessary.
Section 142 (2A) to (2D) - Audit
If at any stage the assessing officer having regard to the nature and complexity or the volume
or any doubts in the accounts and due to multiplicity of transaction in the interest of revenues
is of opinion that audit is required then he can direct the assessee to get the books of accounts
audited to furnish a report of such audit. It requires approval of principal chief commissioner or
chief commissioner or commissioner or principal commissioner of IT.

The accountant by whom audit should be carried out shall be nominated by principal chief
commissioner or chief commissioner or commissioner or principal commissioner of IT ACT
1961. The audit report shall be duly provided by them which shall be filled in by the auditor.

An opportunity of being heard shall be given to the assessee before issuing direction of special
audit

The assessing officer is empowered to direct the audit to be carried out in a particular situation
or any situation even if the assessee has got his books audited under section 44AB.

The report of the auditor after conducting the audit shall be submitted within the time
specified by AO. The aggregate period or the extended period shall not exceed 180 days in any
case.

Section 142A - Powers of Assessing Officer to make a Reference to

Valuation Officer
As per section assessing officer can appoint valuation officer for the purpose of valuation of any
investment, article, jewellery etc. And based on report of valuation officer the assessing officer
can go for the further assessment and reassessment after giving assessee an opportunity of
being heard. In this case the assessing officer can ask the valuation officer to estimate their
values including the market value and provide a report to him. In the same way valuation
officer shall have the Power to access the asset or any property and all other power as per
wealth tax act the time limit will be specified by assessing officer.

Sec.143 - Assessment
The return of income filed under section 139 or in response to notice under section 142(1) shall
be processed (section 143 (1) process of return) it will be done in following manner
1) The total income or loss shall be computed after making the following adjustment –

a) Any arithmetical error in the return

b) An incorrect claim which is directly focused from any of information in return (Ex:- In
respect of deduction where such deduction exceeds specified statutory limit)

2) The Tax or interest if any, Shall be computed on the basis of Total income computed after
considering the adjustment mentioned above

3) The tax payable or refund due to the assessee shall be determined after TDS advance tax
rebate u/s 87, relief u/s 91, self assessment tax (SAT), or any other amount paid other than by
way of interest

4) Intimation is required to be sent in case where there is demand payable by the assessee or
where refund is due to the assessee. Again intimation shall be sent when the loss declared by
the assessee is adjusted but no tax is payable or no refund is due.

5) In all other cases, acknowledgement on filing return shall be deemed to be the intimation
(acknowledgement shall be in the form ITRV)

6) Intimation shall be sent within 1 year from the end of FY in which the return is made,
however if return is u/s 139(5) [Revised return] the period of intimation shall commence from
the end of FY in which such return was filed.

For the purpose of processing of return 143(1) the Board is empowered to make a scheme for
centralized processing of return with a view to process the returns faster and determine the tax
payable or refund due.

Regular Assessment/ Scrutiny Assessment

1. Compulsory issuing of Notice u/s 143(2):- The assessing officer shall serve the notice to the
assessee within 3 months from the end of FY in which the return of income is furnished or
revised if he considers that it is necessary to ensure the assessee has

a) Not understated the income

b) Not computed excessive loss

c) Has not underpaid the tax in any manner

The AO may undertake the assessment done without notice shall be considered void.
2. Order of Assessment sec 143(3):- The assessing officer shall make an assessment order in
writing including the total income or loss of the assessee as computed by him the tax payable
or refund due after considering the arguments, supporting evidences provided by the assessee
and all the relevant material gathered by the officer in connection with the assessee. However,
where the assessee is a research association, news agency, trust claiming exemption under
section 10, the assessing officer shall complete the assessment after giving effect to exemption
under section 10, but if the assessing officer is of the opinion that asseesse has not been
carrying on activities against subclasses of section 10 under which they are approved for
exemption then assessing officer shall pass an assessment order without considering exemption
under section 10 intimate the central government or the prescribed authority regarding the
same and proceed to do so only after approval by them.

In case of University colleges or other institutions under section 35 the assessing officer shall
satisfy himself that the activities of these institutions are being carried out in accordance with
the guidelines and conditions subject to which the approval was granted. If not, the assessing
officer can pass assessment without giving exemption under section 10 by obtaining approval
from the higher authority.

Assessment u/s 143(3) should be completed within 9 months from the end of the relevant
assessment year.

3. Remedy available to assist against scrutiny assessment under section 143 (3):-

a) An appeal to the commissioner of income tax (appeals)

b) To file a revision petition to the commissioner of IT (CIT)/Chief CIT u/s 264

4. Adjustment of tax under regular assessment section 143 (4):- the tax paid on regular
assessment under section 143 (3) or best judgement assessment under section 144 is adjusted
as below

a) Any tax or interest paid by the assessee shall be deemed to have been paid under regular
assessment

b) In case if any excess amount has been refunded but amount refunded on regular
assessment is less the excess amount of refund shall be deemed to be the tax payable by the
assessee

Best Judgement Assessment (Section 144)

An assessee may or may not have filed the return where by the assessing officer may see some
information related to assessee based upon the data gathered by him. To facilitate the
assessing officer for ensuring adequate and appropriate amount of data is collected to
complete the assessment in a fair manner this section has come into effect. Notices will be sent
to the assessee for complying with the law. In case the assessee fails to comply with these
notices the act empowers assessing officer to deal with such case

Assessing officer is authorised to make best judgement assessment in case an assessee fails to
oblige. It is also known as ex parte (single party) assessment. This type of assessment is made
when the assessee does not co-operate with assessing officer and in the absence of sufficient
information the assessing officer proceeds with the finalisation of income or loss of the
assessee according to best of his ability and knowledge, judgement etc

The idea behind this type of assessment is not to punish the assessee for non cooperation but
to make the assessment on the basis of information or materials gathered by assessing officer.
He can base his judgement on the previous return, local knowledge and reputation of the
assessee and circumstances at that time.

An assessment under section 144 shall be made if any person:-

a) Fails to furnish IT returns u/s 139(1) or 139(4) or 139(5)

b) Fails to comply with all the terms of notice under section 142 (1)

c) Fails to comply with the direction issued under section 142 (2A)

d) Having made a return fails to comply with the notice issued under section 143 (2)

This section provides that the assessing officer shall make an assessment of assessee’s TI or loss
to the best of judgement after taking into account all relevant documents which he has
gathered and after giving the assessee an opportunity of being heard.

If assessee has failed to respond to the notice under section 142 (1) then no opportunity of
being heard will be given to the assessee.

Assessment u/s 144 should be completed within 9 months from the end of the relevant
assessment year.

Alone with BJA the assessee will have to face the following consequences

a) When the assessee files an application of appeal against the BJA, he is prevented from
presenting any new fact in front of appellate authority

b) Penalty provisions and prosecution provisions shall apply

Remedies available to assessee

1) Filing of an application with the assessing officer for cancellation of BJA it has to be made
within one month from the date of service of notice of demand under section 144

Section 146 empowers the assessing officer to cancel the BJA provided the assessee has applied
on the following grounds

a) Assessee was prevented by sufficient cause from making the returns under section 139

b) He did not have any reasonable opportunity to comply and was prevented by sufficient
cause from complying for notice issued

Every application made for cancellation must be disposed off within 90 days from the date of
receipt of application by assessing officer

2) Filing an appeal against such assessment to CIT appeals, however no new facts or evidence
has to be brought in.

Section 145 Method of Accounting

1. For computing income under the head PGBP are income from other sources that may adapt
either cash or mercantile system accounting.

2. The central government may notify from time to time in official gazette income computation
and disclosure standards to be followed by any class of assessees or in respect of any class of
income.

3. Based on the above power the central government has prescribed to income computation
and disclosure standard which shall be followed by the assessee following mercantile system of
accounting.

This is applicable from assessment year 2019-20

4. If there is a conflict between ICDS and provisions of law, the law prevails over ICDS

SECTION 145A VALUATION OF STOCK

1. The valuation of purchase and sale of goods and inventory for the purpose of determining
income under the head PGBP shall be done

a) in accordance with the method of accounting adopted by the assessee

b) It shall be further adjusted by including any amount of tax duty or cess actually paid or
incurred by the assessee to bring the goods to the present location and condition.

Section 145 (3) empowers the assessing officer to make a discretionary BJA in these cases:-

a) Where the assessing officer is not satisfied about the correctness and completeness of books
of account

b) Where no method of accounting has been regularly followed by the assessee.

Under the above circumstances it is up to the decision of assessing officer whether to make a
BJA or a regular assessment under section 143 (3). But once this type of assessment is made
and tax is determined then assessee will have no option but to file an appeal with the higher
authority against BJA

Section 147 Income Escaping Assessment or Re-assessment.

If assessing officer has a reason to believe that any income chargeable to tax has escaped
assessment for any assessment year he may subject to provision of section 148 to section 153:

1. Assess or re-assess such income and also other income chargeable to tax which has escaped
assessment that comes to the notice in the subsequent years or proceedings or

2. Re-compute the laws for the depreciation allowance for the relevant assessment year

Time limit:- if any assessment under section 143 (3) or 147 has already been made by the
assessing officer then the time limit shall be 4 years from the end of assessment year

EXCEPTIONS:-
1. In case where any income chargeable to tax has escaped assessment due to failure of
assessee to make return under section 139 or respond to notice under section 142(1) or section
148 or to disclose fully and truly all material fact for that assessment year.

2. In case where income chargeable to tax in relation to asset located outside India, then
assessing officer can initiate re-assessment even after expiry of 4 years.

Section 154 – Rectification of Mistake

An income-tax authority, is empowered (suo moto or on application by assessee) to –

(a) rectify any mistake apparent in an order passed by him; or

(b) amend any intimation issued u/s 143(1) or deemed intimation

(c) amend any intimation issued u/s 200A(1).

Taxpoint: Such order of rectification must be passed in writing.

Time limit for Rectification [Sec. 154(7)]: Within 4 years from the end of the financial year in
which the order sought to be amended was passed.

However, in respect of an application made by the assessee or deductor or collector, the

authority shall, within a period of 6 months from the end of the month in which the application
is received by it, pass an order –

a. making the amendment; or

b. refusing to allow the claim.

Opportunity of being heard [Sec. 154(3)]: If such rectification order is prejudicial to the assessee
or deductor or collector, an opportunity of being heard must be given to the assessee, before
passing such order.