ASSESSMENT

Income Tax Act, 1961

 MEANING
• The term ‘Assessment’ is not defined under the Income Tax Act.

• The process of examining the return of income by the Income-Tax department is called as
“Assessment”.

• The process of Assessment comes immediately after the return of income is filed and it is
one of the most importance procedure followed by the Income-Tax Department as it is
used to ascertain the correctness and genuiness of the return filed.
 TYPES OF ASSESSMENT
1. Self-Assessment – SECTION 140A

2. Summary Assessment – SECTION 143(1) (Regular Assessment)

3. Scrutiny Assessment – SECTION 143(3) (Regular Assessment)

4. Best Judgement Assessment – SECTION 144

5. Faceless Assessment – SECTION 144B

6. Protective assessment

7. Re-assessment or Income Escaping Assessment – SECTION 147

8. Assessment in case of search – SECTION 153A

SELF- ASSESSMENT – SECTION 140A
• On the basis of the return of income that is being filed u/s.139, the assessee is
required to compute the self-assessment tax payable by him after taking into
account certain factors such as tax already paid by him, relief claimed under
DTAA, etc.

• Individual assessee’s are required to file the return of income by the end of the
31st day of July every year.

• Example, for the PY 2023-2024, the return has to be filed within 31st of July, 2024.
 SUMMARY ASSESSMENT – SECTION 143(1)
• Assessment under section 143(1) is like preliminary checking of the return of income. At
this stage no detailed scrutiny of the return of income is carried out. At this stage, the total
income or loss is computed after making the following adjustments (if any), namely:
• (i) any arithmetical error in the return; or
• (ii) an incorrect claim, if such incorrect claim is apparent from any information in the
return;
• (iii) disallowance of loss, expenditure and deduction claimed.

• NOTE: No adjustment shall be made unless an intimation is given to the assessee of such
adjustment. The response received from the assessee, if any, shall be considered before
making any adjustment, and in case where no response is received within 30 days of the
issue of such intimation, such adjustments shall be made.
• Procedure of assessment under section 143(1)

➢ After correcting arithmetical error or incorrect claim (if any), the tax and interest
and fee, if any, shall be computed on the basis of the adjusted income.

➢ Any sum payable by or refund due to the taxpayer shall be intimated to him.

➢ An intimation shall also be sent to the taxpayer in a case where the loss
declared in the return of income by the taxpayer is adjusted and no tax or
interest is payable by or no refund is due to him.

• Time-limit: Assessment under section 143(1) should be made within a period of nine
months from the end of the financial year in which the return of income is filed.
SCRUTINY ASSESSMENT – SECTION 143(3)
• This is a detailed assessment. At this stage a detailed scrutiny of the return of income will
be carried out in order to confirm the correctness and genuineness of various claims,
deductions, etc., made by the taxpayer in the return of income.
• Service of Notice – Section 143(2): The AO or the prescribed IT Authority should take up
a case for scrutiny assessment by service a notice u/s.143(2), specifying the date on which
the assessee should either attend or produce evidence he relies upon, so as to ensure that
the assessee has not:
➢ Understated his income; or
➢ Computed excessive loss; or
➢ Underpaid tax in any manner.

NOTE: The notice has to be served on the assessee within 3 months from the end of the FY
in which the return is furnished.
• Order of Assessment – Section 143(3)

• The AO should by an order in writing, make an assessment of the total income or

loss of the assessee and determine the sum payable or refund due on the basis
assessment, after taking into consideration the following:

➢ The evidence assessee produces during the course of hearing and such other
evidence that the AO may requires on specified points; and

➢ All relevant material gathered by him.

• Time-limit: As per Section 153, the time limit for making assessment under section 143(3)
1) Within 21 months from the end of the assessment year in which the income was first
assessable. [For assessment year 2017-18 or before]
2) 18 months from the end of the assessment year in which the income was first [For
assessment year 2018-19 & 2020-21]
3) 12 months from the end of the assessment year in which the income was first assessable
[For Assessment year 2019-20]
5) 9 months from the end of the assessment year in which the income was first [For
assessment year 2021-22]
6) 12 months from the end of the assessment year in which the income was first [For
assessment year 2022-23 and onwards]
Note: If reference is made to TPO, the period available for assessment shall be extended
by 12 months.
 BEST JUDGEMENT ASSESSMENT
SECTION 144
• This is an assessment carried out as per the best judgment of the Assessing Officer on the
basis of all relevant material he has gathered. This assessment is carried out in cases
where the taxpayer fails to comply with the requirements specified in section 144.

Scope of assessment under section 144

• As per section 144, the Assessing Officer is under an obligation (compulsory) to make an
assessment to the best of his judgment in the following cases:

➢ If the taxpayer fails to file the return required within the due date prescribed under
section 139(1) or a belated return under section 139(4) or a revised return under section
139(5).

➢ If the taxpayer fails to respond or comply with the terms of a notice issued under
section 142(1).
Discretionary Best Judgement Assessment – Section 145(3)

• The AO may make best judgement assessment when the AO is not satisfied with the
correctness or completeness of the accounts of the assessee.

Time-limit: As per Section 153, the time limit for making assessment under section 143(3)
1) Within 21 months from the end of the assessment year in which the income was first
assessable. [For assessment year 2017-18 or before]
2) 18 months from the end of the assessment year in which the income was first [For assessment
year 2018-19 & 2020-21]
3) 12 months from the end of the assessment year in which the income was first assessable [For
Assessment year 2019-20]
5) 9 months from the end of the assessment year in which the income was first [For assessment
year 2021-22]
6) 12 months from the end of the assessment year in which the income was first [For
assessment year 2022-23 and onwards]
Note: If reference is made to TPO, the period available for assessment shall be extended by 12
months.
 FACELESS ASSESSMENT – SECTION 144B

• Assessment shall be made in a faceless manner as per the following procedure

➢ the National Faceless Assessment Centre shall assign the case selected for the purposes
of faceless assessment to a specific assessment unit through an automated allocation
system;

➢ the National Faceless Assessment Centre shall intimate the assessee about the same;

➢ a notice shall be served on the assessee, through the National Faceless Assessment
Centre and the assessee may file his response to such notice within the date specified
therein, to the National Faceless Assessment Centre which shall forward the same to the
assessment unit.
• Where a case is assigned to the assessment unit, it may make a request
through the National Faceless Assessment Centre for—

(a) obtaining such further information, documents or evidence from the

assessee or any other person, as it may specify;

(b) conducting of enquiry or verification by verification unit;

(c) seeking technical assistance.

 PROTECTIVE ASSESSMENT
• The general rule of tax law is that a person cannot be made liable to pay tax on the
income of another person, except when clubbing operates. But this form of assessment, as
the name suggests is made to ‘protect’ the interest of the revenue.

• When the ownership of the income is in dispute or is a mater of doubt, the AO is open to
assess the income in case of a person who is considered liable to tax.

• Attorney-General v. Aramayo & Others, it was held that the AO cannot be expected
to be a silent spectator of the uncertainty as the inherent power given to him in the
law is to protect the interest of the revenue which will be frustrated if he fails to act
within the time of limitation.

• This principle was reaffirmed by the judiciary in India in Jagannath Hanumanbux v.

ITO.
 RE-ASSESSMENT OR INCOME
ESCAPING ASSESSMENT – SECTION 147
If the Assessing Officer has reason to believe that any income chargeable to tax has escaped
assessment for any assessment year, he may

1. assess or re-assess the income, which escaped assessment;

2. re-compute the loss/depreciation/allowance, for that AY.

• ‘Assess’ – Assessment is done when no return is filed or no assessment has been done
earlier under sections 143(3) or 144.

• ‘Re-assess’ – Re-assessment will be done when assessment is completed under 143(3) or

144, but income has escaped such assessment.
• Scope of Assessment under Section 147

➢ If the Assessing Officer has reason to believe that any income chargeable to tax
has escaped assessment for any assessment year, then he may assess or reassess
such income and also any other income chargeable to tax which has escaped
assessment and which comes to his notice subsequently in the course of the
proceedings under this section. He is also empowered to re-compute the loss or
the depreciation allowance or any other allowance, as the case may be, for the
assessment year concerned.

➢ Items which are the subject matters of any appeal, reference or revision
cannot be covered by the Assessing Officer under section 147.
Illustrative cases of escaping of income – Explanation 2 to Sec.147

1. Where no return of income has been furnished by the taxpayer, although his total
income or the total income of any other person in respect of which he is assessable
during the previous year exceeded the basic exemption limit.

2. Where a return of income has been furnished by the taxpayer but no assessment has
been made and it is noticed by the Assessing Officer that the taxpayer has understated
the income or has claimed excessive loss, deduction, allowance or relief in the return.
• Issue of notice – Section 148

• The AO before making an assessment or reassessment or re-computation should

serve a notice on the assessee requiring him to furnish a return of his income or
return of income of such other person in respect of which he is assessable.
However, before serving a notice the AO has to record his reasons for doing so.

• Time-limit for issuance of notice under Sec 148

• Notice - within a period of 3 years from the end of the relevant assessment
year.
• If AO has the books of accounts and other documents, that income in the form
of assets is likely to exceed Rs.50,00,000, then notice up to 10 years.
Time-limit for completion of assessment under section 147

As per Section 153, the time limit for making assessment under section 147 is: –

1) Within 9 months from the end of the financial year in which the notice under section
148 was served (if notice is served before 01-04-2019).

2) 12 months from the end of the financial year in which notice under section 148 is
served (if notice is served on or after 01-04-2019).

Note: If reference is made to TPO, the period available for assessment shall be extended
by 12 months.
 ASSESSMENT IN CASE OF SEARCH
SECTION153 A
Issue notice- Assessor re-assess the total income of six
assessment years immediately preceding the assessment year
relevant to the previous year in which such search is
conducted or requisition is made.
Example: Search is conducted in the PY 2020-2021 (Relevant AY
2021-2022). Now, the AO can ask for the assessee to file return for
the AYs 20-21, 19-20, 18-19, 17-18, 16-17 & 15-16.
Time limit for completion of assessment u/s 153A : [153B]
21 months from the end of the financial year
 HIERARCHY OF IT DEPARTMENT
SECTION 116
1. Central Board of Direct Taxes (CBDT)
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);
4. Additional Directors of Income Tax or Additional Commissioners of Income
Tax or Additional Commissioner of Income Tax (Appeals);
5. Joint Directors of Income Tax or Joint Commissioner of Income Tax;
6. Deputy Directors of Income Tax or Deputy Commissioners of Income Tax or Deputy
Commissioners of Income Tax (Appeals)
7. Assistant Directors of Income Tax or Assistant Commissioners of Income Tax;
8. Income Tax Officers;
9. Tax Recovery Officers; and
10. Inspectors of Income Tax