Professional Documents
Culture Documents
Assess Pro 1
Assess Pro 1
Assess Pro 1
, Nagpur
APRIL, 2009
AS SESS MENT
PRO CED URE
SEC . 139 o nwar ds
by
Dr Vinay Kumar Singh
1
Additional Director (Faculty),
NATIONAL ACADEMY OF DIRECT
TAXES, NAGPUR
Introduction to Income-
LAW tax .
Voluntary I.T.I.s
CITIZENS OF
compliance
INDIA I.T.O.s
Asstt/Dep. Cs
Elections C.s I.T. (Appeal) I.T.
ORDERS Addl./Jt.C.s I.T.
LEGISLATURE C.s I.T.
I.T.A.T.
OF INDIA C.C.s I.T.
S.C. / H.C. C.B.D.T.
Interpretation of
intention of legislature M.O.F.
CASE
Intension of legislature STATUTE LAWS
2
PRINCIPLES OF NATURAL Introduction to Income-
tax .
JUSTICE
• Law is made by the
LEGISLAT EXECUTIV
URE E representatives of the citizens
JUDICIA
RY • All public servants work for the
citizens of the country
• Executive has the responsibility
of ensuring compliance of the
Law
• Income tax authorities are
QUASI-JUDICIAL in nature
• While exercising this
responsibility, and while dealing
with citizens, they must follow
the basic principles of natural
justice:
– APPRECIATION OF EVIDENCE
– OPPORTUNITY OF BEING
HEARD
3
– SPEAKING ORDER
LIMITATIONS ON AUTHORITY OF
Introduction to Income-
tax .
EXECUTIVE
• LIMITATION OF POWER
– No action can be taken by an executive that
impinges upon any of the rights of the citizens,
EXECUTIV unless the Law authorizes such action
E
– Action can only be taken by the authority to
whom the power is delegated, ONLY within his
JURISDICTION
– There must be application of mind by that
authority
– Action must be BONA-FIDE & NON-
DISCRIMINATORY (NEUTRALITY)
• LIMITATION OF TIME
– Time limits often defined in the Act for certain
actions
– No action possible once BARRED BY TIME
LIMITATION
• LIMITATION OF INTERPRETATION
4
– Words (& phrases) defined in the statute
Introduction to Income-
tax .
INCOME-TAX AUTHORITIES
Sec. 116. There shall be the following classes of income-tax
authorities for the purposes of this Act, namely :
(a) the Central Board of Direct Taxes constituted under the Central
Boards of Revenue Act, 1963 (54 of 1963),
(b) Directors-General of Income-tax or Chief Commissioners of
Income-tax,
(c) Directors of Income-tax or Commissioners of Income-tax or
Commissioners of Income-tax (Appeals),
(cc) Additional Directors of Income-tax or Additional Commissioners of
Income-tax or Additional Commissioners of Income-tax (Appeals),
(cca) Joint Directors of Income-tax or Joint Commissioners of Income-
tax,
(d) Deputy Directors of Income-tax or Deputy Commissioners of
Income-tax or Deputy Commissioners of Income-tax (Appeals),
(e) Assistant Directors of Income-tax or Assistant Commissioners of
Income-tax,
(f) Income-tax Officers,
(g) Tax Recovery Officers,
(h) Inspectors of Income-tax.
5
Introduction to Income-
tax .
INCOME-TAX AUTHORITIES
EXECUTIVE
Sec. 2 (7A)
Sec. 2 (28)
Sec. 2 (25)
Sec. 2 (9A) / 2(9B) / 2(19A)/ 2(19C)
Sec. 2 (1C) / 2(1D) / 2(28C)/ 2(28D)
Sec. 2 (16)
Sec. 2 (15A)
Sec. 2 (12)
6
Introduction to Income-
tax .
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 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 7
Introduction to Income-
tax .
ASSESSING OFFICER
Sec. 2 (7A) Assessing Officer
Sec. 120 Jurisdiction of income-tax authorities
(1) Income-tax authorities shall exercise all or any of the
powers and perform all or any of the functions conferred
on, or, as the case may be, assigned to such authorities
by or under this Act in accordance with such directions as
the Board may issue for the exercise of the powers and
performance of the functions by all or any of those
authorities.
Explanation. For the removal of doubts, it is hereby
declared that any income-tax authority, being an
authority higher in rank, may, if so directed by the Board,
exercise the powers and perform the functions of the
income-tax authority lower in rank and any such direction
issued by the Board shall be deemed to be a direction
issued under sub-section (1).
(2) The directions of the Board under sub-section (1) may
8
authorise any other income-tax authority to issue orders
Introduction to Income-
tax .
ASSESSING OFFICER
Sec. 2 (7A) Assessing Officer
Sec. 120 Jurisdiction of income-tax authorities
4) Without prejudice to the provisions of sub-sections (1) and (2), the
Board may, by general or special order, and subject to such
conditions, restrictions or limitations as may be specified therein,
(a) authorise any Director General or Director to perform such
functions of any other income-tax authority as may be assigned to
him by the Board;
(b) empower the Director General or Chief Commissioner or
Commissioner to issue orders in writing that the powers and
functions conferred on, or as the case may be, assigned to, the
Assessing Officer by or under this Act in respect of any specified
area or persons or classes of persons or incomes or classes of
income or cases or classes of cases, shall be exercised or
performed by an Additional Commissioner or an Additional
Director or a Joint Commissioner or a Joint Director, and, where
any order is made under this clause, references in any other
provision of this Act, or in any rule made thereunder to the
Assessing Officer shall be deemed to be references to such
9
Additional Commissioner or Additional Director or Joint
Introduction to Income-
tax .
ASSESSMENT OF INCOME
Sec. 2 (24)
RETURN OF INCOME
for the
Sec. 2 (9) Sec. 2 (34)
ASSESSMENT YEAR / PREVIOUS YEAR
Sec. 2 (8)
ASSESSMENT
of ASSESSEE
INCOME
Sec. 2 (43)
10
Introduction to Income-
tax .
ASSESSEE
Sec 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
Not necessary to have by him or by such other person, or of
actual proceedings the amount of refund due to him or to
inititiated and pending such other person ;
for being considered a
assessee (b) every person who is deemed to be
ITO vs. DDA [200] 252 an assessee under any provision of
ITR 772 (SC) this Act ; 11
Introduction to Income-
tax .
PERSON
Sec(31) person includes
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of
individuals, whether incorporated or
not,
(vi) a local authority, and
(vii) every artificial juridical person, not
falling within any of the preceding sub-
clauses.
Explanation. For the purposes of this clause, an
association of persons or a body of
individuals or a local authority or an
artificial juridical person shall be deemed to
be a person, whether or not such person 12 or
Introduction to Income-
tax .
PREVIOUS YEAR / ASSESSMENT YEAR
Sec 2 (34) Sec 3
SALARIES Sec 17
HOUSE Sec 22
PROPERTY Sec 28
HEADS OF BUSINESS OR
INCOME PROFESSION
CAPITAL GAINS Sec 45
Sec 14 OTHER Sec 56
SSOURCES
15
Introduction to Income-
tax .
INCOME
Rs. Rs.
OPENING STOCK 100 SALE RECEIPTS 300
PURCHASES 200 CLOSING STOCK 200
ELECTRICITY 100
GROSS PROFIT 100
------ ------
500 500
------ ------
Section 139 (1) Every person, if his total income or the total income of
any other person in respect of which he is assessable under this Act
during the previous year exceeded the maximum amount which is not
chargeable to income-tax, shall, on or before the due date, furnish a
return of his income or the income of such other person during the
previous year, in the prescribed form and verified in the prescribed
manner and setting forth such other particulars as may be prescribed.
ITR - 1 TO 8
17
Introduction to Income-
tax .
ASESSMENT
Sec 139 (1)
Sec 2 (8)
18
Introduction to Income-
tax .
ASESSMENT
Sec 2 (8) assessment includes reassessment
;
Sec (40) regular assessment means the assessment made
under subsection (3) of section 143 or section 144 ;
21
Introduction to Income-
tax .
ASESSMENT
Sec 2 (8) assessment includes reassessment
;
Self-assessment
Sec 140A (1) Where any tax is payable on the basis of any
return required to be furnished under section 139 or section
142 or, as the case may be, section 148, after taking into
account the amount of tax, if any, already paid under any
provision of this Act, the assessee shall be liable to pay such
tax together with interest payable under any provision of this
Act for any delay in furnishing the return or any default or
delay in payment of advance tax, before furnishing the return
and the return shall be accompanied by proof of payment of
such tax and interest.
22
Introduction to Income-
tax .
ASESSMENT
Sec 2 (8) assessment includes reassessment
;
Processing of Return
Sec 143(1) Where a return has been made under section 139,
or in response to a notice under sub-section (1) of section 142,
such return shall be processed in the following manner
namely :-
•The total income or loss shall be computed after making the
following adjustments 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;
…………………
ASESSMENT
RETURN OF INCOME SELF
for the ASSESSM
ASSESSMENT YEAR / PREVIOUS YEAR
ENT
PROCESSING OF RETURN
Sec 2 (29)
LEGAL
Sec 2 (29)
BOOKS REPRESENTATI
OF VE
ACCOUNT
S
DOCUMEN ASSESSEE
TS AUTHORISED
Sec 2 (22AA) REPRESENTATI
VE
Sec 288 (2)
ASSESSMENT of INCOME
REASSESSMENT of INCOME
TAX
24
Introduction to Income-
tax .
ASESSMENT
Sec 2 (29) legal representative has the meaning
assigned to it in clause (11) of section 2 of the Code of Civil
Procedure, 1908 (5 of 1908)
Code of Civil Procedure, 1908
Sec 2 (11) "legal representative" means a person who in law
represents the estate of a deceased person, and includes
any person who intermeddles with the estate of the deceased
and where a party sues or is sued in a representative
character the person on whom the estate devolves on the
Secdeath of the
2(12A) partyor
books sobooks
suing or
of sued;
account includes ledgers, day-
books, cash books, account-books and other books, whether kept
in the written form or as print-outs of data stored in a floppy,
disc, tape or any other form of electro-magnetic data storage
device;
28
Introduction to Income-
tax .
TAX
29
Introduction to Income-
tax .
TAX
30
Introduction to Income-
tax .
TAX
XYZ
T.D.S.
PAYMEN
TS
ASSESSEE
ADVANCE
TAX
SELF SELF
ASSESSME ASSESSMENT
TAX
NT [+
INTEREST
]
TAX DEMAND
ASSESSING
ASSESSME
OFFICER
NT 31
Introduction to Income-
tax .
AGRICULTURAL INCOME
CONDITIONS : (i) Person to whom Para A of Part I applies : Individual, HUF, AOP,
BOI, AJP (ii) Total income > the max non-taxable income (iii) Agri income > Rs
5000
COMPUTE AGRI INCOME FROM EACH INCOME PARTIALLY AGRICULTURE,
SOURCE SEPERATELY PARTIALLY BUSINESS
+
+
+
DEEMED AGRI INCOME – SHARE IN
AOP [R-5]
+ +
ME forward 32
Introduction to Income-
tax .
ASESSMENT
TOTAL INCOME
Sec 2 (45)
33
Introduction to Income-
tax .
TOTAL INCOME
Sec 2(45) total income means the total amount of income
referred to in section 5, computed in the manner laid down in
this Act
Sec 5 (1) Subject to the provisions of this Act, the total income
of any previous year of a person who is a resident includes all
income from whatever source derived which
(a) is received or is deemed to be received in India in such year
by or on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him in
India during such year ; or
(c) accrues or arises to him outside India during such year :
Provided that, in the case of a person not ordinarily resident in
India within the meaning of sub-section (6) of section 6, the
income which accrues or arises to him outside India shall not be
so included unless it is derived from a business controlled in or a
profession set up in India.
34
Introduction to Income-
tax .
TOTAL INCOME
Sec 2(45) total income means the total amount of income
referred to in section 5, computed in the manner laid down in
this Act
Sec 5 (2) Subject to the provisions of this Act, the total income
of any previous year of a person who is a non-resident includes all
income from whatever source derived which
(a) is received or is deemed to be received in India in such year
by or on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him in
India during such year.
Explanation 1. Income accruing or arising outside India shall not
be deemed to be received in India within the meaning of this
section by reason only of the fact that it is taken into account in a
balance sheet prepared in India.
Explanation 2. For the removal of doubts, it is hereby declared
that income which has been included in the total income of a
person on the basis that it has accrued or arisen or is deemed to
have accrued or arisen to him shall not again be so included on35
Introduction to Income-
tax .
GROSS TOTAL INCOME
CHAPTER VI A DEDUCTIONS IN RESPECT OF
CERTAIN INCOME
Sec 80B In this chapter -
(5) "gross total income" means the total income
computed in accordance with the provisions of this Act,
before making any deduction under this Chapter
-
GROSS TOTAL DEDUCTIONS
INCOME UNDER
CHAPTER VI A
= TOTAL INCOME
36
Introduction to Income-
tax .
TOTAL INCOME
SALARY + INCOME OF OTHER
+ PERSONS
INCLUDED IN
HOUSE PROPERTY TOTAL INCOME
+ (CHAPTER V)
+ for
BUSINESS & PROF adjustment of
INCOME ON WHICH
+ NO INCOME-TAX IS losses,
OTHER SOURCES PAYABLE UNDER CHAPTER VI
+ +
CHAPTER VII
-
DEDUCTIONS
GROSS TOTAL
INCOME
UNDER
CHAPTER VI A
= TOTAL INCOME
37
Introduction to Income-
tax .
RESIDENT
38
Introduction to Income-
tax .
RESIDENT
10 9 8 7 6 5 4 3 2 1
1998-
2004-
2005-
2007-
2000-
2001-
2002-
2003-
2006-
1999-
00
01
03
05
99
02
04
06
07
08
2008-09
≥ 182
DAYS
≥ 60
≥ 365 DAYS DAYS
NON-RESIDENT IN ≥ 9 YEARS
≤ 729 DAYS
39
Assessment Procedure
.
ASSESSMENT PROCEDURE
• CHAPTER XIV
of INCOME TAX ACT FORMS
NOTIFICATIONS
1961 CIRCULARS
• PART III
• ASSESSMENT of INCOME TAX RULES
PROCEDURE 1962
• ASSESSMENT
• Sec 139 to 158 PROCEDURE
CASE LAWS • Rule 12 to 15
40
Assessment Procedure
.
RETURN OF INCOME
Sec 139 (1) Every person,
• being a company or a firm; or
(b) being a person other than a company or a firm, if his
total income or the total income of any other person
in respect of which he is assessable under this Act
during the previous year exceeded the maximum
amount which is not chargeable to income-tax, shall, on
or before the due date, furnish a return of his
income or the income of such other person during the
previous year, in the prescribed form and verified in
the prescribed manner and setting forth such
other particulars as may be prescribed :
Sec 2 (33) prescribed means prescribed by rules made under this Act ;
41
Assessment Procedure
.
prescribed form
RETURN OF INCOME
Rule 12. (1) The return of income required to be furnished
under sub-section (1) or sub-section (3) or sub-section (4A) or
sub-section (4B) or sub-section (4C) or sub-section (4D) of
section 139 or clause (i) of sub-section (1) of section 142 or
sub-section (1) of section 148 or section 153A or the return of
fringe benefits required to be furnished under sub-section (1) or
sub-section (2) of section 115WD relating to the assessment
year commencing on the 1st day of April, 2008 shall,
(a) in the case of a person being an individual where the total
income includes income chargeable to income-tax under the
head Salaries or income in the nature of family pension as
defined in the Explanation to clause (iia) of section 57 but does
not include any other income except income by way of
interest chargeable to income-tax under the head Income from
other sources, be in Form No. ITR-1 and be verified in the
manner indicated therein;
(b) in the case of a person being an individual not being an
individual to whom clause (a) applies or a Hindu 42
undivided family where the total income does not include
Assessment Procedure
.
prescribed form
RETURN OF INCOME
A snapshot from https://incometaxindiaefiling.gov.in/portal/individual_huf.do
43
Assessment Procedure
.
prescribed form
RETURN OF INCOME
A snapshot from ITR-1
Provided also that every person, being an individual or a Hindu undivided family or
an association of persons or a body of individuals, whether incorporated or not, or
an artificial juridical person, if his total income or the total income of any other
person in respect of which he is assessable under this Act during the previous year,
without giving effect to the provisions of section 10A or section 10B or
section 10BA or Chapter VI-A exceeded the maximum amount which is not
chargeable to income-tax, shall, on or before the due date, furnish a return of
his income or the income of such other person during the previous year, in the
prescribed form and verified in the prescribed manner and setting forth such other
particulars as may be prescribed.
47
Assessment Procedure
.
RETURN OF INCOME
Scheme of filing of
returns by
salaried
employees
through
Schemeemployer,
for bulk
2004
filing of returns by
(1 Filing of return by salaried employees through employer
salaried
A) employees,2002
(1 E – filing of return Electronic furnishing of returns of
B) income scheme 2007
Return to be filed for carrying forward a LOSS under ‘Profits
(3) & gains from business & profession’ or ‘capital gains’
Sec 80. Notwithstanding anything contained in this Chapter, no loss which has
not been determined in pursuance of a return filed in accordance with the
provisions of sub-section (3) of section 139, shall be carried forward and set
off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-
section (1) or sub-section (3)] of section 74 or sub-section (3) of section 74A.
(4) BELATED RETURN Up to one year from the end of relevant AY or assessment
(6 Audit report etc Audit return, principal place, branches, partners, members etc
A) If AO considers return defective – opportunity for rectify
(9) DEFECTIVE RETURN
within 15 days / time allowed by AO 50
Assessment Procedure
.
RETURN OF INCOME
Sec 139 (9) Where the Assessing Officer considers that the
return of income furnished by the assessee is defective, he
may intimate the defect to the assessee and give him an
opportunity to rectify the defect within a period of fifteen
days from the date of such intimation or within such
further period which, on an application made in this behalf,
the Assessing Officer may, in his discretion, allow;
and if the defect is not rectified within the said period of
fifteen days or, as the case may be, the further period so
allowed, then, notwithstanding anything contained in any
other provision of this Act, the return shall be treated as
an invalid return and the provisions of this Act shall apply
as if the assessee had failed to furnish the return :
Provided that where the assessee rectifies the defect after the
expiry of the said period of fifteen days or the further period
allowed, but before the assessment is made, the Assessing
Officer may condone the delay and treat the return as a valid 51
return.
Assessment Procedure
.
RETURN OF INCOME
Sec139(9) Explanation. For the purposes of this sub-section,
a return of income shall be regarded as defective
unless all the following conditions are fulfilled, namely :
(a) 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;
(b) the return is accompanied by a statement showing the
computation of the tax payable on the basis of the
return;
(bb) 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;
52
Assessment Procedure
.
RETURN OF INCOME
Sec139(9) Explanation. For the purposes of this sub-section,
a return of income shall be regarded as defective
unless all the following conditions are fulfilled, namely :
(c) the return is accompanied by proof of
(i) 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
Provided that 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
(a) a certificate for tax deducted or collected was not
furnished under section 203 or section 206C to the person
furnishing his return of income;
(b) such certificate is produced within a period of two years
specified under sub-section (14) of section 155;
(ii) the amount of compulsory deposit, if any, claimed to have 53
Assessment Procedure
.
RETURN OF INCOME
Sec139(9) Explanation. For the purposes of this sub-section,
a return of income shall be regarded as defective
unless all the following conditions are fulfilled, namely
:
(d) where regular books of account are maintained by the
assessee, the return is accompanied by copies of
• manufacturing account, trading account, profit and
loss account or, as the case may be, income and
expenditure account or any other similar account and
balance sheet;
(ii) 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;
54
Assessment Procedure
.
RETURN OF INCOME
Sec139(9) Explanation. For the purposes of this sub-section,
a return of income shall be regarded as defective
unless all the following conditions are fulfilled, namely
:
(e) where the accounts of the assessee have been
audited, the return is accompanied by copies of the
audited profit and loss account and balance sheet and
the auditors report and, where an audit of cost
accounts of the assessee has been conducted, under
section 233B of the Companies Act, 1956 (1 of 1956), also
the report under that section;
(f) where regular books of account are not maintained by
the assessee, 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 55
disclosing the amounts of total sundry debtors, sundry
Assessment Procedure
.
RETURN OF INCOME
Who
should
file a
return ?
56
Assessment Procedure
.
prescribed form
RETURN OF INCOME
A snapshot from ITR-1
Sec 140
57
Introduction to Income-
tax .
WHO SHOULD SIGN ?
Absent from India by PERSON DULY AUTHORISED
Can NOT sign by PERSON DULY AUTHORISED
INDIVUD INDIVIDUAL himself
UAL Mentally incapacitated GUARDIAN
H.U.F KARTA if absent from India / mentally incapacitated ANY
ADULT MEMBER
Co being wound up by LIQUIDATOR [ sec 178 (1) ]
Co. NOT RESIDENT by PERSON HAVING P.O.A.
COMPAN (enclosed
MANAGING with return)
DIRECTOR if no MD / MD can’t sign
Y DIRECTOR
Management taken over by Governmant PRINCIPAL
OFFICER
FIRM MANAGING PARTNER can’t sign / no Managing partner
ANY PARTNER (major)
AOP / BOI Any MEMBER / PRINCIPAL OFFICER
POLITICAL CHIEF EXECUTIVE OFFICER
PARTY
LOCAL PRINCIPAL
AUTHORITY OFFICER
ANY OTHER THAT PERSON / PERSON COMPETENT TO ACT
PERSON ON ITS BEHALF
Art. Juridical
PERSON 58
Assessment Procedure
.
RETURN OF INCOME
RULE 12
ITR 1 TO 8
a return ?
What if the return
filed is found by A O
to be defective
59
Assessment Procedure
.
RETURN OF INCOME
WHAT HAPPENS IF
Return invalid
RULE 12 Return
ITR 1 TO 8 not NO RETURN 60
rectifie
Assessment Procedure
.
RETURN OF INCOME
WHAT HAPPENS IF
NO RETURN
.
NO RETURN
Penalty u/s 272A(2) Notice u/s 142 (1)
Rs.100/-for every day Penalty u/s 271 F
during which the failure c/f losses u/s 80 not allowed
continues Prosecution u/s 276CC
RULE
62
12
ITR 1
Assessment Procedure
.
RETURN OF INCOME
Sec 276CC. If a person wilfully fails to furnish in due time the
return of fringe benefits which he is required to furnish under sub-
section (1) of section 115WD or by notice given under sub-section (2)
of the said section or section 115WH or the return of income which
he is required to furnish under sub-section (1) of section 139 or by
notice given under 37clause (i) of sub-section (1) of section 142 or
section 148 38or section 153A, he shall be punishable,
(i) in a case where the amount of tax, which would have been evaded if
the failure had not been discovered, exceeds one hundred
thousand rupees, with rigorous imprisonment for a term which
shall not be less than six months but which may extend to
seven years and with fine;
(ii) in any other case, with imprisonment for a term which shall not be
less than three months but which may extend to three years
and with fine:
Provided that a person shall not be proceeded against under this
section for failure to furnish in due time the return of fringe benefits
under sub-section (1) of section 115WD or return of income under sub-
section (1) of section 139
(i) for any assessment year commencing prior to the 1st day of April, 1975; or
(ii) for any assessment year commencing on or after the 1st day of 63
April 1975, if
Assessment Procedure
.
RETURN OF INCOME
4. Annexure-less Form
No document (including TDS certificate) should be attached to this
form. Official receiving the return has been instructed to detach all
documents enclosed with this form and return the same to the
assessee.
The above persons shall apply for allotment of PAN within 15 days of
the date of publication of the notification in the Official Gazette.
However, persons who may fall in the above category, after the date
of the above notification, shall apply for allotment of PAN:
• (a) in case of (I) above, before making an import or export;
• (b) in case of (ii) and (iii) above, before making am application for
registration under central excise;
Assessment Procedure
.
P.A.N.
• The Central Govt. by notification no. 355/2001, dated 11-12-
2001 has further notified the following class or classes of persons:
Sec 139A. (3) Any person, not falling under sub-section (1)
or sub-section (2), may apply to the Assessing Officer for the
allotment of a permanent account number and, thereupon,
the Assessing Officer shall allot a permanent account number
to such person forthwith.
(4) For the purpose of allotment of permanent account
numbers under the new series, the Board may, by
notification in the Official Gazette, specify the date
from which the persons referred to in sub-sections (1) and (2)
and other persons who have been allotted permanent
account numbers and residing in a place to be
specified in such notification, shall, within such time as
may be specified, apply to the Assessing Officer for the
allotment of a permanent account number under the new
series and upon allotment of such permanent account
number to a person, the permanent account number, if any,
allotted to him earlier shall cease to have effect :
Provided that the persons to whom permanent account number
PAN
139A. (5) Every person shall
(a) quote such number in all his returns to, or
correspondence with, any income-tax authority;
(b) quote such number in all challans for the payment of any
sum due under this Act;
(c) quote such number in all documents pertaining to such
transactions as may be prescribed by the Board in the
interests of the revenue, and entered into by him:
Rule 114 B
By AO
Order for special audit
103
becomes void
Assessment Procedure
.
Sec 142
Can inquiry u/s 142 done after assessment?
No . It pre-assessment enquiry.............. Amal Kr Ghatak v. ITO
(1971) 79 ITR 452 (Cal)
Can a reference to t eh valuation cell u/s 55A be made u/s 142) ?
No …………………………………………..Smt Amiya Bala Paul v. CIT
(2003) 262 ITR 407 (SC)
Where AO gathers material from records pertaining to an earlier year,
is he bound to give an opportunity to be heard ?
Yes, as such material is covered u/s 142 (3)………….Ponkummam
Traders v. Additional ITO (1972) 83 ITR 508 (Ker)
If the notice u/s 142 (1) is accompanied by a letter asking for
information, whether non compliance of that letter amount to non-
compliance u/s 142 (1) ?
No …………………………………. Calcutta Chromotype P Ltd. V. ITO ,
(1971) 79 ITR 442 (All)
If the notice u/s 142 (1) called for information part of which was prior to
three years from the relevant PY then will the whole notice become
illegal ?
No. only the part pertaining to information prior to 3 years will be
104
illegal – if it is severable from the other parts ………Murlidhar Madanlal
v. CIT (1954) 26 ITR 231 (Pat)
Assessment Procedure
.
Sec 142
Who is to decide which books are required to be produced u/s 142 (1)?
AO is the sole judge.............. Tejmal Bhojraj V. CIT (1952) 22 ITR
208 (Nag)
Can AO ask for special audit u/s 142 (2A) without looking at the
accounts?
No. An honest attempt must be made first to understand the
accounts of the assessee ………………………..Swadeshi Cotton Mills Co
Ltd V. CIT (1988) 17 ITR 634 (All)
Can special audit be asked for in a case where the accounts are
already audited?
Yes………….Jagjit Sugar Mills Co Ltd. V. CIT (1994) 210 ITR 468
(Punj&Har)
Can the Commissioner issue an order for the special audit u/s 142(2A)?
No . An order by CIT does not amount to approval as envisaged in
the statute………………………. Peerless Gen Fin & Inv Co Ltd V. CIT
(1999) 102 Taxman 654 (Cal)
If the AO makes a proposal to the CIT for appointing an auditor u/s 142
(2A) without sharing any other information related with the case, and if
CIT nominates an auditor for the audit, does it amount to compliance
of sec 142 ? Is the action valid ? 105
No. Approval by the CIT must be specific and given after considering
Assessment Procedure
.
Sec 142
Would an AO be justified in ordering special audit on the ground that
there were many litigations going between the assessee and the RBI ?
No . That is an irrelevant consideration.............. Peerless Gen Fin &
Inv Co Ltd V. CIT (1999) 236 ITR 671(Cal)
Can a special audit be ordered on the ground that the stocks could not
be reconciled by the auditors ?
No. ………………………..UP State Handloom CorpL td V. CIT (2000)
245 ITR 192 (All)
Can special audit be asked by AO if the assessee did not respond to his
queries regarding accounts ?
No That is not a reasonable ground envisaged in sec 142 (2A)………
….Mothoottu Mini Kuries V. Dy CIT (2001) 250 ITR 455 (Ker)
The order u/s 142 (2A) did not disclose any reason for special audit, nor
did records reveal any application of mind by AO. Subsequently th
eorder u/s 142 (2A) was challenged as being bad in law and it was
submitted by AO that special audit was ordered because of past history
of assessee, the fact that he offered income under VDIS scheme and
had not filed audited accounts as was required u/s 44AB. Was th eorder
of AO ?
No . Since the reasons / application of mind were not apparent in106 the
order u/s 142 (2A) it is invalid………………………. HP States Forest Corp
Assessment Procedure
.
Sec 142
Is AO required to provide an opportunity to be heard to the assessee
before ordering a special audit u/s 142 (2A) ?
YES ……………….Proviso u/s 142 (2A) ……………………….inserted by
Fin Act 2007, wef 1.6.2007 after the judgment in case of UP Fin Corp
V. JCIT (2005) 147 Taxman 21 (All) which held that such an
opportunity was not required as per the statute.
Can the AO issue a notice u/s 142 (1) calling for a return of income,
after the due date provided in Sec 139 and before the end of the
relevant assessment year?
Yes………………………..Departmental circular No. 572 dated 3rd
August 1990
………. What is the intention behind introduction of words or before the
end of the relevant assessment year by Finance Act 2006 ?
Clarificatory amendment regarding the time limit for issue of
notice under section 142
The existing provisions contained in sub-section (1) of said section, inter-
alia, provide that for the purposes of making assessment in a case
where a person has not made a return of his income within the time
specified under sub-section (1) of section 139, the Assessing Officer
may serve a notice under the said sub-section on such person requiring
107
him to furnish the return of his income in the prescribed form and
manner.
Assessment Procedure
.
Sec 142
Would an AO be justified in ordering special audit on the ground that
accounts or documents are voluminous ?
No . That is not enough to make the accounts complex or justify
special audit.............. Bajrang Textiles V. CIT (2004) 3 SOT 115 (Jodh)
Can the AO make a reference to an auditor to prepare books of
accounts on the basis of records seized during a search ?
No. ……………………….. Bajrang Textiles V. CIT (2004) 3 SOT 115
(Jodh)
Is the audit report u/s 142 (2A) binding on the AO? Can the AO reject
the same without assigning any reason ?
No. It is NOT binding. However, the AO cannot reject the special
audit report without assigning any reasons………….CIT Vs. Sahara India
Fin Corp Ltd (2004) 135 Taxman 154 (Nag)
In case an assessee fails to file a return of income, is it mandatory for
the AO to issue a notice u/s 142 (1) ?
No
Can a best judgment u/s 144 be completed in a case of non-filing of
return, without issuing a notice u/s 142 (1) for filing of a return u/s 142
(1) (i) ?
108
Yes. It is not mandatory to issue a notice u/s 142(1) (i) in all cases of
non-filers or a necessary part of assessment u/s 144, but then an
Assessment Procedure
.
Sec 142 A
Estimate by Valuation Officer in certain cases
Sec 142A.(1) For the purposes of making an assessment or
reassessment under this Act, where an estimate of the value of
any investment referred to in section 69 or section 69B or the
value of any bullion, jewellery or other valuable article referred
to in section 69A or section 69B is required to be made, the
Assessing Officer may require the Valuation Officer to
make an estimate of such value and report the same to
him.
(2) The Valuation Officer to whom a reference is made under
sub-section (1) shall, for the purposes of dealing with such
reference, have all the powers that he has under section
38A of the Wealth-tax Act, 1957 (27 of 1957).
(3) On receipt of the report from the Valuation Officer, the
Assessing Officer may, after giving the assessee an
opportunity of being heard, take into account such
report in making such assessment or reassessment:
Provided that nothing contained in this section shall apply in
respect of an assessment made on or before the 30th day
Assessment Procedure
.
Sec 142A
Estimate by Valuation Officer in certain cases
Sec 142A ……………………
Explanation. In this section, Valuation Officer has the same
meaning as in clause (r) of section 2 of the Wealth-tax Act,
1957 (27 of 1957).]
c PROVIS
INTIMATION SENT IN CASE OF ADJUSTMENT OF LOSS
O 1
14 PROVIS NO INTIMATION AFTER THE END OF ONE YEAR FROM
O 2
3 END OF F.Y. IN WHICH RETURN WAS FILED
(a
(i) INCONSISTENT ENTRIES IN R/I
)
(ii) INFORMATION REQUIRED NOT FURNISHED
(iii) DEDUCTION EXCEEDS STATUTORY LIMIT
(b If no adjustment
) ACKNOWLEDGEMENT DEEMED INTIMATION
123
Assessment Procedure
.
Sec 143
(1
)
Se CENTRALIS
(
1A) Board Power for making a SCHEME for Centralised processing
c ED
(
PROCESSIN Central Govt Notification IF any provisions of Act will Not apply
14 G OF
1B)
( Notification to be laid before the parliament
3 RETURNS
1C)
124
Assessment Procedure
.
Sec 143
(1
)
Se
c
14 IF AO CONSIDERS IT NECESSARY / EXPEDIENT TO ENSURE
THAT ASSESSEE HAS NOT UNDERSTATED HIS INCOME/
3 (2 NOTIC COMPUTED EXCESSIVE LOSSES/ /PRODUCE
UNDERPAID/ CAUSE
TAXES
TO ATTEND HIS OFFICE
E
) TO BE PRODUCED
ANY EVIDENCE ON WHICH HE MAY WISH TO
OF TOTAL
RELY INCOME & DETERMINATION OF SUM
IN SUPPORT
(3 ASSESSME PAYABLE or REFUND DUE TO ASSESSEE by
) NT ORDER IN WRITING
After HEARING EVIDENCE THAT ASSESSEE MAY
PRODUCE / AO MAY REQUIRE & TAKING INTO
ACCCOUNT
TAXES DEDUCTED PAID ALL RELEVANT
TO BE TAKEN MATERIAL
(4
INTO ACCOUNT 125
)
Assessment Procedure
.
Sec 143
What should the AO do if due to some reason he is not able to adhere
to the schedule of hearing for which a notice is already issued ?
The assessee should be informed in advance either through a
letter or through telephone, wherever possible
........ Instruction No. 1395 (F. No 201/28/81-ITA-II) dt 15.5.81 (114th Report (82-
83) of the PAC, p-16-17)
Can an AO fix the hearing in case of many assessees at the same time?
No. AO should give each assessee a different time …………………
……………………… Circular No 230 dt 27.10.77 ( F No 225/109/77-ITA-II)
If during the hearing the AO comes to observe a relief or claim or
deduction that the assessee was entitled to but has not claimed, can
the AO advice the assessee to claim it?
Yes. Officers of the Deptt must not take advantage of the
ignorance of the assessee. Although the responsibility of claiming
refunds or reliefs rest with the assessee, the officers of the Department
should (i) draw their attention to any refund or relief to which they
appear to be clearly entitled & (ii) freely advise, when approached
by them, about their rights and liabilities, and as to the procedure to
be adopted for claiming such refunds and reliefs.
………….Circular No 14 (XL-35) dt 11.4.55 126
Assessment Procedure
.
Sec 143
What is expected from the AO in an assessment?
Except that he should give precedence to the cases which are
likely to yield more revenue, the AO should not be obsessed with
budget figures. He has certain judgments to complete in an year and
his merit will be judged by the way in which he completes those cases
and not by the extent to which he has collected his budget estimate.
........ Instruction No. 3 of 1942 dt 16.1.42
The assessment has to be made in a reasonable & fair manner after
taking into account all relevant circumstances of the case. Even when
the assessment has to be made ex-parte, the information available
should be reasonably weighed and a proper estimate made in the
exercise of best judgment in the circumstances.
……….Instruction No 574 dt 27.7.73 (193rd Report (83-84) of the PAC, p-26-
27)
Can the AO call for an affidavit?
Unless there is some material basis for suspicion, affidavits sworn
or affirmed before a magistrate should not be called for.
........ Instruction No. 3 of 1942 dt 16.1.42
Is a notice of demand of tax payable on the basis of assessment valid if
not accompanied with a copy of the assessment order? 127
No. As per the Board’s circular No 10D, C No 9(22)-IT/47 dt
Assessment Procedure
.
Sec 143
Can the assessee ask for an adjournment at the last minute ? Can the
request of assessee for grant of an adjournment be refused by the AO?
Where the assessee has already taken one adjournment but
desires another adjournment, the assessee should make the request
for adjournment well in advance so as to enable him, in case of a
refusal, to be prepared to proceed on the appointed day.
........ CIT V. Laxmi Narayan Badridas (1937) 5 ITR 170 (PC)
Will every minor error vitiate the assessment proceeding?
No. An assessment proceeding does not cease to be a proceeding
under the Act merely by reason of a want of notice. It will be a
proceeding liable to be challenged and corrected. ……………….Estate of
Late Ranglal Jajodia V. CIT (1971) 79 ITR 505 (SC)
Will an error in the name of the assessee vitiate the assessment
proceeding?
No ……………….Estate of Late Ranglal Jajodia V. CIT (1971) 79 ITR
505 (SC)
For a return of income for AY 2005-06, filed on 31.3.07 – if the law was
amended w.e.f. 1.4.06, will the amended provisions apply ?
No. The law as it rules during the AY will apply…….Reliance Jute 129
& Industries Ltd V. CIT (1979) 20 ITR 921 (SC)
Assessment Procedure
.
Sec 143
Is an assessment u/s 143(3) valid if the return filed was not signed ?
No. Assessment based on an invalid return is invalid & liable to be
cancelled.
........ CIT V. Krishan Lal Goyal (1984) 148 ITR 283 (Punj & Har)
The AO made an addition during the assessment wherein he relied on a
provision of the IT Act which was subsequently held as ultra-vires to
the constitution. Will the assessment order is also null & void ?
No. If the machinery provision used for assessment is valid ……………
….Raleigh Investment Co. V. Governor General in Council (1947) 15
ITR 332 (PC)
The assessee is having a dispute with a third party on certain income.
Should the AO necessarily wait till the litigation is decided before
passing the assessment order ?
No. Income-tax assessment has to made every year and cannot
be held up until the final result of a legal proceeding which may pass
through several courts………….CIT V. H Hirjee (1953) 23 ITR 427 (SC)
What if the AO does not sign the assessment order?
Invalid order …….Kalyan kumar Roy V. CIT (1996) 219 ITR 214
(SC)
What if the AO does not state the computation of tax in the assessment
130
order, but such computation was given in the demand notice sent
Assessment Procedure
.
Sec 143
Does the Evidence Act apply in case of assessment ?
Though the provisions of the Evidence Act do not apply to
assessment proceeding, when the authorities are called upon to
consider the effects of a document, the general provisions embodied in
Sec 91, 92 & 94 of Evidence Act will apply.
........ AVN Jagga Row V. CIT (1987) 166 ITR 862 (AP)
131
Assessment Procedure
.
Sec 143
Evidence Act, 1872
92. Exclusion of evidence or oral agreement - When the terms of any such
contract, grant or other disposition of property, or any matter required by law to be
reduced to the form of a document have been proved according to the last
section, no evidence of any oral agreement or statement shall be admitted, as
between the parties to any such instrument or their representatives in interest, for
the purpose of contradicting, varying adding to, or subtracting from, its term:
Proviso (1) - Any fact may be proved which would invalidate any document, or
which would entitle any person to any decree or order relating thereto, such as
fraud, intimidation, illegality, want for due execution, want of capacity in any
contracting party, want or failure of consideration, or a mistake in fact or law.
Proviso (2) - The existence of any separate oral agreements to matter on which
a document is silent, and which is not inconsistent with its terms, may be proved.
In considering whether or not this proviso applies, the Court shall have regard to the
degree of formality of the document.
Proviso (3) - The existence of any separate oral agreement, constituting, a
condition precedent to the attaching of any obligation under any such contract,
grant or disposition of property, may be proved.
132
Assessment Procedure
.
Sec 143
Evidence Act, 1872
92. Exclusion of evidence or oral agreement
Proviso (4) - The existence of any separate oral agreement, constituting, a
condition precedent to the attaching of any obligation under any such contract,
grant or disposition of property, may be proved, except in cases in which such
contract, grant or disposition of property, is by law required to be in writing, or has
been registered according to the law in force for the time being as to the registration
of documents.
Proviso (5) - Any usage or custom by which incidents not expressly mentioned
in any contract are usually annexed to contracts of that description may be proved.
Provided that the annexing of such incident would not be repugnant to, or inconsistent
with, the express terms of the contract.
Proviso (6) - Any fact may be proved which shows in what manner the language of
a document is related to existing facts.
Sec 94. Exclusion of evidence against application of document of existing facts
- When language used in a document is plain in itself, and when it applies
accurately to existing facts, evidence may not be given to show that it was not
meant to apply to such facts. 133
Assessment Procedure
.
Sec 143
Can the AO take circumstantial evidence into account ?
In case of the circumstantial evidence, the totality of circumstances
has got to be taken into account, and the combined effect of all the
circumstances is determinative of the question as to whether or not a
particular fact is proved.
........ CIT V. Rameshwar Prasad Bagla (1968) 68 ITR 653 (All)
Can the AO reject affidavits filed by the Assessee ?
It cannot be rejected straightaway on the ground that no material
evidence is filed to prove. Rejection of an affidavit is not justified
unless the assessee is either cross-examined or called upon to produce
documentary evidence in support of the affidavit sworn by him ………
……….L Sohan Lal Gupta V. CIT (1958) 33 ITR 786 (All)
Can the AO rely on evidence that has never been brought to the notice
of the assessee?
No. It will violate the principles of natural justice. …………. MO
Thomakutty V. CIT (1958) 34 IR 501 (Ker)
Opportunity to assessee to rebut material is essential………….
Ponkunnam Traders V. Addl ITO (1972) 83 ITR 508 (Ker)
138
Can the AO make an addition on the ground that the assessee has
been evading taxes in earlier years?
Assessment Procedure
.
Sec 143
Time limit for completion of assessments and reassessments.
Sec 153. (1) No order of assessment shall be made under
section 143 or section 144 at any time after the expiry of
(a) two years from the end of the assessment year in which
the income was first assessable ; or (b) one year from the end
of the financial year in which a return or a revised return relating to
the assessment year commencing on the 1st day of April,
1988, or any earlier assessment year, is filed under sub-
section (4) or sub-section (5) of section 139, whichever is later :
Provided that in case the assessment year in which the income
was first assessable is the assessment year commencing on the
1st day of April, 2004 or any subsequent assessment year,
the provisions of clause (a) shall have effect as if for the words
two years, the words twenty-one months had been
substituted :
Provided further that in case the assessment year in which the income
was first assessable is the assessment year commencing on the 1st day
of April, 2005 or any subsequent assessment year and during the
course of the proceeding for the assessment of total income, a reference
under sub-section
REFERENCE (1) of section
TO TRANSFER 92CA
PRICING (i) was made before the 1st
OFFICER
day of June, 2007 but an order under sub-section (3) of that
Assessment Procedure
.
Sec 143
FILING OF RETURN
139 (4) /
139 (1) AY 2009-10 (5)