Procedure for Assesment

8/8/2019 Procedure for Assesment

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Presented By-

Rahul Kesarwani

III Semester



I. Self assessment

Ev ery assessee liable to pay income tax or fringe benefit tax isrequired to submit his return u/s 115 WD or u/s 139,142,148 or u/s153A or u/s 158BC.The assessee should prepare his return aftertaking into account following points :

i) The amount of tax, if any, already paid under any pro v ision of this Act.

ii) Any tax deducted or collected at source.

iii) Any relief of tax or deduction of tax claimed u/s 90 or 91 on

account of tax paid in a country outside India.i v ) Any relief of tax claimed u/s 90A is account of tax paid in any

specific territory outside India referred to in that section.

v ) Any tax credit claimed to be set off in accordance with thepro v ision of Section 115 AA.



Interest payable u/s 234A shall be computed on the amount of tax on the total income as declared in the return as reducedby the amount of :

a) Ad v ance tax, if any , paid.

b) Any tax deducted or collected at source.

c) Any relief of tax or deduction of tax claimed u/s 90 or 91(Double Taxation Relief ) on account of tax pain in a country outside India.

d) Any relief of tax claimed u/s 90A on account of tax paid in any specified territory outside India.

e) Any tax credit claimed to be set off in accordance with thepro v ision of section 115JJ.



II Enquiry before assessment

Before finalising the assessment of an assessee, the Assessingofficer may be interested to go through certain books, accounts,documents, statements of the assessee and certain otherinquiries, which the Assessing officer may think desirable

finalising the Assessment. Section 142 empowers the Assessingofficer in this regard. He can issue a notice to the assessee u/s142(1), requiring him(assessee) on a due date to be specifiedtherein :

I. were such person has, within the time allowed u/s 139(1) orbefore the end of rele v ant assessment year failed, to furnish areturn of his income or income of any other person in respectif which he is assessable under this Act, in the prescribed formand v erified in prescribed manner and setting forth such otherparticulars as may be prescribed, or



II. to produce or cause to be produce, such books accounts ordocuments as the Assessing officer may require, or

III. to furnish in writing and v erified in prescribed mannerinformation in such form and on such points or matters(including a statement of all assets and liabilities if the

assessee whether included in accounts or not) as the Assessingofficer mat require.

IV. The Assessing officer shall not require production of any books of accounts relating to a period more than three yearsprior to the pre v ious year. But in the case of documents, there

is no such limit.U/s 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.



III Assessment on the basis of return filed

W ith effect from assessment year 1989-90 new procedure of regular assessment has been prescribed which is as follows :

1. When a return has been filed[Section 143(1)(a)].In case assesseehas filed any return u/s 139 or in response to notice u/s 142(1) and :

I. If any tax or intrest if found due on the basis of such returnafter adjustment of any ad v ance tax paid, any tax paid on self assessment or any amount paid otherwise by way of tax orintrest, then , without prejudice to the pro v isions of sub-section(2), an intimation shall be sent to the assessee specifing

the the sum so payable, and such intimation shall be deemed tobe a notice of demand issued under section 156 and allpro v isions of this Act shall apply accordingly ; and

II. If any refund is due on the basis of such return, it shall begranted to the assessee and an intimation to this effect shall besent to the assessee ;



2. Assessment on the basis of enquiry i.e. scrutiny [Section 143(2)and 143(3)]

I. If the Assessing officer has reason to belie v e that the assesseehas claimed loss, exemption, deduction, allowance or rebate

which is not admissible under the Act, a notice requiring himto produce proof of such claims on a specified date , shall beissued. No notice under this shall be issued with effect from 1-

6-2003.II. Such notice can also be ser v ed to an assessee who has either

understand his income or has computed excessi v e loss or hasunder paid tax, ask him to produce e v idence to support hiscase.

III. It is pro v ided that no notice under this clause shall be ser v edon the assessee after the expiry of six months from the end of financial year in which the return is furnished.

IV. On the specific day the Assessing officer after hearing thee v idence or after inspecting the documents may accept or

reject the claim and pass the necessary orders in writing.



After such orders the amount of tax may be determined and

demand notice/refund order may be issued. V. In case return of income is filed by following persons, no order

shall be issued without gi v ing effect to the exemption allowedu/s 10 unless he has intimated the central go v ernment orconditions for claim of exemption and such appro v al has been

rescinded :a) Scientific Research organisation or fund or trust,

b) News agency,

c) Association or institution referred to u/s 10(23A)(such asinstitution set up to promote professional subjects).

d) Association or institution referred to u/s 10(23B) such as Khadiand Village Industries Board.



e) Following institutions as co v ered u/s 10(23C).

Prime Ministers National Relief Fund, Prime Ministers National(Promotion of Folk Art) Fund, Prime Ministers Aid to studentsFund, National Foundation for Communal Harmony, any uni v ersity or other educational institution, any hospital or otherinstitution, any charitable institution etc.



3. Adjustment of tax on Regular Assessment [ section 143(4)]In case regular assessment is made u/s 143(3) or 144:

I. Any tax or interest paid by assessee shall be deemed to ha v ebeen paid towards such regular assessment;

II. In case any excessi v e amount has been refunded but amountrefundable on regular assessment is less, the excess amount of refund shall be deemed to be tax payable by assessee.



IV Best judgment assessment

In the process of making assessment of an assessee, the Assessing officer calls for certain informations through noticesfrom such assesses. To know the correct income or loss of anassessee, such in formations may be necessary. In case an

assessee fail to comply with such notices, the Act has armed the Assessing officer with wide powers to deal with such cases. Tomake a best judgment assessment of assessees income is themost important tool in the hands of the Assessing officer. Thisassessment is also known as Ex-parte assessment.

The best judgement assessment is of two types :

a) Compulsory best judgement assessment.

b) Discretionary best judgement assessment.



Compulsory Best Judgement Assessment

An assessment made u/s 144 is known as Compulsory best judgement assessment. A Compulsory best judgementassessment shall be made, if any person :

I. fails to file the return u/s 139(1) and has not made a return or are v ised return u/s 139(4) and 139(5); or

II. fail to comply with all terms of a notice issued u/s 142(1); or

III. fail to comply with the directions issued under section 142(2A);

IV. ha v ing made a return, fails to comply with all the terms of a

notice issued u/s 143(2).



Consequences

Along with the best judgement assessment, the assessee will alsoface the following consequences:

I. When the assessee files an application of appeal against the

best judgement assessment, he is pre v ented from bringing onrecord any new facts before the appellate authorities.

II. The assessee becomes liable for penalties and prosecutions u/s271, 276 CC and 276 D.



R emedies

When a best judgement assessment is made against any assessee,he has only two remedies against such assessment. These are :

I. Filling of an application with the Assessing officer for the

cancellation of the best judgement assessment : Within one month of the ser v ice of the notice of demand on thebasis of the best judgement assessment u/s 144, the assessee canapply to the Assessing officer for the cancellation of suchassessment. Section 146 empowers the Assessing officer to

cancel the best judgement assessment. But the cancellation canonly be there if the assessee applies on the basis of the followinggrounds.



These are :

a) that the assessee was pre v ented by sufficient cause from makingthe return required u/s 139, or

b) that he did not recei v e the notice issued u/s 142(1) and 143(2), or

c) that he did not ha v e reasonable opportunity to comply or waspre v ented by sufficient cause from complying with the noticeissued u/s 142(1) and 143(2).

If the Assessing officer s satisfied with the reasons forwarded by the assessee for non-compliance he must cancel the best

judgement assessment and should proceed with the making of regular assessment.

Ev ery application made for cancellation of best judgementassessment shall be disposed of within ninety days from thedate of receipt of application by Assessing officer.



If the Assessing officer refuses to cancel the best judgement

assessment the assessee has been gi v

en a rite to file an appealagainst the best judgement assessment.

II. Filling of an appeal against such assessment with thehigher authority:

This remedy is not helpful as the assessee cannot produce any e v idence before the Appellate authority as he had failed toproduce such e v idence before Assessing officer.



Discretionary Best Judgement Assessment

Method of accounting [Section 145]

1) For computing the income under the head profits and gains of business or profession the assessee may adopt either cash ormercantile system of accounting.

2) The central go v ernment may modify the accounting standardsto be following by any class of assessees or in respect of any class of incomes.

Method of accounting in certain cases [Section 145 A]

a) The v aluation of purchase and sale of goods and in v entory for

purpose of determining income under the head profits andgains of business or profession shall be done :

I. in accordance with the method of accounting adopted by the assessee ; and



II. it shall be further adjusted by including any amount of tax,

duty, cess or fee (by whate v

er name called) actually paid orincurred by the assessee to bring the goods to place of itslocation and condition as on the date of v aluation.

b) Interest recei v e by an assessee on compensation or onenhanced compensation , as the case may be, shall be deemedto be income of the year in which it is recei v ed. [ Inserted by the Finance Act, 2009 w.e.f. 1-4-2010].

Section 154(3) empowers the Assessing officer to make adiscretionary type of best judgement assessment. This type of assessment may be made under the following two types of

cases:I. Where Assessing officer is not satisfied about the correctness

or completeness of the accounts of the assessee, or

II. Where no method of accounting has been regularly employedby the assessee.



V Income Escaping Assessment or Reassessment

R e-assessment

If the Assessing officer, has reason to belie v e that any incomechargeable to tax has escaped assessment for any assessment

year, he may, subject to the pro v isions of sections 148 to 153,

assess or re-assess such income and also any other incomechargeable to tax which has escaped assessment and whichcomes to his notice subsequently in the course of theproceedings under this section, or re-compute the loss or thedepreciation allowance or any other allowance, as the case may

be, for the assessment year concerned (hereafter in this sectionand in section 148 to 153 referred to as the rele v ant assessment

year) :



Where an assessment under sub-section (3) of section 143 or this

section has been made for the rele v ant assessment year, noaction shall be taken under this section after the expiry of four

years from the end of the rele v ant assessment year, unless any income chargeable to tax has escaped assessment for suchassessment year by reason of the failure on the part of the

assessee to make a return under section 139 or in response to anotice issued under sub- section (1) of section 142 or section 148or to disclose fully and truly all material fact necessary for hisassessment for that assessment year.

It is also pro v ided that the Assessing officer may assess or re-assess such income, other than the income, in v ol v ing matters

which are the subject matter of any appeal, reference or re v ision, which is chargeable to tax and has escaped assessment.



Assessment or reassessment of Income in respect of anissue the reasons for which not recorded under section148(2) [Introduction by the Finance Act, 2009, w.r.e.f.assessment year 1989-90]

Deemed cases of escaped income assessment

The following shall be deemed to be the case where incomechargeable to tax has escaped assessment

I. Assessees own taxable income or the total income of any person in respect of which he is assessable exceeds themaximum exempted amount but the assessee has not filed orfurnished return of his income.

II. The Assessee has furnished the return of his income but no

assessment has been made and the Assessing officer hasnoticed that-

a) the assessee has understated his income, or

b) has claimed excessi v e loss, deduction , allowance, relief, etc. in hisreturn.



III. The Assessing officer has made an assessment, but he has

found that-a) income chargeable to tax has been under-assessed; or

b) such income has been assessed at too low a rate; or

c) such income has been made the subject of excessi v e relief under this Act; or

d) excessi v e loss or depreciation allowance under this Act hasbeen computed.



Issue of notice where income has escaped assessment

[Section 148]Before making the assessment, re-assessment or re-computationunder section 147 the Assessing officer shall ser v e on the assesseea notice requiring him to furnish within such period, not beingless than thirty days, as may be specified in the notice, a return

of his income or the income of any other person in respect of which he is assessable under this Act during the pre v ious yearcorresponding to rele v ant assessment year, in the prescribedform and v erified in the prescribed manner and setting forthsuch other particulars as may be prescribed; and the pro v isions

of this Act shall, so far as may be, apply accordingly as if suchreturn were a return required to be furnished under section 139.



Time limit for issuing notice[Section 149]

No notice under section 148 shall be issued for the rele v antassessment year,

(a) In a case where as assessment under sub-section(3)of section 143 or section 147 has been made for suchassessment year:

if four years ha v e elapsed from the end of therele v ant assessment year, unless the case falls undersub clause-(ii).

if four years, but not more than six years, ha v e

elapsed from the end of the rele v ant assessment yearunless the income chargeable to tax which hasescaped assessment accounts to or is likely toamount to rupees 1,00,000 or more than that year ;



R ates of tax on re-assessment

Section 152(1) pro v ides that in assessment, or re-assessmentmade under section 147, the tax shall be chargeable at the rate orrates at which it would ha v e been charged had the income notescaped assessment. It means the rate of that assessment yearshall apply, to which the escape income actually belongs.



Time limit for completion of assessment and reassessment

[Section 153]Section 153 has prescribed the time limit for completion of assessment or reassessment as under :

R egular or best judge assessment. A regular assessment u/s143 or best judgement assessment u/s 144 is required to be

completed within 21 months from the end of the rele v antassessment year. For example assessment/reassessment relatedto assessment year 2007-2008 i.e., upto 31 December 2009.

In case of assessment of fringe benefit tax u/s 15 W E

or u/s 115 WF, the assessment must also be completed within 21 monthsfrom the end of assessment year in which fringe benefits werefirst assessable.



Escaped income assessment or reassessment u/s 147

[Section 153(2)]

An assessment u/s 147 is required to be completed within 9 monthsfrom the end of the financial tear in which the notice u/s 148 wasser v ed.

For example assessee has escaped income of 2 Lakhs rupees and anotice in this regard u/s 148 is ser v er on the assessee on 15th June2007( this financial year ends on 31st March 2008) and so thisassessment should be completed upto 31st December 2008.

Procedure for Assesment

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