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Income Tax Assessments

Income Tax Assessments

by Sanjeev Archak

In our previous blog, we examined the new income tax assessment structure. In this post, we shall look at the various types of income tax assessments conducted by the department.The department selects cases for assessment based on certain parameters. The parameters for FY 18-19 has been published  by the department on 05.09.2019.

Under the Income-tax Law, there are four major  tax assessments:

1.Summary Assessment

A summary assessment is done by the department without human interface. The Central Board of Direct Taxes has set up a Centralized Processing Cell to do summary assessment. A return filed by the tax payer is verified with the information already available with the department.

For instance, the TDS credit claimed by the tax payer is checked with the credit in Form 26AS. Any mismatch is informed to the tax payer by an intimation. The tax payer is given time to respond to the intimation. A summary assessment can be made can be made within a period of one year from the end of the financial year in which the return of income is filed.  Any intimation issued beyond this time limit will be invalid.

2. Regular  Assessment

This is a detailed assessment and is also  called  as scrutiny assessment. At this stage a detailed scrutiny of the return of income is carried out  to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income. The tax payer is required to produce books of accounts and any other record the income tax officer requires to be produced.

The objective of scrutiny assessment is to confirm that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. To conduct a regular assessment a notice has to be issued by the Officer to the tax payer. Such notice cannot be issued  after the expiry of 6 months from the end of the financial year, in which return is filed.

3.Best judgment assessment

A best judgement assessment is carried out in the following cases:

  1. If the taxpayer fails to comply with all the terms of a notice
  2. If the taxpayer fails to file the return required within the due date
  3. If the taxpayer fails to comply with the Special Audit requirements
  4. If the taxpayers fails to produce documents required by the tax office

As per the Income Tax Act, a best judge assessment has to be carried out within 12 months from the end of the assessment year in which the income was first assessable.

4. Income Escaping Assessment

This assessment is carried out if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any previous years. The objective of carrying out this assessment is to bring under the tax net any income which has escaped assessment in original assessment.

This assessment is carried out in the following scenarios:

  1. tax payer has taxable income and has not filed the returns
  2. tax payer is found to have understated his income or over stated his expenses
  3. tax payer has not filed a report for his international transactions
  4. tax payer has assets outside India

A notice has to be issued to the tax payer before commencing this assessment. Such a notice has to be issued within a period of  4 years years from the end of the relevant assessment year.

If you have received a notice from the Income Tax Department, please get in touch with experts at Integra Books.

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