INCOME TAX ASSESSMENT PROCEDURE RELATING REGULAR ASSESSMENT, SCRUTINY ASSESSMENT, BEST JUDGEMENT ASSESSMENT, INCOME ESCAPING ASSESSMENT IN INDIA

1. What is a notice us 142(1)(i)

A notice is issued if assessee has not filed return within the time.

2. Can notice us 142(1) (i) be issued after end of the relevant A.Y.?

Yes.

3. Can A.O make best judgement assessment us 144 without giving notice us 142(1).

It is not mandatory to give notice us 142(1) for making assessment us 144.

4. Is it required to file ITR by a person who is not required to file, if he received notice us 142(1)

Yes.

5. Can Accounts, Documents and other information be called for by notice us 142(1)(ii)

Yes, for the purpose of making assessment A.O. can require such things us 142(1)(ii)

6. Can statement of assets and liabilities be required by A.O. us 142(1)(ii)

A.O. is required to obtain approval of JOINT COMMISSIONER before requiring such information.

7. Can A.O. require information for more than 3 years prior to the relevant .P.Y. us 142(1)(ii)?

No, he can  not.

8. Is notice us 142(1)(ii) issued for the purpose of making assessment?

Normally such notice is served after notice us 143(2), 144, 148, 153A.

9. What is the general purpose of issuing notice us 142(1)(ii)?

A.O. generally sends such notice to procure information for the purpose of making assessment.

10. What are the requirements of notices under different sections?

10.1 For making assessment us 143(3) => notice us 143(2)
10.2 For making assessment us 144=> show cause  notice.
10.3 For making assessment us 147 => notice us 147.
10.4  For making assessment us 153A=> notice us 253A.

SPECIAL AUDIT

1. When an A.O. orders for Special Audit us 142(2A)?

At any stage of proceedings if A.O. is of the opinion that audit required having regard to the:

*Nature of complexity of Accounts
*volume of Accounts
*doubt about the correctness
*multiplicity of transactions
*specialised nature of business activities
*for the interest of revenue

2. Is it required to provide the assessee an opportunity of being heard for the A.O. to give direction of Special Audit?

Yes.

3. When such direction for special audit can be issued?

When an assessment / reassessment is pending before the A.O.
Such order can not be issued after completion of assessment / reassessment.

4. Can such order be given for assessing whether a case can be reopened?

No.

5. Is there any requirement of giving a show cause notice before giving direction of Special Audit?

Yes, an opportunity of being heard is to be issued before giving such direction.

6. What is the remedy available to an assessee against such direction?

A WRIT PETITION to high court is the remedy.

7. Is it required to obtain previous approval of higher authority for giving such direction?

Yes, previous approval of CC is required to be obtained by A.O.

8.  Who will audit and how will be the audit fees be determined and paid?

The audit will be conducted by a Chartered Accountant nominated by C.C. / C.

A.O. will determine the Audit fees and expenses will be paid by the Central Government.

9. Can such direction be given even the accounts has already been audited by Income Tax Law or any other law?

Yes

10. Is there any time limit for submission of audit report?

Yes the time is specified in the direction.

11. Can such time period be extended?

A.O.  may extend the time of submission of audit report on application by assessee.
Further A.O. may suo Moto extend such period on application by auditor.

12. Can an A.O. ulitise information or material gathered from such Audit?

Assessee is required to be given opportunity of being heard before utilisation of such information.

13. If assessee fails to respond in notice us 144 is it required to give opportunity of being heard for utilisation of information gathered in Special Audit?

No, no further opportunity of being heard is required to be given.

14. What would be the consequence if assessee is defeated in WRIT PETITION?

There is no remedial provision in the Income Tax Act against any notice of I.T. department. Only constitutional remedy is the available first WRIT PETITION in High Court and then SPECIAL LEAVE PETITION to Supreme Court.

REFERENCE TO VALUATION OFFICER BY AO

1. what is the relevant Section for referring to the Valuation Officer (V.O.) by A.O.,?

Section 142A

2. What is the purpose for which A.O. can refer to a Valuation Officer?

For the purpose making assessment and reassessment.

3. Which value the V.O. will determine?

Estimated Value including Fair Market Value.

4. What are the types of assets the V.O. is referred for?

Any asset, property and Investment.

5. When A.O. refers to V.O.?

If A O. is not satisfied regarding the correctness and completeness of the accounts.

6. What is the source of information to the V.O.?

V.O. may ask the assessee for providing information and he himself may possess information.

7. Is it required to give opportunity of being heard to the assessee by the V.O.?

In case the V.O. wants to use information in his possession he is required to give the assessee reasonable opportunity of being heard.

8. Can V.O. make best judgement assessment?

In case if the assessee doesn't co-operate

9. What is the time period within which the Valuation Officer will send report to the A.O and the assessee as well?

Within six months from the month of such reference to V. O

10. Is it required by the A O  to provide opportunity of being heard to the assessee?

Before using the information of the report of the V. O.

11. Is it compulsory that reference to V.O. can be made only with regard to computation of Capital Gains?

Certain Courts are of such opinion that reference can be made with regard to Capital Gains only. But Section 142A overrides such view, hence reference to V.O. can be made for making assessment / reassessment.

12. Is it required by A.O. to reject the books of accounts of assessee, if he is not satisfied with the correctness or completeness,  for exercising the power of reference to V.O.?

Certain Courts are of such view. But Section 142A provides that reference to V.O. can be made any time whether or not A.O. is satisfied with the correctness or completeness of accounts.

SCHEME OF PROCESSING RETURN US 139(1)

1. What are adjustments that are required to be made for processing a return us 139(1)?

1.1 Any arithmetical error
1.2 Incorrect claim apparent from record
1.3 Disallowance of loss claimed due to submission of return in earlier period after due date.
1.4 Disallowance of expenditure claimed in Tax Audit report.
1.5 Disallowance of any Deduction
1.6 Addition of income as per 26AS / 16 / 16A
Note: from A.Y. 2018-19 before giving effect of above written / electronic communication to be made and response made by assessee is required to be considered. If no response is received within one month then adjustment can be made.
1.7 Tax / Interest and fee us 234F
1.8 The sum payable by assessee
1.9 Intimation for amount payable / refundable
1.10 Refund to be granted
1.11 Loss as declared in the ITR allowed
1.12 The intimation shall be sent within one year from the financial year in which return is made.

2. What is an incorrect claim?

2.1 Any item which is inconsistent with other item.
2.2 Information required to be submitted for substantiating any item and which is not provided.
2.3 Any excess deduction.

3. Is the acknowledgement of return itself deemed to be treated as intimation!

Yes, where no adjustment has been made

4. Is there is human intervention in generating intimation us 143(1)

No, the system is fully computerized.

5. Can appeal be made against order us 143(1) to the IT (Appeals)?

Yes, previously an appeal to IT(Appeal) was not possible since appeal is allowable only against an Assessment Order and an intimation us 143(1) is not an Assessment Order.

6. Can revision application us 264 be filled against intimation us 143(1)?

No, there is no ammendment as done in case of Appeal to CIT, and revision us 264 can be made against an assessment order only, since intimation us 143(1) is not an assessment order revision can not be made.

7. Can CIT revise us  263 an intimation us 143(1)?

No, since an assessment order can only be revised.

8. Can rectification be made us 154 of an intimation 143(1)?

Yes, an A.O. can amend an intimation passed us 143(1).

9. Can an assessee seek rectification us 154 of an intimation us 143(1)?

Yes, an assessee can seek of any mistake apparent.

10. Can a benefit of TDS be claimed us 154, which has not been allowed by the A.O.?

Yes, us 154, such claim can be made with furnishing rectification application with details of such TDS.

11. Can revised return be filled even after issue of intimation us 143(1)?

Yes, intimation is not assessment order.

12. What will be consequence if the tax is not paid  within whthim 30 days of demand as per 143(1)?

The assessee will be treated as assessee in default. Interest us 220 and penalty us 221 are required to be paid.

13. Can refund be granted after after one year from the Financial Year in which return is submitted?

Yes, but intimation can only be issued within one year from the Financial Year in which return is submitted.

WITHHOLDING REFUND

1. Whether an A.O can withhold any refund due to an assessee?

Finance Act 2017 inserted section 241A, in the following cases:

1. If any notice is issued us 142(1) in between when refund is due to such return.
2. If it is required for the interest of revenue.

2. Is it required to obtain previous approval and to keep written record by the A.O.?

Yes, previous approval of CIT is required and A.O. to record the reason as how such decision will effect the interest of revenue.

SCRUTINY ASSESSMENT

1. What are the areas which an A.O. wants to assure by issuing notice us 142(2)?

A.O. wants to ensure the following:
1.1 No understatement of income
1 2 No computation of heavy loss
1.3 No underpayment of Tax

2. What is the time limit of SERVICE of the notice?

Six months from the F. Y. in which return is furnished.

3. When a notice us 143(2) can be served after the Specified time period?

A second notice requiring further information or documents can be served after Specified time if first notice is served within Specified time.

4. Is communication in Electronic Mode considered as Hearing?

Section 2(23C) includes communication in Electronic Mode as hearing.

5. Can such notice be issued by centralised cprocessing Centre?

Section 282A has been ammended so that such notice can be issued by CPC, who will be the A O. in such case.

REGULAR / SCRUTINY ASSESSMENT US 143(3)

1. How a Scrutiny Assessment is made?

Generally in the following way:
1.1 Hearing of evidences as produced by assessee is made by the A.O.
1.2 A.O. may require additional evidences.
1.3 A.O. may gather other relevant information and documents.

After considering all above A.O. shall issue an written order making assessment of total income.

A.O. shall determine amount of income tax payable / refundable.

2. Can A.O. intimate concerned authority for withdrawal of approval us 11 / 12 as a result of scrutiny assessment?

Section 143(3) provides that A.O. shall pass assessment order after giving effect of provisions of section 10 in case the return is submitted us 139(4C).

If A.O. notices contravention of section 10 is there, he may give reasonable opportunity of being heard. After such hearing he may recommend the concerned authority to withdraw such approval.

3. Can Assessment be conducted us 143(2) in case where assessee has not filed ITR?

No, assessment us 143(3) can only be made if assessee has filed ITR us 139 / 142(1).

4. Is it required to serve notice us 143(2) for making assessment us 143(3)?

Yes, it is compulsory to serve notice us 143(2)

5. Is it possible to make assessment us 143(3) by issuing notice after expiry of 6 months from the end of the F. Y. in which return is filled?

No, to make assessment the notice us required to be issued within the due date.

6. Can refund be granted as a result of scrutiny assessment?

Yes, A.O. can assess income below income as declared in return or can assess loss higher than the returned loss.

7. Can Assessment order be passed at anytime from the end of A.Y.?

According to Section 153(1) order shall be passed within 12 months from the end of relevant A Y. (18 months for A.Y. 2018-19.

8.  Can certain exemption under section 10(21),(22B),(23A),(23B),(23C) be disallowed by the A.O. while making assessment us 143(3)?

According to first proviso to section 143(3) such exemption can be disallowed only if Government / prescribed Authority has rescinded notification withdrawing exemption.

9. Can A.O. recommend the Central Government for withdrawal of exemption us 35(ii) / 35(iii) as a result of scrutiny assessment?

According to second proviso to section 143(3) if A.O. finds that the conditions which are provided in section 35 are not complying, then he can recommend.

10. What is Scheme as made by the government for assessment us 143(3)?

By Finance Act 2018 section 143(3A), ( 3B), (3C) have been implemented for the following objectives:

1. Elemination of human intervention in the process,
2. Optimisation of resources
3. Introduction of team-based assessment.

BEST JUDGEMENT ASSESSMENT

1. What are grounds of best judgement assessment?

1.1 Assessee fails to furnish return
1.2 does not file return us 139(4)
1.3 fails to comply notice 142(i) relating to submission of ITR
1.4 fails to comply notice 142(ii) relating to furnishing of information
1.5 fails to comply with requirement of Special Audit us 142(2A)
1.6 fails to comply with notice us 143(2) for scrutiny assessment

2. Is it required to give assessee an opportunity of being heard?

Yes, A.O. shall give the assessee such opportunity by serving notice.

3. Is there any situation when the A.O. is not required to give notice for making assessment us 144?

Yes, when A.O. has already served notice us 142(1)(i) requiring assessee to submit return of income and assessee fails to comply, then he is not required to give notice again for making assessment us 144.

4. What will be the consequence if A.O. doesn't give such notice when it is required?

The Assessment will be void.

5. Can A.O. allowed refund us 144 by assessing income below the returned income or by allowing higher loss than that shown in return?

No, A.O. can not do so.

6. Can A.O. make assessment at the wish that he thinks appropriate?

No, the A.O. can make assessment only on the basis of material which he collects.

7. What is the time limit for assessment us 144?

12 months from the end of relevant A.Y. (for A.Y. 2018-19 the period is 18 months).

8. Can A.O. gives notice us 144 even the period for submission of belated return us 139(4) has not been expired?

Yes, he can give notice even before the expiry of period of submission of belated return us 139(4).

9. Is it required to honour the notice of which has been served before the expiry of the period of submission of belated return?

Yes, assessee should provide proper reply to the notice otherwise A.O. may initiate best judgement assessment us 144

POWER OF JOINT COMMISSIONER TO ISSUE DIRECTION SEC. 144A

1. Can JC  give directions on his own motion?

Yes, he can give.

2. Can AO refer to the JC?

Yes, AO can

3. How an assessee can refer to JC?

By making an application to him.

4. When JC can give directions?

Considering

*the nature of the case
*amount involved
*any other reason

When he thinks fit

5. To whom JC give such direction?

JC will give directions to AO to enable him to complete assessment.

6. Can AO avoid direction of JC?

NO, the direction is binding on him.

7. Can JC give directions prejudicial to the assessee?

No, JC can not give unless he assessee an opportunity of being heard.