Short Notes on Assessment Procedure

By
ASSESSMENT PROCEDURES
Section no. Heading Brief Notes
139 (1) Return of Income * Every co. & firm - Always (even if no income /all income is exempt)

* Any other person- If his TI/ TI of person in respect of which he is assessable

  exceeds BEL

Note: TI is to be computed before allowing any deduction u/s 10A, 10B or 10BA and u/c VI-A
Time Limit for submission of Return * In case of Companies/ person whose accounts are required to be audited by any law/ working partner of firm whose accounts are required to be audited (even if he is paid fixed remuneration) - 30th September of the AY

* Other assessees- 31st July of the AY

* If person who is required to file return, fails to file the same within due date, is liable for penalty of Rs. 5000 (Sec271 F)
139 (3) Loss Return * If you want to carry forward & set off the loss - file return within above time limit

* In case of HP loss/ Unabsorbed depreciation/ unabsorbed family planning expenses - it can be set off even if return is not filed within above time limit. However, return should be filed before you can carry forward the loss (as only determined loss can be c/f)
139 (4) Belated Return * If any person required to file return u/s 139 (1) has not filed return within time limit specified above

* If any person not required to file return u/s 139 (1) but to whom notice u/s 142 (1) was issued to file return has not filed return within time allotted under notice

   - may file return at any time before expiry of 1 year from end of relevant AY or before completion of assessment (u/s 144), w.e.e
139 (4A) ROI of Charitable Trust or Institution * If its TI before giving exemption u/s 11 or 12 exceeds BEL shall file return 
139 (4B) ROI of Political Party * If its TI before deduction u/s 13A exceeds BEL shall file return 
139 (4C) ROI of certain Association & Institutions * If its TI before giving exemption u/s 10 exceeds BEL shall file return 
139 (4D) ROI Of University, College Or other Institution carrying Scientific Research Programs * It shall file the ROI compulsorily
139 (5) Revised Return of Income * It can be filed only if original return was filed in time and was not a belated return

* It can be filed if we discovers any omission or wrong statement

* Return can be revised any no. of times

* Loss return can also be revised

* Time limit:- 1 year from  end of RAY or completion of assessment w.e.e
139 (9) Defective Return * AO, if finds any defect can intimate aa

* aa shall file new return within 15 days
139A PAN * Few conditions for compulsory application

* one can apply voluntarily also
139B Submission of Return through Tax Return Preparers (TRPs) * TRPs help aa to prepare & file returns 
139C Power of Board to Dispense with furnishing of the Documents with Returns * CBDT may provide class/ es of person to whom to it may dispense with furnishing of the Documents with Returns
139D Electronic Filing Of Return * CBDT may make rule for e-filing of return
140 Who Shall Sign The Return To be signed by authorized persons:

* Individual- himself/ authorized person

* HUF- Karta

* P.F - Any partner

* Company- M.D. / Director

* Local Authority- Principal officer

* AOP/ BOI - any member/ Principal officer
140A Self Assessment * Tax is payable on basis of return submitted

* Tax to be paid after taking into credit advance tax/ TDS/ TCS, relief u/s 90, 91, 90A and MAT credit

* tax to be paid along with interest

* If payment is short, then it is first applied towards interest
142 (1) Direct Inquiry From Assessee AO may serve notice for

* Filing of return if not filed within time limit u/s 139 (1)

* Production of accounts & documents

* Furnishing of Information on required matters (including statement on Assets & Liabilities, included in accounts or not)

* For statement on Assets & Liabilities not included in accounts prior approval of JC is required

* A.O. shall not require production of accounts & documents exceeding a period of 3 years prior to RPY
142 (2) Inquiry from any Person in connection with assessment * Inquiry from any person in connection with assessment of Income of assessee can be made for getting Full Information
142 (2A) Special Audit * AO may direct aa to get its accounts audited

* Prior approval of CCIT/ CIT required

*  OBH to be given to aa

* Even if the books are audited earlier, again audit required

* Time limit- Specified in order, however, not to extend 180 days

* Audit fees- Paid by C.G. w.e.f. 1/06/2007
142 (3) Opportunity Of Being Heard aa shall be given an OBH in respect of material gathered on enquiry & proposed to be used for the purpose of assessment 
142A Estimate by Valuation Officer in Certain Cases * A.O. may refer V.O. after giving  OBH, where a estimate is required to be made of value of investment refer to in:

    - sec 69 - Unexplained Investment

    - sec 69 A - Unexplained money, etc.

    - sec 69 B - Investments not fully disclosed

    - sec 69 C - Unexplained expenditure

* OBH shall be given to aa before taking report of V.O. into account
143 (1) Summary Assessment Return processed by making prima facie adjustments for

* Arithmetical error

* Incorrect claim apparent from record i.e.

     - an item inconsistent with another entry of same / some other item of return

     - information required to substain any entry in return not given

     - deduction taken over specified limits

* Tax & Interest to be paid as per total income computed above

* intimation shall be given to aa specifying amount due/ refund payable from/ to him on basis of above

* However no intimation is required if there is no amount due/ refund payable and acknowledgement would be deemed as intimation

* However, intimation is required if loss claimed is reduced

* Time Limit for such intimation is upto expiry of 1 year from end of F.Y. in which return is filed
143 (2) Notice for Making Scrutiny/Regular Assessment where aa has furnished return and AO thinks it necessary or expedient to ensure that aa has

    - not understated the income

    - not  computed excessive loss

    - not under paid the tax in any manner

shall furnish on aa a notice to attend his office on a specified date requiring him to produce any evidence on which aa may rely in support of his return

* Time limit:- For serving notice - 6 months from end of FY in which ROI was filed
143 (3) Assessment Order In Case Of Scrutiny/Regular Assessment * After hearing aa and taking into consideration all documents/ materials submitted by aa, AO will make an assessment of total income or loss of aa and determine amount due/ refund payable to him

* order of assessment shall be passed within 21 months from end of relevant AY

* If case is referred to TPO then order of assessment shall be passed within 33 months from end of relevant AY
1st & 2nd Proviso Assessment In Special Cases * In case of institutions/ aa claiming exemption under clause 21, 22B, 23A, 23B, 23C of section 10 had contravened with its provisions

* AO shall inform C.G. of such contravention

* C.G. after giving OBH, is satisfied that the contravention has happened, shall withdrew the exemption

* AO will then make assessment w/o considering this exemption and calculate tax payable
144 Best Judgment Assessment * If an aa has -

    - failed to make return

    - failed to comply with all the terms of a notice issued u/s. 142(1) or 142 (2A)

    - having made return failed to comply with all the terms of a notice issued u/s

      143 (2)

after taking into consideration all the material he has gathered shall, after giving the assessee an OBH, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee

* OBH shall be be given by serving a notice calling upon the aa to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment

* Provided that it shall not be necessary to give such OBH in a case where a notice u/s 142 (1) has been issued prior to the making of an assessment under this section

* Time Limit: for making order shall be before expiry of 21 months form end of RAY
144A Power Of JCIT To issue Directions in certain cases JCIT may

* on his own motion or

* reference made by either AO/aa,

call for records and information of any proceeding which is pending for assessment, if he considers it nescessary or expedient to do so.

* He may issue such guidance to AO to enable him to complete assessment

* This guidelines are binding on AO

* Where such guidelines are prejudical to aa - no such guidelines be issued before aa is given an OBH
145 Method of Accounting * Income chargeable u/h “PGBP" or “IOS” shall,be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee

* The CG may notify in the Official Gazette from time to time accounting standards to be followed by any class of aa or in respect of any class of income

* Where the AO is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting or accounting standards, have not been regularly followed by the assessee, the AO may make an assessment in the manner provided in section 144
145A Method of Accounting in certain cases Notwithstanding anything to the contrary contained in section 145, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head “PGBP” shall be—

     - in accordance with the method of accounting regularly employed by the assessee; and

     - further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.



Explanation.— For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment (Meaning - even if cenvat credit is receivable the cost should include excise element)
147 Income Escaping Assessment * AO has REASON TO BELIEVE that income chargeable to tax has escaped assessment for any AY, he may assess/ reassess such income or compute/recompute such loss/ depreciation allowance

* Proviso: However if assessment u/s 143 (3)/ 147 has already done for that AY, AO can't reassess income of AY after the end of 4 years from completion if RAY

* Exception to above:

     - aa had failed to make return under provisions of sec 139, 142 (1) or 148

     - aa had failed to disclose fully and truly all material facts

* Doctrine of part merger: Issues which are subject matter of any appeal, revision or reference can't be reassessed
Explanation 2 to sec 147 Income deemed to be escaping assessment Income is deemed to have escaped assessment---

* Where no return of income has been furnished by the assessee although his TI exceeded the BEL

* Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return

* Where an assessment has been made, but—

     - income chargeable to tax has been under assessed or

     - such income has been assessed at too low a rate or

     - such income has been made the subject of excessive relief under this Act or

     - excessive loss or depreciation allowance or any other allowance has been computed

148 Notice for Income Escaped Assessment * AO shall serve notice on aa requiring him to file a return of his income for the PY mentioned in notice within such time as has been mentioned in the notice

* AO shall before issuing such notice record his reasons for doing so
149 Time limit for Notice u/s 148 * Within 4 years form end of RAY irrespective of amount escaped assessment

* Within 6 years form end of RAY only if amount escaped assessment is 1,00,00 or more
150 Provision for cases where Assessment is in Pursuance of an order on appeal, etc. * Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act or by a Court in any proceeding under any other law

* The above provisions shall not apply in any case where assessment relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision was made, by reason of any other provision limiting the time within which any action may be taken
151 Sanction for issue of notice u/s 148 * Where assessment u/s 143 (3) / 147 has already taken place:

    - If income escaping assessment < 1,00,000 then by AC/DC or any other subordinate authority with permission of JCIT

    - If income escaping assessment >= 1,00,000 then by any AO  with permission of CCIT/CIT

* Where no assessment u/s 143 (3) / 147 has already taken place:

    - If income escaping assessment < 1,00,000 - Any AO

    - If income escaping assessment >= 1,00,000 - JCIT or any other subordinate authority with permission of JCIT
152 Other Provisions * In an reassessment u/s 147, the tax shall be chargeable at the rate or rates at which it would have been charged had the income not escaped assessment

* Where the assessee has not impugned original order by appeal or revision, may claim that the proceedings under section 147 shall be dropped on showing that

    -- he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account

    -- or the assessment or computation had been properly made
153 (1), (1A), (1B), (2) Time Limit for completion of Assessment & Reassessment * Assessment u/s 143 or 144 - within 21 months from end of RAY (if case refered to TPO within 33 months from end of RAY)

* Assessment u/s 115 WE (regular assessment of FBT) or u/s 115 WF (Best judgement assessment of FBT) - within 21 months from end of RAY

* Assessment u/s 115 WG (Reassessment of FBT) - within 9 months form end of the month in which notice u/s 115 WH was served

* Assessment u/s 147 - within 9 months form end of the month in which notice u/s 148 was served
153 (2A) De-Novo Assessment * If an order for fresh assessment is made in pursuance of an order u/s 254 (Order of ITAT), 263 & 264 (Revision order) then setting aside the assessment made earlier, a fresh assessment would be made before

     - expiry of 9 months from the end of F.Y. in which order u/s 254 was received

       /order u/s 263, 264 was passed

     - expiry of 21months - If refered to TPO
153A Assessment in case of Search or Requistion * Where a search is initiated against u/s 132 AO shall

    - Issue notice to aa requiring him to file the return of 6 AYs preceeding the RAY

    - assess/ reassess total income in respect of such 6 Ays

* All other assessment for this 6 years shall abate

* Where the order of search assessment is annuled in appeal, then the above abated assessments shall be revived and if the order of search assessment annuled was set aside then all other assessments shall again abate

* Where the assessment stands revived due to annulment of order of search - it shall be completed within 1 year from end of month of such revieval or within time allowed u/s 153, w.e.l
153B Time Limit for completion of Assessment u/s153A Time limit for search & requistion assessment - 21 months from end of FY in which last of the authorizations for search was executed

* However on happening of few circumstances the relevant period is excluded from computation of above time limit (eg:- where appication is made to settlement commision)
153C Assessment of Income of Any Other Person * Where AO is satisfied that money, bullion, jewellery or other valuable article or documents seized belong/s to another person then such asset/ document shall be handed over to AO who has jurisdiction over such other person

* Such AO will issue the notice for assessment according to provisions of sec 153A

* Time limit:-

     - 21 months from end of FY in which last of the authorizations for search was

       executed or

    - 9 months from end of FY in which such asset/ document were handed over to

      AO
153D Prior Approval Necessary for Assessment in cases of Search or Requisition Approval of JCIT is required if assessment is carried on by any subordinate authority
154 Rectification of Mistake * With a view to rectify mistake apparent from the record an income tax authority may ammend any order/ intimation u/s 143 (1)

     - On its own motion

     - On request of aa/ AO

* rectification can not be sought on the order which are subject of appeal/ revision (Doctrine of part merger)

* Time limit:- Before the expiry of 4 years from end of FY in whoch order sought to be ammended was passed. However, where the application is made by aa then the rectification order shall be passed/ application shall be refused within 6 months from end of month in which application was made

* Where an revision order has effect of increasing tax/ reducing refund- then aa shall be given notice and OBH
155 Other Amendments In few cases the time limit of 4 years given in section 154 is no to be applied from end of FY in which order was passed

* For eg:- Rectification in hands of Partner would be made before the expiry of 4 years from end of FY in which order was passed for firm
156 Notice of Demand * When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the AO shall serve upon the aa a notice of demand in the prescribed form specifying the sum so payable

* Where any sum is determined to be payable by the aa u/s 143(1), the intimation under that section shall be deemed to be a notice of demand for the purposes of this section

157 Intimation of Loss When in the course of the assessment it is established that a loss has taken place which the aa is entitled to have carried forward and set off under the provisions of act, the AO shall notify to the assessee by an order in writing the amount of the loss as computed by him for this purpose
158 Intimation of assessment of firm Whenever, a firm is assessed under the provisions of act AO shall notify to the firm by an order in writing the amount of its total income assessed and the apportionment thereof between the several partners


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