Types of Income Tax Assessments You Need to Know

The various sorts of assessments offered perplex many taxpayers. We will go over the various types of assessments that the Assessment Officer does to ensure taxpayers have not hidden anything. To comprehend the various sorts of Income Tax Assessments, it is vital to first comprehend what Income Tax Assessments are. This article will provide information on what is Income Tax Assessment, and Different types of Income Tax Assessments under the Income Tax Act.

Table of Content

• What is Income Tax Assessment?
• Different types of Income Tax Assessments under Income Tax Act
• Conclusion

What is Income Tax Assessment?

The process of gathering and assessing information presented by assesses in their income tax returns is known as an income tax assessment. All individuals and companies are required to file an income tax return by self-calculating the amount of income received and paying the tax due at the end of each fiscal year.

Different types of Income Tax Assessments under Income Tax Act

Best Judgment Assessment – u/s 144

The computation of income and tax payable is based on the best opinion of the income tax officer conducting the examination of the taxpayer. When an assessee refuses to cooperate with an Income Tax officer’s request for information, fails to keep the required books and records, or fails to file a tax return the best judgment assessment is made. As a result, an Income Tax officer initiates the best judgment procedure for the following reasons:

• A tax return is not filed by the taxpayer.
• The taxpayer fails to comply with an income tax notice issued concerning the filing of an income tax return or the conduct of an accounting audit.
• During a scrutiny assessment, the taxpayer fails to respond to requests for information and documentation.
• The facts or documentation submitted by the assessee do not satisfy the Assessing Officer.

The Income Tax Officer must provide the taxpayer an opportunity to be heard before completing and passing the order.

Self-Assessment – u/s 140A

The amount of income tax due is determined by the assessee. Various forms for filing income tax returns have been made accessible by the tax department. The assessee aggregates his revenue from multiple sources and adjusts it for any losses, deductions, or exemptions that he may have during the year. The assesses total income is then calculated. To determine the tax payable on such income, the assessee subtracts the TDS (Tax Deducted at Source) and Advance Tax from the total. If he still owes tax, it is known as self-assessment tax, and it must be paid before he files his income tax return. Self-assessment is the term for this procedure.

Assessment in case of Search – u/s 153A

In this sort of income tax assessment, the assessing officer will do the following:

Giving such a person notice necessitates delivering it within the specified time range. Clause (b) refers to each of the six assessment years’ income returns, which were confirmed in a specified manner. containing such other particulars as may be prescribed, and the provisions of this Act shall apply to the extent possible as if such return were a return required to be filed under Section 139;

Assessor reassesses the entire income of the six assessment years preceding the assessment year relevant to the prior year in which the search or request is made.

Protective Assessment

Although there is no provision in the income tax act authorizing the levy of income tax on someone other than the person to whom the tax is due, the authorities have the authority to make a protective or alternative assessment if it is not clear who is truly liable to pay the tax among a few possible parties.

When the authorities make a protective assessment, they are just making an evaluation and leaving it as a paper assessment until the problem (as to who owns the asset) is resolved in some way. Furthermore, while a protective order of assessment is permissible, a protective order of penalty is not. It should be emphasized, however, that while protective assessment is permissible, a protective order for recovery is not.

Summary Assessment – u/s 143(1)

It is a form of evaluation that does not require any human intervention. The information given by the assessee in his income tax return is cross-checked against the information that the income tax department has access to in this type of assessment. The department verifies the return’s reasonableness and accuracy during the procedure. The return is handled online, including automatic corrections for arithmetical errors, inaccurate claims, and disallowances. For example, the taxpayer’s TDS credit is more than what is available against his PAN (Permanent Account Number) according to department data.

Making a change in this area may increase the taxpayer’s tax liability. If the assessee is compelled to pay tax after making the aforementioned modifications, he would be provided an intimation under Section 143. The assessed must reply appropriately to this notification.

Income Escaping Assessment – u/s 147 

The assessing officer can assess or evaluate the assessed income if he has reasonable grounds to suspect that any taxable income has eluded assessment. A notice to reopen an assessment must be issued within four years of the end of the relevant assessment year. The following are some examples of when reassessment is conducted:

• Although the assessment has taxable income, he has yet to file his tax return.
• After filing the income tax return, the assessee is discovered to have overstated his income or claimed excessive allowances or deductions.
• Where he is required to do so, the assessee has omitted to provide reports on international transactions.

For some taxpayers, the assessment process may be short, while for others, it may be lengthy. If you are uncomfortable dealing with income tax officers, it is recommended that you seek the assistance of a Chartered Accountant.

Scrutiny Assessment – u/s 143(3)

Scrutiny assessment is the process of evaluating a return filed by an assessee by allowing the assessee to use documentation to back up the declared income and expenses, as well as claims for deductions, losses, exemptions, and other items in the return. A single work plan is used by the committee to manage it. The committee works on specific projects and organizes informal panels (for more in-depth activities) and working groups.

The assessing officer is given the opportunity to investigate to check if the assessee recorded his or her income correctly on the return. Deductions, exemptions, and other benefits claims are legal and factually valid. If there are any omissions, inconsistencies, inaccuracies, or other problems, the assessing officer creates his or her own assessment for the assessment, taking all relevant factors into account.

Conclusion

Any type of income tax assessment should be taken seriously. Furthermore, in order to avoid any type of income tax assessment in front of the assessing officer, the income tax return must be carefully prepared. I hope this article will help you gain knowledge related to the 7 types of Assessment in Income Tax.