Representation before Income Tax Authorities

madhuvridhi provides following taxation related services

  • Tax planning & advising clients on tax related matters.
  • Tax assessments including filling of Tax Returns, TDS Returns.
  • Appeals involving filing and appearing before appellate and tribunals.
  • Registration
  • E-filing of returns
  • Assessments
  • Audit

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Things to know relating to Income Tax Assessment & Notices issued by the Income Tax department

What is Assessment?

Every taxpayer has to furnish the details of his income to the Income-tax Department. These details are to be furnished by filing his return of income. Once the return of income is filed by the taxpayer, the next step is the processing of the return of income by the Income-tax Department. The Income-tax Department examines the return of income for confirming its correctness. The process of examining the return of income by the Income-tax Department is called Assessment. Assessment also includes re-assessment or best judgment assessment under section 144

What are the major assessments under the Income Tax act?

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

Section 143(1), i.e., Summary assessment without calling the assesse i.e. taxpayer.

Assessment under section 143(3), i.e., Scrutiny assessment.

Assessment under section 144, i.e., Best judgment assessment.

Assessment under section 147, i.e., Income escaping assessment.?

What is assessment u/s 143(1)?

Assessment under section 143(1)is like preliminary checking of the return of income. At this stage, no detailed scrutiny of the return of income is carried out. At this stage, the total income or loss is computed after making the following adjustments (if any), namely:-

(i) Any arithmetical error in the return; or

(ii) An incorrect claim, if such incorrect claim is apparent from any information in the return

After correcting arithmetical error or incorrect claim (if any) as discussed, the tax and interest, if any, shall be computed on the basis of the adjusted income.

Any sum payable by the taxpayer or refund due to the taxpayer shall be intimated to him.

What is assessment u/s 143(3)?

This is a detailed assessment and is referred to as scrutiny assessment. At this stage, a detailed scrutiny of the return of income will be carried out. The scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income.

What is the procedure adopted u/s 143(3)?

If the Assessing Officer considers it necessary or expedient to ensure that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, then he will serve on the taxpayer a notice requiring him to attend his office or to produce or cause to be produced any evidence on which the taxpayer may rely on in support of the return.

The provisions of notice are governed by section 143(2). In other words, to carry out assessment under section 143(3), the Assessing Officer should serve a notice under section 143(2).

Notice under section 143(2)shall be served on the taxpayer within a period of six months from the end of the financial year in which the return is filed.

The taxpayer or his representative (as the case may be) will appear before the Assessing Officer and will place his arguments, supporting, etc., on various matters/issues as required by the Assessing Officer.

After hearing/verifying such evidence and taking into account such particulars as the taxpayer may produce and such other evidence as the Assessing Officer may require on specified points and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the taxpayer and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.

What is assessment u/s 144?

Assessment under section 144(called best judgment assessment) is an assessment carried out as per the best judgment of the Assessing Officer. Best judgment assessment is resorted due to certain failures (specified under section 144) on the part of the taxpayer.

What are the specified circumstances when best judgment assessment is resorted?

As per section 144, the Assessing Officer is under an obligation to make an assessment to the best of his judgment in the following cases:

If the taxpayer fails to file the return of income as required within the due date prescribed under section 139(1) or a belated return under section 139(4) or a revised return under section 139(5).

If the taxpayer fails to comply with all the terms of a notice issued under section 142(1).

section 142(1) deals with the general provisions relating to an inquiry before assessment. Under section 142(1), the Assessing Officer can issue notice asking the taxpayer to file the return of income if he has not filed the return of income or to produce or cause to be produced such accounts or documents as he may require and to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the taxpayer, whether included in the accounts or not) as he may require.

If the taxpayer fails to comply with the directions issued under section 142(2A).

Section 142(2A) deals with special audit. As per section 142(2A), if the conditions justifying special audit as given in section 142(2A) are satisfied, then the Assessing Officer will direct the taxpayer to get his accounts audited from a chartered accountant nominated by the principal chief commissioner or Chief Commissioner or Principal Commissioner or Commissioner and to furnish a report of such audit in the prescribed form.

If after filing the return of income, the taxpayer fails to comply with all the terms of a notice issued under section 142(2A), i.e., notice of scrutiny assessment.

From the above criteria, it can be observed that best judgment assessment is resorted in cases where the return of income is not filed by the taxpayer or there is no co-operation

by the taxpayer on various matters.

What is assessment u/s 147?

This is an income escaping assessment. This assessment is carried out if the Assessing Officer observes that any income has escaped assessment. The procedures adopted for making the assessment under section 147 are as follows:

For making an assessment under section 147, the Assessing Officer has to issue notice under section 148 to the taxpayer and has to give him an opportunity of being heard. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, then he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147. He is also empowered to re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned.

Items which are the subject matters of any appeal, reference or revision cannot be covered by the Assessing Officer under section 147.

What recourse is available if assesse is not satisfied with order by the assessing officer?

If you are not satisfied with the order passed by your Assessing Officer then you can file an appeal to the higher authority. The first appellate authority is the Commissioner (Appeals). Subsequently, the matter can be taken to the Income-tax Appellate Tribunal, then to the High Court and the Supreme Court.

Alternatively, instead of going for the appeal mechanism, you can make an application of revision to the Commissioner of Income-tax.?

As per provisions laid out in the Income Tax Act, certain persons or individuals can represent an income tax assessee on his or her behalf with regards to the filing of income tax returns.