assessment generally understood

Baldev Raj CA - 9312235173 S.P.PURI & CO.

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District Centre Janak Puri Study District Centre Janak Puri Study Circle of NIRC OF ICAI Circle of NIRC OF ICAI

Assessment procedure for Assessment procedure for

Scrutiny cases under Income Scrutiny cases under Income Tax Act Tax Act


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Assessment generally understoodAssessment generally understood

• Regular assessment U/s 143(3)• Income escaping assessment under section

147• Assessment under search cases


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Assessment procedure under Assessment procedure under Chapter XIV of the Income Tax Chapter XIV of the Income Tax

ActAct

Procedure of self assessment :• Section 139 and 140 - Filling of return , PAN, singing of

return, deposit of self assessment tax

Procedure of assessment • Section 143 - Intimation and regular assessment • Section 144 - Best judgment assessment• Section 147 - Income escaping assessment • Section 153A – Assessment in search cases


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Related and supported provisionsRelated and supported provisions

• Section 142 - Inquiry before assessment including audit

• Section 142A- Estimations of valuation officer

• Section 145 - Method of Accounting• Section 154 – Rectification• Section 156 - Notice of demand• Section 157 - Intimation of loss


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Other important provisions Other important provisions relating to assessment under relating to assessment under

Income Tax ActIncome Tax Act • Section 131 -Power regarding discovery,

production of evidence etc.

• Section 133 (6) - Power to call for information• Section 292BB - Notice deemed to be valid


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Self AssessmentSelf Assessment

• Return – voluntarily or in response to notice

• Assessee is required to make his own assessment

• Compute his income and deposit all tax along with interest

• Interest and Penalty


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ASSESSMENT DEPARTMENT ASSESSMENT DEPARTMENT

Two stages1) Processed to correct arithmetical mistakes, internal inconsistency, tax calculation and verification of tax payment2) % of tax returns selected for scrutiny-

verification of the income


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Processing u/s 143(1)Processing u/s 143(1)

• Total income/ loss after Adjustments:Arithmetical errors:Incorrect claim apparent from records :

Inconsistent with any other entry – tax audit report vs computation i.e

depreciation personal expenses Information required not furnished Deduction exceeds specified statutory Limit –

80C Rs. 1,00,000• Tax and interest- • Intimation to be send : refund due / tax

payable / loss reduce Period : one year from the end of the financial

year


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ISSUES ISSUES

If no intimation and time lapse and refund due

When TDS credit / Advance tax not allowed / short allowed

When different tax rate charged i.e general rate in place special rate

Notice u/s 143(2) issued and processing not done

Alternative : Rectification/Appeal


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Notice u/s 143(2)Notice u/s 143(2)

Whether notice ? Served upon assessee Served in time Served in proper manner If invalid notice – objection (Section 292BB)Valid notice Response at first hearing : Filing of documents ? POA • Reasons for selection ? • Board guidelines on selection of cases


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Comparison of Notice Comparison of Notice U/s 142(1) Vs. Section 143(2)U/s 142(1) Vs. Section 143(2)

Notice u/s 142(1)• Notice to call for ROI/ books

ofAccounts/other information

• By issuing notice u/s 142(ii) alone, assessment is not possible

• Notice can be issued even if the assessee has not filed the ROI

• No time limit prescribed in law for issue of this notice

• Books of accounts can be asked for a limited period (3 years)

Notice u/s 143(2)• Notice for making assessment

u/s143(3)

• Assessment u/s 143(3) is possible only if the notice u/s 143(2) has been issued.

• Notice can be issued only if the assessee has filed ROI

• Time limit of 12 months prescribed for service of notice.

• No such restriction


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Regular assessment under section Regular assessment under section

143(3)143(3) • Enquires and investigation ; Calling for books of accounts or other

relevant documents Calling for information in such form and on

such point or matters Requiring to furnish a statement of all

assets and liabilities Examining the assessee or other parties as

witness under section 131 to verify any accounts or transaction


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continuationcontinuation

Gathering information from banks, financial institutions and such other person with whom assessee has had transaction during the year- section 133(6)/131

Directing to get account audited u/s 142 (2A)

Reference to Valuation officer u/s 142A- determine the value of any investment, bullion, jewellery or other articles

Gather all relevant and requisite evidence, properly scrutinizing,


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• Allowing reasonable opportunity , to explain the discrepancies , inaccuracies and omissions

• Rule of evidence : Adverse inference - if assessee fail to answer or produce evidence to contradict the data/ information gathered by assessing officer

• Determine the total income , compute tax and interest


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ISSUES FOR DISCUSSION

• Fact of assessee and its business

• Strength and weakness

• Assessment of self code cases

In case of returned U/S 139 4A , 4B , 4C etcTrust , Political parties, educations trust etc

• AIR Information's

• Reconciliations –income with TDS certificates

• Rejection of books of accounts – 145 (3)


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• In case of non-resident cases and TP issues order- New provision w.e.f 01.10.09 DRP

( Dispute Resolution Panel )

• New Claim in assessment proceedings GOETZE (INDIA) LTD. Vs. CIT (2006) 284 ITR 323(SC)


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Show cause noticeShow cause notice

Revenue / capital expenses , business vs capital gain,business vs income from other sources etc

Facts, provisions, Case laws

Section 40A(2)specified persons Three criteriaFair mkt value, legitimate needs of business ,

benefit to the assessee (cumulative or alternative)2009 314 ITR 1 (Guj)


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• Information u/s 133(6)- Not received received with difference or Notice un served or

Stock statement submit with bank/stock audit conducted by bank

confrontation during the assessment proceedings

• Summons issued : Un served not attended by the parties Absence of personnel presence – default?

Use of affidavit


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Assessee duty in caseAssessee duty in case• Confirmations - in case of creditors,

debtors• Matter send for valuation u/s 142 A


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Section 68 to 69DSection 68 to 69D • Objective – an effort to curb the all pervading evil of

generation and proliferation of black money • Section are clarificatory and addition may be made

otherwise• ‘May’ word used – discretion of assessing officer • Cash credit : The existence of books of accounts maintained by

assessee himself A credit entry in the books of accounts Absence of satisfactory explanation by the assessee

about the nature and source Burdon of proof on assessee The identity of the creditors The capacity of the creditors The genuineness of the transaction • The assessee has adduced evidence to establish prima facie

the aforesaid, than onus shift to department


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• other issues ?


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Assessment is void-ab-initio• Assessment without serving a notice u/s

143(2)• Notice served after expiry of period Assessment is invalid.• After the expiry of 23 months from the

relevant year • Fresh assessment on set-aside or

cancelled order or on order made under section 263/ 264 made after expiry of 9 months from the financial year


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Best judgment assessment-u/s Best judgment assessment-u/s 144144

• Defaults : Fail to submit return Fail to complied with terms of the notice u/s

142(1)/ 143(2) Fail to comply with direction u/s 142(2A)• Show cause notice -best judgement • Reasonable opportunity • On the basis of all relevant material gathers –

compute the income or loss to the best of his judgement , determine the tax payable

• Cannot assess the income below return income/ loss more than return loss


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C/O of best judgment C/O of best judgment assessment-u/s 144assessment-u/s 144

• Assessment :Not be arbitrary or on adhoc basisBased on material On rational and scientific basisOrder must speaking order


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Directions u/s 144ADirections u/s 144A• Objective Improve the quality of assessment Eliminate avoidable litigation • Joint commissioner On his own motion On reference made by assessing officer On application of the assessee • Call for and examine the record of the pending

proceeding • Reasonable opportunity to assessee before issue

direction being prejudicial to the assessee • Investigation not an prejudicial to the assessee • Issue direction • Binding on assessing officer


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Directions u/s 144ADirections u/s 144A

• No appeal against direction • In practice:No seriousness for the intended purpose of

the legislature The responsibility cast on supervisory

officers not discharged

assessment generally understood

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