Introduction:

Any individual income exceeding the basic exemption limit for the financial year(s) is required to file an Income Tax Return (ITR) detailing his income, deductions and related particulars. When a claim is filed, the Income Tax Department processes the claim. Sometimes, some refunds are selected for consideration based on norms laid down by the Central Board of Direct Taxes (CBDT).

Assessment plays a pivotal role in the income tax system, enabling tax authorities to determine the tax obligations of individuals or business entities. Various types of assessments exist within the income tax framework, each serving distinct purposes and following specific procedures. This blog aims to explore these diverse assessment types within the realm of income tax.

Income Tax Assessment:

The new tax regime in India has fixed the basic exemption limit at Rs. 3 lakh for individuals above the age of 60. Consequently, any person or company earning income above this limit will have to file income tax returns for the previous financial year. Once taxpayers meticulously input their income details, it undergoes assessment by the income tax authorities. This process, commonly known as income tax assessment, encompasses various types of assessments within the realm of income tax, which are essential to understand.

Types of  Tax Assessment:

Regular Assessment:

Regular assessment involves tax authorities verify the accuracy of the information provided by checking the documents submitted by the taxpayer. This process may include inquiries, record reviews, and determination of tax liability based on available information. Additionally, authorities may issue notices to request additional information or fail to appear when questioned by the taxpayer.

The Department will provide ample notice to an assessee if they are to undergo a scrutiny assessment. However, if six months have elapsed since the end of the fiscal year in which the return was filed, no such notification will be issued.

Summary Assessment:

Summary assessment constitutes another type of assessment within the income tax framework. Governed by Section 143(1), this assessment method involves automated verification of information provided by assessees against the records stored by the Income Tax Department, without human intervention. Through summary assessment, clerical errors and inconsistencies in the ITR can be identified.

However, this first part of the analysis serves to summarize any statistical errors, inaccuracies, or disagreements. Consequently, this process takes place before the Tax Office issues notice to taxpayers of refunds, errors or amendments.

Self-Assessment : 

When taxpayers independently calculate their total taxable income, it is termed as self-assessment. According to Section 140A, assessees are required to compute their income from diverse sources, offset it against losses and deductions, and settle the applicable tax.

In simple terms, self-assessment tax refers to the amount remaining after taxes have been deducted at source (TDS) and advance tax, which must be remitted to the income tax department. This surplus can arise if the taxpayer falls into a higher tax bracket yet receives income such as capital gains, subject to TDS at a reduced rate. Failure to pay self-assessment tax when filing income tax returns renders the submission invalid and accrues interest due to non-compliance with legal obligations.

Best Judgment Assessment:

• This assessment covers the following issues.
• If the assessee neglects to respond to the notice issued by the department, directing them to furnish specific information or books of accounts.
• The assessee fails to file the application on the due date or within any extended period allowed by the CBDT.
• If he or she fails to adhere to a Special Audit ordered by the Income Tax authorities.
• If the assessee fails to comply with the terms outlined in the notice issued under Summary Assessment, the assessing officer, after providing an opportunity to hear the assessee’s arguments, renders a decision based on all relevant materials and evidence available to them. This process is referred to as Best Judgment Assessment.

Scrutiny Assessment:

• Now, let’s delve into the thorough scrutiny of Income Tax Returns submitted by taxpayers. An Assessing Officer (AO) assumes the responsibility of conducting an inquiry and verifying the accuracy of income details furnished by assesses.
• For a comprehensive review, an AO has the authority to request the submission of books of accounts or specific documents. The objective is to ensure alignment between the income earned and the tax paid. Consequently, the AO scrutinizes whether taxpayers have understated their income or exaggerated their losses.
• In case of a disparity, an assessee can either settle the additional amount owed or accept refunds. However, if taxpayers are discontent with the assessment, they have the option to appeal to higher authorities or request a correction under Section 154.

Income Escaping Assessment:

• If the assessing officer has reasonable grounds for suspecting that the taxable income has not been properly assessed, they have the right to calculate or reassess the computed income. The notification period for the reopening of the assessment is four years after the end of the relevant assessment year.
• Below are some scenarios that trigger reassessment.
• The assessee has taxable income but has not yet filed their return.
• After filing the income tax return, it is found that the assessee has not declared his minimum income or claimed over-allowance or deduction
• The assessee has neglected to furnish the notice as required in international transactions. For some taxpayers, the tax process may complete quickly, but for others it is likely to be more difficult. If you feel uncomfortable dealing with Income Tax Officers, it is advisable to seek the help of a Chartered Accountant to review your case.

Protective Assessment:

Protective assessment occurs when a disagreement arises between the taxpayer and tax authorities regarding tax liability. In such instances, tax authorities may assess at a higher rate than claimed by the taxpayer to safeguard revenue. Additionally, taxpayers may be asked to provide security or make a payment before finalizing the assessment.

conclusion:

Income tax assessment plays a crucial role in ensuring the smooth and efficient operation of the Indian taxation system. To prevent delays in receiving income tax returns, individuals should steer clear of undergoing assessments in front of an AO. Additionally, taxpayers should meticulously familiarize themselves with the different types of income tax assessments and ensure accurate filing of ITR.