CA Abhijit Sawarkar

Income tax assessment is estimation for an amount assessed while paying Income
Tax by assessee himself or by income tax officer. Following types of assessment are carried
out under Income tax act. We will discuss each type of assessment in detailed in this article.

(i) Self assessment u/s 140A.

(ii) Summary Assessment u/s 143(1)

(iii) Scrutiny assessment u/s 143(3).

(iv) Best judgment assessment u/s 144.

(v) Protective Assessment.

(vi)  Income escaping assessment u/s 147.

(vii) Assessment in case of search u/s 153A

For making assessment under these various provisions of the act, some compliance is
mandatory to assessing officer:

Particulars Mandatory Requirements

Self assessment u/s 140A. –
Scrutiny assessment u/s 143(3). Section 143(2) Notice
Best judgment assessment u/s 144. Show cause notice u/s 144
Protective Assessment –
Income escaping assessment u/s Section 148 Notice
147.
Assessment in case of search u/s Section 153A
153A

 Self Assessment u/s 140A

Page Contents

  Self Assessment u/s 140A

 Summary Assessment u/s 143(1)
 Scrutiny assessment u/s 143(3).
 Best judgment assessment u/s 144.
 Protective Assessment.

Before submitting returns assessee is supposed to find whether he is liable for any tax or
interest. For this purpose this section has been introduced in Income tax act.
Where any tax is payable on the basis of any return required to be furnished under section
139 or section 142 or section 148 or section 153A, after deducting:

1. Advance tax Paid, if any

2. TDS/TCS
3. Relief under section 90, 91 & 90A
4. MAT credit under 115JAA or 115JD

Then assessee shall pay tax & interest and fee before furnishing return and proof of such
payment will be accompanied with return of income.

Self assessment calculation Summary:

  Particulars Amount
Income tax + Edu. Cess +Surcharge if any Xxx
Add Interest u/s 234A, 234B, 234C Xxx
Less TDS/TCS Xxx
Less Advance tax Paid, if any Xxx
Less Relief under section 90, 91 & 90A Xxx
Less MAT credit under 115JAA or 115JD Xxx
  Amount Payable by way of Self Assessment u/s 140A Xxx

 If any amount is payable under section 140A then amount so paid shall be adjusted against
interest payable first and then balance amount to be adjusted toward tax payable.

Summary Assessment u/s 143(1)

“Summary Assessment”, it is not an actual assessment. Under this section, the Return of
Income filed by assessee will not be scrutinized, however whatever, is claimed by assessee in
his ROI will be accepted by assessing officer after only confirming arithmetical accuracy.

1. the total income or loss shall be computed after making the following adjustments, 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;

(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is
claimed was furnished beyond the due date specified under sub-section (1) of section 139;

(iv)  disallowance of expenditure indicated in the audit report but not taken into account in
computing the total income in the return;

(v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-

IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-
section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been
included in computing the total income in the return. However no adjustment shall be made
under this  in relation to a return furnished for the assessment year commencing on or after
the 1st day of April, 2018

However no such adjustments shall be made unless an intimation is given to the assessee of
such adjustments either in writing or in electronic mode:

The response received from the assessee, if any, shall be considered before making any
adjustment, and in a case where no response is received within thirty days of the issue of such
intimation, such adjustments shall be made.

2 .the tax and interest, if any, shall be computed on the basis of the total income computed
under clause (a);

3. the sum payable by, or the amount of refund due to, the assessee shall be determined after
adjustment of the tax and interest and fee, if any, computed under clause (b) by any tax
deducted at source, any tax collected at source, any advance tax paid, any relief allowable
under an agreement under section 90 or section 90A, or any relief allowable under section 91,
any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any
amount paid otherwise by way of tax or interest and fee;

4. an intimation shall be prepared or generated and sent to the assessee specifying the sum
determined to be payable by, or the amount of refund due to, the assessee under clause (c);
and

5. the amount of refund due to the assessee in pursuance of the determination under clause (c)
shall be granted to the assessee:

Scrutiny assessment u/s 143(3).

 Scrutiny assessments are popularly known as regular assessment.

1. On the day specified in the notice issued under] sub-section (2), or as soon afterwards as
may be, after hearing such evidence as the assessee 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 assessee, and determine the sum
payable by him or refund of any amount due to him on the basis of such assessment.

2. No order of assessment/ reassessment under section 143(3) shall be made after the expiry
of 21 months(18 months for A.y 2018-19 and 12 months wef wef A.y 2019-20) from the end
of relevant Assessment Year.

3.Where a reference has been made to Transfer Pricing Officer to determine Arm’s Length
Price, then no order of assessment/ reassessment under section 143(3) shall be made after the
expiry of 33 months(30 months for A.y 2018-19 and 24 months wef wef A.y 2019-20) from
the end of relevant Assessment Year.
What if Analysis of Section 143(2) and 143(3)?

What if – Answer
What if assessee has not filed Return of Notice under section 143(2) can not
Income? issue therefore assessment under 143(3)
not possible.
What if notice under section 143(2) not Assessment is Void
issued?
What if Notice is served after the expiry Assessment is Void
of six months from the end of the
financial year in which the return is
furnished.
What if, Assessing officer reduce Yes AO can reduced below returned
income below returned income? income, as per CBDT clarification
What if assessee claims certain No request will be entertain unless
deduction through letter to Assessing return has been revised
officer during assessment?

Best judgment assessment u/s 144.

If any person—

(a)  fails to make the return required under sub-section (1) of section 139 and has not made a
return or a revised return under sub-section (4) or sub-section (5) of that section, or

(b)  fails to comply with all the terms of a notice issued under sub-section (1) of section 142
or fails to comply with a direction issued under sub-section (2A) of that section], or

(c) having made a return, fails to comply with all the terms of a notice issued under sub-
section (2) of section 143,

the Assessing Officer, after taking into account all relevant material which the Assessing
Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the
assessment of the total income or loss to the best of his judgment and determine the sum
payable by the assessee on the basis of such assessment :

Provided that such opportunity shall be given by the Assessing Officer by serving a notice
calling upon the assessee 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 further that it shall not be necessary to give such opportunity in a case where a
notice under sub-section (1) of section 142 has been issued prior to the making of an
assessment under this section.

(2) The provisions of this section as they stood immediately before their amendment by the
Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any
assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier
assessment year and references in this section to the other provisions of this Act shall be
construed as references to those provisions as for the time being in force and applicable to the
relevant assessment year.

(3)  No order of assessment/ reassessment under section 144 shall be made after the expiry of
21 months(18 months for A.y 2018-19 and 12 months  wef A.y 2019-20) from the end of
relevant Assessment Year

(4)  Where a reference has been made to Transfer Pricing Officer to determine Arm’s Length
Price, then no order of assessment/reassessment under section 144 shall be made after the
expiry of 33 months(30 months for A.y 2018-19 and 24 months wef wef A.y 2019-20) from
the end of relevant Assessment Year.

What if Analysis of Section 144 –

What if – Answer
What if Assessing Officer has not provided Assessment is Void
opportunity of being heard by servicing notice?
What if Assessing Officer has not provided Assessment is Valid
opportunity of being heard by servicing notice
but notice under 142(1) (i) is already issued?
What if, Assessing officer (AO) reduces AO can not reduce income.
income below returned income?
What if, assessment is done in an arbitrary Assessment is Void. Assessment
manner? should be based on material
which AO collects.
What if, assessment carried out after 2 years of Assessment is Void
completion of assessment year

Protective Assessment.
There appears to be no provision in the Act providing for the manner in which a protective
assessment has to be done. But traditionally wherever the department has been in doubt on
account of a pending litigation as to how exactly an assessment had been framed against the
assessee, the Assessing Officer has been making an assessment in a manner in which he
thought the assessment should be done and apprehending that such assessment may be set
aside in the pending litigation, he would make another assessment as per the stand of the
assessee for the purpose of protecting the interest of the revenue. There is no provision
anywhere in the Act stipulating that such protective assessment has also to be made along
with the original assessment – Bhatia Motor Stores  v. CIT [2006] 152 Taxman 89 (MP).
Certain case laws based on protective assessments are Supreme Court in Lalji Haridas v. ITO,
(43 ITR 387) also G. Topi Saheb vs Commissioner of Income-Tax (170 ITR 181 AP).

We will discuss Income escaping assessment u/s 147 & Assessment in case of search u/s
153A in details in second part of this article. You can send any queries on this article in
comment column or mail me at [email protected].