Unit- V

1. Procedure for Assessment:

1. Self-Assessment
2. Reassessment
a. Block Assessment
b. Reassessment by way of Appeal / court order
c. Reassessment generally U/s 147
3. Best Judgment Assessment
a. Compulsory best Judgment Assessment
b. Discretionary best Judgment Assessment
4. Rectifications of mistakes :( Sec 154)
5. Re- Opening of Assessment
1. Self Assessment [Sec.140A]
The provisions of Section 140A apply in respect of Self assessment Following are the
provisions. The assessee has to submit his return of income under Section 139 or 142 or 148
or 153A or 158BC.
1. Return under Section 139 for obligatory filing of return.
2. Return under Section 142 is return of income in the prescribed form.
3. Return under Section 148 is return in response to notice for Assessment.
Before submitting the return of income the assessee is supposed to find our whether any tax
and/ or interest is payable.
Self assessment tax determined is to be deposited by the assessee before submitting
the return of income. The proof of deposit shall be submitted by the assessee along with the
return of income where the amount paid by the assessee falls short of tax and interest and the
amount paid shall be adjusted first towards interest and the balance if any is adjusted towards
tax payable.
2. Reassessment or Assessment of Escaped Income [Sec.147, 148 and 149]: When any
income is deemed to have escaped assessment:
In the following cases, chargeable income will be deemed to have escaped
assessment:
(1) If the assessee has not furnished return of income, despite liability to do so under
Sec. 139.
(2) If return of income has been furnished by him but no assessment has been made,
and it is noticed by the AO that the assessee has understated income or claimed excessive
loss, deduction, allowance or relief in the return.
 (3) If an assessment has been made but-
a) Chargeable income has been under-assessed.
b) It has been assessed at too low a rate.
c) It has been made the subject of excessive relief under the act.
d) Excessive loss, depreciation, or any other allowance has been
computed [Sec.147].

Provisions as to Assessment / Reassessment of Escaped Income

(1) Where the AO has reason to believe that any income chargeable to tax has
escaped assessment: For any assessment year, the AO may assess or reassess such income or
recomputed the loss, or depreciation allowance, or any other allowance.
(2) No Action after the expiry of four years: If an assessment has been made
for the relevant assessment year under Sec. 143(3) or Sec. 147 may action will be taken after
the expiry of four years from the end of the relevant failure to make a return under Sec 139 or
to disclose fully and truly all material facts necessary for his assessment for that year.
(3) Serving of notice: Before making the assessment, reassessment or
recomputation under Sec. 147, the AO will serve a notice requiring the assessee to furnish a
return of income assessable in his hands within a period as specified and in prescribed form
and manner.
Time Limit for Completion of Assessment and Reassessment [Sec.153]
The limit as regards assessment: An order or assessment under Sec.143 (or)
144 will be completed within 21 months from the end of assessment year is which income
was first assessable.
The limit as regards assessment under Sec. 147: An order assessment,
reassessment or recomputation will not be made under Sec. 147 after the expiry of two years
from the end of the Financial year in which the notice under Sec. 148 has been served.
The Limit not to apply in some cases: In the following cases there will be
no time limit:
(a) If assessment or recomputation is done as a consequence of an order is appeal,
reference, or revision, or any order by the I.T authority in any proceeding under the I.T Act or
by a Court.
(b) If an assessment is made on the partner of a firm as a result of the assessment
made on the firm under Sec. 147.
3. Best Judgment Assessment [Sec.144 and 145 (2)]:
A best judgment assessment is an assessment by the assessment officer to the best of
his judgment after taking into Account all relevant material which he has gathered. Applying
his own (best) intelligence deciding on the question of income tax, if an A.O completes an
assessment it is called best judgment Assessment.
Sources of Information
1. Books of Accounts
2. Information collected by him through inquiry, etc.
Best judgment assessment may be
1) Compulsory, or
2) Discretionary.
1) Compulsory best Judgment Assessment [Sec.144]

(a) When best judgment assessment is Mandatory:

In the following cases, the assessment officer is required to make a best Judgment
assessment;
(i) If any person fails to furnish the return in compliance with Sec.139(1), or
des not furnish a delayed return under Section 139(4) or a revised return u/s 139(5);
(ii) If any person fails to comply with all the terms of a notice under
Sec.142(1) requiring him to produce the books of account and document.
(iii) If any person fails to comply with direction under Section 142(2A) for
audit of his accounts by a nominated auditor; or
(iv) If any person, having furnished the return, fails to comply with a notice
under Sec. 143(2), requiring his presence before the assessing officer, or production of
evidence in support of the return.
(b) Opportunity to assessee of being heard:
Best Judgment assessment will only be made after giving the assessee an opportunity
of being heard. Such opportunity will be given by the assessing officer (AO) by a notice
requiring the assessee to show cause, on a specified date and time, why best Judgment
assessment should not be made in his case.
(c) principles of Best Judgment Assessment:
Best Judgment assessment is a penal provision to be invoked only if any default as specified
is Sec. 144 is proved. But it is necessary for the AO, who proceeds to make such assessment,
to ensure that he acts honestly on the material, however, inadequate, before his and not
vindictively, capriciously, or arbitrarily.
(d) Consequences of compulsory best Judgment assessment:
The following consequence may arise from a compulsory best Judgment assessment.
(i) For non-Compliance with the terms of the notice under Sec. 142(1)(2) and
(2A) – the assessee may be liable to penalties under Sec.271.
(ii) For failure to file return – the assessee may be liable to penalty made Sec.
271 and prosecution under Sec.276CC, and for failure to comply with the notices as per Sec.
142(1) or (2A), he may be liable under Sec. 276D.
(iii) For default by a firm assessed as a firm – the firm shall not be assessed as
a firm but as an association of persons [Sec.185].
Appeal against compulsory best Judgment assessment [Sec.246]:
An assessee aggrieved by best judgment assessment, may appeal is the
prescribed appellate authority, i.e., Deputy Commissioner (Appeals) or Commissioner
(Appeals). He may object to the amount of income assessed, the amount of tax determined,
the amount of loss computed, or the status under which he has been assessed.

2) Discretionary best Judgment assessment under Sec. 145(2):

(a) When discretionary best Judgment may be made:

In following cases the A.O. may make the assessment on an assessee in the manner provided
in Sec. 144:
(i) If he is not satisfied about the correctness or completeness of the accounts
of the assessee (or)
(ii) If no method of accounting has been regularly employed by the assessee.
(b)Assessment of interest on Securities:
If no method of accounting is regularly employed by the assessee, any income by way of
interest on securities will be chargeable as income of the previous year in which it became
due to the circumstances as specified above, he will decide whether to make a regular
assessment under Sec. 143(3), or a best Judgment assessment u/s 144.
(c) Assessment u/s143(3) or Sec. 144:
Assessment in this case is purely at the discretion of A.O. If he is satisfied as to existence of
the circumstances as specified above, he will decide whether to make a Regular Assessment/s
143(3), or a Best Judgment Assessment u/s 144.
(d) Power of Deputy Commissioner to issue directions in certain cases [Sec.144A]:
A Deputy Commissioner may, on his own or on a reference made to him by the AO, or on
application by the ssesssee, send for record of any proceedings in which an assessment is
pending.
4.Rectifications of mistakes :( Sec 154)
a) When rectification may be made in order to rectify the mistake apparent from the regard,
an IT authority,
1, Amend any order passed by it under IT act.
2, Amend any intimation sent by it under Sec 143(1), or enhance or reduce the
amount of refund granted by it under this section.
3, IT authority may, on its own amend the order passed by it. In the event of any
mistake brought to its notice by the assesse the IT authority will have to amend its order as it
deems fit.
b) Rectification is mandatory if mistake is brought to Assessing Officer (AO) Notice:
The rectification is to be done within three months from the end of the month in
which this mistake is brought to his notice. In case the rectification is not done with in the
period, it will open to the assesse to appeal against intimation to the appellate authority
concerned.
c) Rectification of orders being subject matter of appeal;
d) Rectification having adverse effect anassesse,
e) No Rectification required evidence is produce later:
The any deduction is disallowed at the time of regular assessment under Sec 143(1)(a)
for want evidence as to actual payment of duty, tax or bonus under Sec 43B, by way of
investment of capital gain for exemption purpose, under Sec 80, Such deduction/exemption
will not be allowed under Sec54 even if the evidence subsequently produced.
Time Limit for Rectification of Mistakes:
There can be no rectification of an order after the expiry of Four years from the end of
financial year in which it was passed.
In case any search has been conducted, the assessing officer will serve notice on such
person to fill a return in prescribed form with in period of not less than 15 days but not more
than 45 days. The return is related to total income including the undisclosed income for the
block period.
5. Reopening of assessment u/s 147 of the IT Act ,

Reopening of assessment u/s 147 of the IT Act , 1961 on the basis of information
from Investigation Wing of the department

On the basis of information received from the investigation wing of the department,
the Assessing officer cannot issue notice u/s 148 of the act mechanically, without using his
own mind. He has to go to the information received from the investigation. Sufficiency of
information is not required at this stage, but use of mind is required to form opinion regarding
escapement of income, recording reasons and issue of notice u/s 148. Even if specific
information is there from the DDIT, even then ITO has to apply his own mind.Sufficiency of
tangible material is required at this stage and use of mind by the AO.
Q.no 2.
I.RETURN OF INCOME
Computation of total income is one of the major part of procedure involved in levying
tax of an assesse. While using the word Assessment most comprehensive imposing the
liability upon the tax payer, the method of assessment of tax can be divided into three steps
are as follows;
a) Computation of total / taxable income
b) Computation of tax payable
c) Serving of notice of demand prescribed form.
Computation of total income of assesse can be done only furnished particular of his
income. The act makes it the obligation of each and every person to submit particulars of the
income relating to the particular accounting period to the income tax officer of his area in
prescribed form. The prescribed form is known as “Return of income”.
 Prescribed Form: [u/s 139(6)]

The return of income shall be filed in Prescribed form. Every assesse is required to
furnish the under mentioned detail;
1, Income exempt from tax.
2, Assets of the prescribed nature of value, bank account and credit card held by him.
3, Expenditure exceeding the prescribed limits incurred and under prescribed head and
such other outgoing may be prescribed.
 Penalty for non-filing Return:

In case a person does not submit his return on or before due date , a Penalty of Rs. 5,000 shall
be imposed on such person.
 Filing a Return of Income:

1 .A Company,
2. A person other than company having income in excess of the amount chargeable to tax.
3. Head a trust for charitable or religious purpose.
4. Chief executive officer of a political party.
5. Scientific Research Association, New agency, trade union, Educational Institution,
Hospital and Medical purpose.
II.RETURN OF LOSS [U/S 139(3)]
1) The provision of Sec 139(3) require the assesse to file a return of loss in case of
return of income with in time allowed under Sub section 139(1)
2) A return of loss has to be filed by the assesse in own interest and Non- recipient of
a notice from the assessing officer requiring him to file the return cannot be valid under any
circumstances for Non-filing of such return.
3) In particular return of loss must be filed by an assesse incurred loss under the heads
of “Income from business or profession”, “Capital Gain”, and “Income from other sources” it
include loss from the activity of owing and maintenance of horse race.
III.BELATED RETURN [U/S139 (4)]
Any assesse has not furnished return with in time allowed under notice issued under
Section 142 (1) may furnish the return of any previous year at any time before the expiry of
one year from the end of the relevant assessment year.
 Consequences of filing a belated return:
 Assessee shall be liable to pay interest at 1% p.m U/S 234A
 If return for any previous year is submitted after the end of relevant
assessment year the assesse liable to a penalty of Rs. 5000.
 A belated return can also be revised.
 Deduction under section 80-IA., 80-IAB., 80-IAC., 80-IB., 80-IBA., 80-IC.,
80-ID and 80- IE shall not be available

IV.REVISED RETURN [U/S 139(5)]

If any person having furnished a return under section 139(1) or pursuance of a notice
issued under section 142(2) discover of any omission or any wrong statement to revised
return at any time before the expiry of one year the end of the relevant assessment year or
before completion of assessment whichever is earlier.
 A return can be revised any number of time.
 There is no fee for filing a revised Return.
 A return of loss can be also be revised.
 A belated return can also be revised.