Types of Assessment in Income Tax: An Overview

The amount payable on the taxable Income which is paid to government for income earned by an individual or business within a jurisdiction. This enables the government to fulfill the public duty properly and on time. The Income Tax Act, 1961 includes the provisions which govern the Income Tax Assessment. Here we discuss the types of assessment in income tax:-

Income Tax Returns (ITR)

Individuals those income for the financial year is more than the basic exemption limit files statement to Income tax Department which contains the information which is related to the income and deductions is the income tax return.

Income Tax Assessment

The income tax return which is filed by the individuals is sorted and reviewed by the tax authorities at end of every financial year. This is known as Income Tax Assessment.

Income Tax Provisions have structural flow of the tax assessment, this shall be adhering to individuals and Income Tax department. The flow of these assessment provided by the Income Tax Act are:-

• Self-assessment, section 140A
• Summary-assessment, section 143(1)
• Scrutiny-assessment, section 143(3)
• Best judgment-assessment, section 144
• Income escaping assessment, section 147

Types of Assessment in Income Tax

Self-assessment:-

Self Assessment, the assessee shall compute the income tax return on their own, calculating the income earned against the loss which incurred and other deductions. If this amount exceeds th Tax deducted at source (TDS) or the advance tax, they shall pay the outstanding amount before filing the Income Tax Return this is known as self assessment tax.

It is the tax which is remaining amount that the assessee shall pay to the Income Tax Department when the tax exceeds the tax deducted at source (TDS) and the advance tax. This Excess amount can happen when taxpayer has capital gains or any other income on which the TDS is deducted at lower rate but the taxpayer is under high slabs. If assessee files the Income Tax Return without self-assessment tax, this type of filing will be considered Void and Subjected to interest on account of Non-Adherance to the provisions of Law.

Summary assessment:

This is the initial stage of Tax Assessment where an overview scrutinization is conducted, a non detailed scrutiny will be done for checking the plausible error in return filing such as:-

1. Mathematical miscalculations or arithmetical errors in the return.
2. Incorrect claim
3. Incorrect disallowance
4. Errors occurring from form16, 16A, or 26AS.
5. Disallowance of expenses u/s 10AA, 80 IA to 80 IE if the return is furnished beyond the due date specified u/s 139(1).

No such adjustment will be made unless an intimation is given to the assessee for such adjustment in writing or electronic mode.

Scrutiny Assessment:

An officer assigned for reviewing the filing carefully and ensuring that the tax liability is not over or understated by the assessee. The main objective of this is to make sure that the taxpayer has not understated his income or has not calculated excessive loss or not being underpaid the tax in any manner. A detailed scrutiny will be conducted. If a mismatch is found in the submitted statement, the assessee can agree with the claim or if he has any dissatisfaction, they can appeal to the Commissioner of the Income Tax Appeals (CITA) further to Income Tax Appellate Tribunal (ITAT), High Court or the Supreme Court.

Best Judgment-Assessment:

In Best Judgement Assessment the assessing officer bases the assessment on the best judgement which means not acting dishonestly or flackery. The Best judgement assessment refers to a situation where the officer has computed the tax payable as the assessee does not comply in providing and maintaining necessary documents or the book of accounts for supporting the claim.

Here, the officer will compute the tax liability based on the best judgement. The Income Tax Act provides situations under which income tax officer can compute the tax liability based on the best judgement:- 

:- When Assessee has not filed an Income Tax Return

:- When Assessee responds to the notice requesting the submission of the documents.

:- Response of Assessee has crossed the limit which is permitted by Central Board of Direct Taxes(CBDT)

:- When Officer is not satisfied with Provided Documents.

Income escaping-assessment:

When Assessing Officer has the reasons for believing that any income which is chargeable to tax has escaped assessment for the financial year, an income escaping assessment shall be conducted. Here, the income tax department has all reasons for believing that any income charged to tax has not been mentioned while doing the assessment for financial year, an income escaping assessment shall be conducted. In here the Income Tax department has complete authority for revisiting and reviewing six years tax filing if the alleged amount is 1,00,000 or more than that.

Acc. to the guidelines the time limit of opening such case has been reduced from 6 to 3 years. Although for cases where the concealed income is more than Rs.50 Lakh (Seious Tax Evasion), these cases can be opened for 10 years.

Circumstances under which income is deemed to have escaped assessment are,

1. When assessee is found to have taxable income but not filed income tax returns for financial year.
2. Submitted Income Tax Return is under or overstated
3. Failure in furnishing information related to International Income
4. Unaccounted Overseas Assets
5. When the Income of Assessee exceeds the tax exemption limit but has not filed Income Tax Returns.

Penalty for Non-Filing of Income Tax Return

If return is filed after due date, then 3 scenarios could be there:- 

1. Gross Total Income is Rs.2.5 lakh or less then the penalty will be Nil.
2. If total income is more than Rs.2.5 lakhs and up to Rs. 5 lakh then the penalty will be 1000.
3. If total income is more than 5 lakh then the penalty will be Rs.5,000.

When date of filing u/s 139 (1) has exceeded, the assessee will not be able to carry forward the losses except for the House Property losses incurred for the Financial Year. Pending Unpaid taxes will be chargeable at 1% of the tax liability for every month or part of that month till the payment of that amount.