Types of Income Tax Assessments under the Income Tax Act

 

What is Income Tax Assessment?

Income tax assessment is the procedure of checking the information given by the assessee while filing an income tax return. Every person and company must file an income tax return at the end of every financial year by calculating income and tax due. Tax experts will do income tax assessments after the filing of income tax returns. This blog highlights the different types of Income Tax Assessments in detail.

Types of Income Tax Assessments

There are many types of income tax assessments under the Income Tax Act such as:

1. Self-assessment- Section 140A

The first type of income tax assessment is Self-assessment. In this assessment, the assessee calculates tax himself by including the due payment. Tax payable is calculated after adding TDS and deducting advance tax paid. The amount that you get after this work is the tax payable under section 139, section 142, and section 148.

Self-assessment is generally done by small firms or owners of sole proprietors. They will calculate the tax based on the yearly income and pay income tax every year. Self-assessment tax should be paid by 31^st July every year.

2. Scrutiny assessment- section143 (3)

It is necessary to file an income tax return every year. After filing tax returns, the Income-tax department selects a tax officer to scrutinize the assessment. Taxpayers will get an income tax notice from the Assessment officer. This notice informs taxpayers about scrutiny assessment.

In scrutiny assessment, the tax office will ask for information and some documents fromthe book of accounts. After getting all the documents, the tax officer will calculate the assessment and give the amount of tax payable. If taxable income and tax payable do not match, the taxpayers can accept the calculation of the officer and pay the tax. They can also demand a refund from the tax office.

If the tax assessment is not correct, the taxpayers can apply for rectification under section 154. Apart from that, the assessee can also apply for revision to the Income Tax commissioner under section 263. If taxpayers do not get the required results, they can also apply to the High court or Supreme Court.

3. Summary assessment- section 143(1)

Under summary assessment, the taxpayer gets intimation under section 143(1) from IRS. The tax department will do comparative income tax calculations. Income or loss incurred is calculated in the income tax assessment.

4. Protective assessment

A protective assessment is a kind of assessment that is carried out to protect the revenue’s interest. There is no provision in the Income tax Act for the imposition of income tax on other persons. The act strictly states that the imposition of income tax can be done only on the person to whom the tax is due. However, tax authorities can choose a protective or alternative assessment if there are no persons to pay the tax due.

Tax authorities should assess the paper until the case is solved. They can also issue protective order of assessment.

ITR for individual

5. Best Judgment Assessment under section 144

Best Judgment assessment is one of the most important Types of Income Tax Assessment as per section 144. In this assessment, the income of the assessee or officer’s opinion is included while calculating doing income tax assessment.

In the case of best judgment assessment, the tax officer will decide after considering the best reasoning. The assessee should not be dishonest in the assessment.

There are many cases in which the best judgment assessment is done such as:

·        Taxpayer fails to file income tax returns during any financial year.

·        The taxpayer does not act as per the notice of income tax or fails to get books of account audited from an accountant.

·        Taxpayers fail to provide all the necessary documents and papers to tax authorities while doing an income tax assessment.

·        When the tax officer or assessing officer is not satisfied with the given proofs of income and documents.

Income tax officers should give a chance to taxpayers before passing an order.

6. Income escaping assessment or Re-assessment- Section 147

As the name suggests, income escaping assessment is done when the assessing officer thinks that income liable is escaped in any assessment year. Under this situation, it is necessary to do an income escaping assessment as per section 147. Tax authorities will reassess income and turnover that were not counted before.

Re-assessment will show income that has not been included in the original assessment in the tax net. Taxpayers cannot escape under re-assessment. They will have to pay all the unpaid taxes as demanded by income tax authorities. 

7. Assessment under section 153A

As per section 153, the notice is given for 6 years to the person. This period does not include the year of search. The person has to file ITR Online in India for 6 years excluding the year of search after receiving a notice from the assessing officer.

Final words

We discuss the different types of Income Tax Assessments in this blog. Taxpayers should treat every kind of income tax assessment seriously. Keep TDS return filing every year to avoid any type of income tax assessment. Apart from that, the taxpayers can also consult tax experts or ask tax consultants how to avoid paying an extra amount.

Many professional tools help in simplifying the work of accounts and taxation. You can also use software to file ITR for a business or company.  There are some more options such as Bulk Return, business return, and revised return filing. You can pick any one of the options to avoid any type of income tax assessment.

You can find many tax consultants and taxation experts online today. The best thing is to fill out an online form and receive quotes from different tax firms. You can also choose customized packages of taxation from online sites for your company or business. Tax experts will help you to avoid any tax penalty or reassessment.