by Income Tax Assessment is a process of verifying the details of the income and tax paid by the taxpayer. The Income Tax Department carries out various assessments, audits, and surveys to ensure that taxpayers comply with the provisions of the Income Tax Act, 1961. In this article, we will discuss the various procedures involved in Income Tax Assessment.
Self-Assessment Tax
Self-assessment tax is the tax paid by the taxpayer based on their own calculation of their tax liability for a particular financial year. This tax is paid before filing the income tax return. After the return is filed, the Income Tax Department verifies the details of income and tax paid by the taxpayer. If any discrepancy is found, the taxpayer will be asked to pay additional tax, along with interest and penalties.
Scrutiny Assessment
Scrutiny Assessment is a process of verifying the income tax return filed by the taxpayer. The Income Tax Department selects a few returns for scrutiny assessment every year. The selection can be done on the basis of certain criteria such as high-value transactions, low tax paid, etc. The taxpayer will be asked to provide the necessary documents to support their income and expenses. The assessing officer will scrutinize the return and may ask for additional information or documents. If any discrepancy is found, the taxpayer will be asked to pay additional tax, along with interest and penalties.
Best Judgment Assessment
Best Judgment Assessment is done when the taxpayer fails to file the income tax return or fails to comply with the notices issued by the Income Tax Department. In such cases, the assessing officer will make an assessment to the best of their judgment, based on the available information. The taxpayer will be given an opportunity to provide their explanation, but if the assessing officer is not satisfied, the assessment will be made to the best of their judgment. The taxpayer will be asked to pay the tax based on this assessment.
Income Escaping Assessment
Income Escaping Assessment is done when the assessing officer has reason to believe that the income of the taxpayer has escaped assessment. This can be due to the non-disclosure of income, incorrect claim of deductions, etc. In such cases, the assessing officer can issue a notice to the taxpayer and assess the income that has escaped assessment. The taxpayer will be given an opportunity to provide their explanation, but if the assessing officer is not satisfied, the assessment will be made based on the available information. The taxpayer will be asked to pay the tax based on this assessment.
Reassessment
Reassessment is done when the assessing officer has reason to believe that the income of the taxpayer has escaped assessment. This can be due to the non-disclosure of income, incorrect claim of deductions, etc. In such cases, the assessing officer can issue a notice to the taxpayer and assess the income that has escaped assessment. However, if the assessing officer has already completed the assessment and the taxpayer has already paid the tax, then reassessment can be done only under certain circumstances such as discovery of new information, etc.
Survey
Survey is a process of collecting information about the taxpayer’s business or profession. The survey can be conducted by the Income Tax Department at the taxpayer’s place of business. The survey can be conducted to verify the details of income and tax paid, to verify the compliance with the provisions of the Income Tax Act, etc. The taxpayer will be asked to provide the necessary documents to support their income and expenses. The survey team may also seize certain documents if they are found to be relevant to the assessment.
Audit
Audit is a process of verifying the details of income and tax paid by the taxpayer. The audit can be conducted by the Income Tax Department or by a Chartered Accountant appointed by the taxpayer. The audit can be conducted to verify the compliance with the provisions of the Income.
Question:
Mr. X received a notice from the Income Tax Department for assessment of his income tax return for the Assessment Year 2022-23. What are the steps that he needs to follow to comply with the assessment process?
Solution:
When Mr. X receives a notice from the Income Tax Department for assessment of his income tax return, he needs to follow the below-mentioned steps to comply with the assessment process:
- Review the notice: Mr. X should carefully review the notice and understand the reasons for assessment.
- Respond to the notice: Mr. X should respond to the notice within the specified time limit. If he requires more time to respond, he can request an extension from the AO.
- Gather documents: Mr. X should gather all the relevant documents such as bank statements, salary slips, Form 16, and other supporting documents to support the income tax return.
- Attend hearing: Mr. X may need to attend a hearing with the AO to discuss the assessment. He should be prepared to answer any questions asked by the AO.
- Provide clarification: If the AO raises any queries or doubts, Mr. X should provide a clarification with supporting documents.
- Follow-up: After submitting the documents and attending the hearing, Mr. X should follow-up with the AO to know the status of the assessment.
