Types of Income Tax Assessment

The Income Tax Act of 1961 mandates every person falling within the taxable bracket to

file their income tax return before the due date. Post submission of the return, the Income Tax Department goes on to verify the accounts and assess the taxability. This process is known as an Income Tax Assessment. Assessments are classified into different kinds, which we will explore in brief in this article.

Summary Assessment

This is also known as a preliminary assessment, where accounts are verified on a preliminary basis. Any adjustments made post-assessment shall be communicated to the assessee, either in written or electronic means. The assessee may respond if the assessee feels the need for it. If the assessee has not responded for a period of 30 days, the adjustments will be finalized.

Procedure for Summary Assessment

After correcting any errors, the tax payable would be calculated on the basis of adjusted income.
The assessee would be informed of any refundable or payable amount.
The assessee would also be intimated on certain adjustments, whether or not the same had any effect on the amount of tax to be paid.
In case of nil adjustments, the assessee would be acknowledged on the receipt of returns filed.

Time Limit for Summary Assessment

The time limit for summary assessment can be a year from the date of filing of returns.

Scrutiny Assessment

Scrutiny assessment is when the taxpayer's claims, deductions, documents etc, based on the income tax return are verified thoroughly in order to authenticate the same.

Procedure of Scrutiny Assessment

If the assessing officer feels the need to verify the authenticity of the taxpayer, to clarify whether or not the taxpayer has committed any defaults in terms of manipulation of income stated; computation of excessive laws; or evasion of tax, the taxpayer may need to appear before the officer for the purpose of verification, and if required, submit the relevant documents or evidence relating to the query posed by the assessing officer.
The assessing officer needs to submit a notice informing the assessee on the details of the assessment, and the notice must be served within a period of 6 months from the end of the financial year in which the assessee has filed the returns.
The taxpayer or his representative need to appear before the assessing officer to answer the necessary queries or produce the relevant documents.
After determining the tax through the above processes, the taxpayer goes on to specify any amendments on tax payable on the basis of corrections, mistakes etc.

Time Limit for Scrutiny Assessment

The time limit for assessment is 21 months from the end of the assessment year in which the income was assessable. This would apply until the end of the current financial year (2017-18), it would change to 18 months for the financial year 2018-19 and would be 12 months from 2019-20 onwards.

Best Judgement Assessment

A best judgement assessment is conducted when the taxpayer fails to comply with any of the regulations like timely filing of returns, submission of necessary documents and so on. These assessments are done by the officer with the help of available knowledge and documents.

Procedure of Assessment

A show-cause notice will be given to the assessee explaining the need to conduct a best judgement assessment.
If the officer is not satisfied with the arguments or response of the taxpayer, he would go on with the best judgement assessment.
Finally, after giving the assessee an opportunity to hear, the officer will conduct the assessment based on the best of the knowledge and documents available to him, and determine the tax payable accordingly.

Income Escaping Assessment

As the name suggests, income-escaping assessment is carried out if the assessing officer feels that any income was being left out from assessment in any assessment year.

Procedure of Assessment

The taxpayer must be given an opportunity to hear, post which notice is issued briefing the taxpayer on the assessment to be conducted and its need.
The assessing officer will then go on to compute the incomes which he feels escaped assessment. He may also re-compute the loss or depreciation allowance or the likes of it, for the particular assessment year.
The taxpayer would be notified of the results computed and the implications thereto.

Time Limit for Income Escaping Assessment

Income escaping assessment must be completed within a period of 9 months from the end of the financial year from which the notice of invoice was served. This is for notices served before the financial year 2019-20, post which the time for completing the same would be 12 months.

Time Limit for Issue of Notice for Income Escaping Assessment

A notice indicating the conduction of an Income Tax Assessment can be given to the concerned

taxpayer within a period of 4 years from the end of the relevant assessment year, and 6 years in case the value escaped is more than 1,00,000 rupees. On the other hand, if the escaped income is related to a particular asset located out of the Indian frontiers, a period of 16 years can be allowed. To know about the concept of tax audit turnover in income tax, click here.

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Frequently Asked Questions

Common questions about Income Tax Assessment Types in India 2023.

An Income Tax Assessment is the process by which the Income Tax Department verifies the accounts and assesses the taxability of a person who falls within the taxable bracket. It is mandated by the Income Tax Act of 1961 for every taxpayer to file their income tax return before the due date, after which the assessment process takes place.

The article discusses four main types of Income Tax Assessments: Summary Assessment, Scrutiny Assessment, Best Judgement Assessment, and Income Escaping Assessment. Each type follows a different procedure and has specific time limits for completion.

A Summary Assessment is a preliminary assessment where accounts are verified on a basic level. Any adjustments made during the assessment are communicated to the assessee, who has 30 days to respond. If there is no response, the adjustments are finalized.

A Scrutiny Assessment is conducted when the assessing officer needs to verify the authenticity of the taxpayer's claims, deductions, documents, etc., based on the income tax return filed. The officer may summon the taxpayer or their representative to appear before them and provide relevant documents or evidence.

A Best Judgement Assessment is carried out when the taxpayer fails to comply with regulations, such as timely filing of returns or submission of necessary documents. The assessing officer conducts the assessment based on the best available knowledge and documents.

An Income Escaping Assessment is conducted if the assessing officer believes that any income has been left out from assessment in a particular assessment year. The officer may re-compute the income, losses, or depreciation allowances for that year.

A notice for an Income Escaping Assessment can be issued to the taxpayer within 4 years from the end of the relevant assessment year, or 6 years if the escaped income is more than 1,00,000 rupees. For escaped income related to assets located outside India, the time limit is 16 years.

The time limit for completing a Scrutiny Assessment is 21 months from the end of the assessment year in which the income was assessable until the current financial year (2017-18). From 2018-19 onwards, the time limit will be reduced to 18 months, and from 2019-20 onwards, it will be further reduced to 12 months.

If the taxpayer does not respond to adjustments made during a Summary Assessment within 30 days, the adjustments will be finalized, and the tax payable or refundable will be determined based on the adjusted income.

The article does not explicitly mention the process of appealing against an Income Tax Assessment. However, it is generally understood that taxpayers have the right to appeal against assessments if they disagree with the findings or calculations made by the assessing officer, following the prescribed procedures and time limits.