Define The Various Types Of Income Tax Assessment
Define The Various Types Of Income Tax Assessment

According to The Income Tax Act of 1961, it is mandatory for every individual who is earning a taxable amount of income, to file their income tax return before the due date. If the individual fails to maintain the deadline or in case of any mismatch of income returns, it falls upon the Income Tax Department to verify the accounts and access the taxability. This procedure is known as an assessment, which includes the best judgment assessment or reassessments. Tax assessments involve the estimation for tax for an amount, which can either be done by the assessee or by the income tax officer. These Income Tax assessments are classified into different kinds which we will learn in brief below:

1. Self Assessment: Self Assessment is wherein the assessee himself determines the tax or interest that he is supposed to pay. For easing the process of self-assessment, the Income-tax Department has released a number of forms for filing income tax returns. After combining his income from all the sources, the assessee adjusts his income against his losses or deductions encountered during the year. From the Total Income that he arrives at this point, he deducts the amount of TDS and Advances tax to determine the amount that he has to pay on such income.

2. Summary Assessment: The process of summary assessment or preliminary assessment does not require any manual involvement. The information submitted by the assessee is cross-checked against the data owned by the income tax department. Here, the income tax department verifies the correctness and reasonableness of the return. This process involves automatic adjustments of any mathematical errors, disallowances, false claims by the online processing system. Post-assessment, if the assessee has to pay tax, he will be sent an intimation under section 143 which he will be required to respond to accordingly within the time period of 30 days, after which the adjustments will be finalized.

3. Best Judgement Assessment: These assessments are conducted when any one of these situations arise:

  • The assessee does not produce or respond in time to any such notice as issued by the department that requires him to prove or present a piece of information or the book of his/her accounts in general.
  • In case the assessee fails to observe the Special Audit instructed by the Income-tax authorities.
  • Upon failing to follow any of the terms or regulations mentioned in the notice that was issued under Summary assessment earlier.
  • Upon failing to file the return within the mentioned date or any extended time allowed to that individual.

The Best Judgement Assessment will be passed after the assessee has presented relevant evidence and materials that excuse him from doing the same.

4. Income Escaping Assessment: As suggested by the name itself, income-escaping assessment is carried out when the assessing officer has sufficient valid reasons that certain income has escaped assessment. He then has the authority to assess or reassess the income of the assessee, and the assessing officer can only validate this privilege within four years after the end of the applicable assessment year. The following are some examples of incidents that can lead to a reassessment:

  • An omission in filing return upon taxable income by the assessee.
  • When the filed return is found to contain understated income or excess allowances.
  • When the assessee has failed to present any report on the international transaction when he was asked to do so.

The process of assessment can be quite a compelling task for some taxpayers. If you are facing any issue with the process of assessments, you can seek professional help from Income tax return service for small business or Chartered Accountants to ease your grievances.

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