Module III:
Assessment Procedure
Every assessee, who earns income beyond the basic exemption limit in a Financial Year (FY),
must file a statement containing details of his income, deductions, and other related
information. This is called the Income Tax Return (ITR). Once you as a taxpayer file the
income returns, the Income Tax Department will process it. There are occasions where, based
on set parameters by the Central Board of Direct Taxes (CBDT), the return of an assessee gets
picked for an assessment.
RETURNS
The statement in which the assesee discloses the details of his income during the
previous year is called a return. The income tax department has prescribed specific forms for
returns to be submitted by different categories of assessees
-Types of returns-
Return of income is a form used for detailing the income and taxes paid on the income and
reporting the same to the government. For the purpose of income tax, there are mainly three
types of returns which can be filed:
• Original If a filer files income tax return for the first time for the financial year, it is
called original return
• Revised. If any modification is required in original return then a filer has to file revised
return
• Belated belated tax returns are income tax return when you file your tax returns after
the extended returns filing deadline
Voluntary Returns:
If a person or entity has filed income tax returns should an event arise wherein the individual
or the entity is not under any compulsion to file a Mandatory Return, then the income tax
returns filed by the person or the entity in question will be deemed to be a Voluntary Return.
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Defective return: An income tax return will be considered defective if you
provide incomplete details. In case of notice of defective return u/s 139(9), then you
must correct your return by revising it within 15 days from the receipt of notice by the Income
Tax Department. You can also apply for extension by writing an application to the Assessing
Officer (A.O.)
Revised return Revised return is a return which is filed u/s 139(5) as revision for the
original return. It is a revision for any omission or mistake made in the filing of that
original return.
Penalty of belated return
Consequences of belated return: Not filing your ITR on time can lead to a penalty, but there
are also other consequences and inconveniences attached to the delay, they are stated in the
following:
a. Unable to set off losses
Losses incurred (other than house property loss) are not allowed to be carried forward to
subsequent years. You cannot set off these losses against future gains if the return has not been
filed within the due date. However, if there are losses under house property, carry forward of
losses is permitted.
b. Interest on the delay of filing return
Apart from the penalty for late filing, interest under section 234A at 1% per month or part
thereof will be charged till the date of payment of taxes. It is important to note that ITR cannot
be filed unless taxes are paid.
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c. Delayed Refunds
In case you’re entitled to receiving a refund from the government for excess taxes paid, you
must file the returns before due date to receive your refund at the earliest.
Due date filing the returns-
Every person whose total income during the previous year exceeds the minimum
taxable limit, shall, on or before the due date, furnish his return of income in the
prescribed form. The due date for a company and where the audit is required is 30th
September of the assessment year. In all the other cases, the due date is 31th July of the
assessment year.
On or before 30th September – in the case of a company or a person other than a
company or a working partner of firm
On or before 31st July- others
On or before 30th November- companies which are required to furnish report from a
chartered accountant regarding international transactions.
E-filing-
The process of electronically filing Income tax returns through the internet is known as
e-Filing.
Required Documents
Before we get started, you should have the following documents at hand to pace up the
process:
✓ PAN
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✓ Aadhaar
✓ Bank account details
✓ Form 16 Form 16 is essentially a certificate employers issue to their employees. It
provides a validation that TDS has been deducted and deposited with the government
authorities on behalf of the employee. It gives a detailed summary of the salary paid to
the employee and the TDS deducted.
✓ Investments details
Procedure
1. Visit [Link]
2. Select the required ITR form and download Return Preparation Software for the
selected Form
3. Prepare your return offline at your convenience and follow simple steps to upload your
Return.
4. On successful upload take the print of the acknowledgement form if the Return is
digitally signed or under electronic verification code.
5. In case the Return is not digitally signed, or under electronic verification code, take the
print of ITR-V Form (two copies)
6. Send one copy ITR-V Form duly signed and verified by Ordinary post or speed post
within 120 days from the date of filing of the Return at the following address
Different forms for filing the return-
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Demand If the tax department assesses that more tax is due than paid and declared in
return, then one would normally get a demand notice. The taxpayer should match the finances
with the ITR filed and if required, file a belated or revised ITR correctly declaring all the
transactions
Recovery Modes of Recovery of Tax [Section 122] Section-122 provides that in case
assessee fails to pay any sum imposed by way of interest, fine, penalty, or any other sum
payable under the provisions of this Act, the same shall be recoverable in the manner specified
in the Act for the recovery of arrears of tax.
Assessment is the process of assessing the income of an assesse to decide the income
and tax liability of that person on the basis of return filed and gathered information. Every tax
payer has to furnish the details of his income to the income-tax department.
ASSESSING OFFICER:
An Individual officer of Income-tax department who is entrusted with this task of assessment is
called as 'Assessing Officer (AO)' An AO is an income tax officer who has jurisdiction to make
an assessment of a taxpayer (assessee) who is liable to tax under the Act.
Types of Assessment-
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The various forms of assessment are as follows:
✓ Self-Assessment
Self-assessment tax refers to any balance tax that has to be paid by an assessee on his assessed
income after the TDS and advance tax have been taken into account before filing the return of
income. The IT return cannot be submitted to the IT Department till the time the taxes have
been paid.
✓ Summary Assessment
It is a type of assessment carried out without any human intervention. In this type of
assessment, the information submitted by the assessee in his return of income is cross-
checked against the information that the income tax department has access to. In the
process, the reasonableness and correctness of the return are verified by the
department
✓ Regular Assessment
Tax on regular assessment is the tax that a taxpayer is required to pay against a notice of
demand from the Income-tax department. So when a notice of demand is received and it is
found that some additional tax is required to be paid, the same shall be deposited under the
head "Tax on Regular Assessment"
✓ Best Judgement Assessment
In a best judgement assessment, the Assessing Officer should really base the assessment
on his best judgement, i.e., he must not act dishonestly or vindictively or capriciously.
He must make a fair estimate of the proper figure of assessment and for this purpose
he must be able to take into consideration local knowledge and repute in regard to the
assessee’s circumstances and his own knowledge of previous returns and assessment of
the assessee and all other matters which he thinks will assist him in arriving at a fair and
proper estimate
✓ Income Escaping Assessment (re assessment)
When the assessing officer has sufficient reasons to believe that any taxable income has
escaped assessment, he has the authority to assess or reassess the assessee’s income. Re-
assessment is carried out if the Assessing officer has reason to believe that any income
chargeable to tax has escaped assessment for any assessment year.
The time limit for issuing a notice to reopen an assessment is 4 years from the end of the
relevant assessment Year
✓ Faceless assessment
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The assessment eliminates the human interface between the taxpayer and the income
tax department and lays down the procedure to carry out a faceless assessment through
electronic mode
✓ Jurisdiction free assessment
.Jurisdiction means power or legal authority. Under jurisdiction free assessment jurisdiction-
free assessment, where a taxpayer would be assessed by a taxman based in any part of the
country as part of measures to reduce instances of corruption and harassment.
Appeal refers to an act of referring the case or a matter to a higher authority against the
order passed by a lower authority in respect of the case matter. It implies a complaint toa
higher authority against the order or judgement of an administrative authority or appellate
authority
Revision of an Income Tax order is performed when a taxpayer feels that an income
tax assessment order forwarded by the assessing officer was unjust or unreasonable. Income
Tax orders can also be revised in a manner which causes enhancement of the taxpayer’s tax
liability. A Principal Commissioner or Commissioner of the Income Tax Department is
empowered with the rights to enhance, annul or modify an income tax order if the officer feels
that the interests of the revenue are at stake due to the erroneous passing of orders by the
Assessing Officer.
Settlement- Settlement Commission is a premier Alternative Dispute Resolution (ADR)
body in India. Its mandate is to resolve tax disputes in respect of Indian Income Tax & Wealth
Tax Laws between the two disputing parties, Income Tax Department on one side and
litigating tax payer on the other.
• Liability for E Commerce transactions-
Taxation of e-commerce is an important issue for countries, businesses and consumers who
want to be a party of e-commerce. The issues such as tax loss and tax evasion are crucial in
terms of countries
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PAN
The income Tax Department issues a permanent account number to every tax payer
borne on its records. The purpose of PAN is to identify each assessee regarding the tax
matters. PAN has ten alphanumeric characters and it is issued by the income tax department in
the form of a laminated card. PAN is allotted to a person on the basis of the application
submitted in the prescribed form.
Procedure for the application of PAN-
Step 1: Submit the PAN card application Form 49A available on the NSDL
Website[Link]
Step 2: Fill all the details in the form. Read the detailed instructions before furnishing the
details in the form. [Link]
Step 3: Mode of Payment: The charges for applying for PAN is Rs. 93 (excluding GST) for
Indian communication address and Rs. 864 (excluding GST) for foreign communication
address. Payment of application fee can be made through credit/debit card, demand draft or
net-banking. On successful payment, acknowledgment will be displayed. Save this
acknowledgment number.
Step 4: Documents to be sent to NSDL Once the application and payment are accepted, the
applicant is required to send the supporting documents through courier/post to NSDL. Only
after the receipt of the documents, PAN application would be processed by NSDL.
Documents include one proof of identity, one proof of address and one proof of date of birth
TAN-
TAN - Tax Deduction Account Number or Tax Collection Account Number - is a ten-
digit alphanumeric number issued by government agency Income Tax Department. TAN is to
be obtained by individuals responsible for deducting tax at source (TDS) or collecting tax at
source (TCS).
Methods of Tax collection-
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There are two different types of taxes in India- direct and indirect. The direct taxes are
applicable to your income and profits. On the other hand, indirect taxes such as excise duty,
service tax, octroi, and customs duty are paid on goods and services.
Following are the different ways in which the government collects income tax-
1) TDS
TDS or Tax Deducted at Source is the tax deduction that occurs at the source itself. For
instance, if you are a salaried employee, your employer will deduct TDS and give the same to
the government. Your TDS is calculated as per your income tax slab.
Apart from your salary, TDS is also deducted from interest payments, rent, professional fees,
commission, etc. Depending on who is deducting the TDS, you will either receive Form 16 or
Form 16A with detailed information about the deducted tax. You will need this form while
filing your income tax returns.
2) TCS
Sellers collect TCS or Tax Collected at Source from buyers. All the goods for which TCS is
applicable are mentioned under Section 206C of the IT Act. The TCS rates vary based on the
product sold. For instance, TCS on Tendu leaves is 5%, and the same for liquor of alcoholic
nature is 1%.
It is important to note that the seller here is not paying any kind of tax. He/she is only
collecting it from the buyers and passing the same to the government. Sellers are required to
deposit TCS collected from buyers within a week from the last day of the month when the tax
was collected.
3) ONLINE/OFFLINE TAX PAYMENTS
While the TDS is automatically deducted at source, there are still other types of taxes such as
Self-Assessment Tax, Regular Assessment Tax, and Advance Tax that taxpayers might be
required to pay to the government. Challan 280 can be used for paying such income taxes
online or offline.
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You can visit the TIN NSDL website for paying these taxes online. Another option is to pay
the same offline at one of the designated bank branches empanelled by the IT department.
The income tax collection mechanism is well-structured in India to ensure that the taxpayers
experience complete convenience. Moreover, the government also makes regular
improvements to the same to further strengthen the nation and aid its development.
TDS
✓ TDS is income tax reduced from the money paid at the time of making specified
payments such as rent, commission, professional fees, salary, interest, etc by the
persons making such payments.
✓ A Person gets income only after deduction of tax at source.
✓ Any person making specified payments mentioned under the Income Tax Act are
required to deduct TDS at the time of making such specified payment. But no TDS
has to deducted if the person making the payment is an individual or HUF whose
books are not required to be audited.
✓ In case of rent payments made by individuals and HUF exceeding Rs. 50,000 per
month, are required to deduct TDS @ 5% even if the individual or HUF is not liable
for a tax audit.
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✓ TDS has to be deposited to the government by 7th of the subsequent month. TDS has
to be deposited using challan ITNS-281 on the government portal.
TCS Tax collected at source (TCS) is the tax payable by a seller which he collects
from the buyer at the time of sale. Section 206C of the Income-tax act governs the goods
on which the seller has to collect tax from the purchasers.
➢ Advance payment of Tax advance tax refers to paying a part of
your taxes before the end of the financial year. Also called 'pay-as-you-earn'
scheme, advance tax is the income tax payable if your tax liability is more than
Rs 10,000 in a financial year. It should be paid in the year in which the income is
received.
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