Procedure of assessment
The procedure of assessment refers to the process by which the tax authorities determine the tax liability of an individual or entity. In India, the assessment procedure is carried out by the Income Tax Department. Here is an overview of the assessment procedure:
Filing of Tax Return
The first step in the assessment process is the filing of an income tax return by the taxpayer. The taxpayer is required to report their income, deductions, and tax liability for the relevant assessment year in the prescribed tax return form. The return can be filed online or physically, depending on the taxpayer’s category and income threshold.
Scrutiny and Verification
Once the tax return is filed, the Income Tax Department conducts scrutiny and verification of the return. This involves a preliminary examination of the return to check for any apparent errors, inconsistencies, or red flags. The department may issue notices seeking additional information, documents, or explanations related to the filed return.
Selection for Assessment
Based on risk analysis and certain criteria, the Income Tax Department selects tax returns for different types of assessments. These assessments can be categorized into three types:
- Scrutiny Assessment: In this type of assessment, the tax return is selected for a detailed examination. The taxpayer may be required to provide supporting documents, financial statements, and explanations for various items reported in the return.
- Limited Scrutiny Assessment: In limited scrutiny assessment, only specific aspects or issues in the tax return are examined. The taxpayer may receive a notice seeking clarification or additional information related to those specific aspects.
- Best Judgment Assessment: If the taxpayer fails to respond to notices or provide required information, the assessing officer can make an assessment based on the best judgment of the available information. The taxpayer has the right to appeal against such assessments.
During the assessment proceedings, the assessing officer reviews the taxpayer’s response, supporting documents, and other relevant information. The officer may conduct further inquiries, examine witnesses, or gather additional evidence if necessary. The taxpayer is given an opportunity to present their case and provide explanations or justifications for any discrepancies or issues identified.
Issue of Assessment Order
After completing the assessment proceedings, the assessing officer issues an assessment order. The order specifies the taxable income, deductions, tax liability, and any applicable interest or penalties. If any additional tax liability is determined, the taxpayer is required to pay the outstanding amount within the stipulated time.
If the taxpayer disagrees with the assessment order, they have the right to file an appeal with the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal, depending on the amount involved. The appellate authorities review the case, consider arguments from both sides, and provide a decision.
Appeals & Revision
In India, companies have the option to appeal or seek revision of their tax assessments if they disagree with the decisions or orders issued by the tax authorities. The appeal and revision processes provide a mechanism for companies to present their case and seek a review or reconsideration of the tax liability. Here is an overview of the appeals and revision provisions available to companies:
First Level of Appeal: Commissioner (Appeals)
Companies can file an appeal with the Commissioner (Appeals) against the assessment order issued by the assessing officer. The appeal should be filed within 30 days from the date of receipt of the assessment order. The Commissioner (Appeals) is an independent authority who reviews the case and provides a decision.
Second Level of Appeal: Income Tax Appellate Tribunal (ITAT)
If the company is not satisfied with the decision of the Commissioner (Appeals), it can further appeal to the Income Tax Appellate Tribunal (ITAT). The appeal to the ITAT should be filed within 60 days from the date of receipt of the Commissioner (Appeals) order. The ITAT is an independent tribunal that hears appeals and provides a final decision on tax matters.
Higher Levels of Appeal: High Court and Supreme Court
If the company is dissatisfied with the decision of the ITAT, it can appeal to the High Court within the stipulated time frame. The appeal to the High Court is based on substantial questions of law. The High Court has the authority to hear and decide on the appeal.
Further, a company can appeal to the Supreme Court if it believes that the case involves a significant question of law or if there is a divergence of decisions among different High Courts on the same issue. The Supreme Court has the highest appellate jurisdiction and its decision is final in such matters.
Revision of Assessment
Apart from the appeal process, companies also have the option to seek revision of their assessment under certain circumstances. The provisions for revision are outlined under Section 263 of the Income Tax Act. The Commissioner of Income Tax has the power to revise an assessment if it is found to be erroneous and prejudicial to the interests of the revenue. The company can file an application for revision within two years from the end of the relevant assessment year.