A quick guide to assessment procedure under Income Tax Act, 1961

1. ASSESSMENT PROCEDURE
By:
CA Ankit Lakhotia
CA Nidhi Mundra

2. TYPES OF ASSESSMENT
 Self Assessment (u/s 140A)
 Intimation (u/s 143(1))
 Scrutiny Assessment (u/s 143(3))
 Best Judgment Assessment (u/s 144)
 Income Escaping Assessment (u/s 147)
 Assessment in case of Search (u/s 153A)

3. Self Assessment – Section 140A
Where any tax is payable on the basis of any return required to be furnished under
section 139 / 142 / 148 / 153A, after taking into account,—
(i) the amount of tax, if any, already paid
(ii) any tax deducted or collected at source;
(iii) any relief of tax or deduction of tax claimed u/s 90 or 91
(iv) any relief of tax claimed under section 90A and
(v) any tax credit claimed to be set off in accordance with the provisions
of section 115JAA,
liable to pay such tax together with interest for any delays

4. Intimation (u/s 143(1))
Intimation u/s 143(1) is wherein the total income or loss shall be computed after ma
king the following adjustments:
(i) any arithmetical error in the return;
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the
return;
(iii) disallowance of loss claimed, if return of the previous year for which set off of
loss is claimed was furnished beyond the due date specified u/s 139(1)
(iv) disallowance of expenditure indicated in the audit report but not taken into
account in computing the total income in the return;
(v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB,
80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date
specified u/s 139(1); or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has
not been included in computing the total income in the return:

5. Provided…
 that no such adjustments shall be made unless an intimation is given to the
assessee of such adjustments either in writing or in electronic mode:
 that the response received from the assessee, if any, shall be considered before
making any adjustment, and in a case where no response is received within
thirty days of the issue of such intimation, such adjustments shall be made.
Time limit
Intimation under section 143(1) can be made within a period of one year from
the end of the financial year in which the return of income is filed.

6. Please Note
 The acknowledgement of the return of income shall be deemed to be the
intimation in a case where no sum is payable by or refundable to the assessee or
where no adjustment is made to the returned income.
 The processing of a return under section 143(1) shall not be necessary, where a
notice has been issued to the assessee under section 143(2), i.e., a notice for
scrutiny assessment has been issued to the taxpayer.

7. Service of Notice (u/s143(2))
AO may serve a notice for scrutiny assessment if:
 the assessee has filed a ROI u/s 139 or
 in response to a notice issued u/s 142(1)
as the case maybe
And if AO considers it necessary to do so, in order to ensure that the assessee has
not under-stated the income, or computed excessive loss, or underpaid tax in any
manner.
Time limit
Notice has to be served before the expiry of 6 months from the end of the financial
year in which the return is furnished
Notice has to be ‘served’ and mere ‘issue’ is not sufficient

8. Inquiry Before Assessment u/s 142
For the purpose of making an assessment, the AO can :
 Serve a notice u/s 142(1)(i) for furnishing the ROI
 Serve a notice u/s 142(1)(ii) to produce such documents or accounts
– return must be filed earlier.
 Serve a notice u/s 142(1)(iii) to call for information he may require including
statement of assets & liabilities
- return must be filed earlier.

9. Scrutiny Assessment(u/s 143(3))
 This is a detailed assessment.
 At this stage a detailed scrutiny of the return of income will be carried out confirm the
correctness and genuineness of various claims, deductions, etc., made by the taxpayer
in the return of income.
Time Limit
As per section 153 of the Act, assessment under section 143(3) shall be made
within a period of 21 months from the end of assessment year.

10. Limited Scrutiny
 The Central Board of Direct Taxes ('CBDT'), vide Instruction No. 7/2014 dated
26-9-2014 had clarified the extent of enquiry in certain category of cases
specified therein, which are selected for scrutiny through CASS.
 The said Instruction is applicable only in respect of the cases selected for
scrutiny through CASS-2014.
 The said Instruction is applicable where the case is selected for scrutiny under
CASS only on the parameter(s) of AIR/CIB/26AS data. If a case has been
selected under CASS for any other reason(s)/parameter(s) besides the AIR/CIB/
26AS data, then the said instruction would not apply.
 The Questionnaire under section 142(1) of the Act in 'Limited Scrutiny' cases
shall remain confined only to the specific reasons/issues for which case has been
picked up for scrutiny. Further, the scope of enquiry shall be restricted to the
'Limited Scrutiny' issues.

11. Limited Scrutiny to Complete Scrutiny
During the course of assessment proceedings in 'limited Scrutiny' cases, if:
 It comes to the notice of the Assessing Officer that there is potential escapement of
income exceeding Rs.5 lac/ 10 lac (for metro charges) requiring substantial
verification on any other issue(s), then, the case may be taken up for 'Complete
Scrutiny' with the approval of the Pr. CIT/CIT concerned.
 The AO has to take approval of Pr. CIT/CIT in writing after being satisfied about
merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case.
'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru,
Hyderabad and Ahmedabad.

12. Best Judgment Assessment (u/s 144)
As per section 144, the AO is under an obligation to make an assessment to the
best of his judgment in the following cases:-
 If the taxpayer fails to file the return required within the due date prescribed
u/s 139(1) or a belated return u/s 139(4) or a revised return u/s 139(5).
 If the taxpayer fails to comply with all the terms of a notice issued u/s 142(1).
 If the taxpayer fails to comply with the directions issued u/s 142(2A).
 If after filing the return of income the taxpayer fails to comply with all the terms
of a notice issued under section 143(2), i.e., notice of scrutiny assessment
 If the assessing officer is not satisfied about the correctness or the completeness of
the accounts of the taxpayer or if no method of accounting has been regularly
employed by the taxpayer.
Time limit
As per section 153, assessment under section 144 shall be made within a period of
21 months from the end of the relevant assessment year.

13. Assessment u/s 147
 This 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.
Objective
The objective of carrying out assessment under section 147 is to bring under the tax
net any income which has escaped assessment in original assessment.
Original assessment here means an assessment u/s 143(1), 143(3), 144 & 147.

14. Cases Where Income Has Escaped Assessment
 Where no return has been furnished, although the total income exceed the
maximum amount chargeable to tax.
 Where return has been furnished but no assessment have been made and it is
noticed by the AO that the assessee has understated the income or has claimed
excessive loss/deduction/allowance/ relief in the return.
 Where the taxpayer has failed to furnish the report as required u/s 92 E.
 Where assessment have been made but
i) income chargeable to tax has been under assessed; or
ii) income has been assessed at low rate; or
iii) income has been made the subject of excessive relief; or
iv) excessive loss or depreciation allowance or any other allowance has been
computed;

15.  On the basis of information received u/s 133C, if it is noticed by the AO that the
income of the assessee exceeds the maximum amount not chargeable to tax, or as
the case may be, the assessee has understated the income or has claimed
excessive loss, deduction, allowance or relief in the return.
 Where a person is found to have any asset (including financial interest in any
entity) located outside India.

16. Time limit for
notice u/s 148
Income
escaping
assessment is
less than 1lac
4 years
Income
escaping
assessment is 1
lac or more
6 years
Assessment u/s
143(3)/148 was
made.
4 years except where income
chargeable to tax has escaped
assessment due to failure on the part of
assesse to:
-Furnish return u/s 139 or 142 or 148
-To disclose fully and truly material
facts
Asset located
outside India
16 years

17. Time limit for completion of assessment
As per section 153, assessment under section 147 shall be made within a period of
9 months from the end of the financial year in which notice under section 148 is
served on the tax payer.

18. Assessment in case of Search u/s 153A
Notwithstanding anything contained in section 139/147/148/149/151/153, i
n the case of a person where a search is initiated under section 132 or books of
account, other documents or any assets are requisitioned under section 132A ,
the Assessing Officer shall—
(a) issue notice to such person requiring him to furnish the return of income in
respect of each assessment year falling within six assessment years , as if
such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately
preceding the assessment year relevant to the previous year in which such
search is conducted or requisition is made :
Provided that the Assessing Officer shall assess or reassess the total income in
respect of each assessment year falling within such six assessment years:

19.  Provided that assessment or reassessment, pending on the date of initiation of
search u/s 132 or 132A of the six assessment years referred, shall stand abated.
If any proceeding initiated or any order of assessment or reassessment made in
case of search or requisition has been annulled in appeal or any other legal
proceeding, then, notwithstanding anything contained u/s 153(1), the
assessment or reassessment relating to any assessment year which was abated
under the second proviso section 153(1), shall stand revived with effect from
the date of receipt of the order of such annulment.
 Central Government may by rules specify the class or classes in which the AO
shall not issue notice for assessing or reassessing the total income of the six AY.

20. Assessment of income u/s 153C
Notwithstanding anything contained in section 139/147/148/149/151/153,
where the Assessing Officer satisfied that,
 any money, bullion ,jewellery or other valuable article or thing , seized or
requisitioned, belongs to; or
 any books of account or documents, seized or requisitioned ,pertains or
pertain to, or any information contained therein, relates to,
a person other than the person referred to in section 153A, then , the books of
account or documents or assets, seized or requisitioned shall be handed over
to the AO having jurisdiction over such other person.

21.  In respect of each AY falling within 6 AYs immediately preceding the AY
relevant to the previous year in which search was conducted or requisition
was made.
 In respect of AY relevant to the previous year in which search was conducted
or requisition is made,
Within a period of 21 months from the end of financial year in which the
last of the authorisation for search u/s 132 or requisition u/s 132A was
executed.
Time limit for completion of assessment u/s 153A/C