There are four main types of assessments under the Income Tax Act: 1) Self-assessment where the taxpayer calculates their own liability; 2) Regular assessment where the tax authority scrutinizes around 2-3% of returns filed; 3) Best judgment assessment where the authority assesses tax based on their judgment if the taxpayer does not file a return or provide complete information; 4) Reassessment where the authority re-examines a taxpayer's income if they believe income was previously missed based on new evidence or records. The document then provides details on the procedures and conditions for each type of assessment.

1. Assessment Procedure under IT Act
Assessment means checking, judging or in simple words
computing the income and tax on it. Under Income Tax
Act there are four types of Assessment: -
1) Sec 140 A – Self Assessment
2) Sec 143 (3) – Regular / Scrutiny Assessment
3) Sec 144 – Best Judgment Assessment
4) Sec 147 – Assessment / Reassessment of Income
Escaping Assessment
Normal Procedure of Taxation
The usual process of Taxation is:
1) The assessee earns income
2) Assessee deposits tax – based on self calculation – or
as determined by his Tax Consultant
3) The assessee files Income Tax Return (ITR)
Income Tax Return (ITR)
l ITR can be called a self declaration of information
containing various sources of income earned and tax paid.
The Government requires ITR because, in absence of
that, it would not be able to understand as to what
amounts and from what sources the assessee has earned
in the year, and what taxes has to been paid by the
assessee. l ITR under normal course should be filed u/s
139(1). This section describes the normal time limit of
filing the ITR – which is for non-audit cases is July 31 of
the Assessment year, and for audit cases September 30
of the Assessment year. l Generally, a person who has
income above the minimum exemption limit (without giving
effect of any sections of IT Act) is obligated under law to
file ITR. However assessee eg a Company has to file ITR
compulsorily whether it earns profit or not. Also, a person,
who has income below the minimum exemption limit,
though not required by law, is not barred from filing ITR.

2. Often people having income below the minimum
exemption limit also file ITR – and the motivation for filing
it varies – it can be that someone wants a Credit Card or a
loan from some Bank or NBFC, or has to produce the ITR
for getting some contract. Many of those who return such
income are genuine cases. However, there are others who
would try to manipulate law for their ends. Also,
sometimes, ITR is filed for the purpose of getting refund of
TDS. Had there been no TDS, the person might not have
required filing ITR.
1) Self Assessment u/s 140 A :
This simply means that the person is calculating his own
tax liability and thereafter filing ITR after payment of self-
calculated tax. Since assessee himself calculates the tax
and income returned – it is called self-assessment. The
Assessing Officer (AO) only checks the return of income
on the face of it and corrects the mistake, if any on it. If
there is any short of tax he call for it and if there is any
excess of tax paid he shall refund the same. However, the
system of self-assessment is only to make the work of IT
Dept easier – it is not the end of assessment. It is simply
paying tax and filing of Return by the assessee. The IT
Dept only gives an acknowledgement / intimation u/s
143(1). The assessee can file ITR as Self assessment
under the different sections of 139 (Return within due date
/ Belated Return / Return of Loss etc.) or in response to
notice u/s 142(1) or 148 or 153A There is no assessment
order by the Dept. under Self Assessment simply
because, the assessment is not being done by the
department. Since the assessment is not being done by
the IT Department, for legal purpose the acknowledgment
/ intimation by IT Department is not considered as
‘Assessment’.
2) Regular / Scrutiny Assessment u/s 143(3):
On the basis of return of income filed, AO may undertake
deep examination of some return of income roughly 2% to

3. 3% of the total returns filed. In scrutiny assessment the
AO calls the assessee to furnish the explanations and
books of accounts. For undertaking the scrutiny
assessment the AO has to issue a notice to the assessee
under section 143(2). If Assessee produces the
information and explanations required by the Assessing
Officer (AO) the AO completes the assessment and
determine the Taxable income and income tax liability on
the basis of the information and explanations produced
before him. Assessment made under this section would be
final and the department cannot open the case again –
unless there are valid reasons (‘reasons to believe’).
3) Best Judgement Assessment u/s 144 :
Best Judgment Assessment, as the name indicates Best
Judgment Assessment means the computation of income
and tax is undertaken by the AO himself, on the basis of
the best of his judgment. The Best judgment Assessment
can be made by an A.O. under the following cases: -
1. Assessee does not file his regular return of income u/s
139.
2. Assessee does not comply with instructions u/s 142 (1),
i.e., notice requiring to file his return of income or 142
(2A), i.e., notice requiring assessee to conduct audit of his
accounts.
3. Assessee does not comply with instructions u/s 143(2),
i.e., notice of scrutiny assessment.
4. AO is not satisfied regarding completeness of accounts
Since in all of the above cases either assess does not
cooperate with the Assessing Officer (AO) or does not file
return of income or does not have complete accounts.
Thus, the assessing officer cannot calculate the income
and therefore, he has to judge the income on the basis of
his best assumptions/judgments. The AO must give a
hearing to the assessee before completing the
assessment as per best of his judgment. No refund can be
granted under best judgment assessment. U/s 144 A.O.

4. cannot assess income below returned income and cannot
assess loss higher than the returned loss. Even in case
there is no return for the year, the AO has to base his
calculation on certain logical/rational/ scientific and
reasonable ways viz . based on ratios, growth rate of
industry / sector. The assessment order should therefore
be a speaking order. Assessment u/s 144 can also be
resorted to if AO is not satisfied with the correctness /
completeness of Books of Accounts. Also the AO can
reject Books of accounts u/s 145 if assessment
proceedings are in process u/s 143(3) / 144 /
147 / 153A – and in such case, the AO shall assess the
income and tax to the best of judgement (ie. as per the
requirements / procedure of sec 144) and complete
assessment proceedings under the particular section
under which the proceedings are going on.
4) Assessment / Reassessment of Income Escaping
Assessment u/s 147 :
To undertake assessment u/s 147, notice has to be issued
u/s 148. Before issuing notice u/s 148 the AO shall ‘record
his reasons’ for issuing the notice. The notice has to be
issued separately for each AY for which proceedings are
to be taken up u/s 147. The assessee has to file Return in
response to notice u/s 148 – even if he has filed the return
previously within due date. Also, the AO is duty bound to
provide the assessee the reasons recorded by him – if the
assessee requests for it after filing Return of Income in
response to the notice. If on request the reasons are not
supplied – then the AO cannot proceed u/s 147
If there has been no previous assessment u/s 143(3) or
144, then proceedings u/s 147 is called assessment, else
it is called re-assessment. Also assessment / re-
assessment u/s 147 cannot be undertaken for any AY, if
assessment proceedings are already underway under any
other section of IT Act. In this the most important thing is
that the AO should have ‘reasons to believe’ that income

5. chargeable to tax has escaped assessment. In proceeding
under this sections, the AO can also consider any other
income under any head of income that comes to his
detection subsequent to issue of notice u/s 148. However,
u/s 147 can only relate to issues of underassessment –
and unlike assessment u/s 143(3), the AO cannot reduce
income or increase losses. This assessment can be
undertaken whether the Assessee has filed return or not –
or whether any assessment has been undertaken
previously or not. This is because, the section 147 speaks
both of assessment and also reassessment.
Reasons to believe includes:
1) There has been retrospective change of law – either
by legislation or due to court order (usually Supreme
Court) – and the AO finds that the assessee needs to be
re-assessed in light of the new law / rule that is to be
applied retrospectively.
2) Evidence that has come to notice of AO. This
evidence can be from any source – including any other
assessment proceedings or information received from
revenue intelligence etc.
3) Mistake apparent from records
The interesting thing is that it is only necessary that there
is prima facie some material on basis of which the case
can be reopened. The sufficiency or even correctness of
material is not to be considered at the stage of opening /
reopening of case u/s 147. However reasons to believe
does not include – rumors, gossips, suspicion or change
of personal opinion of AO. Now, the assessment u/s 147
and 143(3) (and also 144) is sort of linked. After all, any
assessment can be done only on scrutiny of records. Now
to take up assessment u/s 143(3) – notice u/s 143(2) has
to be served on the assessee within six months of expiry
of financial year in which the return was furnished