Dr.

SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY

LUCKNOW

Faculty of Law

PROJECT ON

Assessment & procedure & other concepts

For

COURSE ON ‘Income Tax Law & Accounts’

Submitted by

Shubham Pathak

B.com LLB

Academic Session: 2020-21

Under the Guidance of

Sagir Ahmad Raza Sir

 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Mr. Sagir Ahmad
Sir who gave me the golden opportunity to do this wonderful topic in "INCOME TAX
LAW" which also helped me in doing a lot of research and I came to know about so
many new things I am really thankful to him.

Shubham Pathak
 INTRODUCTION

TAX

A tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer (an
individual or other legal entity) by a governmental organization in order to fund various public
expenditures. A failure to pay, or evasion of or resistance to taxation, is punishable by law. Taxes
consist of direct or indirect taxes and may be paid in money or as its labour equivalent. Most
countries have a tax system in place to pay for public/common/agreed national needs and
government functions: some levy a flat percentage rate of taxation on personal annual income,
some on a scale based on annual income amounts, and some countries impose almost no taxation
at all, or a very low tax rate for a certain area of taxation. Some countries charge a tax both on
corporate income and dividends; this is often referred to as double taxation as the individual
shareholder(s) receiving this payment from the company will also be levied some tax on that
personal income.

Definition:

According to Hugh Dalton, "a tax is a compulsory contribution imposed by a public

authority, irrespective of the exact amount of service rendered to the taxpayer in return,
and not imposed as penalty for any legal offence."

Important Characteristics of a Good Tax System:

A good tax system is one which has predominantly good taxes and which fulfills most of
the canons of taxation: it must yield sufficient revenue, but cause minimum aggregate
sacrifice to the people and minimum obstruction to incentives for production. A good tax
system should possess the following characteristics:

1. It should ensure maximum social advantage. Taxation should be used to finance public
services.

2. It should cause minimum aggregate sacrifice. In a good tax system, the allocation of
taxes among tax payers is made according to the ability to pay. It falls more heavily on
the rich and less on the poor. It should be reasonably progressive so as to minimize the
gap of inequality of income and wealth in the community, thereby ensuring their better
distribution.

3. In a good tax system, taxes are universally applicable in the sense that persons with
same ability to pay are treated in the same way without any discrimination whatsoever. In
the Indian tax system, however, this attribute is lacking to some extent. For instance,
income tax is not universal in India, as no income tax is levied on agricultural incomes.

4. It should contain a predominance of good taxes satisfying most of the canons of

taxation. That is to say, the taxes imposed should be more or less equitable, convenient to
pay, economical, certain, productive, flexible and simple as far as possible.

5. The entire structure of the tax system should have built-in flexibility, so that changes
are possible according to the changing conditions of a dynamic economy. It should be
possible to add or withdraw a tax without destroying the entire system and its balancing
effect. A rigid tax structure is very unsatisfactory. Taxation must cope with the changing
needs of the modern government. The capacity to adjust itself to the dynamic conditions
of an economy is a virtue of a good tax system.

6. A good tax system should be a balanced one. It means there must exist not one kind of
taxes but all types in the right proportion. In other words, it should not contain just
progressive, regressive or proportional taxes only, but a healthy combination of all such
taxes. Similarly, it should have a balance of direct and indirect taxes.

7. The tax system should be multiple, but then took a great multiplicity is not desirable.
Dalton, however, suggests that a good tax system has to be also a reasonably efficient
administrative system.

8. Further, in a good tax system there is simplicity, implying the absence of any
unnecessary and avoidable complexities.

9. A good tax system should not hamper the development of trade and industry, but
instead help the rapid economic development of the country. Taxation is designed to
mobilize the surplus resources in the economy and not deprive the private sector of its
resources.

More than everything the most fundamental characteristic of a good tax system is the
appreciation of the rights and problems of the tax payer.

Type of Taxes in India:-

 Direct Taxes:
 Income tax
 Capital gains tax
 Securities Transaction Tax
 Perquisite Tax
 Corporate Tax

 Indirect Taxes:
 Sales tax
 Service Tax
 Value Added Tax
 Custom duty & Octroi (On Goods)
 Excise Duty
 Anti Dumping Duty

 Other Taxes:
 Professional Tax
 Dividend distribution Tax
  Municipal Tax
 Entertainment Tax
 Stamp Duty, Registration Fees, Transfer Tax
 Education Cess , Surcharge
 Gift Tax
 Wealth Tax
 Toll Tax
 Swachh Bharat Cess
 Krishi Kalyan Cess
 Dividend Tax
 Infrastructure Cess
 Entry Tax

ASSESSMENT:

Assessment occurs when an asset's value must be determined for the purpose of taxation.
Assessments are made annually on certain types of property, such as homes and cars;
other assessments may be made only once.

For example, homes are often valued every three or four years according to their physical
condition and comparable values of surrounding residences.

Income tax Assessment Procedure

Income tax assessment is estimation for an amount assessed while paying Income Tax by
assessee himself or by income tax officer. Following types of assessment are carried out
under Income tax act.

1. Self assessment u/s 140A.

2. Summary Assessment u/s 143(1)
3. Scrutiny assessment u/s 143(3).
4. Best judgment assessment u/s 144.
5. Protective Assessment.
6.  Income escaping assessment u/s 147.

For making assessment under these various provisions of the act, some compliance is
mandatory to assessing officer:

Particulars Mandatory Requirements

Self assessment u/s 140A. –
Scrutiny assessment u/s 143(3). Section 143(2) Notice
Best judgment assessment u/s 144. Show cause notice u/s 144
Protective Assessment –
Income escaping assessment u/s 147. Section 148 Notice
Assessment in case of search u/s 153A Section 153A
Self Assessment u/s 140A

Before submitting returns assessee is supposed to find whether he is liable for any tax or
interest. For this purpose this section has been introduced in Income tax act. Where any
tax is payable on the basis of any return required to be furnished under section 139 or
section 142 or section 148 or section 153A, after deducting:

1.Advance tax Paid, if any

2.TDS/TCS

3.Relief under section 90, 91 & 90A

4.MAT credit under 115JAA or 115JD

Then assessee shall pay tax & interest before furnishing return and proof of such payment
will be accompanied with return of income.

Self assessment calculation Summary:

If any amount is payable under section 140A then amount so paid shall be adjusted
against interest payable first and then balance amount to be adjusted toward tax payable.

Summary Assessment u/s 143(1)

“Summary Assessment”, it is not an actual assessment. Under this section, the Return of
Income filed by assessee will not be scrutinized, however whatever, is claimed by
assessee in his ROI will be accepted by assessing officer after only confirming
arithmetical accuracy.

1. the total income or loss shall be computed after making the following adjustments,
namely:

(i) any arithmetical error in the return; or

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the
return;

2 .the tax and interest, if any, shall be computed on the basis of the total income computed
under clause (a);

3. the sum payable by, or the amount of refund due to, the assessee shall be determined
after adjustment of the tax and interest, if any, computed under clause (b) by any tax
deducted at source, any tax collected at source, any advance tax paid, any relief allowable
under an agreement under section 90 or section 90A, or any relief allowable under section
91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment
and any amount paid otherwise by way of tax or interest;

4. an intimation shall be prepared or generated and sent to the assessee specifying the sum
determined to be payable by, or the amount of refund due to, the assessee under clause
(c); and

5. the amount of refund due to the assessee in pursuance of the determination under
clause (c) shall be granted to the assessee:

Protective Assessment.

There appears to be no provision in the Act providing for the manner in which a
protective assessment has to be done. But traditionally wherever the department has been
in doubt on account of a pending litigation as to how exactly an assessment had been
framed against the assessee, the Assessing Officer has been making an assessment in a
manner in which he thought the assessment should be done and apprehending that such
assessment may be set aside in the pending litigation, he would make another assessment
as per the stand of the assessee for the purpose of protecting the interest of the revenue.
There is no provision anywhere in the Act stipulating that such protective assessment has
also to be made along with the original assessment – Bhatia Motor Stores v. CIT [2006]
152 Taxman 89 (MP). Certain case laws based on protective assessments are Supreme
Court in Lalji Haridas v. ITO, (43 ITR 387) also G. Topi Saheb vs Commissioner of
Income-Tax (170 ITR 181 AP).

Enquiry before assessment. [ Section 142]

Enquiry:

(1) The Assessing Officer has power to make inquiry from any person (a) who has made a
return under section 139 or (b) in whose case the time allowed under section 139(1) for
furnishing the return has expired. For the purpose a notice can be issued for :

(i) where such person has not made a return within the time allowed under section 139(1),
to furnish a return of his income or

(ii) to produce such accounts or documents as the Assessing Officer may require, or

(iii) to furnish in writing and verified in the prescribed manner information in such form
and on such points or matters including a statement of all assets and liabilities of the
assessee, whether included in the accounts or not, as the Assessing Officer may require.

(2) For the purpose of obtaining full information in respect of the income or loss of any
person, the Assessing Officer may make such inquiry as he considers necessary.
Audit : If the Assessing Officer, having regard to the nature and complexity of the
accounts of the assessee and the interests of the revenue, opines that it is necessary so to
do, he may, direct the assessee to get the accounts audited by an accountant, as defined in
the Explanation below section 288(2) and to furnish an audit report, within such period as
may be specified, in the prescribed form. The expenses of such audit shall be paid by the
assessee. These provisions of audit shall have effect notwithstanding that the accounts of
the assessee have been already audited.

Opportunity to Assessee :

The assessee shall be given an opportunity of being heard in respect of any material
gathered on the basis of any inquiry or any audit and proposed to be utilised for the
purposes of the assessment. Such opportunity need not be given where the assessment is
made under section 144.

Estimate by Valuation Officer in certain cases [Sec. 142A]

For the purposes of making an assessment under this Act, where an estimate of the value
of any investment referred to in section 69 or section 69B or the value of any bullion,
jewellery or other valuable article referred to in section 69A or section 69B is required to
be made, the Assessing Officer may require the Valuation Officer to make an estimate of
such value and report the same to him. On receipt of the report from the Valuation
Officer, the Assessing Officer may, after giving the assessee an opportunity of being
heard, take into account such report in making such assessment.

Regular Assessment [Section 143(3)]

Where a return has been furnished under section 139, or in response to a notice under
sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or
expedient to ensure that the assessee has not understated the income or has not computed
excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice
requiring him, either to attend his office or to produce, any evidence on which the
assessee may rely in support of the return. However, no notice shall be served after the
expiry of twelve months from the end of the month in which the return is furnished. On
the day specified in the notice issued or as soon afterwards as may be, after hearing such
evidence as the assessee may produce and such other evidence as the Assessing Officer
may require on specified points, and after taking into account all relevant material which
he has gathered, the Assessing Officer shall, by an order in writing, make an assessment
of the total income or loss of the assessee, and determine the sum payable by him or
refund of any amount due to him on the basis of such assessment.

Tax has to be determined and such determination is to be made in the Assessment order
or computation sheet to be annexed with the Assessment order. [ Kalyan Kumar Ray vs.
CIT] The assessed income may be lower than the returned income. The boards circular no
549 para 5.12 dt. 31.10.1989 has been held to be ultra-vires Gujarat Gas Co Ltd v
JCIT(A)

Best Judgement Assessment(Sec. 144)

This assessment gets invoked in following scenarios:

a. If the assessee fails to respond to a notice issued by the department instructs him to
produce certain information or books of accounts.

b. If he/she fails to comply with a special audit ordered by the income tax authorities

c. The assessee fails to fails to file the return within due date or such extended time limit
as allowed by the CBDT

d. The assessee fails to comply with the terms as contained in the notice issued under
Summary assessment

After providing an oppurtunity to hear the assessee;s argument, the assessing officer
passes an order based on all the relevant materials & evidence available to him. This is
known as best judgement assessment.

Income escaping assessment(Sec. 147)

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. The
time limit for issuing a notice to reopen an assessment is 4 years from the end of the
relevant assessment year

Some scenarios where reassessment gets triggered:

a. The assessee has taxable income but has not yet filed his return.

b. The assessee after filing the income tax return is found to have either understand his
income or claimed excess allowances or deductions.

c. The assessee has failed to furnish reports on international transactions, where he is

required to do so.

FILING OF RETURNS:

E-FILING:

What is E Filing?

E-filing or electronic filing is submitting our income tax returns online. There are two
ways to file our income tax returns. The traditional way is the offline way, where we go
the Income Tax Department’s office to physically file our returns. The other way is when
we e-file through the internet. Over the past few years, e filing has become popular
because it is easier, doesn’t require prints of documents, and can be done for free!

Am I Required to File Income Tax Returns?

It is mandatory to file income tax returns in India if any of the below conditions are
applicable to we (as per the Income Tax Act):

• Earn gross annual income more than-

Particulars Amount

For individuals below 60 years Rs 2.5 Lakhs

For individuals between 60 to 80 years Rs 3.0 Lakhs

For individuals above 80 years Rs 5.0 Lakhs

 Earn income other than salary like house property, etc.

 Want to claim income tax refund from the department
 Earn from or have invested in foreign assets
 Wish to apply for visa or loan applications
 Company or a firm, irrespective of profit or loss

Who should e-file income tax returns?

Online filing of tax returns is easy and can be done by most assesses.

 Assessed with a total income of Rs. 5 lakhs and above.

 Individual/HUF resident with assets located outside India.
 An assesse required to furnish a report of audit specified under sections 10(23C)
(IV), 10(23C) (v), 10(23C) (VI), 10(23C) (via), 10A, 12A (1) (b), 44AB, 80IA,
80IB, 80IC, 80ID, 80JJAA, 80LA, 92E or 115JB of the Act.
 Assessee required to give a notice under Section 11(2) (a) to the assessing officer.
 A firm (which does not come under the provisions of section 44AB), AOP, BOI,
Artificial Juridical Person, Cooperative Society and Local Authority (ITR 5).
 An assessee required to furnish returns U/S 139 (4B) (ITR 7).
 A resident who has signing authority in any account located outside India.
 A person who claims relief under sections 90 or 90A or deductions under section
91.
 All companies.

Types of e-Filing:

•Use Digital Signature Certificate (DSC) to e-file. It is mandatory to file IT forms using
Digital Signature Certificate (DSC) by a chartered accountant.
•If we e-file without DSC, ITR V form is generated, which should then be printed, signed
and submitted to CPC, Bangalore by ordinary post or speed post within 120 days from the
date of e-filing.

•We can file e-file IT returns through an E-return Intermediary (ERI) with or without
DSC.

General details:

•Bank account details •PAN Number

Reporting salary income:

•Rent receipts for claiming HRA •Form 16 •Pay slips

Reporting capital gains:

•Stock trading statement is required along with purchase details if there are capital gains
from selling the shares

•In case a house or property is sold, we must sought sale price, purchase price, details of
registration and capital gain details

•Details of mutual fund statement, sale and purchase of equity funds, debt funds, ELSS
and SIPs

Reporting other income:

•The income from interest is reported. In case of interest accumulated in savings account,
bank account statements are required

•Interest income from tax saving bonds and corporate bonds must be reported

•The income details earned from post office deposit must be reported.

Steps to follow to file Income Tax Returns:

Filing our income tax returns online doesn't have to be a complicated process. Simply
follow the below steps.

First, log on to IncomeTaxIndiaeFiling.gov.in And register on the website.

•Our Permanent Account Number (PAN) is our user ID.

•View our tax credit statement or Form 26AS. The TDS as per our Form 16 must tally
with the figures in Form 26AS.

•Click on the income tax return forms and choose the financial year.
•Download the ITR form applicable to we. If we're exempt income exceeds Rs.5,000, the
appropriate form will be ITR-2 (If the applicable form is ITR-1 or ITR 4S, we can
complete the process on the portal itself, by using the 'Quick e-file ITR' link - this has
been explained below).

•Open excel utility (the downloaded return preparation software) and fill out the form by
entering all details using our Form 16.

•Check the tax payable amount by clicking the 'calculate tax' tab.

•Pay tax (if applicable) and fill in the challan details.

•Confirm all the data provided in the worksheet by clicking the 'validate' tab.

•Generate an XML file and save it on our desktop.

•Go to 'upload return' on the portal's panel and upload the saved XML file.

•A pop-up will be displayed asking we to digitally sign the file. In case we have obtained
a digital signature, select'˜Yes'. If we have not got digital signature, choose 'No'.

•The acknowledgment form, ITR Verification (ITR-V) will be generated which can be
downloaded by we.

•Take a printout of the form ITR-V and sign it in blue ink

•Send the form by ordinary or speed post to the Income-Tax Department-CPC , Post Bag
No. 1 , Electronic City Post Office, Bangalore, 560 100, Karnataka within 120 days of
filing our returns online.
 Conclusion
There ar types of taxes in India which work on different aspects and levels in our
country. Both direct and indirect taxes are necessary for the economic growth of the
country and they sum up to create everything around us, and depicts the financial
position of our country, or any country's to be precise.

Also, Every taxpayer has to furnish the details of his income to the Income-tax
Department. These details are to be furnished by filing up his return of income.
Once the return of income is filed up by the taxpayer, the next step is the processing
of the return of income by the Income Tax Department. The Income Tax
Department examines the return of income for its correctness. The process of
examining the return of income by the Income-Tax department is called as
“Assessment”. Assessment also includes re-assessment and best judgment
assessment and it begins from the Section 144.

It's also a very imperative feature of our tax structure that they are assessed very
carefully and with detail, all of these elements are necessary for a smooth
functioning of any nation's tax structure It is also absolutely mandatory for every
taxpayer to communicate the details of his income to the Income-tax Department.
These details are to be furnished in the prescribed form known as return of income.
In this part, you can gain knowledge about the various provisions relating to return
of income.
The provisions of Section 139A of the Income Tax Act, to be read with Rule 114 of
the Income Tax Rules deal with the requirement of application and obtaining of
Permanent Account Number. PAN is a 10 digit code allotted to each Assessee by I.T.
Dept. The Quoting of the Permanent Account Number (PAN) is mandatory by the
I.T. Department in many instances. An Assessee needs to mention his PAN in his
return and the main advantages of having a PAN include, convenience to locate the
Assessing Officer, Faster Assessment , Processing of Refunds, ensuring Tax
Compliance, Credit for Payment of Taxes, and Control over unregulated and
Undisclosed Transactions.
 BIBLIOGRAPHY

BOOKS:

 Income tax law & accounts, R.K jain

 Income tax law & accounts, Sahitya bhawan publications, Dr. H.C
Mehrotra