Section 59 – Self Assessment

“Every registered person shall self-assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39”.

Self-Assessment is the first stage for all the assessments now. The registered person is required to compute his output, take the available input credit and pay the balance amount and file the returns in the prescribed forms. Prima- Facie the department shall accept such self-assessed returns and declarations, subject to scrutiny and other modes of assessment in the selected cases and in the prescribed manner.

Section 60 – Provisional Assessment

“(1) Subject to the provisions of sub-section (2), where the taxable person is unable to determine the value of goods or services or both or determine the rate of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a provisional basis and the proper officer shall pass an order, within a period not later than ninety days from the date of receipt of such request, allowing payment of tax on provisional basis at such rate or on such value as may be specified by him.”

Normally, provisional assessment is done in the case of imports and in a case of foreign ships doing business through Indian ports. Provisional assessment also opts in certain cases of manufacturing and processing which may attract litigation as to taxability and valuation.

“(2) The payment of tax on provisional basis may be allowed, if the taxable person executes a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, binding the taxable person for payment of the difference between the amount of tax as may be finally assessed and the amount of tax provisionally assessed”

These kind of surety clauses always exist along with the provisional assessment clauses, so as to ensure that the revenue is not at loss post such provisional assessment, which is normally done in haste.

“(3) The proper officer shall, within a period not exceeding six months from the date of the communication of the order issued under sub-section (1), pass the final assessment order after taking into account such information as may be required for finalising the assessment:

  Provided that the period specified in this subsection may, on sufficient cause being shown and for reasons to be recorded in writing, be extended by the Joint Commissioner or Additional Commissioner for a further period not exceeding six months and by the Commissioner for such further period not exceeding four years.”

These kinds of surety clauses always exist along with the provisional assessment clauses, so as to ensure that the revenue is not at loss post such provisional assessment, which is normally done in haste.

“(4) The registered person shall be liable to pay interest on any tax payable on the supply of goods or services or both under provisional assessment but not paid on the due date specified under sub-section (7) of section 39 or the rules made thereunder, at the rate specified under sub-section (1) of section 50, from the first day after the due date of payment of tax in respect of the said supply of goods or services or both till the date of actual payment, whether such amount is paid before or after the issuance of order for final assessment.”

(5) Where the registered person is entitled to a refund consequent to the order of final assessment under sub-section (3), subject to the provisions of sub-section (8) of section 54, interest shall be paid on such refund as provided in section 56”

Scrutiny of Returns

Section 61 – Scrutiny of Returns

“(1) The proper officer may scrutinise the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto

(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard

(3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74.”

• Scrutiny of returns is the first stage post self-assessment (In selected cases as per the prescribed method), wherein, the authenticity of the returns filed can be verified and cross verified.
• A discrepancy, if any, shall be communicated to the person which the person need to explain and take corrective action in the return filed.
• If no satisfactory explanation is furnished or no corrective measure is taken within 30 days of such communication or within the extended time period as allowed by the proper officer, the officer may initiate other proceedings like audit by tax authorities, special audit, Inspection, search and seizure and accordingly determining the short tax payment, interest, penalty and tax recovery measures.

Assessment of Non- Filers of Returns

“(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing

of the annual return for the financial year to which the tax not paid relates.

(2) Where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under subsection (1) of section 50 or for payment of late fee under section 47 shall continue.”

• This is a provision similar to “Best Judgement Assessment (BJA)” under the Income Tax Act, 1961
• If the returns itself is not filed by the person, the proper officer, can assess the tax liability as per best of his judgement
• However, BJA cannot be done after 5 years from the due date of annual return filing for the year, which is under Best Judgement Assessment, has elapsed.
• The law also gives the option to the person to file a valid return within 30 days of service of the BJA order and nullify the order (The order shall be deemed to be withdrawn), subject to the person paying the interest and late fee.

Assessment of un-registered Persons

“Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates:

Provided that no such assessment order shall be passed without giving the person an opportunity of being heard”

This provision is similar to section 62 relating to BJA of registered persons who have failed to file the returns. This section gives power to the proper officer to carry out BJA on even the unregistered person. However, this won’t be done without following the principles of natural justice.

Summary Assessment in Special Cases

“(1) The proper officer may, on any evidence showing a tax liability of a person coming to his notice, with the previous permission of Additional Commissioner or Joint Commissioner, proceed to assess the tax liability of such person to protect the interest of revenue and issue an assessment order, if he has sufficient grounds to believe that any delay in doing so may adversely affect the interest of revenue:

Provided that where the taxable person to whom the liability pertains is not

ascertainable and such liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and liable to pay tax and any other amount due under this section.

(2) On an application made by the taxable person within thirty days from the date of receipt of order passed under sub-section (1) or on his own motion, if the Additional Commissioner or Joint Commissioner considers that such order is erroneous, he may withdraw such order and follow the procedure laid down in section 73 or section 74.”

• This provision gives a right to the proper officer to carry out assessment and pass orders in case of special cases, where the department has ‘sufficient grounds’ to believe adverse effect to the revenue.
• In this case, the liability can be raised either by the taxable person or if the taxable person is not known (Eg. – In the case of confiscation of goods), the person-in-charge of the goods can be deemed as ‘taxable person’ and liability can be raised on him accordingly.
• Withing 30 days of such an order, either on application and representation made by a taxable person or on its own motion, an order under this section can be withdrawn if found to be erroneous.
• No action under this section can be taken without a permission obtained of an Additional Commissioner or Joint Commissioner (This is to check lower level officers from taking un-due advantage of this provision and harassing the person)

Audit by Tax Authorities

• The Commissioner or a person authorised by him may undertake an audit of a registered person for the period, frequency and manner prescribed.
• Audit can be carried out either in the premises of the registered person or may also be done at the office of the proper officer, by calling for information and documents
• 15 days clear notice shall be provided to the person before initiation of such an audit
• The audit proceedings have to be closed within 3 months from the date of initiation of audit (Where the date of commencement of audit shall be the date on which all the documents and information called for are provided or audit actually initiated at the business premises, whichever is later).

• Also, if the Commissioner is satisfied that the audit cannot be completed in 3 months, he can record the reasons in writing extend the time for a further period of maximum 6 more months.
• The registered person is obliged to provide all necessary details, documents and information required for completion of an audit.
• On conclusion of an audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings.
• Once the above are done, the proper officer may determine tax payable and interest and penalty, if any, thereon, and also initiation collection proceedings.

Special Audit

• During any stage of any investigation, scrutiny, assessment or any other proceedings under this act, if the proper officer, not below the rank of Assistant Commissioner, with the prior approval of Commissioner, may get the books of accounts audited by a CA or Cost Accountant nominated by the Commissioner, if so required in interest of revenue keeping in view of the complexity of transactions or business or claim of input credit
• Such CA or Cost Accountant is required to submit duly signed and certified report within 90 days to such Assistant Commissioner, extendable to further period of 90 days in case of an application in writing by such CA or Cost Accountant or for a sufficient reason
• Such audit report is subject to principle of natural justice, wherein, an opportunity to be heard shall also be provided to the registered person
• Remuneration or fee of such nominated person shall be decided by the commissioner and his decision shall be final
• All other provisions of tax, interest, penalty and collection shall apply to audit under this section too.

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